Company Quick10K Filing
Quick10K
Boyd Gaming
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$26.98 111 $2,990
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-04-15 Officers, Shareholder Vote
8-K 2019-02-21 Earnings, Exhibits
8-K 2018-12-12 Other Events, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-10-15 M&A, Regulation FD, Exhibits, Exhibits
8-K 2018-09-20 M&A, Regulation FD, Exhibits
8-K 2018-08-02 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-07-26 Earnings, Exhibits
8-K 2018-06-28 Other Events, Exhibits
8-K 2018-06-28 Other Events, Exhibits
8-K 2018-06-25 Enter Agreement, Off-BS Arrangement, Shareholder Rights, Exhibits
8-K 2018-06-11 Other Events, Exhibits
8-K 2018-06-11 Other Events, Exhibits
8-K 2018-06-08 Other Events, Exhibits
8-K 2018-06-01 Regulation FD, Other Events, Exhibits
8-K 2018-05-01 Enter Agreement, Other Events, Exhibits
8-K 2018-04-26 Earnings, Regulation FD, Exhibits
8-K 2018-04-16 Officers, Shareholder Vote
8-K 2018-02-20 Earnings, Exhibits
ZTS Zoetis 48,660
WETF Wisdomtree Investments 1,090
AC Associated Capital Group 898
NYNY Empire Resorts 464
HMLP Hoegh Lng Partners 373
DFBH DFB Healthcare Acquisitions 314
OSS One Stop Systems 35
ELSE Electro Sensors 12
BFB Brown Forman 0
SFEF Santa Fe Financial 0
BYD 2019-03-31
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Note 1. Organization and Basis of Presentation
Note 2. Summary of Significant Accounting Policies
Note 3. Acquisitions
Note 4. Property and Equipment, Net
Note 5. Intangible Assets, Net
Note 6. Accrued Liabilities
Note 7. Long-Term Debt
Note 8. Commitments and Contingencies
Note 9. Leases
Note 10. Stockholders' Equity and Stock Incentive Plans
Note 11. Fair Value Measurements
Note 12. Segment Information
Note 13. Condensed Consolidating Financial Information
Note 14. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 q12019exhibit311-ceo.htm
EX-31.2 q12019exhibit312-cfo.htm
EX-32.1 q12019exhibit321-ceo.htm
EX-32.2 q12019exhibit322-cfo.htm

Boyd Gaming Earnings 2019-03-31

BYD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 byd10q3312019.htm 10-Q Document
 
 
 
 
 
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 March 31, 2019
OR
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
___________________________________________________

image0a03a01a02a13.jpg
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 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 
 
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
 
Trading Symbol
 
Name of each exchange on which registered
 
 
Common stock, $0.01 par value
 
BYD
 
New York Stock Exchange
 
The number of shares outstanding of the registrant’s common stock as of May 3, 2019 was 111,383,877.





BOYD GAMING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2019
TABLE OF CONTENTS
 
 
 
Page
No.
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018
 
 
 
 
Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 and 2018
 
 
 
 
Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2019 and 2018
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 






PART I. Financial Information

Item 1.        Financial Statements (Unaudited)

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
 
March 31,
 
December 31,
(In thousands, except share data)
2019
 
2018
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
247,681

 
$
249,417

Restricted cash
24,951

 
23,785

Accounts receivable, net
58,862

 
54,667

Inventories
18,872

 
20,590

Prepaid expenses and other current assets
46,817

 
45,815

Income taxes receivable
5,477

 
5,477

Total current assets
402,660

 
399,751

Property and equipment, net
2,742,918

 
2,716,064

Operating lease right-of-use assets
919,583

 

Other assets, net
115,476

 
106,277

Intangible assets, net
1,440,999

 
1,466,670

Goodwill, net
1,088,500

 
1,062,102

Other long-term tax assets
5,475

 
5,475

Total assets
$
6,715,611

 
$
5,756,339

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
119,549

 
$
111,172

Current maturities of long-term debt
26,986

 
24,181

Accrued liabilities
412,889

 
334,175

Income tax payable
1,392

 
173

Total current liabilities
560,816

 
469,701

Long-term debt, net of current maturities and debt issuance costs
3,922,519

 
3,955,119

Operating lease liabilities, net of current portion
855,768

 

Deferred income taxes
131,193

 
121,262

Other long-term tax liabilities
3,687

 
3,636

Other liabilities
71,519

 
60,880

Commitments and contingencies (Notes 3, 8 and 10)

 

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

 

Common stock, $0.01 par value, 200,000,000 shares authorized; 111,381,986 and 111,757,105 shares outstanding
1,114

 
1,118

Additional paid-in capital
877,470

 
892,331

Retained earnings
292,125

 
253,357

Accumulated other comprehensive loss
(600
)
 
(1,065
)
Total stockholders' equity
1,170,109

 
1,145,741

Total liabilities and stockholders' equity
$
6,715,611

 
$
5,756,339


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


3




BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
Three Months Ended
 
March 31,
(In thousands, except per share data)
2019
 
2018
Revenues
 
 
 
Gaming
$
620,253

 
$
440,463

Food & beverage
111,090

 
85,399

Room
57,244

 
47,912

Other
38,701

 
32,344

Total revenues
827,288

 
606,118

Operating costs and expenses
 
 
 
Gaming
276,616

 
189,035

Food & beverage
102,151

 
82,690

Room
26,882

 
20,933

Other
23,880

 
20,805

Selling, general and administrative
115,411

 
87,583

Master lease rent expense
23,962

 

Maintenance and utilities
38,100

 
27,926

Depreciation and amortization
67,253

 
51,276

Corporate expense
31,177

 
25,857

Project development, preopening and writedowns
4,031

 
3,440

Other operating items, net
199

 
1,799

Total operating costs and expenses
709,662

 
511,344

Operating income
117,626

 
94,774

Other expense (income)
 
 
 
Interest income
(106
)
 
(457
)
Interest expense, net of amounts capitalized
61,330

 
44,259

Loss on early extinguishments and modifications of debt

 
61

Other, net
115

 
(380
)
Total other expense, net
61,339

 
43,483

Income before income taxes
56,287

 
51,291

Income tax provision
(10,836
)
 
