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 1934

For the quarterly period ended March 31, 2009.

or

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 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.)

301 Bell Street

Dubuque, Iowa 52001

(563) 690-4975

(Address, including zip code, and telephone number, including area code, of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

Indicate by check mark whether the registrant 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	Page

Item 1 - Financial Statements	3

Peninsula Gaming, LLC:
Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2009 and December 31, 2008	3
Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2009 and 2008	4
Condensed Consolidated Statements of Changes in Member's Deficit and Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2009	5
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2009 and 2008	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	25

Item 4 - Controls and Procedures	26

Part II - Other Information	27

Item 1 - Legal Proceedings	27
Item 6 - Exhibits	27

Signatures	28

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PENINSULA GAMING, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

	March 31, 2009			December 31, 2008
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	39,222		$	38,705
Restricted cash—purse settlements		9,920			5,013
Accounts receivable, net		4,991			5,038
Receivables from affiliates		234			271
Inventories		1,264			1,199
Prepaid expenses and other assets		1,822			1,920
Total current assets		57,453			52,146

PROPERTY AND EQUIPMENT, NET		259,877			263,154
OTHER ASSETS:
Deferred financing costs, net of amortization of $14,880 and $14,021, respectively		18,315			19,174
Goodwill		53,083			53,083
Licenses and other intangibles		38,615			38,506
Deposits and other assets		2,900			3,385
Investment available for sale		11,973			7,828
Total other assets		124,886			121,976
TOTAL	$	442,216		$	437,276

LIABILITIES AND MEMBER’S DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	4,260		$	4,608
Construction payable		6,024			12,324
Purse settlement payable		11,708			6,804
Accrued payroll and payroll taxes		5,091			5,104
Accrued interest		16,206			7,815
Other accrued expenses		12,818			10,387
Payable to affiliates		3,733			3,575
Current maturities of long-term debt and leases		7,029			8,492
Total current liabilities		66,869			59,109

LONG-TERM LIABILITIES:
8 3/4% senior secured notes, net of discount		253,354			253,237
11% senior secured notes, net of discount		109,497			111,258
13% senior notes, net of discount		6,884			6,877
Senior secured credit facilities		22,000			28,500
Term loan		6,326			6,697
Notes and leases payable, net of discount		998			1,229
Obligation under Minimum Assessment Agreement		18,717			16,394
Other liabilities		1,853			5,958
Total long-term liabilities		419,629			430,150
Total liabilities		486,498			489,259

COMMITMENTS AND CONTINGENCIES

MEMBER’S DEFICIT:
Common member’s interest		9,000			9,000
Accumulated deficit		(50,373	)		(53,971	)
Accumulated other comprehensive loss		(2,909	)		(7,012	)
Total member’s deficit		(44,282	)		(51,983	)
TOTAL	$	442,216		$	437,276

See notes to condensed consolidated financial statements (unaudited).

PENINSULA GAMING, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands)

	Three Months Ended March 31, 2009			Three Months Ended March 31, 2008
REVENUES:
Casino	$	65,757		$	56,420
Racing		3,026			3,317
Video poker		1,584			1,558
Food and beverage		5,778			3,756
Other		2,341			2,692
Less promotional allowances		(6,516	)		(4,666	)
Total net revenues		71,970			63,077

EXPENSES:
Casino		27,390			24,180
Racing		2,884			2,909
Video poker		1,062			1,126
Food and beverage		4,301			2,897
Other		1,484			1,422
Selling, general and administrative		12,762			11,994
Depreciation and amortization		6,065			4,863
Pre-opening expense		-			96
Development expense		82			39
Affiliate management fees		1,318			1,370
Loss on disposal of assets		81			103
Total expenses		57,429			50,999

INCOME FROM OPERATIONS		14,541			12,078

OTHER INCOME (EXPENSE):
Interest income		508			744
Interest expense, net of amounts capitalized		(11,250	)		(10,264	)
Total other expense		(10,742	)		(9,520	)

NET INCOME	$	3,799		$	2,558

See notes to condensed consolidated financial statements (unaudited).

PENINSULA GAMING, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER’S DEFICIT

AND COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

	COMMON MEMBER’S INTEREST		ACCUMULATED DEFICIT			ACCUMULATED OTHER COMPREHENSIVE LOSS			TOTAL MEMBER’S DEFICIT			COMPREHENSIVE INCOME

BALANCE, DECEMBER 31, 2008	$	9,000	$	(53,971	)	$	(7,012	)	$	(51,983	)
Net income		—		3,799			—			3,799		$	3,799
Unrealized gain on available for sale investment		—		—			4,103			4,103			4,103
Member distributions		—		(201	)		—			(201	)		—
Comprehensive income												$	7,902
BALANCE, MARCH 31, 2009	$	9,000	$	(50,373	)	$	(2,909	)	$	(44,282	)

See notes to condensed consolidated financial statements (unaudited).

