Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 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: 001-13641
PINNACLE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
(State or other jurisdiction of incorporation or organization)
|
|
95-3667491
(I.R.S. Employer Identification No.) |
3800 Howard Hughes Parkway
Las Vegas, NV 89169
(Address of principal executive offices) (Zip Code)
(702) 784-7777
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to the filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files). YES o NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer þ
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company o |
|
|
|
|
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). YES o NO þ
As of the close of business on November 4, 2009, the number of outstanding shares of the
registrants common stock was 60,079,686.
PINNACLE ENTERTAINMENT, INC.
TABLE OF CONTENTS
PART I
Item 1. Financial Statements
PINNACLE ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
For the nine months |
|
|
|
ended September 30, |
|
|
ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands, except per share data) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
$ |
227,353 |
|
|
$ |
222,063 |
|
|
$ |
694,546 |
|
|
$ |
680,030 |
|
Food and beverage |
|
|
16,576 |
|
|
|
17,012 |
|
|
|
48,063 |
|
|
|
47,254 |
|
Lodging |
|
|
10,895 |
|
|
|
11,709 |
|
|
|
29,352 |
|
|
|
27,067 |
|
Retail, entertainment and other |
|
|
10,553 |
|
|
|
12,070 |
|
|
|
28,627 |
|
|
|
31,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265,377 |
|
|
|
262,854 |
|
|
|
800,588 |
|
|
|
785,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses and other costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
|
137,640 |
|
|
|
132,182 |
|
|
|
408,090 |
|
|
|
410,035 |
|
Food and beverage |
|
|
16,113 |
|
|
|
17,806 |
|
|
|
47,620 |
|
|
|
48,914 |
|
Lodging |
|
|
6,313 |
|
|
|
6,538 |
|
|
|
18,289 |
|
|
|
16,110 |
|
Retail, entertainment and other |
|
|
6,159 |
|
|
|
8,213 |
|
|
|
16,017 |
|
|
|
20,740 |
|
General and administrative |
|
|
58,099 |
|
|
|
60,299 |
|
|
|
174,916 |
|
|
|
182,824 |
|
Depreciation and amortization |
|
|
25,756 |
|
|
|
29,665 |
|
|
|
78,142 |
|
|
|
89,172 |
|
Pre-opening and development costs |
|
|
8,602 |
|
|
|
14,571 |
|
|
|
21,120 |
|
|
|
45,914 |
|
Write-downs, reserves and recoveries, net |
|
|
306 |
|
|
|
976 |
|
|
|
1,019 |
|
|
|
8,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
258,988 |
|
|
|
270,250 |
|
|
|
765,213 |
|
|
|
821,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
6,389 |
|
|
|
(7,396 |
) |
|
|
35,375 |
|
|
|
(36,149 |
) |
Other non-operating income |
|
|
56 |
|
|
|
843 |
|
|
|
292 |
|
|
|
2,466 |
|
Interest expense, net of capitalized interest |
|
|
(18,696 |
) |
|
|
(11,025 |
) |
|
|
(51,448 |
) |
|
|
(34,715 |
) |
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
12,914 |
|
|
|
|
|
Impairment of investment in equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,636 |
) |
Loss on early extinguishment of debt |
|
|
(8,831 |
) |
|
|
|
|
|
|
(8,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes |
|
|
(21,082 |
) |
|
|
(17,578 |
) |
|
|
(11,698 |
) |
|
|
(91,034 |
) |
Income tax (expense) benefit |
|
|
(598 |
) |
|
|
9,295 |
|
|
|
(3,806 |
) |
|
|
18,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(21,680 |
) |
|
|
(8,283 |
) |
|
|
(15,504 |
) |
|
|
(72,414 |
) |
(Loss) income from discontinued operations, net of income taxes |
|
|
(241 |
) |
|
|
(3,561 |
) |
|
|
(778 |
) |
|
|
47,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(21,921 |
) |
|
$ |
(11,844 |
) |
|
$ |
(16,282 |
) |
|
$ |
(24,900 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common sharebasic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.36 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.26 |
) |
|
$ |
(1.21 |
) |
(Loss) income from discontinued operations, net of income taxes |
|
|
(0.01 |
) |
|
|
(0.06 |
) |
|
|
(0.01 |
) |
|
|
0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common sharebasic |
|
$ |
(0.37 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common sharediluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.36 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.26 |
) |
|
$ |
(1.21 |
) |
(Loss) income from discontinued operations, net of income taxes |
|
|
(0.01 |
) |
|
|
(0.06 |
) |
|
|
(0.01 |
) |
|
|
0.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common sharediluted |
|
$ |
(0.37 |
) |
|
$ |
(0.20 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.42 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of sharesbasic |
|
|
60,070 |
|
|
|
59,972 |
|
|
|
60,048 |
|
|
|
59,961 |
|
Number of sharesdiluted |
|
|
60,070 |
|
|
|
59,972 |
|
|
|
60,048 |
|
|
|
59,961 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
PINNACLE ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
(in thousands, except share data) |
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
154,921 |
|
|
$ |
115,712 |
|
Accounts receivable, net of allowance for doubtful accounts of
$12,178 and $11,848 |
|
|
20,025 |
|
|
|
26,348 |
|
Inventories |
|
|
6,192 |
|
|
|
6,425 |
|
Prepaid expenses and other assets |
|
|
25,192 |
|
|
|
18,845 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
206,330 |
|
|
|
167,330 |
|
|
|
|
|
|
|
|
Restricted cash |
|
|
9,370 |
|
|
|
9,318 |
|
Land, buildings, riverboats and equipment: (Note 1) |
|
|
|
|
|
|
|
|
Land and land improvements |
|
|
415,717 |
|
|
|
407,169 |
|
Buildings, riverboats and improvements |
|
|
1,098,612 |
|
|
|
1,099,204 |
|
Furniture, fixtures and equipment |
|
|
446,246 |
|
|
|
436,887 |
|
Construction in progress |
|
|
259,765 |
|
|
|
127,407 |
|
|
|
|
|
|
|
|
|
|
|
2,220,340 |
|
|
|
2,070,667 |
|
Less: accumulated depreciation |
|
|
(511,612 |
) |
|
|
(440,630 |
) |
|
|
|
|
|
|
|
|
|
|
1,708,728 |
|
|
|
1,630,037 |
|
|
|
|
|
|
|
|
Assets held for sale |
|
|
2,667 |
|
|
|
2,687 |
|
Goodwill (Note 1) |
|
|
16,742 |
|
|
|
16,742 |
|
Intangible assets, net (Note 1) |
|
|
32,549 |
|
|
|
32,607 |
|
Other assets, net |
|
|
53,948 |
|
|
|
60,503 |
|
|
|
|
|
|
|
|
|
|
$ |
2,030,334 |
|
|
$ |
1,919,224 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
58,816 |
|
|
$ |
45,755 |
|
Accrued interest |
|
|
15,031 |
|
|
|
11,010 |
|
Accrued compensation |
|
|
42,950 |
|
|
|
41,574 |
|
Accrued taxes |
|
|
26,867 |
|
|
|
17,089 |
|
Other accrued liabilities |
|
|
52,784 |
|
|
|
55,060 |
|
Deferred income taxes |
|
|
2,049 |
|
|
|
4,029 |
|
Current portion of long-term debt (Note 2) |
|
|
9,553 |
|
|
|
89 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
208,050 |
|
|
|
174,606 |
|
|
|
|
|
|
|
|
Long-term debt less current portion (Note 2) |
|
|
1,026,184 |
|
|
|
943,243 |
|
Other long-term liabilities |
|
|
60,514 |
|
|
|
59,831 |
|
Deferred income taxes (Note 3) |
|
|
3,822 |
|
|
|
2,198 |
|
Commitments and contingencies (Note 6) |
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
|
|
|
|
|
|
Preferred stock$1.00 par value, 250,000 shares authorized, none
issued or outstanding |
|
|
|
|
|
|
|
|
Common stock$0.10 par value, 60,079,686 and 59,981,181 shares