(9,892
)
Net income
$
45,451

 
$
41,399

 
 
 
 

 
 
 
Basic net income per common share
$
0.40

 
$
0.36

Weighted average basic shares outstanding
113,340

 
114,375

 
 
 
 

 
 
 
Diluted net income per common share
$
0.40

 
$
0.36

Weighted average diluted shares outstanding
113,871

 
115,154


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

4




BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

 
Three Months Ended
 
March 31,
(In thousands)
2019
 
2018
Net income
$
45,451

 
$
41,399

Other comprehensive income (loss), net of tax:
 
 
 
Fair value adjustments to available-for-sale securities, net of tax
465

 
(964
)
Comprehensive income
$
45,916

 
$
40,435


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

5




BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)

 
Common Stock
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Total
 
 
 
 
 
 
 
 
 
 
(In thousands, except share data)
Shares
 
Amount
 
 
 
 
Balances, January 1, 2019
111,757,105

 
$
1,118

 
$
892,331

 
$
253,357

 
$
(1,065
)
 
$
1,145,741

Net income

 

 

 
45,451

 

 
45,451

Comprehensive income attributable to Boyd, net of tax

 

 

 

 
465

 
465

Stock options exercised
137,063

 
1

 
1,261

 

 

 
1,262

Release of restricted stock units, net of tax
46,958

 

 
(418
)
 

 

 
(418
)
Release of performance stock units, net of tax
270,960

 
3

 
(3,768
)
 

 

 
(3,765
)
Shares repurchased and retired
(830,100
)
 
(8
)
 
(21,645
)
 

 

 
(21,653
)
Dividends declared ($0.06 per share)

 

 

 
(6,683
)
 

 
(6,683
)
Share-based compensation costs

 

 
9,709

 

 

 
9,709

Balances, March 31, 2019
111,381,986

 
$
1,114

 
$
877,470

 
$
292,125

 
$
(600
)
 
$
1,170,109

 
 
 
 
 
 
 
 
 
 
 
 
Balances, January 1, 2018
112,634,418

 
$
1,126

 
$
931,858

 
$
164,425

 
$
(182
)
 
$
1,097,227

Cumulative effect of change in accounting principle, adoption of Update 2018-02

 

 

 
(312
)
 
312

 

Net income

 

 

 
41,399

 

 
41,399

Comprehensive loss attributable to Boyd, net of tax

 

 

 

 
(964
)
 
(964
)
Stock options exercised
221,400

 
2

 
2,043

 

 

 
2,045

Release of restricted stock units, net of tax
16,957

 

 
(364
)
 

 

 
(364
)
Release of performance stock units, net of tax
337,537

 
4

 
(5,274
)
 

 

 
(5,270
)
Shares repurchased and retired
(559,089
)
 
(6
)
 
(19,797
)
 

 

 
(19,803
)
Dividends declared ($0.05 per share)

 

 

 
(5,635
)
 

 
(5,635
)
Share-based compensation costs

 

 
8,927

 

 

 
8,927

Balances, March 31, 2018
112,651,223

 
$
1,126

 
$
917,393

 
$
199,877

 
$
(834
)
 
$
1,117,562


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


6

BOYD GAMING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


 
Three Months Ended
 
March 31,
(In thousands)
2019
 
2018
Cash Flows from Operating Activities
 
 
 
Net income
$
45,451

 
$
41,399

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
67,253

 
51,276

Amortization of debt financing costs and discounts on debt
2,346

 
2,186

Share-based compensation expense
9,709

 
8,927

Deferred income taxes
9,931

 
8,094

Loss on early extinguishments and modifications of debt

 
61

Other operating activities
171

 
56

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(4,195
)
 
3,823

Inventories
1,718

 
387

Prepaid expenses and other current assets
(1,002
)
 
1,047

Income taxes (receivable) payable, net
1,219

 
1,821

Other assets, net
(4,407
)
 
169

Accounts payable and accrued liabilities
25,206

 
(2,795
)
Other long-term tax liabilities
51

 
47

Other liabilities
10,639

 
2,027

Net cash provided by operating activities
164,090

 
118,525

Cash Flows from Investing Activities
 
 
 
Capital expenditures
(89,322
)
 
(25,918
)
Other investing activities
(11,918
)
 
(500
)
Net cash used in investing activities
(101,240
)
 
(26,418
)
Cash Flows from Financing Activities
 
 
 
Borrowings under bank credit facility
434,829

 
179,600

Payments under bank credit facility
(466,802
)
 
(264,403
)
Debt financing costs, net
(53
)
 
(9
)
Share-based compensation activities, net
(2,921
)
 
(3,589
)
Shares repurchased and retired
(21,653
)
 
(19,803
)
Dividends paid
(6,705
)
 
(5,632
)
Other financing activities
(115
)
 
(50
)
Net cash used in financing activities
(63,420
)
 
(113,886
)
Change in cash, cash equivalents and restricted cash
(570
)
 
(21,779
)
Cash, cash equivalents and restricted cash, beginning of period
273,202

 
227,279

Cash, cash equivalents and restricted cash, end of period
$
272,632

 
$
205,500

Supplemental Disclosure of Cash Flow Information
 
 
 
Cash paid for interest, net of amounts capitalized
$
44,687

 
$
16,897

Cash received for income taxes
187

 
65

Supplemental Schedule of Non-cash Investing and Financing Activities
 
 
 
Payables incurred for capital expenditures
$
3,022

 
$
6,452

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

7




BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________
NOTE 1.    ORGANIZATION AND BASIS OF PRESENTATION
Organization
Boyd Gaming Corporation (and together with its subsidiaries, the "Company," "Boyd," "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 geographically diversified operator of 29 wholly owned gaming entertainment properties. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania.

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 for the year ended December 31, 2018, as filed with the U.S. Securities and Exchange Commission ("SEC") on March 1, 2019.

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.

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.

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash balances reported within the condensed consolidated balance sheets to the total balance shown in the condensed consolidated statements of cash flows.
 
