UNITED
STATES
  SECURITIES
AND EXCHANGE COMMISSION
  WASHINGTON,
D.C. 20549
  
 FORM 10-Q
  x
              Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934For
      the quarterly period ended June 30, 2009.oro
              Transition
      Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934
  For
the transition period from
                     
to
  Commission
File Number: 333-88829
  PENINSULA
      GAMING, LLC
              
              PENINSULA
      GAMING CORP.(Exact
      name of registrants
                as
      specified in their charter)
              
              (Exact
      name of registrants
                as
      specified in their charter)DELAWARE
              
              DELAWARE(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (State
      or other jurisdiction of
                incorporation
      or organization)20-0800583
              
              25-1902805(I.R.S.
      Employer
                Identification
      No.)
              
              (I.R.S.
      Employer
                Identification
      No.)
 
 301
Bell Street
 Dubuque,
Iowa 52001
 (563)
690-4975
 (Address,
including zip code, and telephone number, including area code, of principal
executive offices)
  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 twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes o  No x
 
 Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). Yes o  No o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.:
 
 Large
Accelerated Filer o        Accelerated
Filer o        Non-Accelerated
Filer    x    Smaller
reporting company o
 
 Indicate
by check mark if the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o  No x
  All of
the common equity interests of Peninsula Gaming, LLC (the “Company”) are held by
Peninsula Gaming Partners, LLC. All of the common equity interests of Diamond
Jo, LLC, The Old Evangeline Downs, L.L.C., Diamond Jo Worth Holdings, LLC and
Peninsula Gaming Corp. are held by the Company. All of the common equity
interests of Diamond Jo Worth, LLC and Diamond Jo Worth Corp. are held by
Diamond Jo Worth Holdings, LLC.  All of the common equity interests of
AB Casino Acquisition, LLC are held by Diamond Jo, LLC.
  
 PENINSULA
GAMING, LLC
  INDEX
TO FORM 10-Q
  Part I - Financial Information
              PageItem 1 - Financial
      Statements
              3Peninsula Gaming, LLC:Condensed Consolidated Balance Sheets
      (Unaudited) as of June 30, 2009 and December 31,
      2008
              3Condensed Consolidated Statements of
      Operations (Unaudited) for the Three and Six Months Ended June 30, 2009
      and 2008
              4Condensed Consolidated
      Statement of Changes in Member's Deficit and Comprehensive Income
      (Unaudited) for the Six Months Ended June 30,
      2009
              5Condensed Consolidated Statements
      of Cash Flows (Unaudited) for the Six Months Ended June 30, 2009 and
      2008
              6Notes to Condensed
      Consolidated Financial Statements (Unaudited)
              7Item 2 - Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              23Item 3 - Quantitative and
      Qualitative Disclosures About Market Risk
              29Item 4 - Controls and
      Procedures
              30Part II - Other
      Information
              30Item 1 - Legal
      Proceedings
              30Item 1A – Risk Factors
              30Item 6 -
      Exhibits
              32Signatures
              33
 
 
 2
 
 PARTI.FINANCIAL
      INFORMATION
 ITEM 1.
      FINANCIAL STATEMENTS
  PENINSULA GAMING, LLC
 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (in
thousands)
 June
      30,
                  2009
                
                
                December 31,
                  2008ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                22,400
                
                
                $
                38,705Restricted
      cash—purse settlements
                
                
                7,506
                
                
                
                5,013Accounts
      receivable, net
                
                
                6,648
                
                
                
                5,038Receivables
      from affiliates
                
                
                175
                
                
                
                271Inventories
                
                
                1,650
                
                
                
                1,199Prepaid
      expenses and other assets
                
                
                2,255
                
                
                
                1,920Total
      current assets
                
                
                40,634
                
                
                
                52,146PROPERTY
      AND EQUIPMENT, NET
                
                
                257,411
                
                
                
                263,154OTHER
      ASSETS:Deferred
      financing costs, net of amortization of $15,783 and $14,021,
      respectively
                
                
                17,655
                
                
                
                19,174Goodwill
                
                
                53,083
                
                
                
                53,083Licenses
      and other intangibles
                
                
                39,734
                
                
                
                38,506Deposits
      and other assets
                
                
                13,054
                
                
                
                3,385Investment
      available for sale
                
                
                15,887
                
                
                
                7,828Total
      other assets
                
                
                139,413
                
                
                
                121,976TOTAL
                
                $
                437,458
                
                
                $
                437,276LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
                
                $
                4,713
                
                
                $
                4,608Construction
      payable
                
                
                986
                
                
                
                12,324Purse
      settlement payable
                
                
                9,764
                
                
                
                6,804Accrued
      payroll and payroll taxes
                
                
                5,526
                
                
                
                5,104Accrued
      interest
                
                
                7,788
                
                
                
                7,815Other
      accrued expenses
                
                
                10,907
                
                
                
                10,387Payable
      to affiliates
                
                
                4,015
                
                
                
                3,575Current
      maturities of long-term debt and leases
                
                
                4,224
                
                
                
                8,492Total
      current liabilities
                
                
                47,923
                
                
                
                59,109LONG-TERM
      LIABILITIES:8
      3/4% senior secured notes, net of discount
                
                
                253,476
                
                
                
                253,23711%
      senior secured notes, net of discount
                
                
                109,542
                
                
                
                111,25813%
      senior notes, net of discount
                
                
                6,891
                
                
                
                6,877Senior
      secured credit facilities
                
                
                38,200
                
                
                
                28,500Term
      loan
                
                
                5,952
                
                
                
                6,697Notes
      and leases payable, net of discount
                
                
                819
                
                
                
                1,229Obligation
      under Minimum Assessment Agreement
                
                
                19,075
                
                
                
                16,394Other
      liabilities
                
                
                1,782
                
                
                
                5,958Total
      long-term liabilities
                
                
                435,737
                
                
                
                430,150Total
      liabilities
                
                
                483,660
                
                
                
                489,259COMMITMENTS
      AND CONTINGENCIESMEMBER’S
      DEFICIT:Common
      member’s interest
                
                
                9,000
                
                
                
                9,000Accumulated
      deficit
                
                
                (56,165
                )
                
                
                (53,971
                )Accumulated
      other comprehensive income (loss)
                
                
                963
                
                
                
                (7,012
                )Total
      member’s deficit
                
                
                (46,202
                )
                
                
                (51,983
                )TOTAL
                
                $
                437,458
                
                
                $
                437,276
  See notes
to condensed consolidated financial statements (unaudited).
  
 3
 PENINSULA GAMING, LLC
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (in
thousands)
  Three Months
                            Ended
                            June 30, 2009
                          
                          
                          Three Months
                            Ended
                            June 30, 2008
                          
                          
                          Six Months
                            Ended
                            June 30, 2009
                          
                          
                          Six Months
                            Ended
                            June 30, 2008REVENUES:Casino
                          
                          $
                          63,898
                          
                          
                          $
                          58,663
                          
                          
                          $
                          129,655
                          
                          
                          $
                          115,083Racing
                          
                          
                          5,828
                          
                          
                          
                          6,399
                          
                          
                          
                          8,854
                          
                          
                          
                          9,716Video
      poker
                          
                          
                          1,395
                          
                          
                          
                          1,598
                          
                          
                          
                          2,979
                          
                          
                          
                          3,156Food
      and beverage
                          
                          
                          6,215
                          
                          
                          
                          4,432
                          
                          
                          
                          11,993
                          
                          
                          
                          8,188Other
                          
                          
                          2,717
                          
                          
                          
                          3,189
                          
                          
                          
                          5,058
                          
                          
                          
                          5,881Less
      promotional allowances
                          
                          
                          (6,610
                          )
                          
                          
                          (5,408
                          )
                          
                          
                          (13,126
                          )
                          
                          
                          (10,074
                          )Total
      net revenues
                          
                          
                          73,443
                          
                          
                          
                          68,873
                          
                          
                          
                          145,413
                          
                          
                          
                          131,950EXPENSES:Casino
                          
                          
                          26,560
                          
                          
                          
                          24,909
                          
                          
                          
                          53,950
                          
                          
                          
                          49,089Racing
                          
                          
                          5,041
                          
                          
                          
                          5,253
                          
                          
                          
                          7,925
                          
                          
                          
                          8,162Video
      poker
                          
                          
                          1,034
                          
                          
                          
                          1,203
                          
                          
                          
                          2,096
                          
                          
                          
                          2,329Food
      and beverage
                          
                          
                          4,269
                          
                          
                          
                          3,433
                          
                          
                          
                          8,570
                          
                          
                          
                          6,330Other
                          
                          
                          1,973
                          
                          
                          
                          2,081
                          
                          
                          
                          3,457
                          
                          
                          
                          3,503Selling,
      general and administrative
                          
                          
                          11,705
                          
                          
                          
                          3,585
                          
                          
                          
                          24,467
                          
                          
                          
                          15,579Depreciation
      and amortization
                          
                          
                          5,908
                          
                          
                          
                          5,067
                          
                          
                          
                          11,973
                          
                          
                          
                          9,930Pre-opening
      expense
                          
                          
                          -
                          
                          
                          
                          31
                          
                          
                          
                          -
                          
                          
                          
                          127Development
      expense
                          
                          
                          126
                          
                          
                          
                          (648
                          )
                          
                          
                          208
                          
                          
                          
                          (609
                          )Affiliate
      management fees
                          
                          
                          1,421
                          
                          
                          
                          1,467
                          
                          
                          
                          2,739
                          
                          
                          
                          2,837(Gain)
      loss on disposal of assets
                          
                          
                          (56
                          )
                          
                          
                          120
                          
                          
                          
                          25
                          
                          
                          
                          223Total
      expenses
                          
                          
                          57,981
                          
                          
                          
                          46,501
                          
                          
                          
                          115,410
                          
                          
                          
                          97,500INCOME
      FROM OPERATIONS
                          
                          
                          15,462
                          
                          
                          
                          22,372
                          
                          
                          
                          30,003
                          
                          
                          
                          34,450OTHER
      INCOME (EXPENSE):Interest
      income
                          
                          
                          499
                          
                          
                          
                          608
                          
                          
                          
                          1,007
                          
                          
                          
                          1,352Interest
      expense, net of amounts capitalized
                          
                          
                          (10,933
                          )
                          
                          
                          (10,072
                          )
                          
                          
                          (22,183
                          )
                          
                          
                          (20,336
                          )Total
      other expense
                          
                          
                          (10,434
                          )
                          
                          
                          (9,464
                          )
                          
                          
                          (21,176
                          )
                          
                          
                          (18,984
                          )NET
      INCOME
                          
                          $
                          5,028
                          
                          
                          $
                          12,908
                          
                          
                          $
                          8,827
                          
                          
                          $
                          15,466
  See notes
to condensed consolidated financial statements (unaudited).
  4
 
 PENINSULA
GAMING, LLC
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEMBER’S
DEFICIT
 AND
COMPREHENSIVE INCOME (UNAUDITED)
 (in
thousands)
   COMMON
                  MEMBER’S
                  INTEREST
                
                
                ACCUMULATED
                  DEFICIT
                
                
                ACCUMULATED
      OTHER COMPREHENSIVE INCOME (LOSS)
                
                
                TOTAL
                  MEMBER’S
                  DEFICIT
                
                
                COMPREHENSIVE
      INCOMEBALANCE,
      DECEMBER 31, 2008
                
                $
                9,000
                
                
                $
                (53,971
                )
                
                $
                (7,012
                )
                
                $
                (51,983
                )Net
      income
                
                
                —
                
                
                
                8,827
                
                
                
                —
                
                
                
                8,827
                
                
                $
                8,827Unrealized
      gain on available for sale investment
                
                
                —
                
                
                
                —
                
                
                
                7,975
                
                
                
                7,975
                
                
                
                7,975Member
      distributions
                
                
                —
                
                
                
                (11,021
                )
                
                
                —
                
                
                
                (11,021
                )
                
                
                —Comprehensive
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                16,802BALANCE,
      JUNE 30, 2009
                
                $
                9,000
                
                
                $
                (56,165
                )
                
                $
                963
                
                
                $
                (46,202
                )
 
  See notes
to condensed consolidated financial statements (unaudited).
 
 
 5
 PENINSULA
GAMING, LLC
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (in thousands)
  Six Months
                  Ended
                  June
      30,
                  2009
                
                
                Six Months
                  Ended
                  June
      30,
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                
                $
                8,827
                
                
                $
                15,466Adjustments
      to reconcile net income to net cash flows from operating
      activities:Depreciation
      and amortization
                
                
                11,973
                
                
                
                9,930Non-cash
      interest
                
                
                2,705
                
                
                
                2,530Non-cash
      equity based and other compensation
                
                
                613
                
                
                
                (4,737
                )Loss
      on disposal of assets
                
                
                25
                
                
                
                223Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
                
                
                (2,493
                )
                
                
                (2,524
                )Receivables
                
                
                (2,549
                )
                
                
                (1,962
                )Inventories
                
                
                (451
                )
                
                
                (95
                )Prepaid
      expenses and other assets
                
                
                774
                
                
                
                (1,100
                )Accounts
      payable
                
                
                2,694
                
                
                
                4,803Accrued
      expenses
                
                
                840
                
                
                
                (1,850
                )Payable
      to affiliates
                
                
                522
                
                
                
                (659
                )Net
      cash flows from operating activities
                
                
                23,480
                
                
                
                20,025CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
                
                
                (195
                )
                
                
                (104
                )Business
      acquisition and licensing costs
                
                
                (1,246
                )
                
                
                (1,258
                )Deposit
      under purchase agreement
                
                
                (10,000
                )
                
                
                —Construction
      project development costs
                
                
                (15,054
                )
                
                
                (20,051
                )Purchase
      of property and equipment
                
                
                (4,785
                )
                
                
                (4,084
                )Proceeds
      from sale of property and equipment
                
                
                669
                
                
                
                -Net
      cash flows from investing activities
                
                
                (30,611
                )
                
                
                (25,497
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
                
                
                (17
                )
                
                
                (159
                )Principal
      payments on debt
                
                
                (5,222
                )
                
                
                (2,883
                )Proceeds
      from senior credit facilities
                
                
                29,700
                
                
                
                4,500Payments
      on senior credit facilities
                
                
                (22,000
                )
                
                
                (4,500
                )Proceeds
      from term loan
                
                
                —
                
                
                
                1,023Member
      distributions
                
                
                (11,635
                )
                
                
                (2,133
                )Net
      cash flows from financing activities
                
                
                (9,174
                )
                
                
                (4,152
                )NET
      DECREASE IN CASH AND CASH EQUIVALENTS
                
                
                (16,305
                )
                
                
                (9,624
                )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                
                
                38,705
                
                
                
                42,100CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                
                $
                22,400
                
                
                $
                32,476SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for interest
                
                $
                19,570
                
                
                $
                18,757SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING
    ACTIVITIES:Property
      and equipment acquired, but not paid
                
                $
                2,311
                
                
                $
                12,094Property
      and equipment acquired in exchange for obligation under Minimum Assessment
      Agreement
                
                
                1,989
                
                
                
                3,506Unrealized
      gain (loss) on available for sale investment
                
                
                7,975
                
                
                
                (853
                )Liability
      settled in exchange for property and equipment
                
                
                4,104
                
                
                
                -
 
  See notes
to condensed consolidated financial statements (unaudited).
  6
 
 PENINSULA
GAMING, LLC
  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
  1. Organization and Basis of
      Presentation
  Peninsula
Gaming, LLC (“PGL” or the “Company”), a Delaware limited liability company, is a
casino entertainment holding company with gaming operations in local markets in
Iowa and Louisiana. PGL’s wholly owned operating subsidiaries consist of:
(i) Diamond Jo, LLC, a Delaware limited liability company (“DJL”), that
owns and operates the Diamond Jo casino in Dubuque, Iowa; (ii) The Old
Evangeline Downs, L.L.C., a Louisiana limited liability company (“EVD”), that
owns and operates the Evangeline Downs Racetrack and Casino, or racino, in St.
Landry Parish, Louisiana and four off-track betting (“OTB”) parlors in
Louisiana; and (iii) Diamond Jo Worth, LLC, a Delaware limited liability
company (“DJW”), that owns and operates the Diamond Jo casino in Worth County,
Iowa. The Company is a wholly owned subsidiary of Peninsula Gaming Partners, LLC
(“PGP”), a Delaware limited liability company.
 
 Other
wholly owned subsidiaries of PGL include:  (i) Peninsula Gaming
Corp. (“PGC”), a Delaware corporation with no assets or operations formed solely
to facilitate the offering of the Company’s 8 3/4% senior secured notes due 2012
(the “Peninsula Gaming Notes”); (ii) DJW Corp. (“DJWC”), a Delaware
corporation with no assets or operations formed solely to facilitate the
offering by DJW of its 11% senior secured notes due 2012 (the “DJW Notes”); and
(iii) AB Casino Acquisition, LLC, a Delaware limited liability company (“AB
Acquisition”), formed solely to facilitate the proposed acquisition of the Belle
of Orleans, L.L.C. dba Amelia Belle Casino (“Amelia Belle”) located in Amelia,
Louisiana (the “Proposed Amelia Belle Acquisition”).
  In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of normal recurring entries
unless otherwise disclosed, necessary to present fairly the financial
information of the Company for the interim periods presented and have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The interim results reflected in the financial
statements are not necessarily indicative of results expected for the full year
or other periods.
  The
financial statements contained herein should be read in conjunction with the
audited financial statements and accompanying notes to the financial statements
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008. Accordingly, footnote disclosure which would
substantially duplicate the disclosure in the audited financial statements has
been omitted in the accompanying unaudited financial statements.
 
 The
Company has evaluated all subsequent events that occurred up to the time of the
Company’s issuance of its financial statements on August 13, 2009.
 
