BOYD GAMING CORP (Form: 10-K, Received: 03/14/2006 16:08:25)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2005

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

Commission file number: 1-12882

BOYD GAMING CORPORATION

(Exact name of registrant as specified in its charter)

Nevada

88-0242733

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2950 Industrial Road, Las Vegas NV 89109

(Address of principal executive offices) (Zip Code)

(702) 792-7200

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, Par Value $.01 Per Share		New York Stock Exchange
8.75% Senior Subordinated Notes Due 2012		New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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 than 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 ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨

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

As of June 30, 2005, the aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price on the New York Stock Exchange for such date, was approximately $2,192,000,000.

As of February 28, 2006, the Registrant had outstanding 89,295,825 shares of Common Stock.

Documents Incorporated by Reference

Portions of the definitive Proxy Statement for the Registrant’s 2006 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days after the Registrant’s fiscal year end of December 31, 2005 are incorporated by reference into Part III of this report.

Boyd Gaming Corporation 2005 Annual Report on Form 10-K

Table of Contents


		Page No.
PART I
ITEM 1.	Business	1
ITEM 1A.	Risk Factors	6
ITEM 1B.	Unresolved Staff Comments	12
ITEM 2.	Properties	12
ITEM 3.	Legal Proceedings	12
ITEM 4.	Submission of Matters to a Vote of Security Holders	13
ITEM 4A.	Executive Officers of the Registrant	13

PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
ITEM 6.	Selected Consolidated Financial Data	14
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
ITEM 7A.	Quantitative and Qualitative Disclosure about Market Risk	31
ITEM 8.	Financial Statements and Supplementary Data	32
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32
ITEM 9A.	Controls and Procedures	32
ITEM 9B.	Other Information	34

PART III
ITEM 10.	Directors and Executive Officers of the Registrant	34
ITEM 11.	Executive Compensation	34
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
ITEM 13.	Certain Relationships and Related Transactions	34
ITEM 14.	Principal Accounting Fees and Services	34

PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	35

Signature Page		69

Part I

ITEM 1. Business

Overview

We are a multi-jurisdictional gaming company that has been operating for approximately 30 years. Our 18 wholly-owned casino facilities, which we operate, are located in nine distinct gaming markets in five states. As of December 31, 2005, we owned an aggregate of approximately 969,500 square feet of casino space, containing 26,751 slot machines and 626 table games. We derive the majority of our gross revenues from our gaming operations, which produced 74%, 75% and 77%, respectively, of gross revenues for the years ended December 31, 2005, 2004 and 2003. Food and beverage revenues, which produced 13.2%, 12.9% and 11.9%, respectively, of gross revenues for the years ended December 31, 2005, 2004 and 2003, represent the only other revenue source which produced more than 10% of gross revenues during these periods.

On July 1, 2004, we consummated a $1.3 billion merger with Coast Casinos, Inc., or Coast, pursuant to which Coast became a wholly-owned subsidiary of Boyd Gaming Corporation. The Coast stockholders received approximately $482 million in cash, and the Coast stock and option holders received approximately 19.4 million shares of our common stock. In connection with the merger, we refinanced substantially all of Coast’s debt.

On May 19, 2004, we acquired all of the outstanding limited and general partnership interests of the partnership that owns the Shreveport Hotel and Casino in Shreveport, Louisiana, for approximately $197 million. After the acquisition, we renamed the property Sam’s Town Hotel and Casino, and we refer to the property as Sam’s Town Shreveport.

We and MGM MIRAGE each own 50% of a limited liability company that owns and operates Borgata Hotel Casino and Spa, a $1.1 billion destination resort located at Renaissance Pointe in Atlantic City, New Jersey. Borgata commenced operations on July 3, 2003.

We are subject to a variety of regulations in the jurisdictions in which we operate and we are required to be licensed by certain authorities in order to conduct gaming operations. A more detailed description of the regulations to which we are subject is contained in Exhibit 99.1 to this Annual Report on Form 10-K, which exhibit is incorporated herein by reference.

For further information related to our segment information for revenues, net income and total assets as of and for the three years in the period ended December 31, 2005, see Note 17 to our Consolidated Financial Statements presented at Item 15, “Exhibits and Financial Statement Schedules.”

Business Strategy and Competitive Strengths

We believe that the following factors have contributed to our success in the past and are central to our future success:

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we emphasize slot revenues, the most consistently profitable segment of the gaming industry;

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we have comprehensive marketing and promotion programs;

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seven of our properties are well-positioned to capitalize on the Las Vegas locals market, making us a leader in one of the strongest and fastest-growing gaming markets in the United States;

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our downtown Las Vegas properties focus their marketing programs on, and derive a majority of their revenues from, a unique niche — customers from Hawaii;

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our operations are geographically diversified;

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we have the ability to develop new and expand certain existing properties;

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we make opportunistic acquisitions; and

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we have an experienced management team.

Properties

The following table sets forth certain information regarding our wholly-owned properties (listed by the segment in which each such property is reported) and Borgata as of and for the year ended December 31, 2005.


	Year Opened or Acquired	Casino Space (Sq. Ft.)	Slot Machines	Table Games	Hotel Rooms	Land (Acres)	Hotel Occupancy		Average Daily Rate
BOULDER STRIP, Nevada
Sam’s Town Hotel and Gambling Hall	1979	133,000	3,035	40	648	63	96	%	$	53
Eldorado Casino	1993	16,000	498	6	—	4	—			—
Jokers Wild Casino	1993	22,500	518	7	—	14	—			—

COAST CASINOS, Nevada Barbary Coast Hotel and Casino	2004	30,000	590	36	197	4	93	%	$	80
Gold Coast Hotel and Casino	2004	87,000	2,057	54	711	26	94	%	$	58
The Orleans Hotel and Casino	2004	135,000	3,102	68	1,885	77	95	%	$	73
Suncoast Hotel and Casino	2004	82,000	2,434	52	419	49	87	%	$	90
South Coast Hotel and Casino	2005	80,000	2,366	52	647	53	78	%	$	98

LAS VEGAS STRIP, Nevada Stardust Resort and Casino	1985	75,000	1,299	57	1,552	72	93	%	$	62

DOWNTOWN LAS VEGAS, Nevada California Hotel and Casino	1975	36,000	1,104	34	781	16	94	%	$	32
Fremont Hotel and Casino	1985	32,000	1,090	25	447	2	93	%	$	34
Main Street Station Casino, Brewery and Hotel	1993	28,500	900	19	406	15	95	%	$	36

CENTRAL REGION
Mississippi
Sam’s Town Hotel and Gambling Hall	1994	75,000	1,358	39	1,070	272	69	%	$	49
Illinois
Par-A-Dice Hotel Casino	1996	26,000	1,130	24	208	20	89	%	$	54
Indiana
Blue Chip Hotel and Casino	1999	42,500	1,719	47	184	37	98	%	$	54
Louisiana
Treasure Chest Casino	1997	24,000	967	40	—	14	—			—
Delta Downs Racetrack Casino & Hotel	2001	15,000	1,462	—	206	211	79	%	$	59
Sam’s Town Hotel and Casino	2004	30,000	1,122	26	514	18	92	%	$	89
Total of wholly-owned properties		969,500	26,751	626	9,875	967
Atlantic City, New Jersey
Borgata Hotel Casino and Spa ⁽¹⁾	2003	124,000	3,572	133	2,000	42	95	%	$	133

⁽¹⁾	Borgata is our 50% joint venture with MGM MIRAGE.

In addition to the properties discussed above, we own and operate a travel agency located in Hawaii, a Hawaiian-based insurance company that underwrites travel-related insurance, and an offsite sports book located in Las Vegas. In 2005, the limited partnership formed our development project in Pennsylvania, in which we are the general partner and have an ownership interest of 90%, submitted gaming applications seeking selection to apply for a gaming license. Also, we have recently organized other entities for the development of Echelon Place.

Las Vegas Locals — Boulder Strip Properties

Sam’s Town Hotel and Gambling Hall

Sam’s Town Hotel and Gambling Hall (“Sam’s Town Las Vegas”) is located on the Boulder Strip, approximately six miles east of the Las Vegas Strip and features a contemporary western theme. Its informal, friendly atmosphere appeals to both local residents and visitors alike. Gaming, bowling and live entertainment create a social center that attracts many Las Vegas residents. By offering excellent values in its food and beverage operations as well as slot marketing programs that include generous slot payouts, Sam’s Town Las Vegas has generated repeat customer business. The popularity of Sam’s Town Las Vegas among local residents has allowed it to benefit from the rapid development of the Las Vegas metropolitan area, which has been one of the fastest growing cities in the United States over the last decade.

Eldorado Casino and Jokers Wild Casino

Located in downtown Henderson Nevada, the Eldorado is approximately 14 miles from the Las Vegas Strip. Jokers Wild is also located in Henderson, Nevada. The amenities at each of these properties include keno, a sports book, and multiple dining options. The principal customers of these properties are Henderson residents.

Las Vegas — Coast Casinos Properties

Barbary Coast Hotel and Casino

Barbary Coast is located on the Las Vegas Strip at the intersection of Flamingo Road and Las Vegas Boulevard, one of the busiest intersections on the Strip. Historically, Barbary Coast has relied on foot traffic on the Las Vegas Strip for a significant amount of its revenues. As a result, Barbary Coast’s primary customer base is visitors to the Las Vegas area. In addition to its favorable location on the Strip, Barbary Coast has also benefited from its more intimate gaming atmosphere, allowing it to develop a loyal base of table games and slot customers. Barbary Coast is furnished and decorated in an elegant turn-of-the-century Victorian theme and features three restaurants: Michael’s gourmet restaurant, Drai’s on the Strip (leased to and operated by a third party) and the Victorian Room.

Gold Coast Hotel and Casino

Gold Coast is located on West Flamingo Road, approximately one mile west of the Las Vegas Strip and one-quarter mile west of Interstate 15, the major highway linking Las Vegas and Southern California. Its location offers easy access from all four directions in the Las Vegas valley. The primary target market for Gold Coast consists of local middle-market customers who gamble frequently. Gold Coast amenities include multiple restaurant options, a 70-lane bowling center and banquet and meeting space.

The Orleans Hotel and Casino

The Orleans is located on Tropicana Avenue, a short distance from the Las Vegas Strip and McCarran International Airport. The target markets for The Orleans are both local residents and visitors to the Las Vegas area. The Orleans provides an upscale, off-Strip experience in an exciting New Orleans French Quarter-themed environment. Amenities at The Orleans include a spa and fitness center, 18 stadium-seating movie theaters, a 70-lane bowling center, banquet and meeting space and a special events arena that seats up to 9,500 patrons.

In the fourth quarter of 2004, we completed the construction of a new hotel tower at The Orleans. The project included 461 hotel rooms, which increased the total number of hotel rooms to 1,885, and a remodeled and expanded swimming pool area.

Suncoast Hotel and Casino

Suncoast is located in Peccole Ranch, a master-planned community adjacent to Summerlin, one of the fastest growing areas of the Las Vegas valley. Suncoast is located at the intersection of Rampart Boulevard and Alta Drive, readily accessible from most major points in Las Vegas, including downtown (approximately eight miles) and the Strip (approximately nine miles). The primary target market for Suncoast consists of local middle-market customers who gamble frequently. Suncoast is a Mediterranean-themed facility whose features include 25,000 square feet of banquet and meeting facilities, 16 stadium-seating movie theatres and a 64-lane bowling center.

Construction is underway for a competitor’s hotel casino that is approximately three miles away from Suncoast. In April 2006, when this new casino is expected to open, it will compete directly with Suncoast and could have a material adverse impact on the operations of Suncoast.

South Coast Hotel and Casino

On December 22, 2005, we opened South Coast, a new hotel-casino that is located on approximately 53 acres on Las Vegas Boulevard South, adjacent to Interstate 15, and approximately five miles south of Mandalay Bay Resort and Casino. Amenities at South Coast include a 16-screen movie theater, a 64-lane bowling center, a race and sports book, and meeting and banquet space. A 4,400 seat equestrian and events center and an exhibit hall opened in February 2006. A second hotel tower comprised of approximately 695 rooms, a spa and fitness center, and swimming pool area are currently under construction, and are expected to open in the second quarter of 2006.

Las Vegas Strip — Stardust Resort and Casino

In January 2006, we announced redevelopment plans for the land on which Stardust is currently located. We plan to build Echelon Place, a $4.0 billion destination resort, on 63 acres of land on the Las Vegas Strip. We intend to continue to operate the Stardust through 2006 as we move forward with Echelon Place’s design and permitting process and thereafter to close and demolish the Stardust as we commence construction of Echelon Place. For more information about the Echelon Place project, see “ Management’s Discussion and Analysis of Financial Position and Results of Operations — Projects — Echelon Place .”

The Stardust is a casino hotel complex located on the Las Vegas Strip and distinguished by its dramatic building lighting. The Stardust amenities include a conference center, a special event pavilion/exhibit center, and a sports book that is the home of the Stardust line, a sports line service that is quoted throughout the United States and abroad. The property caters primarily to adult Las Vegas visitors seeking the classic Las Vegas gaming experience. Using its extensive database, the property promotes customer loyalty and generates repeat customer business by communicating with its customers regarding special events, new product offerings and special incentive promotions at the property. The Stardust uses a network of tour operators and wholesalers to reach customers who prefer packaged trips, and print and broadcast media to attract the independent traveler. Patrons of the property are primarily from Southern California, Arizona and the Midwest.

Downtown Las Vegas Properties

Our Unique Downtown Niche.

We have developed a distinct niche for our downtown properties by focusing on customers from Hawaii. Our marketing strategy for the downtown properties targets gaming enthusiasts from Hawaii and tour and travel agents in Hawaii with whom we have cultivated relationships since we opened the California in 1975. Through our Hawaiian travel agency, Vacations Hawaii, we currently operate six charter flights from Honolulu to Las Vegas each week, helping to ensure a stable supply of reasonably priced air seats. Vacations Hawaii operates with an agreement with Omni Air International to provide direct air service from Hawaii to Las Vegas. We also have strong, informal relationships with other Hawaiian travel agencies and offer affordable all-inclusive packages. These relationships combined with our Hawaiian promotions have allowed the California, the Fremont and Main Street Station to capture a significant share of the Hawaiian tourist trade in Las Vegas. For the year ended December 31, 2005, patrons from Hawaii comprised approximately 70% of the occupied room nights at the California, 61% of the occupied room nights at the Fremont and 59% of the occupied room nights at Main Street Station.

California Hotel and Casino and Main Street Station Casino, Brewery and Hotel

Although the California and Main Street Station are separate hotel casinos located in downtown Las Vegas, they are connected by an indoor pedestrian bridge. Both properties offer a variety of amenities including multiple dining options. In addition, Main Street Station features a 96-space recreational vehicle park, the only such facility in the downtown area.

Fremont Hotel and Casino

The Fremont is adjacent to the principal pedestrian thoroughfare in downtown Las Vegas known as the Fremont Street Experience. The property’s amenities include a race and sports book, meeting space and a 350-space parking garage.

Central Region Properties

Sam’s Town Hotel and Gambling Hall

Sam’s Town Hotel and Gambling Hall (“Sam’s Town Tunica”) is located in Tunica County, Mississippi. The property has extensive amenities, including an entertainment lounge, four dining venues, a specialty shop, and the 1,650-seat River Palace Arena. Sam’s Town Tunica and two other neighboring casino properties are each one-third partners in an entity that owns River Bend Links, an eighteen-hole championship golf course. Tunica is the closest gaming market to Memphis, Tennessee and is located off of State Highway 61, approximately 30 miles south of Memphis. The adult population within a 200-mile radius is over three million people and includes the cities of Nashville and Memphis, Tennessee; Jackson, Mississippi and Little Rock, Arkansas.

Par-A-Dice Hotel Casino

Par-A-Dice is a riverboat casino operating dockside on the Illinois River in East Peoria, Illinois. Located adjacent to the Par-A-Dice riverboat is a land-based pavilion that features three restaurants and a gift shop. Par-A-Dice is strategically located within three-quarters of a mile from Interstate 74, a major east-west interstate highway. Par-A-Dice is the only gaming facility located within approximately 90 miles of Peoria, Illinois.

Treasure Chest Casino

Treasure Chest is a dockside casino located on Lake Pontchartrain in the western suburbs of New Orleans, Louisiana. The property is designed as a classic 18th-century Victorian-style paddle-wheel riverboat and has a total capacity for 1,750 people. The entertainment complex located adjacent to the riverboat houses a 140-seat Caribbean showroom, as well as several restaurants. Located approximately five miles from the New Orleans International Airport, Treasure Chest primarily serves both residents of suburban New Orleans and tourists, and currently competes with two other riverboats and one land-based casino.

Blue Chip Hotel and Casino

Blue Chip is a riverboat gaming property located in Michigan City, Indiana. On January 31, 2006, we began operations on our newly constructed single-level dockside riverboat. The new boat allowed us to expand our casino to 2,170 slot machines and 51 table games. In connection with the construction of our new boat, we added a new parking structure and enhanced the land-based pavilion. Michigan City, Indiana is located 60 miles east of Chicago and 40 miles west of South Bend, Indiana. To the west, the property competes primarily with four casinos in northern Indiana and, to a lesser extent, with Illinois casinos in the Chicago area.

The Pokagon Band of Potawatomi Indians, a federally recognized Native American tribe, announced its intention to begin construction on a land-based gaming operation near New Buffalo, Michigan (which is located approximately fifteen miles from Blue Chip) in mid-2006 and to open the facility in mid-2007. If their facility is constructed and begins operations, it could have a material adverse impact on the operations of Blue Chip. In addition, there is currently an additional Illinois casino license that is the subject of litigation and administrative action. If a gaming facility is opened, depending on its location, it could compete with Blue Chip.

Delta Downs Racetrack Casino & Hotel

In 2001, we acquired substantially all of the assets of the Delta Downs Racetrack in Vinton, Louisiana. Delta Downs has historically conducted horse races on a seasonal basis and operated year-round simulcast facilities for customers to place bets on races held at other tracks. In 2002, we began slot operations in connection with a renovation project that expanded the facility and equipped the casino. In 2004, we completed an expansion of the casino and in March 2005, we completed the development of a 206-room hotel at the property.

Delta Downs is approximately 25 miles closer to Houston than the next closest gaming market, located in Lake Charles, Louisiana. Customers traveling from Houston, Beaumont and other parts of southeastern Texas will generally have to drive past Delta Downs to reach Lake Charles.

Sam’s Town Hotel and Casino

Sam’s Town Hotel and Casino (“Sam’s Town Shreveport”) is located along the Red River in Shreveport Louisiana. The property features a 19 ^th century themed riverboat casino. Other amenities at the property include a spa, heated pool, four restaurants, a live entertainment venue and convention and meeting space. Shreveport is one of the largest gaming markets in the state of Louisiana. Feeder markets include east Texas, Texarkana, Arkansas and surrounding Louisiana cities including Bossier City, Minden, Ruston and Monroe.

Borgata

Borgata Hotel Casino and Spa opened at Renaissance Point in Atlantic City, New Jersey on July 3, 2003. Atlantic City is the second largest gaming jurisdiction in the United States by revenues and is predominantly a regional day-trip and overnight-trip market. The property is an equity-method joint venture. We and MGM MIRAGE each own a 50% interest in this project. As the managing venturer, we are responsible for the day-to-day operations of Borgata, including the operation and improvement of the facility and business. Borgata employs a management team and full staff to perform these services for the property. We maintain the oversight and responsibility for the operations, but do not directly operate Borgata. As such, we do not receive a management fee from Borgata.

Borgata is an upscale destination resort that features 11 restaurants, 11 retail boutiques and a European-style health spa. The property also contains meeting and event space as well as several entertainment venues. Borgata is in the process of a $200 million expansion to add both gaming and non-gaming amenities, including additional slot machines, table games, poker tables, restaurants and nightclubs. This public space expansion is expected to be completed in the second quarter of 2006. In addition to this expansion, Borgata recently began construction on a $325 million project that will add a second hotel tower and additional meeting space during the fourth quarter of 2007. Borgata expects to finance the expansions from Borgata’s cash flow from operations and from Borgata’s recently amended bank credit agreement. We do not expect to make further capital contributions to Borgata for these projects.

Corporate History, Availability of Reports and Corporate Governance Information

We were incorporated in Nevada in June 1988. Our principal executive offices are located at 2950 Industrial Road, Las Vegas, NV 89109, and our main telephone number is (702) 792-7200. We make our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and all amendments to these reports available free of charge on our corporate website as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. In addition, our Code of Business Conduct, Corporate Governance Guidelines, and charters of the Audit Committee, Compensation and Stock Option Committee and the Corporate Governance and Nominating Committee are available on our

website. Our website is www.boydgaming.com. We will provide reasonable quantities of electronic or paper copies of filings free of charge upon request. In addition, we will provide a copy of the above referenced charters to stockholders upon request.

Private Securities Litigation Reform Act

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include statements regarding:

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

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our ability to capture a significant share of the Hawaiian tourist trade and remain a leading destination for visitors from Hawaii;

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capitalization on the Las Vegas market and our leadership in one of the strongest and fastest growing markets in the United States;

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our strategy;

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competition, including expansion of gaming into additional markets and new projects such as that proposed by the Pokagons in Michigan and that under construction near Suncoast and our ability to respond to competition;

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expenses;

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indebtedness, including our ability to refinance or pay amounts outstanding under the bank credit facility and notes when they become due;

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financing;

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revenue and our ability to generate significant cash flow;

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

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ability to continue to pay dividends or to pay any specific rate of dividends, including assumptions made in connection with our Black-Scholes option pricing model;

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adjusted EBITDA and its usefulness as a measure of operating performance or valuation;

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the impact of SFAS No. 123R on our consolidated financial statements;

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operations;

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earnings;

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our market risk exposure and ability to minimize risk;

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expansion, development and renovation plans at Borgata, Blue Chip, South Coast, Echelon Place/Stardust, and North Las Vegas including expected costs, financing and timing;

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

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

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estimated undiscounted cash flows at Sam’s Town Tunica and our analysis of such asset’s impairment;

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pending litigation;

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our overall outlook, including all statements under the heading “ Overall Outlook ” in Item 7. “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ”;

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our ability to receive insurance reimbursement;

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compliance with applicable laws; and

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expectation, plans, hopes or intentions regarding the future.

Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from such forward-looking statements include the risks described in greater detail in the following section entitled “Risk Factors.” All forward-looking statements in this document are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement.

ITEM 1A. Risk Factors

An investment in our securities is subject to risks inherent to our business. The material risks and uncertainties that our management believes affect us are described below.

Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that our management is not aware of or focused on or that they currently deem immaterial may also adversely affect our business operations. This report is qualified

in its entirety by these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of securities, including our common stock, could decline significantly, and you could lose all or part of your investment.

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

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

In recent years, with fewer new markets opening for development, competition in existing markets has intensified. We have invested in expanding existing facilities, developing new facilities, such as South Coast Hotel and Casino, and acquiring established facilities in existing markets, such as our acquisition of Coast Casinos, Inc. in July 2004 and Sam’s Town Shreveport in May 2004. In addition, our competitors have also invested in expanding their existing facilities and developing new facilities. This expansion of existing casino entertainment properties, the increase in the number of properties and the aggressive marketing strategies of many of our competitors have increased competition in many markets in which we compete, and this intense competition can be expected to continue.

If our competitors operate more successfully, if competitors’ properties are enhanced or expanded, or if additional hotels and casinos are established in and around the locations in which we conduct business, we may lose market share. In particular, the expansion of casino gaming in or near any geographic area from which we attract or expect to attract a significant number of our customers could have a significant adverse effect on our business, financial condition and results of operations.

We also compete with legalized gaming from casinos located on Native American tribal lands. A proliferation of Native American gaming in areas located near our properties, or in areas in or near those from which we draw our customers, could have an adverse effect on our operating results.

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

We regularly evaluate expansion, development and renovation opportunities. On January 4, 2006, we announced our planned redevelopment of the property located on the Las Vegas Strip on which the Stardust and our executive offices are presently located into a new resort complex, which will be the largest and most expensive development project we have undertaken to date. We recently opened a new property, the South Coast, in Las Vegas, Nevada. A second hotel tower at South Coast is under construction and is scheduled to open in the second quarter of 2006. A limited partnership in which we are the general partner and have a 90% ownership interest submitted gaming applications seeking selection to apply for a gaming license for a potential future casino entertainment facility near Philadelphia, Pennsylvania. Borgata is nearing completion of a public space expansion and recently began construction of a new hotel tower and spa.

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

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shortages of materials;

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shortages of skilled labor or work stoppages;

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

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weather interference, floods, fires or other casualty losses; and

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unanticipated delays and cost increases.

Our anticipated costs and construction period for projects are based upon budgets, conceptual design documents and construction schedule estimates prepared by us in consultation with our architects and contractors. The cost of any project may vary significantly from initial expectations, and we may have a limited amount of capital resources to fund cost overruns. If we cannot finance cost overruns on a timely basis, the completion of one or more projects may be delayed until adequate funding is available. The completion dates of any of our projects could also differ significantly from expectations for construction-related or other reasons. We cannot assure you that any project will be completed, if at all, on time or within established budgets, or that any project will result in increased earnings to us. Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations. Furthermore, our projects may not help us compete with new or increased competition in our markets.

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

In addition, although we design our projects for existing facilities to minimize disruption of existing business operations, expansion and renovation projects require, from time to time, portions of the existing operations to be closed or disrupted. In particular, our Echelon Place project will require the razing of the Stardust. Any significant disruption in operations could have a significant adverse effect on our business, financial condition and results of operations.

We face risks associated with growth and acquisitions.

As part of our business strategy, we regularly evaluate opportunities for growth through development of gaming operations in existing or new markets, through acquiring other gaming entertainment facilities or through redeveloping our existing gaming facilities. We also pursue expansion opportunities, including joint ventures, in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. The expansion of our operations, whether through acquisitions, development or internal growth could divert management’s attention and could also cause us to incur substantial costs, including legal, professional and consulting fees. There can be no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems. Additionally, there can be no assurance that we will receive gaming or other necessary licenses for our new projects or that gaming will be approved in jurisdictions where it is not currently approved.

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

We intend to finance our current and future expansion, development and renovation projects, as well as our other capital expenditures, primarily with cash flow from operations, borrowings under our bank credit facility and equity or debt financings. If we are unable to finance our current or future expansion, development and renovation projects, or our other capital expenditures, we will have to adopt one or more alternatives, such as reducing or delaying planned expansion, development and renovation projects as well as other capital expenditures, selling assets, restructuring debt, or obtaining additional equity financing or joint venture partners, or modifying our bank credit facility. These sources of funds may not be sufficient to finance our expansion, development and renovation projects, and other financing may not be available on acceptable terms, in a timely manner or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness. If we are unable to secure additional financing, we could be forced to limit or suspend expansion, development and renovation projects and other capital expenditures, which may adversely affect our business, financial condition and results of operations.

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

Alvin C. Copeland is the sole shareholder of an entity that applied in 1993 for a riverboat license at the location of our Treasure Chest Casino. Copeland was unsuccessful in the application process and has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him and monetary damages. The suit was dismissed by the trial court citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. In 2002, the First Circuit

Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. In 2003, we filed a motion to dismiss the matter and that motion was denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds, which motions are currently pending. It is not possible to determine the likely date of trial, if any, at this time. We intend to vigorously defend the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it would have a significant adverse effect on our business, financial condition and results of operations.

We are subject to extensive governmental gaming regulation and taxation policies, which may harm our business.

We are subject to a variety of regulations in the jurisdictions in which we operate. Regulatory authorities at the federal, state and local levels have broad powers with respect to the licensing of casino operations and may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other actions, any one of which could have a significant adverse effect on our business, financial condition and results of operations. A more detailed description of the regulations to which we are subject is contained in Exhibit 99.1 to this Annual Report on Form 10-K, which exhibit is incorporated herein by reference.

If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals are introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and our company. Legislation of this type may be enacted in the future. The federal government has also previously considered a federal tax on casino revenues and may consider such a tax in the future. In addition, gaming companies are currently subject to significant state and local taxes and fees in addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any time. If there is any material increase in state and local taxes and fees, our business, financial condition and results of operations could be adversely affected.

Our directors, officers and key employees must also be approved by certain state regulatory authorities. If state regulatory authorities were to find a person occupying any such position unsuitable, we would be required to sever our relationship with that person. Certain public and private issuances of securities and certain other transactions by us also require the approval of certain state regulatory authorities.

In addition to gaming regulations, we are also subject to various federal, state and local laws and regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our business and our operating results.

Certain of our facilities are located in areas that experience extreme weather conditions.

Certain of our facilities are located in areas that experience extreme weather conditions, including, but not limited to, hurricanes. Extreme weather conditions may interrupt our operations, damage our properties and reduce the number of customers who visit our facilities in the affected areas. For example, our Treasure Chest Casino, which is located near New Orleans, Louisiana, suffered minor damage and was closed for 44 days in 2005 as a result of Hurricane Katrina, and has since reopened with limited hours of operation and limited food and beverage outlets. Additionally, our Delta Downs Racetrack Casino & Hotel, which is located in southwest Louisiana, suffered significant property damage and closed for 42 days in 2005 as a result of Hurricane Rita, and has since reopened with limited hours of operation and limited food and beverage outlets. Horse races at Delta Downs are scheduled to resume in April 2006. While we maintain insurance that may cover some of the costs we incur as a result of some extreme weather conditions, our coverage is subject to deductibles and limits on maximum benefits. There can be no assurance that we will be able to fully collect, if at all, on any claims resulting from extreme weather conditions, including claims we have submitted in connection with the damage sustained at our Delta Downs property. We did not submit insurance claims in connection with the hurricane damage sustained by our Treasure Chest property in part because the amount of property damage did not exceed our insurance deductible. If these or any of our other properties are damaged or if their operations are disrupted as a result of extreme weather in the future, or if extreme weather adversely impacts general economic or other conditions in the areas in which our properties are located or from which they draw their patrons, our business, financial condition and operating results could be materially adversely affected.

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

In addition to being in areas that are often subject to extreme weather conditions, gaming operations conducted on riverboat casinos or at dockside facilities could be lost from service for a variety of reasons, including casualty, forces of nature, mechanical failure or extended or extraordinary maintenance.

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

U.S. Coast Guard regulations require a hull inspection for all riverboats at five-year intervals. Under certain circumstances, extensions may be approved. The U.S. Coast Guard may require that such hull inspections be conducted at a U.S. Coast Guard-approved dry-docking facility, and if so required, the travel to and from such docking facility, as well as the time required for inspections of the affected riverboats, could be significant. To date, the U.S. Coast Guard has allowed in-place inspections of our riverboats. The U.S. Coast Guard may not allow these types of inspections in the future. The loss of a dockside casino or riverboat casino from service for any period of time could adversely affect our business, financial condition and results of operations.

U.S. Coast Guard regulations also require us to prepare and follow certain security programs. In 2004, we implemented the American Gaming Association’s Alternative Security Program at our riverboat casinos and dockside facilities. The American Gaming Association’s Alternative Security Program is specifically designed to address riverboat casinos and their respective dockside facilities maritime security requirements. Changes to these regulations could adversely affect our business, financial condition and results of operations.

We draw a significant percentage of our customers from limited geographic regions. Events adversely impacting the economy or these regions, including terrorism, may also impact our business.

Our California Hotel and Casino, Fremont Hotel and Casino and Main Street Station Casino, Brewery and Hotel draw a substantial portion of their customers from the Hawaiian market. For the year ended December 31, 2005, patrons from Hawaii comprised approximately 70% of the room nights sold at the California, 61% at the Fremont and 59% at Main Street Station. An increase in fuel costs or transportation prices, a decrease in airplane seat availability, or a deterioration of relations with tour and travel agents, particularly as they affect travel between the Hawaiian market and our facilities, could adversely affect our business, financial condition and results of operations.

Our Las Vegas properties also draw a substantial number of customers from certain other specific geographic areas, including Southern California, Arizona, Las Vegas and the Midwest. Native American casinos in California and other parts of the United States have diverted some potential visitors away from Nevada, which has had and could continue to have a negative affect on Nevada gaming markets. In addition, due to our significant concentration of properties in Nevada, any terrorist activities or disasters in or around Nevada, or the areas from which we draw customers for our Las Vegas properties, could have a significant adverse effect on our business, financial condition and results of operations. Each of our other properties located outside of Nevada depends primarily on visitors from their respective surrounding regions and are subject to comparable risk. The outbreak of public health threats at any of our properties or in the areas in which they are located, or the perception that such threats exist, as well as adverse economic conditions that affect the national or regional economies, whether resulting from war, terrorist activities or other geopolitical conflict, weather or other factors, could have a significant adverse effect on our business, financial condition and results of operations.

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

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

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

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

William S. Boyd, our Chairman and Chief Executive Officer, together with his immediate family, beneficially owned approximately 35% of our outstanding shares of common stock as of December 31, 2005. Michael J. Gaughan, the Chief Executive Officer of Coast Casinos, Inc., a subsidiary of Boyd Gaming, owned approximately 17% of our outstanding shares of common stock as of December 31, 2005. As a result, the Boyd family and/or Mr. Gaughan have the ability to significantly influence our affairs, including the election of our directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation or sale of assets.

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

We lease certain parcels of land on which The Orleans Hotel and Casino, Suncoast Hotel and Casino, Sam’s Town Tunica, Treasure Chest Casino and Sam’s Town Shreveport are located. In addition, we lease other parcels of land on which portions of California and Fremont are located. If we were to default on any one or more of these leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected land and any improvements on the land, including the hotel-casinos. This would have a significant adverse effect on our business, financial condition and results of operations as we would then be unable to operate all or portions of the affected facilities.

Leverage and Debt Service

We have a significant amount of indebtedness. At December 31, 2005, we had total consolidated long-term debt, less current maturities, of approximately $2.6 billion. We expect that our long-term indebtedness will substantially increase in connection with the capital expenditures we anticipate making as a results of our planned expansion, development and renovation projects. Our substantial indebtedness could have important consequences. For example it could:

•

make it more difficult for us to satisfy our obligations under our current indebtedness;

•

increase our vulnerability to general adverse economic and industry conditions;

•

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

•

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

•

place us at a competitive disadvantage compared to our competitors that have less debt; and

•

limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could have a significant adverse effect on us.

In addition, the interest rates on a portion of our long-term debt are subject to fluctuation based upon changes in short-term interest rates. Interest expense could increase as a result of this factor.

Our current debt service requirements on our bank credit facility primarily consist of interest payments on outstanding indebtedness. The bank credit facility consists of a $1.35 billion revolving credit facility that matures in June 2010, and a $500 million term loan. The term loan is being repaid in increments of $1.25 million per quarter that began on September 30, 2004 and will continue through March 31, 2011. The remaining balance of the term loan matures in June 2011.

Debt service requirements under our senior subordinated notes existing at December 31, 2005 consist of semi-annual interest payments (based upon fixed annual interest rates ranging from 6.75% to 8.75%) and repayment of the $250 million, $300 million and $350 million of principal on April 15, 2012, December 15, 2012 and April 15, 2014, respectively. In January 2006, we issued $250 million principal amount of 7.125% senior subordinated notes due February 1, 2016 which also requires semi-annual interest payments and the repayment of the principal at maturity.

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

It is unlikely that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under our bank credit facility, in amounts sufficient to enable us to pay our indebtedness as it matures and to fund our other liquidity needs. We believe that we will need to refinance all or part of our indebtedness at each maturity. However, we may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. We could have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing or joint-venture partners. These financing strategies may not be effected on satisfactory terms, if at all. In addition, certain states’ laws contain restrictions on the ability of

companies engaged in the gaming business to undertake certain financing transactions. Some restrictions may prevent us from obtaining necessary capital.

Employees

At December 31, 2005, we employed approximately 23,400 persons. On such date, we had collective bargaining relationships with seven unions covering approximately 2,500 employees, substantially all of whom are employed at Stardust, Fremont, Eldorado, Main Street Station, Barbary Coast and Blue Chip. Several collective bargaining agreements are currently in effect and other agreements are in various stages of negotiation. Employees covered by expired agreements have continued to work during the negotiations, in one case under the terms of the expired agreements and, in another, under modifications thereof.

ITEM 1B. Unresolved Staff Comments

None.

ITEM 2. Properties

Information relating to the location and general characteristics of our properties appears in tabular format under Item 1. “ Business – Properties ” and is incorporated herein by reference.

Substantially all of our real and personal property (other than stock and other equity interests), including each of our wholly-owned casino properties, is pledged as collateral for our bank credit facility.

Some of our hotel casinos are located on leased property, including:

•

Stardust Resort and Casino site consists of 72 acres of land on the Las Vegas Strip. We own 63 acres of this land, including a 13-acre site acquired in 2004. The redevelopment plans for this site are currently planned for only the owned land. We plan to contribute 6.5 acres of this land to a 50/50 joint venture with Morgans Hotel Group Co. in order to develop two hotel properties for Echelon Place.

•

The Orleans Hotel and Casino is located on 77 acres of leased land.

•

Suncoast Hotel and Casino is located on 49 acres of leased land.

•

California Hotel and Casino is located on 13.9 acres of owned land and 1.6 acres of leased land.

•

Fremont Hotel and Casino is located on 1.4 acres of owned land and 0.9 acres of leased land.

•

Sam’s Town Tunica is located on 272 acres of leased land.

•

Treasure Chest Casino is located on 14 acres of leased land.

•

Sam’s Town Hotel and Casino in Shreveport is located in 18 acres of leased land.

ITEM 3. Legal Proceedings

Copeland. Alvin C. Copeland is the sole shareholder of an entity that applied in 1993 for a riverboat license at the location of our Treasure Chest Casino. Copeland was unsuccessful in the application process and has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him and monetary damages. The suit was dismissed by the trial court citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. In 2002, the First Circuit Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. In 2003, we filed a motion to dismiss the matter and that motion was denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds, which motions are currently pending. It is not possible to determine the likely date of trial, if any, at this time. We intend to vigorously defend the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it would have a significant adverse effect on our business, financial condition and results of operations.

Collective Bargaining Issue. On January 11, 2006, the parties described below entered into a memorandum of agreement to settle the outstanding claims described below. Pursuant to this agreement, among other things, the Union agreed to withdraw the outstanding litigation against us, and we agreed to withdraw the unfair labor practice charges that we previously brought against the Union. By order filed on January 23, 2006, based on a stipulation of the parties, the Court dismissed the action with each party bearing its own fees and costs.

Barbary Coast Hotel and Casino, which has a current and different CBA with the Union, and also to other Coast properties: Gold Coast, The Orleans and Suncoast. This demand was based on a “neutrality agreement” and other provisions of the Stardust CBA. This demand of the Union was rejected. On August 12, 2004, the Union filed a lawsuit in the U. S. District Court for the District of Nevada against Boyd and Mare-Bear, Inc., seeking to compel arbitration of alleged violations of the Stardust neutrality agreement. On September 1, 2004, Boyd filed a motion to dismiss the Union’s lawsuit as to Boyd. Mare-Bear filed an answer to the complaint on September 2, 2004. On September 23, 2004, Boyd, Coast Casinos, Inc. and its subsidiary, Coast Hotels and Casinos, Inc., filed a complaint for declaratory relief in the U. S. District Court against the Union, seeking a judgment that the Barbary Coast CBA continued in effect and was binding upon Boyd, the Barbary Coast and the Union. On December 15, 2004, a judgment for declaratory relief was granted on behalf of Boyd and the Barbary Coast, affirming that the Barbary Coast CBA remains in effect and is binding on Boyd, the Barbary Coast and the Union. On December 22, 2004, Boyd filed unfair labor practice charges against the Union with the National Labor Relations Board (“NLRB”), alleging that the Union’s lawsuit was filed for an illegal purpose and that the provisions of the Stardust agreement on which the Union relies are unlawful. Coast Hotels and Casinos, Inc. also filed similar unfair labor practice charges against the Union with the NLRB on December 22, 2004. On February 8, 2005, Boyd filed additional unfair labor practice charges against the Union with the NLRB, challenging the legality of the Stardust neutrality agreement. Boyd and Mare-Bear were granted a protective order by the U. S. District Court, staying discovery sought by the Union, pending the Court’s ruling on Boyd’s motion to dismiss.

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

ITEM 4. Submission of Matters to a Vote of Security Holders

There were no matters subject to a vote of our security holders during the fourth quarter of 2005.

ITEM 4A. Executive Officers of the Registrant

The following table sets forth the non-director executive officers of Boyd Gaming Corporation as of February 28, 2006:


Name	Age	Position
Ellis Landau	62	Executive Vice President, Chief Financial Officer
Paul J. Chakmak	41	Senior Vice President—Finance and Treasurer
Brian A. Larson	50	Senior Vice President, Secretary and General Counsel
Jeffrey G. Santoro	44	Vice President and Controller

Ellis Landau has served as our Executive Vice President since January 1997 and Senior Vice President and Chief Financial Officer since August 1990. Mr. Landau also served as our Treasurer from August 1990 to February 2004. Mr. Landau has informed us that he intends to retire effective May 31, 2006.

Paul J. Chakmak joined us in February 2004 as our Senior Vice President—Finance and Treasurer. From June 1987 to February 2004, Mr. Chakmak was employed by CIBC World Markets in various positions, the last of which was as managing director. CIBC World Markets is the global investment banking arm of Canadian Imperial Bank of Commerce, a leading North American financial institution. Mr. Chakmak will serve as our Chief Financial Officer beginning June 1, 2006.

Brian A. Larson has served as our Secretary since February 2001 and as our Senior Vice President and General Counsel since January 1998. He became our Associate General Counsel in March 1993 and Vice President—Development in June 1993.

Jeffrey G. Santoro has been Vice President since February 2001 and Controller since May 1998. Mr. Santoro joined the Company in March 1997 as our Director of Financial Reporting.

Part II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Common Stock is listed on the New York Stock Exchange under the symbol “BYD.” Information with respect to sales prices and record holders of our Common Stock is set forth below:

PRICE RANGE OF COMMON STOCK

The following table sets forth, for the calendar quarters indicated, the high and low sales prices of the Common Stock as reported by the New York Stock Exchange.