March 31,
 
December 31,
 
March 31,
 
December 31,
(In thousands)
2019
 
2018
 
2018
 
2017
Cash and cash equivalents
$
247,681

 
$
249,417

 
$
179,706

 
$
203,104

Restricted cash
24,951

 
23,785

 
25,794

 
24,175

Total cash, cash equivalents and restricted cash
$
272,632

 
$
273,202

 
$
205,500

 
$
227,279


8

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________


Leases
Management determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. For our operating leases for which the rate implicit in the lease is not readily determinable, we generally use an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating right-of-use ("ROU") assets and finance lease assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease and non-lease components are accounted for separately.

Operating leases are included in operating lease right-of-use assets, other current liabilities and operating lease liabilities on our condensed consolidated balance sheets.

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

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

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

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

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

9

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________


The estimated retail value related to goods and services provided to customers without charge or upon redemption of points under our player loyalty programs, included in departmental revenues, and therefore reducing our gaming revenues, are as follows:
 
Three Months Ended
 
March 31,
(In thousands)
2019
 
2018
Food & beverage
$
53,918

 
$
42,638

Rooms
23,274

 
19,000

Other
3,466

 
2,580


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 $135.7 million and $78.1 million for the three months ended March 31, 2019 and 2018, 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 the available evidence, it is more likely than not that such assets will not be realized. Use of the term "more likely than not" indicates the likelihood of occurrence is greater than 50%. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability, the duration of statutory carryforward periods, our experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.

Other Long-Term Tax Liabilities
The Company's income tax returns are subject to examination by the Internal Revenue Service 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.


10

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

Recently Adopted Accounting Pronouncements
Accounting Standards Update ("ASU") 2018-02, Income Statement - Reporting Comprehensive Income ("Update 2018-02")
In first quarter 2018, the Company adopted ASU 2018-02 which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The effect of this change in accounting principle is to record an other comprehensive income tax effect of $0.3 million as a reduction in retained earnings on the condensed consolidated statement of changes in stockholders' equity for the three months ended March 31, 2018.

ASU 2016-02, Leases ("Update 2016-02"); ASU 2018-10, Targeted Improvements ("Update 2018-10"); ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842 ("Update ASU 2018-01"); ASU 2018-11, Codification Improvements to Topic 842, Leases ("Update 2018-11"); ASU 2019-01, Codification Improvements to Topic 842, Leases (collectively, the “Lease Standard”)
The Lease Standard provides for transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Company adopted the Lease Standard effective January 1, 2019, using the modified retrospective approach, which allows the initial application of the new guidance as of the adoption date without adjusting comparative periods presented. We elected the package of practical expedients for leases that commenced prior to the adoption date whereby we elected to not reassess (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. We also made an accounting policy election that leases with an initial term of 12 months or less are not recognized on our condensed consolidated balance sheet. Adoption of the Lease Standard resulted in the recognition of $926.7 million of ROU assets and $921.8 million of lease liabilities on our condensed consolidated balance sheet as of the date of adoption, primarily related to land, buildings and office space. The difference of $4.9 million represented deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of right-of-use assets. The adoption of the Lease Standard did not have a material impact on our condensed consolidated statements of income, stockholders’ equity and cash flows.

See Note 9, Leases, for further information regarding our leases.

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

NOTE 3.    ACQUISITIONS
Ameristar Casino Hotel Kansas City; Ameristar Casino Resort Spa St. Charles; Belterra Casino Resort; Belterra Park
On October 15, 2018, we completed the acquisition of Ameristar Casino Kansas City, LLC ("Ameristar Kansas City"), the owner and operator of Ameristar Casino Hotel Kansas City; Ameristar Casino St. Charles, LLC ("Ameristar St. Charles"), the owner and operator of Ameristar Casino Resort Spa St. Charles; Belterra Resort Indiana LLC ("Belterra Resort"), the owner and operator of Belterra Casino Resort located in Florence, Indiana; and PNK (Ohio) LLC ("Belterra Park"), the owner and operator of Belterra Park, located in Cincinnati, Ohio (collectively, the "Pinnacle Properties"), pursuant to a Membership Interest Purchase Agreement (as amended, the "Pinnacle Purchase Agreement"), dated as of December 17, 2017, as amended as of January 29, 2018 ("Amendment No. 1") and October 15, 2018 ("Amendment No. 2"), in each case by and among Boyd Gaming, Boyd TCIV, LLC, a wholly owned subsidiary of Boyd Gaming ("Boyd TCIV"), Penn National Gaming, Inc. ("Penn"), and, solely following the execution and delivery of a joinder to the Pinnacle Purchase Agreement, Pinnacle Entertainment, Inc. ("Pinnacle Entertainment") and its wholly owned subsidiary, Pinnacle MLS, LLC (collectively with Pinnacle Entertainment, "Pinnacle").
 
Pursuant to the Pinnacle Purchase Agreement, Boyd Gaming acquired from Pinnacle all of the issued and outstanding membership interests of the Acquired Companies as well as certain other assets (and assumed certain other liabilities) of Pinnacle related to the Acquired Companies (collectively, the "Pinnacle Acquisition"). Each of the Acquired Companies is now a wholly owned subsidiary of Boyd Gaming. The acquired companies are aggregated into our Midwest & South segment (See Note 12, Segment Information). The net purchase price was $568.3 million, subject to adjustments based on final working capital, cash and indebtedness of the combined properties at closing and transaction expenses.

Pursuant to the Pinnacle Purchase Agreement, Boyd TCIV entered into a Master Lease, dated October 15, 2018 (the "Master

11

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

Lease"), with Gold Merger Sub, LLC ("Gold Merger Sub"), as landlord, and Boyd TCIV, as tenant, pursuant to which the landlord agreed to lease to Boyd TCIV the real estate associated with Ameristar Kansas City, Ameristar St. Charles, Belterra Resort and Ogle Haus, LLC, a wholly owned subsidiary of Belterra Resort ("Ogle Haus"), commencing on October 15, 2018 and ending on April 30, 2026 as the initial term, with options for renewal.