 Recent
Developments
 
 On June
18, 2009, PGP and AB Acquisition entered into a definitive purchase agreement
(the “Purchase Agreement”) with Columbia Properties New Orleans, L.L.C. to
purchase 100% of the outstanding limited liability company interest of Amelia
Belle for $106.5 million, subject to certain adjustments.  In
accordance with the terms of the Purchase Agreement, AB Acquisition deposited
$10.0 million in escrow, which amount will be credited toward the purchase price
at closing.  The Proposed Amelia Belle Acquisition will be
financed with a portion of the proceeds from the issuance of senior secured and
unsecured notes by PGL in August 2009 (the “New PGL Notes”).  See
Note 10 below for more information on the issuance of the New PGL Notes and
related transactions.  Completion of the acquisition is subject to, among
other matters, regulatory approval.
  2. Summary of Significant
      Accounting Policies
  Obligation Under
Minimum Assessment Agreement— On October 1, 2007, DJL entered into
the Amended and Restated Port of Dubuque Public Parking Facility Development
Agreement (“Development Agreement”) with the City of Dubuque, Iowa (“City”)
regarding, among other things, the design, development, construction and
financing of the public parking facility located adjacent to DJL’s new
land-based casino. The City issued $23.0 million principal amount of 7.5% Urban
Renewal Tax Increment Revenue Bonds, Taxable Series 2007 (“City Bonds”) to fund,
in part, the construction of the facility. Due to DJL’s expected use of the
public parking facility and its obligations under a Minimum Assessment Agreement
with the City, combined with the Company’s guarantee of DJL’s obligation under
the Minimum Assessment Agreement, DJL will record an obligation to the City to
the extent proceeds from the City Bonds are used to construct the parking
facility.  As of June 30, 2009 and December 31, 2008, approximately
$19.1 million and $16.4 million, respectively, of proceeds from the City Bonds
had been used related to the construction of the parking facility which amount
was recorded as a long-term obligation of DJL on the balance sheet. The
obligation, along with related interest costs, are expected to be paid off over
the life of the City Bonds through payments from DJL under the Minimum
Assessment Agreement.
  Licenses—The
Company’s gaming licenses require renewals in the State of Iowa annually and
every five years in the State of Louisiana.  EVD’s horse racing
license requires renewal annually.  Renewal costs are expensed as
incurred.  The Company’s renewal experience is that renewals will be
granted except under extraordinary circumstances.
 
 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 periods. Actual results could differ
from those estimates. Significant estimates involve the intrinsic values of
equity based compensation, the fair values of an embedded derivative and the DJW
investment in City Bonds, the periodic review of the carrying value of assets
for impairment, the estimated useful lives for depreciable assets, and the
estimated liabilities for slot club awards and customer legal
disputes.
 
 7
 
 Recently Issued
Accounting Standards— In June 2009, the Financial Accounting
Standards Board (“FASB”) issued Statement of Financial Accounting Standards
(“SFAS”) No. 168, FASB
Accounting Standards Codification(“Codification”)and the Hierarchy of Generally
Accepted Accounting Principles ("GAAP") – a replacement of FASB Statement No.
162(“SFAS 168”).   The purpose of the Codification is to
provide a single source of authoritative U.S. GAAP.  SFAS 168 is
effective for the Company in the third quarter of 2009.  As the
codification was not intended to change or alter existing GAAP, the adoption of
SFAS 168 is not expected to have a material effect on the Company’s financial
statements.
 
 In May
2009, the FASB issued SFAS No. 165, Subsequent
Events.  The purpose of the new statement is to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued.  The new standard was adopted in the second
quarter of 2009.  The adoption of SFAS No. 165 did not have a material
effect on the Company’s financial statements.
 
 In
April 2009, the FASB issued three FASB Staff Positions (“FSP”) intended to
provide additional application guidance and enhanced disclosures regarding fair
value measurements and impairments of securities. FSP No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, provides
additional guidelines for estimating fair value in accordance with SFAS
No. 157, Fair Value
Measurements.FSP No. 115-2, Recognition and Presentation of
Other-Than-Temporary Impairments, provides additional guidance related to
the disclosure of impairment losses on securities and the accounting for
impairment losses on debt securities. FSP No. 115-2 does not amend existing
guidance related to other-than-temporary impairments of equity securities. FSP
No. 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1,
Interim Disclosures about Fair
Value of Financial Instruments, increases the frequency of fair value
disclosures. These FSPs are effective for fiscal years and interim periods ended
after June 15, 2009. The Company adopted these FSPs effective
June 30, 2009. The adoption of these FSP’s did not have a material impact
on the Company’s financial statements.
 
 In April
2008, the FASB released staff position (“FSP”) No. 142-3, Determination of the Useful Life of
Intangible Assets.  The FSP requires entities to disclose
information for recognized intangible assets that enable users of financial
statements to understand the extent to which expected future cash flows
associated with intangible assets are affected by the entity’s intent or ability
to renew or extend the arrangement associated with the intangible
asset.  The FSP also amends the factors an entity should consider in
developing the renewal or extension assumptions used in determining the useful
life of recognized intangible assets under SFAS No. 142, Goodwill and Other Intangible
Assets.  The FSP applies prospectively to intangible assets
acquired after the FSP’s effective date, but the disclosure requirements applies
prospectively to all intangible assets recognized as of, and after, the FSP’s
effective date.  The FSP was effective for fiscal years beginning
after December 15, 2008, with early adoption prohibited.  The Company
adopted FSP No. 142-3 on January 1, 2009 and the adoption did not have a
material effect on the Company’s financial statements.
 
 In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133 (“SFAS 161”). SFAS 161 requires, among other things, enhanced
disclosure about the volume and nature of derivative and hedging activities and
a tabular summary showing the fair value of derivative instruments included in
the balance sheet and statement of operations. SFAS 161 also requires expanded
disclosure of contingencies included in derivative instruments related to
credit-risk. SFAS 161 was effective for fiscal years and interim periods
beginning after November 15, 2008. The Company adopted SFAS 161 on January 1,
2009 and the adoption did not have a material effect on the Company’s financial
statements.  See Note 5 for further information.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
141R”). SFAS 141R significantly changes the way companies account for business
combinations and will generally require more assets acquired and liabilities
assumed to be measured at their acquisition-date fair value. Under SFAS 141R,
legal fees and other transaction-related costs are expensed as incurred and are
no longer included as a cost of acquiring the business. SFAS 141R also requires,
among other things, acquirers to estimate the acquisition-date fair value of any
contingent consideration and to recognize any subsequent changes in the fair
value of contingent consideration in earnings. In addition, restructuring costs
the acquirer expected, but was not obligated to incur, will be recognized
separately from the business acquisition. SFAS 141R applies to the Company
prospectively for business combinations occurring on or after January 1, 2009.
The Company expects SFAS 141R will have an impact on accounting for business
combinations, but the effect will be dependent upon any potential future
acquisition.
 
 In
February 2008, the FASB issued FSP No. 157-2, Effective Date of FASB Statement
No. 157, which amends SFAS No. 157 by delaying its effective
date by one year for non-financial assets and non-financial liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis. Therefore, beginning on January 1, 2009, this
standard applies prospectively to fair value measurements of non-financial
assets and non-financial liabilities. The Company adopted FSP No. 157-2 on
January 1, 2009 and the adoption did not have a material effect on the Company’s
financial statements.
 
 3. Property and
Equipment
  Property
and equipment at June 30, 2009 and December 31, 2008 is summarized as
follows (in thousands):
  June
      30,
                  2009
                
                
                December 31,
                  2008Land
      and land improvements
                
                $
                18,501
                
                
                $
                18,118Buildings
      and improvements
                
                
                220,817
                
                
                
                201,421Furniture,
      fixtures and equipment
                
                
                82,690
                
                
                
                81,449Computer
      equipment
                
                
                10,986
                
                
                
                11,009Vehicles
                
                
                645
                
                
                
                404Construction
      in progress
                
                
                3,232
                
                
                
                26,582Subtotal
                
                
                336,871
                
                
                
                338,983Accumulated
      depreciation
                
                
                (79,460
                )
                
                
                (75,829
                )Property
      and equipment, net
                
                $
                257,411
                
                
                $
                263,154
 
 Depreciation
and amortization expense for the three months ended June 30, 2009 and 2008 was
$5.9 million and $5.1 million, respectively.  Depreciation and
amortization expense for the six months ended June 30, 2009 and 2008 was $12.0
million and $9.9 million, respectively.
  The
Company capitalizes interest costs associated with debt incurred in connection
with significant construction projects. The amount capitalized during the three
months ended June 30, 2008 was $0.6 million.  The amount capitalized
during the six months ended June 30, 2008 was $0.9 million.  There was
no capitalized interest during the three and six months ended June 30,
2009.
 
 8
 In
connection with DJL’s casino development, DJL began accelerating depreciation on
long-lived assets with a net book value of approximately $4.5 million that were
either contributed to the Historical Society in January 2009 or were not
utilized at its new land-based casino and were disposed in January
2009.  Accelerated depreciation on these assets began during the
fourth quarter of 2006, and DJL continued to depreciate the remaining net book
value of those assets, less their estimated fair market value at the date of
contribution or estimated net realizable value, through the period that DJL
commenced operations at the new facility.  Depreciation expense for
the three and six months ended June 30, 2008 increased by approximately $0.3
million and $0.5 million, respectively, as a result of accelerated depreciation
on these assets.
  In April
2009, EVD entered into a ground lease with a third party to design, develop,
construct and operate a hotel with a minimum of 100 rooms adjacent to the racino
on land owned by EVD (“Ground Lease”).  The hotel is expected to include at
least 25 suites, five meeting rooms and an indoor pool.  Under the
terms of the Ground Lease, EVD will lease the land on which the hotel will be
located for a lease fee of 2% of gross revenue of the hotel. The agreement
also contains a purchase option which allows EVD to purchase the hotel from the
third party operator.  The Ground Lease is conditioned upon the third party
operator obtaining financing for the project.  If the financing
contingency is satisfied, EVD will impair $1.4 million of capitalized
design and development costs already incurred related to the hotel project which
will not be utilized by the third party operator.  EVD expects a
resolution to the financing contingency in the third quarter of
2009.
 
 4. Debt
  Long-term
debt consists of the following (in thousands):
  June
      30,
                  2009
                
                
                December 31,
                  20088
      3/4% senior secured notes due April 15, 2012, net of discount of
      $1,524 and $1,763, respectively, secured by substantially all the assets
      of PGL, DJL and EVD and the equity of DJL and EVD
                
                $
                253,476
                
                
                $
                253,23711%
      senior secured notes of DJW due April 15, 2012, net of discount of
      $487 and $568, respectively, secured by substantially all the assets of
      DJW and the equity of DJW and DJWC
                
                
                109,542
                
                
                
                111,25813%
      senior notes of EVD due March 1, 2010 with contingent interest, net
      of discount of $19 and $33, respectively
                
                
                6,891
                
                
                
                6,877$65,000
      revolving line of credit under a loan and security agreement of DJL and
      EVD with Wells Fargo Foothill, Inc., interest rate at prime plus a margin
      of 2.5% with a floor of 6.0% (current rate of 6.0% at June 30, 2009),
      maturing January 15, 2012, secured by substantially all assets of DJL and
      EVD
                
                
                38,200
                
                
                
                28,500$5,000
      revolving line of credit under a loan and security agreement of DJW with a
      bank, interest rate at prime less a margin of 1.0% with a floor of 5.0%
      (current rate of 5.0% at June 30, 2009), maturing March 31, 2010,
      secured by substantially all the assets of DJW and guaranteed by the
      Company’s Chief Executive Officer
                
                
                -
                
                
                
                2,000Term
      loan under a loan and security agreement of PGL, DJL and EVD with American
      Trust & Savings Bank, interest rate 6.5%, due in installments through
      December 1, 2013, secured by certain assets of DJL
                
                
                7,416
                
                
                
                8,000Notes
      payable and capital lease obligations, net of discount of $59 and $170,
      respectively, interest rates at 6% - 8 3/4%, due 2009 –
      2011
                
                
                3,579
                
                
                
                6,418Total
      debt
                
                
                419,104
                
                
                
                416,290Less
      current portion
                
                
                (4,224
                )
                
                
                (8,492
                )Total
      long term debt
                
                $
                414,880
                
                
                $
                407,798
 
 Pursuant
to the indenture governing the DJW Notes, DJW is required to offer to buy back a
portion of the DJW Notes on a semi-annual basis at a premium of 7.5%, beginning
March 31, 2007, with 50% of Excess Cash Flow (as defined
therein).  DJW redeemed $1.8 million principal amount of DJW Notes,
plus applicable premium and accrued interest, in May 2009 based on the Excess
Cash Flow provision.
  As of
June 30, 2009, the Company had $38.2 million of outstanding advances under its
$65.0 million senior secured credit facility (“PGL Credit Facility”). As of June
30, 2009, DJW had no outstanding advances under its $5.0 million senior secured
credit facility (“DJW Credit Facility”). In addition, as of June 30, 2009, the
Company had outstanding letters of credit under the PGL Credit Facility and the
DJW Credit Facility of approximately $0.9 million and $0.7 million,
respectively, resulting in available borrowings thereunder of $25.9 million and
$4.3 million, respectively.
  As of
June 30, 2009, the Company was in compliance with the terms of the agreements
governing its outstanding indebtedness.
 
 In
connection with the refinancing of the Company’s existing senior notes in August
2009, the DJW Notes were redeemed in full and the Peninsula Gaming Notes and the
13% senior notes will be redeemed in September 2009.  See Note 10
below for more information relating to such refinancing.
  5. Fair Value
Measurements
  Under
generally accepted accounting principles, certain assets and liabilities must be
measured at fair value. Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date (an exit price). The Company has two
financial instruments that must be measured at fair value in the financial
statements: (i) an available for sale investment and (ii) a derivative. The
Company currently does not have non-financial assets and non-financial
liabilities that are required to be measured at fair value.
 
 SFAS 157,
Fair Value Measurements, establishes a valuation hierarchy for disclosure of the
inputs to valuation used to measure fair value.  This hierarchy
prioritizes these inputs into three broad levels.  The three levels
are as follows:
 
 Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement
date;
 
 Level
2-Inputs include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are observable for the
asset or liability (i.e., interest rates, yield curves, etc.), and inputs that
are derived principally from or corroborated by observable market data by
correlation or other means (market corroborated inputs); and
 
 Level
3-Unobservable inputs that reflect the Company’s estimate about the assumptions
that market participants would use in pricing the asset or liability. The
Company develops these inputs based on the best information available, including
its own data.
 
 9
 The
Company had no Level 1 or Level 2 financial instruments at June 30, 2009 and
December 31, 2008. The Company had two Level 3 financial instruments at June 30,
2009 and December 31, 2008.  In accordance with the fair value
hierarchy described above, the following table shows the fair value of the
Company’s Level 3 financial assets and liabilities that are required to be
measured at fair value as of June 30, 2009 and December 31, 2008, which are
classified as “Investment available for sale” and “Other long-term
liabilities/Other accrued liabilities (short-term portion)” (in
thousands):
 
 Total
      Carrying Value at June 30, 2009
                
                
                Fair
      Value Measurements at June 30, 2009
                
                
                Total
      Carrying Value at December 31, 2008
                
                
                Fair
      Value Measurements at December 31, 2008Investment
      available for sale
                
                $
                15,887
                
                
                $
                15,887
                
                
                $
                7,828
                
                
                $
                7,828Derivative
      liability, not designated as a hedging instrument
                
                
                (826
                )
                
                
                (826
                )
                
                
                (790
                )
                
                
                (790
                )
 
 The
following table summarizes the changes in fair value of the Company’s Level 3
assets and liabilities for the three months ended June 30, 2009 and 2008 (in
thousands):
 Three
      Months Ended June 30, 2009
                
                Three
      Months Ended June 30, 2008Investment
      available for sale
                
                Derivative
                  liability,
      not designated as a hedging instrument
                
                Investment
      available
                  for
      sale
                
                Derivative liability,
      not designated as a hedging instrumentBalance
      at beginning of the reporting period
                
                $
                11,973
                
                
                $
                (929
                )
                
                $
                12,527
                
                
                $
                (1,199
                )Total
      gains (losses) (realized or unrealized):Included
      in earnings
                
                
                42
                
                
                
                (32
                )
                
                
                37
                
                
                
                (29
                )Included
      in other comprehensive income (loss)
                
                
                3,872
                
                
                
                -
                
                
                
                (853
                )
                
                
                -Transfers
      in or out of Level 3
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Purchases,
      sales, issuances and settlements
                
                
                -
                
                
                
                135
                
                
                
                -
                
                
                
                103Ending
      balance at June 30, 2009 and 2008
                
                $
                15,887
                
                
                $
                (826
                )
                
                $
                11,711
                
                
                $
                (1,125
                )Gains
      (losses) included in earnings attributable to the
    change
                Included
      in interest income
                
                Included
      in interest expense
                
                Included
      in interest income
                
                Included
      in interest expensein
      unrealized gains or losses relating to
      assets/liabilitiesstill
      held at the reporting date
                
                $
                42
                
                
                $
                (32
                )
                
                $
                37
                
                
                $
                (29
                )
 
 The
following table summarizes the changes in fair value of the Company’s Level 3
assets and liabilities for the six months ended June 30, 2009 and 2008 (in
thousands):
 Six
      Months Ended June 30, 2009
                
                Six
      Months Ended June 30, 2008Investment
      available for sale
                
                Derivative
                  liability,
      not designated as a hedging instrument
                
                Investment
      available
                  for
      sale
                
                Derivative liability,
      not designated as a hedging instrumentBalance
      at beginning of the year
                
                $
                7,828
                
                
                $
                (790
                )
                
                $
                12,491
                
                
                $
                (1,252
                )Total
      gains (losses) (realized or unrealized):Included
      in earnings
                
                
                84
                
                
                
                (171
                )
                
                
                73
                
                
                
                24Included
      in other comprehensive income (loss)
                
                
                7,975
                
                
                
                -
                
                
                
                (853
                )
                
                
                -Transfers
      in or out of Level 3
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Purchases,
      sales, issuances and settlements
                
                
                -
                
                
                
                135
                
                
                
                -
                
                
                
                103Ending
      balance at June 30, 2009 and 2008
                
                $
                15,887
                
                
                $
                (826
                )
                
                $
                11,711
                
                
                $
                (1,125
                )Gains
      (losses) included in earnings attributable to the
    change
                Included
      in interest income
                
                Included
      in interest expense
                
                Included
      in interest income
                
                Included
      in interest expensein
      unrealized gains or losses relating to
      assets/liabilitiesstill
      held at the reporting date
                
                $
                84
                
                
                $
                (171
                )
                
                $
                73
                
                
                $
                24
  Comprehensive
income for the three months ended June 30, 2009  and 2008 and the six
months ended June 30, 2009 and 2008 was $8.9 million, $12.1 million, $16.8
million and $14.6 million, respectively.
  DJW holds
an investment in a single municipal bond issuance that is classified as
available for sale and is recorded at fair value.  DJW is the only
holder of this instrument and there is no quoted market price for this
instrument.  The estimate of the fair value of such investment was
determined using a combination of current market rates and estimates of market
conditions for instruments with similar terms, maturities, and degrees of risk
and also on the fair value of the Peninsula Gaming Notes due to the PGL guaranty
of DJL’s obligation under the minimum assessment agreement, adjusted for credit
default differences between the two securities.  Unrealized gains and
losses on this instrument resulting from changes in the fair value of the
instrument are not charged to earnings, but rather are recorded as other
comprehensive income (loss) in the member’s deficit section of the Company’s
balance sheet.  The discount associated with this investment is
netted with the investment on the balance sheet 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 statement of
operations.
  10
 Under the
indenture governing the DJW Notes, DJW must offer to buy back a portion of the
DJW Notes on a semi-annual basis with 50% of Excess Cash Flow (as defined
therein) at a premium of 7.5%. Such obligation was determined to be an embedded
derivative and was fair valued and separated from the DJW Notes at date of
issuance since it was not clearly and closely related to the DJW
Notes.  The fair value of the put option was determined to be the
present value of the estimated premium payments through the maturity date of the
DJW Notes. The fair value is calculated using estimated future cash flows
developed by the Company to estimate the portion of the DJW Notes that would be
subject to the contingent put option, yields of comparable financial
instruments, the remaining date to maturity of the DJW Notes and based on
historical experience that the holders of the notes will elect to be paid the
contingent put option. The fair value of the put option is revalued at the end
of each reporting period with a corresponding charge (benefit) to interest
expense.
 