PENINSULA GAMING, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended March 31, 2009			Three Months Ended March 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,799		$	2,558
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization		6,065			4,863
Non-cash interest		1,313			1,262
Non-cash equity based and other compensation		516			2,035
Loss on disposal of assets		81			103
Changes in operating assets and liabilities:
Restricted cash — purse settlements		(4,907	)		(5,289	)
Receivables		(13	)		654
Inventories		(65	)		(66	)
Prepaid expenses and other assets		400			(664	)
Accounts payable		4,107			5,538
Accrued expenses		10,200			7,189
Payable to affiliates		195			(837	)
Net cash flows from operating activities		21,691			17,346

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in cash value of life insurance for premiums paid		(95	)		(78	)
Business acquisition and licensing costs		(127	)		(130	)
Construction project development costs		(8,311	)		(7,371	)
Purchase of property and equipment		(2,054	)		(2,284	)
Proceeds from sale of property and equipment		502			-
Net cash flows from investing activities		(10,085	)		(9,863	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs		(9	)		(137	)
Principal payments on debt		(1,862	)		(920	)
Proceeds from senior credit facilities		4,000			-
Payments on senior credit facilities		(12,500	)		-
Member distributions		(718	)		(841	)
Net cash flows from financing activities		(11,089	)		(1,898	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		517			5,585

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		38,705			42,100

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	39,222		$	47,685

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	1,314		$	720

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired, but not paid	$	2,192		$	7,920
Property and equipment acquired in exchange for obligation under Minimum Assessment Agreement		1,989			1,417
Unrealized gain on available for sale investment		4,103			-
Liability settled in exchange for property and equipment		4,104			-

See notes to condensed consolidated financial statements (unaudited).

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 its equity interests in its wholly owned subsidiaries. PGL’s operating subsidiaries consist of: (i) Diamond Jo, LLC, a Delaware limited liability company (“DJL”), that owns and operates the Diamond Jo casino in Dubuque, Iowa; (ii) The Old Evangeline Downs, L.L.C., a Louisiana limited liability company (“EVD”), that owns and operates the Evangeline Downs Racetrack and Casino, or racino, in St. Landry Parish, Louisiana and four off-track betting (“OTB”) parlors in Louisiana; and (iii) Diamond Jo Worth, LLC, a Delaware limited liability company (“DJW”), that owns and operates the Diamond Jo casino in Worth County, Iowa. Other subsidiaries of PGL include (i) Peninsula Gaming Corp. (“PGC”), a Delaware corporation with no assets or operations formed solely to facilitate the offering of the Company’s 8 3/4% senior secured notes due 2012 (the “Peninsula Gaming Notes”) 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 (“PGP”), a Delaware limited liability company.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring entries unless otherwise disclosed, necessary to present fairly the financial information of the Company for the interim periods presented and have been prepared in accordance with accounting principles generally accepted in the United States of America. The interim results reflected in the financial statements are not necessarily indicative of results expected for the full year or other periods.

The financial statements contained herein should be read in conjunction with the audited financial statements and accompanying notes to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. Accordingly, footnote disclosure which would substantially duplicate the disclosure in the audited financial statements has been omitted in the accompanying unaudited financial statements.

2. Summary of Significant Accounting Policies

Obligation Under Minimum Assessment Agreement— On October 1, 2007, DJL entered into the Amended and Restated Port of Dubuque Public Parking Facility Development Agreement (“Development Agreement”) with the City of Dubuque, Iowa (“City”) regarding, among other things, the design, development, construction and financing of the public parking facility located adjacent to DJL’s new casino development. The City issued $23 million principal amount of 7.5% Urban Renewal Tax Increment Revenue Bonds, Taxable Series 2007 (“City Bonds”) to fund, in part, the construction of the facility. Due to DJL’s expected use of the public parking facility and its obligations under a Minimum Assessment Agreement with the City, combined with the Company’s guarantee of DJL’s obligation under the Minimum Assessment Agreement, DJL will record an obligation to the City to the extent proceeds from the City Bonds are used to construct the parking facility. As of March 31, 2009 and December 31, 2008, approximately $18.7 million and $16.4 million, respectively, of proceeds from the City Bonds had been used related to the construction of the parking facility which amount was recorded as a long-term obligation of DJL on the balance sheet. The obligation, along with related interest costs, are expected to be paid off over the life of the City Bonds through payments from DJL under the Minimum Assessment Agreement.