The Pinnacle Acquisition occurred substantially concurrently with the acquisition of Pinnacle Entertainment by Penn pursuant to the Merger Agreement, dated December 17, 2017, by and among Pinnacle Entertainment, Penn and Franchise Merger Sub, Inc., a wholly owned subsidiary of Penn.

Concurrently with the Pinnacle Acquisition, Boyd (Ohio) PropCo, LLC, a wholly owned subsidiary of Boyd TCIV ("Boyd PropCo"), acquired the real estate associated with Belterra Park in Cincinnati, Ohio (the "Belterra Park Real Property Sale") utilizing mortgage financing from a subsidiary of Gaming and Leisure Properties, Inc. ("GLPI"), pursuant to a purchase agreement, dated December 17, 2017 ("Belterra Park Purchase Agreement"), by and among Penn, Gold Merger Sub, a wholly owned subsidiary of GLPI, Belterra Park and Pinnacle Entertainment, and a Novation and Amendment Agreement, dated October 15, 2018 (the "Novation Agreement"), by and among Penn, Gold Merger Sub, Boyd PropCo, Belterra Park and Pinnacle Entertainment. Pursuant to the Novation Agreement, Gold Merger Sub, the original purchaser under the Belterra Park Purchase Agreement, assigned, transferred and conveyed to Boyd PropCo and Boyd PropCo accepted Gold Merger Sub’s rights, title and interest in the Belterra Park Purchase Agreement.

Consideration Transferred
The fair value of the consideration transferred on the date of the Pinnacle Purchase Agreement included the purchase price of the net assets transferred. The total gross cash consideration was $607.3 million.

Status of Purchase Price Allocation
The Company is following the acquisition method of accounting per FASB Accounting Standards Codification Topic 805 ("ASC 805") guidance. For purposes of these condensed consolidated financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on preliminary estimates of fair value as determined by management with the assistance from third-party specialists. The excess of the purchase price over the preliminary estimated fair value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company has recognized the assets acquired and liabilities assumed in the acquisition based on fair value estimates as of the date of the Pinnacle Acquisition. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) is currently in process. This determination requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to finalize the determination of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. The final fair value determinations are expected to be completed during third quarter 2019. The final fair value determinations may be significantly different than those reflected in the condensed consolidated financial statements at March 31, 2019.


12

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

The following table summarizes the preliminary allocation of the purchase price:
 
Preliminary Purchase Price Allocation
(In thousands)
As of December 31, 2018
 
Adjustments
 
As of March 31, 2019
Current assets
$
64,604

 
$

 
$
64,604

Property and equipment
167,000

 
(400
)
 
166,600

Other assets
(28
)
 

 
(28
)
Intangible assets
415,400

 
(16,700
)
 
398,700

Total acquired assets
646,976

 
(17,100
)
 
629,876

 
 
 
 
 
 
Current liabilities
54,585

 

 
54,585

Other liabilities
57,832

 

 
57,832

Total liabilities assumed
112,417

 

 
112,417

Net identifiable assets acquired
534,559

 
(17,100
)
 
517,459

Goodwill
72,740

 
17,100

 
89,840

Net assets acquired
$
607,299

 
$

 
$
607,299


The following table summarizes the preliminary values assigned to acquired property and equipment and estimated useful lives:
(In thousands)
Useful Lives
 
As Recorded
Land
 
 
$
7,350

Buildings and improvements
15 - 40 years
 
89,150

Furniture and equipment
2 - 10 years
 
65,200

Construction in progress
 
 
4,900

Property and equipment acquired
 
 
$
166,600


The following table summarizes the acquired intangible assets and weighted average useful lives of definite-lived intangible assets.
(In thousands)
Useful Lives
 
As Recorded
Customer relationship
4 years
 
$
41,200

Trademark
Indefinite
 
43,000

Gaming license right
Indefinite
 
314,500

Total intangible assets acquired
 
 
$
398,700


The goodwill recognized is the excess of the purchase price over the preliminary values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to the Midwest & South reportable segment. All of the goodwill is expected to be deductible for income tax purposes.

The Company recognized $1.0 million and $0.5 million of acquisition related costs that were expensed for the three months ended March 31, 2019 and 2018, respectively. These costs are included in the consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".

Condensed Consolidated Statement of Operations for the three months ended March 31, 2019
The following supplemental information presents the financial results of the Pinnacle Properties included in the Company's condensed consolidated statement of operations for the for the three months ended March 31, 2019:

13

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

 
Three Months Ended
(In thousands)
March 31, 2019
Total revenues
$
160,558

Net income
$
12,656


Valley Forge Convention Center Partners
On September 17, 2018, we completed the acquisition of Valley Forge Convention Center Partners, L.P., the owner and operator of Valley Forge Casino Resort ("Valley Forge"), pursuant to an Agreement and Plan of Merger (as amended, the "Valley Forge Merger Agreement"), dated as of December 20, 2017, as amended as of September 17, 2018, in each case by and among Boyd, Boyd TCV, LP, a Pennsylvania limited partnership and a wholly owned subsidiary of Boyd (“Boyd TCV”), Valley Forge, and VFCCP SR LLC, a Pennsylvania limited liability company, solely in its capacity as the representative of Valley Forge’s limited partners.

Pursuant to the Valley Forge Merger Agreement, Boyd TCV merged with and into Valley Forge (the "Valley Forge Merger"), with Valley Forge surviving the merger. Valley Forge is now a wholly owned subsidiary of Boyd. Valley Forge is a modern casino and hotel in King of Prussia, Pennsylvania that offers premium accommodations, gaming, dining, entertainment and retail services, and is aggregated into our Midwest & South segment (See Note 12, Segment Information). The net purchase price was $266.6 million.

Consideration Transferred
The fair value of the consideration transferred on the date of the Valley Forge Merger included the purchase price of the net assets transferred. The total gross consideration was $291.4 million.