outstanding, net of treasury shares |
|
|
6,209 |
|
|
|
6,199 |
|
Additional paid-in capital |
|
|
1,009,609 |
|
|
|
999,419 |
|
Accumulated deficit |
|
|
(246,360 |
) |
|
|
(230,077 |
) |
Accumulated other comprehensive loss |
|
|
(17,604 |
) |
|
|
(16,105 |
) |
Treasury stock, at cost, for both periods 2,008,986 of treasury shares |
|
|
(20,090 |
) |
|
|
(20,090 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
731,764 |
|
|
|
739,346 |
|
|
|
|
|
|
|
|
|
|
$ |
2,030,334 |
|
|
$ |
1,919,224 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
PINNACLE ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
For the nine months |
|
|
|
ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in thousands) |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(16,282 |
) |
|
$ |
(24,900 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
78,142 |
|
|
|
89,596 |
|
Loss on disposal of assets |
|
|
595 |
|
|
|
1,738 |
|
Impairment of buildings, riverboats and equipment |
|
|
394 |
|
|
|
9,440 |
|
Impairment of investment in equity securities |
|
|
|
|
|
|
22,636 |
|
Loss on early extinguishment of debt |
|
|
8,831 |
|
|
|
|
|
Gain on sale of equity securities |
|
|
(12,914 |
) |
|
|
|
|
Provision for bad debts |
|
|
1,431 |
|
|
|
2,158 |
|
Amortization of debt issuance costs |
|
|
4,189 |
|
|
|
3,479 |
|
Share-based compensation expense |
|
|
9,774 |
|
|
|
6,997 |
|
Change in deferred income taxes |
|
|
11,095 |
|
|
|
25,253 |
|
Tax benefit from stock option exercises |
|
|
|
|
|
|
(97 |
) |
Insurance advances in excess of net book value |
|
|
|
|
|
|
2,018 |
|
Change in long-term accounts, net |
|
|
|
|
|
|
(2,030 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Receivables |
|
|
2,954 |
|
|
|
(2,808 |
) |
Prepaid expenses and other |
|
|
(6,298 |
) |
|
|
(4,129 |
) |
Other long-term assets |
|
|
2,846 |
|
|
|
|
|
Accounts payable |
|
|
(2,330 |
) |
|
|
(17,037 |
) |
Accrued compensation |
|
|
2,442 |
|
|
|
2,358 |
|
Accrued interest |
|
|
4,021 |
|
|
|
4,401 |
|
Other accrued liabilities |
|
|
3,315 |
|
|
|
6,559 |
|
Other long-term liabilities |
|
|
(769 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
91,436 |
|
|
|
125,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(146,204 |
) |
|
|
(267,676 |
) |
Change in restricted cash |
|
|
(52 |
) |
|
|
18 |
|
Purchase of intangible assets |
|
|
(65 |
) |
|
|
|
|
Kansas City application deposit |
|
|
|
|
|
|
(25,000 |
) |
Kansas City application refund |
|
|
|
|
|
|
25,000 |
|
Proceeds from sale of equity securities |
|
|
23,674 |
|
|
|
|
|
Proceeds from sale of property and equipment |
|
|
373 |
|
|
|
312 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(122,274 |
) |
|
|
(267,346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowings under credit facility |
|
|
80,299 |
|
|
|
215,000 |
|
Repayments under credit facility |
|
|
(232,066 |
) |
|
|
(140,000 |
) |
Proceeds from Senior 8.625% Notes due 2017 |
|
|
443,687 |
|
|
|
|
|
Payment of Senior Subordinated 8.75% Notes due 2013 |
|
|
(129,438 |
) |
|
|
|
|
Payment of Senior Subordinated 8.25% Notes due 2012 |
|
|
(76,547 |
) |
|
|
|
|
Payments on other secured and unsecured notes payable |
|
|
(67 |
) |
|
|
(68 |
) |
Proceeds from common stock options exercised |
|
|
553 |
|
|
|
706 |
|
Debt issuance and other financing costs |
|
|
(15,799 |
) |
|
|
(511 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
70,622 |
|
|
|
75,127 |
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(575 |
) |
|
|
67 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
|
39,209 |
|
|
|
(66,520 |
) |
Cash and cash equivalents at the beginning of the period |
|
|
115,712 |
|
|
|
191,124 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
|
$ |
154,921 |
|
|
$ |
124,604 |
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information: |
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
|
$ |
42,867 |
|
|
$ |
50,132 |
|
Cash payments (refunds) related to income taxes, net |
|
|
3,272 |
|
|
|
(5,078 |
) |
Increase (decrease) in construction related deposits and liabilities |
|
|
14,028 |
|
|
|
(13,240 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
PINNACLE ENTERTAINMENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1Summary of Significant Accounting Policies
Basis of Presentation and Organization Pinnacle Entertainment, Inc. (Pinnacle) is a
developer, owner and operator of casinos and related hospitality and entertainment facilities. We
operate seven domestic casinos located in southeastern Indiana (Belterra Casino Resort); Lake
Charles, New Orleans and Bossier City, Louisiana (LAuberge du Lac, Boomtown New Orleans and
Boomtown Bossier City, respectively); Reno, Nevada (Boomtown Reno) and St. Louis, Missouri
(Lumière Place Casino and President Casino). Internationally, we operate one significant casino
and several small casinos in Argentina (Casino Magic Argentina). We view each domestic property
as an operating segment and aggregate our Argentine casinos into the Casino Magic Argentina
reporting segment. References in this Quarterly Report on Form 10-Q to Pinnacle, the Company,
we, our or us refer to Pinnacle Entertainment, Inc. and its subsidiaries, except where the
context otherwise indicates.
In July 2008, we announced plans to sell or otherwise discontinue operations of The Casino at
Emerald Bay in the Bahamas and officially ceased operations on January 2, 2009. We have classified
the related assets as held for sale in our Condensed Consolidated Balance Sheets and have included
its results in discontinued operations in our unaudited Condensed Consolidated Statement of
Operations.
Within our construction and development pipeline, we have a number of projects at various
stages of development. In south St. Louis County, we are constructing a casino named River City,
which is expected to open in the spring of 2010. In Lake Charles, Louisiana, we have begun the
foundation work on a second casino resort to be called Sugarcane Bay. We are also developing a
casino-hotel in Baton Rouge, Louisiana. Each of these projects is subject to various regulatory
approvals.
Principles of Consolidation The accompanying unaudited Condensed Consolidated Financial
Statements have been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (SEC) and, therefore, do not include all information and footnote disclosures
necessary for complete financial statements in accordance with generally accepted accounting
principles (GAAP) in the United States. The results for the periods indicated are unaudited, but
reflect all adjustments that management considers necessary for a fair presentation of operating
results. The unaudited Condensed Consolidated Financial Statements include the accounts of Pinnacle
Entertainment, Inc. and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
The results of operations for interim periods are not indicative of a full year of operations.
These unaudited Condensed Consolidated Financial Statements and notes thereto should be read in
conjunction with the Consolidated Financial Statements and notes thereto included in our Annual
Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2008.