	High		Low
2004
First Quarter	$	23.30	$	15.74
Second Quarter		27.28		21.27
Third Quarter		28.29		24.17
Fourth Quarter		42.70		27.35

2005
First Quarter		58.65		37.70
Second Quarter		59.25		47.75
Third Quarter		54.99		39.05
Fourth Quarter		50.60		37.34

On February 28, 2006, the closing sales price of our Common Stock on the NYSE was $43.73 per share. On that date, we had approximately 1,086 holders of record of our Common Stock.

In July 2003, our Board of Directors instituted a policy of quarterly cash dividends on our common stock. Dividends are declared at our Board’s discretion; however, we do expect, for the near future, to continue to pay a quarterly dividend. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. The following table sets forth the cash dividends declared and paid:


Payment Date	Record Date	Dividend Per Share
March 2, 2004	February 13, 2004	$	0.075
June 1, 2004	May 14, 2004		0.075
September 1, 2004	August 13, 2004		0.085
December 1, 2004	November 12, 2004		0.085
March 1, 2005	February 11, 2005		0.085
June 1, 2005	May 13, 2005		0.125
September 1, 2005	August 12, 2005		0.125
December 1, 2005	November 10, 2005		0.125

We did not repurchase any securities during the fourth quarter 2005. Item 12 of Part III contains information concerning securities authorized for issuance under equity compensation plans.

ITEM 6. Selected Consolidated Financial Data

We have derived the selected consolidated financial data presented below as of December 31, 2005 and 2004 and for the three years in the period ended December 31, 2005 from the audited consolidated financial statements contained elsewhere in this Form 10-K. The selected consolidated financial data presented below as of December 31, 2003 and as of and for the years ended December 31, 2002 and 2001 have been derived from our audited consolidated financial statements not contained herein. Operating results for the periods presented below are not necessarily indicative of the results that may be expected for future years.

The following is a listing of our major acquisitions and dispositions that occurred during the five year period ended December 31, 2005:

•

In May 2001, we acquired substantially all of the assets of the Delta Downs Racetrack in Vinton, Louisiana. Delta Downs began casino operations in February 2002 with approximately 1,500 slot machines.

•

In July 2003, Borgata, our 50% owned joint venture, began operations. We use the equity method to account for our investment in Borgata.

•

In May 2004, we acquired all of the outstanding limited and general partnership interests of the partnership that owns the Shreveport Hotel and Casino in Shreveport, Louisiana.

•

In July 2004, we consummated a $1.3 billion merger with Coast Casinos, Inc., pursuant to which Coast became our wholly-owned subsidiary.


	Year ended December 31,
($ in thousands, except share data)	2005			2004		2003		2002			2001
OPERATING DATA
Gross revenues	$	2,471,003		$	1,932,091	$	1,394,529	$	1,357,448		$	1,222,991
Net revenues		2,223,020			1,734,058		1,253,070		1,228,901			1,102,335
Operating income (a)		402,486			295,958		148,800		164,475			115,883
Interest expense, net of amounts capitalized		129,023			102,027		74,549		72,904			75,374
Income before cumulative effect of a change in accounting principle		161,049			111,454		40,933		48,224			24,950
Cumulative effect of a change in accounting principle, net of tax ^{(b) (c)}		(16,439	)		—		—		(8,212	)		—
Net income	$	144,610		$	111,454	$	40,933	$	40,012		$	24,950
PER SHARE DATA - DILUTED
Income before cumulative effect of a change in accounting principle	$	1.78		$	1.42	$	0.62	$	0.73		$	0.40
Cumulative effect of a change in accounting principle		(0.18	)		—		—		(0.12	)		—
Net income	$	1.60		$	1.42	$	0.62	$	0.61		$	0.40
Weighted average diluted common shares		90,507			78,235		66,163		66,125			62,360
Cash dividends declared per common share	$	0.46		$	0.32	$	0.15	$	—		$	—
OTHER OPERATING DATA Depreciation and amortization ^(b)	$	174,939		$	136,126	$	93,756	$	90,077		$	99,811
Capital expenditures		694,613			329,261		86,751		77,051			87,762

	December 31,
($ in thousands)		2005			2004		2003		2002			2001
BALANCE SHEET DATA
Total assets	$	4,424,971		$	3,919,032	$	1,872,997	$	1,912,990		$	1,754,913
Long-term debt (excluding current maturities) ^(d)		2,552,795			2,304,343		1,097,589		1,227,324			1,143,358
Stockholders’ equity		1,098,004			943,770		441,253		408,561			353,737

^(a)

Operating income for 2005 includes a $56 million non-cash impairment charge related to the redevelopment plans for the Stardust and $9.3 million of net hurricane and related expenses. Operating income for 2004 includes $6.5 million of merger, acquisition and transition related expenses and operating income for 2002 includes a loss on assets held for sale of $3.8 million.

^(b)

On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets . In connection with the initial application of SFAS No. 142, we ceased the amortization of our goodwill, ceased the amortization of our intangible license rights as we have determined that the intangible license rights have an indefinite life, and recorded an $8.2 million non-cash charge as the cumulative effect of a change in accounting principle to write down the remaining goodwill balance related to the 1985 acquisition of the Stardust.

^(c)

On January 1, 2005, we adopted EITF D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill, which was issued by the Emerging Issues Task Force. On the adoption of this pronouncement, we valued our intangible assets using the direct value method and recorded a $25.4 million non-cash charge, $16.4 million net of taxes, as a cumulative effect of a change in accounting principle to write down Delta Downs intangible license rights to its fair value.

^(d)

Long-term debt is increased by an adjustment of $1.5 million related to fair value hedge accounting for our derivative instrument at December 31, 2005. At December 31, 2004 and 2003, long-term debt is decreased by net adjustments of $0.9 million and $1.8 million, respectively, and increased by $4.8 million at December 31, 2002, related to fair value hedge accounting for our derivative instruments.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a diversified operator of eighteen wholly-owned gaming entertainment properties, one joint-venture property, a Hawaiian travel agency, a Hawaiian-based insurance company that underwrites travel-related insurance and an offsite sports book. Headquartered in Las Vegas, we have gaming operations in Nevada, Illinois, Louisiana, Mississippi, Indiana and New Jersey. We aggregate certain of our wholly-owned properties in order to present five wholly-owned reportable segments: Boulder Strip, Coast Casinos, Stardust, Downtown Properties and Central Region. In addition, we are a 50% partner in a joint venture that owns a limited liability company that operates Borgata Hotel Casino & Spa in Atlantic City, New Jersey. For further information related to our segment information, including the property compositions of each segment, the definition of Adjusted EBITDA and reconciliations of certain financial information, see Note 17 to our Consolidated Financial Statements presented at Item 15. “Exhibits and Financial Statement Schedules.”

Our main business emphasis is on slot revenues, which are highly dependent on the volume of customers at our properties. Gross revenues are one of the main performance indicators of our properties. Most of our revenue is cash-based, and our properties have historically generated significant operating cash flow. Our industry is capital intensive, and we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing, pay income taxes, fund maintenance capital expenditures and provide excess cash for future development and the payment of dividends.

Overall Outlook

Over the past few years, we have been working to strategically position our Company for greater success by strengthening our operating foundation and effecting strategic growth in order to attempt to increase shareholder value. The following is a listing of our most recently completed areas of growth:

•

Expansion of Blue Chip Hotel and Casino in January 2006 through the construction of a single-level boat that allowed us to expand our casino to 2,170 slot machines and 51 table games.

•

Opening of South Coast Hotel and Casino in December 2005 with 2,366 slot machines and 52 table games.

•

Opening of 206-room hotel at Delta Downs Racetrack Casino and Hotel in March 2005.

•

Opening of a new 461-room hotel tower at The Orleans Hotel and Casino in October 2004.

•

July 2004 merger with Coast Casinos that added four existing casino hotel properties to our portfolio.

•

May 2004 acquisition of Sam’s Town Shreveport.

We are currently focused on future expansion projects at several of our properties, including our recently announced $4.0 billion project named Echelon Place. Echelon Place will occupy the 63 acres we own on the Las Vegas Strip on which the Stardust is currently located. We plan to operate the Stardust through 2006 after which we expect to close and demolish the property. We plan to develop Echelon Place in one phase and to open it in early 2010.

In addition to our expansion projects mentioned above, we regularly evaluate opportunities for growth through development of gaming operations in existing or new markets and through acquiring other gaming entertainment facilities. For example, in late 2005, we formed a Pennsylvania limited partnership in which we are the general partner and have an ownership interest of 90%, that owns a 125-acre site in Pennsylvania that subsequently filed gaming applications with the Pennsylvania Gaming Control Board seeking selection to apply for a gaming license. In addition, in early 2006, we purchased land in North Las Vegas for the development of a Las Vegas locals casino. These projects are described in more detail at “ Management’s Discussion and Analysis of Financial Position and Results of Operations — Projects . ”

Summary Financial Results


	Year ended December 31,
(In thousands)	2005		2004		2003
Gross revenues	$	2,471,003	$	1,932,091	$	1,394,529
Operating income		402,486		295,958		148,800
Income before cumulative effect of a change in accounting principle		161,049		111,454		40,933

Our July 2004 merger with Coast Casinos is the primary reason that our 2005 operating results increased from 2004 and that our 2004 operating results increased from 2003. Our operating results for 2004 contain six months of operations from the Coast properties, whereas our 2005 operating results contain a full year of operations from these properties.

With the December 2005 opening of South Coast Hotel and Casino, we now operate 12 properties in or near Las Vegas, Nevada. In 2005, gross revenues from our Nevada properties contributed 61% of our consolidated gross revenues. As such, the state of the Las Vegas economy can affect the operating results of our Nevada properties. In 2005 and recent years, the Las Vegas economy continued to be a leader in the nation for both population and job growth. This strong Las Vegas economy helped drive results in our Nevada operations. Additionally, Downtown Properties generate a significant portion of their business from Hawaiian feeder markets and have experienced increased volumes due to a strong Hawaiian economy in 2005.

We were impacted in 2005 from two hurricanes that affected certain of our Central Region properties. Treasure Chest Casino closed in August 2005 as a result of Hurricane Katrina and remained closed for 44 days, reopening in October with limited hours of operation and limited food and beverage outlets. Delta Downs Racetrack Casino & Hotel closed in September 2005 as a result of Hurricane Rita and remained closed for 42 days, reopening in November 2005 with limited hours of operation and limited food and beverage outlets. Horse races at Delta Downs are scheduled to resume in April 2006. Insurance matters related to the hurricane impacts on both properties are described in further detail at “ — Insurance Coverage Related to Hurricane Impacts at Treasure Chest and Delta Downs .”

Gross Revenues


	Year ended December 31,
(In thousands)	2005		2004		2003
Gross Revenues
Boulder Strip	$	218,558	$	205,125	$	188,387
Coast Casinos		819,681		379,158		—
Stardust		183,020		174,579		158,200
Downtown Properties		282,363		260,377		252,967
Central Region		967,381		912,852		794,975
Total gross revenues	$	2,471,003	$	1,932,091	$	1,394,529

All of our wholly-owned segments reported aggregate gains in gross revenues in 2005 and 2004.

•

Boulder Strip gross revenues increased each year due primarily to increased slot wagering for each period.

•

Coast Casinos gross revenues in 2005 increased from 2004 due primarily to the full year of operations for 2005, following the completion of our merger with Coast in July 2004. Also, South Coast operated for nine full days in 2005 due to its December opening.

•

Stardust gross revenues increased $8.4 million in 2005, primarily the result of an increase in slot winnings on a similar level of slot wagering. The increase in gross revenues at Stardust for 2004 is primarily the results of increased slot and table game wagering.

•

Gross revenues at our Downtown Properties increased $22 million from 2004 to 2005 due primarily to a $10.7 million increase in gaming revenues from increased slot wagering at each property and a $9.1 million increase in revenues at Vacations Hawaii, our Hawaiian charter operation, due to higher average charter prices. For 2004, each Downtown casino property also recorded increased slot wagering at each property as compared to 2003.

•

Central Region gross revenues increased from both 2003 and 2004 due mainly to the inclusion of results from Sam’s Town Shreveport, which we acquired in May 2004. Additionally, Central Region gross revenues were affected by the following items:

Despite its closure for 44 days during 2005 due to the Hurricane Katrina, Treasure Chest’s gross revenue was 4.0% greater than 2004 due to the limited competition in the New Orleans and Gulf Coast areas from other casinos and other forms of entertainment that were closed as a result of the effects of the hurricane.

Gross revenue from Delta Downs for 2005 was 0.9% greater than 2004. The impact of the closure due to the effects of Hurricane Rita was offset by the revenue from the new hotel and other amenities that opened in March 2005. Delta Downs gross revenues in 2004 were 4.2% less than 2003 due primarily to construction disruption related to a casino remodeling and reconfiguration project that was completed in 2004.

Sam’s Town Tunica gross revenues declined 11.1% in 2005 as compared to 2004 due primarily to decreased slot and table game wagering.

Adjusted EBITDA

See Note 17 to our Consolidated Financial Statements presented at Item 15. “Exhibits and Financial Statement Schedules,” for a definition of Adjusted EBITDA and reconciliations of this financial information.


	Year ended December 31,
(In thousands)	2005		2004		2003
Adjusted EBITDA
Boulder Strip	$	59,122	$	49,438	$	39,622
Coast Casinos		253,960		105,474		—
Stardust		24,651		18,016		9,563
Downtown Properties		52,295		38,738		40,511
Central Region		224,816		191,198		177,365

•

Boulder Strip Adjusted EBITDA increased in 2005 and 2004 primarily due to the growth in gross revenues during those periods.

•

Coast Casinos 2005 Adjusted EBITDA increased from 2004 due primarily to the full year of operations for 2005, following the completion of our merger with Coast in July 2004.

•

Adjusted EBITDA for the Stardust increased in 2005 and 2004 mainly due to the increase in gross revenues for each period combined with lower entertainment expenses in 2005 and 2004.

•

Adjusted EBITDA increased 35% in 2005 compared to 2004 for the Downtown Properties. This increase is due mainly to the growth in revenues for the period coupled with a decline in payroll expenses related to more efficient operations. This increase in Adjusted EBITDA was achieved despite a $5.4 million increase in fuel costs related to the Hawaiian charter operation.

•

Downtown Properties Adjusted EBITDA declined $1.8 million, or 4.4%, in 2004 compared to 2003 despite a 2.9% increase in gross revenues due to a $3.6 million increase in charter fuel costs during the period.

•

Central Region Adjusted EBITDA increased from both 2003 and 2004 due mainly to the inclusion of results from Sam’s Town Shreveport which was acquired in May 2004. Other significant changes to Central Region Adjusted EBITDA are:

Adjusted EBITDA from Treasure Chest increased 103% in 2005 due to the increase in gross revenues combined with lower payroll and marketing expenses at the property due to the change in operations resulting from the impact of the hurricane.

Delta Downs Adjusted EBITDA increased 18.3% in 2005 due primarily to the increase in gross revenues combined with a decline in payroll expenses during the year due primarily to the change in operations resulting from the impact of the hurricane.

Operating Results – Discussion of Certain Charges

The following expenses and charges are further discussed below:


	Year ended December 31,
(In thousands)	2005		2004		2003
Depreciation and amortization	$	174,939	$	136,126	$	93,756
Preopening expenses		18,927		2,308		—
Impairment loss		56,000		—		—
Deferred rent		5,131		1,994		—
Merger, acquisition and transition related expenses		—		6,534		—
Hurricane and related expenses, net		9,274		—		—
Blue Chip consulting termination fee		—		5,000		—

Depreciation and Amortization. Depreciation and amortization expense increased in 2005 due primarily to the full year of depreciation and amortization from Coast Casinos and Sam’s Town Shreveport that were acquired in 2004. The increase in depreciation and amortization expense from 2003 to 2004 was also primarily due to those 2004 acquisitions.

Preopening Expenses

•

In 2005, preopening expenses related to the following items:

$11.2 million for South Coast which opened in December 2005;

$3.5 million for the Echelon Place project;

$1.3 million for the Blue Chip expansion project; and

$2.9 million for other projects.

•

In 2004, preopening expenses related primarily to our unsuccessful efforts to develop gaming activities in Nebraska.

Impairment Loss. In 2005, we recorded a $56 million non-cash impairment loss to write down the long-lived assets at Stardust to their estimated fair value. Because we intend to redevelop the land on which Stardust is located and our plans include demolishing Stardust’s existing buildings and abandoning other related assets, we performed an impairment test for this property. This non-cash charge was the result of our calculation of the estimated remaining net cash flows for Stardust compared to the net book value of the assets expected to be demolished or abandoned. For more information about this project, see “ Management’s Discussion and Analysis of Financial Position and Results of Operations — Projects .”

Deferred Rent. We record deferred rent related to certain of our Coast Casinos and Sam’s Town Shreveport land leases as the cash payments under the associated leases are currently less than the amount of rent expense recorded. Deferred rent increased in 2005 due primarily to the full year of deferred rent expense from Coast Casinos and Sam’s Town Shreveport due to their 2004 acquisitions. Deferred rent is recorded in selling, general, and administrative expenses on our consolidated statements of operations.

Merger, Acquisition and Transition Related Expenses. In 2004, we recorded $6.5 million of merger, acquisition and transition related expenses, $5.9 million of which related to indirect and general expenses of the Sam’s Town Shreveport acquisition and $0.6 million of which related to indirect, general and incremental expenses of the Coast Casinos merger.

Hurricane and Related Expenses, net. Due to the effects of Hurricanes Katrina and Rita on two of our properties, we recorded $9.3 million of hurricane and related expenses, net of anticipated insurance recoveries, in 2005. Delta Downs recorded $1.0 million of net hurricane and related expenses, which represents the property damage deducible on its insurance policy. Treasure Chest recorded $8.0 million in net hurricane expenses comprised primarily of post-closing expenses. For more information on the status of insurance coverage at both properties, see “ — Insurance Coverage Related to Hurricane Impacts at Treasure Chest and Delta Downs. ”

Blue Chip Consulting Termination Fee. A consulting agreement signed in connection with Blue Chip’s purchase agreement provided for a $5.0 million contingent payment if certain tribal gaming facilities had not commenced gaming operations near our Blue Chip casino by a specified date. As tribal gaming facilities had not commenced by the specified date, we expensed and paid the $5.0 million fee during 2004. This fee was recorded in selling, general, and administrative expenses on our consolidated statements of operations.

Operating Income


	Year ended December 31,
(In thousands)	2005			2004			2003
Operating Income (Loss)
Boulder Strip	$	38,008		$	29,890		$	20,667
Coast Casinos		180,556			74,364			—
Stardust		(45,274	)		3,284			(4,470	)
Downtown Properties		36,663			23,643			25,178
Central Region		151,430			126,336			135,615
Corporate		(54,911	)		(39,524	)		(26,280	)
Operating income from Borgata		96,014			77,965			(1,910	)
Operating income	$	402,486		$	295,958		$	148,800

•

Boulder Strip operating income increased in 2005 and 2004 primarily due to the growth in gross revenues during those periods.

•

Coast Casinos 2005 operating income increased from 2004 due primarily to the full year of operations for 2005, following the completion of our merger with Coast in July 2004.

•

Stardust reported an operating loss for 2005 due primarily to the $56 million non-cash impairment loss previously discussed. Operating income increased in 2004 due primarily to the increase in 2004 gross revenues and reduced entertainment expenses in 2004.

•

Operating income increased 55% in 2005 compared to 2004 for the Downtown Properties. This increase is due mainly to the growth in revenues for the period coupled with a decline in payroll expenses related to more efficient operations.

•

Central Region operating income increased from 2004 due mainly to the inclusion of results from Sam’s Town Shreveport which was acquired in May 2004. Other significant changes to Central Region operating income are:

Operating income from Treasure Chest increased 110% in 2005 reflecting the increase in gross revenues combined with lower payroll and marketing expenses at the property due to the change in operations resulting from the hurricane impact.

Delta Downs operating income increased 8.1% in 2005 due primarily to the increase in gross revenues combined with a decline in payroll expenses during the year due primarily to the change in operations resulting from the hurricane impact.

•

Central Region operating income declined from 2003 to 2004 due primarily to the $5 million Blue Chip consulting termination fee recorded in 2004, $5.9 million of acquisition and transition related expenses incurred in 2004 from the Sam’s Town Shreveport acquisition and a 20% decline in Delta Downs operating income due to the construction disruption related to the casino remodeling and reconfiguration project that was completed in 2004.

•

Corporate expenses increased 39% in 2005 compared to 2004 due primarily to higher payroll costs in 2005 as a result of the addition of personnel from our recent acquisitions.

Operating Data for Borgata – our 50% joint venture in Atlantic City

The following table sets forth, for the periods indicated, certain operating data for Borgata, our 50% joint venture in Atlantic City. We use the equity method to account for our investment in Borgata. Borgata commenced operations on July 3, 2003.


	Year ended December 31,
(In thousands)	2005			2004			2003
Gross revenues	$	944,705		$	852,281		$	359,859
Operating income (loss)		194,623			158,572			(2,885	)
Total non-operating expenses		(23,435	)		(25,107	)		(17,508	)
Net income (loss)		171,188			133,465			(20,393	)

The following table reconciles the presentation of our share of Borgata’s operating results computed from the above table to the results presented in our accompanying consolidated statements of operations.


	Year ended December 31,
(In thousands)	2005			2004			2003
Our share of Borgata’s operating income (loss)	$	97,312		$	79,286		$	(1,442	)
Net amortization expense related to our investment in Borgata		(1,298	)		(1,321	)		(468	)
Our share of Borgata’s operating income (loss) as reported on consolidated statement of operations	$	96,014		$	77,965		$	(1,910	)

Our share of Borgata’s non-operating expenses	$	(11,718	)	$	(12,554	)	$	(8,754	)

Our share of Borgata’s operating income increased $18.0 million in 2005 compared to 2004 due mainly to Borgata’s increase in gross revenues. Borgata’s gross revenues increased 10.8% in 2005 due primarily to increased table game and slot wagering. Our share of Borgata’s operating income increased $80 million in 2004 as Borgata operated for the full year as compared to approximately half of 2003. In addition, Borgata recorded $39 million in preopening expenses in 2003.

Borgata Tax Credits . Based on New Jersey state income tax rules, Borgata is eligible for state tax credits, a significant portion of which are refundable, under the New Jersey New Jobs Investment Tax Credit (“New Jobs Tax Credit”) because Borgata made a qualified investment in a new business facility that created new jobs. The total estimated available net New Jobs Tax Credits are approximately $75 million over a five-year period, subject to certain annual conditions. Borgata began receiving refunds related to this tax credit in early 2005. As such, Borgata recorded approximately $23 million of net New Jobs Tax Credits in 2004, comprised of New Jobs Tax Credits generated from the years ended December 31, 2003 and 2004. Borgata has recorded approximately $18.7 million of net New Jobs Tax Credits in 2005. Borgata expects to generate net New Jobs Tax Credits for both of the years ending December 31, 2006 and 2007, of approximately $16.8 million per year. Borgata may be entitled to incremental New Jersey New Jobs Investment Tax Credits as a result of its expansion projects. Additionally, Borgata is eligible to receive tax credits in an amount equal to 50% of its New Jersey Adjusted Net Profits Tax (“ANP Tax”), subject to capital expenditure requirements, for the state’s fiscal years ending June 30, 2004 through 2006. For the years ended December 31, 2005 and 2004, Borgata recorded approximately $1.9 million and $2.9 million, respectively, of ANP Tax credits.

Other Operating Items

Sam’s Town Tunica reported an operating loss of $5.6 million for 2005. Due to a history of operating losses at Sam’s Town Tunica, we continue to test the assets of Sam’s Town Tunica for recoverability pursuant to Statement of Financial Accounting Standards No. 144, or SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The asset recoverability test requires estimating Sam’s Town Tunica’s undiscounted future cash flows and comparing that aggregate total to the property’s carrying value. As the property’s estimated undiscounted future cash flows exceed its carrying value, we do not believe Sam’s Town Tunica’s assets to be impaired at this time. However, we will continue to monitor the performance of Sam’s Town Tunica and, if necessary, continue to update our asset recoverability test under SFAS No. 144. If future asset recoverability tests indicate that the assets of Sam’s Town Tunica are impaired, we will be subject to a non-cash write-down of its assets which would have a material impact on our consolidated statement of operations.

In 2006, we will begin to record expense related to our stock options. For more information about the adoption of this new accounting pronouncement, see, “ – New Accounting Policies .”

In connection with the planned closure and demolition of Stardust, we have reevaluated the estimated useful lives of the depreciable assets residing on the land associated with the redevelopment, including our corporate office building. We estimate that our depreciation expense in 2006 will be approximately $12 million greater than the depreciation expense under the originally assigned useful lives of these assets.

Also in connection with the Las Vegas Strip redevelopment plan, we anticipate that we will continue to operate the Stardust through 2006, after which we expect to close and demolish the property. In February 2006, we established and communicated our plan to provide one-time termination benefits to our Stardust employees. We currently estimate that the cost of these benefits will range from $7 million to $9 million and will be recorded as expenses over the required employee service period during 2006. At this time, the Company is unable to provide any further estimates regarding other amounts or charges to be incurred that will result from such exit or disposal activities related to the Stardust.

Other Non-Operating Expenses


	Year ended December 31,
(In thousands)	2005			2004			2003
Interest costs	$	151,953		$	107,487		$	83,717
Less capitalized interest		(22,930	)		(5,460	)		(9,168	)
Interest expense, net		129,023			102,027			74,549
Loss on early retirements of debt		17,529			4,344			—
Gain on sales of undeveloped land		(659	)		(9,880	)		—

Interest costs increased in 2005 and 2004 due to higher outstanding debt used to help finance the merger with Coast Casinos and the acquisition of Sam’s Town Shreveport in 2004. In addition, the interest rates on our variable rate debt increased in 2005 and 2004. Capitalized interest was higher in 2005 due to the increased amount of cash expenditures for projects under construction in 2005 such as South Coast and the Blue Chip expansion project.

In 2005, we recorded a loss on early retirement of debt related to our $200 million principal amount of 9.25% senior notes originally due in 2009. The $17.5 million loss is comprised of the premium related to the call for redemption of these notes, unamortized deferred loan costs and the notes’ market adjustments from fair value hedges. In 2004, we recorded a $4.3 million non-cash loss on early retirement of debt related to the write-off of unamortized debt fees associated with our old bank credit facility that was refinanced in 2004.

Provision for Income Taxes

The effective tax rate for 2005 was 34% compared to 40% in 2004 and 38% in 2003. The provision for 2005 includes a net tax benefit of $1.5 million for a tax retention credit related to the hurricanes. Included in the provision for 2004 was a $5.7 million charge, net of federal benefit, related to an adverse tax ruling in Indiana.

Cumulative Effect of a Change in Accounting Principle

In September 2004, the Emerging Issues Task Force, or EITF, of the Financial Accounting Standards Board, or FASB, issued EITF D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill, which requires the application of the direct value method for intangible assets acquired in business combinations completed after September 29, 2004. In addition, EITF D-108 requires companies that have applied the residual method to the valuation of intangible assets acquired prior to such date for purposes of impairment testing to perform an impairment test using the direct value method commencing with their fiscal year beginning after December 15, 2004. Impairments of intangible assets recognized upon application of a direct value method should be reported as a cumulative effect of a change in accounting principle.

We have utilized a residual cash flow methodology in performing our annual impairment tests for all of our indefinite-lived intangible assets acquired prior to 2004. For the transition testing in 2005 as well as annually thereafter, we intend to utilize the direct value method to perform our impairment tests on such indefinite-lived intangible assets. Effective January 1, 2005, we completed this transition testing for all our intangible license rights and determined that the fair value of our Delta Downs intangible license rights was less than its book value. Accordingly, in 2005, we recorded a non-cash charge of $25.4 million, $16.4 million, net of taxes, to reduce the balance of this asset to its fair value. This charge has been reflected as a cumulative effect of a change in accounting principle, net of taxes, in the accompanying condensed consolidated statements of operations.

Liquidity and Capital Resources

Cash Flows Summary


	Year ended December 31,
(In thousands)	2005			2004			2003
Net cash provided by operating activities	$	419,908		$	259,039		$	172,687
Cash flows from investing activities:
Capital expenditures		(618,444	)		(268,848	)		(81,536	)
Net cash paid for Shreveport acquisition		—			(187,220	)		—
Net cash paid for Coast Casinos acquisition		—			(909,245	)		—
Investments in and advances to Borgata		—			(30,807	)		(50,065	)
Other		10,001			31,398			—
Net cash used in investing activities		(608,443	)		(1,364,722	)		(131,601	)
Cash flows from financing activities:
Net borrowings under bank credit agreement		446,800			844,800			105,800
Net proceeds from issuance of long-term debt		—			344,596			16,000
Payments for retirements of long-term debt		(209,325	)		—			(250,063	)
Proceeds from issuance of common stock		21,999			22,979			7,522
Dividends paid on common stock		(40,735	)		(24,717	)		(9,679	)
Other		(2,521	)		(9,465	)		(13,833	)
Net cash provided by (used in) financing activities		216,218			1,178,193			(144,253	)
Net increase (decrease) in cash and cash equivalents	$	27,683		$	72,510		$	(103,167	)

Cash Flow from Operating Activities and Working Capital

For 2005, we generated operating cash flow of $420 million compared to $259 million for 2004 and $173 million in 2003. The primary reason for the increase in operating cash flow in 2005 and 2004 is due to the addition of operating results of Coast Casinos, which we acquired in July 2004.

In addition, Borgata began distributions of its earnings to us in 2005 and distributed a total of $29 million in 2005. Both the joint venture agreement related to Borgata and Borgata’s bank credit agreement allow for certain limited distributions to be made to its partners. In February 2006, Borgata amended its bank credit agreement which increased the amount of allowable distributions to us. Borgata has significant uses for its cash flows, including maintenance and expansion capital expenditures, interest payments, state income taxes and debt principal payments. Borgata’s cash flows are primarily used for its business needs and are not generally available (except to the extent dividends are allowed to be paid to us) to service our indebtedness.

As of December 31, 2005 and 2004, we had balances of cash and cash equivalents of $188 million and $161 million, respectively, and working capital deficits of $152 million and $60 million, respectively.

Historically, we have operated with minimal or negative levels of working capital in order to minimize borrowings and related interest costs under our bank credit facility. The revolver portion of our bank credit facility generally provides any necessary funds for our day-to-day operations, interest and tax payments as well as capital expenditures. On a daily basis, we evaluate our cash position and adjust our revolver balance as necessary by either paying it down with excess cash or borrowing under the revolver. We also plan the timing and the amounts of our capital expenditures. We believe that our bank credit facility and cash flows from operating activities will be sufficient to meet our projected operating and maintenance capital expenditures for the next twelve months and the remaining costs associated with the Blue Chip and South Coast expansions as well as the expected expenditures for Echelon Place for the next twelve months.

Cash Flows from Investing Activities

Cash paid for capital expenditures in 2005 increased over 2004 due to spending on major projects and land acquisitions, including:

•

Blue Chip expansion project that opened in January 2006;

•

South Coast Hotel and Casino that opened in December 2005;

•

Delta Downs 206-room hotel that opened in March 2005;

•

Acquisition of Pennsylvania land; and

•

Acquisition of land under the Barbary Coast.

Spending on these projects totaled $489 million in 2005. In addition, for several of these projects, we have total construction payables at December 31, 2005 totaling $128 million that are expected to be paid in 2006. Other capital expenditures, primarily comprised of maintenance capital expenditures and hurricane repair costs, totaled $129 million in 2005. Capital expenditures in 2004 were significantly higher than 2003 due largely to the Blue Chip, South Coast and Delta Downs projects noted above that were also in progress during 2004. In addition, capital expenditures in 2004 included $20 million for The Orleans hotel tower and the purchase of land adjacent to the Stardust for a purchase price of $43 million, for which we paid $27 million in cash and assumed $16 million in debt.

In 2004, we paid net cash of $187 million for the acquisition of the partnership interests of Sam’s Town Shreveport and we paid net cash of $909 million for the acquisition of Coast Casinos.

Cash Flows from Financing Activities

Substantially all of the funding for our acquisitions and our renovation and expansion projects comes from cash flows from existing operations, as well as debt financing and equity issuances.

During 2005, we redeemed the entire $200 million principal amount of our 9.25% senior notes originally due in 2009 for approximately $209 million, funded by availability under our bank credit facility.

We began paying quarterly dividends in 2003. Dividends are declared at the discretion of our Board of Directors. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility.

In 2004, we issued $350 million principal amount of 6.75% senior subordinated notes due April 2014. Our net proceeds from the issuance of these notes were approximately $345 million, from which we repaid approximately $296 million of outstanding indebtedness under our bank credit facility. We used approximately $49 million of the net proceeds from this issuance to pay for a portion of the Shreveport acquisition.

In 2003, we redeemed the outstanding $116 million principal amount of 9.50% senior subordinated notes originally due in 2007 for approximately $122 million, we repaid and retired approximately $6.1 million of other indebtedness and repaid the $122 million outstanding principal amount of 9.25% senior notes at their maturity.

Expansion Projects

Blue Chip Expansion Project. In January 2006, we completed the expansion at Blue Chip Casino that included the construction of a new boat that allowed us to expand our casino to 2,170 slot machines and 51 table games and allowed for the casino to be located on one floor. We also completed the reconfiguring and refurbishing of the existing pavilion.

We are in the process of obtaining estimates and analyzing alternatives for operational uses for the old boat, including its use for conventions and meetings, offices and warehouse storage. Should we decide to sell the old boat, abandon it, or cease to use it in our operations, we would become subject to either an impairment analysis or accelerated depreciation expense, depending upon our intentions, which could have a material impact on our consolidated results of operations.

South Coast Project. The South Coast Hotel and Casino began operations in December 2005 with 647 hotel rooms, 2,366 slot machines and 52 table games. South Coast’s 4,400 seat equestrian and events center and an exhibit hall opened in February 2006. South Coast’s second hotel tower of approximately 695 hotel rooms, a spa and fitness center, and a swimming pool area are expected to open in the second quarter of 2006.

Echelon Place. In January 2006, we announced plans to redevelop the 63-acres we own on the Las Vegas Strip on which the Stardust Resort and Casino is currently located into Echelon Place. Plans for Echelon Place include a wholly-owned resort hotel, casino and spa and additional hotel and retail joint ventures between us and strategic partners. We expect to include four hotels in the project: Echelon Resort, the Shangri-La Hotel Las Vegas, Delano Las Vegas and Mondrian Las Vegas.

We anticipate that Echelon Resort will be wholly-owned and principally operated by us and will include two upscale hotel towers with an aggregate of approximately 3,300 guest rooms and suites. We expect that each hotel tower will contain its own spa and will connect directly to extensive public areas containing a 140,000 square-foot casino, approximately 25 restaurants and bars, and pool and garden areas. We also plan to build a 4,000-seat theatre with a large stage and stadium seating designed to accommodate major concerts and production shows, as well as 1,500-seat theater to house smaller shows and touring acts.

Our plans for Echelon Place also include the Shangri-La Hotel Las Vegas, which will be located within a portion of one of the upscale hotel towers at Echelon Resort. The Shangri-La Hotel Las Vegas is expected to include approximately 400 guest rooms and suites, a 20,000 square foot spa, two restaurants and meeting space. While we plan to own this hotel, we have entered into a management agreement with Shangri-La Hotels and Resorts for its management.

We have also entered into a 50/50 joint venture agreement with a subsidiary of Morgans Hotel Group Co., or Morgans, for the development of two additional hotels within Echelon Place: Delano Las Vegas and Mondrian Las Vegas, which are expected to include approximately 600 and 1,000 guest rooms and suites, respectively. We anticipate that Delano Las Vegas will also feature a nightclub, spa, lobby bar and restaurant, and a private pool and recreation area. We expect that Mondrian Las Vegas will also feature a distinctive bar and restaurant, meeting and conference space, and a private pool and recreation area. We have entered into a management agreement with Morgans for them to manage both Delano Las Vegas and Mondrian Las Vegas.

The redevelopment plans also include the Las Vegas ExpoCenter at Echelon Place, featuring approximately 650,000 square feet of exhibition and pre-function space and approximately 175,000 square feet of meeting and conference space. In addition, Echelon Place is expected to include over 350,000 square feet of shopping, dining, nightlife and cultural space with the Retail Promenade, which we plan to develop with a joint venture partner. We also plan to reserve a three-acre parcel within Echelon Place for future development.

We anticipate that the total cost of Echelon Place, including both our wholly-owned portions and the joint venture portions, will be approximately $4.0 billion. We expect our wholly-owned portions of Echelon Place, which include Echelon Resort and the Las Vegas ExpoCenter, to cost approximately $2.9 billion. We expect that, in conjunction with our joint venture with Morgans, we will contribute approximately 6.5 acres of land (valued at approximately $15.0 million per acre) and Morgans will contribute approximately $97.5 million to the venture, and that the venture will arrange non-recourse project financing to develop the two hotel properties, for a total project cost of approximately $700 million.

We plan to develop Echelon Place in one phase and to open it in early 2010. We intend to continue to operate the Stardust through 2006 as we move forward with Echelon Place’s planning, design and permitting process, and thereafter to close and demolish the Stardust to commence construction of Echelon Place.

In 2006, we expect to record capital and preopening expenditures totaling approximately $170 million for the Blue Chip, South Coast and Echelon Place projects. The source of funds for our wholly-owned projects is expected to come primarily from cash flows from operations and availability under our bank credit facility, to the extent availability exists after we meet our working capital needs. Additional funds are expected to be generated from incremental bank financing or additional debt. We could also fund these projects with equity offerings. Additional financing may not be available to us, or, if available, may not be on terms favorable to us.

We can provide no assurances that our expansion and development projects will be completed within our current estimates, commence operations as expected, include all of the anticipated amenities, features or facilities or achieve market acceptance. Our expansion project at South Coast is subject to the many risks inherent in expansion projects, including potential unanticipated design, construction, regulatory, legal and environmental problems, increased project costs and timing delays. In addition, the Echelon Place development project is subject to all of the same risks discussed above, as well as those additional risks inherent in the development and operation of a new or expanded business enterprise, including potential unanticipated operating problems. If our expansion or development projects do not become operational within the time frame and project costs currently contemplated or do not successfully compete in their markets, it could have a material adverse effect on our business, financial condition and results of operations. Once our projects become operational, they will face many of the same risks that our current properties face including, but not limited to, increases in taxes due to changes in legislation. In addition, the Blue Chip expansion project may not help us compete with new or increased competition. For additional information regarding associated risks, see “ Risk Factors - Our expansion, development and renovation projects may face significant risks inherent in construction projects or implementing a new marketing strategy, including receipt of necessary government approvals.”

Other Opportunities. We regularly investigate and pursue additional expansion opportunities both in Nevada and in other markets where casino gaming is currently permitted. We also pursue expansion opportunities in jurisdictions where casino gaming is not currently permitted in order to be prepared to develop projects upon approval of casino gaming. Such expansions will be affected and determined by several key factors, including:

•

outcome of license selection processes;

•

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

•

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

•

availability of acceptable financing.

Additional projects may require us to make substantial investments or may cause us to incur substantial costs related to the investigation and pursuit of such opportunities, which investments and costs we may fund through cash flow from operations or availability under our bank credit facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to us.

Potential Pennsylvania Gaming Operation. In November 2005, the limited partnership formed for our development project in Pennsylvania, in which we are the general partner and have an ownership interest of 90%, acquired property near Philadelphia and, in December 2005, submitted gaming applications with the Pennsylvania Gaming Control Board seeking selection to apply for a gaming license. The 125-acre site is part of a 260-acre planned retail and commercial property development. If we are selected to receive a gaming license, we plan to invest approximately $400 million in the initial phase of a casino entertainment facility. Of this amount, approximately $26 million was paid for the land. In addition, we posted a $50 million letter of credit in December 2005 in connection with our application for the gaming license. The first phase of the project is expected to include approximately 3,000 slot machines, a 200-room hotel, three restaurants and other amenities. Although we expect to own a substantial majority of and control the project, we plan to develop the project in conjunction with a group of limited partners consisting of local business and professional leaders.

North Las Vegas Locals Casino. In February 2006, we purchased a 40-acre parcel in North Las Vegas for approximately $35 million for the development of a Las Vegas locals casino. We anticipate beginning work in 2007 on the development of a full-service casino hotel for this site which is expected to open in early 2009.

Corporate Office Building. In February 2006, we purchased a new corporate office building for $26 million to replace the corporate office building we expect to abandon and demolish in connection with the Las Vegas Strip redevelopment project.

Insurance Coverage Related to Hurricane Impacts at Treasure Chest and Delta Downs

Property Damage – Treasure Chest and Delta Downs. Insurance policies carried on both Treasure Chest and Delta Downs include coverage for replacement costs related to property damage with associated deductibles of $1 million and certain other limitations. Based upon the minor damage sustained at Treasure Chest from the hurricane, no insurance claim was made for property damage because the deductible was not met. We have submitted insurance claims for the property damage sustained by Delta Downs from the hurricane because the damage exceeded the related insurance deductible. In 2005, we received insurance advances totaling $10.0 million from our insurance carrier, approximately $6 million of which related to partial reimbursement for property damage. We can provide no assurances that additional property damage will not be discovered as repairs are made for both Treasure Chest and Delta Downs or that any additional property damage would be covered by insurance.

As discussed above, our insurance policy at Delta Downs covers replacement costs for property damage. Through December 31, 2005, we received insurance advances related to property damage at Delta Downs in an amount that approximated the net book value of assets damaged or destroyed, net of the $1 million deductible. However, the cost of rebuilding and repairing these assets is expected to exceed the net book value of such assets. We expect the hurricane reconstruction costs will range from $35 million to $40 million. Through December 31, 2005, we had incurred approximately $22 million of capital expenditures related to this reconstruction project, $1 million of which will not be reimbursed due to the associated deductible and approximately $15 million of which had not yet been reimbursed by insurance. Any further insurance advances or settlements related to property damage will be recorded as a gain on our consolidated statement of operations, when fully realized, as the insurance proceeds would then exceed the net book value of damaged or destroyed assets. In 2006, we have received additional insurance advances totaling $14.0 million, all of which related to partial reimbursement of property damage. We are working with our insurance company on the scope of our

reconstruction project and can provide no assurance that we will receive full reimbursement for the total cost of our reconstruction project.