Status of Purchase Price Allocation
The Company is following the acquisition method of accounting per ASC 805 guidance. For purposes of these condensed consolidated financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on preliminary estimates of fair value as determined by management based on its judgment. The excess of the purchase price over the preliminary estimated fair value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company has recognized the assets acquired and liabilities assumed in the acquisition based on fair value estimates as of the date of the Valley Forge Merger. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) is currently in process. This determination requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to finalize the determination of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. The final fair value determinations are expected to be completed during second quarter 2019. The final fair value determinations may be significantly different than those reflected in the condensed consolidated financial statements at March 31, 2019.


14

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

The following table summarizes the preliminary allocation of the purchase price:
 
Preliminary Purchase Price Allocation
(In thousands)
As of December 31, 2018
 
Adjustments
 
As of March 31, 2019
Current assets
$
29,909

 
$

 
$
29,909

Property and equipment
56,500

 

 
56,500

Other assets
483

 
2,702

 
3,185

Intangible assets
148,600

 
(12,000
)
 
136,600

Total acquired assets
235,492

 
(9,298
)
 
226,194

 
 
 
 
 
 
Current liabilities
12,968

 

 
12,968

Other liabilities
606

 

 
606

Total liabilities assumed
13,574

 

 
13,574

Net identifiable assets acquired
221,918

 
(9,298
)
 
212,620

Goodwill
69,446

 
9,298

 
78,744

Net assets acquired
$
291,364

 
$

 
$
291,364


The following table summarizes the preliminary values assigned to acquired property and equipment and estimated useful lives:
(In thousands)
Useful Lives
 
As Recorded
Land
 
 
$
15,200

Buildings and improvements
15 - 40 years
 
32,900

Furniture and equipment
2 - 6 years
 
7,971

Construction in progress
 
 
429

Property and equipment acquired
 
 
$
56,500


The following table summarizes the acquired intangible assets and weighted average useful lives of definite-lived intangible assets.
(In thousands)
Useful Lives
 
As Recorded
Customer relationship
5 years
 
$
16,100

Trademark
Indefinite
 
12,500

Gaming license right
Indefinite
 
108,000

Total intangible assets acquired
 
 
$
136,600



The goodwill recognized is the excess of the purchase price over the preliminary values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to the Midwest & South reportable segment. All of the goodwill is expected to be deductible for income tax purposes.

The Company recognized $0.3 million and $0.4 million of acquisition related costs that were expensed for the three months ended March 31, 2019 and 2018, respectively. These costs are included in the condensed consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".


15

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

Condensed Consolidated Statement of Operations for the three months ended March 31, 2019
The following supplemental information presents the financial results of Valley Forge included in the Company's condensed consolidated statement of operations for the three months ended March 31, 2019:
 
Three Months Ended
(In thousands)
March 31, 2019
Total revenues
$
41,191

Net income
$
6,828


Lattner Entertainment Group Illinois
On June 1, 2018, we completed the acquisition of Lattner Entertainment Group Illinois, LLC ("Lattner"), a distributed gaming operator headquartered in Ottawa, Illinois, pursuant to an Agreement and Plan of Merger (the "Lattner Merger Agreement") dated as of May 1, 2018, by and among Boyd, Boyd TCVI Acquisition, LLC, a wholly owned subsidiary of Boyd ("Boyd TCVI"), Lattner, and Lattner Capital, LLC, solely in its capacity as the representative of the equity holders of Lattner.

Pursuant to the Lattner Merger Agreement, Boyd TCVI merged with and into Lattner (the "Lattner Merger"), with Lattner surviving the Lattner Merger and becoming a wholly owned subsidiary of Boyd. Lattner operates nearly 1,000 gaming units in approximately 220 locations across the state of Illinois and is aggregated into our Midwest & South segment (See Note 12, Segment Information). The net purchase price was $100.0 million.

Consideration Transferred
The fair value of the consideration transferred on the date of the Lattner Merger included the purchase price of the net assets transferred. The total gross consideration was $110.5 million.

Status of Purchase Price Allocation
The Company is following the acquisition method of accounting per ASC 805 guidance. For purposes of these condensed consolidated financial statements, we have allocated the purchase price to the assets acquired and the liabilities assumed based on preliminary estimates of fair value as determined by management based on its judgment. The excess of the purchase price over the preliminary estimated fair value of the assets acquired and liabilities assumed has been recorded as goodwill. The Company has recognized the assets acquired and liabilities assumed in the acquisition based on fair value estimates as of the date of the Lattner Merger. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) is currently in process. This determination requires significant judgment. As such, management has not completed its valuation analysis and calculations in sufficient detail necessary to finalize the determination of the fair value of the assets acquired and liabilities assumed, along with the related allocations of goodwill and intangible assets. The final fair value determinations are expected to be completed during second quarter 2019. The final fair value determinations may be significantly different than those reflected in the condensed consolidated financial statements at March 31, 2019.


16

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

The following table summarizes the preliminary allocation of the purchase price:
 
Preliminary Purchase Price Allocation
(In thousands)
As of December 31, 2018
 
Adjustments
 
As of March 31, 2019
Current assets
$
10,638

 
$

 
$
10,638

Property and equipment
9,307

 

 
9,307

Other assets
1,963

 

 
1,963

Intangible assets
58,000

 

 
58,000

Total acquired assets
79,908

 

 
79,908

 
 
 
 
 
 
Current liabilities
1,062

 

 
1,062

Total liabilities assumed
1,062

 

 
1,062

Net identifiable assets acquired
78,846

 

 
78,846

Goodwill
31,692

 

 
31,692

Net assets acquired
$
110,538

 
$

 
$
110,538


The following table summarizes the preliminary values assigned to acquired property and equipment and estimated useful lives:
(In thousands)
Useful Lives
 
As Recorded
Buildings and improvements
10 - 45 years
 
$
66

Furniture and equipment
3 - 7 years
 
9,241

Property and equipment acquired
 
 
$
9,307


The following table summarizes the acquired intangible asset and weighted average useful lives of the definite-lived intangible asset.
(In thousands)
Useful Lives
 
As Recorded
Host agreements
15 years
 
$
58,000

Total intangible assets acquired
 
 
$
58,000


The goodwill recognized is the excess of the purchase price over the preliminary values assigned to the assets acquired and liabilities assumed. All of the goodwill was assigned to the Midwest & South reportable segment. All of the goodwill is expected to be deductible for income tax purposes.