Licenses—The Company’s gaming licenses require renewals in the State of Iowa annually and every five years in the State of Louisiana. EVD’s horse racing license requires renewal annually. Renewal costs are expensed as incurred. The Company’s renewal experience is that renewals will be granted except under extraordinary circumstances.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates involve the intrinsic values of equity based compensation, the fair values of an embedded derivative and the DJW investment in City Bonds, the periodic review of the carrying value of assets for impairment, the estimated useful lives for depreciable assets, and the estimated liabilities for the EVD sales tax contingency, slot club awards and customer legal disputes.

In addition, an estimated loss from a loss contingency is recorded when information available prior to issuance of the 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 May 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 162, The Hierarchy of Generally Accepted Accounting Principles (“GAAP”) (“SFAS 162”). The purpose of the new standard is to provide a consistent framework for determining what accounting principles should be used when preparing U.S. GAAP financial statements. Previous guidance did not properly rank the accounting literature. The new standard is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of SFAS 162 is not expected to have a material effect on the Company’s financial statements.

In April 2008, the FASB released staff position (“FSP”) No. 142-3, Determination of the Useful Life of Intangible Assets. The FSP requires entities to disclose information for recognized intangible assets that enable users of financial statements to understand the extent to which expected future cash flows associated with intangible assets are affected by the entity’s intent or ability to renew or extend the arrangement associated with the intangible asset. The FSP also amends the factors an entity should consider in developing the renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142, Goodwill and Other Intangible Assets. The FSP will be applied prospectively to intangible assets acquired after the FSP’s effective date, but the disclosure requirements will be applied prospectively to all intangible assets recognized as of, and after, the FSP’s effective date. The FSP is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company adopted FSP No. 142-3 on January 1, 2009 and the adoption did not have a material effect on the Company’s financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires, among other things, enhanced disclosure about the volume and nature of derivative and hedging activities and a tabular summary showing the fair value of derivative instruments included in the balance sheet and statement of operations. SFAS 161 also requires expanded disclosure of contingencies included in derivative instruments related to credit-risk. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company adopted SFAS 161 on January 1, 2009 and the adoption did not have a material effect on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R significantly changes the way companies account for business combinations and will generally require more assets acquired and liabilities assumed to be measured at their acquisition-date fair value. Under SFAS 141R, legal fees and other transaction-related costs are expensed as incurred and are no longer included as a cost of acquiring the business. SFAS 141R also requires, among other things, acquirers to estimate the acquisition-date fair value of any contingent consideration and to recognize any subsequent changes in the fair value of contingent consideration in earnings. In addition, restructuring costs the acquirer expected, but was not obligated to incur, will be recognized separately from the business acquisition. SFAS 141R applies to the Company prospectively for business combinations occurring on or after January 1, 2009. The Company expects SFAS 141R will have an impact on accounting for business combinations, but the effect will be dependent upon any potential future acquisition.

In February 2008, the FASB issued FSP No. 157-2, Effective Date of FASB Statement No. 157, which amends SFAS No. 157 by delaying its effective date by one year for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Therefore, beginning on January 1, 2009, this standard applies prospectively to fair value measurements of non-financial assets and non-financial liabilities. The Company adopted FSP No. 157-2 on January 1, 2009 and the adoption did not have a material effect on the Company’s financial statements.

3. Property and Equipment

Property and equipment at March 31, 2009 and December 31, 2008 is summarized as follows (in thousands):

	March 31, 2009			December 31, 2008
Land and land improvements	$	18,485		$	18,118
Buildings and improvements		220,463			201,421
Furniture, fixtures and equipment		83,418			81,449
Computer equipment		10,670			11,009
Vehicles		561			404
Construction in progress		2,038			26,582
Subtotal		335,635			338,983
Accumulated depreciation		(75,758	)		(75,829	)
Property and equipment, net	$	259,877		$	263,154

Depreciation and amortization expense during the three months ended March 31, 2009 and 2008 was $6.1 million and $4.9 million, respectively.

The Company capitalizes interest costs associated with debt incurred in connection with significant construction projects. There was no capitalized interest during the three months ended March 31, 2009. The amount capitalized during the three months ended March 31, 2008 was $0.3 million.

