Peninsula Gaming Form 10-Q

THIS REPORT HAS NOT BEEN, NOR WILL IT BE, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS REPORT, AND THE INFORMATION CONTAINED HEREIN, IS REQUIRED TO BE PROVIDED PURSUANT TO CONTRACTUAL OBLIGATIONS OF PENINSULA GAMING, LLC AND PENINSULA GAMING CORP.

FORM 10-Q ______

Quarterly report for the period ended March 31, 2016 ______

(Exact name of registrant as specified in its charter) ______Peninsula Gaming, LLC Peninsula Gaming Corp. (Exact name of registrants as (Exact name of registrants as specified in their charter) specified in their charter)

Delaware Delaware (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization)

20-0800583 25-1902805 (I.R.S. Employer (I.R.S. Employer Identification No.) Identification No.)

600 Star Brewery Dr., Suite 110, Dubuque, Iowa 52001 (Address of principal executive offices) (Zip Code)

(563) 690-4975 (Registrant's telephone number, including area code)

All of the common equity interests of Peninsula Gaming, LLC (the "Company") are held by Boyd Acquisition II, LLC ("HoldCo"), which is a wholly owned indirect subsidiary of Boyd Gaming Corporation ("Parent"). All of the common equity interests of Diamond Jo, LLC, The Old Evangeline Downs, L.L.C., Diamond Jo Worth, LLC, Belle of Orleans, L.L.C., Kansas Star Casino, LLC and Peninsula Gaming Corp. are held by the Company. PENINSULA GAMING, LLC

QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2016 TABLE OF CONTENTS

Page PART 1. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 1 Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 1 Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and 2015 2 Condensed Consolidated Statement of Changes in Member's Equity for the three months ended March 31, 2016 3 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and 2015 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 24 Item 4. Controls and Procedures 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings 25 Item 1A. Risk Factors 25 Item 6. Exhibits 26 Signatures 27

PART I. Financial Information Item 1. Financial Statements (Unaudited)

PENINSULA GAMING, LLC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands) March 31, December 31, (Unaudited) 2016 2015 ASSETS Current assets Cash and cash equivalents $ 27,195 $ 29,561 Restricted cash 7,457 3,626 Accounts receivable, net 2,733 2,276 Inventories 2,174 1,856 Prepaid expenses and other current assets 4,166 5,458 Total current assets 43,725 42,777 Property and equipment, net 368,065 375,252 Other assets, net 4,190 4,344 Intangible assets, net 455,736 459,455 Goodwill 471,735 471,735 Investment available for sale 17,984 17,429 Total assets $ 1,361,435 $ 1,370,992 LIABILITIES AND MEMBER’S EQUITY Current liabilities Current maturities of long-term debt $ 6,188 $ 8,250 Accounts payable 9,465 10,486 Accrued liabilities 39,485 41,920 Payable to affiliates 1,827 1,643 Total current liabilities 56,965 62,299 Long-term debt, net of current maturities and debt issuance costs 969,425 984,000 Deferred income taxes 48,638 43,033 Obligation under assessment arrangements 23,759 24,062 Other liabilities 4,707 4,797 Commitments and contingencies (Note 7) Member's equity Common member’s interest 305,140 305,140 Accumulated deficit (47,406) (52,024) Accumulated other comprehensive income (loss) 207 (315) Total member's equity 257,941 252,801 Total liabilities and member's equity $ 1,361,435 $ 1,370,992

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

1 PENINSULA GAMING, LLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended (In thousands) March 31, (Unaudited) 2016 2015 Revenues Gaming $ 117,245 $ 117,043 Food and beverage 9,525 9,979 Other 4,363 3,905 Gross revenues 131,133 130,927 Less promotional allowances 4,943 5,018 Net revenues 126,190 125,909 Operating costs and expenses Gaming 53,801 54,280 Food and beverage 6,370 6,369 Other 2,270 2,382 Selling, general and administrative 13,548 13,256 Maintenance and utilities 3,089 3,259 Depreciation and amortization 13,583 16,988 Corporate expense 409 405 Affiliate management fees 4,878 4,828 Project development, preopening and writedowns 151 128 Other operating items, net — 46 Total operating costs and expenses 98,099 101,941 Operating income 28,091 23,968 Other expense (income) Interest income (462) (467) Interest expense 17,811 18,670 Loss on early extinguishments of debt 427 508 Loss from equity affiliate 92 161 Total other expense, net 17,868 18,872 Income before income taxes 10,223 5,096 Income taxes provision (5,605) (4,498) Net income 4,618 598 Other comprehensive income, net of tax Unrealized gain on investment available for sale, net of tax 522 270 Comprehensive income $ 5,140 $ 868

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

2 PENINSULA GAMING, LLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEMBER'S EQUITY

Accumulated Common Other Total (In thousands) Member's Accumulated Comprehensive Member's (Unaudited) Interest Deficit Loss Equity Balances, January 1, 2016 $ 305,140 $ (52,024) $ (315) $ 252,801 Net income — 4,618 — 4,618 Unrealized gain on investment available for sale, net of tax — — 522 522 Balances, March 31, 2016 $ 305,140 $ (47,406) $ 207 $ 257,941

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

3 PENINSULA GAMING, LLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended (In thousands) March 31, (Unaudited) 2016 2015 Cash Flows from Operating Activities Net income $ 4,618 $ 598 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,583 16,988 Amortization of debt issuance costs 2,461 2,527 Loss on early extinguishments of debt 427 508 Share-based compensation expense 130 97 Deferred income taxes 5,605 4,498 Other operating activities 211 255 Changes in operating assets and liabilities: Restricted cash (3,831) (4,041) Accounts receivable, net (457) (2,342) Inventories (318) 216 Prepaid expenses and other current assets 1,292 583 Other assets, net 56 (175) Accounts payable and accrued liabilities (2,037) (2,280) Other liabilities (393) (364) Payables to affiliates 20 4,796 Net cash provided by operating activities 21,367 21,864 Cash Flows from Investing Activities Capital expenditures (4,213) (7,077) Other investing activities 5 164 Net cash used in investing activities (4,208) (6,913) Cash Flows from Financing Activities Borrowings under bank credit facility 95,200 91,400 Payments under bank credit facility (114,725) (108,625) Payments under notes payable — (2) Net cash used in financing activities (19,525) (17,227) Change in cash and cash equivalents (2,366) (2,276) Cash and cash equivalents, beginning of period 29,561 29,926 Cash and cash equivalents, end of period $ 27,195 $ 27,650 Supplemental Disclosure of Cash Flow Information Cash paid for interest $ 22,002 $ 22,993 Supplemental Schedule of Non-cash Investing and Financing Activities Payables incurred for capital expenditures $ 2,988 $ 4,396 Increase in fair value of investment available for sale 522 270