The Company recognized $0.2 million of acquisition related costs that were expensed for the three months ended March 31, 2019. There were no acquisition related costs expensed for the three months ended March 31, 2018. These costs are included in the condensed consolidated statements of operations in the line item entitled "Project development, preopening and writedowns".

We have not provided the amount of revenue and earnings included in our consolidated financial results from the Lattner acquisition for the period subsequent to its acquisition as such amounts are not material three months ended March 31, 2019.

Supplemental Unaudited Pro Forma Information
The following table presents pro forma results of the Company, as though Lattner, Valley Forge and the Pinnacle Properties (the "Acquired Companies") had been acquired as of January 1, 2018. The pro forma results do not necessarily represent the results that may occur in the future. The pro forma amounts include the historical operating results of the Company, Lattner, Valley Forge and the Pinnacle Properties, prior to the acquisition, with adjustments directly attributable to the acquisitions.


17

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

 
Three Months Ended March 31, 2018
(In thousands)
Boyd Gaming Corporate (As Reported)
 
Acquired Companies
 
Boyd Gaming Corporate (Pro Forma)
Total revenues
$
606,118

 
$
209,716

 
$
815,834

Net income from continuing operations, net of tax
$
41,399

 
$
3,446

 
$
44,845

Basic net income per share
$
0.36

 
 
 
$
0.39

Diluted net income per share
$
0.36

 
 
 
$
0.39


Pro Forma and Other Adjustments
The unaudited pro forma results, as presented above, include adjustments to record: (i) rent expense under the Master Lease; (ii) the net incremental depreciation expense for the adjustment of property and equipment to fair value and the allocation of a portion of the purchase price to amortizing intangible assets; (iii) the increase in interest expense incurred on the incremental borrowings incurred by Boyd to fund the acquisition, including the Belterra Park Mortgage; (iv) the estimated tax effect of the pro forma adjustments and on the historical taxable income of the Acquired Companies; and (v) miscellaneous adjustments as a result of the preliminary purchase price allocation on the amortization of certain assets and liabilities.

NOTE 4.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
 
March 31,
 
December 31,
(In thousands)
2019
 
2018
Land
$
327,506

 
$
316,590

Buildings and improvements
3,091,773

 
3,084,337

Furniture and equipment
1,519,582

 
1,480,917

Riverboats and barges
239,452

 
240,507

Construction in progress
97,660

 
66,752

Total property and equipment
5,275,973

 
5,189,103

Less accumulated depreciation
2,533,055

 
2,473,039

Property and equipment, net
$
2,742,918

 
$
2,716,064


Depreciation expense is as follows:
 
Three Months Ended
 
March 31,
(In thousands)
2019
 
2018
Depreciation expense
$
60,045

 
$
50,146



18

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

NOTE 5.    INTANGIBLE ASSETS, NET
Intangible assets, net consist of the following:
 
March 31, 2019
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles
 
 
 
 
 
 
 
 
 
Customer relationships
4.0 years
 
$
66,700

 
$
(21,062
)
 
$

 
$
45,638

Favorable lease rates
36.8 years
 
11,730

 
(3,358
)
 

 
8,372

Development agreement
 
21,373

 

 

 
21,373

Host agreements
14.2 years
 
58,000

 
(3,222
)
 

 
54,778

 
 
 
157,803

 
(27,642
)
 

 
130,161

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets
 
 
 
 
 
 
 
 
 
Trademarks
Indefinite
 
207,387

 

 
(4,300
)
 
203,087

Gaming license rights
Indefinite
 
1,321,685

 
(33,960
)
 
(179,974
)
 
1,107,751

 
 
 
1,529,072

 
(33,960
)
 
(184,274
)
 
1,310,838

Balance, March 31, 2019
 
 
$
1,686,875

 
$
(61,602
)
 
$
(184,274
)
 
$
1,440,999


 
December 31, 2018
 
Weighted
 
Gross
 
 
 
Cumulative
 
 
 
Average Life
 
Carrying
 
Cumulative
 
Impairment
 
Intangible
(In thousands)
Remaining
 
Value
 
Amortization
 
Losses
 
Assets, Net
Amortizing intangibles
 
 
 
 
 
 
 
 
 
Customer relationships
7.3 years
 
$
65,400

 
$
(15,113
)
 
$

 
$
50,287

Favorable lease rates
37.0 years
 
11,730

 
(3,302
)
 

 
8,428

Development agreement
 
21,373

 

 

 
21,373

Host agreements
14.4 years
 
58,000

 
(2,256
)
 

 
55,744

 
 
 
156,503

 
(20,671
)
 

 
135,832

 
 
 
 
 
 
 
 
 
 
Indefinite lived intangible assets
 
 
 
 
 
 
 
 
 
Trademarks
Indefinite
 
207,387

 

 
(4,300
)
 
203,087

Gaming license rights
Indefinite
 
1,341,685

 
(33,960
)
 
(179,974
)
 
1,127,751

 
 
 
1,549,072

 
(33,960
)
 
(184,274
)
 
1,330,838

Balance, December 31, 2018
 
 
$
1,705,575

 
$
(54,631
)
 
$
(184,274
)
 
$
1,466,670



19

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

NOTE 6.    ACCRUED LIABILITIES
Accrued liabilities consist of the following:
 
March 31,
 
December 31,
(In thousands)
2019
 
2018
Payroll and related expenses
$
79,895

 
$
85,532

Interest
50,031

 
35,734

Gaming liabilities
61,002

 
59,823

Player loyalty program liabilities
27,032

 
25,251

Advance deposits
26,032

 
21,687

Outstanding chip liabilities
5,641

 
7,449

Dividend payable
6,683

 
6,705

Operating lease liabilities
63,815

 

Other accrued liabilities
92,758

 
91,994

Total accrued liabilities
$
412,889

 
$
334,175


NOTE 7.    LONG-TERM DEBT
Long-term debt, net of current maturities and debt issuance costs, consists of the following:
 