In connection with DJL’s casino development, DJL began accelerating depreciation on long-lived assets with a net book value of approximately $4.5 million that were either contributed to the Historical Society in January 2009 or were not utilized at its new casino facility and were disposed in January 2009. Accelerated depreciation on these assets began during the fourth quarter of 2006, and DJL continued to depreciate the remaining net book value of those assets, less their estimated fair market value at the date of contribution or estimated net realizable value, through the period that DJL commenced operations at the new facility. Depreciation expense for the quarter ended March 31, 2008 increased by approximately $0.3 million as a result of accelerated depreciation on these assets.

In April 2009, EVD entered into a ground lease with a third party to design, develop, construct and operate a hotel with a minimum of 100 rooms adjacent to the racino on land owned by EVD (“Ground Lease”). The hotel is expected to include at least 25 suites, five meeting rooms and an indoor pool. Under the terms of the Ground Lease, EVD will lease the land on which the hotel will be located for a lease fee of 2% of gross revenue of the hotel. The agreement also contains a purchase option which allows EVD to purchase the hotel from the third party operator. The Ground Lease is conditioned upon the third party operator obtaining financing for the project. If the financing contingency is satisfied, EVD will impair $1.4 million of capitalized design and development costs already incurred related to the hotel project which will not be utilized by the third party operator. If the financing contingency is not satisfied, EVD will continue with its own existing design and development of the hotel and no impairment would be necessary. EVD expects a resolution to the financing contingency in the second quarter of 2009.

4. Debt

Long-term debt consists of the following (in thousands):

	March 31, 2009			December 31, 2008
8 3/4% senior secured notes due April 15, 2012, net of discount of $1,646 and $1,763, respectively, secured by substantially all the assets of PGL, DJL and EVD and the equity of DJL and EVD	$	253,354		$	253,237
11% senior secured notes of DJW due April 15, 2012, net of discount of $532 and $568, respectively, secured by substantially all the assets of DJW and the equity of DJW and DJWC		111,294			111,258
13% senior notes of EVD due March 1, 2010 with contingent interest, net of discount of $26 and $33, respectively		6,884			6,877
$65,000 revolving line of credit under a loan and security agreement of DJL and EVD with Wells Fargo Foothill, Inc., interest rate at prime plus a margin of 2.5% with a floor of 6.0% (current rate of 6.0% at March 31, 2009), maturing January 15, 2012, secured by substantially all assets of DJL and EVD		22,000			28,500
$5,000 revolving line of credit under a loan and security agreement of DJW with a bank, interest rate at prime less a margin of 1.0% with a floor of 5.0% (current rate of 5.0% at March 31, 2009), maturing March 31, 2010, secured by substantially all the assets of DJW and guaranteed by the Company’s Chief Executive Officer		-			2,000
Term loan under a loan and security agreement of PGL, DJL and EVD with American Trust & Savings Bank, interest rate 6.5%, due in installments through December 1, 2013, secured by certain assets of DJL		7,766			8,000
Notes payable and capital lease obligations, net of discount of $103 and $170, respectively, interest rates at 6% - 8 3/4%, due 2009 – 2011		4,790			6,418
Total debt		406,088			416,290
Less current portion		(7,029	)		(8,492	)
Total long term debt	$	399,059		$	407,798

Pursuant to the indenture governing the DJW Notes, DJW is required to offer to buy back a portion of the DJW Notes on a semi-annual basis at a premium of 7.5%, beginning March 31, 2007, with 50% of Excess Cash Flow (as defined therein) (“Excess Cash Flow Amount”). The Excess Cash Flow Amount for the six month period ended March 31, 2009 was $1.9 million, which includes $1.8 million in principal 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, 2009, the Company had $22.0 million of outstanding advances under its $65.0 million senior secured credit facility (“PGL Credit Facility”). As of March 31, 2009, DJW had no outstanding advances under its $5.0 million senior secured credit facility (“DJW Credit Facility”). In addition, as of March 31, 2009, the Company had outstanding letters of credit under the PGL Credit Facility and the DJW Credit Facility of approximately $0.9 million and $0.7 million, respectively, resulting in available borrowings thereunder of $42.1 million and $4.3 million, respectively.

As of March 31, 2009, the Company was in compliance with the terms of the agreements governing its outstanding indebtedness.

5. Fair Value Measurements

Under generally accepted accounting principles, certain assets and liabilities must be measured at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company has two financial instruments that must be measured at fair value in the financial statements: (i) an available for sale investment and (ii) a derivative. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value.