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

4 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION Organization Peninsula Gaming, LLC, a Delaware limited liability company ("Peninsula Gaming," and together with its subsidiaries, the "Company," "we" or "us"), is a casino entertainment holding company with gaming operations in local markets in Iowa, Kansas and Louisiana. Peninsula Gaming’s wholly owned subsidiaries consist of:

• Diamond Jo, LLC, a Delaware limited liability company ("Diamond Jo Dubuque"), which owns and operates the Diamond Jo Casino in Dubuque, Iowa;

• Diamond Jo Worth, LLC, a Delaware limited liability company ("Diamond Jo Worth"), which owns and operates the Diamond Jo Casino in Northwood, Iowa;

• Kansas Star Casino, LLC, a Kansas limited liability company ("Kansas Star"), which owns the assets of the Kansas Star Casino in Mulvane, Kansas (excluding lottery gaming equipment, which is owned by the State of Kansas) and manages the lottery gaming operations on behalf of the State of Kansas;

• The Old Evangeline Downs, L.L.C., a Louisiana limited liability company ("Evangeline Downs"), which owns and operates the Evangeline Downs Racetrack and Casino, or racino, in Opelousas, Louisiana and three off-track betting parlors in Louisiana;

• Belle of Orleans, L.L.C., a Louisiana limited liability company ("Amelia Belle"), which owns and operates the Amelia Belle Casino in Amelia, Louisiana; and

• Peninsula Gaming Corp., a Delaware corporation, with no assets or operations.

The Company is an indirect, wholly owned subsidiary of Boyd Gaming Corporation ("Boyd"). Boyd is headquartered in Las Vegas, Nevada, and has been operating since 1975. Boyd is a diversified operator of 21 wholly owned gaming entertainment properties and holds a non-controlling 50% equity interest in another property. Boyd's common stock is traded on the New York Stock Exchange under the symbol "BYD".

Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and footnote disclosures necessary for complete financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP").

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

The accompanying condensed consolidated financial statements include the accounts of Peninsula Gaming and its wholly owned subsidiaries. Investments in unconsolidated affiliates, which do not meet the consolidation criteria of the authoritative accounting guidance for voting interest, controlling interest or variable interest entities, are accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation.

We view each operating property as an operating segment and all operating segments have been aggregated into one reportable segment.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015.

5 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Promotional Allowances The retail value of food and beverage and other services furnished to guests without charge is included in gross revenues and then deducted as a promotional allowance. Promotional allowances also include incentives earned in our player loyalty programs. We reward customers, through our player loyalty programs, with points based on amounts wagered that can be redeemed for a specified period of time for complimentary slot play, food and beverage, and to a lesser extent for other goods or services, depending upon the property.

The amounts included in promotional allowances are as follows: Three Months Ended March 31, (In thousands) 2016 2015 Food and beverage $ 4,207 $ 4,590 Other 736 428 Total promotional allowances $ 4,943 $ 5,018

The estimated costs of providing such promotional allowances are as follows: Three Months Ended March 31, (In thousands) 2016 2015 Food and beverage $ 1,499 $ 1,609 Other 313 378 Total estimated cost of promotional allowances $ 1,812 $ 1,987

Gaming Taxes We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate. These gaming taxes are assessed based on our gaming revenues and are recorded as a gaming expense in the condensed consolidated statements of comprehensive income. These taxes totaled approximately $33.0 million and $33.3 million for the three months ended March 31, 2016 and 2015, respectively.

Income Taxes Income taxes are recorded under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is continually assessed based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, Boyd's experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies.

As of March 31, 2016, we concluded that it was not more likely than not that the benefit from our deferred tax assets would be realized. As a result of our analysis, a valuation allowance of $49.5 million has been recorded on our federal and state income tax net operating loss carryforwards and other deferred tax assets. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above. Based on recent earnings, there is a reasonable possibility that, within the next year, sufficient positive evidence may become available to reach a conclusion that all or a portion of the valuation allowance will no longer be needed. As such, the Company may release a significant portion of its valuation allowance against its deferred tax assets within the next 12 months. However, the exact timing will be dependent on the levels of income achieved and management's visibility into future period results. The release of our valuation allowance would result in the recognition of certain deferred tax assets and a non-cash income tax benefit in the period in which the release is recorded.

6 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

For the three months ended March 31, 2016 and 2015, we have computed our provision for income taxes by applying the actual effective tax rate, under the discrete method, to year-to-date income. The discrete method was used to calculate income tax expense or benefit as the annual effective tax rate was not considered a reliable estimate of year-to-date income tax expense. We believe the discrete method provides the most reliable estimate of year-to-date income tax expense.

Our tax rate is impacted by adjustments that are largely independent of our operating results before taxes. Such adjustments relate primarily to changes in our valuation allowance and the accrual of non-cash tax expense in connection with the tax amortization of indefinite-lived intangible assets that are not available to offset existing deferred tax assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets when determining our valuation allowance.

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

Recently Issued Accounting Pronouncements Accounting Standards Update 2016-09, Improvements to Employee Share-Based Payment Accounting ("Update 2016-09") In March 2016, the Financial Accounting Standards Board ("FASB") issued Update 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of the new standard on its consolidated financial statements.

Accounting Standards Update 2016-08, Revenue from Contracts with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("Update 2016-08") In March 2016, the FASB issued Update 2016-08, which clarifies the implementation guidance on principal versus agent considerations. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is evaluating the impact of the new standard on its consolidated financial statements.

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

Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities ("Update 2016-01") In January 2016, the FASB issued Update 2016-01, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and early adoption is permitted only if explicit early adoption guidance is applied. The Company is evaluating the impact of the new standard on its consolidated financial statements.

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

7 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

NOTE 3. PROPERTY AND EQUIPMENT, NET Property and equipment, net consists of the following: March 31, December 31, (In thousands) 2016 2015 Land $ 38,922 $ 38,922 Buildings and improvements 312,465 312,176 Furniture and equipment 126,864 126,698 Riverboat 20,712 20,725 Construction in progress 2,774 1,641 Total property and equipment 501,737 500,162 Less accumulated depreciation 133,672 124,910 Property and equipment, net $ 368,065 $ 375,252

Depreciation expense for the three months ended March 31, 2016 and 2015 was $9.9 million and $10.6 million, respectively.

