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 March 31, 2008.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
  DIAMOND
      JO, LLC
              
              PENINSULA
      GAMING, LLC
              
              PENINSULA GAMING
      CORP.(Exact
      name of registrants
                as
      specified in their charter)
              
              (Exact
      name of registrants
                as
      specified in their charter)
              
              (Exact
      name of registrants
                as
      specified in their charter)DELAWARE
              
              DELAWARE
              
              DELAWARE(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (State
      or other jurisdiction of
                incorporation
      or organization)
              
              (State
      or other jurisdiction of
                incorporation
      or organization)42-1483875
              
              20-0800583
              
              25-1902805(I.R.S.
      Employer
                Identification
      No.)
              
              (I.R.S.
      Employer
                Identification
      No.)
              
              (I.R.S.
      Employer
                Identification
      No.)
 
 3rd
Street Ice Harbor, PO Box 1750
 Dubuque,
Iowa 52001
 (563)
583-7005
 (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 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.
 
  
  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
      March 31, 2008 and December 31, 2007
              3Condensed Consolidated Statements of Operations (Unaudited) for
      the Three Months Ended March 31, 2008 and 2007
              4Condensed Consolidated Statements of Cash Flows
      (Unaudited) for the Three Months Ended March 31, 2008 and
      2007
              5Notes to Condensed Consolidated Financial Statements
      (Unaudited)
              6Item 2 - Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
              21Item 3 - Quantitative and Qualitative Disclosures About
      Market Risk
              26Item 4 - Controls and Procedures
              27Part II
      - Other Information
              27Item 1 - Legal Proceedings
              27Item 1A - Risk Factors
              28Item 2 - Unregistered Sales of Equity Securities and
      Use of Proceeds
              28Item 3 - Defaults Upon Senior
      Securities
              28Item 4 - Submission of Matters to a Vote of
      Security Holders
              28Item 5 - Other Information
              28Item 6 - Exhibits
              28Signatures
              29
 
 
  2
  PART I.
      FINANCIAL INFORMATION
 ITEM 1. FINANCIAL
STATEMENTS
  PENINSULA
GAMING, LLC
 CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)
 (in
thousands)
  March 31,
                2008
              
              
              December 31,
                2007ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              47,685
              
              
              $
              42,100Restricted
      cash—purse settlements
              
              
              10,191
              
              
              
              4,902Accounts
      receivable, less allowance for doubtful accounts of $27 and $32,
      respectively
              
              
              3,134
              
              
              
              3,000Receivable
      from affiliates
              
              
              189
              
              
              
              -Inventories
              
              
              977
              
              
              
              911Prepaid
      expenses and other assets
              
              
              1,486
              
              
              
              1,375Total
      current assets
              
              
              63,662
              
              
              
              52,288PROPERTY
      AND EQUIPMENT, NET
              
              
              201,449
              
              
              
              188,812OTHER
      ASSETS:Deferred
      financing costs, net of amortization of $11,342 and $10,325,
      respectively
              
              
              20,830
              
              
              
              21,785Goodwill
              
              
              53,083
              
              
              
              53,083Licenses
      and other intangibles
              
              
              37,145
              
              
              
              37,016Deposits
      and other assets
              
              
              5,240
              
              
              
              6,452Investment
      available for sale
              
              
              12,527
              
              
              
              12,491Total
      other assets
              
              
              128,825
              
              
              
              130,827TOTAL
              
              $
              393,936
              
              
              $
              371,927LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
              
              $
              4,511
              
              
              $
              3,489Construction
      payable
              
              
              9,206
              
              
              
              4,884Purse
      settlement payable
              
              
              12,006
              
              
              
              6,723Accrued
      payroll and payroll taxes
              
              
              4,532
              
              
              
              5,618Accrued
      interest
              
              
              16,354
              
              
              
              7,797Other
      accrued expenses
              
              
              9,880
              
              
              
              9,800Payable
      to affiliates
              
              
              3,253
              
              
              
              3,921Current
      maturities of long-term debt and leases
              
              
              4,092
              
              
              
              3,147Total
      current liabilities
              
              
              63,834
              
              
              
              45,379LONG-TERM
      LIABILITIES:8
      3/4% senior secured notes,
      net of discount
              
              
              252,898
              
              
              
              252,78911%
      senior secured notes, net of discount
              
              
              115,039
              
              
              
              116,35813%
      senior secured notes, net of discount
              
              
              6,858
              
              
              
              6,853Notes
      and leases payable, net of discount
              
              
              1,389
              
              
              
              1,887Obligation
      under Minimum Assessment Agreement
              
              
              1,699
              
              
              
              -Other
      liabilities
              
              
              8,089
              
              
              
              8,283Total
      long-term liabilities
              
              
              385,972
              
              
              
              386,170Total
      liabilities
              
              
              449,806
              
              
              
              431,549COMMITMENTS
      AND CONTINGENCIESMEMBER’S
      DEFICIT:Common
      member’s interest
              
              
              9,000
              
              
              
              9,000Accumulated
      deficit
              
              
              (62,672
              )
              
              
              (66,424
              )Accumulated
      other comprehensive loss
              
              
              (2,198
              )
              
              
              (2,198
              )Total
      member’s deficit
              
              
              (55,870
              )
              
              
              (59,622
              )TOTAL
              
              $
              393,936
              
              
              $
              371,927
 See notes
to condensed consolidated financial statements (unaudited).
   3
  PENINSULAGAMING, LLC
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (in
thousands)
  Three Months
                Ended
                March 31,
                2008
              
              
              Three Months
                Ended
                March 31,
                2007REVENUES:Casino
              
              $
              56,420
              
              
              $
              52,864Racing
              
              
              3,317
              
              
              
              3,462Video
      poker
              
              
              1,558
              
              
              
              1,137Food
      and beverage
              
              
              3,756
              
              
              
              3,419Other
              
              
              2,692
              
              
              
              2,363Less
      promotional allowances
              
              
              (4,666
              )
              
              
              (4,906
              )Total
      net revenues
              
              
              63,077
              
              
              
              58,339EXPENSES:Casino
              
              
              24,180
              
              
              
              22,339Racing
              
              
              2,909
              
              
              
              2,917Video
      poker
              
              
              1,126
              
              
              
              829Food
      and beverage
              
              
              2,897
              
              
              
              2,724Other
              
              
              1,422
              
              
              
              1,251Selling,
      general and administrative
              
              
              11,994
              
              
              
              11,021Depreciation
      and amortization
              
              
              4,863
              
              
              
              4,949Pre-opening
      expense
              
              
              96
              
              
              
              83Development
      expense
              
              
              39
              
              
              
              1,645Affiliate
      management fees
              
              
              1,370
              
              
              
              1,155Loss
      on disposal of assets
              
              
              103
              
              
              
              81Total
      expenses
              
              
              50,999
              
              
              
              48,994INCOME
      FROM OPERATIONS
              
              
              12,078
              
              
              
              9,345OTHER
      INCOME (EXPENSE):Interest
      income
              
              
              744
              
              
              
              723Interest
      expense, net of amounts capitalized
              
              
              (10,264
              )
              
              
              (9,622
              )Total
      other expense
              
              
              (9,520
              )
              
              
              (8,899
              )NET
      INCOME
              
              $
              2,558
              
              
              $
              446
 
   See notes
to condensed consolidated financial statements (unaudited).
   4
  PENINSULA
GAMING, LLC
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (in thousands)
  Three Months
                Ended
                March 31,
                2008
              
              
              Three Months
                Ended
                March 31,
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
              
              $
              2,558
              
              
              $
              446Adjustments
      to reconcile net income to net cash flows from operating
      activities:Depreciation
      and amortization
              
              
              4,863
              
              
              
              4,949Non-cash
      interest
              
              
              1,262
              
              
              
              1,125Non-cash
      equity based and other compensation
              
              
              2,035
              
              
              
              1,602Loss
      on disposal of assets
              
              
              103
              
              
              
              81Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
              
              
              (5,289
              )
              
              
              (4,663
              )Receivables
              
              
              654
              
              
              
              1,089Inventories
              
              
              (66
              )
              
              
              (82
              )Prepaid
      expenses and other assets
              
              
              (664
              )
              
              
              (696
              )Accounts
      payable
              
              
              5,538
              
              
              
              4,769Accrued
      expenses
              
              
              7,189
              
              
              
              9,432Payable/receivable
      - affiliates
              
              
              (837
              )
              
              
              196Net
      cash flows from operating activities
              
              
              17,346
              
              
              
              18,248CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
              
              
              (78
              )
              
              
              (79
              )Proceeds
      from restricted cash
              
              
              -
              
              
              
              7,722Business
      acquisition and licensing costs
              
              
              (130
              )
              
              
              (126
              )Construction
      project development costs
              
              
              (7,371
              )
              
              
              (7,772
              )Purchase
      of property and equipment
              
              
              (2,284
              )
              
              
              (4,037
              )Proceeds
      from sale of property and equipment
              
              
              -
              
              
              
              22Net
      cash flows from investing activities
              
              
              (9,863
              )
              
              
              (4,270
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
              
              
              (137
              )
              
              
              (367
              )Principal
      payments on debt
              
              
              (920
              )
              
              
              (2,448
              )Member
      distributions
              
              
              (841
              )
              
              
              (468
              )Net
      cash flows from financing activities
              
              
              (1,898
              )
              
              
              (3,283
              )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              5,585
              
              
              
              10,695CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              42,100
              
              
              
              56,921CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              47,685
              
              
              $
              67,616SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the period for interest
              
              $
              720
              
              
              $
              851SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Property
      additions acquired, but not paid
              
              $
              7,920
              
              
              $
              6,389Property
      and equipment acquired in exchange for long-term deposit
              
              
              1,213
              
              
              
              -Property
      and equipment acquired in exchange for obligation under Minimum Assessment
      Agreement
              
              
              1,417
              
              
              
              -Minimum
      Assessment Agreement obligation reclassified from deposit
              
              
              117
              
              
              
              -Property
      and equipment purchased in exchange for indebtedness
              
              
              -
              
              
              
              2,819Deferred
      financing costs incurred, but not paid
              
              
              63
              
              
              
              10
 
  See notes
to condensed consolidated financial statements (unaudited).
   5
  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
organized in 1999, is a holding company with no independent operations whose
primary assets are cash and its equity interests in its wholly owned
subsidiaries. PGL’s subsidiaries consist of: (i) Diamond Jo, LLC, a
Delaware limited liability company (“DJL”), which owns and operates the Diamond
Jo riverboat casino in Dubuque, Iowa; (ii) The Old Evangeline Downs,
L.L.C., a Louisiana limited liability company (“EVD”), which 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;
(iii) Diamond Jo Worth Holdings, LLC, a Delaware limited liability company
(“DJWH”), and (iv) 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”) in
March 2004. DJWH is a holding company with no independent operations whose
sole assets are its equity interests in its wholly owned subsidiaries. DJWH’s
subsidiaries consist of: (i) Diamond Jo Worth, LLC, a Delaware limited
liability company (“DJW”), which owns and operates the Diamond Jo casino in
Worth County, Iowa and (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”). The Company is a wholly
owned subsidiary of Peninsula Gaming Partners, LLC, a Delaware limited liability
company (“PGP”).
  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, 2007. Accordingly, footnote disclosure which would
substantially duplicate the disclosure in the audited financial statements has
been omitted in the accompanying unaudited financial statements.
  2.
      Summary of Significant Accounting
Policies
  Investment—In
October 2007, DJW purchased approximately $23 million principal amount of 7.5 %
Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 (“City
Bonds”).  This investment is the Company’s only investment, is
classified as available-for-sale, and is recorded at fair value.  The
fair value of the investment at each of March 31, 2008 and December 31, 2007 was
approximately $12.5 million.  The estimate of the fair value of the
investment is based on current market rates and estimates of market conditions
for instruments with similar terms, maturities, and degrees of
risk.
 