Business Interruption – Treasure Chest. Treasure Chest maintains business interruption insurance that covers lost profits and continuing normal operating expenses, up to a maximum amount of $10 million. This coverage pertains to business interruption due to civil authority, ingress/egress or off-premise utility interruption. Our insurance carrier has notified us that they are denying our business interruption claim. Therefore, we have not recorded a receivable from our insurance carrier for post-closing expenses as recovery of these amounts currently does not appear to be probable. We intend to vigorously pursue our claims under Treasure Chest’s insurance policy.

Business Interruption – Delta Downs. Delta Downs maintains business interruption insurance that covers lost profits and continuing normal operating expenses, up to a maximum of $1 million per day. Our insurance carrier has confirmed that Delta Downs is covered under the policy for these items due to the effects of the hurricane. As such, we have recorded an insurance receivable for post-closing expenses. As noted above, we received advances of $10.0 million from our insurance carrier in 2005, approximately $4 million of which related to partial reimbursement of post-closing expenses. At December 31, 2005, the insurance receivable balance related to post-closing expenses at Delta Downs was $4.3 million. Any recoveries for Delta Downs’ lost profits from the insurance carrier will be recorded on our consolidated statement of operations when fully realized. As of December 31, 2005, we had not received any such recoveries for lost profits related to Delta Downs.

Indebtedness

Our long-term debt primarily consists of a bank credit facility and senior subordinated notes. We pay variable interest based on LIBOR on our bank credit facility. In 2004, we restated our bank credit facility, and in 2005 we amended it to increase the revolving portion of the facility to $1.35 billion and to extend the maturity date of the revolving portion to June 2011. At December 31, 2005, we had availability under our bank credit facility of $162 million. We pay fixed rates of interest ranging from 6.75% to 8.75% on our notes. In 2005, we redeemed all of our outstanding 9.25% senior notes originally due in 2009 with availability under our bank credit facility.

Bank Credit Facility Covenants. Our bank credit facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a fixed charge coverage ratio, (ii) establishing a maximum permitted total leverage ratio and senior leverage ratio, (iii) imposing limitations of the incurrence of additional secured indebtedness and (iv) imposing restrictions on investments, dividends and certain other payments. We believe are in compliance with the bank credit facility covenants at December 31, 2005.

Notes. Our $250 million, $300 million, $350 million and $250 million principal amounts of senior subordinated notes due 2012, 2012, 2014, and 2016, respectively, contain limitations on, among other things, (i) our ability and our restricted subsidiaries’ (as defined in the indentures governing the notes) ability to incur additional indebtedness, (ii) the payment of dividends and other distributions with respect to our capital stock and of our restricted subsidiaries and the purchase, redemption or retirement of our capital stock and our restricted subsidiaries, (iii) the making of certain investments, (iv) asset sales, (v) the incurrence of liens, (vi) transactions with affiliates, (vii) payment restrictions affecting restricted subsidiaries, (viii) certain consolidations, mergers and transfers of assets. We believe we are in compliance with the covenants related to notes outstanding at December 31, 2005.

Our ability to service our debt will be dependent on future performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, certain of which are beyond our control. It is unlikely that our business will generate sufficient cash flow from operations to enable us to pay our indebtedness as it matures and to fund our other liquidity needs. We believe that we will need to refinance all or a portion of our indebtedness at each maturity.

Contractual Obligations and Commitments. The following table summarizes our contractual obligations as of December 31, 2005.


	Payments Due by Period
(In thousands)	Total		2006		2007		2008		2009		2010		Thereafter
Contractual Obligations
Long-term debt obligations	$	2,557,035	$	5,729	$	20,896	$	5,582	$	5,616	$	1,139,952	$	1,379,260
Capital lease obligations		—		—		—		—		—		—		—
Operating lease obligations		534,859		16,507		13,694		12,019		10,584		8,872		473,183
Interest obligations on fixed-rate debt ⁽¹⁾		502,280		70,946		69,990		69,511		69,477		69,441		152,915
Purchase obligations
Entertainment contracts		3,545		3,545		—		—		—		—		—
Construction projects		49,946		49,946		—		—		—		—		—
Other ⁽²⁾		157,334		48,671		37,009		33,633		34,023		3,300		698
Other long-term obligations ⁽³⁾		10,698		1,542		471		402		356		251		7,676
Total contractual obligations	$	3,815,697	$	196,886	$	142,060	$	121,147	$	120,056	$	1,221,816	$	2,013,732

⁽¹⁾

Includes interest rate obligations on our fixed rate debt that comprises $0.9 billion of our total December 31, 2005 debt balance of $2.6 billion. Our variable rate debt at December 31, 2005 consists of $1.6 billion in outstanding balances on our bank credit facility. Interest payments for future periods related to the variable rate debt are dependent upon certain items including future eurodollar rates and the outstanding borrowings under the bank credit facility, that fluctuate from period to period and have not been presented in this table. At December 31, 2005, the blended interest rate for outstanding borrowings under the bank credit facility was 5.7%.

⁽²⁾	Other consists of various contracts for good and services, including our contract for Hawaiian air charter operations.

⁽³⁾	Other long-term obligations relate primarily to deferred compensation balances at December 31, 2005.

In addition, we have outstanding commitments at December 31, 2005. At December 31, 2005, we were in the process of completing projects at Blue Chip and South Coast. Open purchase orders related to these projects are included in the table above.

In conjunction with the limited partnership formed for our development project in Pennsylvania, in which we are the general partner and have an ownership interest of 90%, we made a commitment to contribute capital of $50 million to the partnership if we are selected to receive a gaming license from the Pennsylvania Gaming Control Board. As of December 31, 2005, we had contributed approximately $26 million to the partnership in order for the partnership to purchase land in Pennsylvania. Additionally, we posted a $50 million letter of credit in December 2005 in connection with our application for the gaming license.

As discussed above, we purchased land located in Pennsylvania for the development of a potential casino resort. We paid approximately $26 million and issued a $6.3 million contingent promissory note for the land acquisition. The contingent note does not bear interest and becomes payable if the Pennsylvania Gaming Control Board issues a gaming license permitting gambling on the site, subject to certain conditions. Should a gaming license be issued for our site, we will record the note payable and increase the historical cost of the land on our consolidated balance sheet.

In 2006, we entered into a 50/50 joint venture agreement with Morgans as part of the development for Echelon Place. In conjunction with this joint venture agreement, we expect to contribute approximately 6.5 acres of land (valued at approximately $15.0 million per acre) and Morgans will contribute approximately $97.5 million to the venture, and that the venture will arrange non-recourse project financing to develop two hotel properties, for a total project cost of approximately $700 million.

We are required to pay, to the City of Kenner, Louisiana, a boarding fee of $2.50 for each passenger boarding our Treasure Chest riverboat casino during the year. The future minimum payment due in 2006 to the City of Kenner, based upon a portion of actual passenger counts from the prior year, is approximately $3.5 million.

In 2005, the Illinois legislature passed new legislation for wagering taxes that imposes a minimum wagering tax for casinos for the next two state-based fiscal years ending June 30, 2007. Under these minimum wagering tax provisions, during each of the State’s fiscal years ending June 30, 2006 and 2007, Par-A-Dice will be required to remit to the State the amount, if any, by which $43 million exceeds the wagering taxes actually paid by Par-A-Dice during each of those fiscal years. The payments, if any, are required by each of June 15, 2006 and 2007.

Off Balance Sheet Arrangements . Our off balance sheet arrangements consist primarily of investments in unconsolidated affiliates, which mainly consist of our investment in Borgata. We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions other than straightforward interest rate swaps and

collars, and through Borgata, interest rate swaps, caps and collars. Our joint venture investment allows us to realize the benefits of owning a full-scale resort in a manner that lessens our initial investment. We do not guarantee financing obtained by Borgata, nor are there any other provisions of the venture agreement which are unusual or subject us to risks to which we would not be subjected if we had full ownership of the resort.

We have entered into certain agreements that contain indemnification provisions such as indemnification agreements with our executive officers and directors and provide indemnity insurance pursuant to which directors and officers are indemnified or insured against liability or loss under certain circumstances which may include liability or related loss under the Securities Act and the Exchange Act. In addition, our Restated Articles of Incorporation and Restated Bylaws contain provisions that provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by law.

At December 31, 2005, we had outstanding letters of credit totaling $53.8 million which primarily relate to an application for a gaming license in Pennsylvania.

New Accounting Policies

In December 2004, the FASB issued SFAS 123R, Share-Based Payment , which revised SFAS No. 123, Accounting for Stock-Based Compensation and superseded APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This statement requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). This cost will be recognized over the period during which an employee is required to provide service in exchange for the award. This statement also addresses the accounting for the tax effects of share-based compensation awards. Pursuant to a Securities and Exchange Commission rule issued in April 2005, this statement is effective for us commencing on January 1, 2006. We are adopting this standard on that date using the modified prospective application. Under the modified prospective application, we will expense the cost of share-based compensation awards issued after January 1, 2006. Additionally, we will recognize compensation cost for the portion of awards outstanding on January 1, 2006 for which the requisite services have not been rendered over the periods the requisite services will be rendered after January 1, 2006. Based upon stock options outstanding at December 31, 2005, we estimate that for those options, we will record approximately $20 million in stock option expense for the year ending December 31, 2006. The amount of stock option expense to be recorded for each quarter is not pro-rata, but based upon certain factors, including the timing of the stock options vesting during each quarter. We currently estimate the amount of stock option expense to be recorded in the three month period ending March 31, 2006 will approximate $6 million. Any stock option grants in 2006 will increase our estimate of stock option expense to be recorded for the year. We can provide no assurances that the actual amount of stock option expense to be recorded in 2006 will approximate our current estimate.

In March 2005, the FASB issued Interpretation 47 (“FIN 47”), Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143. This interpretation clarified the term “conditional asset retirement obligation” and also clarified the requirement to recognize a liability for the fair value of such an obligation when incurred if the liability’s fair value can be reasonably estimated. The 2005 adoption of FIN 47 did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections . This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Additionally, this statement provides guidance on recording and disclosing changes in accounting estimates. We will adopt this statement on January 1, 2006 and do not expect its adoption to have a material effect on our financial statements.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make estimates and assumptions that affect the reported amounts included in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from the estimates. We believe the following critical accounting policies may require a higher degree of judgment and complexity.

Goodwill, Intangible and Other Long-Lived Assets. We evaluate our goodwill, intangible other long-lived assets in accordance with the applications of SFAS No. 142 related to goodwill and other intangible assets and SFAS No. 144 related to impairment or disposal of long-lived assets. For goodwill and intangible assets, we review the carrying values on an annual basis and between annual dates in certain circumstances. For assets to be disposed of, we recognize the asset at the lower of carrying value or fair market value less costs of

disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For assets to be held and used, we review for impairment whenever indicators of impairment exist.

Inherent in the reviews of the carrying amounts of the above assets are various estimates. First, management must determine the usage of the asset. To the extent management decides that an asset will be sold or disposed of, it is more likely that an impairment may be recognized. Assets must be tested at the lowest level for which identifiable cash flows exist. This means that some assets must be grouped, and management has some discretion in the grouping of assets. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. If our ongoing estimates of future cash flows are not met, we may have to record additional impairment charges in future accounting periods. Our estimates of cash flows are based on the current regulatory, social and economic climates, recent operating information and budgets of the various properties where we conduct operations. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to our properties.

In accordance with SFAS No. 144, we have tested the assets of Sam’s Town Tunica for recoverability during 2005 due to a history of operating losses. As the property’s estimated undiscounted future cash flows exceed its carrying value, we do not believe these assets to be impaired at this time. However, we will continue to monitor the performance of Sam’s Town Tunica as well as continue to update our asset recoverability test under SFAS No. 144. If future asset recoverability tests indicate that the assets of Sam’s Town Tunica are impaired, we will be subject to a non-cash write-down of its assets which would likely have a material impact on our consolidated financial statements.

We determined that the impact of Hurricanes Katrina and Rita was a triggering event requiring impairment tests for Treasure Chest and Delta Downs’ assets during 2005. Our impairment tests were based upon estimated future cash flows from these properties. Based upon the results of the tests, no impairment was indicated for any of the assets tested.

Because we intend to redevelop the land on which Stardust is located and our plans include demolishing Stardust’s existing buildings and abandoning other related assets, we performed an impairment test for this property. Based upon the results of this test, we recorded a $56 million non-cash impairment loss in 2005 to write down the long-lived assets of the Stardust to their estimated fair value.

Capital Expenditures and Depreciation. We must also make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense or a capital asset is a matter of judgment. Our depreciation expense is highly dependent upon the assumptions we make about our assets’ estimated useful lives. We determine the estimated useful lives based upon our experience with similar assets. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively. For example, in connection with the planned closure and demolition of Stardust, we have reevaluated the estimated useful lives of the depreciable assets residing on the land associated with the redevelopment, including our corporate office building. We estimate that our depreciation expense in 2006 will be approximately $12 million greater than the depreciation expense under the originally assigned useful lives of these assets.

Capitalized Interest . We capitalize interest costs associated with major construction projects. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted average cost of borrowing. Capitalization of interest ceases when the project or discernible portions of the project are complete. We amortize capitalized interest over the estimated useful life of the related asset.

Derivative Instruments. We utilize an investment policy for managing risks associated with our current and anticipated future borrowings, such as interest rate risk and its potential impact on our fixed and variable rate debt. Under this policy, we may utilize derivative contracts that effectively convert our borrowings from either floating rate to fixed or fixed rate to floating. The policy does not allow for the use of derivative financial instruments for trading or speculative purposes. To the extent we employ such financial instruments pursuant to this policy, and the instruments qualify for hedge accounting, we designate and account for them as hedged instruments. In order to qualify for hedge accounting, the underlying hedged item must expose us to risks associated with market fluctuations and the financial instrument used must be designated as a hedge and must reduce our exposure to market fluctuations throughout the hedged period. If these criteria are not met, a change in the market value of the financial instrument is recognized as a gain or loss in the period of change. Otherwise, gains and losses are not recognized except to the extent that the hedged debt is disposed of prior to maturity or to the extent that acceptable ranges of ineffectiveness exist in the hedge. Net interest paid or received pursuant to the financial instrument is included in interest expense in the period.

At December 31, 2005, we had seven derivative instruments outstanding with a total notional amount of $350 million. One of these derivative instruments is a fixed-to-floating swap that meets the criteria for fair value hedge accounting established by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, as well as the criteria for the “shortcut” method, which allows for an assumption of no ineffectiveness. As such, there was no net impact on our consolidated statement of operations from changes in value of the hedging instrument. Instead, the fair value of the instrument is recorded as either an asset or liability on our consolidated balance sheets with offsetting adjustments to the carrying values of the related debt. As such, at December 31, 2005, we recorded a long-term asset of $1.5 million on the accompanying consolidated balance sheet, representing the fair market value of the swap at that date. The corresponding net adjustment increased the carrying value of the long-term debt items hedged, as the interest rate swap is considered highly effective under the criteria established by GAAP.

At December 31, 2005, we also had four floating-to-fixed derivative instruments and two interest rate collars designated as cash flow hedges. On a quarterly basis, we monitor the effectiveness of these derivatives and record any ineffectiveness in our consolidated statements of operations. Our derivative instruments are recorded on our consolidated balance sheets at their fair value. For the six derivatives discussed, we recorded an asset of $6.1 million as of December 31, 2005.

Borgata Derivative Instruments. In addition, Borgata, our joint venture project, utilized derivative financial instruments designated as cash flow hedges, the last of which expired in December 2005. The following table reports our share of the effects of Borgata’s derivative instruments for the periods indicated. Our share of the increase or decrease in fair value of certain financial instruments related to hedges deemed to be ineffective is reported on our accompanying consolidated statements of operations. Our share of the increase or decrease in fair value of certain financial instruments related to hedges deemed to be effective is reported in other comprehensive income on the accompanying consolidated balance sheets. For more information on the derivatives, see Item 7A. “Quantitative and Qualitative Disclosure about Market Risk.”


	Year Ended December 31,
(In thousands)	2005			2004		2003
Net gain (loss) on derivative instruments due to ineffectiveness in certain hedges
Reported during preopening stage and included in operating loss from Borgata	$	—		$	—	$	(309	)
Reported during operating stage and included in non-operating expense from Borgata		(404	)		111		350
Derivative instruments market adjustment	$	2,927		$	4,643	$	4,192
Tax effect of derivative instruments market adjustment		1,044			1,655		1,532
Net derivative instruments market adjustment	$	1,883		$	2,988	$	2,660

Stock-Based Employee Compensation. We are required to estimate the fair value of stock options grants and, beginning in 2006, record the related employee stock-based compensation costs in our consolidated statements of operations. To value our options, we utilize a Black-Scholes option pricing model that requires the formation of assumptions to be used in the model, such as expected stock volatility, risk-free interest rates, expected option lives and dividend yields. We formed our assumptions using historical experience, observable conditions and a third party valuation of our stock options.

Income Taxes. We are subject to income taxes in the United States and several states in which we operate. We account for income taxes according to SFAS No. 109, Accounting for Income Taxes . SFAS No. 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards, tax credit carryforwards and certain temporary differences. A valuation allowance is recognized if, based upon the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be recognized.

Our income tax returns are subject to examination by tax authorities. We regularly assess the potential outcome of these examinations in determining the adequacy of our provision for income taxes and our income tax liabilities. To determine necessary reserves, we must make assumptions and judgments about potential actions by taxing authorities, partially based on past experiences. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental, and we believe we have adequately provided for any reasonable and foreseeable outcomes relating to uncertain tax matters. When actual results of tax examinations differ from our estimates or when potential actions are settled differently than we expected, we adjust the income tax provision and our tax reserves in the current period.

Self-Insurance Reserves. We are self-insured up to certain stop loss amounts for employee heath coverage, workers’ compensation and general liability costs. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claims. We believe our estimates of

future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities.

Litigation, Claims and Assessments. We also utilize estimates for litigation, claims and assessments related to our business and tax matters. These estimates are based upon our knowledge and experience about past and current events and also upon reasonable assumptions about future events. Actual results could differ from these estimates.

ITEM 7A. Quantitative and Qualitative Disclosure about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market and short-term and long-term eurodollar rates, and its potential impact on our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our bank credit facility. Borrowings under our bank credit facility are based upon either the agent bank’s quoted base rate or the eurodollar rate, plus applicable margins. However, the amount of outstanding borrowings is expected to fluctuate from time to time. We also attempt to manage the impact of interest rate risk on our long-term debt by utilizing derivative financial instruments in accordance with established policies and procedures. We do not utilize derivative financial instruments for trading or speculative purposes. For more information, see Note 10, “ Derivative Instruments ” in the notes to the consolidated financial statements.

During the year ended December 31, 2005, we utilized interest rate swap agreements. Interest differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense. Interest rate swaps related to debt are matched to specific debt obligations.

We are exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreement outstanding at December 31, 2005. However, we believe that this risk is minimized because we monitor the credit ratings of the counterparties to the swaps. If we had terminated our swaps as of December 31, 2005, we would have been entitled to receive a total of $7.6 million based on the fair values of the derivative instruments.

The following table provides information about our financial instruments (both debt obligations and interest rate swaps) that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows by expected maturity dates for our outstanding debt at December 31, 2005 and related weighted-average interest rates as of December 31, 2005. For our interest rate swaps, the table presents the notional amounts by the contractual maturity dates and variable rates. The notional amounts are used to calculate the contractual cash flows to be exchanged under the contracts. The variable rates are based upon prevailing interest rates.

The scheduled maturities of our long-term debt and interest rate swap agreements outstanding as of December 31, 2005 for the years ending December 31 are as follows:


	Year Ending December 31,
(In thousands)	2006			2007			2008			2009			2010			Thereafter			Total
Liabilities
Long-term debt (including current portion):
Fixed-rate	$	729		$	15,896		$	582		$	616		$	652		$	911,760		$	930,235
Average interest rate		6.6	%		8.7	%		5.7	%		5.7	%		5.7	%		7.6	%		7.6	%
Variable-rate	$	5,000		$	5,000		$	5,000		$	5,000		$	1,139,300		$	467,500		$	1,626,800
Average interest rate		5.9	%		5.9	%		5.9	%		5.9	%		5.7	%		5.9	%		5.7	%
Interest Rate Derivatives
Derivative Instruments:
Pay floating		—			—			—			—			—		$	50,000		$	50,000
Average receivable rate		—			—			—			—			—			8.8	%		8.8	%
Average est. payable rate		—			—			—			—			—			7.5	%		7.5	%
Pay fixed		—			—			—			—		$	200,000			—		$	200,000
Average receivable rate		—			—			—			—			4.0	%		—			4.0	%
Average payable rate		—			—			—			—			4.1	%		—			4.1	%
Collars		—			—			—			—		$	100,000			—		$	100,000
Cap rate		—			—			—			—			5.3	%		—			5.3	%
Floor rate		—			—			—			—			3.5	%		—			3.5	%

The following table provides other information about our long-term debt at December 31, 2005 (in thousands):


	Outstanding Face Amount		Carrying Value		Estimated Fair Value
Bank Credit Facility	$	1,626,800	$	1,626,800	$	1,631,725
6.75% Senior Subordinated Notes due 2014		350,000		350,000		347,375
7.75% Senior Subordinated Notes due 2012		300,000		300,000		314,250
8.75% Senior Subordinated Notes due 2012		250,000		251,489		268,125
Other debt		30,235		30,235		30,235
Total	$	2,557,035	$	2,558,524	$	2,591,710

ITEM 8. Financial Statements and Supplementary Data

The information required by this item is contained in the financial statements listed in Item 15(a) of this Form 10-K under the caption “Financial Statements.” In addition, audited consolidated financial statements for Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, our 50% Atlantic City joint venture, as of and for the three years in the period ended December 31, 2005 are included in Exhibit 99.2 and are incorporated herein by reference.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in or disagreements with accountants on accounting and financial disclosures during the three years in the period ended December 31, 2005.

ITEM 9A. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we include a report of management’s assessment of the design and effectiveness of our internal controls as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Our independent registered public accounting firm also attested to, and reported on, management’s assessment of the effectiveness of internal control over financial reporting. Management’s report and the independent registered public accounting firm’s attestation report are located below.

There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of the end of the most recent fiscal year, December 31, 2005, based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework in Internal Control — Integrated Framework , our management concluded that our internal control over financial reporting was effective as of the end of our most recent fiscal year, December 31, 2005.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in its report which is included below.

Report of Independent Registered Public Accounting Firm on Management’s Assessment on Internal Control Over Financial Reporting

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Boyd Gaming Corporation and Subsidiaries

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Boyd Gaming Corporation and Subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2005, of the Company and our report dated March 13, 2006 expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the Company’s adoption of EITF D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill .

DELOITTE AND TOUCHE LLP

Las Vegas, Nevada

March 13, 2006

ITEM 9B. Other Information

None.

Part III

ITEM 10. Directors and Executive Officers of the Registrant

Information regarding the members of our board of directors and our audit committee, including our audit committee financial expert, is set forth under the caption “Proposal No. 1 — Election of Directors” and “Executive Compensation and Other Information — Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement to be filed in connection with our 2006 Annual Meeting of Stockholders and is incorporated herein by reference. Information regarding non-director executive company officers is set forth in Item 4A of Part I of this Report on Form 10-K.

Code of Ethics. Our code of ethics is posted on our website at www.boydgaming.com. Any waivers or amendments to our code of ethics will be posted on our website.

ITEM 11. Executive Compensation

The information required by this item is set forth under the caption “Executive Compensation and Other Information” and “Proposal No. 1 — Election of Directors — Compensation of Directors” in our definitive Proxy Statement to be filed in connection with our 2006 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is set forth under the caption “Stock Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in our definitive Proxy Statement to be filed in connection with our 2006 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions

The information required by this item is set forth under the captions “Executive Compensation and Other Information — Certain Relationships and Related Transactions” and “— Compensation Committee Interlocks and Insider Participation” in our definitive Proxy Statement to be filed in connection with our 2006 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14. Principal Accounting Fees and Services

Information about principal accounting fees and services, as well as the audit committee’s pre-approval policies appears under the caption “Proposal No. 2 — Ratification of Appointment of Independent Auditors — Audit Committee Pre-Approval of Audit and Non-Audit Services” in our definitive Proxy Statement to be filed in connection with our 2006 Annual Meeting of Stockholders and is incorporated herein by reference.

Part IV

ITEM 15. Exhibits and Financial Statement Schedules


		Page No.
(a)	Financial Statements. The following financial statements for the three years in the period ended December 31, 2005 are filed as part of this report:

	Report of Independent Registered Public Accounting Firm	37

	Consolidated Balance Sheets at December 31, 2005 and 2004	38

	Consolidated Statements of Operations for the Three Years in the Period Ended December 31, 2005	39

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Years in the Period Ended December 31, 2005	40

	Consolidated Statements of Cash Flows for the Three Years in the Period Ended December 31, 2005	41

	Notes to Consolidated Financial Statements	43

	Audited consolidated financial statements for Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, as of and for the three years in the period ended December 31, 2005 are presented in Exhibit 99.2 and are incorporated herein by reference

(b)	Exhibits. Refer to (c) on page 66.

Boyd Gaming Corporation and Subsidiaries

Index to Consolidated Financial Statements


		Page No.
Report of Independent Registered Public Accounting Firm		37

Consolidated Financial Statements

Consolidated Balance Sheets		38

Consolidated Statements of Operations		39

Consolidated Statements of Changes in Stockholders’ Equity		40

Consolidated Statements of Cash Flows		41

Notes to Consolidated Financial Statements		43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Boyd Gaming Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of Boyd Gaming Corporation and Subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Boyd Gaming Corporation and Subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 8 to the consolidated financial statements, in 2005, the Company changed its method of accounting for intangible assets to conform to EITF D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill , and recorded a cumulative effect of a change in accounting principle.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

DELOITTE AND TOUCHE LLP

Las Vegas, Nevada

March 13, 2006

Consolidated Balance Sheets


	December 31,
(In thousands, except share data)	2005		2004
ASSETS
Current assets
Cash and cash equivalents	$	188,406	$	160,723
Restricted cash		8,412		6,619
Accounts receivable, net		25,706		29,263
Insurance receivable		4,313		—
Inventories		14,402		12,597
Prepaid expenses and other		37,237		32,138
Income taxes receivable		7,002		16,004
Deferred income taxes		2,683		4,711
Total current assets		288,161		262,055
Property and equipment, net		2,734,485		2,277,067
Investment in Borgata, net		388,372		330,486
Other assets, net		102,909		112,867
Intangible assets, net		506,838		532,351
Goodwill, net		404,206		404,206
Total assets	$	4,424,971	$	3,919,032

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current maturities of long-term debt	$	5,729	$	5,682
Accounts payable		92,556		69,935
Construction payables		128,136		49,337
Accrued liabilities
Payroll and related		78,005		73,832
Interest		15,762		20,764
Gaming		62,825		58,312
Accrued expenses and other		56,813		44,442
Total current liabilities		439,826		322,304
Long-term debt, net of current maturities		2,552,795		2,304,343
Deferred income taxes and other liabilities		334,346		348,615
Commitments and contingencies
Minority interest		—		—
Stockholders’ equity
Preferred stock, $.01 par value; 5,000,000 shares authorized		—		—
Common stock, $.01 par value; 200,000,000 shares authorized; 89,286,491 and 87,537,122 shares outstanding		893		875
Additional paid-in capital		619,852		574,723
Retained earnings		473,964		370,089
Accumulated other comprehensive income (loss), net		3,295		(1,917	)
Total stockholders’ equity		1,098,004		943,770
Total liabilities and stockholders’ equity	$	4,424,971	$	3,919,032

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

Consolidated Statements of Operations


	Year Ended December 31,
(In thousands, except per share data)	2005			2004			2003
Revenues
Gaming	$	1,817,289		$	1,454,884		$	1,073,736
Food and beverage		326,566			248,654			165,899
Room		178,091			122,496			76,819
Other		149,057			106,057			78,075
Gross revenues		2,471,003			1,932,091			1,394,529
Less promotional allowances		247,983			198,033			141,459
Net revenues		2,223,020			1,734,058			1,253,070
Costs and expenses
Gaming		807,712			689,324			535,388
Food and beverage		203,901			152,370			96,096
Room		53,063			37,184			22,058
Other		129,342			99,457			81,706
Selling, general and administrative		322,226			283,024			194,180
Maintenance and utilities		97,063			76,829			56,581
Depreciation and amortization		174,939			136,126			93,756
Corporate expense		44,101			32,909			22,595
Preopening expenses		18,927			2,308			—
Impairment loss		56,000			—			—
Merger, acquisition and transition related expenses		—			6,534			—
Hurricane and related expenses, net		9,274			—			—
Total costs and expenses		1,916,548			1,516,065			1,102,360
Operating income (loss) from Borgata		96,014			77,965			(1,910	)
Operating income		402,486			295,958			148,800
Other income (expense)
Interest income		224			186			318
Interest expense, net of amounts capitalized		(129,023	)		(102,027	)		(74,549	)
Loss on early retirements of debt		(17,529	)		(4,344	)		—
Gain on sales of undeveloped land		659			9,880			—
Other non-operating expenses from Borgata, net		(11,718	)		(12,554	)		(8,754	)
Total		(157,387	)		(108,859	)		(82,985	)
Minority interest		—			—			—
Income before provision for income taxes and cumulative effect of a change in accounting principle		245,099			187,099			65,815
Provision for income taxes		84,050			75,645			24,882
Income before cumulative effect of a change in accounting principle		161,049			111,454			40,933
Cumulative effect of a change in accounting for intangible assets, net of taxes of $8,984		(16,439	)		—			—
Net income	$	144,610		$	111,454		$	40,933
Basic net income per common share:
Income before cumulative effect	$	1.82		$	1.46		$	0.64
Cumulative effect of a change in accounting for intangible assets, net of taxes		(0.19	)		—			—
Net income	$	1.63		$	1.46		$	0.64
Diluted net income per common share:
Income before cumulative effect	$	1.78		$	1.42		$	0.62
Cumulative effect of a change in accounting for intangible assets, net of taxes		(0.18	)		—			—
Net income	$	1.60		$	1.42		$	0.62
Dividends declared per common share	$	0.46		$	0.32		$	0.15

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

Consolidated Statements of Changes in Stockholders’ Equity


(In thousands, except share data)	Other Comprehensive Income			Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net			Total Stockholders’ Equity
(In thousands, except share data)	Other Comprehensive Income			Shares		Amount			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net			Total Stockholders’ Equity
Balances, January 1, 2003				64,761,035		$	648		$	163,347		$	252,098		$	(7,532	)	$	408,561
Net income	$	40,933		—			—			—			40,933			—			40,933
Derivative instruments market adjustment, net of taxes of $1.5 million		2,660		—			—			—			—			2,660			2,660

Comprehensive income	$	43,593

Stock options exercised, including taxes of $4.6 million				1,286,035			13			12,154			—			—			12,167
Stock repurchased and retired				(1,066,100	)		(11	)		(13,378	)		—			—			(13,389	)
Dividends paid on common stock				—			—			—			(9,679	)		—			(9,679	)
Balances, December 31, 2003				64,980,970			650			162,123			283,352			(4,872	)		441,253
Net income	$	111,454		—			—			—			111,454			—			111,454
Derivative instruments market adjustment, net of taxes of $1.7 million		2,988		—			—			—			—			2,988			2,988
Restricted available for sale securities market adjustment, net of taxes		(33	)	—			—			—			—			(33	)		(33	)

Comprehensive income	$	114,409

Stock issued in connection with merger with Coast Casinos, net of issuance costs of $425				19,369,869			194			368,958			—			—			369,152
Stock options exercised, including taxes of $20.7 million				3,186,283			31			43,642			—			—			43,673
Dividends paid on common stock				—			—			—			(24,717	)		—			(24,717	)
Balances, December 31, 2004				87,537,122			875			574,723			370,089			(1,917	)		943,770
Net income	$	144,610		—			—			—			144,610			—			144,610
Derivative instruments market adjustment, net of taxes of $3.2 million		5,340		—			—			—			—			5,340			5,340
Restricted available for sale securities market adjustment, net of taxes		(128	)	—			—			—			—			(128	)		(128	)

Comprehensive income	$	149,822

Stock options exercised, including taxes of $23.1 million				1,749,369			18			45,129			—			—			45,147
Dividends paid on common stock				—			—			—			(40,735	)		—			(40,735	)
Balances, December 31, 2005				89,286,491		$	893		$	619,852		$	473,964		$	3,295		$	1,098,004

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

Consolidated Statements of Cash Flows


	Year Ended December 31,
(In thousands)	2005			2004			2003
Cash Flows from Operating Activities
Net income	$	144,610		$	111,454		$	40,933
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		174,939			136,126			93,756
Cumulative effect of a change in accounting principle		25,423			—			—
Impairment loss		56,000			—			—
Non-cash hurricane expenses		2,091			—			—
Amortization of debt issuance costs		4,784			4,741			4,519
Deferred income taxes		(18,253	)		30,630			28,580
Operating and non-operating (income) losses from Borgata		(84,296	)		(65,411	)		10,664
Distributions of earnings from Borgata		29,338			—			—
Gain on sales of undeveloped land and certain other assets		(659	)		(10,309	)		—
Loss on early retirements of debt		17,529			4,344			—
Tax benefit from stock options exercised		23,148			20,694			4,645
Changes in operating assets and liabilities:
Restricted cash		(1,011	)		954			(848	)
Accounts receivable, net		3,557			(8,453	)		(574	)
Insurance receivable		372			—			—
Inventories		(1,805	)		(1,663	)		70
Prepaid expenses and other		(4,507	)		(2,113	)		(2,790	)
Other assets		(8,364	)		(1,990	)		4,075
Other current liabilities		41,306			37,356			(12,407	)
Other liabilities		6,704			3,137			1,090
Income taxes receivable		9,002			(458	)		974
Net cash provided by operating activities		419,908			259,039			172,687
Cash Flows from Investing Activities
Net cash paid for Coast Casinos acquisition		—			(909,245	)		—
Net cash paid for Shreveport acquisition		—			(187,220	)		—
Investments in and advances to Borgata		—			(30,807	)		(50,065	)
Capital expenditures		(618,444	)		(268,848	)		(81,536	)
Insurance proceeds for replacement assets		6,000			—			—
Net proceeds from sales of undeveloped land and certain other assets		4,001			31,398			—
Net cash used in investing activities		(608,443	)		(1,364,722	)		(131,601	)
Cash Flows from Financing Activities
Payments on long-term debt		(684	)		(482	)		(444	)
Payments for retirements of long-term debt		(209,325	)		—			(250,063	)
Payments under bank credit agreements		(518,600	)		(777,950	)		(313,600	)
Borrowings under bank credit agreements		965,400			1,622,750			419,400
Other		(1,837	)		(8,983	)		—
Net proceeds from issuance of long-term debt		—			344,596			16,000
Proceeds from issuance of common stock		21,999			22,979			7,522
Common stock repurchased and retired		—			—			(13,389	)
Dividends paid on common stock		(40,735	)		(24,717	)		(9,679	)
Net cash provided by (used in) financing activities		216,218			1,178,193			(144,253	)
Net increase (decrease) in cash and cash equivalents		27,683			72,510			(103,167	)
Cash and cash equivalents, beginning of year		160,723			88,213			191,380
Cash and cash equivalents, end of year	$	188,406		$	160,723		$	88,213

Consolidated Statements of Cash Flows continued


(In thousands)
Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized	$	128,234		$	83,929		$	74,395
Cash paid (received) for income taxes, including refunds		61,171			24,777			(9,320	)
Supplemental Schedule of Non-Cash Investing And Financing Activities
Payables for capital expenditures	$	137,524		$	61,355		$	10,648
Restricted cash used to purchase restricted investments		(3,773	)		(11,652	)		—
Restricted cash proceeds from sales of restricted investments		4,539			1,097			—
Borgata contributions payable		—			—			35,500
Debt issuance costs		—			5,404			50
Debt assumed for acquisition of land		—			15,764			—
Merger with Coast Casinos
Fair value of non-cash assets acquired	$	—		$	1,525,770		$	—
Net cash paid		—			(909,245	)		—
Less fair value of common stock issued, net		—			(369,152	)		—
Liabilities assumed	$	—		$	247,373		$	—
Acquisition of Sam’s Town Shreveport
Fair value of non-cash assets acquired	$	—		$	192,224		$	—
Net cash paid		—			(187,220	)		—
Liabilities assumed	$	—		$	5,004		$	—

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

Notes to Consolidated Financial Statements

NOTE 1. — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Boyd Gaming Corporation and its wholly-owned subsidiaries. We currently wholly-own and operate 18 gaming entertainment facilities located in Nevada, Mississippi, Illinois, Louisiana and Indiana. In addition, we own and operate a travel agency located in Hawaii, a Hawaiian-based insurance company that underwrites travel-related insurance, and an offsite sports book located in Las Vegas. We are also developing Echelon Place which is further described in Note 4, “ Las Vegas Strip Redevelopment.” In 2005, we formed a Pennsylvania limited partnership, in which we are the general partner and have an ownership interest of 90%, for the development of a potential Pennsylvania gaming operation. We consolidated the accounts and activity of the Pennsylvania limited partnership in our consolidated balance sheet at December 31, 2005 and in our consolidated statement of operations for the year ended December 31, 2005. As such, we have presented a minority interest for the amounts attributable to the minority partners, which were $0 as of and for the year ended December 31, 2005. We are also a 50% partner in a joint venture that owns a limited liability company that operates Borgata Hotel Casino and Spa in Atlantic City, New Jersey, which commenced operations on July 3, 2003. Investments in 50% or less owned subsidiaries over which we have the ability to exercise significant influence, including joint ventures such as Borgata, are accounted for using the equity method. All material intercompany accounts and transactions have been eliminated.

In January 2006, we entered into a 50/50 joint venture agreement associated with Echelon Place. See Note 11, “ Commitments and Contingencies ,” for more information.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with maturities of three months or less at their date of purchase. The carrying value of these investments approximates their fair value due to their short maturities.

Restricted Cash

Restricted cash consists primarily of customer payments related to advanced bookings with our Hawaiian travel agency and amounts on deposit for horse racing purses.

Accounts Receivable, net

Accounts receivable consist primarily of casino, hotel and other receivables, net of an allowance for doubtful accounts of $5.5 million and $6.1 million at December 31, 2005 and 2004, respectively. The allowance for doubtful accounts is estimated based upon our collection experience and the age of the receivables.

Inventories

Inventories consist primarily of food and beverage and retail items and are stated at the lower of cost or market. Cost is determined using the first-in, first-out and retail inventory methods.

Restricted Investments

Restricted investments consist primarily of customer payments related to advanced bookings with our Hawaiian travel agency that are invested generally in fixed income bonds. Investments are stated at fair value based on readily determinable market values using the specific identification method. We classify our investments as available-for-sale and record our investments at their fair market values. The unrealized gains or losses, net of income tax effects, of our restricted available-for-sale investments are reported as a component of accumulated other comprehensive income (losses). See Note 5, “ Restricted Investments ,” for more information.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, over the shorter of the asset’s useful life or life of the lease. Gains or losses on disposal of assets are recognized as incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

Long-Lived Assets

We evaluate our long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, or SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets . For assets to be disposed of, we recognize the asset at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For assets to be held and used, we review for impairment whenever indicators of impairment exist. We then compare the estimated future cash flows of the asset, on an undiscounted basis, to the

Notes to Consolidated Financial Statements continued

carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. All recognized impairment losses, whether for assets to be disposed of or for assets to be held and used, are recorded as operating losses. See Note 4, “ Las Vegas Strip Redevelopment” regarding the $56 million non-cash impairment loss recorded for the year ended December 31, 2005 related to our Stardust Resort and Casino. There were no such write-downs for the years ended December 31, 2004 or 2003.

Sam’s Town Tunica reported an operating loss of $5.6 million for the year ended December 31, 2005. Due to a history of operating losses at Sam’s Town Tunica, we continue to test the assets of Sam’s Town Tunica for recoverability pursuant to SFAS No. 144 . The asset recoverability test requires estimating Sam’s Town Tunica’s undiscounted future cash flows and comparing that aggregate total to the property’s carrying value. As the property’s estimated undiscounted future cash flows exceed its carrying value, we do not believe Sam’s Town Tunica’s assets to be impaired at this time. However, we will continue to monitor the performance of Sam’s Town Tunica and, if necessary, continue to update our asset recoverability test under SFAS No. 144. If future asset recoverability tests indicate that the assets of Sam’s Town Tunica are impaired, we will be subject to a non-cash write-down of its assets which would have a material impact on our consolidated statement of operations.

Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not subject to amortization, but are reviewed for impairment at least annually and between annual test dates in certain circumstances. In September 2004, new accounting literature was introduced related to impairment testing of indefinite-lived intangible assets. Refer to Note 8, “ I ntangible Assets and Goodwill” for additional information on its effect on our consolidated financial statements.

Capitalized Interest

Interest costs associated with major construction projects are capitalized. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted average cost of borrowing. Capitalization of interest ceases when the project or discernible portions of the project are substantially complete. We amortize capitalized interest over the estimated useful life of the related asset. Capitalized interest for the years ended December 31, 2005, 2004 and 2003 was $23 million, $5.5 million and $9.2 million, respectively.

Debt Issuance Costs

Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the expected terms of the related debt agreements.

Revenue and Promotional Allowances

Gaming revenue represents the net win from gaming activities, which is the difference between gaming wins and losses. The majority of our gaming revenue is counted in the form of cash, chips and tokens and therefore is not subject to any significant or complex estimation procedures. Gross revenues include the estimated retail value of rooms, food and beverage, and other goods and services provided to customers on a complimentary basis. Such amounts are then deducted as promotional allowances. The estimated costs and expenses of providing these promotional allowances are charged to the gaming department in the following amounts:


	Year ended December 31,
(In thousands)	2005		2004		2003
Room	$	21,920	$	19,260	$	15,414
Food and beverage		130,666		103,100		74,227
Other		5,131		7,737		5,431
Total	$	157,717	$	130,097	$	95,072

Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms and food and beverages) earned in our slot club and other gaming programs. We reward customers, through the use of loyalty programs, with points based on amounts wagered or won that can be redeemed for a specified period of time, principally for cash, and to a lesser extent for goods or services, depending upon the casino property. We record the estimated retail value of these goods and services as revenue and then deduct them as a promotional allowance. For the years ended December 31, 2005, 2004 and 2003, these incentives were $51 million, $41 million and $32 million, respectively.