NOTE 4. INTANGIBLE ASSETS, NET Intangible assets, net consists of the following:

March 31, 2016 Weighted Average Gross Cumulative Life Carrying Cumulative Impairment Intangible (In thousands) Remaining Value Amortization Losses Assets, Net Amortizing intangibles: Customer relationships 1.6 years $ 136,300 $ (113,713) $ — $ 22,587

Indefinite-lived intangible assets: Trademarks Indefinite 50,800 — (3,500) 47,300 Gaming license rights Indefinite 387,249 — (1,400) 385,849 438,049 — (4,900) 433,149 Balance, March 31, 2016 $ 574,349 $ (113,713) $ (4,900) $ 455,736

December 31, 2015 Weighted Average Gross Cumulative Life Carrying Cumulative Impairment Intangible (In thousands) Remaining Value Amortization Losses Assets, Net Amortizing intangibles: Customer relationships 1.9 years $ 136,300 $ (109,994) $ — $ 26,306

Indefinite-lived intangible assets: Trademarks Indefinite 50,800 — (3,500) 47,300 Gaming license rights Indefinite 387,249 — (1,400) 385,849 438,049 — (4,900) 433,149 Balance, December 31, 2015 $ 574,349 $ (109,994) $ (4,900) $ 459,455

Amortization expense for the three months ended March 31, 2016 and 2015 was $3.7 million and $6.4 million, respectively.

8 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

NOTE 5. ACCRUED LIABILITIES Accrued liabilities consist of the following: March 31, December 31, (In thousands) 2016 2015 Payroll and related expenses $ 6,780 $ 7,762 Interest 4,400 11,750 Gaming liabilities 2,634 2,671 Purse settlement payables 8,962 5,109 Player loyalty program liabilities 2,141 2,121 Property taxes 6,114 4,124 Current obligation under assessment arrangements 3,598 3,598 Other accrued liabilities 4,856 4,785 Total accrued liabilities $ 39,485 $ 41,920

NOTE 6. LONG-TERM DEBT Long-term debt, net of current maturities and debt issuance costs consists of the following: March 31, 2016 Unamortized Outstanding Debt Issuance Long-Term (In thousands) Rate Principal Costs Debt, Net Credit facility 4.25% $ 643,225 $ (11,939) $ 631,286 8.375% senior notes due 2018 8.38% 350,000 (5,673) 344,327 Total long-term debt 993,225 (17,612) 975,613 Less current maturities 6,188 — 6,188 Long-term debt, net $ 987,037 $ (17,612) $ 969,425

December 31, 2015 Unamortized Outstanding Debt Issuance Long-Term (In thousands) Rate Principal Costs Debt, Net Credit facility 4.25% $ 662,750 $ (14,143) $ 648,607 8.375% senior notes due 2018 8.38% 350,000 (6,357) 343,643 Total long-term debt 1,012,750 (20,500) 992,250 Less current maturities 8,250 — 8,250 Long-term debt, net $ 1,004,500 $ (20,500) $ 984,000

9 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

Credit Facility Our $875.0 million senior secured credit facility (the “Credit Facility”) consists of a term loan facility with initial borrowings of $825.0 million (the “Term Loan”) and a revolving credit facility of $50.0 million (the “Revolving Credit Facility”). The Revolving Credit Facility consists of up to $15.0 million in swing line loans ("Swing Loan") and a revolving credit facility ("Revolving Loan") of $50.0 million less Swing Loans outstanding and any amounts allocated to letters of credit. The amounts outstanding under the Credit Facility are comprised of the following: March 31, 2016 Unamortized Outstanding Debt Issuance Long-Term (In thousands) Principal Costs Debt, Net Term Loan $ 621,625 $ (11,700) $ 609,925 Revolving Loan 14,000 (239) 13,761 Swing Loan 7,600 — 7,600 Total long-term debt under the Credit Facility $ 643,225 $ (11,939) $ 631,286

December 31, 2015 Unamortized Outstanding Debt Issuance Long-Term (In thousands) Principal Costs Debt, Net Term Loan $ 647,750 $ (13,868) $ 633,882 Revolving Loan 9,000 (275) 8,725 Swing Loan 6,000 — 6,000 Total long-term debt under the Credit Facility $ 662,750 $ (14,143) $ 648,607

At March 31, 2016, approximately $643.2 million was outstanding under our Credit Facility. As the Company repays the Term Loan, including required quarterly installments and voluntary prepayments, it is not allowed to borrow additional funds under the Term Loan. As such, with $5.0 million allocated to support various letters of credit, we have remaining contractual availability under our Credit Facility at March 31, 2016 of approximately $23.4 million.

Under the Credit Facility, the Company must make quarterly principal payments equal to 0.25% of the original aggregate principal amount of the Term Loan and is allowed to make such payments early without penalty. As of March 31, 2016, the Company has voluntarily paid the quarterly installment due on or before June 30, 2016. As such, current maturities of long-term debt on the condensed consolidated balance sheet as of March 31, 2016, reflect only three quarterly installments for those payments due on or before September 30, 2016, December 31, 2016 and March 31, 2017.

Guarantees and Collateral The Company's obligations under the Credit Facility, subject to certain exceptions, are guaranteed by Peninsula Gaming’s subsidiaries and are secured by the capital stock and equity interests of Peninsula Gaming’s subsidiaries. In addition, subject to certain exceptions, Peninsula Gaming and each of the guarantors granted the collateral agent first priority liens and security interests on substantially all of the real and personal property (other than gaming license rights and subject to certain other exceptions) of Peninsula Gaming and its subsidiaries as additional security for the performance of the obligations under the Credit Facility.

The Company's obligations under the 8.375% senior notes due February 2018, with an aggregate principal amount of $350.0 million, (the "Notes") are fully and unconditionally guaranteed, on a joint and several basis, by each of the Company’s subsidiaries (other than Peninsula Gaming Corp., which has no significant independent assets).

Covenant Compliance The Credit Facility and the Notes contain customary affirmative and negative covenants (and are subject to customary exceptions) for financings of its type. Under the Credit Facility, the Company is required to maintain (i) a maximum Consolidated Leverage Ratio (as defined in the Credit Facility agreement) over each twelve month period ending on the last day of each fiscal quarter; (ii) a minimum consolidated Interest Coverage Ratio (as defined in the Credit Facility agreement) of 2.0 to 1.0 as of the end of

10 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015 each calendar quarter; and (iii) a maximum amount of capital expenditures for each fiscal year. The Credit Facility and the Notes limit the Company's ability to incur additional indebtedness or liens, and substantially all of the Company's net assets are restricted from distribution under the Credit Facility and the Notes, with the exception of specific amounts allowed for certain investments and other restricted payments, as well as payments under a management services agreement between the Company and Boyd Acquisition, LLC ("Boyd Acquisition"), a direct wholly owned subsidiary of Boyd. As of March 31, 2016, we believe that we were in compliance with the financial and other covenants of our debt instruments.

Loss on Early Extinguishments of Debt We incurred non-cash charges of $0.4 million and $0.5 million during the three months ended March 31, 2016 and 2015, respectively, for unamortized debt issuance costs written off, which represents the ratable reduction in borrowing capacity due to optional prepayments made during these periods.

NOTE 7. COMMITMENTS AND CONTINGENCIES Commitments There have been no material changes to our commitments described under Note 9, Commitments and Contingencies, in our Annual Report on Form 10-K for the year ended December 31, 2015.