SFAS 157, Fair Value Measurements, establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes these inputs into three broad levels. The three levels are as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

Level 2-Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and

Level 3-Unobservable inputs that reflect the Company’s estimate about the assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

The Company had no Level 1 or Level 2 financial instruments at March 31, 2009 and December 31, 2008. The Company had two Level 3 financial instruments at March 31, 2009 and December 31, 2008. In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s Level 3 financial assets and liabilities that are required to be measured at fair value as of March 31, 2009 and December 31, 2008, which are classified as “Investment available for sale” and “Other long-term liabilities/Other accrued liabilities (short-term portion)” (in thousands):

	Total Carrying Value at March 31, 2009			Fair Value Measurements at March 31, 2009			Total Carrying Value at December 31, 2008			Fair Value Measurements at December 31, 2008
Investment available for sale	$	11,973		$	11,973		$	7,828		$	7,828
Derivative liability, not designated as a hedging instrument		(929	)		(929	)		(790	)		(790	)

The following table summarizes the changes in fair value of the Company’s Level 3 assets and liabilities for the three months ended March 31, 2009 and 2008 (in thousands):

	Three Months Ended March 31, 2009							Three Months Ended March 31, 2008
	Investment available for sale			Derivative liability, not designated as a hedging instrument				Investment available for sale			Derivative liability, not designated as a hedging instrument
Balance at beginning of the year		$	7,828		$	(790	)		$	12,491		$	(1,252	)
Total gains (losses) (realized or unrealized):
Included in earnings			42			(139	)			36			53
Included in other comprehensive income			4,103			-				-			-
Transfers in or out of Level 3			-			-				-			-
Purchases, sales, issuances and settlements			-			-				-			-
Ending balance at March 31, 2009 and 2008		$	11,973		$	(929	)		$	12,527		$	(1,199	)

Gains (losses) included in earnings attributable to the change	Included in interest income			Included in interest expense				Included in interest income			Included in interest expense
in unrealized gains or losses relating to assets/liabilities
still held at the reporting date		$	42		$	(139	)		$	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 the fair value of the Peninsula Gaming Notes at March 31, 2009. 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 date of the DJW Notes. The fair value is calculated using estimated future cash flows developed by the Company to estimate the portion of the DJW Notes that would be subject to the contingent put option, yields of comparable financial instruments, the remaining date to maturity of the DJW Notes and based on historical experience that the holders of the notes will elect to be paid the contingent put option. The fair value of the put option is revalued at the end of each reporting period with a corresponding charge (benefit) to interest expense.

6. Commitments and Contingencies

Under the Company’s and PGP’s operating agreements, the Company and PGP have agreed, subject to a few exceptions, to indemnify and hold harmless PGP and PGP’s members from liabilities incurred as a result of their positions as sole manager of the Company and as members of PGP, respectively.

In October 2003, EVD filed a Petition for Declaratory Judgment in St. Landry Parish, Louisiana, naming as opposing parties the St. Landry Parish School Board and the City of Opelousas regarding the payment of sales and use tax by EVD. 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 St. Landry Parish or the City of Opelousas as of March 31, 2009.

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.

7. Related Party Transactions

During the three months ended March 31, 2009 and 2008, the Company recorded distributions of $0.7 million and $0.8 million, respectively, to PGP primarily for (i) certain consulting and financial advisory services related to PGP’s development expenses, (ii) board fees and actual out-of-pocket expenses incurred by members of the board of managers of PGP and (iii) tax, accounting, legal and administrative costs and expenses related to PGP. These amounts were recorded as member distributions.

During each of the three months ended March 31, 2009 and 2008, 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 ranging from 3% to 5% 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, 2009 and 2008.

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 during each of the three months ended March 31, 2009 and 2008.

EVD and PGP are parties to a consulting agreement with a board member of PGP. Under such consulting agreement, the board member is entitled to a fee equal to 2.5% of EVD’s and DJW’s earnings before interest, taxes, depreciation, amortization and non-recurring charges during the preceding calendar year. In connection with this agreement, (i) EVD expensed $0.2 million and $0.3 million of affiliate management fees during the three months ended March 31, 2009 and 2008, respectively, and (ii) DJW expensed $0.2 million of affiliate management fees during each of the three months ended March 31, 2009 and 2008.

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 $0.4 million and $1.9 million during the three months ended March 31, 2009 and 2008, respectively, with respect to these incentive units.