 In
connection with the refinancing of the Company’s existing senior notes in August
2009, the DJW Notes were redeemed in full.  See Note 10 below for more
information relating to such refinancing and redemption of the DJW
Notes.
  6. Commitments and
      Contingencies
  Under the
Company’s and PGP’s operating agreements, the Company and PGP have agreed,
subject to a few exceptions, to indemnify and hold harmless PGP and PGP’s
members from liabilities incurred as a result of their positions as sole manager
of the Company and as members of PGP, respectively.
  In
October 2003, EVD filed a Petition for Declaratory Judgment in St. Landry
Parish, Louisiana, naming as opposing parties the St. Landry Parish School Board
and the City of Opelousas regarding the payment of sales and use tax by
EVD.   In July 2009, the sales and use tax dispute with St.
Landry Parish and the City of Opelousas was settled.  As a result of the
settlement, EVD recorded a credit to operating expenses, interest expense and
property and equipment of $0.3 million, $0.3 million and $0.1 million,
respectively, during the second quarter of 2009.
  Neither
the Company nor its subsidiaries are parties to any pending legal proceedings
other than litigation arising in the normal course of
business.  Management does not believe that adverse determinations in
any or all such litigation would have a material adverse effect on the Company’s
financial condition, results of operations or cash flows.
  7. Related Party
Transactions
  During
the three months ended June 30, 2009 and 2008 and the six months ended June 30,
2009 and 2008, the Company paid distributions of $0.9 million, $1.3 million,
$1.6 million and $2.1 million, respectively, to PGP primarily for
(i) certain consulting and financial advisory services related to PGP’s
development expenses, (ii) board fees and actual out-of-pocket expenses
incurred by members of the board of managers of PGP and (iii) tax,
accounting, legal and administrative costs and expenses related to PGP. These
amounts were recorded as member distributions. In addition, during the three
months ended June 30, 2009, the Company made a $10.0 million cash member
distribution to PGP, which was subsequently re-contributed by PGP to the Company
in July 2009.
  During
the three months ended June 30, 2009 and 2008 and the six months ended June 30,
2009 and 2008, the Company expensed $0.1 million, $0.1 million, $0.2 million and
$0.2 million, respectively, as affiliate management fees related to other
compensation and board fees payable to board members of PGP representing
services provided to PGL.
  In
accordance with a management services agreement between OED Acquisition LLC
(“OEDA”), a wholly owned subsidiary of PGP, and EVD, under which EVD pays to
OEDA a base management fee of 0.44% of net revenue (less net food and beverage
revenue) plus an incentive fee ranging from 3% to 5% based on earnings before
interest, taxes, depreciation, amortization and non-recurring charges, EVD
expensed $0.2 million, $0.2 million, $0.4 million and $0.5 million in affiliate
management fees payable to OEDA during the three months ended June 30, 2009 and
2008 and the six months ended June 30, 2009 and 2008, respectively.
  In
accordance with a management services agreement between DJW and PGP under which
DJW pays to PGP a base management fee of 1.75% of net revenue (less net food and
beverage revenue) plus an incentive fee ranging from 3% to 5% based on earnings
before interest, taxes, depreciation, amortization and non-recurring charges,
DJW expensed management fees of $0.6 million, $0.7 million, $1.2 million and
$1.2 million during the three months ended June 30, 2009 and 2008 and the six
months ended June 30, 2009 and 2008, respectively.
  EVD and
PGP are parties to a consulting agreement with a board member of PGP. Under such
consulting agreement, the board member is entitled to a fee equal to 2.5% of
EVD’s and DJW’s earnings before interest, taxes, depreciation, amortization and
non-recurring charges during the preceding calendar year. In connection with
this agreement, (i) EVD expensed $0.3 million, $0.3 million, $0.5 million and
$0.5 million of affiliate management fees during the three months ended June 30,
2009 and 2008 and the six months ended June 30, 2009 and 2008, respectively, and
(ii) DJW expensed $0.2 million, $0.2 million, $0.4 million and $0.4 million of
affiliate management fees for the three months ended June 30, 2009 and 2008 and
the six months ended June 30, 2009 and 2008, respectively.
  On a
quarterly basis, the Company estimates the fair value of all incentive units
granted under PGP’s Amended and Restated 2004 Incentive Unit Plan (the “IUP”)
that have a put option and compares that value to the value of such incentive
units at the date of grant. The value of the incentive units is primarily
determined on a discounted cash flow basis discounted for a minority
interest.  Any appreciation or depreciation in the value of the
incentive units is expensed or credited to an expense based on the percentage of
the grant vested. The Company expensed less than $0.1 million during the three
months ended June 30, 2009 and $0.4 million during the six months ended June 30,
2009 with respect to these incentive units.  The Company recorded a
credit to expense of $6.9 million and $4.9 million during the three months and
the six months ended June 30, 2008 with respect to these incentive
units.
  11
 8. Segment
Information
  The
Company is organized around geographical areas and operates three reportable
segments: (1) Diamond Jo operations, which comprise the Diamond Jo casino
operations in Dubuque, Iowa, (2) Diamond Jo Worth operations, which
comprise the Diamond Jo Worth casino operations in Worth County, Iowa, and
(3) Evangeline Downs operations, which comprise the casino, racetrack and
OTBs operated by EVD in Louisiana.
  The
accounting policies for each segment are the same as those described in Note 2
above and in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008. The Company evaluates performance and allocates
resources based upon, among other considerations, segment operating earnings (as
defined below).
  The
tables below present information about reported segments as of and for the three
and six months ended June 30, 2009 and 2008 (in thousands):
  Net Revenues
      From External Customers
                    Three Months Ended June 30,
                  
                  
                  Net Revenues
      From External Customers
                    Six Months Ended June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Diamond
      Jo Dubuque
                  
                  $
                  17,933
                  
                  
                  $
                  10,466
                  
                  
                  $
                  37,666
                  
                  
                  $
                  20,091Diamond
      Jo Worth
                  
                  
                  21,644
                  
                  
                  
                  22,059
                  
                  
                  
                  41,709
                  
                  
                  
                  42,218Evangeline
      Downs
                  
                  
                  33,866
                  
                  
                  
                  36,348
                  
                  
                  
                  66,038
                  
                  
                  
                  69,641Total
                  
                  $
                  73,443
                  
                  
                  $
                  68,873
                  
                  
                  $
                  145,413
                  
                  
                  $
                  131,950
  
 Segment Operating Earnings
                    Three Months Ended June 30, (1)
                  
                  
                  Segment Operating Earnings
                    Six Months Ended June 30, (1)2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Diamond
      Jo Dubuque
                  
                  $
                  5,823
                  
                  
                  $
                  3,455
                  
                  
                  $
                  12,359
                  
                  
                  $
                  6,303Diamond
      Jo Worth
                  
                  
                  8,761
                  
                  
                  
                  8,780
                  
                  
                  
                  16,561
                  
                  
                  
                  16,564Evangeline
      Downs
                  
                  
                  9,803
                  
                  
                  
                  10,624
                  
                  
                  
                  19,588
                  
                  
                  
                  21,522Total
      Property Segment Operating Earnings (1)
                  
                  
                  24,387
                  
                  
                  
                  22,859
                  
                  
                  
                  48,508
                  
                  
                  
                  44,389General
      corporate
                  
                  
                  (1,527
                  )
                  
                  
                  (1,312
                  )
                  
                  
                  (3,142
                  )
                  
                  
                  (2,343
                  )Total
      Segment Operating Earnings (1)
                  
                  
                  22,860
                  
                  
                  
                  21,547
                  
                  
                  
                  45,366
                  
                  
                  
                  42,046General
      corporate:Non-cash
      equity based compensation
                  
                  
                  1
                  
                  
                  
                  6,862
                  
                  
                  
                  (418
                  )
                  
                  
                  4,912Depreciation
      and amortization
                  
                  
                  (29
                  )
                  
                  
                  (11
                  )
                  
                  
                  (56
                  )
                  
                  
                  (23
                  )Affiliate
      management fees
                  
                  
                  (98
                  )
                  
                  
                  (90
                  )
                  
                  
                  (195
                  )
                  
                  
                  (175
                  )Interest
      income
                  
                  
                  —
                  
                  
                  
                  4
                  
                  
                  
                  —
                  
                  
                  
                  68AB
      Casino Acquisition:Development
      expense
                  
                  
                  (73
                  )
                  
                  
                  —
                  
                  
                  
                  (73
                  )
                  
                  
                  —Diamond
      Jo Dubuque:Depreciation
      and amortization
                  
                  
                  (2,317
                  )
                  
                  
                  (765
                  )
                  
                  
                  (4,371
                  )
                  
                  
                  (1,560
                  )Pre-opening
      expense
                  
                  
                  —
                  
                  
                  
                  (32
                  )
                  
                  
                  —
                  
                  
                  
                  (87
                  )Development
      expense
                  
                  
                  —
                  
                  
                  
                  649
                  
                  
                  
                  —
                  
                  
                  
                  641Gain
      (loss) on disposal of assets
                  
                  
                  (8
                  )
                  
                  
                  (55
                  )
                  
                  
                  1
                  
                  
                  
                  (48
                  )Interest
      expense, net
                  
                  
                  (3,689
                  )
                  
                  
                  (2,311
                  )
                  
                  
                  (7,287
                  )
                  
                  
                  (4,829
                  )Diamond
      Jo Worth:Depreciation
      and amortization
                  
                  
                  (1,850
                  )
                  
                  
                  (2,296
                  )
                  
                  
                  (4,035
                  )
                  
                  
                  (4,424
                  )Pre-opening
      expense
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (32
                  )Affiliate
      management fees
                  
                  
                  (861
                  )
                  
                  
                  (872
                  )
                  
                  
                  (1,625
                  )
                  
                  
                  (1,654
                  )Loss
      on disposal of assets
                  
                  
                  (29
                  )
                  
                  
                  (21
                  )
                  
                  
                  (84
                  )
                  
                  
                  (48
                  )Interest
      expense, net
                  
                  
                  (2,925
                  )
                  
                  
                  (3,032
                  )
                  
                  
                  (5,938
                  )
                  
                  
                  (5,991
                  )Evangeline
      Downs:Depreciation
      and amortization
                  
                  
                  (1,712
                  )
                  
                  
                  (1,995
                  )
                  
                  
                  (3,511
                  )
                  
                  
                  (3,923
                  )Pre-opening
      expense
                  
                  
                  —
                  
                  
                  
                  1
                  
                  
                  
                  —
                  
                  
                  
                  (8
                  )Development
      expense
                  
                  
                  (53
                  )
                  
                  
                  (1
                  )
                  
                  
                  (135
                  )
                  
                  
                  (32
                  )Affiliate
      management fees
                  
                  
                  (462
                  )
                  
                  
                  (505
                  )
                  
                  
                  (919
                  )
                  
                  
                  (1,008
                  )Gain
      (loss) on disposal of assets
                  
                  
                  93
                  
                  
                  
                  (44
                  )
                  
                  
                  58
                  
                  
                  
                  (127
                  )Interest
      expense, net
                  
                  
                  (3,820
                  )
                  
                  
                  (4,125
                  )
                  
                  
                  (7,951
                  )
                  
                  
                  (8,232
                  )Net
      income
                  
                  $
                  5,028
                  
                  
                  $
                  12,908
                  
                  
                  $
                  8,827
                  
                  
                  $
                  15,466
  (1)
              Segment
      operating earnings is defined as net income plus non-cash equity based
      compensation, depreciation and amortization, pre-opening expense,
      development expense, affiliate management fees, loss on disposal of
      assets, and interest expense, net, less gain on disposal of assets.
      Segment operating earnings for the three and six months ended June 30,
      2008 have been adjusted to exclude non-cash equity based compensation to
      conform with the presentation of the three and six months ended June 30,
      2009.
 
 12
  
 Total AssetsJune
      30,
                    2009
                  
                  
                  December 31,
                    2008General
      corporate
                  
                  $
                  1,477
                  
                  
                  $
                  969Diamond
      Jo Dubuque
                  
                  
                  182,623
                  
                  
                  
                  192,999Diamond
      Jo Worth
                  
                  
                  92,274
                  
                  
                  
                  97,017Evangeline
      Downs
                  
                  
                  151,034
                  
                  
                  
                  146,291AB
      Casino Acquisition
                  
                  
                  10,050
                  
                  
                  
                  -Total
                  
                  $
                  437,458
                  
                  
                  $
                  437,276
 
  Cash Expenditures for Additions to
                    Long-Lived AssetsSix
      Months Ended
                    June
      30, 2009
                  
                  
                  Six
      Months Ended June 30, 2008General
      corporate
                  
                  $
                  153
                  
                  
                  $
                  7Diamond
      Jo Dubuque
                  
                  
                  15,007
                  
                  
                  
                  17,232Diamond
      Jo Worth
                  
                  
                  2,150
                  
                  
                  
                  2,067Evangeline
      Downs
                  
                  
                  3,775
                  
                  
                  
                  6,087Total
                  
                  $
                  21,085
                  
                  
                  $
                  25,393
 
 
 9.             Fair
Value of Financial Instruments
  The fair
value of the Company’s financial instruments consisting of cash and cash
equivalents, restricted cash, receivables, and payables approximate their
recorded amounts due to the short term nature of the instruments. The fair value
and recorded amounts for the Company’s investment and debt instruments at June
30, 2009 and December 31, 2008 are as follows (in thousands):
  June
      30, 2009
                
                
                December 31, 2008Fair Value
                
                
                Recorded
                  Amount
                
                
                Fair Value
                
                
                Recorded
                  AmountAvailable
      for sale investment
                
                $
                15,887
                
                
                $
                15,887
                
                
                $
                7,828
                
                
                $
                7,8288
      3/4% senior secured notes
                
                
                230,775
                
                
                
                253,476
                
                
                
                163,200
                
                
                
                253,23711%
      senior secured notes
                
                
                105,078
                
                
                
                109,542
                
                
                
                105,116
                
                
                
                111,25813%
      senior notes
                
                
                6,772
                
                
                
                6,891
                
                
                
                6,219
                
                
                
                6,877Senior
      secured credit facilities
                
                
                38,200
                
                
                
                38,200
                
                
                
                30,500
                
                
                
                30,500Term
      loan
                
                
                7,416
                
                
                
                7,416
                
                
                
                7,429
                
                
                
                8,000Notes
      payable, capital lease obligations and other financial
      instruments
                
                
                4,204
                
                
                
                4,145
                
                
                
                7,128
                
                
                
                6,958Derivative
      liability
                
                
                826
                
                
                
                826
                
                
                
                790
                
                
                
                790Obligation
      under Minimum Assessment Agreement
                
                
                20,307
                
                
                
                19,075
                
                
                
                8,648
                
                
                
                16,394
  Fair
value information is based on current market interest rates and estimates of
market conditions for instruments with similar terms, maturities, and degrees of
risk and, for the investment available for sale, the fair value of the Peninsula
Gaming Notes at June 30, 2009 and December 31, 2008.
  10.          Subsequent
Events
 
 On August
6, 2009, the Company and PGC, as co-issuers (collectively, the “Issuers”),
issued $240.0 million in aggregate principal amount of 8 3⁄8% Senior
Secured Notes due 2015 (the “PGL Secured Notes”) and $305.0 million in aggregate
principal amount of 10 3⁄4% Senior Unsecured Notes due 2017 (the “PGL
Unsecured Notes” and, together with the PGL Secured Notes, the “New PGL Notes”).
The PGL Secured Notes and PGL Unsecured Notes were issued at a discount of $5.5
million and $7.9 million, respectively.  Interest on the New PGL Notes
is due each August 15 and February 15, commencing February 15, 2010.
 The PGL Secured Notes will mature on August 15, 2015. The PGL Unsecured
Notes will mature on August 15, 2017.
 
 13
 The
Company used or will use the net proceeds from the issuance of the New PGL Notes
and cash on hand: (i) to redeem on September 5, 2009 all of the outstanding
Peninsula Gaming Notes in an approximate amount (including call premium and
accrued interest through but not including the redemption date) of $271.3
million; (ii) to redeem on August 7, 2009 all of the DJW Notes in an approximate
amount (including call premium and accrued interest through but not
including the redemption date) of $117.8 million; (iii) to irrevocably redeem on
September 5, 2009 all of EVD’s outstanding 13% senior notes due 2010 (“EVD
Notes”) in an approximate amount (including accrued interest and contingent
interest through but not including the redemption date) of $7.4 million;
(iv) to pay down outstanding advances under the PGL Credit Facility of
approximately $25.6 million; (v) to pay related fees and expenses in connection
with the foregoing transactions of approximately $16.2 million; and (vi) to fund
the remaining purchase price under the Proposed Amelia Belle Transaction of
$96.5 million, plus any required working capital adjustments.
 
 In the
event that the Proposed Amelia Belle Acquisition is not completed or the
Purchase Agreement related thereto is terminated, in either case, on or
prior to December 31, 2009, the Company will redeem $100.0 million in aggregate
principal amount of the New PGL Notes on a pro rata basis at a redemption
price equal to par, plus accrued and unpaid interest, if any, to the applicable
redemption date.
 