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

NOTE 8. FAIR VALUE MEASUREMENTS The authoritative accounting guidance for fair value measurements specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These inputs create the following fair value hierarchy:

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

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

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

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

11 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

Balances Measured at Fair Value The following tables show the fair values of certain of our financial instruments:

March 31, 2016 (In thousands) Balance Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 27,195 $ 27,195 $ — $ — Restricted cash 7,457 7,457 — — Investment available for sale 18,394 — — 18,394 Liability Contingent payments 3,560 — — 3,560

December 31, 2015 (In thousands) Balance Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 29,561 $ 29,561 $ — $ — Restricted cash 3,626 3,626 — — Investment available for sale 17,839 — — 17,839 Liability Contingent payments 3,632 — — 3,632

Cash and Cash Equivalents and Restricted Cash The fair value of our cash and cash equivalents and restricted cash, classified in the fair value hierarchy as Level 1, is based on statements received from our banks at March 31, 2016 and December 31, 2015.

Investment Available for Sale Diamond Jo Worth has an investment in a single municipal bond issuance of $21.4 million that is classified as available for sale. Diamond Jo Worth is the only holder of this instrument and there is no quoted market price for this instrument. As such, the fair value of this investment is classified as Level 3 in the fair value hierarchy. The fair value of the investment is estimated using a discounted cash flows approach and the significant unobservable input used in the valuation at March 31, 2016 and December 31, 2015 is a discount rate of 9.9% and 10.0%, respectively. Unrealized gains and losses on this instrument resulting from changes in the fair value of the instrument are not charged to earnings, but rather are recorded as other comprehensive income in the member's equity section of the Company's condensed consolidated balance sheets. At both March 31, 2016 and December 31, 2015, $0.4 million of the carrying value of the investment available for sale is included as a current asset in prepaid expenses and other current assets and at March 31, 2016 and December 31, 2015, $18.0 million and $17.4 million, respectively, is included in investment available for sale on the condensed consolidated balance sheets. The discount associated with this investment of $3.2 million at both March 31, 2016 and December 31, 2015, is netted with the investment available for sale on the condensed consolidated balance sheets and is being accreted over the life of the investment using the effective interest method. The accretion of such discount is included in interest income on the condensed consolidated statements of comprehensive income.

Contingent Payments In connection with the development of the Kansas Star property, Kansas Star agreed to pay a former casino project promoter 1% of Kansas Star’s earnings before interest expense, taxes, depreciation and amortization ("EBITDA") each month for a period of 10 years commencing on December 20, 2011. The liability is recorded at the estimated fair value of the contingent payments using a discounted cash flows approach and the significant unobservable input used in the valuation at both March 31, 2016 and December 31, 2015 is a discount rate of 18.5%. At both March 31, 2016 and December 31, 2015, $0.9 million of the carrying value of the contingent payments is recorded in accrued liabilities and $2.7 million in other liabilities on the condensed consolidated balance sheets.

12 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

The following table summarizes the changes in fair value of the Company’s Level 3 asset and liability: Three months ended March 31, 2016 2015 Asset Liability Asset Liability Investment Investment available Contingent available Contingent (In thousands) for sale payments for sale payments Balance at beginning of reporting period $ 17,839 $ (3,632) $ 18,357 $ (3,792) Total gains (losses) (realized or unrealized): Included in interest income (expense) 33 (154) 31 (159) Included in other comprehensive income 522 — 270 — Transfers in or out of Level 3 — — — — Purchases, sales, issuances and settlements: Settlements — 226 — 230 Balance at end of reporting period $ 18,394 $ (3,560) $ 18,658 $ (3,721)

We are exposed to valuation risk on our Level 3 financial instruments. We estimate our risk exposure using a sensitivity analysis of potential changes in the significant unobservable inputs of our fair value measurements. Our investment available for sale is most susceptible to valuation risk caused by changes in our significant unobservable inputs. If the discount rate used in our fair value measurements increased or decreased by 100 basis points, the investment available for sale and other comprehensive income (loss) would increase or decrease by approximately $1.3 million at March 31, 2016. We conducted a similar sensitivity analysis for our contingent payment liability and a 100 basis point change in our significant and other unobservable inputs would not cause the value of our fair value measurement to change significantly.

Balances Disclosed at Fair Value The following tables provide fair value measurement information for our obligation under assessment arrangements, long-term debt and other financial instruments:

March 31, 2016 Outstanding Carrying Estimated Fair Value (In thousands) Face Amount Value Fair Value Hierarchy Liabilities Obligation under assessment arrangements $ 34,655 $ 27,357 $ 28,282 Level 3 Other financial instruments 200 189 189 Level 3

Debt Credit facility $ 643,225 $ 631,286 $ 642,479 Level 2 8.375% senior notes due 2018 350,000 344,327 357,000 Level 2 Total debt $ 993,225 $ 975,613 $ 999,479

13 PENINSULA GAMING, LLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) as of March 31, 2016 and December 31, 2015 and for the three months ended March 31, 2016 and 2015

December 31, 2015 Outstanding Carrying Estimated Fair Value (In thousands) Face Amount Value Fair Value Hierarchy Liabilities Obligation under assessment arrangements $ 35,126 $ 27,660 $ 28,381 Level 3 Other financial instruments 200 186 186 Level 3

Debt Credit facility $ 662,750 $ 648,607 $ 661,131 Level 2 8.375% senior notes due 2018 350,000 343,643 357,000 Level 2 Total debt $ 1,012,750 $ 992,250 $ 1,018,131

The estimated fair value of the Credit Facility is based on a relative value analysis performed on or about March 31, 2016 and December 31, 2015. The estimated fair value of our senior notes is based on quoted market prices as of March 31, 2016 and December 31, 2015. We have estimated the fair value of our obligation under assessment arrangements using a discounted cash flow approach, after giving consideration to the changes in market rates of interest, creditworthiness of both parties and credit spreads. The weighted average discount rate used in calculating the fair value of the obligation under assessment arrangements was 9.7% and 9.8% as of March 31, 2016 and December 31, 2015, respectively.

There were no transfers between Level 1, Level 2 and Level 3 measurements during the three months ended March 31, 2016 or the year ended December 31, 2015.

NOTE 9. RELATED PARTY TRANSACTIONS Boyd Management Services Agreement Peninsula Gaming is party to a management services agreement with Boyd Acquisition under which Peninsula Gaming pays to Boyd Acquisition a management fee equal to 2% of consolidated net revenue plus 5% of earnings before interest expense, taxes, depreciation, amortization and other items as defined in the agreement. We expensed management fees of $4.9 million and $4.8 million during the three months ended March 31, 2016 and 2015, respectively.

NOTE 10. SUBSEQUENT EVENTS No events have occurred after March 31, 2016 but before May 9, 2016, the date the condensed consolidated financial statements were issued, that require consideration as adjustments to or disclosures in the condensed consolidated financial statements.