Use of Estimates The preparation of unaudited Condensed Consolidated Financial Statements
in conformity with accounting principles used in the United States requires management to make
estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the
disclosure of contingent assets and liabilities at the date of the consolidated financial
statements, and (iii) the reported amounts of revenues and expenses during the reporting period.
Estimates used by us include, among other things, the estimated useful lives for depreciable and
amortizable assets, the estimated allowance for doubtful accounts receivable, estimated income tax
provisions, the evaluation of the future realization of deferred tax assets, determining the
adequacy of reserves for self-insured liabilities and mychoice customer rewards programs, estimated
cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill and
intangible assets, contingencies and litigation, and estimates of the forfeiture rate and expected
life of share-based awards and stock price volatility when computing share-based compensation
expense. Actual results may differ from those estimates.
Fair Value Effective January 1, 2008, we adopted the authoritative guidance for fair value
measurements, which guidance provides companies the option to measure certain financial assets and
liabilities at fair value with
changes in fair value recognized in earnings each period. We have elected to not measure any
financial assets and liabilities at fair value that were not previously required to be measured at
fair value.
6
Fair value is defined in the authoritative guidance 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. The guidance also establishes a framework for measuring fair value and
expands disclosures about fair value measurements. The fair value framework requires the
categorization of assets and liabilities into three levels based upon assumptions (inputs) used to
price the assets and liabilities. Level 1 provides the most reliable measure of fair value,
whereas Level 3 generally requires significant management judgment. The three levels are defined
as follows:
|
|
|
Level 1: Quoted market prices in active markets for identical assets or
liabilities. |
|
|
|
|
Level 2: Observable market-based inputs or unobservable inputs that are
corroborated by market data. |
|
|
|
|
Level 3: Unobservable inputs that are not corroborated by market data. |
As of September 30, 2009, we had no assets measured at fair value on a recurring basis. As of
September 30, 2009, our liabilities that are measured at fair value on a recurring basis are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
(in millions) |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phantom stock units |
|
$ |
0.8 |
|
|
$ |
0.8 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
$ |
0.8 |
|
|
$ |
0.8 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008, our assets and liabilities that are measured at fair value on a
recurring basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
(in millions) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
$ |
10.8 |
|
|
$ |
10.8 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
10.8 |
|
|
$ |
10.8 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phantom stock units |
|
$ |
0.6 |
|
|
$ |
0.6 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities at fair value |
|
$ |
0.6 |
|
|
$ |
0.6 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale Securities: We classify all equity securities that we hold as current
available-for-sale securities. At December 31, 2008, available-for-sale securities comprised 1.2
million shares of common stock in Ameristar Casinos, Inc., a competitor, with a fair value of $10.8
million. During the second quarter of 2009, we sold such securities for cash proceeds of $23.7
million and realized a gain of $12.9 million.
Land, Buildings, Riverboats and Equipment Land, buildings, riverboats and equipment are
stated at cost. We capitalize the costs of improvements that extend the life of the asset.
Construction in progress at September 30, 2009 and December 31, 2008 relates primarily to our River
City project. Depreciation expense for the three and nine months ended September 30, 2009 was
$25.7 million and $78.0 million, respectively, and $29.7 million and $89.2 million for the three
and nine months ended September 30, 2008, respectively. Interest expense is capitalized on
internally constructed assets at our overall weighted average cost of borrowing. Capitalized
interest was $3.8 million and $8.7 million for the three and nine months ended September 30, 2009,
respectively, and $8.6 million and $23.4 million for the three and nine months ended September 30,
2008, respectively.
Goodwill and Other Intangible Assets In accordance with authoritative guidance, goodwill
and other indefinite-lived intangible assets are subject to an annual assessment for impairment, or
more frequently if there are indications of possible impairment, by applying a fair-value-based
test. There were no impairments to goodwill or indefinite-lived intangible assets during the three
or nine months ended September 30, 2009 and 2008, respectively. We will perform our annual review
of goodwill and indefinite-lived intangible assets in the fourth quarter of 2009.
7
Amortizing Intangible Assets Amortizing intangible assets consist of our concession
agreement in Argentina, which provides us with certain exclusive rights to operate casinos in major
cities of the Province of Neuquén. In June 2008, all of the 32 guestrooms of the hotel that
adjoins the principal casino in Neuquén were opened under the terms of our concession agreement.
Our exclusivity rights are to be extended from 2016 to 2021 with the completion of such luxury
hotel. We are awaiting formal government approval of such extension. The unamortized costs of our
concession agreement as of September 30, 2009 and December 31, 2008 were $634,000 and $753,000,
respectively.
Gaming Taxes We are subject to taxes based on gross gaming revenues in the jurisdictions in
which we operate, subject to applicable jurisdictional adjustments. These gaming taxes are an
assessment of our gaming revenues and are recorded as a gaming expense in the unaudited Condensed
Consolidated Statements of Operations. These taxes totaled approximately $67.0 million and $202
million for the three and nine months ended September 30, 2009, respectively, and $63.2 million and
$197 million for the three and nine months ended September 30, 2008, respectively.
Pre-opening and Development Costs Pre-opening and development costs are expensed as
incurred, consistent with authoritative guidance, and for the three and nine months ended September
30, 2009 and 2008 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Atlantic City (a) |
|
$ |
2.7 |
|
|
$ |
4.1 |
|
|
$ |
8.3 |
|
|
$ |
15.1 |
|
River City (b) |
|
|
2.1 |
|
|
|
1.2 |
|
|
|
4.9 |
|
|
|
3.7 |
|
Baton Rouge |
|
|
2.8 |
|
|
|
0.9 |
|
|
|
5.5 |
|
|
|
6.5 |
|
Sugarcane Bay |
|
|
0.6 |
|
|
|
0.7 |
|
|
|
1.7 |
|
|
|
2.2 |
|
Kansas City |
|
|
|
|
|
|
1.6 |
|
|
|
|
|
|
|
4.4 |
|
Lumière Place |
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
6.2 |
|
Missouri Proposition A Initiative |
|
|
|
|
|
|
5.8 |
|
|
|
|
|
|
|
7.0 |
|
Other |
|
|
0.4 |
|
|
|
0.1 |
|
|
|
0.7 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-opening and development costs |
|
$ |
8.6 |
|
|
$ |
14.6 |
|
|
$ |
21.1 |
|
|
$ |
45.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In late 2008, the Company decided to complete certain demolition projects, but to
otherwise suspend substantially all development activities in Atlantic City indefinitely.
The continuing pre-opening and development costs include property taxes and other costs
associated with ownership of the land. |
|
(b) |
|
Pre-opening costs at the River City project, expected to open in the spring of
2010, include among other items non-cash, straight-lined rent accruals under a lease
agreement of $1.0 million and $2.9 million for the three and nine months ended September
30, 2009, respectively, and $1.0 million and $2.9 million for the three and nine months
ended September 30, 2008, respectively. |
Comprehensive Loss Our comprehensive loss is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Net loss |
|
$ |
(21.9 |
) |
|
$ |
(11.8 |
) |
|
$ |
(16.3 |
) |
|
$ |
(24.9 |
) |
Foreign currency translation (loss) gain |
|
|
(0.2 |
) |
|
|
(1.0 |
) |
|
|
(2.4 |
) |
|
|
0.1 |
|
Post-retirement plan benefit
obligation, net of income taxes (a) |
|
|
|
|
|
|
|
|
|
|
0.9 |
|
|
|
(0.5 |
) |
Unrealized gain on securities, net of
provisions for income taxes |
|
|
|
|
|
|
0.5 |
|
|
|
|
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(22.1 |
) |
|
$ |
(12.3 |
) |
|
$ |
(17.8 |
) |
|
$ |
(24.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Included in this balance are benefit obligations related to both the Executive
Deferred Compensation Plan and Directors Health and Medical Plan. |
8
Earnings per Share Diluted earnings per share assume exercise of in-the-money stock options
(those options with exercise prices at or below the weighted average market price for the periods
presented) outstanding at the beginning of the period or at the date of issuance. We calculate the
effect of dilutive securities using the treasury stock method. As of September 30, 2009 and 2008,
our share-based awards issued under our stock option plans consisted primarily of common stock
option grants.