8. Segment Information

The Company is organized around geographical areas and operates three reportable segments: (1) Diamond Jo operations, which comprise the Diamond Jo casino operations in Dubuque, Iowa, (2) Diamond Jo Worth operations, which comprise the Diamond Jo Worth casino operations in Worth County, Iowa, and (3) Evangeline Downs operations, which comprise the casino, racetrack and OTBs operated by EVD in Louisiana.

The accounting policies for each segment are the same as those described in Note 2 above and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The Company evaluates performance and allocates resources based upon, among other considerations, segment operating earnings (as defined below).

The tables below present information about reported segments as of and for the three months ended March 31, 2009 and 2008 (in thousands):

	Net Revenues From External Customers Three Months Ended March 31,
	2009		2008
Diamond Jo Dubuque	$	19,733	$	9,625
Diamond Jo Worth		20,065		20,159
Evangeline Downs		32,172		33,293
Total	$	71,970	$	63,077

	Segment Operating Earnings Three Months Ended March 31, (1)
	2009			2008
General corporate	$	(2,034	)	$	(2,981	)
Diamond Jo Dubuque		6,536			2,848
Diamond Jo Worth		7,800			7,784
Evangeline Downs		9,785			10,898
Total Segment Operating Earnings (1)		22,087			18,549
General corporate:
Depreciation and amortization		(27	)		(12	)
Affiliate management fees		(97	)		(85	)
Interest income		-			64
Diamond Jo Dubuque:
Depreciation and amortization		(2,054	)		(795	)
Pre-opening expense		-			(55	)
Development expense		-			(8	)
Gain on disposal of assets		9			7
Interest expense, net		(3,598	)		(2,518	)
Diamond Jo Worth:
Depreciation and amortization		(2,185	)		(2,128	)
Pre-opening expense		-			(32	)
Affiliate management fees		(764	)		(782	)
Loss on disposal of assets		(55	)		(27	)
Interest expense, net		(3,013	)		(2,959	)
Evangeline Downs:
Depreciation and amortization		(1,799	)		(1,928	)
Pre-opening expense		-			(9	)
Development expense		(82	)		(31	)
Affiliate management fees		(457	)		(503	)
Loss on disposal of assets		(35	)		(83	)
Interest expense, net		(4,131	)		(4,107	)
Net income	$	3,799		$	2,558

(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.

	Total Assets
	March 31, 2009		December 31, 2008

General corporate	$	1,098	$	969
Diamond Jo Dubuque		185,566		192,999
Diamond Jo Worth		103,035		97,017
Evangeline Downs		152,517		146,291
Total	$	442,216	$	437,276

	Cash Expenditures for Additions to Long-Lived Assets
	Three Months Ended March 31, 2009		Three Months Ended March 31, 2008

General corporate	$	131	$	7
Diamond Jo Dubuque		8,130		6,666
Diamond Jo Worth		679		667
Evangeline Downs		1,552		2,445
Total	$	10,492	$	9,785

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, 2009 and December 31, 2008 are as follows (in thousands):

	March 31, 2009				December 31, 2008
	Fair Value		Recorded Amount		Fair Value		Recorded Amount
Available for sale investment	$	11,973	$	11,973	$	7,828	$	7,828
8 3/4% senior secured notes		204,000		253,354		163,200		253,237
11% senior secured notes		106,235		111,294		105,116		111,258
13% senior notes		5,874		6,884		6,219		6,877
Senior secured credit facilities		22,000		22,000		30,500		30,500
Term loan		7,212		7,766		7,429		8,000
Notes payable, capital lease obligations and other financial instruments		5,538		5,435		7,128		6,958
Derivative liability		929		929		790		790
Obligation under Minimum Assessment Agreement		15,059		18,717		8,648		16,394

Fair value information is based on current market interest rates and estimates of market conditions for instruments with similar terms, maturities, and degrees of risk and, for the investment available for sale, the fair value of the Peninsula Gaming Notes at March 31, 2009 and December 31, 2008.

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.