14 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Overview Peninsula Gaming, LLC ("Peninsula Gaming," and together with its subsidiaries, the "Company," "we" or "us") is a multi- jurisdictional gaming company that has been operating for more than 15 years.

We are a diversified operator of five wholly owned gaming entertainment properties operating in Iowa, Kansas and Louisiana. We view each property as an operating segment, and for financial reporting purposes we aggregate our properties into one reportable segment. These properties are: Diamond Jo Dubuque Dubuque, Iowa Diamond Jo Worth Northwood, Iowa Kansas Star Casino ("Kansas Star") Mulvane, Kansas Amelia Belle Casino ("Amelia Belle") Amelia, Louisiana Evangeline Downs Racetrack and Casino ("Evangeline Downs") Opelousas, Louisiana

Evangeline Downs also operates three off-track betting parlors ("OTBs") in Louisiana, and Peninsula Gaming also owns Peninsula Gaming Corp., a Delaware corporation with no assets or operations.

We operate gaming entertainment properties, all of which include dining and most of which include retail and other amenities. Our main business emphasis is on slot revenues, which are highly dependent upon the number and spending levels of customers at our properties, which affects our operating results.

Our properties have historically generated significant operating cash flow, with the majority of our gaming revenue being cash- based and non-gaming services being paid with cash or by credit card.

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

Our primary areas of focus are: (i) ensuring our existing operations are managed as efficiently as possible, and remain positioned for growth; and (ii) improving our capital structure and strengthening our balance sheet, including paying down debt, improving operations and diversifying our asset base.

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

Strengthening our Balance Sheet We are committed to finding opportunities to strengthen our balance sheet that increase cash flow and reduce our debt.

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

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

Our Key Performance Indicators We use several key performance measures to evaluate the gaming operations of our properties. These key performance measures include the following:

• Slot handle, which means the dollar amount wagered in slot machines, and table game drop, which means the total amount of cash deposited in table game drop boxes. Slot handle and table game drop are measures of volume and/or market share. • Slot win and table game hold, which mean the difference between customer wagers and customer winnings on slot machines and table games, respectively. Slot win and table game hold percentages represent the relationship between slot handle and table game drop to gaming wins and losses. 15 • Racing handle, which means the total amount wagered on live racing at our Evangeline Downs facility as well as amounts wagered on simulcast races at our racino or one of our OTBs. Racing win is Evangeline Downs' share of pari-mutuel wagering on live races from commissions and breakage income and Evangeline Downs' share of wagering from import and export simulcasting.

RESULTS OF OPERATIONS Overview Three Months Ended March 31, (In millions) 2016 2015 Net revenues $ 126.2 $ 125.9 Operating income 28.1 24.0 Net income 4.6 0.6

Net Revenues For the three months ended March 31, 2016, net revenues increased $0.3 million, or 0.2%, over the prior year comparable period due primarily to net revenue growth in Iowa and Kansas, partially offset by net revenue declines in Louisiana.

Operating Income For the three months ended March 31, 2016, operating income increased $4.1 million, or 17.2%, over the prior year comparable period driven primarily by a $3.4 million decrease in depreciation and amortization. Intangible asset amortization declined $2.7 million as our customer relationships are amortized using an accelerated method. Depreciation decreased due to certain assets reaching the end of their useful life in the fourth quarter of 2015.

Net Income For the three months ended March 31, 2016, we experienced an increase in net income of $4.0 million, which was driven by the factors contributing to the $4.1 million operating income increase (as discussed above). Net income was also impacted by a $1.1 million increase in our income taxes provision offset by a $0.9 million decrease in interest expense, both of which are discussed further in the Other Expenses section below.

Operating Revenues We derive the majority of our gross revenues from our gaming operations. Food and beverage gross revenues represent our next most significant revenue source followed by other revenues, which consist primarily of convenience store revenues at Diamond Jo Worth, commissions and special event revenues. Gaming, food and beverage and other revenues were approximately 89%, 8% and 3% of gross revenues, respectively, for each of the three month periods ended March 31, 2016 and 2015.

16 Three Months Ended March 31, (In millions) 2016 2015 REVENUES Gaming $ 117.2 $ 117.0 Food and beverage 9.5 10.0 Other 4.4 3.9 Gross revenues 131.1 130.9 Less promotional allowances 4.9 5.0 Net revenues $ 126.2 $ 125.9

COSTS AND EXPENSES Gaming $ 53.8 $ 54.3 Food and beverage 6.4 6.4 Other 2.3 2.4 Total costs and expenses $ 62.5 $ 63.1

MARGINS Gaming 54.1% 53.6% Food and beverage 33.1% 36.2% Other 48.0% 39.0%

Gaming Gaming revenues are comprised primarily of the net win from our slot machine operations and to a lesser extent the net win from table games, racing and video poker. Gaming revenues increased 0.2% during the three months ended March 31, 2016 over the prior year comparable period. Gaming revenue growth was driven by an increase in hold in both slots and table games of 0.2% and 2.0%, respectively, and offset by a 1.4% decrease in slot handle and 3.5% decrease in table game drop. Consistent with net revenue growth, our Iowa and Kansas operations had gaming revenue growth while our Louisiana operations experienced revenue declines. Our Iowa operations were our strongest performers and generated a combined 8.6% gaming revenue growth over the prior year comparable period. Gaming margins improved slightly to 54.1% from 53.6% due primarily to the closure of an unprofitable OTB at Evangeline Downs in March 2015.

Food and Beverage Food and beverage revenues decreased by $0.5 million, or 4.5%, during the three months ended March 31, 2016 as compared to the prior year comparable period due primarily to a reduction in complimentary food and beverage revenues, particularly at our Louisiana properties. Food and beverage margins decreased to 33.1% from 36.2% due primarily to a decline in margins at Evangeline Downs as a result of the recent opening of two new venues late in 2015. Management will continue to focus on gaining efficiencies and improving margins in the new venues.

Other Other revenues increased by $0.5 million, or 11.7%, during the three months ended March 31, 2016 over the prior year comparable period and margins improved to 48.0% from 39.0%. The other revenue increase and margin improvements are driven by a grant received by Kansas Star from the City of Mulvane for events that generate increased lodging facility occupancy within the City of Mulvane.

17 Other Operating Costs and Expenses The following operating costs and expenses, as presented in our condensed consolidated statements of comprehensive income, are further discussed below: Three Months Ended March 31, (In millions) 2016 2015 Selling, general and administrative $ 13.5 $ 13.3 Maintenance and utilities 3.1 3.3 Depreciation and amortization 13.6 17.0 Corporate expense 0.4 0.4 Affiliate management fees 4.9 4.8 Project development, preopening and writedowns 0.2 0.1

Selling, General and Administrative Selling, general and administrative expenses were substantially unchanged during the three months ended March 31, 2016 and 2015 at $13.5 million and $13.3 million, respectively. These costs primarily include marketing, technology, compliance and risk, finance and security.