 As a
result of the redemption of the Peninsula Gaming Notes, DJW Notes and EVD Notes,
the Company will incur a loss of $22.4 million in the third quarter consisting
of the write-off of deferred financing costs of $7.7 million, the payment of
call premiums of $11.5 million, net interest of $2.0 million incurred during the
irrevocable redemption period and write-off of bond discount of $2.0 million
offset by the reduction in the liability related to DJW’s derivative associated
with the DJW Notes of $0.8 million.
 
 The PGL
Secured Notes and the PGL Unsecured Notes are guaranteed on a senior secured
basis and senior unsecured basis, respectively, by DJL, EVD and DJW
(collectively the “Subsidiary Guarantors”).  It is contemplated that Amelia
Belle will become a guarantor of the New PGL Notes and a borrower under the
PGL Credit Facility upon consummation of the Proposed Amelia Belle
Acquisition. The PGL Secured Notes and the related guarantees are secured by a
security interest in the Company’s and the Subsidiary Guarantors’
respective existing and future assets (other than certain excluded assets)
and by a limited recourse pledge of 100% of the equity interests of PGL by
PGP. The security interest on the collateral that secures the PGL Secured
Notes and the related guarantees are subject to the prior liens of the PGL
Credit Facility. The PGL Unsecured Notes are effectively subordinated to
the PGL Credit Facility, the PGL Secured Notes and other secured indebtedness to
the extent of the collateral securing such indebtedness.
 
 The
indentures governing the New PGL Notes limits the Company’s ability to, among
other things, incur more debt, pay dividends or make other distributions to PGP,
redeem stock, make certain investments, create liens, enter into transactions
with affiliates, merge or consolidate, and transfer or sell assets.
 
 The New
PGL Notes do not limit the Company’s ability to transfer assets between the
Company and the Subsidiary Guarantors.  Under the indentures governing the
New PGL Notes, the Company is allowed, subject to certain conditions and
limitations set forth therein, to make payments and distributions to PGP,
including in respect of (i) certain consulting and financial advisory
services related to PGP development, (ii) board fees and actual
out-of-pocket expenses incurred by members of the board of managers of PGP, and
(iii) tax, accounting, legal and administrative costs and expenses of PGP.
In addition, the Company can pay dividends or make other distributions to PGP,
in addition to the distributions above, if the combined interest coverage ratio
of the Company and the Subsidiary Guarantors is not less than 2.0 to 1.0 for the
immediately preceding ended four full fiscal quarters and subject to certain
aggregate net income and cash proceeds received from the sale of equity interest
limits.  On the issue date of the New PGL Notes, all of the Company’s
net assets were restricted except for $25.0 million.
 
 In
addition, the Company is permitted under the New PGL Indenture to incur
additional indebtedness if at the time of incurrence of such
indebtedness the combined interest coverage ratio of the Company and the
Subsidiary Guarantors is not less than 2.0 to 1.0 for the immediately preceding
four full fiscal quarters, determined on a pro forma basis as if such additional
indebtedness had been incurred and the proceeds thereof applied at the beginning
of such period.  Without limitation to the requirements of the
immediately preceding sentence, the Company is also permitted to incur
additional secured indebtedness if at the time of incurrence of any such secured
indebtedness the secured leverage ratio of the Company would not be
greater than 2.0 to 1.0, determined on a pro forma basis as if such
additional secured indebtedness had been incurred and the proceeds thereof
applied at the beginning of such period.
 
 On August
6, 2009, the Company and Wells Fargo Foothill, Inc., as agent under the PGL
Credit Facility, entered into a consent and waiver under the PGL Credit Facility
which, among other things, consented to (i) the issuance of the New PGL Notes,
(ii) the redemption of the Peninsula Gaming Notes, the DJW Notes and the EVD
Notes, (iii) the acquisition of Amelia Belle and (iv) the joinder of PGL, DJW
and, upon acquisition, Amelia Belle, as borrowers under the PGL Credit
Facility.
 
 In
connection with the issuance of the New PGL Notes in August 2009, the DJW Credit
Facility was terminated and an outstanding letter of credit in an approximate
amount of $0.7 million was replaced with a letter of credit issued under the PGL
Credit Facility.  In addition, in August 2009, the City Bonds were
distributed by DJW to PGP and subsequently contributed back by PGP to
DJW.
  11.           Consolidating
Financial Statements
  As of
June 30, 2009, the Company, DJL and PGC (which has no assets or operations) were
co-issuers of the Peninsula Gaming Notes, EVD was a guarantor of the Peninsula
Gaming Notes, and the equity of DJL and EVD was pledged as collateral securing
the obligations under the Peninsula Gaming Notes. In July 2005, in
connection with the offering of the DJW Notes, DJW was designated as an
“unrestricted subsidiary” under the indenture governing the Peninsula Gaming
Notes and the liens on the assets and equity of DJW under the Peninsula Gaming
Notes were released. In addition, AB Acquisition, a restricted subsidiary of
DJW, is designated as an “unrestricted subsidiary” under the Peninsula Gaming
Notes and, together with DJW, are considered “subsidiary non-guarantors” under
the Peninsula Gaming Notes.  Consolidating financial information of
the co-issuers, the guarantor and the non-guarantors is presented on the
following pages.
  14
 
 CONSOLIDATING
BALANCE SHEETS
  At June
      30, 2009(in thousands)
                
                Parent
                  Co-Issuer -
                  PGL
                
                
                Subsidiary
                  Co-Issuer -
                  DJL
                
                
                Subsidiary
                  Guarantor -
                  EVD
                
                
                Subsidiary
                  Non-
                  Guarantors
                
                
                Consolidating
                  Adjustments
                
                
                ConsolidatedASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                (3
                )
                
                $
                4,963
                
                
                $
                6,912
                
                
                $
                10,528
                
                
                
                
                
                $
                22,400Restricted
      cash-purse settlements
                
                
                
                
                
                
                
                
                
                
                7,506
                
                
                
                
                
                
                
                
                
                
                7,506Accounts
      receivable
                
                
                4
                
                
                
                2,524
                
                
                
                3,532
                
                
                
                588
                
                
                
                
                
                
                6,648Receivables
      from affiliates
                
                
                
                
                
                
                1,862
                
                
                
                99
                
                
                
                77
                
                
                $
                (1,863
                )
                
                
                175Inventories
                
                
                
                
                
                
                567
                
                
                
                535
                
                
                
                548
                
                
                
                
                
                
                
                1,650Prepaid
      expenses and other assets
                
                
                93
                
                
                
                794
                
                
                
                811
                
                
                
                557
                
                
                
                
                
                
                
                2,255Total
      current assets
                
                
                94
                
                
                
                10,710
                
                
                
                19,395
                
                
                
                12,298
                
                
                
                (1,863
                )
                
                
                40,634PROPERTY
      AND EQUIPMENT, NET
                
                
                488
                
                
                
                107,199
                
                
                
                93,278
                
                
                
                56,446
                
                
                
                
                
                
                
                257,411OTHER
      ASSETS:Investment
      in subsidiaries
                
                
                (45,515
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                45,515Deferred
      financing costs
                
                
                243
                
                
                
                11,270
                
                
                
                3,525
                
                
                
                2,617
                
                
                
                
                
                
                
                17,655Goodwill
                
                
                
                
                
                
                53,083
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                53,083Licenses
      and other intangibles
                
                
                
                
                
                
                
                
                
                
                34,734
                
                
                
                5,000
                
                
                
                
                
                
                
                39,734Deposits
      and other assets
                
                
                652
                
                
                
                2,223
                
                
                
                102
                
                
                
                10,077
                
                
                
                
                
                
                
                13,054Investment
      available for sale
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15,887
                
                
                
                
                
                
                
                15,887Total
      other assets
                
                
                (44,620
                )
                
                
                66,576
                
                
                
                38,361
                
                
                
                33,581
                
                
                
                45,515
                
                
                
                139,413TOTAL
                
                $
                (44,038
                )
                
                $
                184,485
                
                
                $
                151,034
                
                
                $
                102,325
                
                
                $
                43,652
                
                
                $
                437,458LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
                
                $
                32
                
                
                $
                870
                
                
                $
                3,426
                
                
                $
                385
                
                
                
                
                
                
                $
                4,713Construction
      payable
                
                
                
                
                
                
                43
                
                
                
                167
                
                
                
                776
                
                
                
                
                
                
                
                986Purse
      settlement payable
                
                
                
                
                
                
                
                
                
                
                9,764
                
                
                
                
                
                
                
                
                
                
                
                9,764Accrued
      payroll and payroll taxes
                
                
                1,595
                
                
                
                1,435
                
                
                
                1,352
                
                
                
                1,144
                
                
                
                
                
                
                
                5,526Accrued
      interest
                
                
                
                
                
                
                2,103
                
                
                
                3,157
                
                
                
                2,528
                
                
                
                
                
                
                
                7,788Other
      accrued expenses
                
                
                465
                
                
                
                2,758
                
                
                
                4,665
                
                
                
                3,019
                
                
                
                
                
                
                
                10,907Payable
      to affiliates
                
                
                
                
                
                
                
                
                
                
                3,839
                
                
                
                2,039
                
                
                $
                (1,863
                )
                
                
                4,015Current
      maturities of long-term debt and leases
                
                
                
                
                
                
                3,486
                
                
                
                573
                
                
                
                165
                
                
                
                
                
                
                
                4,224Total
      current liabilities
                
                
                2,092
                
                
                
                10,695
                
                
                
                26,943
                
                
                
                10,056
                
                
                
                (1,863
                )
                
                
                47,923LONG-TERM
      LIABILITIES8
      3/4% senior secured notes, net of discount
                
                
                
                
                
                
                101,947
                
                
                
                151,529
                
                
                
                
                
                
                
                
                
                
                
                253,47611%
      senior secured notes, net of discount
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                109,542
                
                
                
                
                
                
                
                109,54213%
      senior notes, net of discount
                
                
                
                
                
                
                
                
                
                
                6,891
                
                
                
                
                
                
                
                
                
                
                
                6,891Senior
      secured credit facilities
                
                
                
                
                
                
                38,200
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                38,200Term
      loan
                
                
                
                
                
                
                5,952
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                5,952Notes
      and leases payable, net of discount
                
                
                
                
                
                
                236
                
                
                
                583
                
                
                
                
                
                
                
                
                
                
                
                819Obligation
      under Minimum Assessment Agreement
                
                
                
                
                
                
                19,075
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                19,075Other
      liabilities
                
                
                72
                
                
                
                466
                
                
                
                
                
                
                
                1,244
                
                
                
                
                
                
                
                1,782Total
      long-term liabilities
                
                
                72
                
                
                
                165,876
                
                
                
                159,003
                
                
                
                110,786
                
                
                
                
                
                
                
                435,737Total
      liabilities
                
                
                2,164
                
                
                
                176,571
                
                
                
                185,946
                
                
                
                120,842
                
                
                
                (1,863
                )
                
                
                483,660MEMBER’S
      EQUITY (DEFICIT)
                
                
                (46,202
                )
                
                
                7,914
                
                
                
                (34,912
                )
                
                
                (18,517
                )
                
                
                45,515
                
                
                
                (46,202
                )TOTAL
                
                $
                (44,038
                )
                
                $
                184,485
                
                
                $
                151,034
                
                
                $
                102,325
                
                
                $
                43,652
                
                
                $
                437,458
 
 
 15
  At December 31, 2008Parent
                  Co-Issuer —
                  PGL
                
                
                Subsidiary
                  Co-Issuer —
                  DJL
                
                
                Subsidiary
                  Guarantor —
                  EVD
                
                
                Subsidiary
                  Non-Guarantor —DJW
                
                
                Consolidating
      Adjustments
                
                
                ConsolidatedASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                (38
                )
                
                $
                9,704
                
                
                $
                7,418
                
                
                $
                21,621
                
                
                
                
                
                $
                38,705Restricted
      cash-purse settlements
                
                
                
                
                
                
                
                
                
                
                5,013
                
                
                
                
                
                
                
                
                
                
                5,013Accounts
      receivable
                
                
                1
                
                
                
                3,487
                
                
                
                1,113
                
                
                
                437
                
                
                
                
                
                
                5,038Receivables
      from affiliates
                
                
                5
                
                
                
                1,585
                
                
                
                138
                
                
                
                133
                
                
                $
                (1,590
                )
                
                
                271Inventories
                
                
                
                
                
                
                449
                
                
                
                330
                
                
                
                420
                
                
                
                
                
                
                
                1,199Prepaid
      expenses and other assets
                
                
                39
                
                
                
                710
                
                
                
                753
                
                
                
                418
                
                
                
                
                
                
                
                1,920Total
      current assets
                
                
                7
                
                
                
                15,935
                
                
                
                14,765
                
                
                
                23,029
                
                
                
                (1,590
                )
                
                
                52,146PROPERTY
      AND EQUIPMENT, NET
                
                
                511
                
                
                
                110,934
                
                
                
                92,740
                
                
                
                58,969
                
                
                
                
                
                
                
                263,154OTHER
      ASSETS:Investment
      in subsidiaries
                
                
                (50,908
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                50,908Deferred
      financing costs
                
                
                
                
                
                
                11,837
                
                
                
                4,195
                
                
                
                3,142
                
                
                
                
                
                
                
                19,174Goodwill
                
                
                
                
                
                
                53,083
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                53,083Licenses
      and other intangibles
                
                
                
                
                
                
                
                
                
                
                34,488
                
                
                
                4,018
                
                
                
                
                
                
                
                38,506Deposits
      and other assets
                
                
                456
                
                
                
                2,795
                
                
                
                103
                
                
                
                31
                
                
                
                
                
                
                
                3,385Investment
      available for sale
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                7,828
                
                
                
                
                
                
                
                7,828Total
      other assets
                
                
                (50,452
                )
                
                
                67,715
                
                
                
                38,786
                
                
                
                15,019
                
                
                
                50,908
                
                
                
                121,976TOTAL
                
                $
                (49,934
                )
                
                $
                194,584
                
                
                $
                146,291
                
                
                $
                97,017
                
                
                $
                49,318
                
                
                $
                437,276LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
                
                $
                71
                
                
                $
                805
                
                
                $
                2,988
                
                
                $
                744
                
                
                
                
                
                
                $
                4,608Construction
      payable
                
                
                120
                
                
                
                11,980
                
                
                
                105
                
                
                
                119
                
                
                
                
                
                
                
                12,324Purse
      settlement payable
                
                
                
                
                
                
                
                
                
                
                6,804
                
                
                
                
                
                
                
                
                
                
                
                6,804Accrued
      payroll and payroll taxes
                
                
                1,700
                
                
                
                1,263
                
                
                
                1,289
                
                
                
                852
                
                
                
                
                
                
                
                5,104Accrued
      interest
                
                
                
                
                
                
                2,077
                
                
                
                3,168
                
                
                
                2,570
                
                
                
                
                
                
                
                7,815Other
      accrued expenses
                
                
                82
                
                
                
                2,945
                
                
                
                5,105
                
                
                
                2,255
                
                
                
                
                
                
                
                10,387Payable
      to affiliates
                
                
                
                
                
                
                
                
                
                
                3,201
                
                
                
                1,964
                
                
                $
                (1,590
                )
                
                
                3,575Current
      maturity of long-term debt and leases
                
                
                
                
                
                
                5,266
                
                
                
                572
                
                
                
                2,654
                
                
                
                
                
                
                
                8,492Total
      current liabilities
                
                
                1,973
                
                
                
                24,336
                
                
                
                23,232
                
                
                
                11,158
                
                
                
                (1,590
                )
                
                
                59,109LONG-TERM
      LIABILITIES:8
      3/4% senior secured notes, net of discount
                
                
                
                
                
                
                101,851
                
                
                
                151,386
                
                
                
                
                
                
                
                
                
                
                
                253,23711%
      senior secured notes, net of discount
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                111,258
                
                
                
                
                
                
                
                111,25813%
      senior notes, net of discount
                
                
                
                
                
                
                
                
                
                
                6,877
                
                
                
                
                
                
                
                
                
                
                
                6,877Senior
      secured credit facilities
                
                
                
                
                
                
                28,500
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                28,500Term
      loan
                
                
                
                
                
                
                6,697
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                6,697Notes
      and leases payable, net of discount
                
                
                
                
                
                
                580
                
                
                
                594
                
                
                
                55
                
                
                
                
                
                
                
                1,229Obligation
      under Minimum Assessment Agreement
                
                
                
                
                
                
                16,394
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                16,394Other
      liabilities
                
                
                76
                
                
                
                4,695
                
                
                
                
                
                
                
                1,187
                
                
                
                
                
                
                
                5,958Total
      long-term liabilities
                
                
                76
                
                
                
                158,717
                
                
                
                158,857
                
                
                
                112,500
                
                
                
                
                
                
                
                430,150Total
      liabilities
                
                
                2,049
                
                
                
                183,053
                
                
                
                182,089
                
                
                
                123,658
                
                
                
                (1,590
                )
                
                
                489,259MEMBER’S
      EQUITY (DEFICIT)
                
                
                (51,983
                )
                
                
                11,531
                
                
                
                (35,798
                )
                
                
                (26,641
                )
                
                
                50,908
                
                
                
                (51,983
                )TOTAL
                
                $
                (49,934
                )
                
                $
                194,584
                
                
                $
                146,291
                
                
                $
                97,017
                
                
                $
                49,318
                
                
                $
                437,276
 
  16
 
 CONSOLIDATING
STATEMENTS OF OPERATIONS
 
 Three Months Ended June
      30, 2009Parent
                
                
                Subsidiary
                
                
                SubsidiaryCo-Issuer -
                
                
                Co-Issuer -
                
                
                Guarantor -
                
                
                Subsidiary
      Non-
                
                
                Consolidat-ing(in thousands)
                
                PGL
                
                
                DJL
                
                
                EVD
                
                
                Guarantors
                
                
                Adjustments
                
                
                ConsolidatedREVENUES:Casino
                
                
                
                
                $
                17,590
                
                
                $
                25,920
                
                
                $
                20,388
                
                
                
                
                
                $
                63,898Racing
                
                
                
                
                
                
                
                
                
                5,828
                
                
                
                
                
                
                
                
                
                
                5,828Video
      poker
                
                
                
                
                
                
                
                
                
                1,395
                
                
                
                
                
                
                
                
                
                
                1,395Food
      and beverage
                
                
                
                
                
                1,972
                
                
                
                3,156
                
                
                