Preopening Expenses

We expense certain costs of start-up activities as incurred. During the year ended December 31, 2005, we expensed $18.9 million in preopening costs, including $11.2 million related to South Coast Hotel and Casino, which opened in

Notes to Consolidated Financial Statements continued

December 2005, and $3.5 million related to our Las Vegas Strip redevelopment project. The remaining expense incurred relates to various projects including the recently opened Blue Chip vessel and efforts to develop gaming activities in other jurisdictions. During the year ended December 31, 2004, we expensed $2.3 million in preopening costs, most of which related to our unsuccessful efforts to develop gaming activities in Nebraska.

Advertising Expense

Advertising costs are expensed the first time such advertising appears. Total advertising costs included in selling, general and administrative expenses on the accompanying consolidated statements of operations were $99 million, $87 million and $69 million, respectively, for the years ended December 31, 2005, 2004 and 2003.

Derivative Instruments and Other Comprehensive Income (Loss)

Generally accepted accounting principles, or GAAP, require all derivative instruments to be recognized on the balance sheet at fair value. Derivatives that are not designated as hedges for accounting purposes must be adjusted to fair value through income. If the derivative qualifies and is designated as a hedge, depending on the nature of the hedge, changes in its fair value will either be offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. During the three years in the period ended December 31, 2005, we utilized derivative instruments to manage risk on certain of our borrowings and to manage certain interest rate risk. In addition, Borgata, our joint venture, utilized derivative financial instruments to comply with the requirements of its bank credit agreement. For further information, see Note 10, “ Derivative Instruments .”

Stock-Based Employee Compensation Plans

Through December 31, 2005, we accounted for employee stock options in accordance with Accounting Principles Board Opinion No. 25, or APB No. 25, Accounting for Stock Issued to Employees, and related Interpretations. For more information regarding the plans, see Note 14, “Stockholders’ Equity and Stock Incentive Plans .” No stock-based employee compensation cost is reflected in net income as all options granted under our plans had an exercise price equal to the market value of the common stock on the date of grant. The following table illustrates the effect on net income and net income per share if we had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation , to stock-based employee compensation. The table also discloses the weighted-average assumptions used in estimating the fair value of each option grant on the date of grant using the Black-Scholes option pricing model and the estimated weighted-average fair value of the options granted.


	Year ended December 31,
(In thousands, except per share data)	2005			2004			2003
Income before cumulative effect
As reported	$	161,049		$	111,454		$	40,933
Pro forma stock compensation expense, net of tax		13,513			6,982			10,144
Pro forma income before cumulative effect	$	147,536		$	104,472		$	30,789
Basic income per share before cumulative effect
As reported	$	1.82		$	1.46		$	0.64
Pro forma — basic		1.67			1.36			0.48
Diluted income per share before cumulative effect
As reported	$	1.78		$	1.42		$	0.62
Pro forma — diluted		1.63			1.34			0.47
Net income
As reported	$	144,610		$	111,454		$	40,933
Pro forma stock compensation expense, net of tax		13,513			6,982			10,144
Pro forma net income	$	131,097		$	104,472		$	30,789
Basic net income per share
As reported	$	1.63		$	1.46		$	0.64
Pro forma — basic		1.48			1.36			0.48
Diluted net income per share
As reported	$	1.60		$	1.42		$	0.62
Pro forma — diluted		1.45			1.34			0.47
Weighted-average assumptions
Expected stock price volatility		38	%		36	%		58	%
Risk-free interest rates		4.3	%		3.3	%		3.2	%
Expected option lives (years)		4.2			4.4			6.8
Estimated fair value per share of options granted	$	13.20		$	10.86		$	8.48

In 2006, we will account for our stock based employee compensation based upon SFAS 123R, Share-Based Payment . Refer to Recently Issued Accounting Standards below for additional information.

Notes to Consolidated Financial Statements continued

Recently Issued Accounting Standards

In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS 123R, Share-Based Payment , which revised SFAS No. 123, Accounting for Stock-Based Compensation and superseded APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This statement requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). This cost will be recognized over the period during which an employee is required to provide service in exchange for the award. This statement also addresses the accounting for the tax effects of share-based compensation awards. Pursuant to a Securities and Exchange Commission rule issued in April 2005, this statement is effective for us commencing on January 1, 2006. We are adopting this standard on that date using the modified prospective application. Under the modified prospective application, we will expense the cost of share-based compensation awards issued after January 1, 2006. Additionally, we will recognize compensation cost for the portion of awards outstanding on January 1, 2006 for which the requisite services have not been rendered over the periods the requisite services will be rendered after January 1, 2006. Based upon stock options outstanding at December 31, 2005, we estimate that for those options, we will record approximately $20 million in stock option expense for the year ending December 31, 2006. The amount of stock option expense to be recorded for each quarter is not pro-rata, but based upon certain factors, including the timing of the stock options vesting during each quarter. Any stock option grants in 2006 will increase our estimate of stock option expense to be recorded for the year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated into our consolidated financial statements include the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, the estimated valuation allowance for deferred tax assets, estimated cash flows in assessing the recoverability of long-lived assets, goodwill and related intangible assets, stock option values for proforma information related to stock options, stock option expense to be recorded in future periods, estimated liabilities for our self-insured medical and workers compensation plans, slot bonus point programs, contingencies, and litigation, claims and assessments. Actual results could differ from those estimates.

Reclassifications

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to the December 31, 2005 presentation. These reclassifications had no effect on our net income as previously reported.

NOTE 2. —ACQUISITIONS

On May 19, 2004, we acquired all of the outstanding limited and general partnership interests of the partnership that owns the Shreveport Hotel and Casino in Shreveport, Louisiana for approximately $197 million. After the acquisition, we renamed the property Sam’s Town Hotel and Casino and refer to the property as Sam’s Town Shreveport.

Notes to Consolidated Financial Statements continued

The pro forma consolidated results of operations, as if both the Shreveport and Coast Casinos acquisitions had occurred on January 1, 2003, are as follows:


	Year ended December 31,
(in thousands, except per share data)	2004		2003
Pro Forma
Net revenues	$	2,125,928	$	2,022,687
Net income		127,092		89,362
Basic net income per common share		1.47		1.07
Diluted net income per common share		1.45		1.04

NOTE 3. – HURRICANE AND RELATED EXPENSES

Treasure Chest Casino. On August 27, 2005, Treasure Chest Casino in Kenner, Louisiana closed as a result of Hurricane Katrina. The property suffered minor damage from the hurricane. Treasure Chest reopened for business on October 10, 2005, with limited hours of operation and limited food and beverage outlets. We recorded approximately $8.0 million of expenses, primarily comprised of payroll, certain fixed expenses and repairs, for the 44 days of the property’s closure in 2005. These expenses are presented in “Hurricane and Related Expenses, net” on our accompanying consolidated statements of operations.

Delta Downs Racetrack Casino & Hotel. On September 22, 2005, Delta Downs Racetrack Casino & Hotel closed as a result of Hurricane Rita. Delta Downs reopened for business on November 3, 2005 with limited hours of operation and limited food and beverage outlets. Horse races at Delta Downs are scheduled to resume in April 2006. During the 42 days in 2005 that Delta Downs was closed, we incurred approximately $15.3 million of costs primarily relating to the write-off of damaged or destroyed fixed assets, payroll and certain fixed expenses. Through December 31, 2005, we have received insurance advances of $10.0 million for these items. We have recorded an insurance receivable of $4.3 million on the accompanying consolidated balance sheet at December 31, 2005 since we expect to receive insurance proceeds for a majority of these costs.

The following table presents information related to hurricane expenses and insurance receivables (in thousands):


	As of and for the Year Ended December 31, 2005
	Treasure Chest		Delta Downs			Other		Total
Net book value of damaged or destroyed fixed assets	$	293	$	7,000		$	—	$	7,293
Repairs and maintenance		219		159			—		378
Total property damage		512		7,159			—		7,671
Total post-closing expenses		7,468		8,154			294		15,916
Total hurricane and related costs		7,980		15,313			294		23,587
Insurance proceeds		—		(10,000	)		—		(10,000	)
Insurance receivables		—		(4,313	)		—		(4,313	)
Total hurricane and related expenses, net	$	7,980	$	1,000		$	294	$	9,274

Insurance Coverage Related to Hurricane Impacts at Treasure Chest and Delta Downs

Property Damage – Treasure Chest and Delta Downs. Insurance policies carried on both Treasure Chest and Delta Downs include coverage for replacement costs related to property damage with associated deductibles of $1 million and certain other limitations. Based upon the minor damage sustained at Treasure Chest from the hurricane, no insurance claim was made for property damage because the deductible was not met. We have submitted insurance claims for the property damage sustained by Delta Downs from the hurricane because the damage exceeded the related insurance deductible. In 2005, we received insurance advances totaling $10.0 million from our insurance carrier, approximately $6 million of which related to partial reimbursement for property damage. We can provide no assurance that additional property damage will not be discovered as repairs are made for both Treasure Chest and Delta Downs or that any additional property damage would be covered by insurance.

Notes to Consolidated Financial Statements continued

consolidated statement of operations, when fully realized, as the insurance proceeds would then exceed the net book value of damaged or destroyed assets. In 2006, we have received additional insurance advances totaling $14.0 million, all of which related to partial reimbursement of property damage. We are working with our insurance company on the scope of our reconstruction project and can provide no assurance that we will receive full reimbursement for the total cost of our reconstruction project.

Testing for Impairment Losses. Both Treasure Chest and Delta Downs have intangible license rights with indefinite lives and carrying values of approximately $76 million and $84 million, respectively, at December 31, 2005. We are required to perform an impairment test on such intangible assets as well as long-lived assets when a triggering event has occurred. We believe that the impact of the hurricanes is a triggering event and therefore, we performed impairment tests on the intangible license rights and long-lived assets at both properties. Our impairment tests were based upon estimated future cash flows from these properties. Based upon the results of the tests, no impairment was indicated for any of the assets tested.

NOTE 4. — LAS VEGAS STRIP REDEVELOPMENT

We are planning to redevelop the 63 acres we own on the Las Vegas Strip on which the Stardust Resort and Casino is currently located into Echelon Place. Plans for Echelon Place include a wholly-owned resort, casino and spa and additional hotel and retail joint ventures between us and strategic partners. For more information, see Note 11, “ Commitments and Contingencies .”

Because we intend to redevelop the land on which Stardust is located and our plans include demolishing Stardust’s existing buildings and abandoning other related assets, we performed an impairment test for this property. Based upon the results of this test, we recorded a $56 million non-cash impairment loss for the year ended December 31, 2005 to write down the long-lived assets of the Stardust to their estimated fair value.

In connection with the Las Vegas Strip redevelopment plan, we anticipate that we will continue to operate the Stardust through 2006, after which we expect to close and demolish the property. In February 2006, we established and communicated our plan to provide one-time termination benefits to our Stardust employees. We currently estimate that the cost of these benefits will range from $7 million to $9 million and will be recorded as expenses over the required employee service period during 2006. At this time, the Company is unable to provide any further estimates regarding other amounts or charges to be incurred that will result from such exit or disposal activities related to the Stardust.

NOTE 5. — RESTRICTED INVESTMENTS

Pursuant to an investment policy related to customer payments for advanced bookings with our Hawaiian travel agency, we invest in certain financial instruments. Hawaiian regulations require us to maintain a separate charter tour client trust account solely for the purpose of the travel agency’s charter tour business. Our investment policy generally allows us to

Notes to Consolidated Financial Statements continued

invest these restricted funds in investments with a maximum maturity of three years and with certain credit ratings as determined by specified rating agencies.

At December 31, 2005 and 2004, our restricted investments consist primarily of fixed income bonds maturing through November 2008 and November 2007, respectively. We have classified these investments as available for sale. The table below sets forth certain information about our restricted investments.


	Cost		Gross Unrealized					Market Value
(In thousands)	Cost		Gains		Losses			Market Value
December 31, 2005	$	9,773	$	—	$	(246	)	$	9,527

December 31, 2004	$	10,555	$	5	$	(56	)	$	10,504

We have classified the portions of the fair market value of these restricted investments on our accompanying balance sheet based upon the maturities of the investments. Investments maturing in less than one year have been presented in prepaid expenses and other, while all other long-term investments have been presented in other assets. Net unrealized holding gains and losses have been recorded in other comprehensive income, net of taxes, on the accompanying consolidated balance sheets.

During the years ended December 31, 2005 and 2004, we sold certain of our restricted investments and recorded restricted cash proceeds of approximately $4.5 million and $1.1 million, respectively, which approximated our cost basis in these investments as determined by specific identification.

NOTE 6. — PROPERTY AND EQUIPMENT

Property and equipment consists of the following:


	Estimated Life (Years)	December 31,
(in thousands)	Estimated Life (Years)	2005		2004
Land	—	$	338,565	$	287,726
Buildings and improvements	3—40		2,035,690		1,826,957
Furniture and equipment	3—10		697,697		684,066
Riverboats and barges	12—40		107,180		106,715
Construction in progress	—		305,506		214,947
Total			3,484,638		3,120,411
Less accumulated depreciation and amortization			750,153		843,344
Property and equipment, net		$	2,734,485	$	2,277,067

At December 31, 2005, we had several major projects in progress that are described below. The majority of the total expenditures for these projects as of December 31, 2005 are classified as construction in progress in the above table.

Blue Chip. In January 2006, we completed the expansion at Blue Chip Hotel and Casino that included the construction of a new boat that allowed us to expand our casino to 2,170 slot machines and 51 table games and now allows for the casino to be located on one floor. We also completed all of the reconfiguring and refurbishing of the existing pavilion.

South Coast Project. South Coast Hotel and Casino began operations in December. South Coast’s equestrian and events center and an exhibit hall opened in February 2006. South Coast’s second hotel tower, spa and fitness center and swimming pool area are expected to open in the second quarter of 2006.

In 2006, we announced our plans to develop Echelon Place. For more information, see Note 4, “ Las Vegas Strip Redevelopment.”

NOTE 7. — INVESTMENT IN BORGATA AND OTHER UNCONSOLIDATED ENTITY

We and MGM MIRAGE, through wholly-owned subsidiaries, each have a 50% interest in Marina District Development Holding Co., LLC, or Holding Company. Holding Company owns all the equity interests in Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa. On July 3, 2003, Borgata, located at Renaissance Pointe in Atlantic City, New Jersey, commenced operations. As the managing venturer, we are responsible for the day-to-day operations of Borgata, including the operation and improvement of the facility and business. Borgata employs a management team and full staff to perform these services for the property. We maintain the oversight responsibility for the operations, but

Notes to Consolidated Financial Statements continued

do not directly operate Borgata. As such, we do not receive a management fee from Borgata. Borgata’s bank credit agreement is secured by substantially all of their real and personal property and is non-recourse to MGM MIRAGE and us.

Summarized financial information of Borgata is as follows (in thousands):

CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION


	December 31,
	2005		2004
Assets
Current assets	$	110,355	$	93,288
Property and equipment, net		1,013,744		961,737
Other assets, net		16,876		14,561
Total assets	$	1,140,975	$	1,069,586
Liabilities and Member Equity
Current maturities of long-term debt	$	—	$	2,000
Other current liabilities		109,296		74,457
Long-term debt, net		341,700		423,600
Fair value of derivative financial instruments		—		5,626
Other liabilities		11,872		4,162
Member equity		678,107		559,741
Total liabilities and member equity	$	1,140,975	$	1,069,586

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS INFORMATION


	Year ended December 31,
	2005			2004			2003
Gaming revenues	$	696,965		$	623,400		$	258,270
Non-gaming revenues		247,740			228,881			101,589
Gross revenues		944,705			852,281			359,859
Less promotional allowances		180,722			175,862			68,445
Net revenues		763,983			676,419			291,414
Expenses		512,249			460,852			226,992
Depreciation and amortization		56,951			56,811			27,969
Preopening expenses		—			—			39,186
Loss on asset disposals		160			184			152
Operating income (loss)		194,623			158,572			(2,885	)
Interest and other expense, net		(24,738	)		(34,896	)		(20,995	)
Benefit from income taxes		1,303			9,789			3,487
Subtotal		(23,435	)		(25,107	)		(17,508	)
Net income (loss)	$	171,188		$	133,465		$	(20,393	)

Our share of Borgata’s results has been included in our accompanying consolidated statements of operations for the following periods on the following lines:


	Year ended December 31,
(In thousands)	2005			2004			2003
Our share of Borgata’s operating income (loss)	$	97,312		$	79,286		$	(1,442	)
Net amortization expense related to our investment in Borgata		(1,298	)		(1,321	)		(468	)
Our share of Borgata’s operating income (loss), as reported on consolidated statement of operations	$	96,014		$	77,965		$	(1,910	)
Our share of Borgata’s non-operating expenses, net	$	(11,718	)	$	(12,554	)	$	(8,754	)

Notes to Consolidated Financial Statements continued

The following table reconciles our investment in Borgata.


	December 31,
(In thousands)	2005			2004
Cash contributions	$	254,157		$	254,157
Accumulated amortization of 50% of our unilateral equity contribution		(770	)		(385	)
Deferred gain on sale of asset to Borgata, net		(405	)		(429	)
Capitalized interest, net		35,090			36,026
Equity income		129,638			44,044
Distributed earnings		(29,338	)		—
Equity comprehensive loss		—			(2,927	)
Net investment in Borgata	$	388,372		$	330,486

Our net investment in Borgata differs from our share of the underlying equity at Borgata. In 2004, pursuant to an agreement with MGM MIRAGE related to the funding of Borgata’s project costs, we made a unilateral capital contribution to Borgata of approximately $31 million. We are ratably amortizing $15.4 million (50% of the unilateral contribution which corresponds to our ownership percentage of Borgata) over 40 years. Also, during Borgata’s initial development, construction and preopening phases, we capitalized interest on our investment and are ratably amortizing our capitalized interest over 40 years. Additionally, we are ratably accreting a deferred gain related to the sale of our airplane to Borgata over the plane’s remaining useful life.

Borgata Expansions. Borgata is in the process of a $200 million expansion to add both gaming and non-gaming amenities, including additional slot machines, table games, poker tables, restaurants and a nightclub. This public space expansion is expected to be completed in the second quarter of 2006. In addition to this expansion, Borgata recently began construction on a $325 million project that will add a second hotel tower, space and additional meeting room space during the fourth quarter of 2007. Borgata expects to finance the expansions from Borgata’s cash flow from operations and from Borgata’s recently amended bank credit agreement. We do not expect to make further capital contributions to Borgata for these projects.

Borgata Distributions. Borgata began distributions of its earnings to us in 2005 and distributed a total of $29 million in 2005. Both the joint venture agreement related to Borgata and Borgata’s bank credit agreement allow for certain limited distributions to be made to its partners. In February 2006, Borgata amended its bank credit agreement, which increased the amount of allowable distributions to us. Borgata has significant uses for its cash flows, including maintenance and expansion capital expenditures, interest payments, state income taxes and debt principal payments. Borgata’s cash flows are primarily used for its business needs and are not generally available (except to the extent dividends are allowed to be paid to us) to service our indebtedness.

Other Unconsolidated Entity. We also have a one-third investment in Tunica Golf Course, L.L.C. (d.b.a. River Bend Links) located in Tunica, Mississippi. We account for our share of the golf course’s net loss under the equity method of accounting. At December 31, 2005 and 2004, our net investment in and advances to the golf course was $0.8 million and $1.0 million, respectively, and are presented in other assets on the accompanying consolidated balance sheets.

NOTE 8. — INTANGIBLE ASSETS AND GOODWILL

During 2004, we acquired Sam’s Town Shreveport and Coast Casinos (see Note 2). In connection with those transactions, we recorded significant amounts of intangible assets and goodwill during that are included in the tables below. In 2005, as further described below, we wrote down Delta Downs license rights by $25.4 million.

Intangible assets consist of the following:


	December 31,
(In thousands)	2005		2004
Par-A-Dice license rights	$	121,053	$	121,053
Treasure Chest license rights		85,316		85,316
Blue Chip license rights		166,795		166,795
Delta Downs license rights		84,000		109,443
Sam’s Town Shreveport license rights		28,900		28,900
Sam’s Town Shreveport customer list		100		100
Coast Casinos trademarks		54,400		54,400
Coast Casinos customer list		350		350
Total intangible assets		540,914		566,357
Less accumulated amortization		34,076		34,006
Intangible assets, net	$	506,838	$	532,351

Notes to Consolidated Financial Statements continued

License rights are intangible assets acquired from the purchase of gaming entities that are located in gaming jurisdictions where competition is limited, such as when only a limited number of gaming operators are allowed to operate. License rights and trademarks are not subject to amortization as we have determined that they have an indefinite useful life.

Customer lists are being ratably amortized over a five-year period. For the years ended December 31, 2005 and 2004, amortization expense for the customer lists was less than $0.1 million. For each year in the period ending December 31, 2009, amortization expense related to the customer lists is expected to be approximately $0.1 million, at which time the assets are expected to be fully amortized.

In September 2004, the Emerging Issues Task Force, or EITF, of the FASB issued EITF D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill, which requires the application of the direct value method for intangible assets acquired in business combinations completed after September 29, 2004. In addition, EITF D-108 requires companies that have applied the residual method to the valuation of intangible assets acquired prior to such date for purposes of impairment testing to perform an impairment test using the direct value method beginning with their fiscal year beginning after December 15, 2004. Impairments of intangible assets recognized upon application of a direct value method should be reported as a cumulative effect of a change in accounting principle.

We have utilized a residual cash flow methodology in performing our annual impairment tests for all of our indefinite-lived intangible assets acquired prior to 2004. For the transition testing in 2005 as well as annually thereafter, we intend to utilize the direct value method to perform our impairment tests on such indefinite-lived intangible assets. Effective January 1, 2005, we completed this transition testing for all our intangible license rights and determined that the fair value of our Delta Downs intangible license rights was less than its book value. Accordingly, for the year ended December 31, 2005, we recorded a non-cash charge of $25.4 million, $16.4 million, net of taxes, to reduce the balance of this asset to its fair value. This charge has been reflected as a cumulative effect of a change in accounting principle, net of taxes, in the accompanying consolidated statement of operations.

Goodwill represents the excess of total acquisition costs over the fair market value of net assets acquired in a business combination and consists of the following:


	December 31,
(In thousands)	2005		2004
Coast Casinos goodwill	$	381,024	$	381,024
Sam’s Town Shreveport goodwill		22,319		22,319
Other		6,997		6,997
Total goodwill		410,340		410,340
Less accumulated amortization		6,134		6,134
Goodwill, net	$	404,206	$	404,206

Goodwill and indefinite-lived assets must be reviewed for impairment at least annually and between annual test dates in certain circumstances. We perform our annual impairment test for goodwill and indefinite-lived assets in the second quarter of each year. No impairments were indicated as a result of the annual impairment reviews for goodwill and indefinite-lived assets for 2005, 2004 or 2003. During 2005, we performed impairment tests on our license rights at Treasure Chest and Delta Downs pursuant to triggering events related to hurricanes. For more information, see Note 3, “ Hurricane and Related Expenses.”

NOTE 9. — LONG-TERM DEBT

Long-term debt consists of the following:


	December 31,
(In thousands)	2005			2004
Bank Credit Facility	$	1,626,800		$	1,180,000
6.75% Senior Subordinated Notes due 2014		350,000			350,000
7.75% Senior Subordinated Notes due 2012		300,000			300,000
8.75% Senior Subordinated Notes due 2012		250,000			250,000
9.25% Senior Notes due 2009		—			200,000
Other		30,235			30,917
Total long-term debt		2,557,035			2,310,917
Less current maturities		(5,729	)		(5,682	)
Market value adjustment related to interest rate swaps		1,489			(892	)
Total	$	2,552,795		$	2,304,343

Notes to Consolidated Financial Statements continued

In connection with our fair value hedging transactions (see Note 10, “ Derivative Instruments” ), as of December 31, 2005 we increased and as of December 31, 2004, we reduced, the carrying value of certain of our long-term debt by $1.5 million and $0.9 million, respectively, and also recorded corresponding assets and/or liabilities on the accompanying consolidated balance sheet, representing the fair market values of our derivative instruments at those dates.

Bank Credit Facility . On July 1, 2004 and concurrent with the consummation of the merger with Coast Casinos, Inc., the $1.6 billion bank credit facility (the “Bank Credit Facility”) among Boyd Gaming, Bank of America, N.A and certain other financial institutions became effective. The Bank Credit Facility replaced our old bank credit facility, and as such, we recorded a $4.3 million non-cash loss on early retirement of debt for the year ended December 31, 2004 for the write-off of unamortized debt fees associated with our old bank credit facility.

On June 30, 2005, we entered into a First Amendment to Credit Agreement which amended certain terms of our bank credit facility. Among other changes, the amendment increased the revolving portion of the existing bank credit facility by $250 million and extended the maturity date of the revolving portion of the bank credit facility by one year. The amendment did not change the amount or maturity date of the term loan portion of the bank credit facility.

The Bank Credit Facility consists of a $1.35 billion revolving credit facility and a $500 million term loan. The revolving credit facility matures in June 2010 and the term loan matures in June 2011. The term loan is required to be repaid in increments of $1.25 million per quarter that began on September 30, 2004 and will continue through March 31, 2011. Amounts repaid under the term loan may not be reborrowed. The interest rate on the term loan is based upon either the agent bank’s quoted base rate or the eurodollar rate, plus a fixed margin. The interest rate on the revolving credit facility is based upon either the agent bank’s quoted base rate or the eurodollar rate, plus an applicable margin that is determined by the level of a predefined financial leverage ratio. In addition, we incur commitment fees on the unused portion of the revolving credit facility that ranges from 0.25% to 0.50% per annum. The Bank Credit Facility is secured by substantially all of Boyd Gaming’s real and personal property (other than stock and other equity interests), including each of its wholly-owned casino properties.

The blended interest rates for outstanding borrowings under the bank credit facility at December 31, 2005 and 2004 were 5.7% and 4.2%, respectively. At December 31, 2005, approximately $493 million was outstanding under the term loan, $1.134 billion was outstanding under our revolving credit facility, and $53.8 million was allocated to support various letters of credit, leaving availability under the Bank Credit Facility of approximately $162 million.

The Bank Credit Facility contains certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a fixed charge coverage ratio, (ii) establishing a maximum permitted total leverage ratio and senior leverage ratio, (iii) imposing limitations on the incurrence of additional secured indebtedness and (iv) imposing restrictions on investments, dividends and certain other payments. We believe we are in compliance with the Bank Credit Facility covenants as of December 31, 2005.

6.75% Senior Subordinated Notes due April 2014. On April 15, 2004, we issued, through a private placement, $350 million principal amount of 6.75% senior subordinated notes due April 2014. In July 2004, all but $50,000 in aggregate principal amount of these notes were exchanged for substantially similar notes that were registered with the Securities and Exchange Commission. The notes require semi-annual interest payments on April 15 and October 15 of each year, beginning in October 2004 and continuing through April 2014, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations and limitations on restricted payments (as defined in the indenture governing the notes). We believe we are in compliance with these covenants as of December 31, 2005. At any time prior to April 15, 2007, we may redeem up to 35% of the aggregate principal amount of the outstanding notes with the net proceeds from equity offerings at a redemption price of 106.75% of the principal amount, plus accrued and unpaid interest, subject to certain conditions. On or after April 15, 2009, we may redeem all or a portion of the notes at redemption prices (expressed as percentages of the principal amount) ranging from 103.375% in 2009 to 100% in 2012 and thereafter, plus accrued and unpaid interest.

7.75% Senior Subordinated Notes due December 2012. On December 30, 2002, we issued $300 million principal amount of 7.75% senior subordinated notes due December 2012. The notes require semi-annual interest payments on June 15th and December 15th of each year that began in June 2003 and will continue through December 2012, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations and limitations on restricted payments (as defined in the indenture governing the notes). We believe we are in compliance with these covenants as of December 31, 2005. On or

Notes to Consolidated Financial Statements continued

after December 15, 2007, we may redeem all or a portion of the exchange notes at redemption prices ranging from 103.875% in 2007 to 100% in 2010 and thereafter.

8.75% Senior Subordinated Notes due April 2012. On April 8, 2002, we issued $250 million principal amount of 8.75% senior subordinated notes due April 2012. The notes require semi-annual interest payments on April 15th and October 15th of each year through April 2012, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations and limitations on restricted payments (as defined in the indenture governing the notes). We believe we are in compliance with these covenants as of December 31, 2005. On or after April 15, 2007, we may redeem all or a portion of the notes at redemption prices ranging from 104.375% in 2007 to 100% in 2010 and thereafter.

9.25% Senior Notes Originally due August 2009. On August 1, 2005, we redeemed all $200 million principal amount of our 9.25% senior notes originally due in 2009 at a redemption price of $1.046.25 per $1,000.00 principal amount of notes. The redemption was funded by availability under our bank credit facility. A loss on early retirement of debt of $17.5 million, comprised of the premium related to the call for redemption of these notes, unamortized deferred loan costs for the notes and the notes’ market adjustments from fair value hedges, was recorded on our consolidated statement of operations during 2005.

Other Debt. In November 2004, in connection with the acquisition of certain real estate, we assumed a mortgage with a balance of $15.8 million that is secured by the real property. The mortgage bears interest at the rate of 8.8% per annum. The mortgage is payable in equal monthly installments of principal and interest through May 1, 2007, when the remaining balance becomes due and payable. In February 2003, we issued a note in the amount of $16 million to finance the purchase of a company airplane. The note bears interest at the rate of 5.7% per annum. The note is payable in 120 equal monthly installments of principal and interest until March 2013, when the remaining balance becomes due and payable. The note is secured by the airplane.

Subsequent Event. On January 30, 2006, we issued $250 million principal amount of 7.125% senior subordinated notes due February 2016. The net proceeds of this debt issuance were approximately $246 million which was used to repay a portion of the outstanding borrowings under our bank credit facility. The notes require semi-annual interest payments on February 1st and August 1st of each year beginning in August 2006 and continuing through February 2016, at which time the entire principal balance becomes due and payable. The notes contain certain restrictive covenants regarding, among other things, incurrence of debt, sales of assets, mergers and consolidations and limitations on restricted payments (as defined in the indenture governing the notes). At any time prior to February 1, 2009, we may redeem up to 35% of the aggregate principal amount of the outstanding notes with the net proceeds from one or more public equity offerings at a redemption price of 107.125% of the principal amount, plus accrued and unpaid interest, subject to certain conditions. On or after February 1, 2011, we may redeem all or a portion of the notes at redemption prices ranging from 103.563% in 2011 to 100% in 2014 and thereafter.

The estimated fair value of our long-term debt at December 31, 2005 was approximately $2.6 billion, versus its book value of $2.6 billion. The estimated fair value of our long-term debt at December 31, 2004 was approximately $2.4 billion, versus its book value of $2.3 billion. The estimated fair value amounts were based on quoted market prices on or about December 31, 2005 and 2004 for our debt securities that are traded. For the debt securities that are not traded, fair value was based on book value due primarily to the short maturities of the debt components.

The scheduled maturities of long-term debt for the years ending December 31 are as follows:


(In thousands)
2006	$	5,729
2007		20,896
2008		5,582
2009		5,616
2010		1,139,952
Thereafter		1,379,260
Total	$	2,557,035

NOTE 10. — DERIVATIVE INSTRUMENTS

We utilize derivative instruments to manage certain interest rate risk. The net effect of our interest rate swaps resulted in a reduction in interest expense of $0.6 million, $5.1 million and $4.8 million, respectively, as compared to the contractual rate of the underlying hedged debt for the years ended December 31, 2005, 2004 and 2003.

Notes to Consolidated Financial Statements continued

Fixed-to-Floating Interest Rate Swaps . During 2005, we paid a total of $4.7 million to terminate four fixed-to-floating interest rate swaps with a total notional amount of $200 million. At December 31, 2005, the total notional amount of the remaining fixed-to-floating interest rate swap was $50 million. This interest rate swap converts a portion of our fixed-rate debt to a floating rate. The variable interest rate on this swap is set in arrears. As such, we estimate the variable rate based upon the prevailing interest rates and the implied forward rates in the yield curve. This variable rate estimate is used to record the effect of the swap until the variable rate is set, at which time any further adjustments between our estimate and the actual rate are recorded. At December 31, 2005, we estimated the floating rate to be 7.5% and our fixed rate was 8.8%.

The interest rate swap that converts a portion of our fixed-rate debt to a floating rate is designated as a fair value hedge and qualifies for the “shortcut” method allowed under GAAP, which allows for an assumption of no ineffectiveness. Thus, there is no income statement impact from changes in the fair value of this hedging instrument. Instead, the fair value of this instrument is recorded as an asset or liability on our consolidated balance sheet with an offsetting adjustment to the carrying value of the related debt. As such, we recorded an asset of $1.5 million and $2.9 million as of December 31, 2005 and 2004, respectively, in other assets and a $3.8 million liability in other long-term liabilities as of December 31, 2004 on our accompanying consolidated balance sheets, representing the fair market values of the swaps at those dates.

Floating-to-Fixed Interest Rate Swaps . In June 2005, we entered into four new swaps with a total notional amount of $200 million. These swaps convert the eurodollar-based interest rate on a portion of our floating rate debt to a fixed rate and qualify as cash flow hedges. At December 31, 2005, these swaps had a weighted average fixed rate of 4.1% and a floating rate of 4.0%. At December 31, 2005, we recorded an asset of $5.4 million in other assets on the accompanying consolidated balance sheet, representing the fair market values of these swaps. The offsetting entry for these swap values was an increase to other comprehensive income of $3.3 million, net of $2.1 million in taxes, for the year ended December 31, 2005, as these cash flow hedges were deemed to be effective.

Interest Rate Collars . In August 2005, we paid $0.6 million to enter into two interest rate collars with a total notional amount of $100 million. These collars are designated as cash flow hedges and limit the eurodollar-based interest rate between 5.3% and 3.5% on a portion of our floating rate debt. At December 31, 2005, we recorded an asset of $0.7 million in other assets on the accompanying consolidated balance sheet. Less than $0.1 million was recorded in the consolidated statement of operations for the year ended December 31, 2005, representing the ineffective portion of the collars during the period.

We are exposed to credit loss in the event of nonperformance by the counterparties to the interest rate swap agreements. However, we believe that this risk is minimized because we monitor the credit ratings of the counterparties to the agreements. If we had terminated our swaps as of December 31, 2005, we would have been entitled to receive a total of $7.6 million based on the fair values of the derivatives.

Borgata Derivative Instruments. In addition, Borgata, our joint venture, utilized derivative financial instruments designated as cash flow hedges, the last of which expired in December 2005. The following table reports our share of the effects of Borgata’s derivative instruments for the periods indicated. Our share of the increase or decrease in fair value of certain financial instruments related to hedges deemed to be ineffective is reported on our accompanying consolidated statements of operations. Our share of the increase or decrease in fair value of certain financial instruments related to hedges deemed to be effective is reported in other comprehensive income on the accompanying consolidated balance sheets.


		Year ended December 31,
(In thousands)		2005			2004		2003
Net gain (loss) on derivative instruments due to ineffectiveness in certain hedges
Reported during preopening stage and included in operating loss from Borgata	$	—		$	—	$	(309	)
Reported during operating stage and included in non-operating expense from Borgata		(404	)		111		350
Derivative instruments market adjustment	$	2,927		$	4,643	$	4,192
Tax effect of derivative instruments market adjustment		1,044			1,655		1,532
Net derivative instruments market adjustment	$	1,883		$	2,988	$	2,660

NOTE 11. — COMMITMENTS AND CONTINGENCIES

Leases

In connection with the July 1, 2004 merger with Coast Casinos, we assumed certain land leases. The Orleans is situated on approximately 77 acres of leased land. The lease had an effective commencement date of October 1, 1995, an initial term of 50 years, and includes an option, exercisable by us, to extend the initial term for an additional 25 years. The lease currently

Notes to Consolidated Financial Statements continued

provides for monthly rental payments of $0.2 million through February 2006 and $0.3 million during the 60-month period thereafter. In March 2011, annual rental payments will increase in a compounding basis at a rate of 3.0% per annum. In addition, we have an option to purchase the real property during the two-year period commencing in February 2016.

Suncoast is situated on approximately 49 acres of leased land. The initial term of the land lease expires in December 2055. The lease contains three options to extend the term of the lease for 10 years each. The lease provides for monthly rental payments of approximately $0.2 million in 2004 that increases slightly each year. The landlord has the option to require us to purchase the property at the end of 2014 and each year-end through 2018, at the fair market value of the real property at the time the landlord exercises the option, subject to certain pricing limitations. Based on the terms of the lease, the potential purchase price commitment ranges from approximately $31 million to approximately $51 million in the years 2014 through 2018. If we do not purchase the property if and when required, we would be in default of the lease agreement.

In addition, we have other land leases related primarily to California, Fremont, The Orleans, Suncoast, Sam’s Town Tunica, Treasure Chest and Sam’s Town Shreveport. Future minimum lease payments required under noncancelable operating leases (primarily for land leases) as of December 31, 2005 are as follows:


(In thousands)
2006	$	16,507
2007		13,694
2008		12,019
2009		10,584
2010		8,872
Thereafter		473,183
Total	$	534,859

Rent expense for the years ended December 31, 2005, 2004 and 2003 was $32 million, $16.7 million and $8.5 million, respectively, and is included in selling, general and administrative expenses on the consolidated statements of operations.

Other Commitments

State of Illinois Wagering Tax. In 2005, the Illinois legislature passed new legislation for wagering taxes that imposes a minimum wagering tax for casinos for the next two state-based fiscal years ending June 30, 2007. Under these minimum wagering tax provisions, during each of the State’s fiscal years ending June 30, 2006 and 2007, Par-A-Dice will be required to remit to the State the amount, if any, by which $43 million exceeds the wagering taxes actually paid by Par-A-Dice during each of those fiscal years. The payments, if any, are required by each of June 15, 2006 and 2007. Effective July 1, 2005, we incorporated this minimum payment provision into the effective gaming tax rate for Par-A-Dice.

Treasure Chest. We are required to pay to the City of Kenner, Louisiana, a boarding fee of $2.50 for each passenger boarding our Treasure Chest riverboat casino during the year. The future minimum payment due in 2006 to the City of Kenner, based upon a portion of actual passenger counts from the prior year, is approximately $3.5 million.

Pennsylvania. In conjunction with the limited partnership formed for our development project in Pennsylvania, in which are the general partner and have an ownership interest of 90%, we made a commitment to contribute capital of $50 million to the partnership if we are selected to receive a gaming license from the Pennsylvania Gaming Control Board. As of December 31, 2005, we had contributed approximately $26 million to the partnership in order for the partnership to purchase land in Pennsylvania. Additionally, we posted a $50 million letter of credit in December 2005 in connection with our application for the gaming license.

Echelon Place. In 2006, we announced that we plan to redevelop the 63-acres we own on the Las Vegas Strip on which the Stardust Resort and Casino is located into Echelon Place. Plans for Echelon Place include a wholly-owned resort hotel, casino and spa and additional hotel and retail joint ventures between us and strategic partners. In 2006, we entered into a 50/50 joint venture agreement with a subsidiary of Morgans Hotel Group Co., or Morgans, as part of the development for Echelon Place. In conjunction with this joint venture agreement, we expect to contribute approximately 6.5 acres of land and Morgans will contribute approximately $97.5 million to the venture, and that the venture will arrange non-recourse project financing to develop two hotel properties.

Notes to Consolidated Financial Statements continued

Contingencies

Copeland. Alvin C. Copeland is the sole shareholder of an entity that applied in 1993 for a riverboat license at the location of our Treasure Chest Casino. Copeland was unsuccessful in the application process and has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him and monetary damages. The suit was dismissed by the trial court citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the Louisiana First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was denied. The Court of Appeal refused to reverse the denial of the motion to dismiss. In May 2004, we filed additional motions to dismiss on other grounds, which motions are currently pending. It is not possible to determine the likely date of trial, if any, at this time. We intend to vigorously defend the lawsuit. If this matter ultimately results in the Treasure Chest license being revoked, it would have a significant adverse effect on our business, financial condition and results of operations.

Immediately after the merger of Coast Casinos, Inc. with Boyd Gaming Corporation (“Boyd”), the Local Joint Executive Board of Las Vegas (Culinary Union and Bartenders Union) (“the Union”) demanded that its collective bargaining agreement (“CBA”) with Mare-Bear, Inc. d.b.a. Stardust Resort and Casino (“Stardust CBA”), be extended to the Coast’s Barbary Coast Hotel and Casino, which has a current and different CBA with the Union, and also to other Coast properties: Gold Coast, The Orleans and Suncoast. This demand was based on a “neutrality agreement” and other provisions of the Stardust CBA. This demand of the Union was rejected. On August 12, 2004, the Union filed a lawsuit in the U. S. District Court for the District of Nevada against Boyd and Mare-Bear, Inc., seeking to compel arbitration of alleged violations of the Stardust neutrality agreement. On September 1, 2004, Boyd filed a motion to dismiss the Union’s lawsuit as to Boyd. Mare-Bear filed an answer to the complaint on September 2, 2004. On September 23, 2004, Boyd, Coast Casinos, Inc. and its subsidiary, Coast Hotels and Casinos, Inc., filed a complaint for declaratory relief in the U. S. District Court against the Union, seeking a judgment that the Barbary Coast CBA continued in effect and was binding upon Boyd, the Barbary Coast and the Union. On December 15, 2004, a judgment for declaratory relief was granted on behalf of Boyd and the Barbary Coast, affirming that the Barbary Coast CBA remains in effect and is binding on Boyd, the Barbary Coast and the Union. On December 22, 2004, Boyd filed unfair labor practice charges against the Union with the National Labor Relations Board (“NLRB”), alleging that the Union’s lawsuit was filed for an illegal purpose and that the provisions of the Stardust agreement on which the Union relies are unlawful. Coast Hotels and Casinos, Inc. also filed similar unfair labor practice charges against the Union with the NLRB on December 22, 2004. On February 8, 2005, Boyd filed additional unfair labor practice charges against the Union with the NLRB, challenging the legality of the Stardust neutrality agreement. Boyd and Mare-Bear were granted a protective order by the U. S. District Court, staying discovery sought by the Union, pending the Court’s ruling on Boyd’s motion to dismiss.