 Development
expense—Costs associated with new business opportunities are expensed as
incurred unless the cost is capitalizable and management believes it is probable
the project will be completed.  For the three months ended March 31,
2007, the Company incurred development expenses associated with the development
of DJL’s proposed new casino.  During the quarter ended March 31,
2007, DJL expensed $1.4 million as development expense associated with its
charitable obligations under the Offer to Purchase Real Estate, Acceptance and
Lease, dated September 27, 2006 (“Historical Society Agreement”) between DJL and
the Dubuque County Historical Society (“Historical Society”) and $0.2 million of
other development cost associated with the proposed project.
  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 fair values of equity
based compensation, 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 the EVD sales tax contingency, slot club awards, customer legal
disputes and self insured medical and workers compensation claims.
  In
addition, an estimated loss from a loss contingency is recorded when information
available prior to issuance of the
  6
  financial
statements indicates that it is probable that a liability has been incurred at
the date of the financial statements and the amount of the loss can be
reasonably estimated. Accounting for contingencies such as legal matters
requires the use of judgment. Many of these legal contingencies can take years
to be resolved. An adverse outcome could have a material impact on financial
condition, results of operations, and cash flows.
 
 Recently Issued
Accounting Standards—In March 2008, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial Accounting Standard (“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 is effective for fiscal years and interim periods
beginning after November 15, 2008. The Company is currently evaluating the
impact of SFAS 161’s disclosure requirements on the Company’s financial
statements.
 
 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 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities
to choose to measure certain eligible financial assets and financial liabilities
at fair value (the fair value option). SFAS 159 also establishes presentation
and disclosure requirements designed to facilitate comparisons between entities
that choose different measurement attributes for similar types of assets and
liabilities. Unrealized gains and losses on items for which the fair value
option is elected would be reported in earnings. As of January 1, 2008 the
Company chose not to elect the fair value option for any eligible financial
assets or liabilities existing at that date. The Company will consider whether
to elect the fair value option for new eligible financial assets or liabilities
entered into in the future on an instrument by instrument basis.
 
  In
September 2006, the FASB issued SFASNo. 157, Fair Value Measurements
(“SFAS 157”). SFAS 157 defines fair value, establishes a methodology for
measuring fair value, and expands the required disclosure for fair value
measurements. In February 2008, the FASB issued FASB Staff Position No. FAS
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, 2008, this standard applies prospectively to fair value
measurements of financial instruments and recurring fair value measurements of
non-financial assets and non-financial liabilities. On January 1, 2009, the
standard will also apply to all other fair value measurements. The Company
adopted SFAS No. 157 on January 1, 2008, as required, for financial instruments
and recurring fair value measurements of non-financial assets and liabilities.
See Note 5 for additional information on fair value measurements and
disclosures.
 
 
 3.
Property and Equipment
  Property
and equipment at March 31, 2008 and December 31, 2007 is summarized as
follows (in thousands):
  March 31,
                2008
              
              
              December 31,
                2007Land
      and land improvements
              
              $
              18,171
              
              
              $
              18,170Buildings
      and improvements
              
              
              138,543
              
              
              
              137,669Riverboat
      and improvements
              
              
              8,442
              
              
              
              8,442Furniture,
      fixtures and equipment
              
              
              67,091
              
              
              
              65,077Computer
      equipment
              
              
              8,873
              
              
              
              8,842Vehicles
              
              
              379
              
              
              
              379Construction
      in progress
              
              
              32,488
              
              
              
              18,188Subtotal
              
              
              273,987
              
              
              
              256,767Accumulated
      depreciation
              
              
              (72,538
              )
              
              
              (67,955
              )Property
      and equipment, net
              
              $
              201,449
              
              
              $
              188,812
 
 Depreciation
and amortization expense during each of the three months ended March 31, 2008
and 2007 was $4.9 million.
  The
Company capitalizes interest costs associated with debt incurred in connection
with significant construction projects. The amount capitalized during the three
months ended March 31, 2008 and 2007 was $0.3 million and $0.4 million,
respectively.
  7
 In
connection with DJL’s proposed casino development, DJL began accelerating
depreciation on long-lived assets with a net book value of approximately $4.5
million that will either be contributed to the Historical Society or will not be
utilized at its new casino facility.  Accelerated depreciation on
these assets began during the fourth quarter of 2006 and DJL will continue 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 estimates commencing operations at the new
facility.  Depreciation expense for the quarters ended March 31, 2008
and 2007 increased by approximately $0.3 million and $0.2 million, respectively,
as a result of accelerated depreciation on these assets.
  
 4.
Debt
  Long-term
debt consists of the following (in thousands):
  March 31,
                2008
              
              
              December 31,
                20078
      3/4% senior secured notes
      due April 15, 2012, net of discount of $2,102 and $2,211,
      respectively, secured by substantially all of the assets of PGL, DJL and
      EVD and the equity of DJL and EVD
              
              $
              252,898
              
              
              $
              252,78911%
      senior secured notes of DJW due April 15, 2012, net of discount of
      $714 and $762, respectively, secured by substantially all of the assets of
      DJW and a pledge of equity of DJW and DJWC
              
              
              116,406
              
              
              
              116,35813%
      senior notes of EVD due March 1, 2010 with contingent interest, net
      of discount of $52 and $57, respectively
              
              
              6,858
              
              
              
              6,853$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 0.25% with a floor of 4.0% (current rate of 5.5% at March 31, 2008),
      maturing June 30, 2008, secured by substantially all of the assets of DJL
      and EVD
              
              
              —
              
              
              
              —$5,000
      revolving line of credit under a loan and security agreement of DJW,
      interest rate at prime less a margin of 1.0% with a floor of 5.0% (current
      rate of 5.0% at March 31, 2008), maturing March 1, 2010, secured by
      substantially all of the assets of DJW and guaranteed by the Company’s
      Chief Executive Officer
              
              
              —
              
              
              
              —Notes
      payable and capital lease obligations, net of discount of $49 and $103,
      respectively, interest rate at 7 1/4% - 8 3/4%, due 2008 - 2011
              
              
              4,114
              
              
              
              5,034Total
      debt
              
              
              380,276
              
              
              
              381,034Less
      current portion
              
              
              (4,092
              )
              
              
              (3,147
              )Total
      long term debt
              
              $
              376,184
              
              
              $
              377,887
 
 On August
31, 2006, DJW entered into the First Supplemental Indenture to the Indenture,
dated as of July 19, 2005, requiring among other things, DJW to offer to buy
back a portion of DJW’s 11% senior secured notes due 2012 (“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)
  8
  (“Excess
Cash Flow Amount”).  The Excess Cash Flow Amount for the six month
period ended March 31, 2008 was $1.5 million which includes $1.4 million in
principal, which is included in current maturities of long-term debt and leases
in the Company’s balance sheet, and $0.1 million in related premiums. DJW
intends to make an offer to repurchase a portion of the DJW Notes in an amount
equal to the Excess Cash Flow Amount in accordance with the terms of the
governing indenture.
  As of
March 31, 2008, the Company had no outstanding advances under its $65.0 million
senior secured credit facility (“PGL Credit Facility”). As of March 31, 2008,
DJW had no outstanding advances under its $5.0 million senior secured credit
facility (“DJW Credit Facility”). In addition, as of March 31, 2008, the Company
had outstanding letters of credit under the PGL Credit Facility and the DJW
Credit Facility of approximately $0.9 and $0.7 million, respectively, resulting
in available borrowings thereunder of $64.1 and $4.3 million,
respectively.
   The
Company’s 8 3⁄4% senior secured notes due 2012 (“Peninsula Gaming Notes”), the DJW
Notes, the PGL Credit Facility and the DJW Credit Facility each contain various
restrictive covenants, all with which the Company was in compliance with as of
March 31, 2008.
  5.
      Fair Value Measurements
  The
Company adopted SFAS 157 on January 1, 2008. Under generally accepted accounting
principles, certain assets and liabilities must be measured at fair value, and
SFAS 157 defines fair value and details the disclosures that are required
for items measured at fair value. SFAS 157 defines fair value as 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 standard outlines a valuation framework and creates a fair value hierarchy
in order to increase the consistency and comparability of fair value
measurements and the related disclosures.
 
 The
Company has two financial instruments that must be measured at fair value in the
financial statements under the new fair value standard: (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 on a recurring basis.
 