                1,087
                
                
                
                
                
                
                6,215Affiliate
      management fee income
                
                
                
                
                
                652
                
                
                
                
                
                
                
                
                
                
                $
                (652
                )Other
                
                
                
                
                
                583
                
                
                
                367
                
                
                
                1,767
                
                
                
                
                
                
                
                2,717Less
      promotional allowances
                
                
                
                
                
                (2,212
                )
                
                
                (2,800
                )
                
                
                (1,598
                )
                
                
                
                
                
                
                (6,610
                )Total
      net revenues
                
                
                
                
                
                18,585
                
                
                
                33,866
                
                
                
                21,644
                
                
                
                (652
                )
                
                
                73,443EXPENSES:Casino
                
                
                
                
                
                7,039
                
                
                
                12,390
                
                
                
                7,131
                
                
                
                
                
                
                
                26,560Racing
                
                
                
                
                
                
                
                
                
                5,041
                
                
                
                
                
                
                
                
                
                
                
                5,041Video
      poker
                
                
                
                
                
                
                
                
                
                1,034
                
                
                
                
                
                
                
                
                
                
                
                1,034Food
      and beverage
                
                
                
                
                
                1,466
                
                
                
                1,984
                
                
                
                819
                
                
                
                
                
                
                
                4,269Other
                
                
                
                
                
                343
                
                
                
                80
                
                
                
                1,550
                
                
                
                
                
                
                
                1,973Selling,
      general and administrative
                
                $
                558
                
                
                
                3,262
                
                
                
                3,534
                
                
                
                3,383
                
                
                
                968
                
                
                
                11,705Depreciation
      and amortization
                
                
                29
                
                
                
                2,317
                
                
                
                1,712
                
                
                
                1,850
                
                
                
                
                
                
                
                5,908Development
      expense
                
                
                
                
                
                
                
                
                
                
                53
                
                
                
                73
                
                
                
                
                
                
                
                126Affiliate
      management fees
                
                
                98
                
                
                
                
                
                
                
                1,114
                
                
                
                861
                
                
                
                (652
                )
                
                
                1,421Loss
      (gain) on disposal of assets
                
                
                
                
                
                
                8
                
                
                
                (93
                )
                
                
                29
                
                
                
                
                
                
                
                (56
                )Corporate
      expense allocation
                
                
                
                
                
                
                322
                
                
                
                324
                
                
                
                322
                
                
                
                (968
                )Total
      expenses
                
                
                685
                
                
                
                14,757
                
                
                
                27,173
                
                
                
                16,018
                
                
                
                (652
                )
                
                
                57,981INCOME
      (LOSS) FROM OPERATIONS
                
                
                (685
                )
                
                
                3,828
                
                
                
                6,693
                
                
                
                5,626
                
                
                
                
                
                
                
                15,462OTHER
      INCOME (EXPENSE):Interest
      income
                
                
                
                
                
                
                (3
                )
                
                
                5
                
                
                
                497
                
                
                
                
                
                
                
                499Interest
      expense
                
                
                
                
                
                
                (3,686
                )
                
                
                (3,825
                )
                
                
                (3,422
                )
                
                
                
                
                
                
                (10,933
                )Income
      from equity investment in subsidiaries
                
                
                5,713
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (5,713
                )Total
      other income (expense)
                
                
                5,713
                
                
                
                (3,689
                )
                
                
                (3,820
                )
                
                
                (2,925
                )
                
                
                (5,713
                )
                
                
                (10,434
                )NET
      INCOME
                
                $
                5,028
                
                
                $
                139
                
                
                $
                2,873
                
                
                $
                2,701
                
                
                $
                (5,713
                )
                
                $
                5,028
 
 17
 
  
 Three Months Ended June 30, 2008Parent
                  
                  
                  Subsidiary
                  
                  
                  Subsidiary
                  
                  
                  Subsidiary
                    Non-Co-Issuer -
                  
                  
                  Co-Issuer -
                  
                  
                  Guarantor -
                  
                  
                  Guarantor -
                  
                  
                  Consolidating(in thousands)
                  
                  PGL
                  
                  
                  DJL
                  
                  
                  EVD
                  
                  
                  DJW
                  
                  
                  Adjustments
                  
                  
                  ConsolidatedREVENUES:Casino
                  
                  
                  
                  
                  $
                  10,687
                  
                  
                  $
                  27,496
                  
                  
                  $
                  20,480
                  
                  
                  
                  
                  
                  $
                  58,663Racing
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  6,399
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  6,399Video
      poker
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,598
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,598Food
      and beverage
                  
                  
                  
                  
                  
                  635
                  
                  
                  
                  2,785
                  
                  
                  
                  1,012
                  
                  
                  
                  
                  
                  
                  4,432Affiliate
      management fee income
                  
                  
                  
                  
                  
                  708
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (708
                  )Other
                  
                  
                  
                  
                  
                  567
                  
                  
                  
                  390
                  
                  
                  
                  2,232
                  
                  
                  
                  
                  
                  
                  
                  3,189Less
      promotional allowances
                  
                  
                  
                  
                  
                  (1,423
                  )
                  
                  
                  (2,320
                  )
                  
                  
                  (1,665
                  )
                  
                  
                  
                  
                  
                  
                  (5,408
                  )Total
      net revenues
                  
                  
                  
                  
                  
                  11,174
                  
                  
                  
                  36,348
                  
                  
                  
                  22,059
                  
                  
                  
                  (708
                  )
                  
                  
                  68,873EXPENSES:Casino
                  
                  
                  
                  
                  
                  4,593
                  
                  
                  
                  13,177
                  
                  
                  
                  7,139
                  
                  
                  
                  
                  
                  
                  
                  24,909Racing
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  5,253
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  5,253Video
      poker
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,203
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  1,203Food
      and beverage
                  
                  
                  
                  
                  
                  547
                  
                  
                  
                  2,071
                  
                  
                  
                  815
                  
                  
                  
                  
                  
                  
                  
                  3,433Other
                  
                  
                  
                  
                  
                  3
                  
                  
                  
                  70
                  
                  
                  
                  2,008
                  
                  
                  
                  
                  
                  
                  
                  2,081Selling,
      general and
                    administrative
                  
                  $
                  (1,274
                  )
                  
                  
                  1,868
                  
                  
                  
                  3,950
                  
                  
                  
                  3,317
                  
                  
                  
                  (4,276
                  )
                  
                  
                  3,585Depreciation
      and amortization
                  
                  
                  11
                  
                  
                  
                  765
                  
                  
                  
                  1,995
                  
                  
                  
                  2,296
                  
                  
                  
                  
                  
                  
                  
                  5,067Pre-opening
      expense
                  
                  
                  
                  
                  
                  
                  32
                  
                  
                  
                  (1
                  )
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  31Development
      expense
                  
                  
                  
                  
                  
                  
                  (649
                  )
                  
                  
                  1
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (648
                  )Affiliate
      management fees
                  
                  
                  90
                  
                  
                  
                  
                  
                  
                  
                  1,213
                  
                  
                  
                  872
                  
                  
                  
                  (708
                  )
                  
                  
                  1,467Loss
      on disposal of assets
                  
                  
                  
                  
                  
                  
                  55
                  
                  
                  
                  44
                  
                  
                  
                  21
                  
                  
                  
                  
                  
                  
                  
                  120Corporate
      expense allocation
                  
                  
                  
                  
                  
                  
                  (1,425
                  )
                  
                  
                  (1,426
                  )
                  
                  
                  (1,425
                  )
                  
                  
                  4,276Total
      expenses
                  
                  
                  (1,173
                  )
                  
                  
                  5,789
                  
                  
                  
                  27,550
                  
                  
                  
                  15,043
                  
                  
                  
                  (708
                  )
                  
                  
                  46,501INCOME
      FROM OPERATIONS
                  
                  
                  1,173
                  
                  
                  
                  5,385
                  
                  
                  
                  8,798
                  
                  
                  
                  7,016
                  
                  
                  
                  
                  
                  
                  
                  22,372OTHER
      INCOME (EXPENSE):Interest
      income
                  
                  
                  4
                  
                  
                  
                  7
                  
                  
                  
                  61
                  
                  
                  
                  536
                  
                  
                  
                  
                  
                  
                  
                  608Interest
      expense, net of amounts capitalized
                  
                  
                  
                  
                  
                  
                  (2,318
                  )
                  
                  
                  (4,186
                  )
                  
                  
                  (3,568
                  )
                  
                  
                  
                  
                  
                  
                  (10,072
                  )Income
      from equity investment in subsidiaries
                  
                  
                  11,731
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (11,731
                  )Total
      other income (expense)
                  
                  
                  11,735
                  
                  
                  
                  (2,311
                  )
                  
                  
                  (4,125
                  )
                  
                  
                  (3,032
                  )
                  
                  
                  (11,731
                  )
                  
                  
                  (9,464
                  )NET
      INCOME
                  
                  $
                  12,908
                  
                  
                  $
                  3,074
                  
                  
                  $
                  4,673
                  
                  
                  $
                  3,984
                  
                  
                  $
                  (11,731
                  )
                  
                  $
                  12,908
 
 
 
 18
 
  
 Six Months Ended June
      30, 2009Parent
                
                
                Subsidiary
                
                
                SubsidiaryCo-Issuer -
                
                
                Co-Issuer -
                
                
                Guarantor -
                
                
                Subsidiary
      Non-
                
                
                Consolidat-ing(in thousands)
                
                PGL
                
                
                DJL
                
                
                EVD
                
                
                Guarantors
                
                
                Adjustments
                
                
                ConsolidatedREVENUES:Casino
                
                
                
                
                $
                36,786
                
                
                $
                53,243
                
                
                $
                39,626
                
                
                
                
                
                $
                129,655Racing
                
                
                
                
                
                
                
                
                
                8,854
                
                
                
                
                
                
                
                
                
                
                8,854Video
      poker
                
                
                
                
                
                
                
                
                
                2,979
                
                
                
                
                
                
                
                
                
                
                2,979Food
      and beverage
                
                
                
                
                
                4,209
                
                
                
                5,550
                
                
                
                2,234
                
                
                
                
                
                
                11,993Affiliate
      management fee income
                
                
                
                
                
                1,288
                
                
                
                
                
                
                
                
                
                
                $
                (1,288
                )Other
                
                
                
                
                
                1,264
                
                
                
                766
                
                
                
                3,028
                
                
                
                
                
                
                
                5,058Less
      promotional allowances
                
                
                
                
                
                (4,593
                )
                
                
                (5,354
                )
                
                
                (3,179
                )
                
                
                
                
                
                
                (13,126
                )Total
      net revenues
                
                
                
                
                
                38,954
                
                
                
                66,038
                
                
                
                41,709
                
                
                
                (1,288
                )
                
                
                145,413EXPENSES:Casino
                
                
                
                
                
                14,560
                
                
                
                25,385
                
                
                
                14,005
                
                
                
                
                
                
                
                53,950Racing
                
                
                
                
                
                
                
                
                
                7,925
                
                
                
                
                
                
                
                
                
                
                
                7,925Video
      poker
                
                
                
                
                
                
                
                
                
                2,096
                
                
                
                
                
                
                
                
                
                
                
                2,096Food
      and beverage
                
                
                
                
                
                3,125
                
                
                
                3,674
                
                
                
                1,771
                
                
                
                
                
                
                
                8,570Other
                
                
                
                
                
                729
                
                
                
                144
                
                
                
                2,584
                
                
                
                
                
                
                
                3,457Selling,
      general and administrative
                
                $
                1,346
                
                
                
                6,893
                
                
                
                7,226
                
                
                
                6,788
                
                
                
                2,214
                
                
                
                24,467Depreciation
      and amortization
                
                
                56
                
                
                
                4,371
                
                
                
                3,511
                
                
                
                4,035
                
                
                
                
                
                
                
                11,973Development
      expense
                
                
                
                
                
                
                
                
                
                
                135
                
                
                
                73
                
                
                
                
                
                
                
                208Affiliate
      management fees
                
                
                195
                
                
                
                
                
                
                
                2,207
                
                
                
                1,625
                
                
                
                (1,288
                )
                
                
                2,739Loss
      (gain) on disposal of assets
                
                
                
                
                
                
                (1
                )
                
                
                (58
                )
                
                
                84
                
                
                
                
                
                
                
                25Corporate
      expense allocation
                
                
                
                
                
                
                740
                
                
                
                734
                
                
                
                740
                
                
                
                (2,214
                )Total
      expenses
                
                
                1,597
                
                
                
                30,417
                
                
                
                52,979
                
                
                
                31,705
                
                
                
                (1,288
                )
                
                
                115,410INCOME
      (LOSS) FROM OPERATIONS
                
                
                (1,597
                )
                
                
                8,537
                
                
                
                13,059
                
                
                
                10,004
                
                
                
                
                
                
                
                30,003OTHER
      INCOME (EXPENSE):Interest
      income
                
                
                
                
                
                
                (3
                )
                
                
                10
                
                
                
                1,000
                
                
                
                
                
                
                
                1,007Interest
      expense
                
                
                
                
                
                
                (7,284
                )
                
                
                (7,961
                )
                
                
                (6,938
                )
                
                
                
                
                
                
                (22,183
                )Income
      from equity investment in subsidiaries
                
                
                10,424
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (10,424
                )Total
      other income (expense)
                
                
                10,424
                
                
                
                (7,287
                )
                
                
                (7,951
                )
                
                
                (5,938
                )
                
                
                (10,424
                )
                
                
                (21,176
                )NET
      INCOME
                
                $
                8,827
                
                
                $
                1,250
                
                
                $
                5,108
                
                
                $
                4,066
                
                
                $
                (10,424
                )
                
                $
                8,827
 
 
 
 19
 
 Six Months Ended June 30, 2008Parent
                  
                  
                  Subsidiary
                  
                  
                  Subsidiary
                  
                  
                  Subsidiary
                    Non-Co-Issuer -
                  
                  
                  Co-Issuer -
                  
                  
                  Guarantor -
                  
                  
                  Guarantor -
                  
                  
                  Consolidating(in thousands)
                  
                  PGL
                  
                  
                  DJL
                  
                  
                  EVD
                  
                  
                  DJW
                  
                  
                  Adjustments
                  
                  
                  ConsolidatedREVENUES:Casino
                  
                  
                  
                  
                  $
                  20,148
                  
                  
                  $
                  55,562
                  
                  
                  $
                  39,373
                  
                  
                  
                  
                  
                  $
                  115,083Racing
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  9,716
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  9,716Video
      poker
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  3,156
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  3,156Food
      and beverage
                  
                  
                  
                  
                  
                  1,203
                  
                  
                  
                  5,017
                  
                  
                  
                  1,968
                  
                  
                  
                  
                  
                  
                  8,188Affiliate
      management fee
                    income
                  
                  
                  
                  
                  
                  1,395
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (1,395
                  )Other
                  
                  
                  
                  
                  
                  1,244
                  
                  
                  
                  804
                  
                  
                  
                  3,833
                  
                  
                  
                  
                  
                  
                  
                  5,881Less
      promotional allowances
                  
                  
                  
                  
                  
                  (2,504
                  )
                  
                  
                  (4,614
                  )
                  
                  
                  (2,956
                  )
                  
                  
                  
                  
                  
                  
                  (10,074
                  )Total
      net revenues
                  
                  
                  
                  
                  
                  21,486
                  
                  
                  
                  69,641
                  
                  
                  
                  42,218
                  
                  
                  
                  (1,395
                  )
                  
                  
                  131,950EXPENSES:Casino
                  
                  
                  
                  
                  
                  9,032
                  
                  
                  
                  26,052
                  
                  
                  
                  14,005
                  
                  
                  
                  
                  
                  
                  
                  49,089Racing
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  8,162
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  8,162Video
      poker
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,329
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,329Food
      and beverage
                  
                  
                  
                  
                  
                  1,099
                  
                  
                  
                  3,650
                  
                  
                  
                  1,581
                  
                  
                  
                  
                  
                  
                  
                  6,330Other
                  
                  
                  
                  
                  
                  7
                  
                  
                  
                  130
                  
                  
                  
                  3,366
                  
                  
                  
                  
                  
                  
                  
                  3,503Selling,
      general and administrative
                  
                  $
                  (420
                  )
                  
                  
                  3,650
                  
                  
                  
                  7,796
                  
                  
                  
                  6,702
                  
                  
                  
                  (2,149
                  )
                  
                  
                  15,579Depreciation
      and amortization
                  
                  
                  23
                  
                  
                  
                  1,560
                  
                  
                  
                  3,923
                  
                  
                  
                  4,424
                  
                  
                  
                  
                  
                  
                  
                  9,930Pre-opening
      expense
                  
                  
                  
                  
                  
                  
                  87
                  
                  
                  
                  8
                  
                  
                  
                  32
                  
                  
                  
                  
                  
                  
                  
                  127Development
      expense
                  
                  
                  
                  
                  
                  
                  (641
                  )
                  
                  
                  32
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (609
                  )Affiliate
      management fees
                  
                  
                  175
                  
                  
                  
                  
                  
                  
                  
                  2,403
                  
                  
                  
                  1,654
                  
                  
                  
                  (1,395
                  )
                  
                  
                  2,837Loss
      on disposal of assets
                  
                  
                  
                  
                  
                  
                  48
                  
                  
                  
                  127
                  
                  
                  
                  48
                  
                  
                  
                  
                  
                  
                  
                  223Corporate
      expense allocation
                  
                  
                  
                  
                  
                  
                  (718
                  )
                  
                  
                  (713
                  )
                  
                  
                  (718
                  )
                  
                  
                  2,149Total
      expenses
                  
                  
                  (222
                  )
                  
                  
                  14,124
                  
                  
                  
                  53,899
                  
                  
                  
                  31,094
                  
                  
                  
                  (1,395
                  )
                  
                  
                  97,500INCOME
      FROM OPERATIONS
                  
                  
                  222
                  
                  
                  
                  7,362
                  
                  
                  
                  15,742
                  
                  
                  
                  11,124
                  
                  
                  
                  
                  
                  
                  
                  34,450OTHER
      INCOME (EXPENSE):Interest
      income
                  
                  
                  68
                  
                  
                  
                  45
                  
                  
                  
                  135
                  
                  
                  
                  1,104
                  
                  
                  
                  
                  
                  
                  
                  1,352Interest
      expense, net of amounts capitalized
                  
                  
                  
                  
                  
                  
                  (4,874
                  )
                  
                  
                  (8,367
                  )
                  
                  
                  (7,095
                  )
                  