For the three and nine months ended September 30, 2009, we recorded a net loss. Accordingly,
the potential dilution from the assumed exercise of stock options is anti-dilutive. As a result,
the basic earnings per share is equal to diluted earnings per share for the three and nine months
ended September 30, 2009. Securities that could potentially dilute basic earnings per share in the
future that were not included in the computation of diluted earnings per share were 752,000 and
1,199,000 for the three and nine months ended September 30, 2009, respectively.
Recently Issued Authoritative Guidance
In June 2009, the Financial Accounting Standards Board (FASB) issued new authoritative
guidance to establish the FASB Accounting Standards Codification as the single source of
authoritative non-governmental GAAP. The guidance is effective for interim and annual reporting
periods ending after September 15, 2009. We adopted the guidance effective July 1, 2009, and the
adoption did not have a material effect on our Consolidated Financial Statements.
In June 2009, the FASB issued new authoritative guidance regarding a transfer of financial
assets, the effects of a transfer on its financial statements, and any continued involvement in
transferred financial assets. Additionally, the concept of a qualifying special-purpose entity was
removed. The guidance is effective for annual reporting periods beginning after November 15, 2009.
We do not expect the adoption of such guidance to have a material effect on our Consolidated
Financial Statements.
In June 2009, the FASB issued new authoritative guidance for enterprises involved with
variable interest entities. The guidance is effective for annual reporting periods beginning after
November 15, 2009. We do not expect the adoption of such guidance to have a material effect on our
Consolidated Financial Statements.
In August 2009, the FASB issued new authoritative guidance on measuring liabilities at fair
value. The guidance addresses restrictions on the transfer of a liability and clarifies how the
price of a traded debt security should be considered in estimating the fair value of the issuers
liability. This guidance is effective for the first reporting period beginning after its issuance.
We will adopt the guidance effective October 1, 2009. We do not expect the adoption of such
guidance to have a material effect on our Consolidated Financial Statements.
A variety of proposed or otherwise potential accounting standards are currently under review
and study by standard-setting organizations and certain regulatory agencies. Because of the
tentative and preliminary nature of such proposed standards, we have not yet determined the effect,
if any, that the implementation of any such proposed or revised standards would have on our
Consolidated Financial Statements.
9
Note 2Long-Term Debt
Long-term debt as of September 30, 2009 and December 31, 2008 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Senior Secured Credit Facility |
|
$ |
|
|
|
$ |
151.8 |
|
8.625% Senior Notes due 2017 |
|
|
443.8 |
|
|
|
|
|
8.25% Senior Subordinated Notes due 2012 |
|
|
201.0 |
|
|
|
276.7 |
|
8.75% Senior Subordinated Notes due 2013 |
|
|
9.5 |
|
|
|
133.7 |
|
7.50% Senior Subordinated Notes due 2015 |
|
|
380.6 |
|
|
|
380.2 |
|
Other secured and unsecured notes payable |
|
|
0.8 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
$ |
1,035.7 |
|
|
$ |
943.3 |
|
Less current maturities |
|
|
(9.5 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
$ |
1,026.2 |
|
|
$ |
943.2 |
|
|
|
|
|
|
|
|
Senior Secured Credit Facility: On August 10, 2009, we repaid approximately $206 million of
our $531 million revolving credit facility, which facility matures in December 2010 (Credit
Facility), using proceeds from the 8.625% Senior Notes due 2017 discussed below. We did not
re-borrow any funds prior to or on September 30, 2009, and therefore, as of such date, other than
approximately $12.6 million of outstanding letters of credit, the Credit Facility was unutilized.
On July 21, 2009, we entered into a fourth amendment to our Credit Facility (the Fourth
Amendment). The Fourth Amendment implemented the following changes to the Credit Facility, among
others:
|
|
|
The maximum permitted rolling four-quarter consolidated leverage ratio, as defined in
the agreement, for certain of our fiscal quarters was increased as follows: the maximum
permitted consolidated leverage ratio was increased to 6.50x for all fiscal quarters ending
in 2009; 6.75x for the fiscal quarter ending on March 31, 2010; 6.50x for the fiscal
quarter ending on June 30, 2010; and 6.00x for the fiscal quarter ending on September 30,
2010; and, for all fiscal quarters ending thereafter, the maximum permitted consolidated
leverage ratio reduces to 5.00x. The original credit agreement was based on an earlier
opening of River City and the consolidated leverage ratio covenant was scheduled to tighten
before the currently anticipated opening of River City in spring of 2010. |
|
|
|
The required minimum consolidated interest coverage ratio for each of our fiscal
quarters ending on and after December 31, 2009 through June 30, 2010 was decreased by 0.25
percentage points. |
|
|
|
The applicable margin for all revolving credit loans that mature on or prior to the
non-extending revolving credit termination date (as discussed below) was increased by 0.50
percentage points. |
|
|
|
We may from time to time: (a) request lenders, in their discretion, to convert their
existing revolving-loan commitments or provide new commitments to a new tranche of
extending revolving-loan commitments that mature on a date beyond the existing maturity
date of December 14, 2010 (the non-extending revolving credit termination date) on such
pricing terms (including the applicable margin and any upfront fees and commitment fees) as
may be agreed upon by us and the lender(s) in an extending revolving credit-commitment
agreement, and/or (b) request extending revolving loan commitments from new lenders, in
each case without increasing the total amount of loans that may be outstanding under the
Credit Facility beyond $625 million. Existing lenders are not required to extend the
current maturity of their commitments or to provide additional commitments. |
|
|
|
Each lenders commitment was reduced by 15.0%, so that the aggregate commitment under
the Credit Facility, as amended, is approximately $531 million. |
The Credit Facility has, among other things, restrictive financial covenants and capital
spending limits and other affirmative and negative covenants. As of September 30, 2009, we believe
we were in compliance with all of the financial covenants in our Credit Facility.
10
On November 1, 2009, CIT Group, Inc. (CIT), one of the existing lenders under our Credit
Facility, filed for bankruptcy under Chapter 11 of the Bankruptcy Code. As of September 30, 2009,
CIT was a 4.6% participant in our Credit Facility. While CIT has funded its pro rata portion of
our outstanding borrowings under our Credit Facility as of our last funding date of October 8,
2009, there can be no assurance that CIT will continue to do so in the future.
8.625% Senior Notes due 2017: On August 10, 2009, we closed an offering of $450 million in
aggregate principal amount of new 8.625% senior unsecured notes due 2017 (8.625% Notes). The
8.625% Notes were issued in a private offering conducted pursuant to Rule 144A and Regulation S
under the Securities Act of 1933, as amended, at a price of 98.597% of par to yield 8.875% to
maturity, with interest payable on August 1 and February 1, beginning February 2010. Net of the
original issue discount, initial purchasers fees and various costs and expenses, net proceeds from
the offering were approximately $434 million. Net proceeds from the offering were used to
repurchase $75.0 million in aggregate principal amount of our 8.25% senior subordinated notes due
2012 (8.25% Notes); repurchase $135 million in aggregate principal amount of our 8.75% senior
subordinated notes due 2013 (8.75% Notes), of which $9.5 million was repurchased subsequent to
the quarter end on October 1, 2009; and repay the approximately $206 million in revolving credit
borrowings under the Credit Facility. We expect to use the remaining net proceeds from the
offering for general corporate purposes.