 SFAS 157
establishes a valuation hierarchy for disclosure of the inputs to valuation used
to measure fair value.  This hierarchy prioritizes the 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.
  In
accordance with the fair value hierarchy described above, the following table
shows the fair value of the Company’s financial assets and liabilities that are
required to be measured at fair value as of March 31, 2008, which are
classified as “Investment available for sale” and “Other long-term
liabilities/Other accrued liabilities (short-term portion)” (in
thousands):
 
 Fair
      Value Measurements at March 31, 2008 UsingTotal
      Carrying Value at March 31, 2008
              
              
              Quoted
      prices in active markets
                (Level
      1)
              
              
              Significant
      other observable inputs
                (Level
      2)
              
              
              Significant
      unobservable inputs
                (Level
      3)Investment
      available for sale
              
              $
              12,527
              
              
              $
              -
              
              
              $
              -
              
              
              $
              12,527Derivative
      liability
              
              
              (1,199
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,199
              )
 
  9
  The
following table summarizes the changes in fair value of our Level 3 assets and
liabilities (in thousands):
 Fair
      Value Measurements of Assets and Liabilities Using Level 3
      InputsInvestment
      available for sale
              
              
              Derivative liabilityBalance
      at beginning of the year
              
              $
              12,491
              
              
              $
              (1,252
              )Total
      gains (losses) (realized or unrealized):Included
      in earnings
              
              
              36
              
              
              
              53Included
      in other comprehensive income
              
              
              -
              
              
              
              -Transfers
      in or out of Level 3
              
              
              -
              
              
              
              -Purchases,
      sales, issuances and settlements
              
              
              -
              
              
              
              -Ending
      balance at March 31, 2008
              
              $
              12,527
              
              
              $
              (1,199
              )Gains
      (losses) for the 2008 first quarter included in earnings
      attributable
              
              Included
      in interest income
              
              
              Included
      in interest expenseto
      the change in unrealized gains or losses relating to assets/liabilities
      stillheld
      at the reporting date
              
              $
              36
              
              
              $
              53
  
   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, due to the unique nature of the bond, estimates from two brokers of what
market participants would use in pricing the bond.  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.
   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 of the DJW
Notes. The estimated premium payments are 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
discussions with the holders of the notes as to whether the contingent put
option would be elected by the noteholders. The fair value of the put option is
revalued at the end of each reporting period with a corresponding charge
(benefit) to interest expense.
  6.
      Commitments and Contingencies
   Under the
Company’s and PGP’s operating agreements, the Company and PGP have agreed,
subject to certain 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 Secretary of the Department of
Revenue and Taxation for the State of Louisiana (the “Department”), the St.
Landry Parish School Board and the City of Opelousas. EVD sought a judgment
declaring that sales taxes were not due to the defendants on purchases made by
EVD and its contractors in connection with the construction and furnishing of
the Evangeline Downs Racetrack and Casino, which was constructed in St. Landry
Parish in 2003-2004. EVD’s action was based on Louisiana statutory law which
provides that racetracks are not required to pay taxes and fees other than those
provided in the racing statutes, and that taxes and fees provided in the racing
statutes are in lieu of, among other things, all state and local sales taxes.
The St. Landry Parish School Board and the City of Opelousas questioned the
application of the racing statutes to the construction and furnishing of the
casino portion of the facility, thereby leading to the filing of this action.
Subsequently, the Department adopted a similar position as the St. Landry Parish
School Board and the City of Opelousas.
 
 On
February 20, 2008, EVD and the Department entered into a Settlement Agreement
(the “Settlement Agreement”) which settled certain tax disputes between EVD and
the Department arising out of audits conducted by the Department of
the
  10
  taxable
years ended December 31, 2002, 2003 and 2004.  The Department and EVD
also reached an agreement regarding the payment of additional sales tax by EVD
for tax years beginning on or after January 2005.  The sales and use
tax dispute with St. Landry Parish and the City of Opelousas remains open. EVD
has accrued management’s best estimate of all sales and use taxes that may be
due to the Department, St. Landry Parish or the City of Opelousas as of March
31, 2008.
  In
October 2005, EVD filed a request to arbitrate certain claims against the
general contractor of its racino relating to improper construction of the horse
racetrack at the racino. In March 2008, EVD and the general contractor agreed in
principal to a settlement agreement whereby EVD agreed to pay the general
contractor approximately $0.8 million to settle all claims related to the
arbitration.  The formal agreement is expected to be executed in the second
quarter of 2008, at which time EVD will record a reduction in the $1.6 million
liability for unpaid billings from the contractor recorded on the Company’s
consolidated balance sheet as of March 31, 2008 with a corresponding reduction
in property and equipment.
  Other
than as described above, 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 other litigation would have a material adverse effect on the Company’s
financial condition, results of operations or cash flows.
 
 On
September 25, 2007, DJL entered into a bonded construction contract
with Conlon Construction Company (“Conlon”) for the construction of
its new casino.  The construction contract is based on a cost
plus fee arrangement and establishes a guaranteed maximum price of approximately
$19.3 million for site preparation and certain preliminary construction costs
for the Diamond Jo casino in Dubuque, Iowa.   On April 19, 2008, DJL
entered into a change order with Conlon providing for, among other things, an
increase in the guaranteed maximum price of the construction contract to
approximately $60.9 million for the site preparation and construction costs for
the project. Total estimated cost of the project is estimated to be
approximately $83.3 million.
 
 7.
      Related Party Transactions
   During
the three months ended March 31, 2008 and 2007, the Company recorded
distributions of $0.8 million and $0.5 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 in their capacity as a board
member and (iii) tax, accounting, legal and administrative costs and
expenses related to PGP. These amounts were recorded as member
distributions.
   During
each of the three months ended March 31, 2008 and 2007, the Company expensed
$0.1 million 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 based on earnings before interest, taxes,
depreciation, amortization and non-recurring charges, EVD expensed $0.2 million
in affiliate management fees payable to OEDA during each of the three months
ended March 31, 2008 and 2007.
   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 and $0.4 million during the three
months ended March 31, 2008 and 2007, respectively.
   EVD and
PGP are parties to separate consulting agreements with a board member of PGP.
Under the consulting agreements, EVD and DJW must each pay the board member 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. Under the consulting agreements, the board member is also
entitled to reimbursement of reasonable business expenses as approved by the
board of managers of PGP. EVD expensed $0.3 million of affiliate management fees
during each of the three months ended March 31, 2008 and 2007 related to its
consulting agreement. DJW expensed $0.2 million of affiliate management fees
during each of the three months ended March 31, 2008 and 2007 related to this
agreement.
   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. Any appreciation in
the value of the incentive units is expensed based on the percentage of the
grant vested. The Company expensed $1.9 million and $1.5 million during the
three months ended March 31, 2008 and 2007, respectively, with respect to these
incentive units. As of March 31, 2008, there was approximately $5.5 million
of compensation expense related to nonvested awards which has not been
recognized in the consolidated statement of operations. Based on the intrinsic
value at March 31, 2008, approximately $1.9 million of the unrecognized value of
awards is scheduled to vest over the next six months unless vested earlier
pursuant to the terms of the awards.  The remaining $3.6 million is
scheduled to vest upon a change in control of the Company.
   11
 8.
Segment Information
   The
Company is organized around geographical areas and operates three reportable
segments: (1) Diamond Jo Dubuque 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, 2007. 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
months ended March 31, 2008 and 2007 (in thousands):
  Net Revenues
      From External Customers
                Three Months Ended March 31,2008
              
              
              2007Diamond
      Jo Dubuque
              
              $
              9,625
              
              
              $
              10,070Diamond
      Jo Worth
              
              
              20,159
              
              
              
              16,233Evangeline
      Downs
              
              
              33,293
              
              
              
              32,036Total
              
              $
              63,077
              
              
              $
              58,339
 
  Segment Operating Earnings
                Three Months Ended March 31, (1)2008
              
              
              2007General
      corporate
              
              $
              (2,981
              )
              
              $
              (2,275
              )Diamond
      Jo Dubuque
              
              
              2,848
              
              
              
              2,984Diamond
      Jo Worth
              
              
              7,784
              
              
              
              6,562Evangeline
      Downs
              
              
              10,898
              
              
              
              9,987Total
      Segment Operating Earnings (1)
              
              
              18,549
              
              
              
              17,258General
      corporate:Depreciation
      and amortization
              
              
              (12
              )
              
              
              (11
              )Affiliate
      management fees
              
              
              (85
              )
              
              
              (78
              )Interest
      income
              
              
              64
              
              
              
              251Diamond
      Jo Dubuque:Depreciation
      and amortization
              
              
              (795
              )
              
              
              (1,179
              )Pre-opening
      expense
              
              
              (55
              )
              
              
              -Development
      expense
              
              
              (8
              )
              
              
              (1,633
              )Gain
      (loss) on disposal of assets
              
              
              7
              
              
              
              (61
              )Interest
      expense, net
              
              
              (2,518
              )
              
              
              (2,512
              )Diamond
      Jo Worth:Depreciation
      and amortization
              
              
              (2,128
              )
              
              
              (1,288
              )Pre-opening
      expense
              
              
              (32
              )
              
              
              (59
              )Affiliate
      management fees
              
              
              (782
              )
              
              
              (621
              )Loss
      on disposal of assets
              
              
              (27
              )
              
              
              -Interest
      expense, net
              
              
              (2,959
              )
              
              
              (2,507
              )Evangeline
      Downs:Depreciation
      and amortization
              
              
              (1,928
              )
              
              
              (2,471
              )Pre-opening
      expense
              
              
              (9
              )
              
              
              (24
              )Development
      expense
              
              
              (31
              )
              
              
              (12
              )Affiliate
      management fees
              
              
              (503
              )
              
              
              (456
              )Loss
      on disposal of assets
              
              
              (83
              )
              
              
              (20
              )Interest
      expense, net
              
              
              (4,107
              )
              
              
              (4,131
              )Net
      income
              
              $
              2,558
              
              
              $
              446
  (1)
              Segment
      operating earnings is defined as net income plus 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.
 