                  
                  
                  
                  
                  
                  (20,336
                  )Income
      from equity investment
                    in
      subsidiaries
                  
                  
                  15,176
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (15,176
                  )Total
      other income (expense)
                  
                  
                  15,244
                  
                  
                  
                  (4,829
                  )
                  
                  
                  (8,232
                  )
                  
                  
                  (5,991
                  )
                  
                  
                  (15,176
                  )
                  
                  
                  (18,984
                  )NET
      INCOME
                  
                  $
                  15,466
                  
                  
                  $
                  2,533
                  
                  
                  $
                  7,510
                  
                  
                  $
                  5,133
                  
                  
                  $
                  (15,176
                  )
                  
                  $
                  15,466
 
 
 
 20
  
 CONSOLIDATING
STATEMENTS OF CASH FLOWS
  Six Months Ended June
      30, 2009(in thousands)
                
                Parent
                  Co-Issuer -
                  PGL
                
                
                Subsidiary
                  Co-Issuer -
                  DJL
                
                
                Subsidiary
                  Guarantor -
                  EVD
                
                
                Subsidiary
                  Non-
                  Guarantors
                
                
                Consolidating
                  Adjustments
                
                
                ConsolidatedCASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                
                $
                8,827
                
                
                $
                1,250
                
                
                $
                5,108
                
                
                $
                4,066
                
                
                $
                (10,424
                )
                
                $
                8,827Adjustments
      to reconcile net income (loss) to net cash flows from operating
      activities:Depreciation
      and amortization
                
                
                56
                
                
                
                4,371
                
                
                
                3,511
                
                
                
                4,035
                
                
                
                
                
                
                
                11,973Non-cash
      interest
                
                
                
                
                
                
                1,356
                
                
                
                827
                
                
                
                522
                
                
                
                
                
                
                
                2,705Non-cash
      equity based and other compensation
                
                
                613
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                613Corporate
      expense allocation
                
                
                (2,214
                )
                
                
                740
                
                
                
                734
                
                
                
                740(Gain)
      loss on disposal of assets
                
                
                
                
                
                
                (1
                )
                
                
                (58
                )
                
                
                84
                
                
                
                
                
                
                
                25Income
      from equity investment in subsidiaries
                
                
                (10,424
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                10,424Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
                
                
                
                
                
                
                
                
                
                
                (2,493
                )
                
                
                
                
                
                
                
                
                
                
                (2,493
                )Receivables
                
                
                (3
                )
                
                
                24
                
                
                
                (2,419
                )
                
                
                (151
                )
                
                
                
                
                
                
                (2,549
                )Receivables
      from affiliates
                
                
                5
                
                
                
                (328
                )
                
                
                39
                
                
                
                56
                
                
                
                228Payable
      to affiliates
                
                
                
                
                
                
                
                
                
                
                584
                
                
                
                166
                
                
                
                (228
                )
                
                
                522Inventories
                
                
                
                
                
                
                (118
                )
                
                
                (205
                )
                
                
                (128
                )
                
                
                
                
                
                
                (451
                )Prepaid
      expenses and other assets
                
                
                (55
                )
                
                
                1,071
                
                
                
                (57
                )
                
                
                (185
                )
                
                
                
                
                
                
                774Accounts
      payable
                
                
                (39
                )
                
                
                (346
                )
                
                
                3,229
                
                
                
                (150
                )
                
                
                
                
                
                
                2,694Accrued
      expenses
                
                
                39
                
                
                
                473
                
                
                
                (743
                )
                
                
                1,071
                
                
                
                
                
                
                
                840Net
      cash flows from operating activities
                
                
                (3,195
                )
                
                
                8,492
                
                
                
                8,057
                
                
                
                10,126
                
                
                
                
                
                
                
                23,480CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
                
                
                (195
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (195
                )Business
      acquisition and licensing costs
                
                
                
                
                
                
                
                
                
                
                (246
                )
                
                
                (1,000
                )
                
                
                
                
                
                
                (1,246
                )Deposit
      under purchase agreement
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (10,000
                )
                
                
                
                
                
                
                (10,000
                )Construction
      project development costs
                
                
                
                
                
                
                (13,480
                )
                
                
                (1,574
                )
                
                
                
                
                
                
                
                
                
                
                (15,054
                )Purchase
      of property and equipment
                
                
                (153
                )
                
                
                (1,527
                )
                
                
                (1,955
                )
                
                
                (1,150
                )
                
                
                
                
                
                
                (4,785
                )Proceeds
      from sale of property and equipment
                
                
                
                
                
                
                509
                
                
                
                126
                
                
                
                34
                
                
                
                
                
                
                
                669Net
      cash flows from investing activities
                
                
                (348
                )
                
                
                (14,498
                )
                
                
                (3,649
                )
                
                
                (12,116
                )
                
                
                
                
                
                
                (30,611
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
                
                
                (8
                )
                
                
                (9
                )
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (17
                )Principal
      payments on debt
                
                
                
                
                
                
                (2,870
                )
                
                
                (11
                )
                
                
                (2,341
                )
                
                
                
                
                
                
                (5,222
                )Proceeds
      from senior secured credit facilities
                
                
                
                
                
                
                29,700
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                29,700Payments
      on senior secured credit facilities
                
                
                
                
                
                
                (20,000
                )
                
                
                
                
                
                
                (2,000
                )
                
                
                
                
                
                
                (22,000
                )Member
      contributions (distributions)
                
                
                3,586
                
                
                
                (5,556
                )
                
                
                (4,903
                )
                
                
                (4,762
                )
                
                
                
                
                
                
                (11,635
                )Net
      cash flows from financing activities
                
                
                3,578
                
                
                
                1,265
                
                
                
                (4,914
                )
                
                
                (9,103
                )
                
                
                
                
                
                
                (9,174
                )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                35
                
                
                
                (4,741
                )
                
                
                (506
                )
                
                
                (11,093
                )
                
                
                
                
                
                
                (16,305
                )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                
                
                (38
                )
                
                
                9,704
                
                
                
                7,418
                
                
                
                21,621
                
                
                
                
                
                
                
                38,705CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                
                $
                (3
                )
                
                $
                4,963
                
                
                $
                6,912
                
                
                $
                10,528
                
                
                $
                
                
                
                $
                22,400
 
 
 21
 
 
 
 
 Six Months Ended June 30, 2008(in thousands)
                            
                            Parent
                              Co-Issuer -
                              PGL
                            
                            Subsidiary
                              Co-Issuer -
                              DJL
                            
                            Subsidiary
                              Guarantor -
                              EVD
                            
                            Subsidiary
                              Non-
                              Guarantor -
                              DJW
                            
                            Consolidating
                              Adjustments
                            
                            ConsolidatedCASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                            
                            $         
      15,466
                            
                            $              2,533
                            
                            $    
                7,510
                            
                            $    
                5,133
                            
                            $     
            (15,176
                            )
                            $      
              15,466Adjustments
      to reconcile net income to net cash flows from
      operating activities:Depreciation
      and amortization
                            
                            23
                            
                            1,560
                            
                            3,923
                            
                            4,424
                            
                            
                            
                            9,930Non-cash
      interest
                            
                            
                            
                            1,062
                            
                            948
                            
                            520
                            
                            
                            
                            2,530Non-cash
      equity based and other compensation
                            
                            (4,737
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            (4,737
                            )Corporate
      expense allocation
                            
                            2,149
                            
                            (718
                            )
                            (713
                            )
                            (718
                            )Loss
      on disposal of assets
                            
                            
                            
                            48
                            
                            127
                            
                            48
                            
                            
                            
                            223Income
      from equity investment in subsidiaries
                            
                            (15,176
                            )
                            
                            
                            
                            
                            
                            
                            15,176Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
                            
                            
                            
                            
                            
                            (2,524
                            )
                            
                            
                            
                            
                            (2,524
                            )Receivables
                            
                            
                            
                            (9
                            )
                            (2,131
                            )
                            178
                            
                            
                            
                            (1,962
                            )Receivables
      from affiliates
                            
                            
                            
                            (15
                            )
                            (60
                            )
                            (80
                            )
                            155Payables
      to affiliates
                            
                            
                            
                            
                            
                            328
                            
                            (832
                            )
                            (155
                            )
                            (659
                            )Inventories
                            
                            
                            
                            (25
                            )
                            (13
                            )
                            (57
                            )
                            
                            
                            (95
                            )Prepaid
      expenses and other
                              assets
                            
                            (13
                            )
                            (1,038
                            )
                            (3
                            )
                            (46
                            )
                            
                            
                            (1,100
                            )Accounts
      payable
                            
                            4
                            
                            378
                            
                            4,288
                            
                            133
                            
                            
                            
                            4,803Accrued
      expenses
                            
                            (306
                            )
                            (1,475
                            )
                            392
                            
                            (461
                            )
                            
                            
                            (1,850
                            )Net
      cash flows from operating activities
                            
                            (2,590
                            )
                            2,301
                            
                            12,072
                            
                            8,242
                            
                            
                            
                            20,025CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
                            
                            (104
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            (104
                            )Business
      acquisition and licensing costs
                            
                            
                            
                            
                            
                            (258
                            )
                            (1,000
                            )
                            
                            
                            (1,258
                            )Construction
      project development costs
                            
                            
                            
                            (16,697
                            )
                            (3,354
                            )
                            
                            
                            
                            
                            (20,051
                            )Purchase
      of property and equipment
                            
                            (7
                            )
                            (535
                            )
                            (2,475
                            )
                            (1,067
                            )
                            
                            
                            (4,084
                            )Net
      cash flows from investing activities
                            
                            (111
                            )
                            (17,232
                            )
                            (6,087
                            )
                            (2,067
                            )
                            
                            
                            (25,497
                            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
                            
                            
                            
                            (87
                            )
                            (32
                            )
                            (40
                            )
                            
                            
                            (159
                            )Principal
      payments on debt
                            
                            
                            
                            (7
                            )
                            (10
                            )
                            (2,866
                            )
                            
                            
                            (2,883
                            )Proceeds
      from senior credit facilities
                            
                            
                            
                            3,500
                            
                            
                            
                            1,000
                            
                            
                            
                            4,500Payments
      on senior credit facilities
                            
                            
                            
                            (3,500
                            )
                            
                            
                            (1,000
                            )
                            
                            
                            (4,500
                            )Proceeds
      from term loan
                            
                            
                            
                            1,023
                            
                            
                            
                            
                            
                            
                            
                            1,023Member
      contributions (distributions)
                            
                            (9,215
                            )
                            17,818
                            
                            (9,218
                            )
                            (1,518
                            )
                            
                            
                            (2,133
                            )Net
      cash flows from financing activities
                            
                            (9,215
                            )
                            18,747
                            
                            (9,260
                            )
                            (4,424
                            )
                            
                            
                            (4,152
                            )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                            
                            (11,916
                            )
                            3,816
                            
                            (3,275
                            )
                            1,751
                            
                            
                            
                            (9,624
                            )CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                            
                            11,908
                            
                            4,606
                            
                            11,834
                            
                            13,752
                            
                            
                            
                            42,100CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
                            
                            $     
                  (8
                            )
                            $             
      8,422
                            
                            $      
               8,559
                            
                            $        
           15,503
                            
                            $
                            
                            $                 32,476
 
 22
 ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  The
following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and the related notes thereto
appearing elsewhere in this report.
  Forward Looking
      Statements
  Some
statements contained in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” constitute “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include the words “may,” “estimate,” “intend,”
“continue,” “believe,” “expect,” or “anticipate” and other similar words. These
forward-looking statements generally relate to plans and objectives for future
operations and are based upon management’s reasonable estimates of future
results or trends. Although we believe that the plans and objectives reflected
in or suggested by such forward-looking statements are reasonable, such plans or
objectives may not be achieved. Actual results may differ from projected results
due to, but not limited to, unforeseen developments, including developments
relating to the following:
  ·
              the
      availability and adequacy of our cash flows to satisfy our obligations,
      including payment obligations under the New PGL Notes and the PGL Credit
      Facility and additional funds required to support capital improvements and
      development;
  ·
              economic,
      competitive, demographic, business and other conditions in our local and
      regional markets;
  ·
              changes
      or developments in the laws, regulations or taxes in the gaming and horse
      racing industry;
  ·
              actions
      taken or omitted to be taken by third parties, including customers,
      suppliers, competitors, members and shareholders, as well as legislative,
      regulatory, judicial and other governmental
  authorities;
  ·
              changes
      in business strategy, capital improvements, development plans, including
      those due to environmental remediation concerns, or changes in personnel
      or their compensation, including federal, state and local minimum wage
      requirements;
  ·
              the
      loss of any license or permit, including the failure to obtain an
      unconditional renewal of a required gaming license on a timely
      basis;
 
 ·
              the
      loss of the ability of DJL or DJW to conduct their respective gaming
      operations in the event the electorates in Dubuque County and Worth
      County, respectively, do not vote to continue gaming in Dubuque County and
      Worth County, Iowa, respectively;
  ·
              the
      termination of our operating agreement with the DRA and/or the WCDA or the
      failure of the DRA and/or the WCDA to continue as our “qualified
      sponsoring organization;”
  ·
              the
      loss of our facilities due to casualty, weather, mechanical failure or any
      extended or extraordinary maintenance or inspection that may be
      required;
  ·
              changes
      in federal or state tax
obligations;
  ·
              potential
      exposure to environmental liabilities, changes or developments in the
      laws, regulations or taxes in the gaming or horse racing industry or a
      decline in the public acceptance of gaming or horse racing and other
      unforeseen difficulties associated with our
  operations;
  ·
              adverse
      circumstances, changes, developments or events relating to or resulting
      from our ownership and control of DJL, EVD and DJW;
  and
  ·
              other
      factors discussed in our other filings with the
  SEC.
  
 Overview
  We own
and operate (i) the Diamond Jo riverboat casino in Dubuque, Iowa with 987
slot machines and 18 table games and 5 poker tables, which commenced operations
at its new facility in December 2008, (ii) the Evangeline Downs racino in
Opelousas, Louisiana with 1,424 slot machines and a one-mile dirt and 7/8 mile
turf horse racetrack and four OTBs located throughout south central Louisiana
and (iii) the Diamond Jo Worth casino in Worth County, Iowa with 957 slot
machines, 22 table games and 7 poker tables which opened to the public in April
2006 and subsequently expanded in April 2007.
  23
 
 Results of
      Operations
  Our
results of operations discussed below include the consolidated results of
operations of the Company, DJL, EVD and DJW for the three and six months ended
June 30, 2009 and 2008.
  Statement
of Operations Data
  INCOME
      (LOSS) FROM OPERATIONS:
                
                Three Months Ended
                  June
      30,(in thousands)
                
                2009
                
                
                2008General
      corporate
                
                $
                (1,653
                )
                
                $
                5,449Diamond
      Jo
                
                
                3,498
                
                
                
                3,252Evangeline
      Downs
                
                
                7,669
                
                
                
                8,080Diamond
      Jo Worth
                
                
                6,021
                
                
                
                5,591AB
      Casino Acquisition
                
                
                (73
                )
                
                
                -Income
      from operations
                
                $
                15,462
                
                
                $
                22,372
 
 Diamond Jo
                  Three Months Ended
                  June
      30,
                
                
                Evangeline Downs
                  Three Months Ended
                  June
      30,
                
                
                Diamond Jo Worth
                  Three Months
                  Ended June
      30,(in thousands)
                
                2009
                
                
                2008
                
                
                2009
                
                
                2008
                
                
                2009
                
                
                2008REVENUES:Casino
                
                $
                17,590
                
                
                $
                10,687
                
                
                $
                25,920
                
                
                $
                27,496
                
                
                $
                20,388
                
                
                $
                20,480Racing
                
                
                
                
                
                
                
                
                
                
                5,828
                
                
                
                6,399Video
      poker
                
                
                
                
                
                
                
                
                
                
                1,395
                
                
                
                1,598Food
      and beverage
                
                
                1,972
                
                
                
                635
                
                
                
                3,156
                
                
                
                2,785
                
                
                
                1,087
                
                
                
                1,012Other
                
                
                583
                
                
                
                567
                
                
                
                367
                
                
                
                390
                
                
                
                1,767
                
                
                
                2,232Less
      promotional allowances
                
                
                (2,212
                )
                
                
                (1,423
                )
                
                
                (2,800
                )
                
                
                (2,320
                )
                
                
                (1,598
                )
                
                
                (1,665
                )Net
      revenues
                
                
                17,933
                
                
                
                10,466
                
                
                
                33,866
                
                
                
                36,348
                
                
                
                21,644
                
                
                
                22,059EXPENSES:Casino
                
                
                7,039
                
                
                
                4,593
                
                
                
                12,390
                
                
                
                13,177
                
                
                
                7,131
                
                
                
                7,139Racing
                
                
                
                
                
                
                
                
                
                
                5,041
                
                
                
                5,253Video
      poker
                
                
                
                
                
                
                
                
                
                
                1,034
                
                
                
                1,203Food
      and beverage
                
                
                1,466
                
                
                
                547
                
                
                
                1,984
                
                
                
                2,071
                
                
                
                819
                
                
                
                815Other
                
                
                343
                
                
                
                3
                
                
                
                80
                
                
                
                70
                
                
                
                1,550
                
                
                
                2,008Selling,
      general and administrative
                
                
                3,262
                
                
                
                1,868
                
                
                
                3,534
                
                
                
                3,950
                
                
                
                3,383
                
                
                
                3,317Depreciation
      and amortization
                
                
                2,317
                
                
                
                765
                
                
                
                1,712
                
                
                
                1,995
                
                
                
                1,850
                
                
                
                2,296Pre-opening
      expense
                
                
                
                
                
                
                32
                
                
                
                
                
                
                
                (1
                )Development
      expense
                
                
                
                
                
                
                (649
                )
                
                
                53
                
                
                
                1Loss
      (gain) on disposal of assets
                
                
                8
                
                
                
                55
                
                
                
                (93
                )
                
                
                44
                
                
                
                29
                
                
                
                21Affiliate
      management fees
                
                
                
                
                
                
                
                
                
                
                462
                
                
                
                505
                
                
                
                861
                
                
                
                872Total
      expenses
                
                
                14,435
                
                
                
                7,214
                
                
                
                26,197
                
                
                
                28,268
                
                
                
                15,623
                
                
                
                16,468Income
      from operations
                
                $
                3,498
                
                
                $
                3,252
                
                
                $
                7,669
                
                
                $
                8,080
                
                
                $
                6,021
                
                
                $
                5,591
 
 Three
      months ended June 30, 2009 compared to three months ended June 30,
      2008
  DJL’s
casino revenues increased by $6.9 million, or 64%, to $17.6 million for the
three months ended June 30, 2009 from $10.7 million for the three months ended
June 30, 2008 due to the opening of its new land-based casino. DJL’s slot
revenue increased to $16.0 million for the three months ended June 30, 2009 from
$10.0 million for the three months ended June 30, 2008, and DJL’s table game
revenue increased to $1.6 million for the three months ended June 30, 2009
compared to $0.7 million for the three months ended June 30, 2008.
  EVD’s
casino revenues declined $1.6 million to $25.9 million for the three months
ended June 30, 2009 from $27.5 million for the three months ended June 30,
2008.  Approximately $1.3 million of the decline occurred in June 2009
compared to June 2008 as a result of fewer visitors and less amount spent per
visit during the month. In July 2009, EVD saw June’s trend reverse as evidenced
by a 5% increase in casino revenue over July 2008.
  24
 DJW’s
casino revenues decreased slightly to $20.4 million for the three months ended
June 30, 2009 from $20.5 million for the three months ended June 30,
2008.  DJW’s slot revenue decreased $0.2 million to $18.6 million for
the three months ended June 30, 2009 from $18.8 million for the three months
ended June 30, 2008, and DJW’s table game revenue increased $0.1 million to $1.8
million for the three months ended June 30, 2009 compared to $1.7 million for
the three months ended June 30, 2008.
  Promotional
allowances as a percentage of casino revenues at EVD increased to 10.8% for the
three months ended June 30, 2009 from 8.4% for the three months ended June 30,
2008, which is primarily due to (i) a $0.3 million increase in the dollar amount
of beverage complimentaries on the casino floor which is due primarily to a
price increase on beverages as well as an increased focus on beverage service on
the casino floor and (ii) a $0.2 million increase due to the introduction of new
direct mail programs designed to stimulate increased business.
 