CONSOLIDATING BALANCE SHEETS

	At March 31, 2009
(in thousands)	Parent Co-Issuer - PGL			Subsidiary Co-Issuer - DJL		Subsidiary Guarantor - EVD			Subsidiary Non- Guarantor - DJW			Consolidating Adjustments			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	(5	)	$	5,502	$	8,903		$	24,822					$	39,222
Restricted cash-purse settlements							9,920									9,920
Accounts receivable					3,405		574			1,012						4,991
Receivables from affiliates					1,235		118			117		$	(1,236	)		234
Inventories					416		461			387						1,264
Prepaid expenses and other assets		56			507		789			470						1,822
Total current assets		51			11,065		20,765			26,808			(1,236	)		57,453
PROPERTY AND EQUIPMENT, NET		496			108,875		93,179			57,327						259,877
OTHER ASSETS:
Investment in subsidiaries		(43,848	)										43,848
Deferred financing costs					11,554		3,860			2,901						18,315
Goodwill					53,083											53,083
Licenses and other intangibles							34,615			4,000						38,615
Deposits and other assets		551			2,224		98			27						2,900
Investment available for sale										11,973						11,973
Total other assets		(43,297	)		66,861		38,573			18,901			43,848			124,886
TOTAL	$	(42,750	)	$	186,801	$	152,517		$	103,036		$	42,612		$	442,216

LIABILITIES AND MEMBER’S DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	86		$	806	$	2,814		$	554					$	4,260
Construction payable		1			5,365		480			178						6,024
Purse settlement payable							11,708									11,708
Accrued payroll and payroll taxes		1,255			1,267		1,587			982						5,091
Accrued interest					4,308		6,254			5,644						16,206
Other accrued expenses		116			3,729		6,112			2,861						12,818
Payable to affiliates							3,175			1,794		$	(1,236	)		3,733
Current maturities of long-term debt and leases					4,440		572			2,017						7,029
Total current liabilities		1,458			19,915		32,702			14,030			(1,236	)		66,869
LONG-TERM LIABILITIES
8 3/4% senior secured notes, net of discount					101,898		151,456									253,354
11% senior secured notes, net of discount										109,497						109,497
13% senior notes, net of discount							6,884									6,884
Senior secured credit facilities					22,000											22,000
Term loan					6,326											6,326
Notes and leases payable, net of discount					409		589									998
Obligation under Minimum Assessment Agreement					18,717											18,717
Other liabilities		74			553					1,226						1,853
Total long-term liabilities		74			149,903		158,929			110,723						419,629
Total liabilities		1,532			169,818		191,631			124,753			(1,236	)		486,498

MEMBER’S EQUITY (DEFICIT)		(44,282	)		16,983		(39,114	)		(21,717	)		43,848			(44,282	)
TOTAL	$	(42,750	)	$	186,801	$	152,517		$	103,036		$	42,612		$	442,216

	At December 31, 2008
	Parent Co-Issuer — PGL			Subsidiary Co-Issuer — DJL		Subsidiary Guarantor — EVD			Subsidiary Non-Guarantor —DJW			Consolidating Adjustments			Consolidated

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	(38	)	$	9,704	$	7,418		$	21,621					$	38,705
Restricted cash-purse settlements							5,013									5,013
Accounts receivable		1			3,487		1,113			437						5,038
Receivables from affiliates		5			1,585		138			133		$	(1,590	)		271
Inventories					449		330			420						1,199
Prepaid expenses and other assets		39			710		753			418						1,920
Total current assets		7			15,935		14,765			23,029			(1,590	)		52,146
PROPERTY AND EQUIPMENT, NET		511			110,934		92,740			58,969						263,154
OTHER ASSETS:
Investment in subsidiaries		(50,908	)										50,908
Deferred financing costs					11,837		4,195			3,142						19,174
Goodwill					53,083											53,083
Licenses and other intangibles							34,488			4,018						38,506
Deposits and other assets		456			2,795		103			31						3,385
Investment available for sale										7,828						7,828
Total other assets		(50,452	)		67,715		38,786			15,019			50,908			121,976
TOTAL	$	(49,934	)	$	194,584	$	146,291		$	97,017		$	49,318		$	437,276

LIABILITIES AND MEMBER’S DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	71		$	805	$	2,988		$	744					$	4,608
Construction payable		120			11,980		105			119						12,324
Purse settlement payable							6,804									6,804
Accrued payroll and payroll taxes		1,700			1,263		1,289			852						5,104
Accrued interest					2,077		3,168			2,570						7,815
Other accrued expenses		82			2,945		5,105			2,255						10,387
Payable to affiliates							3,201			1,964		$	(1,590	)		3,575
Current maturity of long-term debt and leases					5,266		572			2,654						8,492
Total current liabilities		1,973			24,336		23,232			11,158			(1,590	)		59,109
LONG-TERM LIABILITIES:
8 ѕ% senior secured notes, net of discount					101,851		151,386									253,237
11% senior secured notes, net of discount										111,258						111,258
13% senior notes, net of discount							6,877									6,877
Senior secured credit facilities					28,500											28,500
Term loan					6,697											6,697
Notes and leases payable, net of discount					580		594			55						1,229
Obligation under Minimum Assessment Agreement					16,394											16,394
Other liabilities		76			4,695					1,187						5,958
Total long-term liabilities		76			158,717		158,857			112,500						430,150
Total liabilities		2,049			183,053		182,089			123,658			(1,590	)		489,259