The 8.625% Notes are senior unsecured obligations and rank equally in right of payment with
all of our existing and future senior debt, including debt under our Credit Facility. The 8.625%
Notes are, however, effectively subordinated to our Credit Facility, which is secured by a first
priority lien, as well as any other secured debt which may be issued in the future. The 8.625%
Notes are guaranteed on a senior basis by certain of our current and future domestic restricted
subsidiaries. The 8.625% Notes rank senior to our existing 7.50% senior subordinated notes due
2015 (7.50% Notes) and to our 8.25% Notes, and prior to the discharge of the indenture governing
the 8.75% Notes, to our 8.75% Notes.
8.25% Senior Subordinated Notes due 2012: In August 2009, we purchased $75.0 million in
aggregate principal amount of our outstanding 8.25% Notes pursuant to a cash tender offer.
Tendering holders were paid an aggregate of approximately $79.1 million, representing 102.063% of
par, plus accrued and unpaid interest. We used a portion of the net proceeds from our issuance of
the 8.625% Notes to fund the tender offer. As of September 30, 2009, the aggregate principal
amount of 8.25% Notes outstanding is $200 million.
8.75% Senior Subordinated Notes due 2013: On July 27, 2009, we commenced a cash tender offer
for all $135 million aggregate principal amount of our outstanding 8.75% Notes. In August 2009, we
purchased $125.5 million aggregate principal amount of such notes pursuant to such cash tender
offer. Tendering holders were paid an aggregate of approximately $133.4 million, representing
103.167% of par, plus accrued and unpaid interest. We used a portion of the net proceeds from our
issuance of the 8.625% Notes to fund the cash tender offer.
On August 31, 2009, The Bank of New York Mellon Trust Company, N. A. (the Trustee), as
trustee under the indenture governing the 8.75% Notes, issued a notice of redemption on our behalf
for the remaining $9.5 million in aggregate principal amount of 8.75% Notes. Pursuant to the
notice of redemption, we exercised our option to call for redemption such remaining notes at a
redemption price of 102.917% of the aggregate principal amount, together with accrued and unpaid
interest up to but excluding the redemption date, which redemption date was October 1, 2009. On
October 7, 2009, we formally discharged the indenture governing the 8.75% Notes. We used a portion
of the net proceeds from our issuance of the 8.625% Notes to fund both the tender offer and
redemption.
As the remaining $9.5 million of 8.75% Notes were not redeemed until October 1, 2009, the $9.5
million is classified as a current liability on the unaudited Condensed Consolidated Financial
Statements as of September 30, 2009.
Loss on early extinguishment of debt: During the three months ended September 30, 2009, we
issued $450 million aggregate principal amount of 8.625% Notes, and used a portion of the net
proceeds to retire early other outstanding debts. Such early retirements resulted in a write-off
of $8.8 million in unamortized premiums, unamortized debt issuance and other costs. We retired
additional outstanding debt on October 1, 2009, resulting in a write-off of $482,000, which will be
recorded in the fourth quarter of 2009.
11
Fair Value of Financial Instruments: The estimated fair value of our long-term debt at
September 30, 2009 was approximately $1.0 billion, versus its book value of $1.0 billion. At
December 31, 2008, the estimated fair value of our long-term debt was approximately $651 million,
versus its book value of $943 million. The estimated fair value of our senior notes and senior
subordinated notes was based on quoted market prices on or about September 30, 2009 and December
31, 2008 and the fair value of our senior secured credit facility was based on estimated fair
values of comparable debt instruments.
Interest expense: Interest expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Interest expense before capitalization of interest |
|
$ |
22.5 |
|
|
$ |
19.6 |
|
|
$ |
60.2 |
|
|
$ |
58.1 |
|
Less: capitalized interest |
|
|
(3.8 |
) |
|
|
(8.6 |
) |
|
|
(8.7 |
) |
|
|
(23.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense, net of capitalized interest |
|
$ |
18.7 |
|
|
$ |
11.0 |
|
|
$ |
51.5 |
|
|
$ |
34.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in interest expense was principally due to the replacement of less expensive
revolver borrowings with the new, long term 8.625% Notes. We believe the longer maturity, fixed
interest rate and fewer covenants of the 8.625% Notes warranted the higher interest rate,
particularly in planning the capital structure necessary to fund our planned growth. The decrease
in capitalized interest was principally due to the suspension of development activities in Atlantic
City, partially offset by an increase in such activities attributable to our River City project.
Note 3Income Taxes
Our effective income tax rate for continuing operations for the three and nine months ended
September 30, 2009, was income tax expense of (2.8)% and (32.5)%, respectively, as compared to
income tax benefit of 52.9% and 20.5% for the same periods in 2008. Our effective tax rates in the
2009 periods were affected by non-deductible items such as state gaming revenue taxes that are not
deductible for Indiana state income taxes, foreign taxes of our Argentine subsidiary pursuant to a
tax amnesty program currently offered by the Argentine government and anticipated results for U.S.
operations for which no tax benefit is currently recognized. We determined that the certainty of
the amnesty program offered temporarily by the Argentine government offset the potential economic
value of eventually prevailing on certain disputed tax positions. Additionally, during June 2009,
we received an informal notification from a field agent for the Indiana Department of Revenue
challenging whether income and gain from certain asset sales, including the sale of the Hollywood
Park Racetrack in 1999, and other transactions outside of Indiana, such as the Aztar merger
termination fee in 2006, which we reported on our Indiana state tax returns for the years 2000
through 2007, resulted in business income subject to apportionment, and proposed a potential
assessment of approximately $11 million, excluding interest and penalties, of additional Indiana
income taxes. We disagree with the position suggested by the field agent as we believe that the
income associated with these items is non-business income and we are in discussion with Indiana tax
authorities regarding those preliminary proposed adjustments. While it is often difficult to
predict the final outcome or the timing of resolution of any particular uncertain tax position,
management believes that the reserves for income taxes reflect the most likely outcome as of
September 30, 2009. We adjust these reserves, as well as the related interest, in light of changing
facts and circumstances.
Note 4Employee Benefit and Other Plans
Share-based Compensation: As of September 30, 2009, we had approximately 6.9 million
share-based awards outstanding, 14,000 of which are restricted stock awards and the rest of which
are common stock options, with approximately 1.1 million share-based awards available for grant.
We recorded pre-tax compensation expense of approximately $2.1 million and $9.8 million for
the three and nine months ended September 30, 2009, respectively, and $2.0 million and
$6.9 million for the three and nine months ended September 30, 2008, respectively. The expense
has increased primarily due to additional options granted to members of our Board of Directors.
These grants, along with all previously outstanding unvested stock
option grants to board members,
became fully vested in May 2009, resulting in a charge of approximately $3.2 million. Theoretical
compensation costs not yet amortized related to stock options granted totaled approximately $15.4
million and $25.8 million at September 30, 2009 and 2008, respectively, and the weighted average
period over which such costs are expected to be recognized is approximately three years.
12
The aggregate amount of cash we received from the exercise of stock options was $98,000 and
$553,000 for the three and nine months ended September 30, 2009, respectively, and $131,000 and
$706,000 for the three and nine months ended September 30, 2008, respectively. The associated
shares were newly issued common stock. There was no excess tax benefit resulting from the exercise
of stock options for the nine months ended September 30, 2009 and 2008.