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

NOTE 12. — EMPLOYEE BENEFIT PLANS

We contribute to multi-employer pension plans under various union agreements. Contributions, based on wages paid to covered employees, totaled approximately $2.5 million, $2.5 million and $2.1 million, respectively, for the years ended December 31, 2005, 2004 and 2003. Our share of the unfunded liability related to multi-employer plans, if any, is not determinable.

We have retirement savings plans under Section 401(k) of the Internal Revenue Code covering our non-union employees. The plans allow employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plans. We expensed our voluntary contributions to the 401(k) profit-sharing plans and trusts of $10.5 million, $7.9 million and $5.2 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Notes to Consolidated Financial Statements continued

NOTE 13. — INCOME TAXES

A summary of the provision for income taxes is as follows:


	Year ended December 31,
(In thousands)	2005			2004			2003
Current
Federal	$	92,287		$	19,925		$	(10,823	)
State		1,032			27,400			2,479
		93,319			47,325			(8,344	)
Deferred
Federal		(8,357	)		40,127			32,554
State		(912	)		(11,807	)		672
		(9,269	)		28,320			33,226
Total provision before cumulative effect of a change in accounting principle	$	84,050		$	75,645		$	24,882
Income tax expense (benefit) included in the financial statements
Provision before cumulative effect of a change in accounting principle	$	84,050		$	75,645		$	24,882
Tax benefit from cumulative effect of a change in accounting principle		(8,984	)		—			—
Total	$	75,066		$	75,645		$	24,882

The following table provides a reconciliation between the federal statutory rate and the effective income tax rate from continuing operations where both are expressed as a percentage of income.


	December 31,
	2005		2004		2003
Tax provision at statutory rate	35.0	%	35.0	%	35.0	%
Increase (decrease) resulting from:
State income tax, net of federal benefit	0.0		5.4		3.1
Other, net	(0.7	)	(0.0	)	(0.3	)
Total	34.3	%	40.4	%	37.8	%

The tax items comprising our net deferred tax liability are as follows:


	December 31,
(In thousands)	2005			2004
Deferred tax liabilities:
Difference between book and tax basis of property	$	231,432		$	252,686
Difference between book and tax basis of intangible assets		78,833			82,039
State tax liability, net of federal effect		13,493			11,076
Reserve differential for gaming activities		3,077			3,282
Prepaid services and supplies		2,203			1,255
Derivative instruments market adjustment		2,071			—
Other		1,868			1,316
Gross deferred tax liabilities		332,977			351,654
Deferred tax assets:
Reserve for employee benefits		9,491			8,820
State net operating loss carryforwards, net of federal effect		4,975			2,322
Provision for doubtful accounts		3,115			3,464
Preopening expenses		3,050			2,637
Tax credit carryforward		—			4,384
Derivative instruments market adjustment		—			1,062
Other		393			263
Gross deferred tax assets		21,024			22,952
Valuation allowance		(1,881	)		(253	)
Deferred tax assets, net of valuation allowance		19,143			22,699
Net deferred tax liabilities	$	313,834		$	328,955

Notes to Consolidated Financial Statements continued

The items comprising our deferred income taxes and other liabilities as presented on the consolidated balance sheets are as follows:


	December 31,
(In thousands)	2005		2004
Net deferred tax liabilities	$	313,834	$	328,955
Current deferred tax asset separately presented		2,683		4,711
Other long-term liabilities		17,829		14,949
Total of long-term deferred income taxes and other liabilities	$	334,346	$	348,615

While we are not under any current Internal Revenue Service examination, our tax returns filed for 2002 and later years may be selected for examination. Our acquired subsidiary, Coast Casino, Inc., is currently under examination for the years ended December 31, 2002 and 2003 and the six month period ended July 1, 2004, the date of our acquisition.

We are currently under examination for various state income and franchise tax matters. Based on our current expectations for the final resolutions of these matters, we believe that we will have adequately reserved for any tax liability. However, the ultimate resolution of these examinations may result in an outcome that is different from our current expectation. We do not believe the resolution of these examinations will have a material impact on our consolidated financial statements.

As of December 31, 2005, we have state net operating loss carryforwards of approximately $94 million, primarily in the states of Indiana and Louisiana, to reduce future state income taxes. The net operating losses will expire at various dates from December 31, 2011 to December 31, 2025 if not fully utilized. A valuation allowance has been recorded to reflect state net operating losses which are not presently expected to be realized. Certain state net operating losses arising from stock option exercises will result in approximately $1.9 million of additional paid in capital, if realized.

The provision for 2005 includes a net tax benefit of $1.5 million for a tax retention credit related to the hurricanes.

In 2003, we received a proposed assessment from the Indiana Department of Revenue based upon its position that our Indiana gaming revenue tax is not deductible for Indiana state income tax purposes. An unrelated third party had been litigating the issue in the Indiana Tax Court for several years under a similar fact pattern. Due to the uncertainty of the outcome of the Tax Court litigation, we had been accruing a portion of the proposed assessment and our estimate of potential future assessments based on our estimate of the probability of loss. On April 19, 2004, the Indiana Tax Court ruled against the third party. On September 28, 2004, the Indiana Supreme Court denied the third party’s petition for review, affirming the Tax Court’s earlier decision.

After the April 2004 ruling, we determined that it was probable that we had incurred a liability for the entire assessment and estimated future assessments and have recorded the related remaining amounts. As such, we recorded a $5.7 million charge, net of federal income tax benefit, to our income tax provision during 2004. As of December 31, 2004, we have settled all outstanding tax assessments related to this issue.

NOTE 14. — STOCKHOLDERS’ EQUITY AND STOCK INCENTIVE PLANS

Stock Options

As of December 31, 2005, we had two stock option plans in effect, both of which have been approved by our shareholders. Stock options awarded under these plans are granted to our employees and directors. The number of shares of common stock authorized for issuance under these plans is approximately 21.6 million shares.

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

Notes to Consolidated Financial Statements continued

Summarized information for the stock options plans is as follows:


	Options		Range of Options Prices		Weighted Average Option Price
Options outstanding at January 1, 2003	8,043,890		$	4.35—$ 17.21	$	9.69
Options granted	1,921,000			11.42— 15.40		14.23
Options canceled	(293,200	)		4.50— 17.21		11.88
Options expired	(869,250	)		5.75— 17.00		16.97
Options exercised	(1,286,035	)		4.35— 17.00		5.86
Options outstanding at December 31, 2003	7,516,405		$	4.35—$ 17.21	$	10.57
Options granted	2,497,000			16.37— 36.76		34.20
Options canceled	(189,611	)		4.55— 17.21		14.23
Options exercised	(3,186,283	)		4.35— 17.21		7.21
Options outstanding at December 31, 2004	6,637,511		$	4.35—$ 36.76	$	20.97
Options granted	1,895,000			39.96— 52.35		40.14
Options canceled	(195,913	)		4.56— 36.76		20.88
Options exercised	(1,749,369	)		4.50— 36.76		12.58
Options outstanding at December 31, 2005	6,587,229		$	4.35—$ 52.35	$	28.71


		Weighted Average Option Price
Exercisable options at December 31, 2003	4,023,381	$	7.60
Exercisable options at December 31, 2004	2,408,918		11.42
Exercisable options at December 31, 2005	2,562,482		19.74
Options available for grant at December 31, 2005	5,226,094

The following table summarizes the information about stock options outstanding at December 31, 2005:


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$ 4.35 — $15.74	1,693,223	6.76	$	12.24	1,154,427	$	11.30
16.37 — 25.75	1,040,839	7.31		19.57	754,844		17.92
36.76 — 36.76	1,958,167	8.94		36.76	653,211		36.76
39.96 — 52.35	1,895,000	9.79		40.14	—		—
	6,587,229	8.37	$	28.71	2,562,482	$	19.74

Stock Repurchase Plan

On November 11, 2002, we announced that our Board of Directors had authorized the repurchase of up to two million shares of our common stock. Depending upon market conditions, shares may be repurchased from time to time at prevailing market prices through open market or negotiated transactions. No date was established for the completion of the share repurchase program. We are not obligated to purchase any shares. Subject to applicable corporate securities laws, repurchases may be made at such times and in such amounts as management deems appropriate. Purchases under the program can be discontinued at any time management feels additional purchases are not warranted. We will finance the purchases with funds from our operations. During the year ended December 31, 2003, we repurchased an aggregate of approximately 1.1 million shares of our common stock for a total cost of $13.4 million. We did not repurchase any stock during the years ended December 31, 2005 or 2004.

Dividends

In July 2003, our Board of Directors instituted a policy of quarterly cash dividends on our common stock. Dividends are declared at our Board’s discretion. We are subject to certain limitations regarding the payment of dividends, such as restricted payment limitations related to our outstanding notes and our bank credit facility. The following table sets forth the cash dividends declared and paid in 2005 and 2004.

Notes to Consolidated Financial Statements continued


Payment Date	Record Date	Dividend Per Share
March 2, 2004	February 13, 2004	$	0.075
June 1, 2004	May 14, 2004		0.075
September 1, 2004	August 13, 2004		0.085
December 1, 2004	November 12, 2004		0.085
March 1, 2005	February 11, 2005		0.085
June 1, 2005	May 13, 2005		0.125
September 1, 2005	August 12, 2005		0.125
December 1, 2005	November 10, 2005		0.125

Dividends paid in 2005 and 2004 totaled $40.7 million and $24.7 million, respectively.

NOTE 15. — EARNINGS PER SHARE

A reconciliation of income and shares outstanding for basic and diluted earnings per share is as follows:


	Year ended December 31,
(In thousands, except per share data)	2005		2004		2003
Income before cumulative effect of a change in accounting for intangible assets, net of taxes	$	161,049	$	111,454	$	40,933
Weighted average common stock outstanding		88,528		76,586		64,293
Dilutive effect of stock options outstanding		1,979		1,649		1,870
Weighted average common and potential shares outstanding		90,507		78,235		66,163
Basic earnings per share	$	1.82	$	1.46	$	0.64
Diluted earnings per share	$	1.78	$	1.42	$	0.62

Nearly all options outstanding during 2005 were included in the computation of diluted earnings per share. Weighted average options to purchase approximately 0.1 million and 2.5 million shares of common stock, respectively, at December 31, 2004 and 2003 at prices of $36.76 and $17.21, respectively, were outstanding during the period but not included in the computation of diluted earnings per share because their exercise price was in excess of the average market price of the common stock for the period presented.

NOTE 16. — RELATED PARTY TRANSACTIONS

William S. Boyd, our Chairman and Chief Executive Officer, together with his immediate family, beneficially owned approximately 35% of our outstanding shares of common stock as of December 31, 2005. Michael J. Gaughan, the President and Chief Executive Officer of Coast Casinos, Inc., a subsidiary of Boyd Gaming, owned approximately 17% of our outstanding shares of common stock as of December 31, 2005. As a result, the Boyd family and/or Mr. Gaughan have the ability to significantly influence our affairs, including the election of our directors and, except as otherwise provided by law, approving or disapproving other matters submitted to a vote of our stockholders, including a merger, consolidation or sale of assets. For the three years in the period ended December 31, 2005, there were no material related party transactions between us and the Boyd family.

We utilize services from Las Vegas Dissemination Company, Inc., or LVDC, in connection with our Nevada race book operations. LVDC is wholly-owned by John Gaughan, son of Michael J. Gaughan, and as such, became a related party on July 1, 2004, the date of the merger with Coast Casinos. We pay to LVDC a monthly fee for race wire services as well as a percentage of wagers, ranging from 3% to 5%, on wagers we accept for races held at certain racetracks. The terms on which the dissemination services are provided are regulated by the Nevada Gaming Authorities. For the six month period ended December 31, 2004, we paid a total of $1.9 million to LVDC. During 2005, we paid a total of $4.2 million to LVDC.

In August 2004, we sold an airplane to Borgata, our 50% joint venture, for use in Borgata’s business, for the airplane’s appraised value of $5.8 million. In connection with this sale, we recorded a net gain of $0.4 million that is recorded in corporate expense on the accompanying consolidated statement of operations during the year ended December 31, 2004. During 2004, Robert L. Boughner, a member of our board of directors, was the Chief Executive Officer of Marina District Development Company, L.L.C., d.b.a. Borgata Hotel Casino and Spa.

Notes to Consolidated Financial Statements continued

NOTE 17. — SEGMENT INFORMATION

We have aggregated certain of our wholly-owned properties in order to present five reportable segments: Boulder Strip, Coast Casinos, Stardust, Downtown Properties and Central Region. The table below lists the classification of each of our properties. Results for Coast Casinos also include the results of an offsite sports book. Results for Downtown Properties also include the results of our Hawaii travel agency and our Hawaiian-based insurance company that underwrites travel-related insurance. Results for Borgata, our Atlantic City joint venture that is accounted for using the equity method, are reported on separately identified lines.


Boulder Strip
Sam’s Town Hotel and Gambling Hall		Las Vegas, NV
Eldorado Casino		Henderson, NV
Jokers Wild Casino		Henderson, NV

Coast Casinos
Barbary Coast Hotel and Casino		Las Vegas, NV
Gold Coast Hotel and Casino		Las Vegas, NV
The Orleans Hotel and Casino		Las Vegas, NV
Suncoast Hotel and Casino		Las Vegas, NV
South Coast Hotel and Casino		Las Vegas, NV

Stardust Resort and Casino		Las Vegas, NV

Downtown Properties
California Hotel and Casino		Las Vegas, NV
Fremont Hotel and Casino		Las Vegas, NV
Main Street Station Casino, Brewery and Hotel		Las Vegas, NV
Vacations Hawaii		Honolulu, HI

Central Region
Sam’s Town Hotel and Gambling Hall		Tunica, MS
Par-A-Dice Hotel Casino		East Peoria, IL
Treasure Chest Casino		Kenner, LA
Blue Chip Hotel and Casino		Michigan City, IN
Delta Downs Racetrack Casino & Hotel		Vinton, LA
Sam’s Town Hotel and Casino		Shreveport, LA

Notes to Consolidated Financial Statements continued

The following table sets forth, for the periods indicated, certain operating data for our reportable segments. South Coast Hotel and Casino began operations on December 22, 2005. We completed our acquisition of Sam’s Town Shreveport on May 19, 2004. Also, on July 1, 2004, we completed our merger with Coast Casinos. Delta Downs Racetrack and Casino, acquired in May 2001, commenced slot operations in February 2002 and opened their hotel in March 2005. Borgata, our Atlantic City joint venture that is accounted for using the equity method, commenced operations on July 3, 2003.


	Year ended December 31,
(In thousands)	2005			2004			2003
Gross Revenues
Boulder Strip	$	218,558		$	205,125		$	188,387
Coast Casinos		819,681			379,158			—
Stardust		183,020			174,579			158,200
Downtown Properties		282,363			260,377			252,967
Central Region		967,381			912,852			794,975
Total gross revenues	$	2,471,003		$	1,932,091		$	1,394,529
Adjusted EBITDA ⁽¹⁾
Boulder Strip	$	59,122		$	49,438		$	39,622
Coast Casinos		253,960			105,474			—
Stardust ⁽³⁾		24,651			18,016			9,563
Downtown Properties		52,295			38,738			40,511
Central Region ⁽²⁾		224,816			191,198			177,365
Wholly-owned property adjusted EBITDA		614,844			402,864			267,061
Corporate expense		(44,101	)		(33,338	)		(22,595	)
Wholly-owned adjusted EBITDA		570,743			369,526			244,466
Our share of Borgata’s operating income before preopening expenses and our amortization expenses		97,312			79,286			18,151
Total adjusted EBITDA		668,055			448,812			262,617
Other operating costs and expenses
Deferred rent		5,131			1,994			—
Other, net		—			(429	)		—
Depreciation and amortization		176,237			137,447			94,224
Blue Chip consulting termination fee		—			5,000			—
Preopening expenses		18,927			2,308			—
Hurricane and related expenses, net		9,274			—			—
Impairment loss		56,000			—			—
Merger, acquisition and transition related expenses		—			6,534			—
Our share of Borgata’s preopening expenses		—			—			19,593
Total other operating expenses		265,569			152,854			113,817
Operating income		402,486			295,958			148,800
Other non-operating costs and expenses
Interest expense, net ⁽⁴⁾		128,799			101,841			74,231
Loss on early retirements of debt		17,529			4,344			—
Gain on sales of undeveloped land		(659	)		(9,880	)		—
Our share of Borgata’s non-operating expenses, net		11,718			12,554			8,754
Total other non-operating costs and expenses		157,387			108,859			82,985
Income before provision for income taxes and cumulative effect of a change in accounting principle		245,099			187,099			65,815
Provision for income taxes		84,050			75,645			24,882
Income before cumulative effect of a change in accounting principle		161,049			111,454			40,933
Cumulative effect of a change in accounting for intangible assets, net of taxes of $8,984		(16,439	)		—			—
Net income	$	144,610		$	111,454		$	40,933

	December 31,
(In thousands)	2005			2004
Property and Equipment, Intangible Assets and Goodwill
Boulder Strip	$	208,442		$	209,877
Coast Casinos		1,904,746			1,517,930
Stardust		62,886			126,435
Downtown Properties		128,917			129,427
Central Region		1,216,953			1,132,638
Total properties’ assets ⁽⁵⁾		3,521,944			3,116,307
Corporate Entities		123,585			97,317
Total assets ⁽⁵⁾	$	3,645,529		$	3,213,624

Notes to Consolidated Financial Statements continued


	Year ended December 31,
(In thousands)	2005			2004			2003
Additions to Property and Equipment and Other Assets
Boulder Strip	$	19,969		$	15,875		$	11,568
Coast Casinos		443,553			110,651			—
Stardust		6,928			5,850			6,605
Downtown Properties		15,297			12,444			5,511
Central Region		173,650			136,382			38,772
Total properties’ additions		659,397			281,202			62,456
Corporate Entities		35,216			48,059			24,295
Total additions to property and equipment and other assets		694,613			329,261			86,751
Change in accrued property additions		(76,169	)		(44,649	)		(5,215	)
Debt assumed in connection with acquisition of land		—			(15,764	)		—
Cash-based property additions	$	618,444		$	268,848		$	81,536

⁽¹⁾

Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, preopening expenses, net hurricane and related expenses, an impairment loss, deferred rent, merger, acquisition and transition related expenses, gain on sales of certain assets, a Blue Chip consulting termination fee, loss on early retirements of debt, our share of Borgata’s non-operating expenses, and a cumulative effect of a change in accounting principle. We believe that adjusted EBITDA is a widely used measure of operating performance in the gaming industry and is a principal basis for valuation of gaming companies. Adjusted EBITDA is presented before preopening, hurricane and merger, acquisition and transition related expenses as it represents a measure of performance of our existing operational activities. We use property-level adjusted EBITDA (adjusted EBITDA before corporate expense) as the primary measure of operating performance of each of our properties. Adjusted EBITDA should not be construed as an alternative to operating income, as an indicator of our operating performance, or as an alternative to cash flow from operating activities, as a measure of liquidity, or as any other measure determined in accordance with accounting principles generally accepted in the United States of America. We have significant uses of cash flows, including capital expenditures, interest payments, income taxes and debt principal repayments which are not reflected in adjusted EBITDA. Also, other gaming companies that report EBITDA information may calculate EBITDA in a different manner than us.

⁽²⁾	Adjusted EBITDA for the year ended December 31, 2004 excludes a $5.0 million consulting termination fee. Adjusted EBITDA results include a one-time charge of $3.5 million for a retroactive gaming tax imposed by the State of Indiana for the year ended December 31, 2003.

⁽³⁾	Adjusted EBITDA for the year ended December 31, 2005 excludes a $56 million non-cash impairment loss related to the Stardust.

⁽⁴⁾	Net of interest income and amounts capitalized.

⁽⁵⁾	Total assets represent total property and equipment, intangible assets and goodwill, net of accumulated depreciation and amortization.

Notes to Consolidated Financial Statements continued

NOTE 18. — SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


	Year ended December 31, 2005
(In thousands, except per share data)	First		Second		Third		Fourth		Total
Net revenues	$	566,890	$	554,250	$	536,514	$	565,366	$	2,223,020
Operating income		123,468		110,818		101,639		66,561		402,486
Income before cumulative effect of a change in accounting principle		56,519		48,638		32,948		22,944		161,049
Net income		40,080		48,638		32,948		22,944		144,610
Basic and diluted net income per common share:
Income before cumulative effect of a change in accounting principle—basic	$	0.64	$	0.55	$	0.37	$	0.26	$	1.82
Income before cumulative effect of a change in accounting principle—diluted		0.63		0.54		0.36		0.25		1.78
Net income—basic		0.46		0.55		0.37		0.26		1.63
Net income—diluted		0.45		0.54		0.36		0.25		1.60

	Year ended December 31, 2004
(In thousands, except per share data)	First		Second		Third		Fourth		Total
Net revenues	$	330,038	$	341,895	$	522,493	$	539,632	$	1,734,058
Operating income		55,714		52,785		89,666		97,793		295,958
Net income		13,465		15,533		35,549		46,907		111,454
Basic and diluted net income per common share:
Net income—basic	$	0.21	$	0.23	$	0.41	$	0.54	$	1.46
Net income—diluted		0.20		0.23		0.40		0.53		1.42

(c) Exhibits.



Exhibit Number		Document
3.1		Restated Articles of Incorporation (incorporated by reference to the Registrant’s Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993).

3.2		Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999).

3.3		Certificate of Amendment of Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 1996).

3.4		Certificate of Amendment of Articles of Incorporation (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).

4.1		Form of Indenture relating to $250,000,000 aggregate principal amount of 8.75% Senior Subordinated Notes due 2012, dated as of April 8, 2002, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee, including the Form of Note (incorporated by reference to the Registrant’s Registration Statement on Form S-4, File No. 333-89774, which was declared effective on June 19, 2002).

4.2		Form of Indenture relating to $300,000,000 aggregate principal amount of 7.75% Senior Subordinated Notes due 2012, dated as of December 30, 2002, by and between the Registrant, as Issuer, and Wells Fargo Bank, National Association, as Trustee, including Form of Note (incorporated by reference to the Registrant’s Registration Statement on Form S-4, File No. 333-103023, which was declared effective on May 15, 2003).

4.3		Form of Indenture relating to $350,000,000 aggregate principal amount of 6.75% Senior Subordinated Notes due 2014, dated as of April 15, 2004, by and between the Registrant, as Issuer, and the Initial Purchasers, named therein (incorporated by reference to the Registrant’s Registration Statement on Form S-4, File No. 333-116373, which was declared effective on June 25, 2004).

4.4		Form of Indenture relating to senior debt securities (incorporated by reference to the Registrant’s Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005).

4.5		Form of Indenture relating to subordinated debt securities (incorporated by reference to the Registrant’s Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005).

4.6		Form of Specimen Common Stock Certificate (incorporated by reference to the Registrant’s Automatic Shelf Registration Statement on Form S-3 dated December 16, 2005).

4.7		Form of Indenture relating to subordinated debt securities, dated as of January 25, 2006, by and between the Registrant, as Issuer, and the Initial Purchasers, named therein (incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 25, 2006).

4.8		First Supplemental Indenture with respect to the 7.125% Senior Subordinated Notes due 2016, dated as of January 30, 2006, by and between the Company, as Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 31, 2006).

10.1		Ninety-Nine Year Lease dated June 30, 1954, by and among Fremont Hotel, Inc., and Charles L. Ronnow and J.L. Ronnow, and Alice Elizabeth Ronnow (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).

10.2		Lease Agreement dated October 31, 1963, by and between Fremont Hotel, Inc. and Cora Edit Garehime (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992)

10.3		Lease Agreement dated December 31, 1963, by and among Fremont Hotel, Inc., Bank of Nevada and Leon H. Rockwell, Jr. (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).

10.4		Lease Agreement dated June 7, 1971, by and among Anthony Antonacci, Margaret Fay Simon and Bank of Nevada, as Co-Trustees under Peter Albert Simon’s Last Will and Testament, and related Assignment of Lease dated February 25, 1985 to Sam-Will, Inc. and Fremont Hotel, Inc. (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).

10.5		Lease Agreement dated July 25, 1973, by and between CH&C and William Peccole, as Trustee of the Peter Peccole 1970 Trust (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended June 30, 1995).

10.6		Lease Agreement dated July 1, 1974, by and among Fremont Hotel, Inc. and Bank of Nevada, Leon H. Rockwell, Jr. and Margorie Rockwell Riley (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).

10.7		Ninety-Nine Year Lease, dated December 1, 1978, by and between Matthew Paratore, and George W. Morgan and LaRue Morgan, and related Lease Assignment dated November 10, 1987, to Sam-Will, Inc., d.b.a. Fremont Hotel and Casino (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).

10.8		Form of Indemnification Agreement (incorporated by reference to the Company’s Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993).

10.9*		1993 Flexible Stock Incentive Plan and related agreements (incorporated by reference to the Company’s Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993).

10.10*		1993 Directors Non-Qualified Stock Option Plan and related agreements (incorporated by reference to the Registrant’s Registration Statement on Form S-8, File No. 333-79895, dated June 3, 1999).

10.11*		1993 Employee Stock Purchase Plan and related agreement (incorporated by reference to the Company’s Registration Statement on Form S-1, File No. 33-64006, which was declared effective on October 15, 1993).



Exhibit Number		Document
10.12		401(k) Profit Sharing Plan and Trust (incorporated by reference to the Registration Statement on Form S-1, File No. 33-51672, of California Hotel and Casino and California Hotel Finance Corporation, which was declared effective on November 18, 1992).

10.13*		2000 Executive Management Incentive Plan (incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement filed with the Commission on April 21, 2000).

10.14*		1996 Stock Incentive Plan (as amended on May 25, 2000) (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).

10.15		Second Amended and Restated Joint Venture Agreement with Marina District Development Company, dated as of August 31, 2000 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).

10.16		Contribution and Adoption Agreement by and among Marina District Development Holding Co., LLC, MAC, Corp. and Boyd Atlantic City, Inc., effective as of December 13, 2000 (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000).

10.17*		Annual Incentive Plan (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).

10.18		Credit Agreement, dated as of May 20, 2004, among the Registrant as the Borrower, certain commercial lending institutions as the Lenders, Bank of America, N.A. as the Administrative Agent and L/C Issuer, Wells Fargo Bank, N.A. as the Swing Line Lender, CIBC World Markets Corp. and Wells Fargo Bank, N.A. as Co-Syndication Agents and Calyon New York Branch and Deutsche Bank Trust Company Americas as Co-Documentation Agents (incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 9, 2004).

10.19		Letter Agreement between MAC, Corp. and Boyd Atlantic City, Inc., dated as of June 16, 2004, relating to the agreement of final project costs and the settlement of capital contributions (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).

10.20*		Form of Stock Option Award Agreement under the 1996 Stock Incentive Plan (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.21*		Form of Stock Option Award Agreement under the 2002 Stock Incentive Plan (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.22*		The Boyd Gaming Corporation Amended and Restated Deferred Compensation Plan for the Board of Directors and Key Employees (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.23*		Amendment Number 1 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.24*		Amendment Number 2 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.25*		Amendment Number 3 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.26*		Amendment Number 4 to the Amended and Restated Deferred Compensation Plan (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.27		Ground Lease dated as of October 1, 1995, between the Tiberti Company and Coast Hotels and Casinos, Inc. (as successor to Gold Coast Hotel and Casino) (incorporated by reference to an exhibit to Coast Resorts, Inc.’s Amendment No. 2 to General Form for Registration of Securities on Form 10 (Commission File No. 000-26922) filed with the Commission on January 12, 1996).

10.28		Ground Lease dated as of October 28, 1994, by and among 21 Stars, Ltd., as landlord, Barbary Coast Hotel & Casino, as tenant, Wanda Peccole, as successor trustee of the Peccole 1982 Trust dated February 15, 1982 (“Trust”), and The William Peter and Wanda Ruth Peccole Family Limited Partnership, and together with Trust, as owner, as amended (incorporated by reference to an exhibit to Coast Resorts, Inc.’s General Form for Registration of Securities on Form 10 (Commission File No. 000-26922) filed with the Commission on October 3, 1995).

10.29		Second Amendment to the Ground Lease Agreement between 21 Stars, Ltd. and Coast Hotels and Casinos, Inc., dated as of May 26, 2003 (incorporated by reference to Exhibit 10.32 of the Quarterly Report on Form 10-Q for Coast Resorts, Inc. (Commission File No. 000-26922) for the quarter ended June 30, 2003).

10.30		Form of Stock Option Award Agreement Under the Registrant’s Directors’ Non-Qualified Stock Option Plan (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005).

10.31		Boyd Gaming Corporation’s 2002 Stock Incentive Plan (as amended and restated on May 12, 2005) (incorporated by reference to Appendix B of the Company’s Definitive Proxy Statement filed with the Commission on April 12, 2005).

10.32		First Amendment to Credit Agreement, dated as of June 10, 2005, among the Registrant, as the Borrower, various financial institutions as the Lenders, and Bank of America, N.A., as the Administrative Agent (incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 5, 2005).

10.33		Joint Venture Agreement dated January 3, 2006, between Morgans/LV Investment LLC and Echelon Resorts Corporation (incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 3, 2006).

10.34*		Summary of Compensation Arrangements.

10.35*		Amendment Number 5 to the Amended and Restated Deferred Compensation Plan.

12.1		Schedule of Ratio of Earnings to Fixed Charges

21.1		Subsidiaries of the Registrant.

23.1		Consent of Deloitte & Touche LLP.

23.2		Consent of Deloitte & Touche LLP.



Exhibit Number		Document
24		Power of Attorney (included in Part IV to this Form 10-K).

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

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

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

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

99.1		Governmental Gaming Regulations

99.2		Audited Consolidated Financial Statements of Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, as of and for the three years in the period ended December 31, 2005.

*	Management contracts or compensatory plans or arrangements.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 14, 2006.


BOYD GAMING CORPORATION

By:		/S/ JEFFREY G. SANTORO
		Jeffrey G. Santoro Vice President and Controller (Principal Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints William S. Boyd, Ellis Landau, and Jeffrey G. Santoro, and each of them, his of her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.


Signature	Title	Date

/s/ WILLIAM S. BOYD William S. Boyd	Chairman of the Board of Directors, Chief Executive Officer and Director (Principal Executive Officer)	March 14, 2006

/s/ MARIANNE BOYD JOHNSON Marianne Boyd Johnson	Vice Chairman of the Board of Directors, Senior Vice President and Director	March 14, 2006

/s/ ELLIS LANDAU Ellis Landau	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	March 14, 2006

/s/ JEFFREY G. SANTORO Jeffrey G. Santoro	Vice President and Controller (Principal Accounting Officer)	March 14, 2006

/s/ KEITH E. SMITH Keith E. Smith	Chief Operating Officer, President and Director	March 14, 2006

/s/ WILLIAM R. BOYD William R. Boyd	Vice President and Director	March 14, 2006

Robert L. Boughner	Director

/s/ MICHAEL J. GAUGHAN Michael J. Gaughan	Director	March 14, 2006

/s/ THOMAS V. GIRARDI Thomas V. Girardi	Director	March 14, 2006

/s/ LUTHER W. MACK, JR. Luther W. Mack, Jr.	Director	March 14, 2006

Michael O. Maffie	Director

/s/ MAJ. GEN. BILLY G. MCCOY, RET. USAF Maj. Gen. Billy G. McCoy, Ret. USAF	Director	March 14, 2006

/s/ FREDERICK J. SCHWAB Frederick J. Schwab	Director	March 14, 2006

/s/ PETER M. THOMAS Peter M. Thomas	Director	March 14, 2006

/s/ VERONICA J. WILSON Veronica J. Wilson	Director	March 14, 2006

EXHIBIT INDEX



10.34*		Summary of Compensation Arrangements.

10.35*		Amendment Number 5 to the Amended and Restated Deferred Compensation Plan.

12.1		Schedule of Ratio of Earnings to Fixed Charges

21.1		Subsidiaries of Registrant.

23.1		Consent of Deloitte & Touche LLP.

23.2		Consent of Deloitte & Touche LLP.

24		Power of Attorney (included in Part IV to this Form 10-K).

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

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

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

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

99.1		Governmental Gaming Regulations

99.2		Audited Consolidated Financial Statements of Marina District Development Company, LLC, d.b.a. Borgata Hotel Casino and Spa, as of and for the three years in the period ended December 31, 2005.

*	Management contracts or compensatory plans or arrangements.

EXHIBIT 10.34

SUMMARY OF COMPENSATION ARRANGEMENTS

Annual Base Salary

Our executive officers are “at will” employees. Currently we have no written or oral employment arrangements with our executive officers. A copy or description of any future such employment arrangement will be filed to the extent required.

The table below summarizes the current annual base salary we have with each of our named executive officers and directors. All of the compensation arrangements we have with our executive officers are reviewed and may be modified from time to time by the Compensation and Stock Option Committee of our Board of Directors.


Name	Annual Base Salary
William S. Boyd Chairman and Chief Executive Officer	2006: $	1,500,000

Robert L. Boughner Director and Chief Executive Officer of Echelon Resorts Corporation	2006: $	1,000,000

Michael J. Gaughan Director and Chief Executive Officer of Coast Casinos, Inc.	2006: $	900,000

Keith E. Smith President, Chief Operating Officer and Director	2006: $	750,000

Ellis Landau Executive Vice President and Chief Financial Officer	2006: $	550,000

Marianne Boyd Johnson Vice Chairman and Senior Vice President	2006: $	220,000

William R. Boyd Vice President and Director	2006: $	190,000

Bonus Plans, Director Compensation Arrangements and Other Compensation

The information regarding bonus plans, director compensation arrangements and other compensation is set forth in our most recent definitive Proxy Statement for the Annual Meeting of Stockholders (and any definitive Annual Proxy Statement filed after the date hereof), which information is incorporated herein by reference.

EXHIBIT 10.35

BOYD GAMING CORPORATION

DEFERRED COMPENSATION PLAN

Amendment Number 5 to Amended and Restated Plan

WHEREAS, Boyd Gaming Corporation (“Employer”) maintains the Boyd Gaming Corporation Deferred Compensation Plan for the Board of Directors and Key Employees (“Plan”); and

WHEREAS, the Employer has reserved to itself the right to amend the Plan at any time it deems necessary or desirable; and

WHEREAS, the Employer desires to amend the Plan to increase the annual limitation applicable to participant deferrals.

NOW, THEREFORE, the Plan is hereby amended, effective as of January 1, 2006, as follows:

Section 3.3 of the Plan is restated in its entirety to read as follows:

“3.3 The Participant shall specify in his Enrollment Agreement the amount of Compensation to be deferred under the Plan from and after January 1, 2006. The maximum permitted to be deferred by an employee under the Plan is (1) 25% of base salary, and (2) 100% of incentive compensation paid. The maximum permitted to be deferred by a non-employee director under the Plan is 100% of Board of Directors fees. Additional deferrals by employees will be allowed in anticipation of the funding of the Participant’s account under the 401(k) Plan as provided in Section 3.11, below. The Plan Administrator may establish minimum deferral amount requirements and maximum limits.”

Except as otherwise provided in this Amendment Number 6 to the Amended and Restated Plan, the Plan is hereby ratified and confirmed in all respects.

EXECUTED this 30 ^th day of December, 2005.


BOYD GAMING CORPORATION, a Nevada Corporation

By:		/s/ ELLIS LANDAU
Name:		Ellis Landau
Its:		Executive Vice President and Chief Financial Officer

EXHIBIT 12.1

Boyd Gaming Corporation

Computation of Ratio of Earnings to Fixed Charges

($ in thousands, except for ratios)

(unaudited)


	Year Ended December 31,
	2005		2004		2003		2002		2001
Earnings Calculation:
Income before provision for income taxes and cumulative effect of a change in accounting principle and before operating and non-operating results from Borgata	$	160,803	$	121,688	$	76,479	$	85,460	$	42,852
Add:
Interest expense		129,023		102,027		74,549		72,904		75,374
Interest component of rent expense		10,580		5,574		2,842		2,670		2,262
Distributed income from Borgata		29,338		—		—		—		—

Earnings available for fixed charges	$	329,744	$	229,289	$	153,870	$	161,034	$	120,488

Fixed charges:
Interest expense	$	129,023	$	102,027	$	74,549	$	72,904	$	75,374
Capitalized interest		22,930		5,460		9,168		17,673		18,009
Interest component of rent expense		10,580		5,574		2,842		2,670		2,262

Total fixed charges	$	162,533	$	113,061	$	86,559	$	93,247	$	95,645

Ratio of earnings to fixed charges		2.0x		2.0x		1.8x		1.7x		1.3x

EXHIBIT 21.1

BOYD GAMING CORPORATION

LIST OF SUBSIDIARIES:

California Hotel and Casino

d.b.a. California Hotel and Casino

d.b.a. Sam’s Town Hotel, Gambling Hall and Bowling Center

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0121743

Boyd Tunica, Inc.

d.b.a. Sam’s Town Hotel and Gambling Hall

(State of Incorporation or Organization) Mississippi

(IRS Employer Identification Number) 64-0829658

Boyd Kenner, Inc.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 88-0319489

Mare-Bear, Inc.

d.b.a. Stardust Resort and Casino

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0203692

Sam-Will, Inc.

d.b.a. Fremont Hotel and Casino

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0203673

Eldorado, Inc.

d.b.a. Eldorado Casino

d.b.a. Jokers Wild Casino

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0093922

MSW, Inc.

d.b.a. Main Street Station Hotel, Casino and Brewery

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0310765

Par-A-Dice Gaming Corporation

d.b.a. Par-A-Dice Hotel Casino

(State of Incorporation or Organization) Illinois

(IRS Employer Identification Number) 37-1268902

Boyd Louisiana L.L.C.

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 86-0880651

Treasure Chest Casino, LLC.

d.b.a. Treasure Chest Casino

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 72-1248550

Blue Chip Casino, LLC.

d.b.a. Blue Chip Hotel and Casino

(State of Incorporation or Organization) Indiana

(IRS Employer Identification Number) 35-2087676

Boyd Atlantic City, Inc.

(State of Incorporation or Organization) New Jersey

(IRS Employer Identification Number) 93-1221994

California Hotel Finance Co.

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0217850

Boyd Louisiana Racing, Inc.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 88-0494602

Boyd Racing, L.L.C.

d.b.a. Delta Downs Racetrack Casino & Hotel

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 91-2121472

Coast Casinos, Inc.

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 20-0836222

Coast Hotels and Casinos, Inc.

d.b.a. Barbary Coast Hotel and Casino

d.b.a. Gold Coast Hotel and Casino

d.b.a. The Orleans Hotel and Casino

d.b.a. Suncoast Hotel and Casino

d.b.a. South Coast Hotel and Casino

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 88-0345706

Boyd Shreveport, L.L.C.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 20-0635765

Boyd Red River, L.L.C.

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 20-0635770

Red River Entertainment of Shreveport Partnership in Commendam

d.b.a. Sam’s Town Hotel and Casino

(State of Incorporation or Organization) Louisiana

(IRS Employer Identification Number) 20-0753582

Boyd Pennsylvania, Inc.

(State of Incorporation or Organization) Pennsylvania

(IRS Employer Identification Number) 51-0559543

Boyd Pennsylvania Partners, LP

(State of Incorporation or Organization) Pennsylvania

(IRS Employer Identification Number) 20-3944905

Echelon Resorts Corporation

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 32-0163131

Echelon Resorts LLC

(State of Incorporation or Organization) Nevada

(IRS Employer Identification Number) 30-0346702

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-17941, 333-79895, 333-68130, 333-90840, 333-119850, and 333-129421 on Form S-8 and 333-130404 on Form S-3ASR of our reports dated March 13, 2006 relating to the consolidated financial statements of Boyd Gaming Corporation and Subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph on the adoption of EITF D-108, Use of the Residual Method to Value Acquired Assets Other Than Goodwill) , and management’s report on the effectiveness of internal control over financial reporting appearing in the Annual Report on Form 10-K of Boyd Gaming Corporation and Subsidiaries for the year ended December 31, 2005.

DELOITTE & TOUCHE LLP

Las Vegas, Nevada

March 13, 2006

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-17941, 333-79895, 333-68130, 333-90840, 333-119850, and 333-129421 on Form S-8 and 333-130404 on Form S-3ASR of our report dated March 13, 2006, relating to financial statements of Marina District Development Company, LLC and subsidiary appearing in the Annual Report on Form 10-K of Boyd Gaming Corporation for the year ended December 31, 2005.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey

March 13, 2006

EXHIBIT 31.1

BOYD GAMING CORPORATION

CERTIFICATION

I, William S. Boyd, certify that:

1.	I have reviewed this annual report on Form 10-K of Boyd Gaming Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: March 14, 2006	By:	/S/ WILLIAM S. BOYD
		William S. Boyd Chairman of the Board and Chief Executive Officer

EXHIBIT 31.2

BOYD GAMING CORPORATION

CERTIFICATION

I, Ellis Landau, certify that:

1.	I have reviewed this annual report on Form 10-K of Boyd Gaming Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: March 14, 2006	By:	/S/ ELLIS LANDAU
		Ellis Landau Executive Vice President and Chief Financial Officer

EXHIBIT 32.1

BOYD GAMING CORPORATION

CERTIFICATION

In connection with the periodic report of Boyd Gaming Corporation (the “Company”) on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, William S. Boyd, Chairman of the Board and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

A signed original of this written statement required by Section 906, or other documentation authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of the written statement required by Section 906, has been provided to Boyd Gaming Corporation and will be retained by Boyd Gaming Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.



Date: March 14, 2006	By:	/S/ WILLIAM S. BOYD
		William S. Boyd Chairman of the Board and Chief Executive Officer

EXHIBIT 32.2

BOYD GAMING CORPORATION

CERTIFICATION

In connection with the periodic report of Boyd Gaming Corporation (the “Company”) on Form 10-K for the period ended December 31, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Ellis Landau, Executive Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.