 Casino
operating expenses increased $1.7 million to $26.6 million for the three months
ended June 30, 2009 from $24.9 million for the three months ended June 30, 2008
due primarily to a $2.5 million increase at DJL related to the opening of
its new land-based casino.  Casino operating expenses as a percentage
of casino revenues declined at DJL due to a more efficient casino floor
layout at DJL’s new land-based casino and certain fixed costs on a larger casino
revenue volume.  The increase at DJL was partially offset by a $0.8
million decrease in casino operating expenses at EVD primarily due to a decrease
in gaming taxes associated with the decrease in casino revenues.
  Racing
revenues at EVD for the three months ended June 30, 2009 decreased 9% to $5.8
million compared to $6.4 million for the three months ended June 30, 2008. The
Company believes this decrease is consistent with an industry trend of decreased
wagering on horse racing throughout the United States.
 
 Food and
beverage revenues increased $1.8 million during the three months ended June 30,
2009 compared to the three months ended June 30, 2008 due primarily to a 211%,
or $1.3 million, increase in food and beverage revenues at DJL related to the
opening of its new land-based casino.  In addition, food and beverage
revenues at EVD increased 13%, or $0.4 million, due primarily to an increase in
pricing and an increase in the number of complimentary beverages served as
discussed above.
  Other
revenues decreased $0.5 million during the three months ended June 30, 2009
compared to the three months ended June 30, 2008 due primarily to a decrease in
convenience store revenues at DJW resulting from lower fuel prices over the
second quarter of 2008.  Consistent with this decrease in gasoline
sales, DJW realized a decrease in other expenses.  In addition, during
the three months ended June 30, 2009, DJL had other revenues of approximately
$0.4 million related to the opening of its new 30-lane bowling center and event
center in December 2008.  DJL also incurred approximately $0.3 million
of other expenses related to these amenities.  During the three months
ended June 30, 2008, DJL recorded approximately $0.5 million in other revenue
associated with the DRA contractual obligation under its operating agreement to
pay DJL $0.33 for each $1.00 reduction in DJL’s adjusted gross
receipts.  The income associated with the DRA agreement terminated in
December 2008 upon the opening of DJL’s new land-based casino.
 
 Selling,
general and administrative expenses increased $8.1 million to $11.7 million for
the three months ended June 30, 2009 from $3.6 million for the three months
ended June 30, 2008. This increase was primarily due to a $7.1 million increase
in corporate selling, general and administrative expenses primarily due to a
$6.9 million credit to non-cash expense in the second quarter of
2008 associated with PGP incentive units previously granted to certain
executive officers of the Company.  The value of the incentive units
is adjusted each quarter to their intrinsic value and the credit in 2008 was
reflective of the overall decline in gaming industry values in 2008. In
addition, DJL selling, general and administrative expenses increased $1.4
million related to expenses associated with operations directly related to costs
associated with the operation of its new, larger casino facility.  This
increase at DJL includes approximately $0.8 million related to DJL’s obligation
under its operating agreement with the DRA to pay the DRA 4.5% of its adjusted
gross gaming receipts from the opening date of DJL’s new land-based
casino.
  Depreciation
and amortization expenses increased $0.8 million to $5.9 million for the three
months ended June 30, 2009 from $5.1 million for the three months ended June 30,
2008 due to an increase of $1.5 million at DJL related to the impact of the
depreciation on the assets associated with DJL’s new land-based
casino.  This increase was partially offset by decreases in
depreciation and amortization expenses at DJW and EVD of $0.4 million and $0.3
million, respectively, primarily related to assets that have reached their
useful lives after the first quarter of 2009.
 
 Development
expenses for the three months ended June 30, 2009 and 2008 were $0.1 million and
$(0.6) million, respectively.  In June 2008, DJL and the Historical
Society reached an amended agreement pursuant to which DJL would arrange for the
sale of its riverboat with the proceeds thereof to be split evenly between
DJL and the Historical Society while the prior agreement required DJL to donate
the riverboat to the Historical Society.  Based on this amended
agreement, DJL reduced its outstanding obligation to the Historical Society by
50% of the expected proceeds to be received upon the sale of the Diamond Jo
vessel with a corresponding credit to development expense on the Company’s
statement of operations.
  Affiliate
management fees of $1.4 million and $1.5 million for the three months ended June
30, 2009 and 2008, respectively, relate to management fees paid or accrued to
related parties under various management services and consulting agreements at
EVD and DJW.
  Interest
expense, net of amounts capitalized, increased $0.9 million primarily due to an
increase in interest expense at DJL in connection with additional debt incurred
related to the financing of its new land-based casino of approximately $0.8
million.  In addition, interest expense of approximately $0.6 million
was capitalized as part of the casino development and other construction
projects during the three months ended June 30, 2008.
 
 25
 
 INCOME
      (LOSS) FROM OPERATIONS:
                
                Six Months Ended
                  June
      30,(in thousands)
                
                2009
                
                
                2008General
      corporate
                
                $
                (3,811
                )
                
                $
                2,371Diamond
      Jo
                
                
                7,989
                
                
                
                5,249Evangeline
      Downs
                
                
                15,081
                
                
                
                16,424Diamond
      Jo Worth
                
                
                10,817
                
                
                
                10,406AB
      Casino Acquisition
                
                
                (73
                )
                
                
                -Income
      from operations
                
                $
                30,003
                
                
                $
                34,450
 
 Diamond Jo
                  Six Months Ended
                  June
      30,
                
                
                Evangeline Downs
                  Six Months Ended
                  June
      30,
                
                
                Diamond Jo Worth
                  Six Months
                  Ended June
      30,(in thousands)
                
                2009
                
                
                2008
                
                
                2009
                
                
                2008
                
                
                2009
                
                
                2008REVENUES:Casino
                
                $
                36,786
                
                
                $
                20,148
                
                
                $
                53,243
                
                
                $
                55,562
                
                
                $
                39,626
                
                
                $
                39,373Racing
                
                
                
                
                
                
                
                
                
                
                8,854
                
                
                
                9,716Video
      poker
                
                
                
                
                
                
                
                
                
                
                2,979
                
                
                
                3,156Food
      and beverage
                
                
                4,209
                
                
                
                1,203
                
                
                
                5,550
                
                
                
                5,017
                
                
                
                2,234
                
                
                
                1,968Other
                
                
                1,264
                
                
                
                1,244
                
                
                
                766
                
                
                
                804
                
                
                
                3,028
                
                
                
                3,833Less
      promotional allowances
                
                
                (4,593
                )
                
                
                (2,504
                )
                
                
                (5,354
                )
                
                
                (4,614
                )
                
                
                (3,179
                )
                
                
                (2,956
                )Net
      revenues
                
                
                37,666
                
                
                
                20,091
                
                
                
                66,038
                
                
                
                69,641
                
                
                
                41,709
                
                
                
                42,218EXPENSES:Casino
                
                
                14,560
                
                
                
                9,032
                
                
                
                25,385
                
                
                
                26,052
                
                
                
                14,005
                
                
                
                14,005Racing
                
                
                
                
                
                
                
                
                
                
                7,925
                
                
                
                8,162Video
      poker
                
                
                
                
                
                
                
                
                
                
                2,096
                
                
                
                2,329Food
      and beverage
                
                
                3,125
                
                
                
                1,099
                
                
                
                3,674
                
                
                
                3,650
                
                
                
                1,771
                
                
                
                1,581Other
                
                
                729
                
                
                
                7
                
                
                
                144
                
                
                
                130
                
                
                
                2,584
                
                
                
                3,366Selling,
      general and administrative
                
                
                6,893
                
                
                
                3,650
                
                
                
                7,226
                
                
                
                7,796
                
                
                
                6,788
                
                
                
                6,702Depreciation
      and amortization
                
                
                4,371
                
                
                
                1,560
                
                
                
                3,511
                
                
                
                3,923
                
                
                
                4,035
                
                
                
                4,424Pre-opening
      expense
                
                
                
                
                
                
                87
                
                
                
                
                
                
                
                8
                
                
                
                
                
                
                
                32Development
      expense
                
                
                
                
                
                
                (641
                )
                
                
                135
                
                
                
                32Loss
      (gain) on disposal of assets
                
                
                (1
                )
                
                
                48
                
                
                
                (58
                )
                
                
                127
                
                
                
                84
                
                
                
                48Affiliate
      management fees
                
                
                
                
                
                
                
                
                
                
                919
                
                
                
                1,008
                
                
                
                1,625
                
                
                
                1,654Total
      expenses
                
                
                29,677
                
                
                
                14,842
                
                
                
                50,957
                
                
                
                53,217
                
                
                
                30,892
                
                
                
                31,812Income
      from operations
                
                $
                7,989
                
                
                $
                5,249
                
                
                $
                15,081
                
                
                $
                16,424
                
                
                $
                10,817
                
                
                $
                10,406
 
 Sixmonths
      ended June 30, 2009 compared to six months ended June 30,
      2008
  DJL’s
casino revenues increased by $16.7 million, or 83%, to $36.8 million for the six
months ended June 30, 2009 from $20.1 million for the six months ended June 30,
2008 due to the opening of its new land-based casino. DJL’s slot revenue
increased to $33.5 million for the six months ended June 30, 2009 from $18.7
million for the six months ended June 30, 2008 and DJL’s table game revenue
increased to $3.3 million for the six months ended June 30, 2009 compared to
$1.4 million for the six months ended June 30, 2008.  In April 2009, the
Dubuque Racing Association ("DRA") completed the renovation of its Mystique
casino (formerly the Dubuque Greyhound Park and Casino).  The
renovation includes a remodeled buffet, a new steakhouse restaurant, an
entertainment facility and additional gaming space.
  EVD’s
casino revenues declined to $53.2 million for the six months ended June 30, 2009
from $55.6 million for the six months ended June 30, 2008.  This
decrease is primarily attributed to a decrease in the number of visitors as well
as a decrease in the amount spent per visitor during the month of June 2009
compared to June 2008 as well as disruptions on the casino gaming floor as a
result of EVD’s $3.7 million casino floor renovation which began at the end of
2008 and was completed in April 2009.  This renovation included, among
other things, the purchase of 100 new slot machines, new slot signage and new
carpeting as well as an overall redesign of the casino floor layout to provide
more space for patrons.
  DJW’s
casino revenues increased $0.2 million to $39.6 million for the six months ended
June 30, 2009 from $39.4 million for the six months ended June 30,
2008.  DJW’s slot revenue increased $0.4 million to $36.4 million for
the six months ended June 30, 2009 from $36.0 million for the six months ended
June 30, 2008, and DJW’s table game revenue decreased $0.2 million to $3.2
million for the six months ended June 30, 2009 compared to $3.4 million for the
six months ended June 30, 2008.
  26
 Promotional
allowances as a percentage of casino revenues at EVD increased to 10.1% for the
six months ended June 30, 2009 from 8.3% for the six months ended June 30, 2008,
primarily due to (i) a $0.3 million increase in the dollar amount of beverage
complimentaries on the casino floor which is due primarily to a price increase
on beverages as well as an increased focus on beverage service on the casino
floor and (ii) a $0.4 million increase due to the introduction of new direct
mail programs designed to stimulate increased business.
 
 Casino
operating expenses increased $4.8 million to $53.9 million for the six months
ended June 30, 2009 from $49.1 million for the six months ended June 30, 2008
due primarily to a $5.5 million increase at DJL related to the opening of
its new land-based casino.  Casino operating expenses as a percentage
of casino revenues declined at DJL due to a more efficient casino floor
layout at DJL’s new land-based casino and certain fixed costs on a larger casino
revenue volume.  The increase at DJL was partially offset by a $0.7
million decrease in casino operating expenses at EVD primarily due to a decrease
in gaming taxes associated with the decrease in casino revenues.
  Racing
revenues at EVD for the six months ended June 30, 2009 decreased 8% to $8.9
million compared to $9.7 million for the six months ended June 30, 2008. The
Company believes this decrease is consistent with an industry trend of decreased
wagering on horse racing throughout the United States.
 
 Food and
beverage revenues increased $3.8 million during the six months ended June 30,
2009 compared to the six months ended June 30, 2008 due primarily to a 250%, or
$3.0 million, increase in food and beverage revenues at DJL related to the
opening of its new land-based casino.  In addition, food and beverage
revenues at EVD increased 11%, or $0.5 million, due primarily to an increase in
pricing and an increase in the number of complimentary beverages served as
discussed above.
  Other
revenues decreased $0.8 million during the six months ended June 30, 2009
compared to the six months ended June 30, 2008 due primarily to a decrease in
convenience store revenues at DJW resulting from lower fuel prices over
2008.  Consistent with this decrease in gasoline sales, DJW realized a
decrease in other expenses.  In addition, during the six months ended
June 30, 2009, DJL had other revenues of approximately $0.9 million related to
the opening of its new 30-lane bowling center and event center in December
2008.  DJL also incurred approximately $0.6 million of other expenses
related to these amenities.  During the six months ended June 30,
2008, DJL recorded approximately $1.1 million in other revenue associated with
the DRA’s contractual obligation under its operating agreement to pay DJL $0.33
for each $1.00 reduction in DJL’s adjusted gross receipts.  The income
associated with the DRA agreement terminated in December 2008 upon the opening
of DJL’s new land-based casino.
 
 Selling,
general and administrative expenses increased $8.9 million to $24.5 million for
the six months ended June 30, 2009 from $15.6 million for the six months ended
June 30, 2008.  This increase was primarily due to a $6.1 million increase
in corporate selling, general and administrative expenses primarily due to a
$4.9 million credit to non-cash expense for the six months ended June 30, 2008
compared to a $0.4 million expense for the six months ended June 30, 2009
associated with PGP incentive units previously granted to certain executive
officers of the Company offset by a $0.8 million increase in salaries and other
general corporate expenses.  The value of the incentive units is
adjusted each quarter to their intrinsic value and the credit in 2008 was
reflective of the overall decline in gaming industry values in 2008. In
addition, DJL selling, general and administrative expenses increased $3.2
million related to expenses associated with operations directly related to costs
associated with the operation of its new, larger casino facility.  This
increase at DJL includes approximately $1.7 million related to DJL’s obligation
under its operating agreement with the DRA to pay the DRA 4.5% of its adjusted
gross gaming receipts from the opening date of DJL’s new land-based
casino.
  Depreciation
and amortization expenses increased $2.1 million to $12.0 million for the six
months ended June 30, 2009 from $9.9 million for the six months ended June 30,
2008 due to an increase of $2.8 million at DJL related to the impact of the
depreciation on the assets associated with the DJL’s new land-based
casino.  This increase was partially offset by decreases in
depreciation and amortization expenses at DJW and EVD of $0.4 million for each
property primarily related to assets that have reached their useful
lives.
 
 Development
expenses for the six months ended June 30, 2009 and 2008 were $0.2 million and
$(0.6) million, respectively.  In June 2008, DJL and the Historical
Society reached an amended agreement pursuant to which DJL would arrange for the
sale of its riverboat with the proceeds to be split evenly between DJL and
the Historical Society while the prior agreement required DJL to donate the
riverboat to the Historical Society.  Based on this amended agreement,
DJL reduced its outstanding obligation to the Historical Society by 50% of the
expected proceeds to be received upon the sale of the Diamond Jo vessel with a
corresponding credit to development expense on the Company’s statement of
operations.
  Affiliate
management fees of $2.7 million and $2.8 million for the six months ended June
30, 2009 and 2008, respectively, relate to management fees paid or accrued to
related parties under various management services and consulting agreements at
EVD and DJW.
  Interest
expense, net of amounts capitalized, increased $1.8 million primarily due to an
increase in interest expense at DJL in connection with additional debt incurred
related to the financing of its new land-based casino of approximately $1.5
million.  In addition, interest expense of approximately $0.9 million
was capitalized as part of the casino development and other construction
projects during the six months ended June 30, 2008.
 
 Our
operations are subject to seasonal fluctuations. Our Iowa operations are
typically weaker from November through February as a result of adverse
weather conditions, and are typically stronger from March through October.
Our Louisiana horse racing operations are also subject to seasonal fluctuations.
Our horse racing operations are usually stronger during live racing season,
which generally runs from April through November. In general, our payroll
and general and administrative expenses are affected by inflation. Although
inflation has not had a material effect on our business to date, we could
experience more significant effects of inflation in future periods.
 