 
 
March 31, 2019
 
 
 
 
 
 
 
Unamortized
 
 
 
Interest
 
 
 
 
 
Origination
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Fees and
 
Long-Term
(In thousands)
Mar. 31, 2019
 
Principal
 
Discount
 
Costs
 
Debt, Net
Bank credit facility
4.649
%
 
$
1,739,356

 
$
(1,218
)
 
$
(20,390
)
 
$
1,717,748

6.875% senior notes due 2023
6.875
%
 
750,000

 

 
(7,262
)
 
742,738

6.375% senior notes due 2026
6.375
%
 
750,000

 

 
(9,263
)
 
740,737

6.000% senior notes due 2026
6.000
%
 
700,000

 

 
(10,290
)
 
689,710

Other
11.023
%
 
58,572

 

 

 
58,572

Total long-term debt
 
 
3,997,928

 
(1,218
)
 
(47,205
)
 
3,949,505

Less current maturities
 
 
26,986

 

 

 
26,986

Long-term debt, net
 
 
$
3,970,942

 
$
(1,218
)
 
$
(47,205
)
 
$
3,922,519


 
 
 
December 31, 2018
 
 
 
 
 
 
 
Unamortized
 
 
 
Interest
 
 
 
 
 
Origination
 
 
 
Rates at
 
Outstanding
 
Unamortized
 
Fees and
 
Long-Term
(In thousands)
Dec. 31, 2018
 
Principal
 
Discount
 
Costs
 
Debt, Net
Bank credit facility
4.651
%
 
$
1,771,330

 
$
(1,286
)
 
$
(21,515
)
 
$
1,748,529

6.875% senior notes due 2023
6.875
%
 
750,000

 

 
(7,701
)
 
742,299

6.375% senior notes due 2026
6.375
%
 
750,000

 

 
(9,594
)
 
740,406

6.000% senior notes due 2026
6.000
%
 
700,000

 

 
(10,639
)
 
689,361

Other
11.010
%
 
58,705

 

 

 
58,705

Total long-term debt
 
 
4,030,035

 
(1,286
)
 
(49,449
)
 
3,979,300

Less current maturities
 
 
24,181

 

 

 
24,181

Long-term debt, net
 
 
$
4,005,854

 
$
(1,286
)
 
$
(49,449
)
 
$
3,955,119



20

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

The outstanding principal amounts under our existing bank credit facility are comprised of the following:
 
March 31,
 
December 31,
(In thousands)
2019
 
2018
Revolving Credit Facility
$
315,000

 
$
320,000

Term A Loan
244,838

 
248,351

Refinancing Term B Loans
1,149,518

 
1,152,679

Swing Loan
30,000

 
50,300

Total outstanding principal amounts under the bank credit facility
$
1,739,356

 
$
1,771,330


At March 31, 2019, approximately $1.7 billion was outstanding under the bank credit facility. With a total revolving credit commitment of $945.5 million available under the bank credit facility, $315.0 million was borrowed on the Revolving Credit Facility, $30.0 million was borrowed on the Swing Loan and $12.7 million allocated to support various letters of credit, leaving a remaining contractual availability of $587.8 million as of March 31, 2019.

Covenant Compliance
As of March 31, 2019, we believe that we were in compliance with the financial and other covenants of our debt instruments.

NOTE 8.    COMMITMENTS AND CONTINGENCIES
Commitments
As of March 31, 2019, 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, 2018, as filed with the SEC on March 1, 2019.

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.

NOTE 9.    LEASES
We have operating and finance leases primarily for three casino hotel properties, corporate offices, parking ramps, gaming and other equipment. Our leases have remaining lease terms of 1 year to 59 years, some of which include options to extend the leases for up to 67 years, and some of which include options to terminate the leases within 1 year. Certain of our lease agreements, including the Master lease, include provisions for variable lease payments, which represent lease payments that vary due to changes in facts or circumstances occurring after the commencement date other than the passage of time. Such variable lease payments are expensed in the period in which the obligation for these payments is incurred. Variable lease expense recognized in the three months ended March 31, 2019 was not material.

The components of lease expense were as follows:
 
 
Three Months Ended
(In thousands)
 
March 31, 2019
Operating lease cost
 
$
29,635

Short-term lease cost
 
336


21

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________


Supplemental cash flow information related to leases was as follows:
 
 
Three Months Ended
(In thousands)
 
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows from operating leases
 
$
29,720

 
 
 
Right-of-use assets obtained in exchange for lease obligations:
 
 
Operating leases
 
3,710


Supplemental balance sheet information related to leases was as follows:
(In thousands, except lease term and discount rate)
 
March 31, 2019
Operating Leases
 
 
Operating lease right-of-use assets
 
$
919,583

 
 
 
Current lease liabilities (included in accrued liabilities)
 
$
63,815

Operating lease liabilities
 
855,768

Total operating lease liabilities
 
$
919,583

 
 
 
Weighted Average Remaining Lease Term
 
 
Operating leases
 
20.2 years

 
 
 
Weighted Average Discount Rate
 
 
Operating leases
 
9.3
%

Maturities of lease liabilities were as follows:
 
 
 
(In thousands)
 
Operating Leases
For the period ending December 31,
 
 
Last three quarters of 2019
 
$
109,753

2020
 
138,789

2021
 
115,046

2022
 
112,981

2023
 
111,604

Thereafter
 
1,375,942

Total lease payments
 
1,964,115

Less imputed interest
 
(980,717
)
Less current portion (included in accrued liabilities)
 
(63,815
)
Long-term portion of operating lease liabilities
 
$
919,583


NOTE 10.    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 (the "2008 Plan"). On December 12, 2018, our Board of Directors authorized a new share repurchase program of $100 million which is in addition to the existing repurchase authorization (the "2018 Plan"). As of March 31, 2019, the 2008 Plan was fully depleted and $78.9 million remained under the 2018 Plan. 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.