Maintenance and Utilities Maintenance and utilities expenses were substantially unchanged during the three months ended March 31, 2016 and 2015 at $3.1 million and $3.3 million, respectively.

Depreciation and Amortization Depreciation and amortization expense decreased $3.4 million during the three months ended March 31, 2016 over the prior year comparable period. The decline is driven by a $2.7 million decrease in intangible asset amortization as our customer relationships are amortized using an accelerated method over their approximate useful life of five years. Depreciation also decreased $0.7 million period over period as certain assets reached the end of their useful life in the fourth quarter of 2015.

Corporate Expense Corporate expense represents unallocated payroll, professional fees, rent and various other administrative expenses that are not directly related to our casino operations. Corporate expense was flat during the three months ended March 31, 2016 and 2015 at $0.4 million, and as a percentage of gross revenues was 0.3% during both periods.

Affiliate Management Fees Affiliate management fees relate to management fees paid or accrued under a management agreement with Boyd Acquisition, LLC ("Boyd Acquisition"). Affiliate management fees, as a percentage of gross revenues, were 3.7% during each of the three months ended March 31, 2016 and 2015.

Project Development, Preopening and Writedowns Project development, preopening and writedowns represent gains and losses on the disposal of certain property and equipment in the ordinary course of business and certain start-up costs which do not meet capitalization criteria and are expensed as incurred. Project development, preopening and writedowns for the three months ended March 31, 2016 and 2015 were not significant.

Other Expenses Interest Expense, Net The following table presents our interest expense, net: Three Months Ended March 31, (In millions, except percentages) 2016 2015 Interest expense, net $ 17.3 $ 18.2 Average long-term debt balance 1,003.2 1,083.4 Weighted average interest rates 5.7% 5.6%

18 Interest expense, net of interest income, decreased $0.9 million, or 4.7%, during the three months ended March 31, 2016 over the prior year comparable period due primarily to a reduction in average long-term borrowings outstanding of $80.2 million during the three months ended March 31, 2016 as compared to the three months ended March 31, 2015. During the twelve months ended March 31, 2016, we made $83.0 million in optional prepayments on the $825.0 million term loan (the "Term Loan") under our $875.0 million senior secured credit facility (the "Credit Facility") with cash flows from operations.

Loss on Early Extinguishments of Debt As a result of optional prepayments under the Term Loan of $22.0 million and $17.0 million during the three months ended March 31, 2016 and 2015, respectively, the Company incurred non-cash losses of $0.4 million and $0.5 million, respectively, for the write-off of unamortized debt issuance costs representing the ratable reduction in borrowing capacity.

Loss from Equity Affiliate Kansas Star holds an equity interest in a third-party venture whose primary purpose is to operate the hotel adjacent to its casino. Kansas Star's share of the loss from operations related to this equity interest is included in loss from equity affiliate in the condensed consolidated statements of comprehensive income with a corresponding adjustment to other assets, net on the condensed consolidated balance sheets. Loss from equity affiliate was not significant during each of the three months ended March 31, 2016 and 2015.

Income Taxes The Company is an indirect, wholly owned subsidiary of Boyd Gaming Corporation ("Boyd"). The Company's taxable income or loss is included in Boyd's consolidated federal income tax return. For state income tax purposes, the Company's taxable income or loss is included in the applicable state tax return filings of a corporate subsidiary of Boyd. Although the Company files its federal income tax return on a consolidated basis or through inclusion in an affiliate return for state income tax purposes, the amounts reflected in our condensed consolidated financial statements are on a modified separate return approach as if we filed independent of the consolidated group. Boyd allocates income tax expense or benefit to us and reimburses us to the extent the consolidated group utilizes our tax attributes. Under this approach, tax expense or benefit is allocated to each member of the consolidated group as if each group member were filing a separate tax return, with an adjustment to minimize inconsistencies. The offsetting entry for our current tax expense or benefit is recorded as an intercompany payable or receivable.

The effective tax rates during the three months ended March 31, 2016 and 2015 were 54.8% and 88.3%, respectively. We have computed our provision for income taxes by applying an actual effective tax rate, under the discrete method, to year-to-date income. The discrete method was used to calculate income tax expense or benefit as the annual effective tax rate was not considered a reliable estimate of year-to-date income tax expense. Our effective tax rate is impacted by adjustments that are largely independent of our operating results before taxes. The tax provision was impacted by changes in the valuation allowance applied to our federal and state income tax net operating losses and other deferred tax assets. Additionally, the tax provision was adversely impacted by an accrual of non-cash tax expense in connection with the tax amortization of indefinite-lived intangible assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in the net operating loss deferred tax assets in determining the valuation allowance.

A valuation allowance of $49.5 million has been recorded against our deferred tax assets as of March 31, 2016 due to uncertainties related to our ability to recognize these assets. In assessing the need to establish a valuation allowance, we consider, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of profitability and taxable income, the duration of statutory carryforward periods, Boyd's experience with the utilization of operating loss and tax credit carryforwards before expiration and tax planning strategies. Valuation allowances are evaluated periodically and subject to change in future reporting periods as a result of changes in the factors noted above. Based on recent earnings, there is a reasonable possibility that, within the next year, sufficient positive evidence may become available to reach a conclusion that all or a portion of the valuation allowance will no longer be needed. As such, the Company may release a significant portion of its valuation allowance against its deferred tax assets within the next 12 months. However, the exact timing will be dependent on the levels of income achieved and management's visibility into future period results. The release of our valuation allowance would result in the recognition of certain deferred tax assets and a non-cash income tax benefit in the period in which the release is recorded.

LIQUIDITY AND CAPITAL RESOURCES We operate with minimal or negative levels of working capital in order to minimize borrowings and related interest costs. At March 31, 2016 and December 31, 2015, we had balances of cash and cash equivalents of $27.2 million and $29.6 million, respectively. Despite such amounts of cash, we had working capital deficits of $11.4 million and $17.9 million at such respective dates.

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

We could also seek to secure additional working capital or repay our current debt maturities, in whole or in part, through incremental bank financing and additional debt offerings.

Cash Flows Summary Three Months Ended March 31, (In millions) 2016 2015 Net cash provided by operating activities $ 21.4 $ 21.9

Cash flows from Investing Activities: Capital expenditures (4.2) (7.1) Other investing activities — 0.2 Net cash used in investing activities (4.2) (6.9)

Cash flows from Financing Activities: Net payments of debt (19.5) (17.2) Net cash used in financing activities (19.5) (17.2) Decrease in cash and cash equivalents $ (2.3) $ (2.2)

Cash Flows from Operating Activities During the three months ended March 31, 2016 and 2015, we generated net operating cash flow of $21.4 million and $21.9 million, respectively. Operating cash flows decreased by $0.5 million and were impacted by a $1.0 million decrease in cash interest paid due to a reduction in the average long-term borrowings outstanding for the three months ended March 31, 2016 (as previously discussed). In addition, operating cash flows were impacted by the timing of certain payments, including: (i) $2.4 million decrease in gaming taxes paid in 2016, primarily in Kansas; (ii) $0.5 million decrease in certain prepaid maintenance contracts paid in 2016 at Kansas Star; and offset by (iii) $4.8 million increase in affiliate management fees paid in 2016 under the management agreement with Boyd Acquisition.