Date: March 14, 2006	By:	/S/ ELLIS LANDAU
		Ellis Landau Executive Vice President and Chief Financial Officer

EXHIBIT 99.1

GOVERNMENTAL GAMING REGULATIONS

We are subject to extensive regulation under laws, rules and supervisory procedures primarily in the jurisdictions where our facilities are located or docked. If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose restrictions or costs that could have a significant adverse effect on us. From time to time, various proposals have been introduced in the legislatures of some of the jurisdictions in which we have existing or planned operations that, if enacted, could adversely affect the tax, regulatory, operational or other aspects of the gaming industry and us. We do not know whether such legislation will be enacted. The federal government has also previously considered a federal tax on casino revenues and the elimination of betting on amateur sporting events and may consider such a tax or eliminations on betting in the future. In addition, gaming companies are currently subject to significant state and local taxes and fees in addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any time. Any material increase in these taxes or fees could adversely affect us.

Some jurisdictions, including Nevada, Illinois, Indiana, Louisiana, Mississippi and New Jersey, empower their regulators to investigate participation by licensees in gaming outside their jurisdiction and require access to periodic reports respecting those gaming activities. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions.

Under provisions of gaming laws in jurisdictions in which we have operations, and under our organizational documents, certain of our securities are subject to restrictions on ownership which may be imposed by specified governmental authorities. The restrictions may require a holder of our securities to dispose of the securities or, if the holder refuses, or is unable, to dispose of the securities, we may be required to repurchase the securities.

The indenture governing our outstanding notes provides that if a holder of a note or beneficial owner of a note is required to be licensed, qualified or found suitable under the applicable gaming laws and is not so licensed, qualified or found suitable within any time period specified by the applicable gaming authority, the holder will be required, at our request, to dispose of its notes within a time period that either we prescribe or such other time period prescribed by the applicable gaming authority, and thereafter, we shall have the right to redeem such holder’s notes.

Nevada

The ownership and operation of casino gaming facilities in Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder, which we refer to as the Nevada Act, and various local codes and ordinances. Our gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission, which we refer to as the Nevada Commission, the Nevada State Gaming Control Board, which we refer to as the Nevada Board, and the Clark County Liquor and Gaming Licensing Board, which, with the Nevada Commission and the Nevada Board, we collectively refer to as the Nevada Gaming Authorities.

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things:

•

the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;

•

the establishment and maintenance of responsible accounting practices and procedures;

•

the maintenance of effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues;

•

providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities;

•

the prevention of cheating and fraudulent practices;

•

the maintenance of a Gaming Compliance and Reporting Plan, including the establishment of a Gaming Compliance Committee and the retention of a Compliance Officer; and

•

the provision of a source of state and local revenues through taxation and licensing fees.

Changes in such laws, regulations and procedures could have an adverse effect on our gaming operations and our business, financial condition and results of operations.

Corporations that operate casinos in Nevada are required to be licensed by the Nevada Gaming Authorities. A gaming license requires the periodic payment of fees and taxes and is not transferable. We are registered by the Nevada Commission

as a publicly traded corporation, or a Registered Corporation. As a Registered Corporation, we are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. We have been found suitable by the Nevada Commission to own the stock of California Hotel and Casino and of Coast Casinos, Inc., or Coast Casinos. California Hotel and Casino is licensed by the Nevada Commission to operate non-restricted gaming activities at the California and Sam’s Town Las Vegas and is additionally registered as a holding corporation and approved by the Nevada Gaming Authorities to own the stock of Mare-Bear, Inc., the operator of the Stardust, Sam-Will, Inc., the operator of the Fremont, Eldorado, Inc., the operator of the Eldorado and Jokers Wild, and M.S.W., Inc., the operator of Main Street Station. Coast Casinos is registered as a holding company and approved by the Nevada Gaming Authorities to own the stock of Coast Hotels and Casinos, Inc., the operator of Gold Coast Hotel and Casino, Barbary Coast Hotel and Casino, The Orleans Hotel and Casino, Suncoast Hotel and Casino, South Coast Hotel and Casino and Renata’s Supper Club. In 2003, the Nevada Commission approved Boyd Louisiana Racing Inc. and Boyd Racing L.L.C., d.b.a. Delta Downs Racetrack, Casino & Hotel, to share in the revenue from the conduct of off-track pari-mutuel wagering, under certain conditions, as it pertains to the broadcast of live racing events to licensed Nevada pari-mutuel race books. No person may become a stockholder of, or receive any percentage of profits from, California Hotel and Casino or its subsidiaries or of Coast Casinos or its subsidiary without first obtaining licenses and approvals from the Nevada Gaming Authorities (all of the foregoing entities are collectively referred to as the “Licensed Subsidiaries”). Boyd Gaming and all of its Licensed Subsidiaries have obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, Boyd Gaming and its Licensed Subsidiaries in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of the Licensed Subsidiaries must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Our officers, directors and key employees who are actively and directly involved in gaming activities of the Licensed Subsidiaries may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us or any of our Licensed Subsidiaries, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require Boyd Gaming or any of its Licensed Subsidiaries to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

Boyd Gaming and its Licensed Subsidiaries are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by the Licensed Subsidiaries must be reported to, or approved by, the Nevada Commission.

If it were determined that the Nevada Act was violated by any of the Licensed Subsidiaries, the gaming licenses they hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, Boyd Gaming and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act or Regulations at the discretion of the Nevada Commission. Further, a supervisor could be nominated by the Nevada Commission for court appointment to operate our gaming properties and, under certain circumstances, earnings generated during the supervisor’s appointment (except for reasonable rental value of our gaming properties) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect our gaming operations and our business, financial condition and results of operations.

Any beneficial holder of our voting securities, regardless of the number of shares owned, may be required to file an application, be investigated and have his suitability as a beneficial holder of our voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than 5% of our voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of our voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of our voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of our board of directors, any change in our corporate charter, bylaws, management, policies or operations, or any of our gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding our voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes include only:

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voting on all matters voted on by stockholders;

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making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in our management, policies or operations; and

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such other activities as the Nevada Commission may determine to be consistent with such investment intent.

If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us, California Hotel and Casino or any of our licensed subsidiaries, we:

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pay that person any dividend or interest upon voting securities of Boyd Gaming;

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allow that person to exercise, directly or indirectly, any voting right conferred through securities held by the person;

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pay remuneration in any form to that person for services rendered or otherwise; or

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fail to pursue all lawful efforts to require such unsuitable person to relinquish their voting securities for cash at fair market value.

Additionally, the Clark County Liquor and Gaming Licensing Board has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license.

The Nevada Commission may, at its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it:

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pays to the unsuitable person any dividend, interest, or any distribution whatsoever;

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recognizes any voting right by such unsuitable person in connection with such securities;

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pays the unsuitable person remuneration in any form; or

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makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

We are required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We are also required to render maximum assistance in determining the identity of the beneficial owner.

We may not make a public offering of our securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to

retire or extend obligations incurred for such purposes. Any representation to the contrary is unlawful. In September 2005, the Nevada Commission granted us two years, the maximum time permitted, in which to make public offerings of debt or equity. This two-year approval or continuous or delayed public offering approval, also known as a shelf approval, is subject to certain conditions and expires in September 2007, at which time we will seek to renew the approval. The Nevada Commission’s approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada Board.

Changes in control of Boyd Gaming through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Gaming Authorities in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchase of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those licensees, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to:

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assure the financial stability of corporate gaming operators and their affiliates;

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preserve the beneficial aspects of conducting business in the corporate form; and

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promote a neutral environment for the orderly governance of corporate affairs.

Approvals are, in certain circumstances, required from the Nevada Commission before we can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. As a Registered Corporation, the Nevada Act also requires prior approval of a plan of recapitalization proposed by our board of directors in response to a tender offer made directly to our stockholders for the purposes of acquiring control of us.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada, Clark County and the City of Las Vegas. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon any of:

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a percentage of the gross revenues received;

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the number of gaming devices operated; or

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the number of table games operated.

An excise tax is also paid by casino operations upon admission to certain facilities offering live entertainment, including the selling of food, refreshment and merchandise in connection therewith.

Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons, which we refer to as Licensees, and who proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.

The sale of food or alcoholic beverages at our Nevada casinos is subject to licensing, control and regulation by the applicable local authorities. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could, and a revocation would, have a significant adverse effect upon the operations of the affected casino or casinos.

Illinois

We are subject to the jurisdiction of the Illinois gaming authorities as a result of our ownership and operation of Par-A-Dice Hotel Casino in East Peoria, Illinois.

In February 1990, the State of Illinois legalized riverboat gambling. The Illinois Riverboat Gambling Act, which we refer to as the initial Illinois Act, authorizes the five-member Illinois Gaming Board, which we refer to as the Illinois Board, to issue up to ten riverboat gaming owners’ licenses on navigable streams within or forming a boundary of the State of Illinois except for Lake Michigan and any waterway in Cook County, which includes Chicago. Pursuant to the initial Illinois Act, a licensed owner who holds greater than a 10% interest in one riverboat operation, could hold no more than a 10% interest in any other riverboat operation. In addition, the initial Illinois Act restricted the location of certain of the ten owners’ licenses. Four of the licenses were to be located on the Mississippi River, one license was to be at a location on the Illinois River south of Marshall County and one license had to be located on the Des Plaines River in Will County. The remaining licenses were not restricted as to location. Currently, nine owner’s licenses are in operation, including one license in each of Alton, Aurora, East Peoria, East St. Louis, Elgin, Metropolis, Rock Island and two licenses in Joliet.

The tenth license, which was initially granted to an operator in East Dubuque, was not renewed by the Illinois Board and has been the subject of on-going litigation. The Illinois Board entered into a settlement agreement with the operator whereby the ownership interest in the tenth license was to be transferred to a new operator. The Illinois Board initiated a bid process and selected Isle of Capri as the new operator with its gaming operations to be located in Rosemont, Illinois. The Illinois Attorney General, pursuant to her authority, did not approve the settlement agreement which would have permitted the transfer of the ownership interest. Instead, the Illinois Board resumed its license revocation hearing, which had been held in abeyance. On November 15, 2005, the Administrative Law Judge issued his opinion, recommending that the Illinois Board revoke the operator’s license. The record of the proceeding and the Judge’s opinion was reviewed by the Illinois Board and the Illinois Board issued a final order revoking the operator’s license. The operator is entitled to appeal a final Illinois Board order to the Illinois Appellate court. There is no assurance that this process will reach a successful conclusion.

Furthermore, under the initial Illinois Act, no gambling could be conducted while a riverboat was docked. A gaming excursion could last no more than four hours, and a gaming excursion was deemed to have started when the first passenger boarded a riverboat. Gaming could continue during passenger boarding for a period of up to 30 minutes. Gaming was also allowed for a period of up to 30 minutes after the gangplank or its equivalent was lowered, thereby allowing passengers to exit the riverboat. During the 30-minute exit time period, new passengers were not allowed to board the riverboat. Although riverboats were mandated to cruise, there were certain exceptions. If a riverboat captain reasonably determined that either it was unsafe to transport passengers on the waterway due to inclement weather or the riverboat had been rendered temporarily inoperable by unforeseeable mechanical or structural difficulties or river icing, the riverboat could remain dockside or return to the dock. In those situations, a gaming excursion could commence or continue while the gangplank or its equivalent was raised and remained raised, in which event the riverboat was not considered docked. If a gaming excursion had to begin or continue with the gangplank or its equivalent raised, and the riverboat did not leave the dock, entry of new patrons on to the riverboat was prohibited until the completion of the excursion.

In June of 1999, amendments to the Illinois Act, which we refer to as the Amended Illinois Act, were passed by the legislature and signed into law by the Governor. The Amended Illinois Act redefined the conduct of gaming in the state. Pursuant to the Amended Illinois Act, riverboats can conduct gambling without cruising, and passengers can enter and leave a riverboat at any time. In addition, riverboats may now be located upon any water within Illinois, and not just navigable waterways. There is no longer any prohibition of a riverboat being located in Cook County. Riverboats are now defined as self-propelled excursion boats or permanently moored barges. The Amended Illinois Act requires that only three, rather than four, owner’s licenses, be located on the Mississippi River. The 10% ownership prohibition has also been removed. Therefore, subject to certain Illinois Board rules, individuals or entities could own more than one riverboat operation.

The Amended Illinois Act also allows for the relocation of a riverboat home dock. A licensee that was not conducting riverboat gambling on January 1, 1998, may apply to the Illinois Board for renewal and approval of relocation to a new home dock and the Illinois Board shall grant the application and approval of the new home dock upon the licensee providing to the Illinois Board authorization from the new dockside community. Any licensee that relocates in accordance with the provisions of the Amended Illinois Act must attain a level of at least 20% minority ownership of such a gaming operation.

The initial Illinois Act strictly regulates the facilities, persons, associations and practices related to gaming operations. The initial Illinois Act grants the Illinois Board specific powers and duties, and all other powers necessary and proper to fully and effectively execute the initial Illinois Act for the purpose of administering, regulating and enforcing the system of riverboat gaming. The Illinois Board has authority over every person, association, corporation, partnership and trust involved in riverboat gaming operations in the State of Illinois.

The initial Illinois Act requires the owner of a riverboat gaming operation to hold an owner’s license issued by the Illinois Board. Each owner’s license permits the holder to own up to two riverboats, however, gaming participants are limited to 1,200 for any owner’s license. The number of gaming participants will be determined by the number of gaming positions available. Gaming positions are counted as follows:

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electronic gaming devices positions will be determined as 90% of the total number of devices available for play;

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craps tables will be counted as having ten gaming positions; and

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games utilizing live gaming devices, except for craps, will be counted as having five gaming positions.

Each owner’s license initially runs for a period of three years. Thereafter, the license must be renewed annually. Under the Amended Illinois Act, the Board may renew an owner’s license for up to four years. An owner licensee is eligible for renewal upon payment of the applicable fee and a determination by the Illinois Board that the licensee continues to meet all of the requirements of the initial Illinois Act and Illinois Board rules. The owner’s license for Par-A-Dice Riverboat Casino initially expired in February 1995. Since that time, the license has been renewed annually. The most recent renewal approved by the Illinois Board in March of 2004 was for a term of four years. An ownership interest in an owner’s license may not be transferred or pledged as collateral without the prior approval of the Illinois Board.

Pursuant to the Amended Illinois Act, which lifted the 10% ownership prohibition, the Illinois Board established certain rules to effectuate this statutory change. In deciding whether to approve direct or indirect ownership or control of an owner’s license, the Illinois Board shall consider the impact of any economic concentration of the ownership or control. No direct or indirect ownership or control shall be approved which will result in undue economic concentration of the ownership of riverboat gambling operations in Illinois. Undue economic concentration means that a person or entity would have actual or potential domination of riverboat gambling in Illinois sufficient to:

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substantially impede or suppress competition among holders of owner’s licenses;

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adversely impact the economic stability of the riverboat casino industry in Illinois; or

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negatively impact the purposes of the initial Illinois Act, including tourism, economic development, benefits to local communities, and State and local revenues.

The Illinois Board will consider the following criteria in determining whether the approval of the issuance, transfer or holding of a license will create undue economic concentration:

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the percentage share of the market presently owned or controlled by the person or entity;

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the estimated increase in the market share if the person or entity is approved to hold the owner’s license;

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the relative position of other persons or entities that own or control owner’s licenses in Illinois;

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the current and projected financial condition of the riverboat gaming industry;

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the current market conditions, including proximity and level of competition, consumer demand, market concentration, and any other relevant characteristics of the market;

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whether the license to be approved has separate organizational structures or other independent obligations;

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the potential impact on the projected future growth and development of the riverboat gambling industry, the local communities in which licenses are located, and the State of Illinois;

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the barriers to entry into the riverboat gambling industry and if the approval of the license will operate as a barrier to new companies and individuals desiring to enter the market;

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whether the approval of the license is likely to result in enhancing the quality and customer appeal of products and services offered by riverboat casinos in order to maintain or increase their respective market shares;

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whether a restriction on the approval of the additional license is necessary in order to encourage and preserve competition in casino operations; and

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any other relevant information.

The initial Illinois Act does not limit the maximum bet or per patron loss. Minimum and maximum wagers on games are set by the owner licensee. Wagering may not be conducted with money or other negotiable currency. No person under the age of 21 is permitted to wager and wagers may only be received from a person present on the riverboat. With respect to electronic gaming devices, the payout percentage may not be less than 80% nor more than 100%.

An admission tax is imposed on the owner of a riverboat operation. Effective July 1, 2003, additional amendments to the Amended Illinois Act were passed by the legislature and signed into law by the Governor (the “Second Amended Illinois Act”). Under the Second Amended Illinois Act, for an owner licensee that admitted 2,300,000 persons or fewer in the previous calendar year, the admission tax is $4.00 per person and for a licensee that admitted more that 2,300,000 persons in the previous calendar year, the admission tax is $5.00. Additionally, a wagering tax is imposed on the adjusted gross receipts, as defined in the initial Illinois Act, of a riverboat operation. As of July 1, 2003, pursuant to the Second Amended Illinois Act, the wagering tax was increased as follows: 15% of annual adjusted gross receipts up to and including $25 million;

27.5% of annual adjusted gross receipts in excess of $25 million but not exceeding $37.5 million; 32.5% of annual adjusted gross receipts in excess of $37.5 million but not exceeding $50 million; 37.5% of annual adjusted gross receipts in excess of $50 million but not exceeding $75 million; 45% of annual adjusted gross receipts in excess of $75 million but not exceeding $100 million; 50% of annual adjusted gross receipts in excess of $100 million but not exceeding $250 million; and 70% of annual adjusted gross receipts in excess of $250 million. The owner licensee is required, on a daily basis, to wire the wagering tax payment to the Illinois Board. The wagering tax as outlined in the Second Amended Illinois Act shall no longer be imposed beginning on the earlier of (i) July 1, 2005; (ii) the first date after the effective date of the Second Amended Illinois Act that riverboat gambling operations are conducted pursuant to the dormant tenth license or (iii) the first day that riverboat gambling operations are conducted under the authority of an owners license that is in addition to the 10 owners’ licenses authorized by the Initial Act. The tax will rollback to the rates as outlined in the Amended Act.

Effective July 1, 2005, additional amendments to the Second Amended Act were passed by the legislature and signed into law by the Governor (the “Third Amended Illinois Act”). Under the Third Amended Act, for an owner that admitted 1,000,000 persons or fewer in calendar year 2004, the admission tax is $2.00 and for all other licensees it is $3.00 per person admitted. Additionally, the wagering tax provisions were “rolled back” to the rates as defined in the Amended Act. Thus, the effective wager tax rates are: 15% of annual adjusted gross receipts up to and including $25,000,000; 22.5% of annual adjusted gross receipts in excess of $25,000,000 but not exceeding $50,000,000; 27.5% of annual adjusted gross receipts in excess of $50,000,000 but not exceeding $75,000,000; 32.5% of annual adjusted gross receipts in excess of $75,000,000 but not exceeding $100,000,000; 37.5% of annual adjusted gross receipts in excess of $100,000,000 but not exceeding $150,000,000; 45% of annual adjusted gross receipts in excess of $150,000,000 but not exceeding $200,000,000; and $50% of annual adjusted gross receipts in excess of $200,000,000. In addition to payment of the above listed amounts, by June 15 of each year, each owner (other than an owner that admitted 1,000,000 or fewer persons in calendar year 2004) must pay to the Illinois Board the amount, if any, by which the base amount for the licensed owner exceeds the amount of tax paid pursuant to the Third Amended Act. The base amount for a riverboat in East Peoria is $43,000,000. This obligation terminates on the earliest of (i) July 1, 2007, (ii) the first day after the effective date of the Third Amended Act that riverboat gambling operations are conducted pursuant to a dormant license, (iii) the first day that riverboat gambling operations are conducted under the authority of an owners license that is in addition to the 10 owners licenses initially authorized, or (iv) the first day that a licensee under the Illinois Horse Racing Act of 1975 conducts gaming operations with slot machines or other electronic gaming devices. There have been legislative discussions that the current base amount may be adjusted upward as it does not incorporate the amount of tax paid by the riverboat to its local community. Any upward adjustment may be imposed retroactively to the effective date of the Third Amended Illinois Act.

The Illinois Board has the authority to reduce the above mentioned wagering tax obligation imposed under the Third Amended Act by an amount the Board deems reasonable for acts of God, terrorism, bioterrorism or a condition beyond the control of the owner licensee. There can be no assurance that the Illinois legislature will not enact additional legislation regarding admission and wagering tax rates.

In addition to owner’s licenses, the Illinois Board also requires licensing for all vendors of gaming supplies and equipment and for all employees of a riverboat gaming operation. The Illinois Board is authorized to conduct investigations into the conduct of gaming and into alleged violations of the Illinois Act and the Illinois Board rules. Employees and agents of the Illinois Board have access to and may inspect any facilities relating to the riverboat gaming operation.

A holder of any license is subject to the imposition of fines, suspension or revocation of such license, or other action for any act or failure to act by himself or his agents or employees, that is injurious to the public health, safety, morals, good order and general welfare of the people of the State of Illinois, or that would discredit or tend to discredit the Illinois gaming industry or the State of Illinois. Any riverboat operations not conducted in compliance with the initial Illinois Act may constitute an illegal gaming place and consequently may be subject to criminal penalties, which penalties include possible seizure, confiscation and destruction of illegal gaming devices and seizure and sale of riverboats and dock facilities to pay any unsatisfied judgment that may be recovered and any unsatisfied fine that may be levied. The initial Illinois Act also provides for civil penalties, equal to the amount of gross receipts derived from wagering on the gaming, whether unauthorized or authorized, conducted on the day of any violation. The Illinois Board may revoke or suspend licenses, as the Illinois Board may see fit and in compliance with applicable laws of the State of Illinois regarding administrative procedures and may suspend an owner’s license, without notice or hearing, upon a determination that the safety or health of patrons or employees is jeopardized by continuing a riverboat’s operation. The suspension may remain in effect until the Illinois Board determines that the cause for suspension has been abated and it may revoke the owner’s license upon a determination that the owner has not made satisfactory progress toward abating the hazard.

If the Illinois Board has suspended, revoked or refused to renew the license of an owner or if a riverboat gambling operation is closing and the owner is voluntarily surrendering its owner’s license, the Illinois Board may petition the local circuit court (the “Court”) in which the riverboat is situated for appointment of a receiver. The circuit court will have sole

jurisdiction over any and all issues pertaining to the appointment of a receiver. The Illinois Board will specify the specific powers, duties and limitations for the receiver, including but not limited to the authority to:

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hire, fire, promote and discipline personnel and retain outside employees or consultants;

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take possession of any and all property, including but not limited to its books, records, and papers;

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preserve or dispose of any and all property;

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continue and direct the gaming operations under the monitoring of the Illinois Board;

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discontinue and dissolve the gaming operation;

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enter into and cancel contracts;

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borrow money and pledge, mortgage or otherwise encumber the property;

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pay all secured and unsecured obligations;

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institute or defend actions by or on behalf of the holder of an owner’s license; and

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distribute earnings derived from gaming operations in the same manner as admission and wagering taxes are distributed under Sections 12 and 13 of the initial Illinois Act.

The Illinois Board will submit at least three nominees to the Court. The nominees may be individuals or entities selected from an Illinois Board approved list of pre-qualified receivers who meet the same criteria for a finding of preliminary suitability for licensure under Sections 3000.230(c)(2)(B) and (C). In the event that the Illinois Board seeks the appointment of a receiver on an emergency basis, the Illinois Board will submit at least two nominees selected from the Illinois Board approved list of pre-qualified receivers to the Court and will issue a Temporary Operating Permit to the receiver appointed by the Court. A receiver, upon appointment by the court, will before assuming his or her duties, execute and post the same bond as an owner’s licensee pursuant to Section 10 of the initial Illinois Act.

The receiver will function as an independent contractor, subject to the direction of the Court. However, the receiver will also provide to the Illinois Board regular reports and provide any information deemed necessary for the Illinois Board to ascertain the receiver’s compliance with all applicable rules and laws. From time to time, the Illinois Board may, at its sole discretion, report to the Court on the receiver’s level of compliance and any other information deemed appropriate for disclosure to the Court. The term and compensation of the receiver shall be set by the Court. The receiver will provide to the Court and the Illinois Board at least 30 days written notice of any intent to withdraw from the appointment or to seek modification of the appointment. Except as otherwise provided by action to the Illinois Board, the gaming operation will be deemed a licensed operation subject to all rules of the Illinois Board during the tenure of any receivership.

The Illinois Board requires that a “Key Person” of an owner licensee submit a Personal Disclosure or Business Entity Form and be investigated and approved by the Illinois Board. The Illinois Board shall certify for each applicant for or holder of an owner’s license each position, individual or Business Entity that is to be approved by the Board and maintain suitability as a Key Person. With respect to an applicant for or the holder of an owner’s license, Key Person shall include:

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any Business Entity and any individual with an ownership interest or voting rights of more than 5% in the licensee or applicant, and the trustee of any trust holding such ownership interest or voting rights;

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the directors of the licensee or applicant and its chief executive officer, president and chief operating officer, or their functional equivalents; and

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all other individuals or Business Entities that, upon review of the applicant’s or licensees Table of Organization, Ownership and Control (as discussed below), the Board determines hold a position or a level of ownership, control or influence that is material to the regulatory concerns and obligations of the Illinois Board for the specified licensee or applicant.

In order to assist the Illinois Board in its determination of Key Persons, applicants for or holders of an owner’s license shall provide to the Illinois Board a Table of Organization, Ownership and Control, which we refer to as the Table. The Table will identify in sufficient detail the hierarchy of individuals and Business Entities that, through direct or indirect means, manage own or control the interest and assets of the applicant or licensee holder. If a Business Entity identified in the Table is a publicly traded company, the following information must be provided in the Table:

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the name and percentage of ownership interest of each individual or Business Entity with ownership of more than 5% of the voting shares of the entity, to the extent such information is known or contained in Schedule 13D or 13G of Securities and Exchange Commission filings;

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to the extent known, the names and percentage of interest of ownership of persons who are relatives of one another and who together (as individuals or through trusts) exercise control over or own more than 10% of the voting shares of the entity; and

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any trust holding more than 5% ownership or voting interest in the entity, to the extent such information is known or contained in Schedule 13D or 13G of Securities and Exchange Commission filings. The Table may be disclosed under the Freedom of Information Act.

Each owner licensee must provide a means for the economic disassociation of a Key Person in the event such economic disassociation is required by an order of the Illinois Board. Based upon findings from an investigation into the character, reputation, experience, associations, business probity and financial integrity of a Key Person, the Illinois Board may enter an order upon the licensee or require the economic disassociation of such Key Person.

Furthermore, each applicant or owner licensee must disclose the identity of every person, association, trust or corporation having a greater than 1% direct or indirect pecuniary interest in an owner licensee or in the riverboat gaming operation with respect to which the license is sought. The Illinois Board may also require an applicant or owner licensee to disclose any other principal or investor and require the investigation and approval of such individuals.

The Illinois Board (unless the investor qualifies as an Institutional Investor) requires a Personal Disclosure Form from any person or entity who or which, individually or in association with others, acquires directly or indirectly, beneficial ownership of more than 5% of any class of voting securities or non-voting securities convertible into voting securities of a publicly-traded corporation which holds an ownership interest in the holder of an owner’s license. If the Illinois Board denies an application for such a transfer and if no hearing is requested, the applicant for the transfer of ownership interest must promptly divest those shares in the publicly-traded parent corporation. The holder of an owner’s license would not be able to distribute profits to a publicly-traded parent corporation until such shares have been divested. If a hearing is requested, the shares need not be divested and profits may be distributed to a publicly-held parent corporation pending the issuance of a final order from the Illinois Board.

An Institutional Investor that individually or jointly with others, cumulatively acquires, directly or indirectly, 5% or more of any class of voting securities of a publicly-traded licensee or a licensee’s publicly-traded parent corporation shall, within no less than ten days after acquiring such securities, notify the Administrator of the Board of such ownership and shall provide any additional information as may be required. If an Institutional Investor (as specified above) acquires 10% or more of any class of voting securities of a publicly-traded licensee or a licensee’s publicly-traded parent corporation, then it shall file an Institutional Investor Disclosure Form within 45 days after acquiring such level of ownership interest. The owner licensee shall notify the Administrator as soon as possible after it becomes aware that it or its parent is involved in an ownership acquisition by an Institutional Investor. The Institutional Investor also has an obligation to notify the Administrator of its ownership interest.

In addition to Institutional Investor Disclosure Forms, certain other forms may be required to be submitted to the Illinois Board. An owner-licensee must submit a Marketing Agent Form to the Illinois Board for each Marketing Agent with whom it intends to do business. A Marketing Agent is a person or entity, other than a junketeer or an employee of a riverboat gaming operation, who is compensated by the riverboat gaming operation in excess of $100 per patron per trip for identifying and recruiting patrons. Key Persons of owner-licensees must submit Trust Identification Forms for trusts, excluding land trusts, for which they are a grantor, trustee or beneficiary each time such a trust relationship is established, amended or terminated.

Applicants for and holders of an owner’s license are required to obtain formal approval from the Illinois Board for changes in the following areas:

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Key Persons;

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type of entity;

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equity and debt capitalization of the entity;

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investors or debt holders;

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source of funds;

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applicant’s economic development plan;

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riverboat capacity or significant design change;

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gaming positions;

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anticipated economic impact; or

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agreements, oral or written, relating to the acquisition or disposition of property (real or personal) of a value greater than $1 million.

A holder of an owner’s license is allowed to make distributions to its stockholders only to the extent that such distribution would not impair the financial viability of the gaming operation. Factors to be considered by the licensee include, but are not limited to, the following:

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cash flow, casino cash and working capital requirements;

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debt service requirements, obligations and covenants associated with financial instruments;

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requirements for repairs and maintenance and capital improvements;

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employment or economic development requirements of the Amended Illinois Act; and

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a licensee’s financial projections.

The Illinois Board may waive any licensing requirement or procedure provided by rule if it determines that such waiver is in the best interests of the public and the gaming industry. Also, the Illinois Board may, from time to time, amend or change its rules.

From time to time, various proposals have been introduced in the Illinois legislature that, if enacted, would affect the taxation, regulation, operation or other aspects of the gaming industry or Boyd Gaming. Some of this legislation, if enacted, could adversely affect the gaming industry or Boyd Gaming. No assurance can be given whether such legislation or similar legislation will be enacted.

Uncertainty exists regarding the Illinois gaming regulatory environment due to limited experience in interpreting the Illinois Act.

New Jersey

On June 11, 2003 the New Jersey Casino Control Commission, or NJCCC, found that Marina District Development Company, LLC, a New Jersey limited liability company (the “Operating Company”) complied with all the requirements of the Casino Control Act for the issuance of a casino license to own and operate Borgata. The effective date of the license was July 2, 2003, the date the NJCCC Commission issued the Operating Company with an Operation Certificate. Such casino license was valid for a one year period and was renewed in June of 2004 for an additional one year period. On June 30, 2005 the casino license of the Operating Company was renewed for a five year period and is subject to successive five year renewal periods thereafter.

MDDC is a wholly-owned subsidiary of Marina District Development Holding Company, LLC (the “Holding Company”), i.e. the Holding Company is the sole member of the Operating Company. Boyd Atlantic City, Inc., or BAC and MAC Corp., a wholly-owned subsidiary of Mirage Resorts, Inc., or MAC, are members of the Holding Company and have 50% ownership interests therein, and BAC is the Managing Member of the Holding Company.

The ownership and operation of casino gaming facilities in New Jersey are subject to the Casino Control Act. In general, the Casino Control Act and the regulations promulgated thereunder contain detailed provisions concerning, among other things:

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the granting of casino licenses;

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the suitability of the approved hotel facility and the amount of authorized casino space and gaming units permitted therein;

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the qualification of natural persons and entities related to the casino licensee;

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the licensing and registration of employees and vendors of casino licensees;

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the rules of the games;

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the selling and redeeming of gaming chips;

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the granting and duration of credit and the enforceability of gaming debts;

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the management control procedures, accountability, and cash control methods and reports to gaming agencies;

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the security standards;

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the manufacture and distribution of gaming equipment;

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the equal opportunity for employees and casino operators, contractors of casino facilities, and others; and

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the advertising, entertainment, and alcoholic beverages.

The NJCCC is empowered under the Casino Control Act to regulate a wide spectrum of gaming and non-gaming related activities and to approve the form of ownership and financial structure of not only a casino licensee, but also its entity qualifiers and intermediary and holding companies.

No casino hotel facility may operate unless the appropriate license and approvals are obtained from the NJCCC, which has broad discretion with regard to the issuance, renewal, revocation, and suspension of such licenses and approvals, which are nontransferable. The qualification criteria with respect to the holder of a casino license include the following:

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its financial stability, integrity and responsibility;

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the integrity and adequacy of its financial resources which bear any relation to the casino project;

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its good character, honesty, and integrity; and

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the sufficiency of its business ability and casino experience to establish the likelihood of creation and maintenance of a successful, efficient casino operation.

The NJCCC may reopen licensing hearings at any time and must reopen a licensing hearing at the request of the New Jersey Division of Gaming Enforcement, or the NJDGE.

To be considered financially stable, a licensee must demonstrate the following ability:

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to pay winning wagers when due;

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to achieve a gross operating profit;

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to pay all local, state, and federal taxes when due;

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to make necessary capital and maintenance expenditures to insure that it has a superior first-class facility; and

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to pay, exchange, refinance or extend debts which will mature and become due and payable during the license term.

In the event a licensee fails to demonstrate financial stability, the NJCCC may take such action as it deems necessary to fulfill the purposes of the Casino Control Act and protect the public interest, including:

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issuing conditional license approvals or determinations;

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establishing an appropriate cure period;

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imposing reporting requirements;

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placing restrictions on the transfer of cash or the assumption of liability;

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requiring reasonable reserves or trust accounts;

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denying licensure; or

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appointing a conservator.

Pursuant to the Casino Control Act, NJCCC regulations and precedent, no entity may hold a casino license unless:

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each officer, director, principal employee, person who directly or indirectly holds any beneficial interest or ownership in the licensee;

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each person who in the opinion of the NJCCC has the ability to control or elect a majority of the board of directors of the licensee (other than a banking or other licensed lending institution which makes a loan or holds a mortgage or other loan acquired in the ordinary course of business); and

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any lender, whom the NJCCC may consider appropriate, obtains and maintains qualification approval from the NJCCC. Qualification approval means qualification requirements as a casino key employee, as described below.

An entity qualifier or intermediary or holding company is required to register with the NJCCC and meet the same basic standards for approval as a casino licensee; provided, however, that the NJCCC, with the concurrence of the Director of the NJDGE, may waive compliance by a publicly-traded corporate holding company as to any officer, director, lender, underwriter, agent or employee thereof, or person directly or indirectly holding a beneficial interest or ownership of the securities of such company, where the NJCCC and the Director of the NJDGE are satisfied that such persons are not significantly involved in the activities of the corporate licensee, and in the case of security holders, do not have the ability to control the publicly-traded corporation or elect one or more of its directors.

The NJCCC may require all financial backers, investors, mortgagors, bond holders and holders of notes or other evidence of indebtedness, either in effect or proposed, which bears any relation to the casino project, publicly-traded securities of an entity which holds a casino license or is an entity qualifier, subsidiary, or holding company of a casino licensee (a Regulated Company), to qualify as financial sources.

An Institutional Investor is defined by the Casino Control Act as any:

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retirement fund administered by a public agency for the exclusive benefit of federal, state, or local public employees;

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investment company registered under the Investment Company Act of 1940;

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collective investment trust organized by banks under Part Nine of the Rules of the Comptroller of the Currency;

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closed end investment trust;

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chartered or licensed life insurance company or property and casualty insurance company;

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banking and other chartered or licensed lending institution;

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investment advisor registered under the Investment Advisers Act of 1940; and

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such other persons as the NJCCC may determine for reasons consistent with the policies of the Casino Control Act.

An Institutional Investor is granted a waiver by the NJCCC from financial source or other qualification requirements applicable to a holder of publicly-traded securities, in the absence of a prima facie showing by the NJDGE that there is any cause to believe that the Institutional Investor may be found unqualified, on the basis of NJCCC findings that:

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its holdings were purchased for investment purposes only and, upon request by the NJCCC, it files a certified statement to the effect that is has no intention of influencing or affecting the affairs of the issuer, the casino licensee or its holding or intermediary companies; provided, however, that the Institutional Investor will be permitted to vote on matters put to the vote of the outstanding security holders; and

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if the securities are debt securities of a casino licensee’s holding or intermediary companies or another subsidiary company of the casino licensee’s holding or intermediary companies which is related in any way to the financing of the casino licensee and represent either:

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20% or less of the total outstanding debt of the company; or

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50% or less of any issue of outstanding debt of the company;

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the securities are under 10% of the equity securities of a casino licensee’s holding or intermediary companies; or

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if the securities so held exceed such percentages, upon a showing of good cause. The NJCCC may grant a waiver of qualification to an Institutional Investor holding a higher percentage of such securities upon a showing of good cause and if the conditions specified above are met.

Generally, the NJCCC requires each institutional holder seeking waiver of qualification to execute a certification to the effect that:

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the holder has reviewed the definition of Institutional Investor under the Casino Control Act and believes that it meets the definition of Institutional Investor;

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the securities are those of a publicly-traded corporation;

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the holder purchased the securities for investment purposes only and holds them in the ordinary course of business;

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the holder has no involvement in the business activities of, and no intention of influencing or affecting the affairs of the issuer, the casino licensee, or any affiliate; and

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if the holder subsequently determines to influence or affect the affairs of the issuer, the casino licensee or any affiliate, will provide not less than 30 days’ prior notice of such intent and will file with the NJCCC an application for qualification before taking any such action.

If an Institutional Investor changes its investment intent, or if the NJCCC finds reasonable cause to believe that it may be found unqualified, the Institutional Investor may take no action with respect to the security holdings, other than to divest itself of such holdings, until it has applied for interim casino authorization and has executed a trust agreement pursuant to such an application.

The Casino Control Act imposes certain restrictions upon the issuance, ownership, and transfer of securities of a Regulated Company, and defines the term “security” to include instruments which evidence a direct or indirect beneficial ownership or creditor interest in a Regulated Company including, but not limited to, mortgages, debentures, security agreements, notes and warrants.

If the NJCCC finds that a holder of such securities is not qualified under the Casino Control Act, it has the right to take any remedial action it may deem appropriate, including the right to force divestiture by such disqualified holder of such securities. In the event that certain disqualified holders fail to divest themselves of such securities, the NJCCC has the power to revoke or suspend the casino license affiliated with the Regulated Company which issued the securities. If a holder is found unqualified, it is unlawful for the holder:

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to exercise, directly or through any trustee or nominee, any right conferred by such securities; or

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to receive any dividends or interest upon any such securities or any remuneration, in any form, from its affiliated casino licensee for services rendered or otherwise.

With respect to non-publicly-traded securities, the Casino Control Act and NJCCC regulations require that the corporate charter or partnership agreement of a Regulated Company establish:

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a right in the NJCCC of prior approval with regard to transfers of securities, shares and other interests; and

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an absolute right in the Regulated Company to repurchase at the market price or the purchase price, whichever is the lesser, any such security, share, or other interest in the event that the NJCCC disapproves a transfer.

With respect to publicly-traded securities, such corporate charter or partnership agreement is required to establish that any such securities of the entity are held subject to the condition that, if a holder thereof is found to be disqualified by the NJCCC, such holder shall dispose of such securities.

Whenever any person enters into a contract to transfer any property which relates to an on-going casino operation, including a security of the casino licensee or a holding or intermediary company or entity qualifier, under circumstances which would require that the transferee obtain licensure or be qualified under the Casino Control Act, and that person is not already licensed or qualified, the transferee is required to apply for interim authorization. Furthermore, the closing or settlement date in the contract may not be earlier than the 121st day after the submission of a complete application for licensure or qualification together with a fully executed trust agreement in a form approved by the NJCCC. If, after the report of the NJDGE and a hearing by the NJCCC, the NJCCC grants interim authorization, the property will be subject to a trust. If the NJCCC denies interim authorization, the contract may not close or settle until the NJCCC makes a determination on the qualifications of the applicant. If the NJCCC denies qualification, the contract will be terminated for all purposes, and there will be no liability on the part of the transferor.

If, as the result of a transfer of publicly-traded securities of a Regulated Company or a financing entity of a Regulated Company, any person is required to qualify under the Casino Control Act, that person is required to file an application for licensure or qualification within 30 days after the NJCCC determines that qualification is required or declines to waive qualification.

The application must include a fully executed trust agreement in a form approved by the NJCCC, or in the alternative, within 120 days after the NJCCC determines that qualification is required, the person whose qualification is required must divest such securities as the NJCCC may require in order to remove the need to qualify.

The NJCCC may grant interim casino authorization where it finds by clear and convincing evidence that:

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statements of compliance have been issued pursuant to the Casino Control Act;

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the casino hotel is an approved hotel in accordance with the Casino Control Act;

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the trustee satisfies qualification criteria applicable to casino key employees, except for residency; and

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interim operation will best serve the interests of the public.

When the NJCCC finds the applicant qualified, the trust will terminate. If the NJCCC denies qualification to a person who has received interim casino authorization, the trustee is required to endeavor, and is authorized, to sell, assign, convey, or otherwise dispose of the property subject to the trust to such persons who are licensed or qualified or shall themselves obtain interim casino authorization.

Where a holder of publicly-traded securities is required, in applying for qualification as a financial source or qualifier, to transfer such securities to a trust in application for interim casino authorization and the NJCCC thereafter orders that the trust become operative:

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during the time the trust is operative, the holder may not participate in the earnings of the casino hotel or receive any return on its investment or debt security holdings; and

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after disposition, if any, of the securities by the trustee, proceeds distributed to the unqualified holder may not exceed the lower of their actual cost to the unqualified holder or their value calculated as if the investment had been made on the date the trust became operative.