 12
 Total AssetsMarch 31,
                2008
              
              
              December 31,
                2007General
      corporate
              
              $
              6,599
              
              
              $
              12,469Diamond
      Jo Dubuque
              
              
              115,396
              
              
              
              102,617Diamond
      Jo Worth
              
              
              106,392
              
              
              
              104,079Evangeline
      Downs
              
              
              165,549
              
              
              
              152,762Total
              
              $
              393,936
              
              
              $
              371,927
 
  Cash Expenditures for Additions to
                Long-Lived AssetsMarch 31, 2008
              
              
              March 31, 2007General
      corporate
              
              $
              7
              
              
              $
              4Diamond
      Jo Dubuque
              
              
              6,666
              
              
              
              761Diamond
      Jo Worth
              
              
              667
              
              
              
              8,691Evangeline
      Downs
              
              
              2,445
              
              
              
              2,479Total
              
              $
              9,785
              
              
              $
              11,935  13
 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 March
31, 2008 and December 31, 2007 are as follows (in thousands):
  March 31, 2008
              
              
              December 31, 2007Fair Value
              
              
              Recorded
                Amount
              
              
              Fair Value
              
              
              Recorded
                AmountInvestment
      available for sale
              
              $
              12,527
              
              
              $
              12,527
              
              
              $
              12,491
              
              
              $
              12,4918
      3/4% senior secured notes
              
              
              221,850
              
              
              
              252,898
              
              
              
              254,363
              
              
              
              252,78911%
      senior secured notes
              
              
              117,120
              
              
              
              116,406
              
              
              
              117,120
              
              
              
              116,35813%
      senior secured notes
              
              
              6,910
              
              
              
              6,858
              
              
              
              6,910
              
              
              
              6,853Notes
      payable and capital lease obligations
              
              
              4,163
              
              
              
              4,114
              
              
              
              5,137
              
              
              
              5,034Derivative
      liability
              
              
              1,199
              
              
              
              1,199
              
              
              
              1,252
              
              
              
              1,252
  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, on estimates from two brokers
of what market participants would use to price the investment.
  10.           Consolidating
Financial Statements
  The
Company, DJL and PGC (which has no assets or operations) are co-issuers of the
Peninsula Gaming Notes. EVD is a guarantor of the Peninsula Gaming Notes, and
the equity of DJL and EVD is pledged as collateral securing 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. Consolidating
financial information of the co-issuers, the guarantor and the non-guarantor is
presented on the following pages.
   14
  CONSOLIDATING
BALANCE SHEETS
 
  At March 31, 2008(in thousands)
              
              Parent
                Co-Issuer -
                PGL
              
              
              Subsidiary
                Co-Issuer -
                DJL
              
              
              Subsidiary
                Guarantor -
                EVD
              
              
              Subsidiary
                Non-
                Guarantor -
                DJW
              
              
              Consolidating
                Adjustments
              
              
              ConsolidatedASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              5,975
              
              
              $
              5,384
              
              
              $
              18,897
              
              
              $
              17,429
              
              
              
              
              
              $
              47,685Restricted
      cash-purse settlements
              
              
              
              
              
              
              
              
              
              
              10,191
              
              
              
              
              
              
              
              
              
              
              10,191Accounts
      receivable
              
              
              
              
              
              
              1,078
              
              
              
              882
              
              
              
              1,174
              
              
              
              
              
              
              3,134Receivables
      from affiliates
              
              
              
              
              
              
              1,785
              
              
              
              92
              
              
              
              106
              
              
              $
              (1,794
              )
              
              
              189Inventories
              
              
              
              
              
              
              193
              
              
              
              360
              
              
              
              424
              
              
              
              
              
              
              
              977Prepaid
      expenses and other assets
              
              
              14
              
              
              
              312
              
              
              
              787
              
              
              
              373
              
              
              
              
              
              
              
              1,486Total
      current assets
              
              
              5,989
              
              
              
              8,752
              
              
              
              31,209
              
              
              
              19,506
              
              
              
              (1,794
              )
              
              
              63,662PROPERTY
      AND EQUIPMENT, NET
              
              
              74
              
              
              
              38,824
              
              
              
              95,317
              
              
              
              67,234
              
              
              
              
              
              
              
              201,449OTHER
      ASSETS:Investment
      in subsidiaries
              
              
              (61,352
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              61,352Deferred
      financing costs
              
              
              
              
              
              
              12,058
              
              
              
              4,697
              
              
              
              4,075
              
              
              
              
              
              
              
              20,830Goodwill
              
              
              
              
              
              
              53,083
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              53,083Licenses
      and other intangibles
              
              
              
              
              
              
              
              
              
              
              34,125
              
              
              
              3,020
              
              
              
              
              
              
              
              37,145Deposits
      and other assets
              
              
              536
              
              
              
              4,464
              
              
              
              201
              
              
              
              39
              
              
              
              
              
              
              
              5,240Investment
      available for sale
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,527
              
              
              
              
              
              
              
              12,527Total
      other assets
              
              
              (60,816
              )
              
              
              69,605
              
              
              
              39,023
              
              
              
              19,661
              
              
              
              61,352
              
              
              
              128,825TOTAL
              
              $
              (54,753
              )
              
              $
              117,181
              
              
              $
              165,549
              
              
              $
              106,401
              
              
              $
              59,558
              
              
              $
              393,936LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
              
              $
              28
              
              
              $
              618
              
              
              $
              3,365
              
              
              $
              500
              
              
              
              
              
              
              $
              4,511Construction
      payable
              
              
              
              
              
              
              6,009
              
              
              
              2,817
              
              
              
              380
              
              
              
              
              
              
              
              9,206Purse
      settlement payable
              
              
              
              
              
              
              
              
              
              
              12,006
              
              
              
              
              
              
              
              
              
              
              
              12,006Accrued
      payroll and payroll taxes
              
              
              1,055
              
              
              
              1,102
              
              
              
              1,318
              
              
              
              1,057
              
              
              
              
              
              
              
              4,532Accrued
      interest
              
              
              
              
              
              
              4,165
              
              
              
              6,278
              
              
              
              5,911
              
              
              
              
              
              
              
              16,354Other
      accrued expenses
              
              
              34
              
              
              
              1,642
              
              
              
              5,617
              
              
              
              2,587
              
              
              
              
              
              
              
              9,880Payable
      to affiliates
              
              
              
              
              
              
              
              
              
              
              2,990
              
              
              
              2,057
              
              
              $
              (1,794
              )
              
              
              3,253Current
      maturities of long-term debt and leases
              
              
              
              
              
              
              14
              
              
              
              571
              
              
              
              3,507
              
              
              
              
              
              
              
              4,092Total
      current liabilities
              
              
              1,117
              
              
              
              13,550
              
              
              
              34,962
              
              
              
              15,999
              
              
              
              (1,794
              )
              
              
              63,834LONG-TERM
      LIABILITIES8
      3⁄4% senior secured notes, net of discount
              
              
              
              
              
              
              101,715
              
              
              
              151,183
              
              
              
              
              
              
              
              
              
              
              
              252,89811%
      senior secured notes, net of discount
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              115,039
              
              
              
              
              
              
              
              115,03913%
      senior secured notes, net of discount
              
              
              
              
              
              
              
              
              
              
              6,858
              
              
              
              
              
              
              
              
              
              
              
              6,858Notes
      and leases payable, net of discount
              
              
              
              
              
              
              8
              
              
              
              1,161
              
              
              
              220
              
              
              
              
              
              
              
              1,389Obligation
      under Minimum Assessment Agreement
              
              
              
              
              
              
              1,699
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,699Other
      liabilities
              
              
              
              
              
              
              6,159
              
              
              
              
              
              
              
              1,930
              
              
              
              
              
              
              
              8,089Total
      long-term liabilities
              
              
              
              
              
              
              109,581
              
              
              
              159,202
              
              
              
              117,189
              
              
              
              
              
              
              
              385,972Total
      liabilities
              
              
              1,117
              
              
              
              123,131
              
              
              
              194,164
              
              
              
              133,188
              
              
              
              (1,794
              )
              
              
              449,806MEMBER’S
      DEFICIT
              
              
              (55,870
              )
              
              
              (5,950
              )
              
              
              (28,615
              )
              
              
              (26,787
              )
              
              
              61,352
              
              
              
              (55,870
              )TOTAL
              
              $
              (54,753
              )
              
              $
              117,181
              
              
              $
              165,549
              
              
              $
              106,401
              
              
              $
              59,558
              
              
              $
              393,936
 
  15
 At December 31, 2007Parent
                Co-Issuer —
                PGL
              
              
              Subsidiary
                Co-Issuer —
                DJL
              
              
              Subsidiary
                Guarantor —
                EVD
              
              
              Subsidiary
                Non-Guarantor —DJW
              
              
              Consolidating
                Adjustments
              
              
              Consolidated(in thousands)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              11,908
              
              
              $
              4,606
              
              
              $
              11,834
              
              
              $
              13,752
              
              
              
              
              
              $
              42,100Restricted
      cash-purse settlements
              
              
              
              
              
              
              
              
              
              
              4,902
              
              
              
              
              
              
              
              
              
              
              4,902Accounts
      receivable
              
              
              
              
              
              
              355
              
              
              
              1,932
              
              
              
              713
              
              
              
              
              
              
              3,000Receivables
      from affiliates
              
              
              
              
              
              
              1,198
              
              
              
              
              
              
              
              17
              
              
              $
              (1,215
              )Inventories
              
              
              
              
              
              
              218
              
              
              
              313
              
              
              
              380
              
              
              
              
              
              
              
              911Prepaid
      expenses and other assets
              
              
              23
              
              
              
              303
              
              
              
              697
              
              
              
              352
              
              
              
              
              
              
              
              1,375Total
      current assets
              
              
              11,931
              
              
              
              6,680
              
              
              
              19,678
              
              
              
              15,214
              
              
              
              (1,215
              )
              
              
              52,288PROPERTY
      AND EQUIPMENT, NET
              
              
              79
              
              
              
              25,935
              
              
              
              93,804
              
              
              
              68,994
              
              
              
              
              
              
              
              188,812OTHER
      ASSETS:Investment
      in subsidiaries
              
              
              (70,383
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              70,383Deferred
      financing costs
              
              
              
              
              
              
              12,356
              
              
              
              5,099
              
              
              
              4,330
              
              
              
              
              
              
              
              21,785Goodwill
              
              
              
              
              
              
              53,083
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              53,083Licenses
      and other intangibles
              
              
              
              
              
              
              
              
              
              
              33,995
              
              
              
              3,021
              
              
              
              
              
              
              
              37,016Deposits
      and other assets
              
              
              459
              
              
              
              5,761
              
              
              
              186
              
              
              
              46
              
              
              
              
              
              
              
              6,452Investment
      available for sale
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,491
              
              
              
              
              
              
              
              12,491Total
      other assets
              
              
              (69,924
              )
              
              
              71,200
              
              
              
              39,280
              
              
              
              19,888
              
              
              
              70,383
              
              
              
              130,827TOTAL
              
              $
              (57,914
              )
              
              $
              103,815
              
              
              $
              152,762
              
              
              $
              104,096
              
              
              $
              69,168
              
              
              $
              371,927LIABILITIES
      AND MEMBER’S DEFICITCURRENT
      LIABILITIES:Accounts
      payable
              
              $
              33
              
              
              $
              402
              
              
              $
              2,603
              
              
              $
              451
              
              
              
              
              
              
              $
              3,489Construction
      payable
              
              
              
              
              
              
              1,772
              
              
              
              2,465
              
              
              
              647
              
              
              
              
              
              
              
              4,884Purse
      settlement payable
              
              
              
              
              
              
              
              
              
              
              6,723
              
              
              
              
              
              
              
              
              
              
              
              6,723Accrued
      payroll and payroll taxes
              
              
              1,605
              
              
              
              1,309
              
              
              
              1,454
              
              
              
              1,250
              
              
              