Cash Flows from Investing Activities Our industry is capital intensive and we use cash flows for investments in maintenance capital expenditures and future development opportunities for our existing properties.

Net investing cash outflows during the three months ended March 31, 2016 and 2015 were driven by capital expenditures of $4.2 million and $7.1 million, respectively. The change in capital expenditures year over year is driven by our development and repositioning projects. In 2016, we paid $0.9 million for Fast and Lucy’s Pub at Evangeline Downs, a newly renovated 110-seat restaurant and bar, which opened in December 2015. In 2015, we paid $4.2 million for construction of the Kansas Star event center and equestrian pavilion, which was completed in December 2014.

Cash Flows from Financing Activities We rely upon our financing cash flows to provide funding for repayments of obligations and ongoing operations.

During the three months ended March 31, 2016 and 2015, our net cash outflows for financing activities were $19.5 million and $17.2 million, respectively, and were for debt extinguishments under our Credit Facility with cash flow from operations, including voluntary prepayments of $22.0 million and $17.0 million, respectively.

20 Indebtedness The outstanding principal balances of long-term debt, excluding debt issuance costs, and the changes in those balances are as follows: March 31, December 31, (In millions) 2016 2015 Decrease Credit facility $ 643.2 $ 662.8 $ (19.6) 8.375% senior notes due 2018 350.0 350.0 — Long-term debt 993.2 1,012.8 (19.6) Less current maturities 6.2 8.3 (2.1) Long-term debt, net of current maturities $ 987.0 $ 1,004.5 $ (17.5)

Credit Facility Our Credit Facility consists of the Term Loan and a revolving credit facility of $50.0 million (the "Revolving Credit Facility"). The Revolving Credit Facility consists of up to $15.0 million in swing line loans ("Swing Loan") and a revolving credit facility ("Revolving Loan") of $50.0 million less Swing Loans outstanding and any amounts allocated to letters of credit. All obligations under the Credit Facility mature on or before November 17, 2017.

The amounts outstanding under the Credit Facility are comprised of the following: March 31, 2016 Unamortized Outstanding Debt Issuance Long-Term (In millions) Principal Costs Debt, Net Term Loan $ 621.6 $ (11.7) $ 609.9 Revolving Loan 14.0 (0.2) 13.8 Swing Loan 7.6 — 7.6 Total long-term debt under the Credit Facility $ 643.2 $ (11.9) $ 631.3

December 31, 2015 Unamortized Outstanding Debt Issuance Long-Term (In millions) Principal Costs Debt, Net Term Loan $ 647.8 $ (13.9) $ 633.9 Revolving Loan 9.0 (0.3) 8.7 Swing Loan 6.0 — 6.0 Total long-term debt under the Credit Facility $ 662.8 $ (14.2) $ 648.6

Interest and Fees The interest rate on the outstanding balance of the Term Loan is based upon, at the Company's option, either: (i) the Eurodollar rate plus 3.25%, or (ii) the base rate plus 2.25%. The interest rate on the outstanding balance of the Revolving Credit Facility is based upon, at the Company's option, either: (i) the Eurodollar rate plus 4.00%, or (ii) the base rate plus 3.00%. The base rate under the Credit Facility will be the highest of (x) Bank of America's publicly-announced prime rate, (y) the federal funds rate plus 0.50%, or (z) the Eurodollar Rate plus 1.00%. The Credit Facility also establishes, with respect to outstanding balances under the Term Loan, a minimum Eurodollar rate for any interest period of 1.00%. In addition, the Company will incur a commitment fee on the unused portion of the Credit Facility at a per annum rate of 0.50%.

The blended interest rate for outstanding borrowings under our Credit Facility was 4.3% at both March 31, 2016 and December 31, 2015.

21 Debt Service Requirements Debt service requirements under our Credit Facility consist of interest payments (based on variable annual interest rates, as discussed above, with payment timing ranging from monthly to quarterly payments) and quarterly principal payments of $2.1 million due on or before the last day of the quarter. As of March 31, 2016, we have paid the quarterly principal payment of $2.1 million that is due on or before June 30, 2016. In addition, the Credit Facility requires prepayment of the loans with proceeds of any significant asset sale or event of loss and annual excess cash flow. All amounts due under the annual excess cash flow requirement for the year ended December 31, 2015 were paid in 2015. The Credit Facility can be prepaid without premium or penalty.

Debt service requirements under our $350.0 million aggregate principal amount of senior notes (the "Notes") consist of semi- annual interest payments (based upon a fixed annual interest rate of 8.375%) and principal repayments due on February 15, 2018. Any amounts due under the excess cash flow calculation for the year ended December 31, 2016 will be due on or before March 31, 2017.

We may redeem all or a portion of the Notes at a redemption price (expressed as a percentage of the principal amount of 104.188% through August 14, 2016 and at a redemption price of 100% beginning August 15, 2016 and thereafter, plus accrued and unpaid interest. Upon the occurrence of a change of control (as defined in the indenture governing the Notes (the “Indenture”)), we will be required, unless certain conditions are met, to offer to repurchase the Notes at a price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to, but not including, the date of purchase. If we sell assets or experience an event of loss, we will be required under certain circumstances to offer to purchase the Notes.

Guarantees and Collateral The Company's obligations under the Credit Facility, subject to certain exceptions, are guaranteed by Peninsula Gaming’s subsidiaries and are secured by the capital stock and equity interests of Peninsula Gaming’s subsidiaries. In addition, subject to certain exceptions, Peninsula Gaming and each of the guarantors granted the collateral agent first priority liens and security interests on substantially all of real and personal property (other than gaming license rights and subject to certain other exceptions) of Peninsula Gaming and its subsidiaries as additional security for the performance of the obligations under the Credit Facility. The obligations under the Revolving Credit Facility rank senior in right of payment to the obligations under the Term Loan.

The Notes are fully and unconditionally guaranteed, on a joint and several basis, by each of the Company’s subsidiaries (other than Peninsula Gaming Corp., which has no significant independent assets).

Financial and Other Covenants The Credit Facility contains customary affirmative and negative covenants (and is subject to customary exceptions) for financings of its type. The Company is required to maintain (i) a maximum Consolidated Leverage Ratio (as defined in the Credit Facility agreement) over each twelve month period ending on the last day of each fiscal quarter; (ii) a minimum consolidated Interest Coverage Ratio (as defined in the Credit Facility agreement) of 2.0 to 1.0 as of the end of each calendar quarter; and (iii) a maximum amount of capital expenditures for each fiscal year. Other covenants restrict our ability to among other things, incur additional debt, pay dividends and make other distributions, make certain investments, restricted payments and dispositions, create liens, enter into transactions with affiliates, merge or consolidate and engage in unrelated business activities.