The NJCCC may permit a licensee to increase its casino space if the licensee agrees to add a prescribed number of qualifying sleeping units within two years after the commencement of gaming operations in the additional casino space. However, if the casino licensee does not fulfill such agreement due to conditions within its control, the licensee will be required to close the additional casino space, or any portion of thereof that the NJCCC determines should be closed.

The NJCCC is authorized to establish annual fees for the renewal of casino licenses. The renewal fee is based upon the cost of maintaining control and regulatory activities prescribed by the Casino Control Act, and may not be less than $100,000

for a one-year casino license nor less than $200,000 for a four-year casino license. Additionally, casino licenses are subject to potential assessments to fund any annual operating deficits incurred by the NJCCC or the NJDGE. There is also an annual license fee of $500 for each slot machine maintained for use or in use in any casino. Additionally, each casino licensee is also required to pay an annual tax of 8% on its gross casino revenues. Finally, commencing in state fiscal years 2004 through 2006, a tax at the rate of 7.5% has been imposed on the adjusted net income of a casino licensee.

Each party to an agreement for the management of a casino is required to hold a casino license, and the party who is to manage the casino must own at least 10% of all the outstanding equity securities of the casino licensee. Such an agreement shall provide for:

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the complete management of the casino;

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the sole and unrestricted power to direct the casino operations; and

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a term long enough to ensure the reasonable continuity, stability, independence and management of the casino.

An investment alternative tax imposed on the gross casino revenues of each licensee in the amount of 2.5% is due and payable on the last day of April following the end of the calendar year. A licensee is obligated to pay the investment alternative tax for a period of 30 years. This investment alternative tax may be offset by investment tax credits equal to 1.25% of gross gaming revenue, which are obtained by purchasing bonds issued by, or investing in housing or other development projects approved by, the Casino Reinvestment Development Authority.

If, at any time, it is determined that a Regulated Company has violated the Casino Control Act, or that any such entity cannot meet the qualification requirements of the Casino Control Act, such entity could be subject to fines or the suspension or revocation of its license or qualification. If a Regulated Company’s license is suspended for a period in excess of 120 days or revoked, or upon the failure or refusal to renew a casino license, the NJCCC could appoint a conservator to operate or dispose of such entity’s casino hotel facilities. The conservator would be required to act under the direct supervision of the NJCCC and would be charged with the duty of conserving, preserving and, if permitted, continuing the operation of such casino hotel. During the period of true conservatorship, a former or suspended casino licensee is entitled to a fair rate of return out of net earnings, if any, on the property retained by the conservator. The NJCCC may also discontinue any conservatorship action and direct the conservator to take such steps as are necessary to affect an orderly transfer of the property of a former or suspended casino licensee.

Casino employees are subject to more stringent requirements than non-casino employees and must meet applicable standards pertaining to financial stability, responsibility, good character, honesty, integrity and New Jersey residency. These requirements have resulted in significant competition among Atlantic City casino operators for the services of qualified employees.

Casinos must follow certain procedures which are outlined in the Casino Control Act when granting gaming credit and recording counter checks which have been exchanged, redeemed or consolidated. Gaming debts arising in Atlantic City in accordance with applicable regulations are enforceable in the courts of the State of New Jersey.

Louisiana

In the State of Louisiana, the Company, through wholly owned subsidiaries, owns and operates three gaming properties: Treasure Chest Casino in Kenner, Delta Downs Racetrack, Casino & Hotel in Vinton and Sam’s Town Hotel and Casino in Shreveport. The operation and management of riverboat casinos, slot machine operations at certain racetracks and live racing facilities in Louisiana are subject to extensive state regulation. The Louisiana Riverboat Economic Development and Gaming Control Act, or the Riverboat Act, became effective on July 19, 1991. The Louisiana Pari-Mutuel Live Racing Facility Economic Redevelopment and Gaming Control Act, or the Slots Act, became effective on July 9, 1997. The statutory scheme regulating live and off-track betting, or the Horse Racing Act, has been in existence for decades.

The Riverboat Act states, among other things, that certain of the policies of the State of Louisiana are:

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to develop a historic riverboat industry that will assist in the growth of the tourism market;

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to license and supervise the riverboat industry from the period of construction through actual operation;

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to regulate the operators, manufacturers, suppliers and distributors of gaming devices; and

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to license all entities involved in the riverboat gaming industry.

The Slots Act states, among other things, that certain policies of the State of Louisiana are:

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to revitalize and rehabilitate pari-mutuel racing facilities through the allowance of slot machine operations at certain racetracks; and

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to regulate and license owners of such facilities.

The Horse Racing Act states, among other things, that certain policies of the State of Louisiana are:

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to encourage the development of horse racing with pari-mutuel wagering on a high plane;

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to encourage the development and ownership of race horses;

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to regulate the business of racing horses and to provide the orderly conduct of racing;

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to provide financial assistance to encourage the business of racing horses; and

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to provide a program for the regulation, ownership, possession, licensing, keeping, breeding and inoculation of horses.

Both the Riverboat Act and the Slots Act make it clear, however, that no holder of a license or permit possesses any vested interest in such license or permit and that the license or permit may be revoked at any time.

In a special session held in April 1996, the Louisiana legislature passed the Louisiana Gaming Control Act, or the Gaming Control Act, which created the Louisiana Gaming Control Board, or the Gaming Control Board. Pursuant to the Gaming Control Act, all of the regulatory authority, control and jurisdiction of licensing for both riverboats and slot facilities was transferred to the Gaming Control Board. The Gaming Control Board came into existence on May 1, 1996 and is made up of nine members and two ex-officio members (the Secretary of Revenue and Taxation and the superintendent of Louisiana State Police). It is domiciled in Baton Rouge and regulates riverboat gaming, the land-based casino in New Orleans, racetrack slot facilities and video poker. The Attorney General acts as legal counsel to the Gaming Control Board. Any material alteration in the method whereby riverboat gaming or slot facilities is regulated in the State of Louisiana could have an adverse effect on the operations of the Treasure Chest, Delta Downs and Sam’s Town Shreveport.

Riverboats

The Louisiana legislature also passed legislation requiring each parish (county) where riverboat gaming is currently authorized to hold an election in order for the voters to decide whether riverboat gaming will remain legal in that parish. Treasure Chest is located in Jefferson Parish, Louisiana. Jefferson Parish approved riverboat gaming at a special election held on November 6, 1996. Sam’s Town Shreveport is located in Caddo Parish, Louisiana which approved riverboat gaming at the special election held on November 6, 1996.

The Riverboat Act approved the conducting of gaming activities on a riverboat, in accordance with the Riverboat Act, on twelve separate waterways in Louisiana. The Riverboat Act allows the Gaming Control Board to issue up to fifteen licenses to operate riverboat gaming projects within the state, with no more than six in any one parish. There are presently fifteen licenses issued and twelve riverboats operating currently. Three riverboats are not operational due to recent storms. The Belle of New Orleans on Lake Pontchartrain is not operational due to Hurricane Katrina. Both Harrah’s riverboats in Lake Charles are not operational due to Hurricane Rita. Pursuant to the Riverboat Act and the regulations promulgated thereunder, each applicant which desired to operate a riverboat casino in Louisiana was required to file a number of separate applications for a Certificate of Preliminary Approval, all necessary gaming licenses and a Certificate of Final Approval. No final Certificate was issued without all necessary and proper certificates from all regulatory agencies, including the U.S. Coast Guard, the U.S. Army Corps of Engineers, local port authorities and local levee authorities.

Both the Treasure Chest project and the Sam’s Town Shreveport project applications for a Certificate of Preliminary Approval were properly filed and each received a Certificate of Preliminary Approval in 1993 (at that time Sam’s Town Shreveport was owned by Harrah’s Entertainment) and both received their original license in 1994. These licenses have been renewed and are subject to certain general operational conditions and are subject to revocation pursuant to applicable laws and regulations.

We and certain of our directors and officers and certain of our key personnel were found suitable to operate riverboat gaming in the State of Louisiana. New directors, officers and certain key employees associated with gaming must also be found suitable by the Gaming Control Board prior to working in gaming-related areas. These approvals may be immediately revoked for a number of causes as determined by the Gaming Control Board. The Gaming Control Board may deny any application for a certificate, permit or license for any cause found to be reasonable by the Gaming Control Board. The Gaming Control Board has the authority to require us to sever our relationships with any persons for any cause deemed reasonable by the Gaming Control Board or for the failure of that person to file necessary applications with the Gaming Control Board.

The current Louisiana riverboat gaming license of Treasure Chest was valid for five years and was to expire on May 18, 2005. An application for renewal was filed and, in January 2005, the renewal was approved by the Gaming Control Board for an additional five-year period. The Sam’s Town Shreveport license was to expire in March of 2005 and in January 2005, the renewal was approved by the Gaming Control Board for an additional five-year period.

The Company is involved in legal proceedings with an unsuccessful applicant for the original Treasure Chest riverboat license in Louisiana.

Alvin C. Copeland, the sole shareholder of an unsuccessful applicant for a riverboat license at the location of our Treasure Chest Casino, has made several attempts to have the Treasure Chest license revoked and awarded to his company. In 1999 and 2000, Copeland unsuccessfully opposed the renewal of the Treasure Chest license and has brought two separate legal actions against us. In November 1993, Copeland objected to the relocation of Treasure Chest Casino from the Mississippi River to its current site on Lake Pontchartrain. The predecessor to the Louisiana Gaming Control Board allowed the relocation over Copeland’s objection. Copeland then filed an appeal of the agency’s decision with the Nineteenth Judicial District Court. Through a number of amendments to the appeal, Copeland improperly attempted to transform the appeal into a direct action suit and sought the revocation of the Treasure Chest license. Treasure Chest intervened in the matter in order to protect its interests. The appeal/suit, as it related to Treasure Chest Casino, was dismissed by the District Court and that dismissal was upheld on appeal by the First Circuit Court of Appeal. Additionally, in 1999, Copeland filed a direct action against Treasure Chest and certain other parties seeking the revocation of Treasure Chest’s license, an award of the license to him and monetary damages. The suit was dismissed by the trial court citing that Copeland failed to state a claim on which relief could be granted. The dismissal was appealed by Copeland to the First Circuit Court of Appeal. On June 21, 2002, the First Circuit Court of Appeal reversed the trial court’s decision and remanded the matter to the trial court. On January 14, 2003, we filed a motion to dismiss the matter and that motion was denied. We currently are vigorously defending the lawsuit.

If this matter ultimately results in the Treasure Chest license being revoked, it would have a significant adverse effect on our business, financial condition and results of operations.

Annual fees are currently charged to each riverboat project as follows:

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$50,000 per year for the first year and $100,000 for each year thereafter; and

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21.5% of net gaming proceeds.

Additionally, each local government may charge a boarding fee or admissions tax. Treasure Chest pays the City of Kenner a fee of $2.50 per passenger boarding the vessel. Sam’s Town Shreveport pays admission taxes of 4.75% of adjusted gross receipts to various local governmental bodies. Any increase in these fees or taxes could have a material and detrimental effect on the operations of Treasure Chest and Sam’s Town.

Slot Facilities

The Slots Act allows for three separate “eligible facilities” to operate slot machines at live horse racing pari-mutuel facilities (one each in Calcasieu Parish, St. Landry Parish and Bossier Parish). Each facility may, upon proper licensure, operate slot machines in up to 15,000 square feet of gaming space.

On October 30, 2001, the Louisiana Gaming Control Board granted us a gaming license to operate slot machines at Delta Downs. However, suits by competitors, Isle of Capri and Harrah’s of Lake Charles delayed the opening of the facility. These suits have since been dismissed with prejudice in favor of Delta Downs.

Gaming licenses and approvals are issued by the Gaming Control Board, and are subject to revocation for any cause deemed reasonable by the Gaming Control Board. Our operation of slot machines at Delta Downs is subject to strict regulation by the Gaming Control Board and the Louisiana State Police. Extensive regulations concerning accounting, internal controls, underage patrons and other aspects of slot machine operations have been promulgated by the Gaming Control Board. Failure to adhere to these rules and regulations can result in substantial fines and the suspension or revocation of the license to conduct slot machine operations. Any failure to comply with the Louisiana Gaming Control Board’s rules or regulations in the future could ultimately result in the revocation of our license to operate slot machines at Delta Downs.

Annual Fees and taxes currently charged Delta Downs under the Slots Acts are as follows:

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15% of the annual net slot machine proceeds are dedicated to supplement purses of the live horse race meets held at the facility;

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3% of the annual net slot machine proceeds dedicated to horse breeders associations;

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18.5% taxable net slot machine proceeds are paid to the state;

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$0.25 per person attending live racing and off-track betting facilities during those periods when it is conducting race meetings, only on those days when there are scheduled live races at its racetrack (currently Thursdays through Sundays) from the hours of 6:00 p.m. until 12:00 a.m. and during those periods when it is not conducting live racing (i.e., between race meetings) only on Thursdays through Mondays from the hours of 12:00 p.m. until 12:00 a.m.

Gaming Control Board

At any time, the Gaming Control Board may investigate and require the finding of suitability of any stockholder, beneficial stockholder, officer or director of Boyd Gaming or of any of its subsidiaries. The Gaming Control Board requires all holders of more than a 5% interest in the license holder to submit to suitability requirements. Additionally, if a shareholder who must be found suitable is a corporate or partnership entity, then the shareholders or partners of the entity must also submit to investigation. The sale or transfer of more than a 5% interest in any riverboat or slot project is subject to Gaming Control Board approval.

Pursuant to the regulations promulgated by the Gaming Control Board, all licensees are required to inform the Gaming Control Board of all debt, credit, financing and loan transactions, including the identity of debt holders. Our subsidiaries, Treasure Chest Casino, L.L.C., Boyd Racing, L.L.C., and Red River Entertainment Partnership (Sam’s Town Shreveport) are licensees and are subject to these regulations. In addition, the Gaming Control Board, in its sole discretion, may require the holders of such debt securities to file applications and obtain suitability certificates from the Gaming Control Board. Although the Riverboat Act and the Slots Act do not specifically require debt holders to be licensed or to be found suitable, the Gaming Control Board retains the discretion to investigate and require that any holders of debt securities be found suitable under the Riverboat Act or the Slots Act. Additionally, if the Gaming Control Board finds that any holder exercises a material influence over the gaming operations, a suitability certificate will be required. If the Gaming Control Board determines that a person is unsuitable to own such a security or to hold such an indebtedness, the Gaming Control Board may propose any action which it determines proper and necessary to protect the public interest, including the suspension or revocation of the license. The Gaming Control Board may also, under the penalty of revocation of license, issue a condition of disqualification naming the person(s) and declaring that such person(s) may not:

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receive dividends or interest in debt or securities;

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exercise directly or through a nominee a right conferred by the securities or indebtedness;

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receive any remuneration from the licensee;

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receive any economic benefit from the licensee; or

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continue in an ownership or economic interest in a licensee or remain as a manager, director or partner of a licensee.

Any violation of the Riverboat Act, the Slots Act or the rules promulgated by the Gaming Control Board could result in substantial fines, penalties (including a revocation of the license) and criminal actions. Additionally, all licenses and permits issued by the Gaming Control Board are revocable privileges and may be revoked at any time by the Gaming Control Board.

Live Horse Racing

Pari-mutuel betting and the conducting of live horse race meets in Louisiana are strictly regulated by the Louisiana State Racing Commission, which we refer to as the Racing Commission. The Racing Commission is comprised of ten members and is domiciled in New Orleans, Louisiana. In order to be approved to conduct a live race meet and to operate pari-mutuel wagering (including off-track betting), an applicant must show, among other things:

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racing experience;

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financial qualifications;

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moral and financial qualifications of applicant and applicant’s partners, officers and officials;

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the expected effect on the breeding and horse industry;

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the expected effect on the State’s economy; and

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the hope of financial success.

In May 2001, a subsidiary of Boyd Gaming applied for and received approval from the Racing Commission to buy Delta Downs. Approval was also granted to conduct live race meets and to operate pari-mutuel wagering at the Delta Downs facility and to conduct off-track wagering at Delta Downs. The term of these licenses is ten years.

In a special session of the Louisiana Legislature, held in October of 2005, HB 56 and HB 78 were passed relative to the conducting of slot operations at an eligible live racing facility in Louisiana. Prior to the passage of the bills, our Delta Downs

race track was required to hold no less than eighty days of live racing within a consecutive twenty-week period. HB 56 and HB 78 now allow the Louisiana State Racing Commission to make certain exceptions for facilities which are affected by natural disasters, such as Hurricane Rita. Due to the property damage done by Hurricane Rita, it was not possible to conduct the requisite days of live racing at Delta Downs and Delta Downs petitioned the Commission for an exemption from the requirement. On January 6, 2006, at a meeting of the Commission, that exemption was granted. Delta Downs now plans to resume live racing in April 2006.

Any alteration in the regulation of riverboat casinos, slot machine operations at certain racetracks, or live racing facilities could have a material adverse effect on the operations of Treasure Chest, Delta Downs, or Sam’s Town Shreveport.

Mississippi

The ownership and operation of casino gaming facilities in the State of Mississippi, such as those at Sam’s Town Tunica, are subject to extensive state and local regulation, but primarily the licensing and regulatory control of the Mississippi Gaming Commission, or the Mississippi Commission.

The Mississippi Gaming Control Act, or the Mississippi Act, is similar to the Nevada Gaming Control Act. The Mississippi Commission has adopted regulations that are also similar in many respects to the Nevada gaming regulations.

The laws, regulations and supervisory procedures of the Mississippi Commission are based upon declarations of public policy that are concerned with, among other things:

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the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;

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the establishment and maintenance of responsible accounting practices and procedures;

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the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing for reliable record keeping and requiring the filing of periodic reports with the Mississippi Commission;

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the prevention of cheating and fraudulent practices;

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providing a source of state and local revenues through taxation and licensing fees; and

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ensuring that gaming licensees, to the extent practicable, employ Mississippi residents.

The regulations are subject to amendment and interpretation by the Mississippi Commission. We believe that our compliance with the licensing procedures and regulatory requirements of the Mississippi Commission will not affect the marketability of our securities. Changes in Mississippi laws or regulations may limit or otherwise materially affect the types of gaming that may be conducted and such changes, if enacted, could have an adverse effect on us and our business, financial condition and results of operations.

The Mississippi Act provides for legalized gaming in each of the fourteen counties that border the Gulf Coast or the Mississippi River, but only if the voters in the county have not voted to prohibit gaming in that county. In recent years, certain anti-gaming groups proposed for adoption through the initiative and referendum process certain amendments to the Mississippi Constitution which would prohibit gaming in the state. The proposals were declared illegal by Mississippi courts on constitutional and procedural grounds. The latest ruling was appealed to the Mississippi Supreme Court, which affirmed the decision of the lower court. If another such proposal were to be offered and if a sufficient number of signatures were to be gathered to place a legal initiative on the ballot, it is possible for the voters of Mississippi to consider such a proposal. While we are unable to predict whether such an initiative will appear on a future ballot or the likelihood of such an initiative being approved by the voters, if such an initiative were passed and gaming were prohibited in Mississippi, it would have a significant adverse impact on us and our business, financial condition, and results of operations.

Currently, gaming is permissible in nine of the fourteen eligible counties in the state and gaming operations have commenced in seven counties. Traditionally, Mississippi law required gaming vessels to be located on the Mississippi River or on navigable waters in eligible counties along the Mississippi River, or in the waters lying south of the counties along the Mississippi Gulf Coast. Recently, however, the Mississippi Legislature amended the Mississippi Act to permit licensees in the three counties along the Gulf Coast to establish land-based casino operations provided the gaming areas do not extend more than 800 feet beyond the nineteen-year mean high water line, except in Harrison County where the 800-foot limit can be extended as far as the southern boundary of Highway 90.

Our Sam’s Town Tunica casino is located on barges situated in a specially constructed basin several hundred feet inland from the Mississippi River. In the past, whether basins such as the one in which our casino barges are located constituted “navigable waters” suitable for gaming under Mississippi law was a controversial issue. The Mississippi Attorney

General issued an opinion in July 1993 addressing legal locations for gaming vessels under the Mississippi Act and the Mississippi Commission later approved the location of the casino barges on the Sam’s Town Tunica site as legal under the opinion of the Mississippi Attorney General. Although a competitor requested the Mississippi Commission to review and reconsider its decision, the Mississippi Commission declined to do so and since that date has issued or renewed licenses to Sam’s Town Tunica on several separate occasions. Continued licensing of Sam’s Town Tunica requires demonstration of compliance with the Mississippi Attorney General’s “navigable waters” opinion, a requirement which has been imposed on many Tunica County licensees. We believe that Sam’s Town Tunica is in compliance with the Mississippi Act and the Mississippi Attorney General’s “navigable waters” opinion. However, no assurance can be given that a court ultimately would conclude that our casino barges at Sam’s Town Tunica are located on navigable waters within the meaning of Mississippi law. If the basin in which our Sam’s Town Tunica casino barges presently are located were not deemed navigable waters within the meaning of Mississippi law, such a decision would have a significant adverse effect on us and our business, financial condition and results of operations.

The Mississippi Act permits unlimited stakes gaming on a 24-hour basis and does not restrict the percentage of space which may be utilized for gaming. The Mississippi Act permits substantially all traditional casino games and gaming devices.

We and any subsidiary of ours that operates a casino in Mississippi, which we refer to as a Gaming Subsidiary, are subject to the licensing and regulatory control of the Mississippi Commission. We are registered under the Mississippi Act as a publicly traded corporation, or a Registered Corporation, of Boyd Tunica, Inc., the owner and operator of Sam’s Town Tunica, a licensee of the Mississippi Commission. As a Registered Corporation, we are required periodically to submit detailed financial and operating reports to the Mississippi Commission and furnish any other information the Mississippi Commission may require. If we are unable to continue to satisfy the registration requirements of the Mississippi Act, we and any Gaming Subsidiary cannot own or operate gaming facilities in Mississippi. No person may become a stockholder of or receive any percentage of profits from a licensed subsidiary of a Registered Corporation without first obtaining licenses and approvals from the Mississippi Commission. We have obtained such approvals in connection with the licensing of Sam’s Town Tunica.

A Gaming Subsidiary must maintain a gaming license from the Mississippi Commission to operate a casino in Mississippi. Such licenses are issued by the Mississippi Commission subject to certain conditions, including continued compliance with all applicable state laws and regulations. There are no limitations on the number of gaming licenses that may be issued in Mississippi. Gaming licenses require the payment of periodic fees and taxes, are not transferable, are issued for a three-year period (and may be continued for two additional three-year periods) and must be renewed periodically thereafter. Sam’s Town Tunica’s current gaming license expires in December of 2007.

Certain of our officers and employees and the officers, directors and certain key employees of Sam’s Town Tunica must be found suitable or approved by the Mississippi Commission. We believe that we have obtained, applied for or are in the process of applying for all necessary findings of suitability with respect to Boyd Gaming or Sam’s Town Tunica, although the Mississippi Commission, in its discretion, may require additional persons to file applications for findings of suitability. In addition, any person having a material relationship or involvement with us may be required to be found suitable, in which case those persons must pay the costs and fees associated with such investigation. The Mississippi Commission may deny an application for a finding of suitability for any cause that it deems reasonable. Changes in certain licensed positions must be reported to the Mississippi Commission. In addition to its authority to deny an application for a finding of suitability, the Mississippi Commission has jurisdiction to disapprove a change in any person’s corporate position or title and such changes must be reported to the Mississippi Commission. The Mississippi Commission has the power to require us and our Mississippi Gaming Subsidiary to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. Determination of suitability or questions pertaining to licensing are not subject to judicial review in Mississippi.

At any time, the Mississippi Commission has the power to investigate and require the finding of suitability of any record or beneficial stockholder of Boyd Gaming. The Mississippi Act requires any person who acquires more than five percent of any class of voting securities of a Registered Corporation, as reported to the Securities and Exchange Commission, or SEC, to report the acquisition to the Mississippi Commission, and such person may be required to be found suitable. Also, any person who becomes a beneficial owner of more than ten percent of any class of voting securities of a Registered Corporation, as reported to the SEC, must apply for a finding of suitability by the Mississippi Commission and must pay the costs and fees that the Mississippi Commission incurs in conducting the investigation. If a stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners.

The Mississippi Commission generally has exercised its discretion to require a finding of suitability of any beneficial owner of more than five percent of any class of voting securities of a Registered Corporation. However, under certain circumstances, an “institutional investor,” as defined in the Mississippi Commission’s regulations, which acquires more than ten percent, but not more than fifteen percent, of the voting securities of a Registered Corporation may apply to the Mississippi Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Registered Corporation, any change in the corporate charter, bylaws, management, policies or operations, or any of its gaming affiliates, or any other action which the Mississippi Commission finds to be inconsistent with holding the voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes include:

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voting on all matters voted on by stockholders;

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making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in management, policies or operations; and

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such other activities as the Mississippi Commission may determine to be consistent with such investment intent.

Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Mississippi Commission may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of our securities beyond such time as the Mississippi Commission prescribes, may be guilty of a misdemeanor. We may be subject to disciplinary action if, after receiving notice that a person is unsuitable to be a stockholder or to have any other relationship with us or any Gaming Subsidiary owned by us, the company involved:

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pays the unsuitable person any dividend or other distribution upon such person’s voting securities;

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recognizes the exercise, directly or indirectly, of any voting rights conferred by securities held by the unsuitable person;

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pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or

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fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value.

We may be required to disclose to the Mississippi Commission, upon request, the identities of the holders of our debt or other securities. In addition, under the Mississippi Act the Mississippi Commission, in its discretion, may require the holder of any debt security of a Registered Corporation to file an application, be investigated and be found suitable to own the debt security if the Mississippi Commission has reason to believe that the ownership of the debt security by the holder would be inconsistent with the declared policies of the State.

Although the Mississippi Commission generally does not require the individual holders of obligations such as notes to be investigated and found suitable, the Mississippi Commission retains the discretion to do so for any reason, including but not limited to, a default, or where the holder of the debt instruments exercises a material influence over the gaming operations of the entity in its question. Any holder of debt securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Commission in connection with such an investigation.

If the Mississippi Commission determines that a person is unsuitable to own a debt security, then the Registered Corporation may be sanctioned, including the loss of its approvals, if without the prior approval of the Mississippi Commission, it:

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pays to the unsuitable person any dividend, interest, or any distribution whatsoever;

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recognizes any voting right by the unsuitable person in connection with those securities;

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pays the unsuitable person remuneration in any form; or

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makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

Each Mississippi Gaming Subsidiary must maintain in Mississippi a current ledger with respect to the ownership of its equity securities and we must maintain in Mississippi a current list of our stockholders which must reflect the record ownership of each outstanding share of any class of our equity securities. The ledger and stockholder lists must be available for inspection by the Mississippi Commission at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Commission. A failure to

make such disclosure may be grounds for finding the record holder unsuitable. We must also render maximum assistance in determining the identity of the beneficial owner.

The Mississippi Act requires that the certificates representing securities of a Registered Corporation bear a legend indicating that the securities are subject to the Mississippi Act and the regulations of the Mississippi Commission. We have received from the Mississippi Commission a waiver of this legend requirement. The Mississippi Commission has the power to impose additional restrictions on the holders of our securities at any time.

Substantially all material loans, leases, sales of securities and similar financing transactions by a Registered Corporation or a Gaming Subsidiary must be reported to or approved by the Mississippi Commission. A Mississippi Gaming Subsidiary may not make a public offering of its securities but may pledge or mortgage casino facilities. A Registered Corporation may not make a public offering of its securities without the prior approval of the Mississippi Commission if any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi or to retire or extend obligations incurred for those purposes. Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering. We have received a waiver of the prior approval requirement with respect to public offerings and private placements of securities, subject to certain conditions, including the ability of the Mississippi Commission to issue a stop order with respect to any such offering if the staff determines it would be necessary to do so.

Under the regulations of the Mississippi Commission, a Gaming Subsidiary may not guarantee a security issued by an affiliated company pursuant to a public offering, or pledge its assets to secure payment or performance of the obligations evidenced by the security issued by the affiliated company, without the prior approval of the Mississippi Commission. A pledge of the stock of a Gaming Subsidiary and the foreclosure of such a pledge are ineffective without the prior approval of the Mississippi Commission. Moreover, restrictions on the transfer of an equity security issued by a Gaming Subsidiary or its holding companies and agreements not to encumber such securities are ineffective without the prior approval of the Mississippi Commission. We have obtained approvals from the Mississippi Gaming Commission for such guarantees, pledges and restrictions in connection with offerings of securities, subject to certain restrictions, but we must obtain separate prior approvals from the Mississippi Commission for pledges and stock restrictions in connection with certain financing transactions. Moreover, the regulations of the Mississippi Commission require us to file a Loan to Licensees report with the Mississippi Gaming Commission within thirty (30) days following certain financing transactions and the offering of certain debt securities. If the Mississippi Commission were to deem it appropriate, the Mississippi Commission could order such transaction rescinded.

Changes in control of us through merger, consolidation, acquisition of assets, management or consulting agreements or any act or conduct by a person by which he or she obtains control, may not occur without the prior approval of the Mississippi Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Mississippi Commission in a variety of stringent standards prior to assuming control of the Registered Corporation. The Mississippi Commission also may require controlling stockholders, officers, directors, and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.

The Mississippi legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect corporate gaming licensees in Mississippi and Registered Corporations may be injurious to stable and productive corporate gaming. The Mississippi Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Mississippi’s gaming industry and to further Mississippi’s policy to:

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assure the financial stability of corporate gaming operators and their affiliates;

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preserve the beneficial aspects of conducting business in the corporate form; and

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promote a neutral environment for the orderly governance of corporate affairs.

Approvals are, in certain circumstances, required from the Mississippi Commission before a Registered Corporation may make exceptional repurchases of voting securities (such as repurchases which treat holders differently) in excess of the current market price and before a corporate acquisition opposed by management can be consummated. Mississippi’s gaming regulations also require prior approval by the Mississippi Commission of a plan of recapitalization proposed by the Registered Corporation’s board of directors in response to a tender offer made directly to the Registered Corporation’s shareholders for the purpose of acquiring control of the Registered Corporation.

Neither we nor any Gaming Subsidiary may engage in gaming activities in Mississippi while also conducting gaming operations outside of Mississippi without approval of the Mississippi Commission. The Mississippi Commission may require determinations that, among other things, there are means for the Mississippi Commission to have access to information concerning the out-of-state gaming operations of us and our affiliates. We previously have obtained a waiver of foreign gaming approval from the Mississippi Commission for operations in other states in which we conduct gaming operations and will be required to obtain approval or a waiver of such approval from the Mississippi Commission prior to engaging in any additional future gaming operations outside of Mississippi.

If the Mississippi Commission were to determine that we or Sam’s Town Tunica had violated a gaming law or regulation, the Mississippi Commission could limit, condition, suspend or revoke our approvals and the license of Sam’s Town Tunica, subject to compliance with certain statutory and regulatory procedures. In addition, we, Sam’s Town Tunica and the persons involved could be subject to substantial fines for each separate violation. Because of such a violation, the Mississippi Commission could attempt to appoint a supervisor to operate the casino facilities. Limitation, conditioning or suspension of any gaming license or approval or the appointment of a supervisor could (and revocation of any gaming license or approval would) materially adversely affect us and our business, financial condition and results of operations.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Mississippi and to the counties and cities in which a Gaming Subsidiary’s operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually. Gaming taxes are based upon the following:

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a percentage of the gross gaming revenues received by the casino operation;

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the number of gaming devices operated by the casino; or

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the number of table games operated by the casino.

The license fee payable to the State of Mississippi is based upon “gaming receipts” (generally defined as gross receipts less payouts to customers as winnings) and the current maximum tax rate imposed is eight percent of all gaming receipts in excess of $134,000 per month. The foregoing license fees we pay are allowed as a credit against our Mississippi income tax liability for the year paid. The gross revenues fee imposed by Tunica County in which Sam’s Town Tunica is located equals approximately four percent of the gaming receipts.

The Mississippi Commission’s regulations require as a condition of licensure or license renewal that an existing licensed gaming establishment’s plan include adequate parking facilities in close proximity to the casino complex and infrastructure facilities, such as hotels, which amount to at least 100% of the casino cost. The Mississippi Commission’s current infrastructure requirement applies to new casinos or acquisitions of closed casinos. Sam’s Town Tunica was grandfathered under a prior version of that regulation that required the infrastructure investment to equal only 25% of the casino’s cost.

The sale of alcoholic beverages by Sam’s Town Tunica is subject to licensing, control and regulation by both the local jurisdiction and the Alcoholic Beverage Control Division, or ABC, of the Mississippi State Tax Commission. Sam’s Town Tunica is in an area designated as special resort area, which allows Sam’s Town Tunica to serve alcoholic beverages on a 24-hour basis. If the ABC laws are violated, the ABC has the full power to limit, condition, suspend or revoke any license for the serving of alcoholic beverages or to place such licensee on probation with or without conditions. Any such disciplinary action could (and revocation would) have a significant adverse effect upon us and our business, financial condition and results of operations. Certain of our officers and managers at Sam’s Town Tunica must be investigated by the ABC in connection with our liquor permits and changes in certain key positions must be approved by the ABC.

Indiana

The Indiana Riverboat Gaming Act, or the Indiana Act, was passed in 1993 and authorized the issuance of up to eleven Riverboat Owner’s Licenses to be operated from counties that are contiguous to the Ohio River, Lake Michigan and Patoka Lake. Five riverboats operate from counties contiguous to the Ohio River and five operate from counties contiguous to Lake Michigan. Pursuant to legislation adopted in May 2003, the Indiana General Assembly eliminated the Riverboat Owner’s License for a riverboat to be docked in a county contiguous to Patoka Lake. However, the General Assembly authorized the Indiana Gaming Commission to enter into a contract pursuant to which an Operating Agent can operate a riverboat in Orange County, which is contiguous to Patoka Lake, on behalf of the Indiana Gaming Commission. The Indiana Gaming Commission conditionally awarded the contract to Blue Sky Casino, LLC. The Indiana Gaming Commission approved the contract on November 9, 2005.

The Indiana Act and rules promulgated thereunder provide for the strict regulation of the facilities, persons, associations and practices related to gaming operations. The Indiana Act vests the seven member Indiana Gaming Commission with the power and duties of administering, regulating and enforcing riverboat gaming in Indiana. In 2005 the Indiana Act was amended to change the residency requirements of Indiana Gaming Commission members requiring only one member, rather than three, reside in counties contiguous to Lake Michigan and to the Ohio River. The Indiana Gaming Commission’s jurisdiction extends to every person, association, corporation, partnership and trust involved in any riverboat gaming operation located in the State of Indiana.

The Indiana Act requires that the owner of a riverboat gambling operation hold a Riverboat Owner’s License issued by the Indiana Gaming Commission. The applicants for a Riverboat Owner’s License must submit a comprehensive application and the substantial owners and key persons must submit personal disclosure forms. The company, substantial owners and key persons must undergo an exhaustive background investigation prior to the issuance of a Riverboat Owner’s License. A person who owns or will own five percent of a Riverboat Owner’s License must automatically undergo the background investigation. The Indiana Gaming Commission may investigate any person with any level of ownership interest. The Operating Agent of an Orange County riverboat will undergo the same background investigation as a Riverboat Licensee. If the holder of a Riverboat license, the Riverboat Licensee or the Operating Agent is a publicly-traded corporation, its Articles of Incorporation must contain language concerning transfer of ownership, suitability determinations and possible divestiture of ownership if a shareholder is found unsuitable.

A Riverboat Owner’s License and Operating Contract entitle the licensee or the Operating Agent to operate one riverboat. The Indiana Act was amended in May 2003 to allow a person to hold up to one hundred percent of two individual Riverboat Owner’s Licenses. In addition, a transfer fee of two million dollars will be imposed on a Riverboat Licensee who purchases or otherwise acquires a controlling interest in a second Indiana Riverboat Owner’s License.

All riverboats must comply with applicable federal and state laws including, but not limited to, U.S. Coast Guard regulations. Each riverboat must be certified to carry at least five hundred passengers and be at least one hundred fifty feet in length. Those riverboats located in counties contiguous to the Ohio River must replicate historic Indiana steamboat passenger vessels of the nineteenth century. The Indiana Act does not limit the number of gaming positions allowed on each riverboat. The only limitation on the number of permissible patrons allowed is established by the U.S. Coast Guard Certificate of Inspection in the specification of the riverboat’s capacity. In 2005 the Indiana Act was amended to allow the Indiana Gaming Commission to adopt an alternative certification process if the U.S. Coast Guard discontinues issuing Certifications of Inspections to Indiana riverboats.

The Indiana Gaming Commission, after consultation with the Corps, may determine those navigable waterways located in counties contiguous to Lake Michigan or the Ohio River that are suitable for riverboats. If the Corps rescinds approval for the operation of a riverboat gambling facility, the Riverboat Owner’s License issued by the Indiana Gaming Commission is void and the Riverboat Licensee may not commence or must cease conducting gambling operations. Employees whose duties consist of operating or navigating the riverboat must hold the appropriate licenses and a merchant marine document from the U.S. Coast Guard.

The initial Riverboat Owner’s License runs for a period of five years. Thereafter, the license is subject to renewal on an annual basis upon a determination by the Indiana Gaming Commission that it continues to be eligible to hold a Riverboat Owner’s License pursuant to the Indiana Act and rules promulgated thereunder. After the expiration of the initial license, the Riverboat Owner’s License must be renewed annually with each Riverboat Licensee undergoing a complete reinvestigation every three years. The Indiana Gaming Commission reserves the right to investigate Riverboat Licensees at any time it deems necessary. The initial license was issued to Blue Chip Casino, Inc., the predecessor to Blue Chip Casino, LLC, in August of 1997. Blue Chip underwent a reinvestigation in 2005 and its license was renewed. The Blue Chip license remains valid until August 2006. The Operating Contract for an Orange County riverboat is to be valid for a period of twenty years. However, the Operating Agent is to be reinvestigated every three years to determine continued suitability. In addition, the Indiana Gaming Commission has the right to reinvestigate the Operating Agent at any time it deems necessary. Riverboat licensees must apply for and hold all other licenses necessary for the operation of a riverboat gambling operation, including, but not limited to, alcoholic beverage licenses and food preparation licenses.

Neither the Riverboat Owner’s License nor the Operating Contract may be leased, hypothecated or have money borrowed or loaned against it. An ownership interest in a Riverboat Owner’s License or an Operating Contract may only be transferred in accordance with the Indiana Act and rules promulgated thereunder.

The Indiana Act does not limit the amount a patron may bet or lose. Minimum and maximum wagers for each game are set by the Riverboat Licensee or an Operating Agent. Wagering may not be conducted with money or other negotiable currency. No person under the age of 21 is permitted to wager on or be present on a riverboat. Wagers may only be taken from a person present on the riverboat. All electronic gaming devices must pay out between eighty and one hundred percent of the amount wagered. In addition, in May 2003, the Indiana General Assembly adopted legislation authorizing twenty-four

hour operation for all Indiana riverboats upon application to, and approval by, the Indiana Gaming Commission. The Indiana Gaming Commission had previously allowed only twenty-one hour gaming. As a result of the legislative change and upon receipt of the requisite approval, Blue Chip commenced twenty-four hour gaming on August 1, 2003.

Pursuant to legislation adopted in May 2003, the Indiana Gaming Commission adopted rules to establish and implement a voluntary exclusion program that requires, among other things, (1) that persons who participate in the voluntary exclusion program be included on a list of persons excluded from all Indiana riverboats, (2) that persons who participate in the voluntary exclusion program may not seek readmittance to Indiana riverboats, (3) Riverboat Licensees and Operating Agents must make reasonable efforts, as determined by the Indiana Gaming Commission, to cease all direct marketing efforts to a person participating in the voluntary exclusion program, and (4) a Riverboat Licensee or Operating Agent may not cash a check of, or extend credit to, a person participating in the voluntary exclusion program. The voluntary exclusion program does not preclude a Riverboat Licensee or Operating Agent from seeking payment of a debt accrued by a person before entry into the voluntary exclusion program. The Indiana Gaming Commission has commenced the voluntary exclusion program and, as of February 17, 2005, 724 individuals had requested voluntary exclusion from Indiana riverboats.

The Indiana General Assembly amended the Indiana Act in 2002 to allow riverboats to choose between continuing to conduct excursions or operate dockside. The Indiana Gaming Commission authorized riverboats to commence dockside operations on August 1, 2002. Blue Chip opted to operate dockside and commenced dockside operations on August 1, 2002. Pursuant to the legislation, the tax rate was increased from 20% to 22.5% during any time an Indiana riverboat does not operate dockside. For those riverboats that operate dockside, the following graduated tax rate is applicable: (i) 15% of the first $25 million of adjusted gross receipts (“AGR”); (ii) 20% of AGR in excess of $25 million, but not exceeding $50 million; (iii) 25% of AGR in excess of $50 million, but not exceeding $75 million; (iv) 30% of AGR in excess of $75 million, but not exceeding $150 million; and (v) 35% of AGR in excess of $150 million. AGR is based on Indiana’s fiscal year (July 1 of one year through June 30 of the following year). Pursuant to legislation adopted in May 2003, the graduated tax rate will be retroactively applied to each riverboat’s July 2002 AGR even though dockside operations did not commence until August 1, 2002. The Operating Agent in Orange County will pay the wagering tax on the same basis as the other ten Indiana riverboats. The Indiana Act requires that Riverboat Licensees pay a $3.00 admission tax for each person. A riverboat that opts to continue excursions pays the admission tax on a per excursion basis while a riverboat that operates dockside pays the admission tax on a per entry basis. The Orange County Operating Agent must pay a $4.00 admission tax for each person that enters the riverboat. The Indiana Act provides for the suspension or revocation of a license whose owner does not timely submit the wagering or admission tax.

Riverboats licensed by the Indiana Gaming Commission are assessed as real property for property tax purposes and, thus, are taxed at rates determined by local taxing authorities. All Indiana state excise taxes, use taxes and gross retail taxes apply to sales made on a riverboat. In 2004 the Indiana Supreme Court ruled that vessels purchased out of the State of Indiana and brought into the State of Indiana would be subject to Indiana sales tax. Additionally, the Supreme Court declined to hear an Indiana Tax Court case that determined wagering tax payments made by a riverboat could not be deducted from the riverboat’s adjusted gross income.