22

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________


The following table provides information regarding share repurchases during the referenced periods.(1) 
 
Three Months Ended
 
March 31,
(In thousands, except per share data)
2019
 
2018
Shares repurchased (2)
830

 
559

Total cost, including brokerage fees
$
21,653

 
$
19,803

Average repurchase price per share (3)
$
26.09

 
$
35.42

(1) Shares repurchased reflect repurchases settled during the three months ended March 31, 2019 and 2018.
(2) All shares repurchased have been retired and constitute authorized but unissued shares.
(3) Amounts 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.

The dividends declared by the Board under this program and reflected in the periods presented are:
Declaration date
 
Record date
 
Payment date
 
Amount per share
December 7, 2017
 
December 28, 2017
 
January 15, 2018
 
$0.05
March 2, 2018
 
March 16, 2018
 
April 15, 2018
 
0.05
December 7, 2018
 
December 28, 2018
 
January 15, 2019
 
0.06
March 4, 2019
 
March 15, 2019
 
April 15, 2019
 
0.06

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

The following table provides classification detail of the total costs related to our share-based employee compensation plans reported in our condensed consolidated statements of operations.
 
Three Months Ended
 
March 31,
(In thousands)
2019
 
2018
Gaming
$
194

 
$
172

Food & beverage
37

 
33

Room
18

 
15

Selling, general and administrative
988

 
872

Corporate expense
8,472

 
7,835

Total share-based compensation expense
$
9,709

 
$
8,927


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.

23

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

The PSU grants awarded in fourth quarter 2015 and 2014 vested during first quarter 2019 and 2018, 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 October 2015 resulted in a total of 395,964 shares being issued during first quarter 2019, representing approximately 1.67 shares per PSU. Of the 395,964 shares issued, a total of 125,004 were surrendered by the participants for payroll taxes, resulting in a net issuance of 270,960 shares due to the vesting of the 2015 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2018; therefore, the vesting of the PSUs did not impact compensation costs in our 2019 condensed consolidated statement of operations.

The PSU grant awarded in December 2014 resulted in a total of 486,805 shares being issued during first quarter 2018, representing approximately 1.57 shares per PSU. Of the 486,805 shares issued, a total of 149,268 were surrendered by the participants for payroll taxes, resulting in a net issuance of 337,537 shares due to the vesting of the 2014 grant. The actual achievement level under the award metrics equaled the estimated performance as of year-end 2017; therefore, the vesting of the PSUs did not impact compensation costs in our 2018 condensed consolidated statement of operations.

NOTE 11.     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 (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:
 
March 31, 2019
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
247,681

 
$
247,681

 
$

 
$

Restricted cash
24,951

 
24,951

 

 

Investment available for sale
16,452

 

 

 
16,452

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent payments
$
2,280

 
$

 
$

 
$
2,280



24

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

 
December 31, 2018
(In thousands)
Balance
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
249,417

 
$
249,417

 
$

 
$

Restricted cash
23,785

 
23,785

 

 

Investment available for sale
15,772

 

 

 
15,772

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent payments
$
2,407

 
$

 
$

 
$
2,407


Cash and Cash Equivalents and Restricted Cash
The fair values 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 March 31, 2019 and December 31, 2018.

Investment Available for Sale
We have an investment in a single municipal bond issuance of $20.0 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 March 31, 2019 and December 31, 2018 is a discount rate of 11.0% and 11.2%, 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 both March 31, 2019 and December 31, 2018, $0.5 million 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 March 31, 2019 and December 31, 2018, $15.9 million and $15.3 million, respectively, is included in other assets on the condensed consolidated balance sheets. The discount associated with this investment of $2.8 million as of both March 31, 2019 and December 31, 2018, 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.

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 March 31, 2019 and December 31, 2018, is a discount rate of 6.9% and 6.8%, respectively. At March 31, 2019 and December 31, 2018, there was a current liability of $0.9 million and $0.8 million, respectively, related to this agreement, which is recorded in accrued liabilities on the respective condensed consolidated balance sheets, and long-term obligation at March 31, 2019 and December 31, 2018, of $1.4 million and $1.6 million, respectively, which is included in other liabilities on the respective condensed consolidated balance sheets.


25

BOYD GAMING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
as of March 31, 2019 and December 31, 2018 and for the three months ended March 31, 2019 and 2018
______________________________________________________________________________________________________

The following tables summarize the changes in fair value of the Company's Level 3 assets and liabilities:
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
 
Assets
 
Liability
 
Assets
 
Liability
(In thousands)
Investment
Available for
Sale
 
Contingent
Payments
 
Investment
Available for
Sale
 
Contingent
Payments
Balance at beginning of reporting period
$
15,772

 
$
(2,407
)
 
$
17,752

 
$
(2,887
)
Total gains (losses) (realized or unrealized):
 
 
 
 
 
 
 
Included in interest income (expense)
37

 
(39
)
 
36

 
(62
)
Included in other comprehensive income (loss)
643

 

 
(1,334
)
 

Included in other items, net

 
(66
)
 

 
(82
)
Purchases, sales, issuances and settlements:
 
 
 
 
 
 
 
Settlements

 
232

 

 
218

Balance at end of reporting period
$
16,452

 
$
(2,280
)
 
$
16,454

 
$
(2,813
)

We are exposed to valuation risk on our Level 3 financial instruments. We estimate our risk exposure using a sensitivity analysis of potential changes in the significant unobservable inputs of our fair value measurements. Our Level 3 financial instruments are most susceptible to valuation risk caused by changes in the discount rate. If the discount in our fair value measurements increased or decreased by 100 basis points, the change would not cause the value of our fair value measurements to change significantly.

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:
 
March 31, 2019
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
29,431

 
$
24,128

 
$
29,141

 
Level 3

 
December 31, 2018
(In thousands)
Outstanding Face Amount
 
Carrying Value
 
Estimated Fair Value
 
Fair Value Hierarchy
Liabilities
 
 
 
 
 
 
 
Obligation under assessment arrangements
$
29,943

 
$
24,477

 
$
29,591

 
Level 3

The following tables provide the fair value measurement information about our long-term debt:
 
March 31, 2019
(In thousands)
Outstanding Face Amount
 
Carrying Value