The following table summarizes information related to our common stock options under our stock
option plans:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted Average |
|
|
|
Stock Options |
|
|
Exercise Price |
|
Options outstanding at January 1, 2009 |
|
|
7,378,540 |
|
|
$ |
14.73 |
|
Granted |
|
|
258,500 |
|
|
$ |
11.08 |
|
Exercised |
|
|
(91,505 |
) |
|
$ |
6.05 |
|
Cancelled, Forfeited |
|
|
(641,495 |
) |
|
$ |
13.81 |
|
|
|
|
|
|
|
|
|
Options outstanding at September 30, 2009 |
|
|
6,904,040 |
|
|
$ |
14.80 |
|
|
|
|
|
|
|
|
|
Vested or expected to vest at a point in the future as of September 30, 2009 |
|
|
6,714,048 |
|
|
|
|
|
Options exercisable at September 30, 2009 |
|
|
4,668,840 |
|
|
$ |
13.74 |
|
Weighted-average value per granted option calculated using the
Black-Scholes option-pricing model for options granted during the nine
months ended September 30, 2009 |
|
$ |
6.61 |
|
|
|
|
|
401(k) Plan: During the second quarter of 2009, management decided to reduce the scope of a
discretionary employee 401(k) matching program for 2008 and the first half of 2009. Amounts
accrued in relation to this supplemental matching program were reversed during the second quarter
of 2009.
Director Phantom Stock Units: As part of his annual retainer, each director receives $10,000
worth of phantom stock units on the date of the annual meeting of stockholders. Each phantom stock
unit is the economic equivalent of one share of our common stock. Units of phantom stock are
payable in common stock following the directors cessation of service as a director for any reason,
which shares have a value of $0.8 million as of September 30, 2009.
Note 5Write-downs, reserves and recoveries, net
Write-downs, reserves and recoveries, net, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Impairment of assets (a) |
|
$ |
0.1 |
|
|
$ |
|
|
|
$ |
0.4 |
|
|
$ |
5.3 |
|
Customer loyalty program related expenses (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.4 |
|
Loss on disposal of assets |
|
|
0.2 |
|
|
|
1.0 |
|
|
|
0.6 |
|
|
|
1.7 |
|
Insurance proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-downs, reserves and recoveries, net |
|
$ |
0.3 |
|
|
$ |
1.0 |
|
|
$ |
1.0 |
|
|
$ |
8.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
During the three and nine months ended September 30, 2009, we incurred asset
impairment charges related to the value of obsolete gaming equipment in the normal course
of business. During the nine
months ended September 30, 2008, we incurred impairment charges of $4.5 million related to
two riverboats acquired in 2006, and approximately $0.8 million in connection with certain
obsolete gaming equipment. |
13
|
|
|
(b) |
|
During the second quarter of 2008, we expanded our mychoice rewards program to
include our LAuberge du Lac and Belterra properties. In doing so, we disclosed to our
customers their reward account balance based on prior play. We had historically
maintained such records to facilitate the provision of complimentary goods and services,
but had not previously disclosed the point balances to customers at these facilities.
This disclosure resulted in a non-cash charge to establish a theoretical liability for
such amounts. |
Note 6Commitments and Contingencies
Redevelopment Agreement: In connection with our Lumière Place project, we have a redevelopment
agreement which, among other things, commits us to oversee the investment of $50.0 million in
residential housing, retail or mixed-use developments in the City of St. Louis within five years of
the opening of the casino and hotel. Such investment can be made with partners and partner
contributions and project debt financing, all of which count toward the $50.0 million investment
commitment. We are also obligated to pay an annual fee of $1.0 million to the City of St. Louis
beginning after our River City project opens. The redevelopment agreement also contains certain
contingent payments in the event of certain defaults. If we and our development partners
collectively fail to invest $50.0 million in residential housing, retail, or mixed-use developments
within five years of the opening of the casino and hotel, we would be obligated to pay an
additional annual service fee of $1.0 million in Year Six, $2.0 million in Years Seven and Eight,
and $2.0 million annually thereafter, adjusted by the change in the consumer price index.
Guaranteed Maximum Price Agreement for River City: On August 8, 2008, we entered into a
Guaranteed Maximum Price Agreement (the Agreement) with a general contractor for the construction
of our River City project. Among other things, the Agreement establishes that the contractor will
complete the construction of the casino for a maximum price of approximately $149 million and that
the project will be substantially complete by January 31, 2010. The guaranteed maximum price set
by the Agreement is a portion of the total budget of $357 million for the River City project. The
budget includes items separate from those covered in the Agreement, such as construction work prior
to entering into the Agreement; pre-opening and development costs; furniture, fixtures and other
equipment; gaming equipment; consulting fees and information technology. The $357 million budget
excludes capitalized interest currently estimated to be approximately $26.0 million, operating cash
estimated to be approximately $10 million and the non-cash accrual for rent during the construction
period.
Lease and Development Agreement: In connection with our River City project, we have a lease
and development agreement with the St. Louis County Port Authority which, among other things,
commits us to lease 56 acres for 99 years (not including certain termination provisions) for annual
rent of the greater of $4.0 million or 2.5% of adjusted gross receipts (as defined in the lease and
development agreement). We are required to invest a minimum of $375 million to: (a) construct a
gaming and multi-use facility; (b) perform environmental remediation on the site of the project,
which remediation has been completed; (c) contribute $5.1 million for the construction of community
and recreational facilities, which amount has been paid; (d) develop and construct a hatch shell on
the adjoining property; and (e) construct a roadway into the project, which construction is
complete. We are also required to pay certain fees, potentially aggregating $20 million, unless we
invest at least an additional $75 million into a second phase that would include a hotel with a
minimum of 100 guestrooms and other amenities, such amenities to be mutually agreed upon by us and
St. Louis County. The lease and development agreement provides that we must proceed with reasonable
diligence to complete the gaming facilities by May 1, 2009, subject to delays beyond our control,
including governmental approvals. We currently anticipate that the property will be completed in
the spring of 2010 due to several factors which were beyond our control, including delays in
receiving governmental approvals and delays caused by unfavorable weather conditions. The second
phase must be opened within three years from August 11, 2009, or we are required to pay fees over
five years beginning on the January 2 immediately following the expiration of three years. In each
of the five subsequent years that the second phase is not opened, the amount of fees begins at $2.0
million for the first year and increases by $1.0 million each subsequent year: hence, $3.0 million
in Year Two, $4.0 million in Year Three, $5.0 million in Year Four and $6.0 million in Year Five.
As a result, the maximum amount of such fees that we would have to pay if the second phase is not
completed is $20.0 million.
Employment and Severance Agreements: We have entered into employment agreements with certain
employees, including our executive officers. The employment agreements require severance payments
in the case of certain triggering events, including a change in control. As of September 30, 2009,
the maximum aggregate amount
that would be paid to this group of 37 employees if a triggering event
occurred on September 30, 2009 following a change in control, where applicable, is approximately
$44.2 million, which includes $2.9 million of the $3.5 million deferred bonus commitment discussed
below.
14
In connection with Wade Hundleys resignation as President of the Company, we entered into a
separation agreement with him, dated as of June 5, 2008. Mr. Hundley is entitled to cash severance
payments equal to approximately $1.4 million, payable in various installments over an 18-month
period, of which approximately $138,600 remains to be paid as of September 30, 2009. Mr. Hundley
is also entitled to approximately $373,000 representing amounts he had previously elected to defer
plus earnings thereon, of which approximately $43,300 has been paid as of September 30, 2009.