              
              
              
              
              5,618Accrued
      interest
              
              
              
              
              
              
              1,925
              
              
              
              3,182
              
              
              
              2,690
              
              
              
              
              
              
              
              7,797Other
      accrued expenses
              
              
              70
              
              
              
              1,722
              
              
              
              5,460
              
              
              
              2,548
              
              
              
              
              
              
              
              9,800Payable
      to affiliates
              
              
              
              
              
              
              
              
              
              
              2,516
              
              
              
              2,620
              
              
              $
              (1,215
              )
              
              
              3,921Current
      maturity of long-term debt and leases
              
              
              
              
              
              
              14
              
              
              
              571
              
              
              
              2,562
              
              
              
              
              
              
              
              3,147Total
      current liabilities
              
              
              1,708
              
              
              
              7,144
              
              
              
              24,974
              
              
              
              12,768
              
              
              
              (1,215
              )
              
              
              45,379LONG-TERM
      LIABILITIES:8
      3/4% senior secured notes, net of discount
              
              
              
              
              
              
              101,671
              
              
              
              151,118
              
              
              
              
              
              
              
              
              
              
              
              252,78911%
      senior secured notes, net of discount
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              116,358
              
              
              
              
              
              
              
              116,35813%
      senior secured notes, net of discount
              
              
              
              
              
              
              
              
              
              
              6,853
              
              
              
              
              
              
              
              
              
              
              
              6,853Notes
      and leases payable, net of discount
              
              
              
              
              
              
              12
              
              
              
              1,166
              
              
              
              709
              
              
              
              
              
              
              
              1,887Other
      liabilities
              
              
              
              
              
              
              6,195
              
              
              
              
              
              
              
              2,088
              
              
              
              
              
              
              
              8,283Total
      long-term liabilities
              
              
              
              
              
              
              107,878
              
              
              
              159,137
              
              
              
              119,155
              
              
              
              
              
              
              
              386,170Total
      liabilities
              
              
              1,708
              
              
              
              115,022
              
              
              
              184,111
              
              
              
              131,923
              
              
              
              (1,215
              )
              
              
              431,549MEMBER’S
      DEFICIT
              
              
              (59,622
              )
              
              
              (11,207
              )
              
              
              (31,349
              )
              
              
              (27,827
              )
              
              
              70,383
              
              
              
              (59,622
              )TOTAL
              
              $
              (57,914
              )
              
              $
              103,815
              
              
              $
              152,762
              
              
              $
              104,096
              
              
              $
              69,168
              
              
              $
              371,927
 
   16
  CONSOLIDATING
STATEMENTS OF OPERATIONS
  Three Months Ended March 31, 2008Parent
              
              
              Subsidiary
              
              
              Subsidiary
              
              
              Subsidiary
                Non-Co-Issuer -
              
              
              Co-Issuer -
              
              
              Guarantor -
              
              
              Guarantor -
              
              
              Consolidating(in thousands)
              
              PGL
              
              
              DJL
              
              
              EVD
              
              
              DJW
              
              
              Adjustments
              
              
              ConsolidatedREVENUES:Casino
              
              
              
              
              $
              9,461
              
              
              $
              28,066
              
              
              $
              18,893
              
              
              
              
              
              $
              56,420Racing
              
              
              
              
              
              
              
              
              
              3,317
              
              
              
              
              
              
              
              
              
              
              3,317Video
      poker
              
              
              
              
              
              
              
              
              
              1,558
              
              
              
              
              
              
              
              
              
              
              1,558Food
      and beverage
              
              
              
              
              
              568
              
              
              
              2,232
              
              
              
              956
              
              
              
              
              
              
              3,756Affiliate
      management fee income
              
              
              
              
              
              687
              
              
              
              
              
              
              
              
              
              
              $
              (687
              )Other
              
              
              
              
              
              677
              
              
              
              414
              
              
              
              1,601
              
              
              
              
              
              
              
              2,692Less
      promotional allowances
              
              
              
              
              
              (1,081
              )
              
              
              (2,294
              )
              
              
              (1,291
              )
              
              
              
              
              
              
              (4,666
              )Total
      net revenues
              
              
              
              
              
              10,312
              
              
              
              33,293
              
              
              
              20,159
              
              
              
              (687
              )
              
              
              63,077EXPENSES:Casino
              
              
              
              
              
              4,439
              
              
              
              12,875
              
              
              
              6,866
              
              
              
              
              
              
              
              24,180Racing
              
              
              
              
              
              
              
              
              
              2,909
              
              
              
              
              
              
              
              
              
              
              
              2,909Video
      poker
              
              
              
              
              
              
              
              
              
              1,126
              
              
              
              
              
              
              
              
              
              
              
              1,126Food
      and beverage
              
              
              
              
              
              552
              
              
              
              1,579
              
              
              
              766
              
              
              
              
              
              
              
              2,897Other
              
              
              
              
              
              4
              
              
              
              60
              
              
              
              1,358
              
              
              
              
              
              
              
              1,422Selling,
      general and administrative
              
              $
              854
              
              
              
              1,782
              
              
              
              3,846
              
              
              
              3,385
              
              
              
              2,127
              
              
              
              11,994Depreciation
      and amortization
              
              
              12
              
              
              
              795
              
              
              
              1,928
              
              
              
              2,128
              
              
              
              
              
              
              
              4,863Pre-opening
      expense
              
              
              
              
              
              
              55
              
              
              
              9
              
              
              
              32
              
              
              
              
              
              
              
              96Development
      expense
              
              
              
              
              
              
              8
              
              
              
              31
              
              
              
              
              
              
              
              
              
              
              
              39Affiliate
      management fees
              
              
              85
              
              
              
              
              
              
              
              1,190
              
              
              
              782
              
              
              
              (687
              )
              
              
              1,370Loss
      (gain) on disposal of assets
              
              
              
              
              
              
              (7
              )
              
              
              83
              
              
              
              27
              
              
              
              
              
              
              
              103Corporate
      expense allocation
              
              
              
              
              
              
              707
              
              
              
              713
              
              
              
              707
              
              
              
              (2,127
              )Total
      expenses
              
              
              951
              
              
              
              8,335
              
              
              
              26,349
              
              
              
              16,051
              
              
              
              (687
              )
              
              
              50,999INCOME
      (LOSS) FROM OPERATIONS
              
              
              (951
              )
              
              
              1,977
              
              
              
              6,944
              
              
              
              4,108
              
              
              
              
              
              
              
              12,078OTHER
      INCOME (EXPENSE):Interest
      income
              
              
              64
              
              
              
              38
              
              
              
              74
              
              
              
              568
              
              
              
              
              
              
              
              744Interest
      expense, net of amounts capitalized
              
              
              
              
              
              
              (2,556
              )
              
              
              (4,181
              )
              
              
              (3,527
              )
              
              
              
              
              
              
              (10,264
              )Income
      from equity investment in subsidiaries
              
              
              3,445
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,445
              )Total
      other expense
              
              
              3,509
              
              
              
              (2,518
              )
              
              
              (4,107
              )
              
              
              (2,959
              )
              
              
              (3,445
              )
              
              
              (9,520
              )NET
      INCOME (LOSS)
              
              $
              2,558
              
              
              $
              (541
              )
              
              $
              2,837
              
              
              $
              1,149
              
              
              $
              (3,445
              )
              
              $
              2,558
  17
 Three Months Ended March 31, 2007Parent
              
              
              Subsidiary
              
              
              Subsidiary
              
              
              Subsidiary
                Non-Co-Issuer -
              
              
              Co-Issuer -
              
              
              Guarantor -
              
              
              Guarantor -
              
              
              Consolidating(in thousands)
              
              PGL
              
              
              DJL
              
              
              EVD
              
              
              DJW
              
              
              Adjustments
              
              
              ConsolidatedREVENUES:Casino
              
              
              
              
              
              $
              9,982
              
              
              $
              27,315
              
              
              $
              15,567
              
              
              
              
              
              
              $
              52,864Racing
              
              
              
              
              
              
              
              
              
              
              3,462
              
              
              
              
              
              
              
              
              
              
              
              3,462Video
      poker
              
              
              
              
              
              
              
              
              
              
              1,137
              
              
              
              
              
              
              
              
              
              
              
              1,137Food
      and beverage
              
              
              
              
              
              
              581
              
              
              
              2,287
              
              
              
              551
              
              
              
              
              
              
              
              3,419Affiliate
      management fee income
              
              
              
              
              
              
              621
              
              
              
              
              
              
              
              
              
              
              $
              (621
              )Other
              
              
              
              
              
              
              665
              
              
              
              463
              
              
              
              1,235
              
              
              
              
              
              
              
              2,363Less
      promotional allowances
              
              
              
              
              
              
              (1,158
              )
              
              
              (2,628
              )
              
              
              (1,120
              )
              
              
              
              
              
              
              (4,906
              )Total
      net revenues
              
              
              
              
              
              
              10,691
              
              
              
              32,036
              
              
              
              16,233
              
              
              
              (621
              )
              
              
              58,339EXPENSES:Casino
              
              
              
              
              
              
              4,526
              
              
              
              12,469
              
              
              
              5,344
              
              
              
              
              
              
              
              22,339Racing
              
              
              
              
              
              
              
              
              
              
              2,917
              
              
              
              
              
              
              
              
              
              
              
              2,917Video
      poker
              
              
              
              
              
              
              
              
              
              
              829
              
              
              
              
              
              
              
              
              
              
              
              829Food
      and beverage
              
              
              
              
              
              
              587
              
              
              
              1,672
              
              
              
              465
              
              
              
              
              
              
              
              2,724Other
              
              
              
              
              
              
              50
              
              
              
              68
              
              
              
              1,133
              
              
              
              
              
              
              
              1,251Selling,
      general and administrative
              
              $
              740
              
              
              
              1,923
              
              
              
              4,094
              
              
              
              2,729
              
              
              
              1,535
              
              
              
              11,021Depreciation
      and amortization
              
              
              11
              
              
              
              1,179
              
              
              
              2,471
              
              
              
              1,288
              
              
              
              
              
              
              
              4,949Pre-opening
      expense
              
              
              
              
              
              
              
              
              
              
              24
              
              
              
              59
              
              
              
              
              
              
              
              83Development
      expense
              
              
              
              
              
              
              1,633
              
              
              
              12
              
              
              
              
              
              
              
              
              
              
              
              1,645Affiliate
      management fees
              
              
              78
              
              
              
              
              
              
              
              1,077
              
              
              
              621
              
              
              
              (621
              )
              
              
              1,155Loss
      on disposal of assets
              
              
              