MEMBER’S EQUITY (DEFICIT)		(51,983	)		11,531		(35,798	)		(26,641	)		50,908			(51,983	)
TOTAL	$	(49,934	)	$	194,584	$	146,291		$	97,017		$	49,318		$	437,276

CONSOLIDATING STATEMENTS OF OPERATIONS

	Three Months Ended March 31, 2009
	Parent			Subsidiary			Subsidiary			Subsidiary Non-
	Co-Issuer -			Co-Issuer -			Guarantor -			Guarantor -			Consolidating
(in thousands)	PGL			DJL			EVD			DJW			Adjustments			Consolidated

REVENUES:
Casino				$	19,196		$	27,323		$	19,238					$	65,757
Racing								3,026									3,026
Video poker								1,584									1,584
Food and beverage					2,237			2,394			1,147						5,778
Affiliate management fee income					636								$	(636	)
Other					681			399			1,261						2,341
Less promotional allowances					(2,381	)		(2,554	)		(1,581	)					(6,516	)
Total net revenues					20,369			32,172			20,065			(636	)		71,970

EXPENSES:
Casino					7,521			12,995			6,874						27,390
Racing								2,884									2,884
Video poker								1,062									1,062
Food and beverage					1,659			1,690			952						4,301
Other					386			64			1,034						1,484
Selling, general and administrative	$	788			3,631			3,692			3,405			1,246			12,762
Depreciation and amortization		27			2,054			1,799			2,185						6,065
Development expense								82									82
Affiliate management fees		97						1,093			764			(636	)		1,318
Loss (gain) on disposal of assets					(9	)		35			55						81
Corporate expense allocation					418			410			418			(1,246	)
Total expenses		912			15,660			25,806			15,687			(636	)		57,429

INCOME (LOSS) FROM OPERATIONS		(912	)		4,709			6,366			4,378						14,541

OTHER INCOME (EXPENSE):
Interest income								5			503						508
Interest expense, net of amounts capitalized					(3,598	)		(4,136	)		(3,516	)					(11,250	)
Income from equity investment in subsidiaries		4,711												(4,711	)
Total other expense		4,711			(3,598	)		(4,131	)		(3,013	)		(4,711	)		(10,742	)
NET INCOME	$	3,799		$	1,111		$	2,235		$	1,365		$	(4,711	)	$	3,799

	Three Months Ended March 31, 2008
	Parent			Subsidiary			Subsidiary			Subsidiary Non-
	Co-Issuer -			Co-Issuer -			Guarantor -			Guarantor -			Consolidating
(in thousands)	PGL			DJL			EVD			DJW			Adjustments			Consolidated

REVENUES:
Casino				$	9,461		$	28,066		$	18,893					$	56,420
Racing								3,317									3,317
Video poker								1,558									1,558
Food and beverage					568			2,232			956						3,756
Affiliate management fee income					687								$	(687	)
Other					677			414			1,601						2,692
Less promotional allowances					(1,081	)		(2,294	)		(1,291	)					(4,666	)
Total net revenues					10,312			33,293			20,159			(687	)		63,077

EXPENSES:
Casino					4,439			12,875			6,866						24,180
Racing								2,909									2,909
Video poker								1,126									1,126
Food and beverage					552			1,579			766						2,897
Other					4			60			1,358						1,422
Selling, general and administrative	$	854			1,782			3,846			3,385			2,127			11,994
Depreciation and amortization		12			795			1,928			2,128						4,863
Pre-opening expense					55			9			32						96
Development expense					8			31									39
Affiliate management fees		85						1,190			782			(687	)		1,370
Loss (gain) on disposal of assets					(7	)		83			27						103
Corporate expense allocation					707			713			707			(2,127	)
Total expenses		951			8,335			26,349			16,051			(687	)		50,999

INCOME (LOSS) FROM OPERATIONS		(951	)		1,977			6,944			4,108						12,078

OTHER INCOME (EXPENSE):
Interest income		64			38			74			568						744
Interest 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	)	$

Peninsula Gaming, LLC 10-Q