Deferred Bonus Plan: We have a deferred bonus plan in which a portion of an employees bonus
is deferred and paid in three equal annual installments contingent on the individual remaining
employed by us, except employees who retire at age 65 or later who will receive their scheduled
annual installments even if they are no longer employed by us. Payments are accelerated upon death,
disability or a change in control, regardless of the age of the employee. We are expensing the
deferred portion over the period of time leading up to the vesting date. As of September 30, 2009,
the deferred bonus commitment was approximately $3.5 million.
Self-Insurance: We self-insure various levels of general liability, property, workers
compensation and medical coverage. Self-insurance reserves include accruals for estimated
settlements for known claims, as well as accruals for estimates of claims not yet made, which are
included in Accrued compensation and Other accrued liabilities on the Condensed Consolidated
Balance Sheets.
Legal
Insurance Litigation: In April 2006, we filed a $347 million insurance claim for our losses
related to our former Casino Magic Biloxi property caused by Hurricane Katrina. In August 2006, we
filed suit in the United States District Court for the District of Nevada against three of our
insurance carriers, Allianz Global Risks US Insurance Company, Arch Specialty Insurance Company and
RSUI Indemnity Company, related to such losses. Prior to the filing of that lawsuit, the various
insurers comprising the first $100 million of coverage paid their respective policy limits to us
for our Hurricane Katrina losses. On February 22, 2008, we settled with Arch Specialty Insurance
Company, which provided $50 million of coverage, in exchange for its agreement to pay us
approximately $36.8 million, which we received in March 2008. On May 9, 2008, we settled with
Allianz Global Risks US Insurance Company, in exchange for its agreement to pay us approximately
$48 million, which we received in June 2008. Allianz Global Risks US Insurance Company had
previously paid us $5 million, which brought Allianz Global Risks US Insurance Companys total
payment on the claim to $53 million. RSUI Indemnity Company provides $50 million of coverage at the
same layer and pari passu with the coverage provided by Arch Specialty Insurance Company and an
additional $150 million of coverage between $250 million and $400 million of total coverage. To
date, RSUI Indemnity Company has paid us approximately $2.0 million as a prepayment on the
undisputed amount of the claim. We continue to pursue our claims against RSUI Indemnity Company for
its respective share of our total hurricane-related damage and consequential loss in Biloxi. On
October 20, 2008, we filed a motion for partial summary judgment on certain outstanding legal
issues relating to the calculation of our business interruption loss for the claim. A hearing date
has not yet been set on that motion.
As of September 30, 2009, the insurers have not designated the $192 million of advances toward
our insurance claim as being specific to any particular part of the claim. Therefore, the advances
have offset the book value of the destroyed assets and certain insured expenses. To the extent that
the advances under the policy, excluding settlements previously discussed, exceed such expenses and
book value, the difference (currently $18.3 million) is recorded as a deferred gain in Other
long-term liabilities on our Condensed Consolidated Balance Sheets.
Our ultimate insurance claim and recovery amounts are based on replacement costs rather than
book value and are unrelated to, computed differently from, and are substantially larger than the
asset write-offs. Management believes that the replacement cost of the assets that were destroyed
is substantially in excess of their book value. We
are also insured for lost profits as a result of the damage, but will not book such profits
until the claim is resolved. The deferred gain reflected on the Condensed Consolidated Balance
Sheets primarily reflects the ongoing dispute with the remaining insurance carrier.
15
Jebaco Litigation: On August 9, 2006, Jebaco, Inc. (Jebaco) filed suit in the U.S. District
Court for the Eastern District of Louisiana against Harrahs Operating Co., Inc., Harrahs Lake
Charles, LLC, Harrahs Star Partnership, Players LC, LLC, Players Riverboat Management, LLC,
Players Riverboat II, LLC, and Pinnacle Entertainment, Inc. The lawsuit arises out of an agreement
between Jebaco and Harrahs (as successor in interest to the various Players defendants) whereby
Harrahs was obligated to pay Jebaco a fee based on the number of patrons entering Harrahs two
Lake Charles, Louisiana riverboat casinos. In November 2006, we acquired the Harrahs Lake Charles
subsidiaries, including the two riverboats. The lawsuit filed by Jebaco asserts that Harrahs, in
ceasing gaming operations in Lake Charles and ceasing payments to Jebaco, breached its contractual
obligations to Jebaco and asserts damages of approximately $34.0 million. Jebaco also asserts that
our agreement with Harrahs violates state and federal antitrust laws. The lawsuit seeks antitrust
damages jointly and severally against both us and Harrahs and seeks a trebling of the $34.0
million in damages Jebaco alleges it has suffered. The defendants answered the complaint, denying
all claims and asserting that the lawsuit is barred, among other reasons, because of the approval
of our transaction with Harrahs by the Louisiana Gaming Control Board and the lack of antitrust
injury to Jebaco. In January 2007, all of the defendants moved to dismiss all of the claims of the
complaint, which motions were heard on July 18, 2007. The motions to dismiss were granted with
prejudice as to the federal antitrust claims and the state-law claims were dismissed without
prejudice. Judgment of dismissal was entered on March 5, 2008. Jebaco has appealed the dismissal of
the federal antitrust claims to the U.S. Court of Appeals for the Fifth Circuit. Further, on March
13, 2008, Jebaco filed a new lawsuit against the same parties in the Louisiana district civil court
for Orleans Parish. This lawsuit seeks unspecified damages arising out of the same circumstances as
the federal lawsuit based on claims for breach of the duty of good faith, negligent breach of
contract, breach of contract, unfair trade practices, unjust enrichment, and subrogation to
Harrahs insurance proceeds. In May 2009, the Louisiana district civil court extended the stay of
the state case indefinitely pending the decision of the Fifth Circuit on Jebacos appeal. On October 30, 2009, the Fifth Circuit affirmed the district courts
dismissal of the federal antitrust claims. Jebaco has not yet indicated if it intends to appeal the Fifth
Circuit decision. We intend to move for dismissal of the state-court claims, but cannot predict at
this time when that motion will be scheduled for hearing by the state district court.
Madison House Litigation: On December 23, 2008, Madison House Group, L.P. (Madison House)
filed suit in Superior Court of New Jersey, Chancery Division, Atlantic County against the Company,
ACE Gaming, LLC (ACE, a wholly owned subsidiary of the Company), and one other defendant. We
acquired ACE as part of our acquisition of the entities owning the former Sands Hotel & Casino (the
Sands) in Atlantic City, New Jersey in November 2006. The lawsuit arises out of a lease dated
December 18, 2000 between Madison House as landlord and ACE as tenant for the Madison House hotel
in Atlantic City, New Jersey. The lawsuit alleges in part that ACE breached certain obligations
under the lease, including, among others, failure to operate and maintain the hotel as required by
the lease, which was alleged to have resulted in substantial damages to the hotel. The lawsuit
further alleges that the Company, as the ultimate parent entity of ACE, should be jointly and
severally liable with ACE for the damages sought, and separately alleges independent actions
against the Company as described more fully in the lawsuit. The lawsuit seeks specific performance
of ACEs obligations under the lease, including restoration of the hotel, as well as unspecified
compensatory and exemplary damages, and attorneys fees, against the Company and ACE. ACE
continues to make its payment obligations under the lease, which expires in December 2012.