              
              
              
              61
              
              
              
              20
              
              
              
              
              
              
              
              
              
              
              
              81Corporate
      expense allocation
              
              
              
              
              
              
              569
              
              
              
              483
              
              
              
              483
              
              
              
              (1,535
              )Total
      expenses
              
              
              829
              
              
              
              10,528
              
              
              
              26,136
              
              
              
              12,122
              
              
              
              (621
              )
              
              
              48,994INCOME
      (LOSS) FROM OPERATIONS
              
              
              (829
              )
              
              
              163
              
              
              
              5,900
              
              
              
              4,111
              
              
              
              
              
              
              
              9,345OTHER
      INCOME (EXPENSE):Interest
      income
              
              
              251
              
              
              
              122
              
              
              
              78
              
              
              
              272
              
              
              
              
              
              
              
              723Interest
      expense, net of amounts capitalized
              
              
              
              
              
              
              (2,634
              )
              
              
              (4,209
              )
              
              
              (2,779
              )
              
              
              
              
              
              
              (9,622
              )Income
      from equity investment in subsidiaries
              
              
              1,024
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,024
              )Total
      other expense
              
              
              1,275
              
              
              
              (2,512
              )
              
              
              (4,131
              )
              
              
              (2,507
              )
              
              
              (1,024
              )
              
              
              (8,899
              )NET
      INCOME (LOSS)
              
              $
              446
              
              
              $
              (2,349
              )
              
              $
              1,769
              
              
              $
              1,604
              
              
              $
              (1,024
              )
              
              $
              446
 
   18
  
  CONSOLIDATING
STATEMENTS OF CASH FLOWS
  Three Months Ended March 31, 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 (loss)
              
              $
              2,558
              
              
              $
              (541
              )
              
              $
              2,837
              
              
              $
              1,149
              
              
              $
              (3,445
              )
              
              $
              2,558Adjustments
      to reconcile net income (loss) to net cash flows from operating
      activities:Depreciation
      and amortization
              
              
              12
              
              
              
              795
              
              
              
              1,928
              
              
              
              2,128
              
              
              
              
              
              
              
              4,863Non-cash
      interest
              
              
              
              
              
              
              513
              
              
              
              482
              
              
              
              267
              
              
              
              
              
              
              
              1,262Non-cash
      equity based and other compensation
              
              
              2,035
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,035Corporate
      expense allocation
              
              
              (2,127
              )
              
              
              707
              
              
              
              713
              
              
              
              707Loss
      on disposal of assets
              
              
              
              
              
              
              (7
              )
              
              
              83
              
              
              
              27
              
              
              
              
              
              
              
              103Income
      from equity investment in subsidiaries
              
              
              (3,445
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,445Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
              
              
              
              
              
              
              
              
              
              
              (5,289
              )
              
              
              
              
              
              
              
              
              
              
              (5,289
              )Receivables
              
              
              
              
              
              
              65
              
              
              
              1,050
              
              
              
              (461
              )
              
              
              
              
              
              
              654Receivables
      from affiliates
              
              
              
              
              
              
              (587
              )
              
              
              (72
              )
              
              
              (89
              )
              
              
              748Payables
      to affiliates
              
              
              
              
              
              
              
              
              
              
              474
              
              
              
              (563
              )
              
              
              (748
              )
              
              
              (837
              )Inventories
              
              
              
              
              
              
              25
              
              
              
              (47
              )
              
              
              (44
              )
              
              
              
              
              
              
              (66
              )Prepaid
      expenses and other assets
              
              
              10
              
              
              
              (535
              )
              
              
              (125
              )
              
              
              (14
              )
              
              
              
              
              
              
              (664
              )Accounts
      payable
              
              
              (5
              )
              
              
              312
              
              
              
              5,189
              
              
              
              42
              
              
              
              
              
              
              
              5,538Accrued
      expenses
              
              
              (586
              )
              
              
              1,675
              
              
              
              3,138
              
              
              
              2,962
              
              
              
              
              
              
              
              7,189Net
      cash flows from operating activities
              
              
              (1,548
              )
              
              
              2,422
              
              
              
              10,361
              
              
              
              6,111
              
              
              
              
              
              
              
              17,346CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
              
              
              (78
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (78
              )Business
      acquisition and licensing costs
              
              
              
              
              
              
              
              
              
              
              (130
              )
              
              
              
              
              
              
              
              
              
              
              (130
              )Construction
      project development costs
              
              
              
              
              
              
              (6,450
              )
              
              
              (921
              )
              
              
              
              
              
              
              
              
              
              
              (7,371
              )Purchase
      of property and equipment
              
              
              (7
              )
              
              
              (216
              )
              
              
              (1,394
              )
              
              
              (667
              )
              
              
              
              
              
              
              (2,284
              )Net
      cash flows from investing activities
              
              
              (85
              )
              
              
              (6,666
              )
              
              
              (2,445
              )
              
              
              (667
              )
              
              
              
              
              
              
              (9,863
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
              
              
              
              
              
              
              (65
              )
              
              
              (32
              )
              
              
              (40
              )
              
              
              
              
              
              
              (137
              )Principal
      payments on debt
              
              
              
              
              
              
              (4
              )
              
              
              (5
              )
              
              
              (911
              )
              
              
              
              
              
              
              (920
              )Member
      contributions (distributions)
              
              
              (4,300
              )
              
              
              5,091
              
              
              
              (816
              )
              
              
              (816
              )
              
              
              
              
              
              
              (841
              )Net
      cash flows from financing activities
              
              
              (4,300
              )
              
              
              5,022
              
              
              
              (853
              )
              
              
              (1,767
              )
              
              
              
              
              
              
              (1,898
              )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              (5,933
              )
              
              
              778
              
              
              
              7,063
              
              
              
              3,677
              
              
              
              
              
              
              
              5,585CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              11,908
              
              
              
              4,606
              
              
              
              11,834
              
              
              
              13,752
              
              
              
              
              
              
              
              42,100CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              5,975
              
              
              $
              5,384
              
              
              $
              18,897
              
              
              $
              17,429
              
              
              $
              -
              
              
              $
              47,685
 
  
 19
  Three Months Ended March 31, 2007(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 (loss)
              
              $
              446
              
              
              $
              (2,349
              )
              
              $
              1,769
              
              
              $
              1,604
              
              
              $
              (1,024
              )
              
              $
              446Adjustments
      to reconcile net income (loss) to net cash flows from operating
      activities:Depreciation
      and amortization
              
              
              11
              
              
              
              1,179
              
              
              
              2,471
              
              
              
              1,288
              
              
              
              
              
              
              
              4,949Non-cash
      interest
              
              
              
              
              
              
              317
              
              
              
              440
              
              
              
              368
              
              
              
              
              
              
              
              1,125Non-cash
      equity based and other compensation
              
              
              1,602
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,602Corporate
      expense allocation
              
              
              (1,535
              )
              
              
              569
              
              
              
              483
              
              
              
              483Loss
      on disposal of assets
              
              
              
              
              
              
              61
              
              
              
              20
              
              
              
              
              
              
              
              
              
              
              
              81Income
      from equity investment in subsidiaries
              
              
              (1,024
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,024Changes
      in operating assets and liabilities:Restricted
      cash — purse settlements
              
              
              
              
              
              
              
              
              
              
              (4,663
              )
              
              
              
              
              
              
              
              
              
              
              (4,663
              )Receivables
              
              
              1
              
              
              
              7
              
              
              
              843
              
              
              
              238
              
              
              
              
              
              
              
              1,089Receivables
      from affiliates
              
              
              
              
              
              
              665
              
              
              
              
              
              
              
              
              
              
              
              (665
              )Payables
      to affiliates
              
              
              
              
              
              
              
              
              
              
              (344
              )
              
              
              (125
              )
              
              
              665
              
              
              
              196Inventories
              
              
              
              
              
              
              (40
              )
              
              
              (46
              )
              
              
              4
              
              
              
              
              
              
              
              (82
              )Prepaid
      expenses and other assets
              
              
              (15
              )
              
              
              (471
              )
              
              
              (123
              )
              
              
              (87
              )
              
              
              
              
              
              
              (696
              )Accounts
      payable
              
              
              12
              
              
              
              (291
              )
              
              
              5,141
              
              
              
              (93
              )
              
              
              
              
              
              
              4,769Accrued
      expenses
              
              
              (242
              )
              
              
              3,449
              
              
              
              3,903
              
              
              
              2,322
              
              
              
              
              
              
              
              9,432Net
      cash flows from operating activities
              
              
              (744
              )
              
              
              3,096
              
              
              
              9,894
              
              
              
              6,002
              
              
              
              
              
              
              
              18,248CASH
      FLOWS FROM INVESTING ACTIVITIES:Increase
      in cash value of life insurance for premiums paid
              
              
              (79
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (79
              )Proceeds
      from restricted cash
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,722
              
              
              
              
              
              
              
              7,722Business
      acquisition and licensing costs
              
              
              
              
              
              
              
              
              
              
              (126
              )
              
              
              
              
              
              
              
              
              
              
              (126
              )Construction
      project development costs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (7,772
              )
              
              
              
              
              
              
              (7,772
              )Purchase
      of property and equipment
              
              
              (4
              )
              
              
              (761
              )
              
              
              (2,353
              )
              
              
              (919
              )
              
              
              
              
              
              
              (4,037
              )Proceeds
      from sale of property and equipment
              
              
              
              
              
              
              22
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              22Net
      cash flows from investing activities
              
              
              (83
              )
              
              
              (739
              )
              
              
              (2,479
              )
              
              
              (969
              )
              
              
              
              
              
              
              (4,270
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Deferred
      financing costs
              
              
              
              
              
              
              (144
              )
              
              
              (109
              )
              
              
              (114
              )
              
              
              
              
              
              
              (367
              )Principal
      payments on debt
              
              
              
              
              
              
              (342
              )
              
              
              (1,343
              )
              
              
              (763
              )
              
              
              
              
              
              
              (2,448
              )Member
      contributions (distributions)
              
              
              1,105
              
              
              
              (823
              )
              
              
              (382
              )
              
              
              (368
              )
              
              
              
              
              
              
              (468
              )Net
      cash flows from financing activities
              
              
              1,105
              
              
              
              (1,309
              )
              
              
              (1,834
              )
              
              
              (1,245
              )
              
              
              
              
              
              
              (3,283
              )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              278
              
              
              
              1,048
              
              
              
              5,581
              
              
              
              3,788
              
              
              
              
              
              
              
              10,695CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              20,999
              
              
              
              13,069
              
              
              