 
 LIQUIDITY AND CAPITAL
RESOURCES
  Cash Flows from Operating,
      Investing and Financing
Activities
  Our cash
balance decreased $16.3 million to $22.4 million at June 30, 2009 from $38.7
million at December 31, 2008.
  Cash
flows from operating activities were $23.5 million during the six months ended
June 30, 2009, an increase of $3.5 million when compared to $20.0 million
during the six months ended June 30, 2008.  This increase is primarily
attributed to improved cash flow from operations at DJL as a result of the
opening of its new land-based casino in December 2008 as well as collections
received by DJL from the DRA of $1.7 million related to the DRA’s obligation
under its operating agreement with DJL.
  27
 Cash
flows used in investing activities during the six months ended June 30, 2009 was
$30.6 million consisting primarily of (i) payments of $13.5 million for
construction and other development costs associated with the DJL casino
development project, (ii) cash outflows of $1.6 million related to
construction projects at EVD including the remodeling of the casino floor, (iii)
the payment of a $10.0 million deposit under the Purchase Agreement related to
the proposed acquisition of Amelia Belle, (iv) cash outflows of $4.8 million
primarily related to the acquisition of slot machines and slot machine
conversions and general maintenance capital expenditures and (v) business
acquisition and licensing costs of $1.2 million primarily related to DJW’s
license agreement with the State of Iowa requiring a $1.0 million payment in May
2009.  To partially offset the cash flows used, DJL received proceeds
of $0.5 million from the sale of the Diamond Jo vessel and other obsolete assets
which were not utilized at its new land-based casino.
  Cash
flows used in financing activities during the six months ended June 30, 2009 of
$9.2 million reflects member distributions of $11.6 million and principal
payments on debt of $5.2 million, partially offset by net proceeds under the
Company’s senior secured credit facilities of $7.7 million.  In June
2009, the Company made a $10.0 million distribution to PGP which was
subsequently re-contributed by PGP to the Company in July 2009.
  As of
June 30, 2009, we had $38.2 million outstanding advances under the revolver
portion of the PGL Credit Facility and outstanding letters of credit of
approximately $0.9 million. The available borrowing amount under the PGL Credit
Facility at June 30, 2009, after reductions for amounts borrowed and letters of
credit outstanding at DJL and EVD, was $25.9 million. As of June 30, 2009, DJW
had no outstanding advances under the DJW Credit Facility and outstanding
letters of credit of approximately $0.7 million.  The available
borrowing amount under the DJW Credit Facility at June 30, 2009, after
reductions for letters of credit outstanding, was $4.3 million.
 
 In
connection with the issuance of the New PGL Notes in August 2009,
outstanding borrowings under the PGL Credit Facility were repaid and the DJW
Credit Facility was terminated. See Note 10 of the condensed consolidated
financial statements contained elsewhere in this quarterly report for more
information relating to these transactions.
  Financing
Activities
  Our
financing activities will have several important effects on our future
operations and are described in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2008.  In August
2009, we made significant changes to our financing structure. At June 30,
2009, we had approximately $419.1 million of long-term
debt.  Subsequent to the redemption of the Peninsula Gaming Notes, the
DJW Notes and the EVD Notes and paydown of advances under the PGL Credit
Facility during the third quarter of 2009 and assuming the consummation of the
Proposed Amelia Belle Acquisition, we will have long-term debt of
approximately $542.5 million.  See Note 10 of the condensed
consolidated financial statements contained elsewhere in this quarterly report
for further information on our financing activities.
  General
  In
addition to our cash on hand (including the net proceeds from the issuance in
August 2009 of the New PGL Notes), we currently have the following sources of
funds for our business: (i) cash flows from operations, and (ii) available
borrowings under the PGL Credit Facility. The available borrowing amount at
August 6, 2009 after our refinancing and after reductions for letters of credit
outstanding under the PGL Credit Facility was $63.4 million.
 
 Our
capital expenditures for the next twelve months related to EVD’s planned
development of an event center and a new OTB located in St. Martinville Parish,
Louisiana are expected to be approximately $4.5 million and $1.5 million,
respectively.  Remaining capital expenditures for the Company for the next
twelve months, excluding amounts discussed above and excluding any capital
expenditures related to the Proposed Amelia Belle Acquisition, are expected to
be approximately $8.0 million. The Company’s debt maturities for the next twelve
months are expected to be approximately $4.2 million.  The Company’s member
distributions to PGP for the next twelve months are expected to be approximately
$4.6 million, including approximately $0.8 million related to fees and expenses
related to the Proposed Amelia Belle Aquisition incurred prior to the signing of
the Purchase Agreement.  We plan to finance these expected cash
requirements with: (i) a portion of the available cash on hand, excluding
amounts needed for normal operations or to fund the Proposed Amelia Belle
Acquisition (or, if the Proposed Amelia Belle Acquisition is not consummated or
the purchase agreement related thereto is terminated, in either case, on or
prior to December 31, 2009, to redeem a portion of the New PGL Notes in an
aggregate principal amount of $100 million); (ii) cash generated from
operations; and (iii) our available balance under the PGL Credit Facility, if
necessary.  There can be no assurances that such projects will be
completed in the estimated time frames or at the estimated
costs.
  Based
on our cash on hand, expected cash flows from operations and our available
sources of financing, we believe we will have adequate liquidity to satisfy our
current operating needs at each of our gaming properties and to service our
outstanding indebtedness for the next twelve months.
 
 Our level
of indebtedness will have several important effects on our future operations
including, but not limited to, the following: (i) a significant portion of
our cash flow from operations will be required to pay interest on our
indebtedness and the indebtedness of our subsidiaries; (ii) the financial
covenants contained in the agreements governing such indebtedness will require
us and/or our subsidiaries to meet certain financial tests and may limit our
respective abilities to borrow additional funds or to transfer funds to PGP or
dispose of assets; (iii) our ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions or general
corporate purposes may be impaired; and (iv) our ability to adapt to
changes in the gaming or horse racing industries which affect the markets in
which we operate could be limited.
  CONTRACTUAL
OBLIGATIONS
  A table of our contractual obligations as of December 31, 2008 was included
in Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008.  See Note 10 of the condensed
consolidated financial statements contained elsewhere in this quarterly report
for information on changes to our long-term debt during the third quarter of
2009.  As a result of these transactions, and assuming such
transactions occurred on December 31, 2008 and assuming the consummation of the
Proposed Amelia Belle Acquisition, our contractual obligations for the periods
presented would have changed as follows: (i) increased by $15.7 million for
periods less than one year; (ii) increased by $26.1 million for the
period 2 – 3 years; (iii) decreased by $299.7 million for the period 4 – 5
years and (iv) increased by $696.5 million for the periods
thereafter.
 
 28
 OFF-BALANCE
SHEET TRANSACTIONS
  Other
than as described in Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2008, we do not maintain any
off-balance sheet transactions, arrangements, obligations or other relationships
with unconsolidated entities or others that are reasonably likely to have a
material current or future effect on our financial condition, cash flows,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.
 
 
 CRITICAL
ACCOUNTING POLICIES
  The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amount 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 periods. We periodically evaluate our policies and the
estimates and assumptions related to these policies.
 
 Understanding
our critical accounting policies and related risks is important in evaluating
our financial condition and results of operations. The critical accounting
policies used in preparation of the Company’s financial statements involve a
significant use of management judgment on matters that are inherently uncertain
and are described in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2008. If actual results
differ significantly from management’s estimates, there could be a material
effect on our financial condition, results of operations and cash flows.
Management regularly discusses the identification and development of these
critical accounting policies with the Audit Committee of the Board of Managers.
There have been no significant changes to our critical accounting policies
during the six months ended June 30, 2009.
 
 ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  We are
exposed to certain market risks which are inherent in our financial instruments
which arise from transactions entered into in the normal course of business.
Market risk is the risk of loss from adverse changes in market prices and
interest rates. We do not currently utilize derivative financial instruments to
hedge market risk. We also do not hold or issue derivative financial instruments
for trading purposes.
  We are
exposed to interest rate risk due to changes in interest rates with respect to
our long-term variable interest rate debt borrowing under the PGL Credit
Facility and, prior to the refinancing transactions that were consummated in
August 2009 in connection with which the DJW Credit Facility was terminated, the
DJW Credit Facility. As of June 30, 2009, the Company had outstanding borrowings
under the PGL Credit Facility of $38.2 million and no outstanding borrowings
under the DJW Credit Facility. We have estimated our market risk exposure
using sensitivity analysis. We have defined our market risk exposure as the
potential loss in future earnings and cash flows with respect to interest rate
exposure of our market risk sensitive instruments assuming a hypothetical
increase in market rates of interest of 100 basis points. Assuming we borrow the
maximum amount allowed under the PGL Credit Facility (currently an aggregate
amount of $65.0 million) and if market rates of interest on our variable rate
debt increase by 100 basis points, the estimated additional annual interest
expense would be approximately $0.7 million.
  We are
also exposed to fair value risk due to changes in interest rates with respect to
our long-term fixed interest rate available for sale investment and debt
borrowings. Our fixed rate available for sale investment is recorded at fair
value, and therefore, is directly impacted by changes in interest rates and
market risks. Our fixed rate debt instruments are not generally affected by a
change in the market rates of interest, and therefore, such changes generally do
not have an impact on future earnings. However, future earnings and cash flows
may be impacted by changes in interest rates related to indebtedness incurred to
fund repayments as such fixed rate debt matures. The following table contains
information relating to our fixed rate available for sale investment and debt
borrowings as of June 30, 2009 (dollars in thousands):
  Description
                
                Maturity
                
                Interest
                  Rate
                
                Carrying
                  Value
                
                Fair
                  ValueAvailable
      for sale investment
                
                2011
      – 2037
                
                7
      1/2
                %
                $    15,887
                
                $    15,887
                (1)8
      3/4% senior secured notes
                
                April 15,
      2012
                
                8
      3/4
                %
                253,476
                
                230,775
                (2)11%
      senior secured notes
                
                April
      15, 2012
                
                11
                %
                109,542
                
                105,078
                (2)13%
      senior notes with contingent interest of EVD
                
                March 1,
      2010
                
                13
                %
                6,891
                
                6,772
                (2)Senior
      credit facility
                
                January
      15, 2012
                
                6
                %(3)
                38,200
                
                38,200Term
      loan
                
                December
      1, 2013
                
                6
      1/2
                %
                7,416
                
                7,416
                (2)Notes
      payable, capital lease obligations and other financial
      instruments
                
                2009—2011
                
                6 %
      - 8 3/4
                %
                4,145
                
                4,204
                (2)Derivative
      liability
                
                April
      15, 2012
                
                N/A
                
                826
                
                826
                (2)Obligation
      under Minimum Assessment Agreement
                
                2011
      – 2037
                
                N/A
                
                19,075
                
                20,307
                (2)
 
 (1)           Our
available for sale investment is not traded.  Fair value is based on
considerable judgment using a combination of current market rates and estimates
of market conditions for similar instruments and the fair value of the Peninsula
Notes at June 30, 2009.  Due to the illiquid nature of the investment,
changes in market risks could have a significant impact on the fair
value.
 
 (2)           Represents
fair value as of June 30, 2009 based on current market interest rates and
estimates of market conditions for instruments with similar terms, maturities,
and degrees of risk.
 
 (3)           Such
borrowings are made under variable interest rates.  The interest rate
listed is as of June 30, 2009.
 
 29
 ITEM 4. CONTROLS
AND PROCEDURES
  Disclosure Controls and
Procedures. We maintain disclosure controls and procedures (as defined
in Rule 13a-l 5(e) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) that are designed to ensure that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, including controls and procedures designed to ensure that
such information is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Management necessarily
applied its judgment in assessing the costs and benefits of such controls and
procedures, which, by their nature, can provide only reasonable assurance
regarding management’s disclosure control objectives. Under the supervision and
with the participation of our management, we evaluated the effectiveness of our
disclosure controls and procedures as of June 30, 2009. Based on that
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of June
30, 2009.
 
 Changes in Internal Control Over
Financial Reporting.  There were no significant changes in our
internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f)) that occurred during our second quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
 
 
 PART II.
      OTHER INFORMATION
  ITEM 1. LEGAL
PROCEEDINGS
  Information
in response to this Item 1 is incorporated by reference to the information set
forth in Note 6 “Commitments and Contingencies” in the Notes to the condensed
consolidated financial statements in Part I of this Quarterly Report on
Form 10-Q.
 
 ITEM
      1A.RISKFACTORS
  Competition
— We face intense competition in our gaming markets and increased competition
may have a material adverse effect on our business, financial condition and
results of operations.
  The
gaming industry is intensely competitive.  If our existing competitors
expand and/or upgrade their facilities or operate more efficiently than we do,
new gaming firms enter the markets in which we operate or our competitors
offer amenities that our casinos do not have, we could lose market share or our
gaming markets could become saturated and new opportunities for expanding our
business could become limited.  As a result, increased competition
could have a material adverse effect on our business, financial condition,
results of operations and cash flows.
  In
Dubuque, Iowa, we face competition primarily from the Mystique Casino (the
“Mystique”), a pari-mutuel greyhound racing
facility.   Mystique’s facility includes 959 slot machines, 18
table games and 4 poker tables. Mystique renovated its gaming facility in
April 2009.  The renovation includes a new restaurant, entertainment
facility and additional gaming space.  In addition, a group of private
investors opened a hotel adjacent to the Mystique in October
2005.  The Mystique is owned and operated by the Dubuque Racing
Association (the “DRA”).  Besides the Mystique, we also currently face
limited competition from other gaming facilities located approximately 60 to 120
miles from our operations.  In May 2005, the Iowa Racing and Gaming
Commission granted 4 new licenses (including ours in
Worth County).  The closest of these licensees to the Diamond Jo
is one located in Waterloo, Iowa, approximately 85 miles to the west of Dubuque,
which opened in June 2007.
  Our
primary competition at the Diamond Jo Worth casino is from the Native American
gaming operations in Minnesota, the closest being approximately 110 miles from
the Diamond Jo Worth casino.  In addition, a new casino in Emmetsburg,
Iowa, located approximately 90 miles from Diamond Jo Worth casino, commenced
operations in June 2006.  As noted above, a new casino located in
Waterloo, Iowa opened in June 2007 and is located approximately 120 miles from
our Diamond Jo Worth casino.
  In
Louisiana, the nearest competitor to Evangeline Downs is a Native American
casino located approximately 50 miles to the south of Lafayette, including
several miles off the highway in Baldwin, Louisiana.  We also face
competition from several other casinos and pari-mutuel gaming facilities located
50 to 100 miles from our racino, including Native American casinos in Kinder,
Louisiana, and riverboat casinos in Baton Rouge and Lake Charles,
Louisiana.  The nearest horse racetrack to our racino that is allowed
to have gaming operations is located in Vinton, Louisiana.  We also
face competition from truck stop video poker parlors and OTBs in the areas
surrounding Lafayette and Opelousas, Louisiana.
  We could
also face additional competition if Louisiana or Iowa or any of the states
bordering Iowa or Louisiana (i) adopts laws authorizing new or additional gaming
or (ii) grants new licenses to licensees located in and around the markets in
which we operate.
 
 We also
compete to some extent with other forms of gaming on both a local and national
level, including state-sponsored lotteries, charitable gaming, on- and off-track
wagering, internet gaming, and other forms of entertainment, including motion
pictures, sporting events and other recreational activities.  It is
possible that these secondary competitors could reduce the number of visitors to
our facilities or the amount they are willing to wager, which could have a
material adverse effect on our ability to generate revenue or maintain our
profitability and cash flows.
 
 Increased
competition may require us to make substantial capital expenditures to maintain
and enhance the competitive positions of our properties, including updating slot
machines to reflect changing technology, refurbishing rooms and public service
areas periodically, replacing obsolete equipment on an ongoing basis and making
other expenditures to increase the attractiveness and add to the appeal of our
facilities.  Because we are highly leveraged, after satisfying our
obligations under our outstanding indebtedness, there can be no assurance that
we will have sufficient funds to undertake these expenditures or that we will be
able to obtain sufficient financing to fund such expenditures.  If we
are unable to make such expenditures, our competitive position could be
materially adversely affected.
 
 30
  Acquisitions –
The Company may not be able to successfully identify attractive acquisitions,
successfully integrate acquired operations or realize the intended benefits of
acquisitions.
 
 The
Company evaluates from time to time attractive acquisition opportunities
involving casino and other gaming operations.  This strategy is
subject to numerous risks, including:
 
 ·
              an
      inability to obtain sufficient financing to complete its
      acquisitions;
 
 ·
              an
      inability to negotiate definitive acquisition agreements on satisfactory
      terms;
 
 ·
              difficulty
      in integrating the operations, systems and management of acquired assets
      and absorbing the increased demands on its administrative, operational and
      financial resources;
 
 ·
              the
      diversion of its management’s attention from its other
      responsibilities;
 
 ·
              the
      loss of key employees following completion of its
      acquisitions;
 
 ·
              the
      failure to realize the intended benefits of and/or synergies created by
      its acquisitions;
 
 ·
              its
      being subject to unknown liabilities;
and
 
 ·
              the
      need for a greater amount of capital, infrastructure or other spending
      than anticipated.
 
 The
Company’s inability to effectively address these risks could force it to revise
its business plan, incur unanticipated expenses or forego additional
opportunities for expansion.
 
 On June
18, 2009, the Company entered into the Amelia Belle Purchase Agreement to
acquire the Amelia Belle Casino.  There can be no assurance that the
Company will be able to obtain any necessary regulatory consents and
approvals.
 
  31
 
 ITEM6.
EXHIBITS
  (a)
              Exhibits
  Exhibit
                Number
              
              Description31.1
              
              Certification
      of M. Brent Stevens, Chief Executive Officer, pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002 and Rule 15d-l4 of the Securities
      Exchange Act, as amended.31.2
              
              Certification
      of Natalie A. Schramm, Chief Financial Officer, pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 15d-14 of
      the Securities Exchange Act, as amended.10.1
              
              Purchase
      Agreement dated as of June 18, 2009 by and among Columbia Properties New
      Orleans, L.L.C., as Seller, AB Casino Acquisition, LLC, as Buyer and
      Peninsula Gaming Partners, LLC – incorporated by reference to Exhibit 1.1
      of Peninsula Gaming, LLC’s Current Report on Form 8-K filed July 21,
      2009.
 
 
 32
 SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dubuque, State of Iowa on August 13,
2009.
  PENINSULA
      GAMING, LLCBy:
                  /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
                  /s/
      JONATHAN SWAINJonathan
      SwainChief
      Operating OfficerBy:
                  /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial OfficerPENINSULA
      GAMING CORP.By:
                  /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
                  /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial Officer
 
  33