The Indiana Gaming Commission is authorized to conduct investigations into gambling games, the maintenance of equipment, and violations of the Indiana Act as it deems necessary. The Indiana Gaming Commission may subject a Riverboat Licensee and an Operating Agent to fines, suspension or revocation of its license or Operating Contract for any conduct that violates the Indiana Act, rules promulgated thereunder or that constitutes a fraudulent act.

A Riverboat Licensee and Operating Agent must post a bond during the period of the initial five-year license in an amount the Indiana Gaming Commission deems will secure the obligations of a Riverboat Licensee for infrastructure and other facilities associated with the riverboat gambling operation and that may be used as payment to the local community, the state and other aggrieved parties. The bond must be payable to the Indiana Gaming Commission as obligee. The initial bond posted by Blue Chip has been reduced as Blue Chip met its obligations to the local community and the State. As a condition of relicensure, Blue Chip must maintain a bond in the amount of $1 million to meet general legal and financial obligations to the local community and the State. The Riverboat Licensee and the Operating Agent must carry insurance in types and amounts as required by the Indiana Gaming Commission.

By rule promulgated by the Indiana Gaming Commission, a Riverboat Licensee may not enter into or perform any contract or transaction in which it transfers or receives consideration that is not commercially reasonable or that does not reflect the fair market value of goods and services rendered or received. All contracts are subject to disapproval by the Indiana Gaming Commission and contracts should reflect the potential for disapproval.

The Indiana Act places special emphasis on minority and women business enterprise participation in the riverboat industry. Riverboat Licensees and Operating Agents must establish goals of expending ten percent of the total dollars spent on the majority of goods and services with minority business enterprises and five percent with women business enterprises.

Riverboat Licensees and Operating Agents may be subject to a disciplinary action for failure to meet the minority and women business enterprise expenditure goals.

By rule promulgated by the Indiana Gaming Commission, a Riverboat Licensee or affiliate may not enter into a debt transaction in excess of $1 million without the prior approval of the Indiana Gaming Commission. A debt transaction is any transaction that will result in the encumbrance of assets. Unless waived, approval of debt transactions requires consideration by the Indiana Gaming Commission at two business meetings. The Indiana Gaming Commission, by resolution, has authorized the Executive Director, subject to subsequent approval by the Indiana Gaming Commission, to approve debt transactions after a review of the documents and consultation with the Chair and the Indiana Gaming Commission’s outside financial analyst.

A rule promulgated by the Indiana Gaming Commission requires the reporting of currency transactions to the Indiana Gaming Commission after the transactions are reported to the federal government. Indiana rules also require that Riverboat Licensees track and maintain logs of transactions that exceed $3,000. The Indiana Gaming Commission has promulgated a rule that prohibits distributions, excluding distributions for the payment of taxes, by a Riverboat Licensee to its partners, shareholders, itself or any affiliated entity if the distribution would impair the financial viability of the riverboat gaming operation. The Indiana Gaming Commission has also promulgated a rule mandating Riverboat Licensees to maintain a cash reserve to protect patrons against defaults in gaming debts. The cash reserve is to be equal to a Riverboat Licensee’s average payout for a three-day period based on the riverboat’s performance the prior calendar quarter. The cash reserve can consist of cash on hand, cash maintained in Indiana bank accounts and cash equivalents not otherwise committed or obligated.

The Indiana Act prohibits contributions to a candidate for a state legislative or local office or to a candidate’s committee or to a regular party committee by:

•

a person who owns at least one percent of a Riverboat Licensee or Operating Agent;

•

a person who is an officer of a Riverboat Licensee or Operating Agent;

•

a person who is an officer of a person that owns at least one percent of a Riverboat Licensee or Operating Agent; or

•

a person who is a political action committee of a Riverboat Licensee or Operating Agent.

The prohibition against political contributions extends for three years following a change in the circumstances that resulted in the prohibition.

Individuals employed on a riverboat and in certain positions must hold an occupational license issued by the Indiana Gaming Commission. Suppliers of gaming equipment and gaming or revenue tracking services must hold a supplier’s license issued by the Indiana Gaming Commission. By rule promulgated by the Indiana Gaming Commission, Riverboat Licensees who employ non-licensed individuals in positions requiring licensure or who purchase supplies from a non-licensed entity may be subject to a disciplinary action.

EXHIBIT 99.2

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Financial Statements

for the Years Ended December 31, 2005, 2004 and 2003

and Report of Independent Registered Public Accounting Firm

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Index to Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm		1

Consolidated Balance Sheets at December 31, 2005 and 2004		2

Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003		3

Consolidated Statements of Changes in Member Equity and Other Comprehensive Income (Loss) for the Years Ended December 31, 2005, 2004 and 2003		4

Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003		5

Notes to Consolidated Financial Statements		7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member of

Marina District Development Company, LLC

Atlantic City, New Jersey

We have audited the accompanying consolidated balance sheets of Marina District Development Company and subsidiary (the “Company”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, changes in member equity and other comprehensive income (loss) and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Marina District Development Company, LLC and subsidiary at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Parsippany, New Jersey

March 13, 2006

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Balance Sheets

(In thousands)


	December 31,
	2005		2004
Assets

Current assets
Cash and cash equivalents	$	49,848	$	37,567
Accounts receivable, net		33,808		23,905
Income tax receivable		17,831		23,021
Due from related parties		54		322
Inventories		3,107		2,986
Prepaid expenses and other		4,529		5,000
Deferred income taxes		1,178		487

Total current assets		110,355		93,288
Property and equipment, net		1,013,744		961,737
Deferred loan origination fees, net		8,619		10,639
Other assets, net		8,257		3,922

Total assets	$	1,140,975	$	1,069,586

Liabilities and Member Equity

Current liabilities
Current maturities of long-term debt	$	—	$	2,000
Accounts payable		11,290		7,151
Construction payables		20,996		1,628
Income taxes payable		7,107		2,219
Accrued payroll and related		27,071		22,839
Accrued interest		744		4,822
Accrued gaming liabilities		20,218		17,341
Accrued and other liabilities		21,171		17,593
Due to related parties		699		864

Total current liabilities		109,296		76,457
Long-term debt, net of current maturities		341,700		423,600
Fair value of derivative financial instruments		—		5,626
Deferred income taxes		4,472		265
Other liabilities		7,400		3,897
Commitments and contingencies (Note 8)

Member equity		678,107		559,741

Total liabilities and member equity	$	1,140,975	$	1,069,586

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

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Statements of Operations

(In thousands)


	Year Ended December 31,
	2005			2004			2003
Revenues
Gaming	$	696,965		$	623,400		$	258,270
Food and beverage		121,013			119,946			52,519
Room		91,257			85,166			39,285
Other		35,470			23,769			9,785

Gross revenues		944,705			852,281			359,859
Less promotional allowances		180,722			175,862			68,445

Net revenues		763,983			676,419			291,414

Costs and expenses
Gaming		265,024			237,091			104,839
Food and beverage		45,510			46,227			24,106
Room		11,205			10,607			5,207
Other		31,515			19,149			9,945
Selling, general and administrative		106,819			103,001			62,774
Maintenance and utilities		52,176			44,777			20,121
Depreciation and amortization		56,951			56,811			27,969
Loss on disposal of assets		160			184			152
Preopening expenses		—			—			39,186

Total		569,360			517,847			294,299

Operating income (loss)		194,623			158,572			(2,885	)

Other income (expense)
Interest expense, net of amounts capitalized		(23,930	)		(35,118	)		(21,694	)
Net gain (loss) on derivative financial instruments		(808	)		222			699

Total		(24,738	)		(34,896	)		(20,995	)

Income (loss) before benefit from income taxes		169,885			123,676			(23,880	)
Benefit from income taxes		1,303			9,789			3,487

Net income (loss)	$	171,188		$	133,465		$	(20,393	)

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

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Statements of Changes in Member Equity and Other Comprehensive Income (Loss)

For The Years Ended December 31, 2005, 2004 and 2003

(In thousands)


	Capital Contributions			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Member Equity			Total Comprehensive Income (Loss)
Balances, January 1, 2003	$	364,000		$	(24,984	)	$	(23,526	)	$	315,490
Capital contributions		122,300			—			—			122,300
Capital contributions receivable		(39,600	)		—			—			(39,600	)
Net loss		—			(20,393	)		—			(20,393	)	$	(20,393	)
Derivative instruments market adjustment, including a tax benefit of $1.5 million		—			—			8,385			8,385			8,385

Total comprehensive loss		—			—			—			—		$	(12,008	)

Balances, December 31, 2003		446,700			(45,377	)		(15,141	)		386,182
Capital contributions		30,807			—			—			30,807
Net income		—			133,465			—			133,465		$	133,465
Derivative instruments market adjustment, net of taxes of $0.9 million		—			—			9,287			9,287			9,287

Total comprehensive income		—			—			—			—		$	142,752

Balances, December 31, 2004		477,507			88,088			(5,854	)		559,741
Distributions		—			(58,676	)		—			(58,676	)
Net income		—			171,188			—			171,188		$	171,188
Derivative instruments market adjustment, net of taxes of $0.6 million		—			—			5,854			5,854			5,854

Total comprehensive income		—			—			—			—		$	177,042

Balances, December 31, 2005	$	477,507		$	200,600		$	—		$	678,107

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

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Statements of Cash Flows

(In thousands)


	Year Ended December 31,
	2005			2004			2003
Cash Flows from Operating Activities
Net income (loss)	$	171,188		$	133,465		$	(20,393	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		56,951			56,811			27,969
Amortization of deferred loan origination fees		2,020			2,238			1,119
Loss on disposal of assets		160			184			152
Net (gain) loss on derivative financial instruments		808			(222	)		(699	)
Deferred income taxes		3,516			6,890			(5,615	)
Provision for doubtful accounts		4,381			4,995			2,561
Non-cash preopening expenses		—			—			1,439
Changes in operating assets and liabilities
Due to (from) related parties		103			(2,279	)		(454	)
Accounts receivable		(14,284	)		(12,199	)		(19,262	)
Income tax receivable		5,190			(23,021	)		—
Inventories		(121	)		(765	)		(2,221	)
Prepaid expenses and other		471			(1,454	)		(4,258	)
Other assets		(4,473	)		(557	)		(3,374	)
Other current liabilities		15,056			15,297			54,903
Other liabilities		3,503			3,483			306

Net Cash provided by Operating Activities		244,469			182,866			32,173

Cash Flows from Investing Activities -
Acquisition of property and equipment		(89,612	)		(23,237	)		(382,896	)

Cash Flows from Financing Activities
Financing fees		—			(3,572	)		—
Borrowings under bank credit agreements		573,000			367,792			474,400
Payments under bank credit agreements		(656,900	)		(548,348	)		(201,044	)
Capital contributions		—			30,807			82,700
Distributions paid		(58,676	)		—			—

Net Cash provided by (used in) Financing Activities		(142,576	)		(153,321	)		356,056

Net increase in cash and cash equivalents		12,281			6,308			5,333
Cash and cash equivalents, beginning of period		37,567			31,259			25,926

Cash and cash equivalents, end of period	$	49,848		$	37,567		$	31,259

Supplemental Disclosure of Cash Flow Information
Cash paid for interest, net of amounts capitalized	$	26,019		$	29,218		$	19,674

Cash paid for income taxes	$	7,605		$	6,007		$	700

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

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Consolidated Statements of Cash Flows (Continued)

(In thousands)


	Year Ended December 31,
	2005		2004		2003
Supplemental Schedule of Non-Cash Investing and Financing Activities

Payables for capital expenditures	$	18,200	$	—	$	5,585

Amortized loan origination fees included in construction in progress	$	—	$	—	$	1,280

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

Marina District Development Company, LLC and Subsidiary

LOGO

(A Wholly-Owned Subsidiary of Marina District Development Holding Co., LLC)

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of Marina District Development Company, LLC, d.b.a. Borgata, (a development-stage enterprise prior to July 3, 2003) (“MDDC, LLC”) and Marina District Finance Company, Inc. (“MDFC”), its wholly-owned subsidiary, collectively referred to herein as the “Company”, “We”, or “Us”. The Company is a wholly-owned subsidiary of Marina District Development Holding Co., LLC (“Holding Company” or “Parent”). Holding Company is jointly owned by MAC, Corp. (“MAC”), a wholly-owned subsidiary of MGM MIRAGE, and Boyd Atlantic City, Inc. (“BAC”), a wholly-owned subsidiary of Boyd Gaming Corporation. Our purpose is to develop, own, and operate a hotel casino and spa facility at Renaissance Pointe in Atlantic City, New Jersey. We opened Borgata on July 3, 2003 with approximately 2,000 hotel rooms, a 125,000 square foot casino, and other amenities.

We are currently in the process of two major expansions at Borgata. The first expansion (“Public Space Expansion”) is a project with an estimated cost of $200 million and the second expansion (“Rooms Expansion”) is a project with an estimated cost of $325 million. The Public Space Expansion consists of substantial additions of both gaming and non-gaming amenities to be built on a portion of the existing surface parking lot. The centerpiece of the Rooms Expansion is a new hotel tower, The Water Club at Borgata, containing approximately 800 rooms and suites, to be built on a portion of the existing surface parking lot, near the existing porte cochere. In addition to the hotel, which will have an arrival separate from our existing hotel tower, the Rooms Expansion will include a new spa, additional meeting room space, and a new parking structure. Access to our existing facilities and the Public Space Expansion amenities is intended to be seamless and convenient. The Public Space Expansion construction commenced in December 2004 with expected completion to occur in the second quarter of 2006. The Rooms Expansion construction began January 2006 and is scheduled for completion in the fourth quarter of 2007. Boyd Gaming Corporation and MGM MIRAGE have approved both projects, which will be built on land leased from MGM MIRAGE (See Note 4). BAC and MAC do not expect to make further capital contributions to us for the expansion projects as we expect to finance the projects from our cash flow and from our recently amended bank credit facility (see Note 5).

Pursuant to the Joint Venture Agreement (the “JV Agreement”), BAC, as the managing venturer of the Holding Company, has oversight responsibility for the management of Borgata which includes the design, development, and construction as well as the day to day operations. We do not record a management fee to BAC as our management team directly performs these services or negotiates contracts to provide for these services. As a result, the costs of these services are directly borne by the Company and are reflected in our accompanying consolidated financial statements.

Cash and Cash Equivalents

Accounts Receivable, net

Accounts receivable consist primarily of casino, hotel and other receivables, net of an allowance for doubtful accounts of $10.2 million and $7.1 million at December 31, 2005 and 2004, respectively. The allowance for doubtful accounts is estimated based upon our collection experience and the age of the receivables.

Inventories

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

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets (see Note 3). Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. Losses on disposal of assets are recognized when such assets are impaired while gains are recognized as realized.

Capitalized Interest

Interest costs associated with our original project and expansion projects are capitalized. Interest costs, which include commitment fees, letter of credit fees and the amortized portion of deferred loan origination fees, are capitalized on amounts expended for the respective projects using our weighted average cost of borrowing. Capitalization of interest ceases when the projects, or discernible portions of the projects, are substantially complete. We amortize capitalized interest over the estimated useful life of the related asset. Capitalized interest for the years ended December 31, 2005, 2004 and 2003 was $2.0 million, less than $0.1 million, and $18.2 million, respectively.

Deferred Loan Origination Fees

Deferred loan origination fees incurred in connection with the issuance of long-term debt are amortized over the terms of the related debt agreement.

Revenue and Promotional Allowances


	Year Ended December 31,
	2005		2004		2003
Room	$	17,089	$	16,165	$	7,340
Food and beverage		44,028		40,793		17,060
Other		7,744		5,649		5,137

Total	$	68,861	$	62,607	$	29,537

Promotional allowances also include incentives such as cash, goods and services (such as complimentary rooms and food and beverages) earned in our slot club and other gaming programs. We reward customers, through the use of loyalty programs, with points based on amounts wagered that can be redeemed for a specified period of time, principally for restricted free play slot machine credits and complimentary goods or services. We record the estimated retail value of these incentives as revenue and then deduct them as a promotional allowance. For the years ended December 31, 2005, 2004 and 2003, these incentives were $58.8 million, $62.4 million and $20.1 million, respectively.

Income Taxes

Our Parent and we are treated as a partnership for federal income tax purposes; therefore, federal income taxes are the responsibility of MAC and BAC. In New Jersey, casino partnerships are subject to state income taxes under the Casino Control Act; therefore, we are required to record New Jersey state income taxes. In 2004, we were granted permission by New Jersey, pursuant to a ruling request, to file a consolidated New Jersey corporation business tax return with MAC and BAC. In accordance with our tax sharing agreement, we have agreed with MAC and BAC that our tax liability will be based upon our stand-alone separate activity, as reflected in our consolidated financial statements.

Pursuant to an amendment to the Casino Control Act, effective July 1, 2003, we are also subject to a 7.5% Adjusted Net Profits Tax which is imposed on a casino’s adjusted net income as defined in the Casino Control Commission regulations. This tax of $3.8 million per year is based on our adjusted net income for our first twelve months of operations ended on June 30, 2004 and is imposed for each of the three fiscal years ending June 30, 2004 through June 30, 2006. We are entitled to a 50% credit against our Adjusted Net Profits Tax if we make qualifying capital expenditures, as defined by statute. We recognize this credit in arriving at our state tax benefit reported on the accompanying consolidated statement of operations (see Note 7).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and notes. Significant estimates incorporated into our accompanying consolidated financial statements include the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, estimated valuation allowance for deferred tax assets, the estimate for available tax credits, the estimated liabilities for our self-insured medical plan, slot club programs, contingencies and litigation, claims and assessments. Actual results could differ from those estimates and assumptions.

Preopening Expenses

We expensed certain costs of start-up activities as incurred during our development stage, which ended when we began operating on July 3, 2003. We expensed preopening expenses of $64.2 million during the period that commenced on August 6, 1998 (date of inception) and ended on July 2, 2003.

Advertising Expense

Advertising costs are expensed the first time such advertising appears. Total advertising costs included in selling, general and administrative expenses on the accompanying consolidated statements of operations were $8.7 million, $6.8 million and $5.6 million, respectively, for the years ended December 31, 2005, 2004 and 2003.

Employee Benefit Plans

We contribute to pension plans under various union agreements. Contributions, based on wages paid to covered employees, totaled approximately $3.8 million, $3.7 million and $1.0 million, respectively, for the years ended December 31, 2005, 2004 and 2003.

We have a retirement savings plan under Section 401(k) of the Internal Revenue Code covering our non-union employees. The plan allows employees to defer up to the lessor of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plan. We expensed our voluntary contributions to the 401(k) plan of $2.8 million, $2.5 million and $0.6 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Self Insurance

We are currently self insured up to $1.0 million, $0.5 million, and $0.2 million with respect to each property damage claim, general liability claim, and non-union employee medical case, respectively. We have accrued $3.6 million and $2.7 million for such claims at December 31, 2005 and 2004, respectively, and incurred expenses of approximately $12.6 million, $7.0 million and $6.7 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Derivative Financial Instruments and Other Comprehensive Income

All of our interest rate protection agreements matured on or before December 31, 2005 (see Note 6). We accounted for our interest rate protection agreements as derivative financial instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments . Our derivative financial instruments were utilized to reduce interest rate risk. We do not enter into derivative financial instruments for trading or speculative purposes. SFAS No. 133 requires all derivatives to be recognized on the balance sheet at fair value. Derivatives that are not designated as hedges must be adjusted to fair value through income. For derivatives designated as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged item through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings.

We accounted for our comprehensive income (loss) in accordance with SFAS No. 130, Reporting Comprehensive Income . Such amounts of accumulated other comprehensive income (loss) related to our derivative financial instruments reversed through our consolidated statements of operations over the lives of the derivative financial instruments.

Recently Issued Accounting Standards

In March 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations . This interpretation clarifies the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations and requires the recognition of a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. This interpretation is effective for fiscal periods ending after December 15, 2005. The 2005 adoption of this interpretation did not have a material impact on our consolidated financial statements.

In October 2005, the FASB issued FASB Staff Position (“FSP”) No. 13-1, Accounting for Rental Costs Incurred during a Construction Period . This FSP requires rental costs associated with ground operating leases that are incurred during a construction period be recognized as rental expense. This FSP is effective for fiscal periods beginning after December 15, 2005. We currently do not expect the adoption of this FSP to have a material impact on our consolidated financial statements (see Note 4).

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections . This statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. Additionally, this statement provides guidance on recording and disclosing changes in accounting estimates. This SFAS is effective for changes and corrections of errors made in fiscal years beginning after December 15, 2005. We currently do not expect the adoption of this SFAS to have a material impact on our consolidated financial statements.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to conform to the December 31, 2005 presentation. These reclassifications had no effect on our net income (loss) as previously reported.

Note 2. Capital Contributions

At December 31, 2003, we had recorded contributions receivable from BAC and MAC in the amounts of $35.5 million and $4.1 million, respectively. These contributions receivable were classified as part of member equity on the consolidated balance sheet at December 31, 2003. Each receivable included $4.1 million related to unfunded contributions pursuant to the total of agreed-upon project costs in the operating agreement. The receivable from BAC also included $31.4 million related to the excess of total estimated project costs over the total agreed-upon project costs. In June 2004, BAC and MAC signed an agreement that finalized the total amount of our original project costs subject to the resolution of a minor contract dispute and the potential refund of certain construction fees. Pursuant to this agreement, both BAC and MAC agreed to waive the remaining capital contributions, which were finalized at $4.0 million each and would have funded us to the total of agreed-upon project costs. In addition, BAC agreed to pay a total of $30.8 million to fulfill their obligation to fund the excess of actual original project costs, calculated before any resolution to the minor outstanding issues, above the total of agreed-upon costs. Accordingly, in June 2004, BAC made a $30.8 million capital contribution to us that was applied to the contribution receivable recorded at December 31, 2003. As such, there are no contributions receivable recorded at December 31, 2005 or 2004.

Note 3. Property and Equipment

Property and equipment consists of the following (in thousands):


	Estimated Life (Years)	December 31,
	Estimated Life (Years)	2005		2004
Land	—	$	87,301	$	87,301
Building and improvements	3-40		800,190		795,490
Furniture and equipment	3-7		165,043		148,224
Construction in progress	—		96,896		9,959

Total			1,149,430		1,040,974
Less accumulated depreciation			135,686		79,237

Property and equipment, net		$	1,013,744	$	961,737

Depreciation expense was $56.8 million, $53.2 million and $26.4 million for the years ended December 31, 2005, 2004 and 2003, respectively. At December 31, 2005, we had two major expansions in process (see Note 1). The majority of the total expenditures for these projects as of December 31, 2005 are classified as construction in progress in the above table.

Note 4. Related Parties

Pursuant to the JV Agreement, MAC is solely responsible for any investigation, analyses, clean-up, detoxification, testing, monitoring, or remediation related to Renaissance Pointe. MAC is also responsible for their allocable share of expenses related to master plan and government improvements at Renaissance Pointe. The related amounts due from MAC for these types of expenditures incurred by us were less than $0.1 million and $0.3 million at December 31, 2005 and 2004, respectively. Reimbursable expenditures incurred were $0.2 million, $0.7 million and $0.7 million for the years ended December 31, 2005, 2004 and 2003, respectively.

Pursuant to the JV Agreement, MAC was responsible for the development of master plan and government improvements at Renaissance Pointe. The related amounts due to MAC for our allocable share of these types of expenditures were $0 at December 31, 2005 and 2004. Master plan and government improvement expenditures reimbursable to MAC were $12.9 million for the year ended December 31, 2003 and were capitalized on the accompanying consolidated balance sheets.

In 2005, we entered into a series of ground lease agreements with MAC related to our expansion projects which increase our leased premises from a total of 15.5 acres to a total of 19.0 acres (see Note 8). These new ground lease agreements and the modified existing employee parking garage ground lease agreement provide the land on which our existing employee parking garage, the Public Space Expansion, the Rooms Expansion, and a modified surface parking lot will reside. The lease terms extend until December 31, 2070 with the exception of the surface parking lot lease (which can be terminated by either party upon 18 months written notice). The related amounts due to MAC for these types of expenditures were $0.3 million and $0.5 million at December 31, 2005 and 2004, respectively. Related rent incurred was $4.9 million,

$1.3 million and $1.2 million for the years ended December 31, 2005, 2004 and 2003, respectively, portions of which were capitalized on the accompanying consolidated balance sheets and portions of which were included in the accompanying consolidated statements of operations.

Pursuant to the ground lease agreements, we are responsible for reimbursing MAC for related property taxes paid on our behalf. The related amounts due to MAC for these types of expenditures were $0 at December 31, 2005 and 2004. Related property tax incurred was $1.7 million, $0.7 million and $0.6 million for the years ended December 31, 2005, 2004 and 2003, respectively, portions of which were capitalized on the accompanying consolidated balance sheets and portions of which were included in the accompanying consolidated statements of operations.

In 2003, we entered into a one year airplane lease agreement with BAC. The related amounts due to BAC for these types of expenditures were $0 at December 31, 2005 and 2004. Related rent expense payments were $0.3 million and $0.2 million for the years ended December 31, 2004 and 2003, respectively. In 2004, we purchased the airplane from BAC for its appraised value of $5.8 million.

We reimburse BAC for compensation paid to employees performing services for us on a full-time basis and for out-of-pocket costs and expenses incurred related to travel. BAC is also reimbursed for various payments made on our behalf primarily related to third party legal fees, investigative fees, and other. The related amounts due to BAC for these types of expenditures paid by BAC were $0.4 million at December 31, 2005 and 2004. Reimbursable expenditures during the years ended December 31, 2005, 2004, and 2003 were $6.0 million, $2.3 million and $5.5 million, respectively, portions of which were capitalized on the accompanying consolidated balance sheets and portions of which were included in the accompanying consolidated statements of operations.

The related party balances are non-interest bearing.

Note 5. Debt

On February 15, 2006, the First Amendment was made to our First Amended and Restated Credit Agreement among MDFC, MDDC, Canadian Imperial Bank of Commerce and certain other financial institutions. The amended bank credit agreement modified our existing amended bank credit agreement and consists of a $750 million revolving credit facility that matures on January 31, 2011. Availability under the revolving credit facility was used to repay in full the outstanding term loan component of the existing amended bank credit agreement.

The interest rate on the revolving credit facility is based upon either (i) the agent bank’s quoted base rate or (ii) the Eurodollar rate, plus an applicable margin that is determined by the level of a predefined financial leverage ratio. In addition, we incur a commitment fee on the unused portion of the revolving credit facility that ranges from 0.2% to 0.375% per annum. The amended bank credit agreement is secured by substantially all of our real and personal property and is non-recourse to MAC and BAC.

The amended bank credit agreement contains certain financial and other covenants, including, without limitation, various covenants (i) establishing a maximum permitted total leverage ratio, (ii) imposing limitations on the incurrence of additional secured indebtedness, (iii) imposing limitations on the maximum permitted expansion capital expenditures during the term of the amended bank credit agreement and (iv) imposing restrictions on investments, dividends and certain other payments.

Amounts outstanding under each component of our bank credit agreements are as follows (in thousands):


	December 31,
	2005		2004
Term loan	$	198,000	$	200,000
Revolving line of credit		143,700		225,600

Total debt		341,700		425,600
Less current maturities		—		2,000

Total long-term debt	$	341,700	$	423,600

The scheduled maturities of long-term debt for the years ending December 31, after giving effect to the amended bank credit agreement discussed above, are as follows (in thousands):


2006	$	—
2007		—
2008		—
2009		—
2010		—
Thereafter		341,700

Total	$	341,700

Prior to the amendment on February 15, 2006, our First Amended and Restated Credit Agreement among MDFC, MDDC, Canadian Imperial Bank of Commerce and certain other financial institutions had become effective on October 20, 2004. The amended bank credit agreement modified our original bank credit agreement.

Under the existing amended bank credit facility, which consisted of a $200 million term loan and a $450 million revolving credit facility, $198 million of borrowings were outstanding under the term loan and $143.7 million was outstanding under the revolving credit facility at December 31, 2005, leaving availability under the existing amended bank credit facility of $306.3 million.

The interest rate on the term loan was based upon either (i) the agent bank’s quoted base rate or (ii) the Eurodollar rate, plus a fixed margin. The interest rate on the revolving credit facility was based upon either (i) the agent bank’s quoted base rate or (ii) the Eurodollar rate, plus an applicable margin that is determined by the level of a predefined financial leverage ratio. In addition, we incurred a commitment fee on the unused portion of the revolving credit facility that ranged from 0.25% to 0.5% per annum. The blended interest rates for outstanding borrowings under the existing amended bank credit agreement at December 31, 2005 and 2004 were 5.9% and 4.0%, respectively. The existing amended bank credit agreement was secured by substantially all of our real and personal property and was non-recourse to MAC and BAC.

The existing amended bank credit facility contained certain financial and other covenants, including, without limitation, various covenants (i) requiring the maintenance of a fixed charge coverage ratio, (ii) establishing a maximum permitted total leverage ratio, (iii) imposing limitations on the incurrence of additional secured indebtedness, (iv) imposing limitations on the maximum permitted expansion capital expenditures during the term of the existing amended bank credit facility and (v) imposing restrictions on investments, dividends and certain other payments. We believe we were in compliance with these covenants as of December 31, 2005.

Note 6. Interest Rate Protection Agreements

On March 8, 2001, we entered into several interest rate protection agreements to comply with the requirements of our original bank credit agreement at an initial cost of $0.8 million. All of our interest rate protection agreements matured on or before December 31, 2005. The interest rate protection agreements were cash flow hedges and consisted of interest rate swaps, caps and collars with a combined total initial aggregate notional amount of $310 million that commenced and matured at various dates ranging from December 2001 to December 2005. The aggregate notional amount of the agreements at December 31, 2004 was $290 million. The interest rate protection agreements were accounted for as derivative financial instruments in accordance with SFAS No. 133. The fair values of the derivative financial instruments at December 31, 2004 have been recorded on the accompanying consolidated balance sheets. Net interest paid or received pursuant to the derivative financial instruments is included in interest expense in the period. The net effect of our interest rate swaps resulted in an increase in interest of $5.1 million, $10.0 million and $11.6 million, respectively, greater than the contractual rate of the underlying hedged debt for the years ended December 31, 2005, 2004 and 2003. At December 31, 2004, the weighted average fixed interest rate that we received was 2.6% and the weighted average variable interest rate that we paid was 5.0%.

The following table reports the effects of the mark to market valuations of our derivative financial instruments for the periods indicated (in thousands). The increase or decrease in fair value of certain hedges deemed to be ineffective is reported in the accompanying consolidated statements of operations. The increase or decrease in fair value of certain hedges deemed to be effective is reported in other comprehensive income (loss) as a component of member equity on the accompanying consolidated balance sheets.


	Year Ended December 31,
	2005			2004			2003
Net gain (loss) on derivative financial instruments due to ineffectiveness in certain hedges	$	(808	)	$	222		$	82

Derivative financial instruments market adjustment	$	6,434		$	10,204		$	6,887
Tax effect of derivative financial instruments market adjustment, including effect of change of tax status (Note 7)		(580	)		(917	)		1,498

Net derivative financial instruments market adjustment	$	5,854		$	9,287		$	8,385

Note 7. Income Taxes

In connection with the commencement of operations on July 3, 2003, we recognized a tax benefit related to operating loss carryforwards accumulated during our development period. This benefit was partially offset by the state income tax and the adjusted net profits tax related to our 2003 post-opening pretax income.

We are entitled to a 50% credit against our Adjusted Net Profits Tax (see Note 1) if we make qualifying capital expenditures, as defined by statute. In 2003, we placed a valuation allowance of approximately $0.5 million on the credit because we had not made any qualifying capital expenditures, nor did we have any definitive expansion plans. In December 2004, we commenced the Public Space Expansion and

submitted the appropriate applications for reimbursement of this tax. As such, we released the $0.5 million valuation allowance on the 2003 credit and realized an additional credit of $2.4 million, representing 50% of the Adjusted Net Profits Tax paid in 2004. This $2.9 million aggregate state tax benefit is included in our accompanying statement of operations for the year ended December 31, 2004 and a state tax benefit of $1.9 million representing 50% of the Adjusted Net Profits Tax paid in 2005 is included in our accompanying statement of operations for the year ended December 31, 2005.

Based on New Jersey state income tax rules, we are eligible for a refundable state tax credit under the New Jersey New Jobs Investment Tax Credit because we made a qualified investment in a new business facility that created new jobs. The total estimated available credit is approximately $75 million over a five year period subject to certain annual conditions. We began receiving refunds related to this tax credit in early 2005. As such, we recorded approximately $23.0 million of net New Jobs Tax Credits during the three months ended December 31, 2004, comprised of New Jobs Tax Credits generated from the years ended December 31, 2003 and 2004. We recorded approximately $18.7 million of net New Jobs Tax Credits for the year ended December 31, 2005 and expect to generate net New Jobs Tax Credits for each of the years ending December 31, 2006 through December 31, 2007, of approximately $16.8 million per year. We may also be entitled to incremental New Jersey New Jobs Investment Tax Credits as a result of our expansion projects as discussed in Note 1.

The following tables present our state income tax benefit and related deferred tax assets. For tax years ended prior to obtaining our casino license on July 3, 2003, we were not subject to New Jersey state income taxes. Accordingly, the tax attributes as of July 3, 2003 are subsequently reflected as a component of the net deferred state tax assets and the benefit from state income taxes as of December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003.

A summary of the benefit from state income taxes is as follows (in thousands):


	Year Ended December 31,
	2005			2004			2003
State
Current	$	(4,037	)	$	(15,761	)	$	2,128
Deferred		2,734			5,972			(5,615	)

Benefit from state income taxes	$	(1,303	)	$	(9,789	)	$	(3,487	)

The following table provides reconciliations between the state statutory rate and the effective income tax rates where both are expressed as a percentage of income.


	Year Ended December 31,
	2005		2004		2003
Tax provision (benefit) at state statutory rate	9.0	%	9.0	%	(9.0	)%
New jobs investment tax credit	(11.0	)	(11.8	)	(35.4	)
Adjusted net profits tax	2.2		3.8		4.0
Adjusted net profits tax credit	(1.1	)	(1.9	)	(2.0	)
Other, net	0.1		0.2		0.6
Valuation allowance	—		(7.2	)	37.4
State income tax attributes (effect of change of tax status)	—		—		(10.2	)

Total state income tax benefit	(0.8	)%	(7.9	)%	(14.6	)%

The components comprising the Company’s net deferred state tax asset (liability) are as follows (in thousands):


	December 31,
	2005			2004
Deferred state tax assets:
Preopening expenses amortized for tax purposes	$	2,716		$	4,076
State tax credit carryforwards		1,657			—
Provision for doubtful accounts		921			637
Reserve for employee benefits		387			179
Reserve differential for gaming activities		294			576
Derivative financial instruments market adjustment		—			580
Other		561			86

Gross deferred state tax asset		6,536			6,134

Deferred state tax liabilities:
Difference between book and tax basis of property		9,480			5,419
Other		350			493

Gross deferred state tax liability		9,830			5,912

Net deferred state tax asset (liability)	$	(3,294	)	$	222

The items comprising our deferred income taxes as presented on the accompanying consolidated balance sheets are as follows (in thousands):


	December 31,
	2005			2004
Current deferred income tax asset	$	1,178		$	487
Non-current deferred income tax liability		(4,472	)		(265	)

Net deferred state tax asset (liability)	$	(3,294	)	$	222

Note 8. Commitments and Contingencies

Future Minimum Lease Payments

Future minimum lease payments required under noncancelable operating leases (principally for land, see Note 4) as of December 31, 2005 are as follows (in thousands):


2006	$	8,525
2007		7,684
2008		6,897
2009		5,718
2010		5,149
Thereafter		293,586

Total	$	327,559

For the years ended December 31, 2005, 2004 and 2003, total rent expense was $6.8 million, $7.0 million and $4.5 million, respectively, portions of which were capitalized on the accompanying consolidated balance sheets and portions of which were included in the accompanying consolidated statements of operations.

Utility Contract

In 2005, we amended our executory contracts with a wholly-owned subsidiary of a local utility company extending the end of the terms to 20 years from the opening of our Rooms Expansion. The utility company provides us with electricity and thermal energy (hot water and chilled water). Obligations under the thermal energy executory contract contain both fixed fees and variable fees based upon usage rates. The fixed fee components under the thermal energy executory contract are currently estimated at approximately $6.5 million per annum. We also committed to purchase a certain portion of our electricity demand at essentially a fixed rate which is estimated at approximately $4.8 million per annum. Electricity demand in excess of the commitment is subject to market rates based on our tariff class.

Investment Alternative Tax

The New Jersey Casino Control Act provides, among other things, for an assessment of licensees equal to 1.25% of their gross gaming revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues. Generally, we may satisfy this investment obligation by investing in qualified eligible direct investments, by making qualified contributions or by depositing funds with the New Jersey Casino Reinvestment Development Authority (“CRDA”). Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be donated to the CRDA in exchange for credits against future CRDA investment obligations. CRDA bonds have terms up to fifty years and bear interest at below market rates.

We entered into a tri-party agreement with the CRDA and MAC committing up to $14 million of our CRDA deposit obligations to the proposed Venice Park Bulkhead Project (the “Bulkhead Project”). Under this agreement, MAC is solely responsible for funding any and all hard and soft costs and expenses of designing, permitting, engineering, developing, consulting, equipping, and opening the Bulkhead Project. As of July 2005, we have fully funded our $14 million of CRDA obligations, based upon 1.25% of gross gaming revenues. The CRDA will hold these funds in a segregated account and will reimburse MAC for their costs associated with the Bulkhead Project. As of December 31, 2005, $0.4 million has been reimbursed to MAC from these funds. In the event that the Bulkhead Project is not fully consummated, we would be required to make expenditures for housing projects in Atlantic City with the remaining funds. Our additional funds, based on 1.25% of gross gaming revenues, above the $14 million are now available for other qualifying investments under the New Jersey Statutes which control such investments. As of December 31, 2005, we have $6.1 million of funds available for other qualifying investments. A full valuation allowance has been provided for the Bulkhead Project as the Company could not determine that such amounts would have any net realizable value and a 33% valuation allowance has been provided for the other qualifying investments, most likely eventual investments in CRDA bonds, as CRDA bonds bear interest at below market rates. Accordingly, expense of $4.7 million, $8.0 million and $3.3 million, respectively, is included in selling, general and administrative expenses on the accompanying consolidated statements of operations for the years ended December 31, 2005, 2004 and 2003.

Grant and Donations Agreement

In June 2004, Borgata and the eleven other casinos in the Atlantic City gaming market (collectively, the “Casinos”) entered into a Grant and Donations Agreement (the “Agreement”) with the New Jersey Sports & Exposition Authority (the “NJSEA”) and the CRDA in the interest of deferring or preventing the proliferation of competitive gaming at New Jersey racing tracks.

Under the terms of the Agreement, the Casinos shall pay to the NJSEA $34 million to be used for certain authorized purposes (the “Authorized Uses”) as defined by the Agreement. The $34 million to be paid by

the Casinos shall be payable over a four year period as follows: $7 million was paid October 15, 2004; $8 million was paid October 15, 2005; $9 million will be paid on or before October15, 2006; and $10 million will be paid on or before October 15, 2007. In the event any of the $34 million is not used by NJSEA for the Authorized Uses by January 1, 2009, the unused funds shall be returned by NJSEA to the Casinos pro rata based upon the share each casino contributed. For each year, each casino’s share of the $34 million will equate to a percentage representing its gross gaming revenue for the twelve months ending June 30th prior to the October 15 payment date compared to the gross gaming revenues for that period for all Casinos. The Casinos, individually and collectively, shall be responsible for the payment of all amounts due. In the event that any casino shall fail to make its payment as required, the remaining Casinos shall pay a pro rata share of the defaulted payment based upon their share of the gross gaming revenue for the period as compared to the gross gaming revenues for the period for all Casinos calculated without the gross gaming revenue of the defaulting casino. As a result, we will expense our pro rata share of the $34 million, estimated to be approximately $4.7 million in total using our actual and forecasted market share of gross gaming revenue, on a straight line basis over the applicable term of the Agreement. Based upon the gross gaming revenues for all Casinos for the twelve months ended June 30, 2005, our share of the $8 million paid on October 15, 2005 was approximately 13.9%, or $1.1 million. Based upon the gross gaming revenues for all Casinos for the twelve months ended June 30, 2004, our share of the $7 million paid on October 15, 2004 was approximately 12.0%, or $0.8 million. We recorded an expense of $1.1 million and $0.5 million for the years ended December 31, 2005 and 2004, respectively.

Also under the terms of the Agreement, the CRDA approved donations in the aggregate amount of $62 million from the Casino’s North Jersey Obligations (pursuant to the New Jersey Casino Control Act) for certain uses as defined by the Agreement including casino projects approved pursuant to rules of the CRDA. The CRDA shall credit 100% of the donations received from each casino against that casino’s obligation to purchase bonds. The donation shall provide that each casino’s share of the $62 million will equate to a percentage representing its gross gaming revenue for the twelve months ended June 30, 2004 compared to the gross gaming revenues for that period for all Casinos. Each casino’s respective annual donation shall be made first from uncommitted current and future funds in the North Jersey Project Fund established in accordance with the CRDA Urban Revitalization Act of that Casino and shall be credited as fulfilling said obligation on behalf of the particular casino making the payment. To the extent such North Jersey Project funds of that casino are not adequate to pay a Casino’s share of the required donations, then that casino’s other uncommitted current and future North Jersey Obligations shall be utilized. As a result, we will expense our pro rata share of the $62 million on a straight line basis over the applicable term of the Agreement; however, our Rooms Expansion project may qualifiy, pursuant to rules of the CRDA, for eligibility to receive future credits of approximately $6.8 million under this Agreement. Based upon the gross gaming revenues for all Casinos for the twelve months ended June 30, 2004, our share of the $62 million is approximately 12.0%, or $7.4 million. We recorded an expense of $1.6 million and $0.8 million for the years ended December 31, 2005 and 2004, respectively. Based on current gross gaming revenue projections, we expect it will take approximately 10 to 12 years to fully fund this obligation as the third quarter of 2006 is the first quarter we are subject to fund North Jersey Obligations.

Legal Matters

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