              8,889
              
              
              
              13,964
              
              
              
              
              
              
              
              56,921CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              21,277
              
              
              $
              14,117
              
              
              $
              14,470
              
              
              $
              17,752
              
              
              
              
              
              
              $
              67,616
 
   20
  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 Peninsula Gaming Notes, the DJW
      Notes, the PGL Credit Facility and the DJW 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
      termination of our operating agreement with the Dubuque Racing
      Association, Ltd. and/or the Worth County Development Authority or the
      failure of the Dubuque Racing Association, Ltd. and/or the Worth County
      Development Authority to continue as our “qualified sponsoring
      organization;”
  ·
              the loss of our riverboat casino
      or land-based facilities due to casualty, weather, mechanical failure or
      any extended or extraordinary maintenance or inspection that may be
      required;
  ·
              the
      failure to complete our construction projects on time and within
      budget;
  ·
              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 a new
  venture;
  ·
              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.
   21
  Overview
  We own
and operate (i) the Diamond Jo riverboat casino in Dubuque, Iowa with 777
slot machines and 17 table games, (ii) the Evangeline Downs racino in
Opelousas, Louisiana with 1,627 slot machines and a one-mile dirt horse
racetrack and four OTBs located throughout south central Louisiana and (iii) the
Diamond Jo Worth casino in Worth County, Iowa with 902 slot machines, 25 table
games and 7 poker tables which opened to the public in April 2006 and
subsequently expanded in April 2007.
  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 months ended March 31,
2008 and 2007.
  Statement
of Operations Data
  INCOME(LOSS) FROM OPERATIONS:
              
              Three Months Ended
                March 31,(in thousands)
              
              2008
              
              
              2007General
      corporate
              
              $
              (3,078
              )
              
              $
              (2,364
              )Diamond
      Jo
              
              
              1,997
              
              
              
              111Evangeline
      Downs
              
              
              8,344
              
              
              
              7,004Diamond
      Jo Worth
              
              
              4,815
              
              
              
              4,594Income
      from operations
              
              $
              12,078
              
              
              $
              9,345
 
 Diamond Jo
                Three Months Ended
                March 31,
              
              
              Evangeline Downs
                Three Months Ended
                March 31,
              
              
              Diamond Jo Worth
                Three Months
                Ended March 31,(in thousands)
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007REVENUES:Casino
              
              $
              9,461
              
              
              $
              9,982
              
              
              $
              28,066
              
              
              $
              27,315
              
              
              $
              18,893
              
              
              $
              15,567Racing
              
              
              
              
              
              
              
              
              
              
              3,317
              
              
              
              3,462Video
      poker
              
              
              
              
              
              
              
              
              
              
              1,558
              
              
              
              1,137Food
      and beverage
              
              
              568
              
              
              
              581
              
              
              
              2,232
              
              
              
              2,287
              
              
              
              956
              
              
              
              551Other
              
              
              677
              
              
              
              665
              
              
              
              414
              
              
              
              463
              
              
              
              1,601
              
              
              
              1,235Less
      promotional allowances
              
              
              (1,081
              )
              
              
              (1,158
              )
              
              
              (2,294
              )
              
              
              (2,628
              )
              
              
              (1,291
              )
              
              
              (1,120
              )Net
      revenues
              
              
              9,625
              
              
              
              10,070
              
              
              
              33,293
              
              
              
              32,036
              
              
              
              20,159
              
              
              
              16,233EXPENSES:Casino
              
              
              4,439
              
              
              
              4,526
              
              
              
              12,875
              
              
              
              12,469
              
              
              
              6,866
              
              
              
              5,344Racing
              
              
              
              
              
              
              
              
              
              
              2,909
              
              
              
              2,917Video
      poker
              
              
              
              
              
              
              
              
              
              
              1,126
              
              
              
              829Food
      and beverage
              
              
              552
              
              
              
              587
              
              
              
              1,579
              
              
              
              1,672
              
              
              
              766
              
              
              
              465Other
              
              
              4
              
              
              
              50
              
              
              
              60
              
              
              
              68
              
              
              
              1,358
              
              
              
              1,133Selling,
      general and administrative
              
              
              1,782
              
              
              
              1,923
              
              
              
              3,846
              
              
              
              4,094
              
              
              
              3,385
              
              
              
              2,729Depreciation
      and amortization
              
              
              795
              
              
              
              1,179
              
              
              
              1,928
              
              
              
              2,471
              
              
              
              2,128
              
              
              
              1,288Pre-opening
      expense
              
              
              55
              
              
              
              
              
              
              
              9
              
              
              
              24
              
              
              
              32
              
              
              
              59Development
      expense
              
              
              8
              
              
              
              1,633
              
              
              
              31
              
              
              
              12Loss
      (gain) on disposal of assets
              
              
              (7
              )
              
              
              61
              
              
              
              83
              
              
              
              20
              
              
              
              27Affiliate
      management fees
              
              
              
              
              
              
              
              
              
              
              503
              
              
              
              456
              
              
              
              782
              
              
              
              621Total
      expenses
              
              
              7,628
              
              
              
              9,959
              
              
              
              24,949
              
              
              
              25,032
              
              
              
              15,344
              
              
              
              11,639Income
      from operations
              
              $
              1,997
              
              
              $
              111
              
              
              $
              8,344
              
              
              $
              7,004
              
              
              $
              4,815
              
              
              $
              4,594
 
 Three
      months ended March 31, 2008 compared to three months ended March 31,
      2007
  Net
revenues increased $4.8 million, or 8%, to $63.1 million for the three months
ended March 31, 2008 from $58.3 million for the three months ended March 31,
2007. This increase was primarily derived from a $3.9 million net revenue
increase at DJW directly related to the impact of DJW’s casino expansion that
opened to the public in April 2007 as well as an increase in net revenues at EVD
of $1.3 million. This increase was partially offset by a decrease in net
revenues at DJL of $0.4 million.
   22
  DJL’s
casino revenues decreased by $0.5 million to $9.5 million for the three months
ended March 31, 2008 from $10.0 million for the three months ended March 31,
2007. We believe this decrease was partially attributed to the continuing
competitive pressure provided by the expansion of a local competitor’s gaming
facility in 2006, including the addition by such competitor of video poker
machines and table games.  In addition, DJL’s operations were
negatively impacted by adverse weather conditions during the first quarter of
2008, which impacted revenue at DJL for 28 days in the first quarter of 2008
compared to only 13 days during the same period in 2007.  DJL’s slot
revenue decreased to $8.8 million for the three months ended March 31, 2008 from
$9.2 million for the three months ended March 31, 2007 and DJL’s table game
revenue decreased to $0.7 million for the three months ended March 31, 2008
compared to $0.8 million for the three months ended March 31, 2007.
  DJW’s
casino revenues increased $3.3 million, or 21%, to $18.9 million for the three
months ended March 31, 2008 from $15.6 million for the three months ended March
31, 2007.  DJW’s slot revenue increased 20% to $17.2 million for the
three months ended March 31, 2008 from $14.3 million for the three months ended
March 31, 2007 and DJW’s table game revenue increased 31% to $1.7 million for
the three months ended March 31, 2008 compared to $1.3 million for the three
months ended March 31, 2007.  These revenue increases are primarily
due to the impact of the April 2007 DJW casino expansion.
  Promotional
allowances as a percentage of casino revenues decreased to 8.3% for the three
months ended March 31, 2008 from 9.3% for the three months ended March 31, 2007
which is primarily due to improvements to the database marketing programs that
targeted more profitable customers.
 
 Casino
operating expenses increased $1.9 million to $24.2 million for the three months
ended March 31, 2008 from $22.3 million for the three months ended March 31,
2007 due primarily to (i) an increase in gaming taxes at DJW and EVD
related to the increases in gaming revenue at each property and (ii) an increase
in casino payroll at DJW related to the casino expansion.
  Video
poker revenues at EVD for the three months ended March 31, 2008 increased 45% to
$1.6 million compared to $1.1 million for the three months ended March 31, 2007.
The increase in video poker revenues is primarily attributable to the addition
of video poker at our Henderson OTB in August 2007 as well as a 15% increase in
video poker revenue at both our Port Allen and Eunice OTBs which is primarily
attributable to recent renovations at the Port Allen facility as well as
continuous updating of the video poker machines at these OTB’s to provide the
latest and most popular games.
 
 Consistent
with this increase in video poker revenues, video poker expenses increased $0.3
million to $1.1 million for the three months ended March 31, 2008 from $0.8
million for the three months ended March 31, 2007.
  Food and
beverage revenues and other revenues increased $0.7 million during the three
months ended March 31, 2008 compared to the three months ended March 31, 2007
due primarily to (i) an increase in food and beverage revenues of $0.4 million
at DJW related to the opening of a new high-end restaurant in January 2008 and
the continued success of DJW’s  buffet restaurant which was added as
part of the casino expansion and opened in June 2007 and (ii) an increase in
other revenue at DJW of $0.3 million related to an increase in convenience store
revenues due to an increase in gallons of fuel sold and an increase in fuel
prices over the first quarter of 2007.  Consistent with these
increases in sales, DJW realized relative increases in food and beverage and
other expenses.
  Selling,
general and administrative expenses increased $1.0 million to $12.0 million for
the three months ended March 31, 2008 from $11.0 million for the three months
ended March 31, 2007. This increase was due primarily to (i) $0.7 million in
expenses associated with operations at DJW primarily related to additional costs
associated with the casino expansion and (ii) a $0.4 million increase in
non-cash expenses related to an increase in the fair value and percentage vested
of PGP incentive units granted to certain executive officers of the Company in
2005.
  Depreciation
and amortization expenses at DJW increased $0.8 million due primarily to the
impact of the depreciation on the assets associated with the casino
expansion.  The increase in deprecation and amortization expenses at
DJW is offset by decreases at DJL and EVD of $0.4 million and $0.5 million,
respectively, related to assets that had reached their useful lives after the
first quarter of 2007.
  In
relation to its new casino development, during the quarter ended March 31, 2007,
DJL expensed $1.4 million as development expense relating to certain of
its charitable obligations under an agreement entered into in
September 2006 with the Dubuque County Historical Society
and approximately $0.2 million of other costs associated with the
development project.  Such development costs during the quarter ended
March 31, 2008 were insignificant.
   23
  Affiliate
management fees of $1.4 million and $1.2 million for the three months ended
March 31, 2008 and 2007, respectively, relate to management fees paid or accrued
to related parties under various management services and consulting agreements
at EVD and DJW and increased primarily due to the increased revenues at
DJW.
  Interest
expense, net of amounts capitalized, increased $0.6 million primarily due to an
increase in interest of approximately $0.6 million related to the issuance of
$23 million principal amount of DJW Notes in October 2007.  Interest
expense of approximately $0.3 million and $0.4 million was capitalized as part
of the casino development and other construction projects during the three
months ended March 31, 2008 and 2007, respectively.
  SEASONALITY
AND INFLATION
  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 increased $5.6 million to $47.7 million at March 31, 2008 from $42.1
million at December 31, 2007.
  Cash
flows from operating activities were $17.3 million during the three months ended
March 31, 2008, a decrease of $0.9 million when compared to $18.2 million
during the three months ended March 31, 2007. The decrease is primarily due to
payments for accrued fees under DJW’s management services
agreement.
  Cash
flows used in investing activities during the three months ended March 31, 2008
was $9.9 million consisting primarily of (i) payments of $6.5 million for
construction and other development costs associated with the DJL casino
development project, (ii) cash outflows of $0.9 million primarily related
to the development of the turf track at EVD and (iii) cash outflows of $2.5
million at DJL, EVD and DJW primarily related to the acquisition of slot
machines and slot machine conversions and general maintenance capital
expenditures.
  Cash
flows used in financing activities during the three months ended March 31, 2008
of $1.9 million reflects principal payments on debt of $0.9 million, member
distributions of $0.9 million and deferred financing cost payments of $0.1
million.
  As of
March 31, 2008, we had no outstanding advances under the revolver and term loan
portions of the PGL Credit Facility and outstanding letters of credit of
approximately $0.9 million. In addition, as of March 31, 2008, DJW had no
outstanding balances under the DJW Credit Facility and outstanding letters of
credit of approximately $0.7 million.
  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, 2007. There have been no
significant changes to our financing activities during the three months ended
March 31, 2008.
  Development
  DJL is
currently constructing a new casino facility in close proximity to its current
riverboat location within the Port of Dubuque in Dubuque, Iowa.  DJL’s
new casino facility is expected to include approximately 1,000 slot machines, 17
table games and a five-table poker room.  Additional amenities are
expected to include a bowling center, various restaurants and an entertainment
center.  The new casino project is estimated to cost approximately
$83.3 million and is expected to open  in fall of 2008.
 