The Notes contain certain restrictive covenants that, subject to exceptions and qualifications, among other things, limit our ability and the ability of our restricted subsidiaries (as defined in the Indenture) to incur additional indebtedness or liens, pay dividends or make distributions, make certain investments, and sell or merge with other companies.

Substantially all of the Company's net assets are restricted from distribution under the Credit Facility and the Indenture, with the exception of specific amounts allowed for certain investments and other restricted payments as well as payments under a management services agreement between the Company and Boyd Acquisition. The Indenture contains provisions that allow for the incurrence of additional indebtedness, if after giving effect to such incurrence, the coverage ratio (as defined in the Indenture, essentially a ratio of our consolidated earnings before interest expense, taxes, depreciation and amortization to fixed charges, including interest) for the trailing four quarter period on a pro forma basis would be at least 2.0 to 1.0. Should this provision prohibit the incurrence of additional debt, we may still borrow under our existing Credit Facility.

As of March 31, 2016, we believe that we were in compliance with the financial and other covenants of our debt instruments.

Other Items Affecting Liquidity We anticipate the ability to fund our capital requirements using cash flows from operations and availability under our Credit Facility. Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to us. The outcome of the specific matters discussed herein, including our commitments and contingencies, may also affect our liquidity.

22 Commitments There have been no material changes to our commitments described in our Annual Report on Form 10-K for the year ended December 31, 2015.

Off Balance Sheet Arrangements Our off balance sheet arrangements consist of the following:

Indemnification We have entered into certain agreements that contain indemnification provisions, as well as indemnification agreements involving certain of Boyd's executive officers and directors. These agreements 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, Boyd's Restated Articles of Incorporation and Restated Bylaws contain provisions that provide for indemnification of directors, officers, employees and other agents to the maximum extent permitted by law.

Outstanding Letters of Credit At March 31, 2016, we had outstanding letters of credit totaling $5.0 million.

Critical Accounting Policies There have been no material changes to our critical accounting policies described under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2015.

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

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

• The effects of intense competition that exists in the gaming industry. • The fact that our expansion, development and renovation projects (including enhancements to improve property performance) are subject to many risks inherent in expansion, development or construction of a new or existing project. • The risk that any of our projects may not be completed, if at all, on time or within established budgets, or that any project will result in increased earnings to us. • The risk that significant delays, cost overruns, or failures of any of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations. • The risk that new gaming licenses or jurisdictions become available (or offer different gaming regulations or taxes) that results in increased competition to us. • The risk that negative industry or economic trends, reduced estimates of future cash flows, disruptions to our business, slower growth rates or lack of growth in our business, may result in significant write-downs or impairments in future periods. • The risk that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines and take other adverse actions against any of our casino operations.

23 • The risk that we may be unable to refinance our outstanding indebtedness as it comes due, or that if we do refinance, the terms are not favorable to us. • The effects of the extensive governmental gaming regulation and taxation policies that we are subject to, as well as any changes in laws and regulations, including increased taxes and imposition of smoking bans, which could harm our business. • The effects of federal, state and local laws affecting our business such as the regulation of smoking, the regulation of directors, officers, key employees and partners and regulations affecting business in general. • The effects of extreme weather conditions or natural disasters on our facilities and the geographic areas from which we draw our customers, and our ability to recover insurance proceeds (if any). • The effects of events adversely impacting the economy or the regions from which we draw a significant percentage of our customers, including the effects of the recent economic recession, war, terrorist or similar activity or disasters in, at, or around our properties. • The risk that we fail to adapt our business and amenities to changing customer preferences. • Financial community and rating agency perceptions of us, and the effect of economic, credit and capital market conditions on the economy and the gaming industry. • The effect of the expansion of legalized gaming in the regions in which we operate. • The risk of failing to maintain the integrity of our information technology infrastructure and our business and customer data. • Our estimated effective income tax rates, estimated tax benefits and merits of our tax positions. • Our ability to utilize our net operating loss carryforwards and certain other tax attributes. • The risks relating to owning Boyd's equity, including price and volume fluctuations of the stock market that may harm the market price of Boyd's common stock and the potential of certain of Boyd's stockholders owning large interests in Boyd's capital stock to significantly influence our affairs. • As well as other statements regarding our future operations, financial condition and prospects and business strategies.

Additional factors that could cause actual results to differ are discussed in Part I. Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2015 and in other current and periodic reports provided from time to time. All forward- looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not hold any market risk sensitive instruments for trading purposes. Our primary exposure to market risk is interest rate risk, specifically long-term U.S. treasury rates and the applicable spreads in the high-yield investment market, short-term and long-term LIBOR rates, and short-term Eurodollar rates, and their potential impact on our long- term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term fixed-rate borrowings and short-term borrowings under our Credit Facility. We do not currently utilize derivative financial instruments for trading or speculative purposes.

As of March 31, 2016, our long-term variable-rate borrowings represented approximately 64.8% of total long-term debt. Based on March 31, 2016 debt levels, a 100 basis point increase in the Eurodollar rate or the base rate would cause the annual interest costs on the Revolving Credit Facility and Term Loan to increase by approximately $0.2 million and $2.7 million, respectively, and a 100 basis point decrease in the Eurodollar rate or the base rate would cause the annual interest costs on the Revolving Credit Facility to decrease by $0.1 million. There would be no decrease to interest costs on the Term Loan as the interest rate at March 31, 2016 was at the floor. The impact of a 100 basis point increase in the Eurodollar rate or the base rate on the Term Loan is lessened as the current Eurodollar rate at March 31, 2016 is below the established minimum 1.0% rate. The impact of a 100 basis point decrease in the Eurodollar rate or the base rate on the Revolving Credit Facility is capped as the current rate at March 31, 2016 is less than 1.0% above the lowest possible rate of 4.0%.

See also "Liquidity and Capital Resources" above.

ITEM 4. Controls and Procedures Not applicable.

24 PART II. Other Information

ITEM 1. Legal Proceedings We are parties to various legal proceedings arising in the ordinary course of business. In our opinion, all pending legal matters are either adequately covered by insurance, or, if not insured, will not have a material adverse impact on our financial position, results of operations or cash flows.

ITEM 1A. Risk Factors There were no material changes from the risk factors set forth under Part I. Item 1A “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

25 ITEM 6. Exhibits

Exhibit Number Description of Exhibit Method of Filing None

26 SIGNATURES

Each of the Company and Peninsula Gaming Corp. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 9, 2016.

PENINSULA GAMING, LLC PENINSULA GAMING CORP.

By: /s/ ANTHONY D. MCDUFFIE Anthony D. McDuffie Authorized Representative