 In
addition, EVD is currently developing a 75,000 square foot, 100 room hotel
contiguous to its current casino at a total estimated cost of approximately
$15.0 million.  Additional amenities for the hotel include a fitness
center, meeting space, a
full in-house support laundry and a guest business center. Adjoining the
existing racino structure, the new hotel will provide easy access to the casino
and all of EVD’s existing amenities.
 
 24
  General
  In
addition to our cash on hand, we currently have the following sources of funds
for our business: (i) cash flows from operations, (ii) available borrowings
under the PGL Credit Facility and (iii) available borrowings under the DJW
Credit Facility. The available borrowing amount at March 31, 2008, after
reductions for letters of credit outstanding under the PGL Credit Facility and
the DJW Credit Facility was $64.1 million and $4.3 million, respectively.
Contractual restrictions and other provisions contained in the agreements
governing our consolidated indebtedness, including our senior credit facilities
and the indentures governing the Peninsula Gaming Notes and the DJW Notes, limit
or restrict our ability to use the funds available to us at each of our gaming
properties.
 
 For DJL
and EVD, we expect our capital expenditures for the next twelve months,
excluding any amounts related to the casino development at DJL and the hotel
development at EVD, to be approximately $7.6 million. Capital expenditures for
the next twelve months related to the casino development at DJL and the hotel
development at EVD are estimated to be approximately $66.2 million and $13.5
million, respectively. DJL and EVD’s debt maturities for the next twelve months
are estimated
to be approximately $0.6 million. DJL and EVD’s member distributions to PGP for
the next twelve months are currently estimated to be approximately $2.0
million.  The Company plans to finance these expected cash
requirements with: (i) a portion of the available cash on hand at the Company,
DJL and EVD of $30.3 million at March 31, 2008, excluding amounts needed for
normal operations, (ii) cash generated from operations, (iii) available
borrowings under the PGL Credit Facility and (iv) available vendor and equipment
financing. There can be no assurances that such projects will be completed in
the estimated time frames or at the estimated costs.  The PGL Credit
Facility is scheduled to terminate in June 2008.  We are currently
working with Wells Fargo Foothill, Inc., the arranger and agent under the
current facility, to extend the PGL Credit Facility under substantially similar
economic terms.  The Company expects to be able to extend the PGL
Credit Facility prior to its expiration.
  For DJW,
we expect our capital expenditures for the next twelve months to be
approximately $3.5 million, including the $1.0 million payment due in May 2008
related to DJW’s gaming license. DJW’s debt maturities for the next twelve
months are estimated to be approximately $3.5 million, including the Excess Cash
Flow Amount under the DJW Notes of approximately $1.4 million. DJW’s member
distributions to PGP for the next twelve months are currently estimated to be
approximately $0.9 million.  The Company plans to finance these
expected cash requirements with: (i) a portion of the available cash on hand at
DJW of $17.4 million at March 31, 2008, excluding amounts needed for normal
operations, and (ii) cash generated from operations.
 
 Based on
our cash on hand, expected cash flows from operations, the expected extension of
the PGL Credit Facility 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, including any
Excess Cash Flow obligations under the DJW Notes, 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 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, 2007 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, 2007. There have been no significant changes to our
contractual obligations during the three months ended March 31,
2008.
  25
 
 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, 2007, 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, 2007. 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 three months ended March 31, 2008.
 
 ITEM
      3. QUANTITATIVE AND QUALITATIVEDISCLOSURES 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 DJW Credit Facility. As of March 31, 2008, the Company had no
outstanding borrowings under the PGL Credit Facility and 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 and DJW Credit Facility (currently an aggregate amount of $70.0
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 and variable rate debt borrowings as of March
31, 2008 (dollars in millions):
  Description
              
              Maturity
              
              Interest
                Rate
              
              Carrying
                Value
              
              Fair
                ValueAvailable
      for sale investment
              
              2011
      - 2037
              
              71⁄2
              %
              $          12.5
              
              $         
      12.5
              (1)8
      3⁄4% senior secured notes
              
              April 15,
      2012
              
              83⁄4
              %
              252.9
              
              221.9
              (2)13%
      senior notes with contingent interest of EVD
              
              March 1,
      2010
              
              13
              %
              6.9
              
              6.9
              (2)11%
      senior secured notes
              
              April
      15, 2012
              
              11
              %
              116.4
              
              117.1
              (2)Notes
      payable and capital lease obligations
              
              2008
      - 2011
              
              7
      1⁄4% -83⁄4
              %
              4.1
              
              4.2
              (2)Derivative
      liability
              
              April
      15, 2012
              
              N/A
              
              1.2
              
              1.2
              (2)
 
  26
  
 (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 estimates from two brokers of
what market participants would use in pricing the bond.  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 March 31, 2008 based on current market interest rates and
estimates of market conditions for instruments with similar terms, maturities,
and degrees of risk.
 
 ITEM
      4. CONTROLSAND
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 March 31, 2008. Based on that
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures were effective as of March
31, 2008.
 
 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 first 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
  In
October 2003, EVD filed a Petition for Declaratory Judgment in St. Landry
Parish, Louisiana, naming as opposing parties the Secretary of the Department of
Revenue and Taxation for the State of Louisiana (the “Department”), the St.
Landry Parish School Board and the City of Opelousas. EVD sought a judgment
declaring that sales taxes were not due to the defendants on purchases made by
EVD and its contractors in connection with the construction and furnishing of
the Evangeline Downs Racetrack and Casino, which was constructed in St. Landry
Parish in 2003-2004. EVD’s action was based on Louisiana statutory law which
provides that racetracks are not required to pay taxes and fees other than those
provided in the racing statutes, and that taxes and fees provided in the racing
statutes are in lieu of, among other things, all state and local sales taxes.
The St. Landry Parish School Board and the City of Opelousas questioned the
application of the racing statutes to the construction and furnishing of the
casino portion of the facility, thereby leading to the filing of this action.
Subsequently, the Department adopted a similar position as the St. Landry Parish
School Board and the City of Opelousas.
 
 On
February 20, 2008, EVD and the Department entered into a Settlement Agreement
(the “Settlement Agreement”) which settled certain tax disputes between EVD and
the Department arising out of audits conducted by the Department of the taxable
years ended December 31, 2002, 2003 and 2004.  The Department and EVD
also reached an agreement regarding the payment of additional sales tax by EVD
for tax years beginning on or after January 2005.  The sales and use
tax dispute with St. Landry Parish and the City of Opelousas remains open. EVD
has accrued management’s best estimate of all sales and use taxes that may be
due to the Department, St. Landry Parish or the City of Opelousas as of March
31, 2008.
  In
October 2005, EVD filed a request to arbitrate certain claims against the
general contractor of its racino relating to improper construction of the horse
racetrack at the racino. In March 2008, EVD and the general contractor agreed in
principal to a settlement agreement whereby EVD agreed to pay the general
contractor approximately $0.8 million to settle all claims related to the
arbitration.  The formal agreement is expected to be executed in the second
quarter of 2008, at which time EVD will record a reduction in the $1.6 million
liability for unpaid billings from the contractor recorded on the Company’s
consolidated balance sheet as of March 31, 2008 with a corresponding reduction
in property and equipment.
   27
  Other
than as described above, 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 other litigation would have a material adverse effect on the Company’s
financial condition, results of operations or cash flows.
 
 ITEM
      1A. RISK FACTORS
  None.
  ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIESAND
      USE OF PROCEEDS
  None.
  ITEM
      3. DEFAULTS UPON SENIOR
      SECURITIES
  None.
  ITEM
      4. SUBMISSION OF MATTERS FOR A VOTE OF SECURITY
      HOLDERS
  None.
  ITEM
      5. OTHER INFORMATION
  None.
  ITEM
      6. 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.
  28
  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 May 14,
2008.
  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 OfficerDIAMOND
      JO, LLCBy:
              /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
              /s/
      JONATHAN SWAINJonathan
      SwainChief
      Operating OfficerBy:
              /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial OfficerTHE
      OLD EVANGELINE DOWNS, L.L.C.By:
              /s/
      M. BRENT STEVENSM.
      Brent StevensChief
      Executive OfficerBy:
              /s/
      JONATHAN SWAINJonathan
      SwainChief
      Operating OfficerBy:
              /s/
      NATALIE A. SCHRAMMNatalie
      A. SchrammChief
      Financial Officer
 
   29