On January 7, 2009, ACE petitioned the United States District Court for the District of New
Jersey for an order compelling arbitration. On September 29, 2009, the federal court denied the
petition and ACE has appealed to the United States Court of Appeals for the Third Circuit. On
February 18, 2009, the trial judge in the state court action issued an order staying the
arbitration, which we have also appealed. Oral argument in the appeal of the state court order has
been set for December 16, 2009. Discovery in the state court lawsuit has commenced. On July 17,
2009, the state trial judge denied Madison Houses motion for partial summary judgment on the issue
of whether ACEs non-operation of the hotel following the closure of the Sands constituted a breach
of the lease. While the Company cannot predict the outcome of this litigation, it intends to
defend the matter vigorously.
Collective Bargaining Agreements: On May 17, 2006, we entered into a Memorandum of Agreement
(the MOA) with Unite HERE Local 74 (Union) commensurate with our obligations under a
development agreement with St. Louis that, among other things, provided union access to certain
employees (bargaining unit employees) employed at our Lumière Place facility should the Union
manifest its intent to organize
those employees. Additionally, the MOA provided that we would
recognize the Union as the exclusive bargaining representative of the bargaining unit employees if
a majority of the employees (verified by a neutral arbitrator) indicated their desire to be
represented by the Union by signing an authorization card.
16
On November 20, 2008, an arbitrator conducted a review of the authorization cards submitted by
the Union and determined that a majority of the bargaining unit employees had indicated
their desire to be represented by the Union. Consistent with the MOA, we recognized the Union as
the exclusive bargaining representative for the bargaining unit employees. We met with the Union
three times to negotiate a collective bargaining agreement; the last meeting was on February 18,
2009.
During March and April 2009, we received competing claims from three unions, each claiming to
be the exclusive collective bargaining representative of our St. Louis employees, including a claim
from one union that they were the successor to the Union. In response to the competing claims for
recognition, we withdrew recognition from the Union because of a lack of continuity of
representation. In May 2009, we notified the Union that the collective bargaining agreement for
HoteLumière was no longer in effect and that the collective bargaining agreement for the President
Casino was being terminated. In May 2009, one of the unions claiming to be the successor to the
Union filed unfair labor practice charges with the National Labor Relations Board
(NLRB) alleging, among other things, that we refused to bargain in good faith by refusing to
engage in collective bargaining negotiations, by refusing to negotiate over the discharge of
employees, and by withdrawing recognition and abrogating the terms and conditions of
employment. In October 2009, the Union again changed its affiliation, and again requested
recognition, which was denied. The charges are currently pending before the NLRB.
Indiana Tax Dispute: In 2008, the Indiana Department of Revenue commenced an income tax
examination of the Companys Indiana income tax filings for the 2005 to 2007 period. During June
of 2009, the Company received an informal notification from the field agent for the Indiana
Department of Revenue challenging whether income and gain from certain asset sales, including the
sale of the Hollywood Park Racetrack in 1999, and other transactions outside of Indiana, such as
the Aztar merger termination fee in 2006, which we reported on our Indiana state tax returns for
the years 2000 through 2007, resulted in business income subject to apportionment, and proposed a
potential assessment of approximately $11 million, excluding interest and penalties, of additional
Indiana income taxes. We disagree with the position suggested by the field agent as we believe
that the income associated with these items is non-business income and we are in discussion with
Indiana tax authorities regarding those preliminary proposed adjustments.
President Casino: The President Casino operates on a vessel known as the Admiral. The hull
of the Admiral was built in 1904. The current certification of the hull by the American Bureau of
Shipping (ABS) expires on July 19, 2010, and the Admiral may not be used to carry passengers
beyond that date without significant repairs and/or specific approval. On July 28, 2009, the
Missouri Gaming Commission (MGC) held a public hearing to discuss our plans to address the
expiration of the ABS certification in 2010. At such hearing, we proposed, subject to MGC review
and ABS and other approvals, to replace the Admiral with a different vessel, specifically a
riverboat built in 1993, which we acquired in 2006. Such boat has been out-of-service since
Hurricane Rita in 2005. At this July 28, 2009 hearing, the Executive Director of the MGC, through
counsel, made a recommendation that the MGC issue a ruling to prohibit Pinnacle from repairing,
replacing or moving the Admiral. On August 26, 2009, the MGC approved a resolution that it is not
practicable for us to repair the President Casino and prohibits us from relocating the President,
or any other vessel, from the current location of the President Casino. The MGCs resolution also
provided that a new license would be needed to replace the President Casino with another vessel at
its present site. On September 24, 2009, we filed a petition for judicial review with the Missouri
Court of Appeals, Western District (CAWD) regarding the MGCs resolution. The petition requests
that the CAWD (1) set aside the MGCs resolution; (2) stay the resolution, or alternatively, issue
a writ of prohibition which would prevent the MGC from enforcing the resolution. On September 25,
2009, we filed a motion in the CAWD requesting that the CAWD (1) stay the enforcement of the
resolution, (2) grant us the specific right, pending the appeal, to make and execute all necessary
plans to repair or replace the President Casino and (3) order expedited briefing, argument, and
review of the appeal. On October 7, 2009, the MGC responded to the motion to stay by arguing that
the MGC is not trying to prohibit the repair of the Admiral and that whether the hull of the
Admiral can be recertified is between us and the ABS. On October 15, 2009, the CAWD denied the
motion to stay and set an accelerated briefing schedule for the appeal. On October 22, 2009 the
MGC moved to dismiss our appeal.
17
We currently intend to repair the hull of the Admiral prior to the expiration of the ABS
certification in July 2010. In the event that we are unsuccessful in repairing the hull of the
Admiral prior to the expiration of the ABS certification and we are unsuccessful in our lawsuit and
we have exhausted all other legal remedies, we could lose the gaming license for the President
Casino. We intend to vigorously pursue all avenues that would allow us to continue the gaming
activities of the President Casino, which we purchased in December 2006 at a cost of approximately
$45 million.
Other: We are a party to a number of other pending legal proceedings. Management does not
expect that the outcome of such proceedings, either individually or in the aggregate, will have a
material effect on our financial position, cash flows or results of operations.
Note 7Consolidating Condensed Financial Information
Our subsidiaries (excluding our Argentine subsidiary; a subsidiary that owns an aircraft;
subsidiaries with approximately $66.0 million in cash and cash equivalents as of September 30, 2009
and certain non-material subsidiaries) have fully and unconditionally and jointly and severally
guaranteed the payment of all obligations under the 7.50% Notes, 8.25% Notes, 8.75% Notes and
8.625% Notes, as well as our Credit Facility. Separate financial statements and other disclosures
regarding the subsidiary guarantors are not included herein because management has determined that
such information is not material to investors. In lieu thereof, we include the following:
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% Owned |
|
|
Consolidating |
|
|
Pinnacle |
|
|
|
Pinnacle |
|
|
100% Owned |
|
|
Non- |
|
|
and |
|
|
Entertainment, |
|
|
|
Entertainment, |
|
|
Guarantor |
|
|
Guarantor |
|
|
Eliminating |
|
|
Inc. |
|
|
|
Inc. |
|
|
Subsidiaries(a) |
|
|
Subsidiaries(b) |
|
|
Entries |
|
|
Consolidated |
|
|
|
(in millions) |
|
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
$ |
|
|
|
$ |
219.2 |
|
|
$ |
8.2 |
|
|
$ |
|
|
|
$ |
227.4 |
|
Food and beverage |
|
|
|
|
|
|
15.8 |
|
|
|
0.8 |
|
|
|
|
|
|
|
16.6 |
|
Other |
|
|
|
|
|
|
21.3 |
|
|
|
0.1 |
|
|
|
|
|
|
|
21.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256.3 |
|
|
|
9.1 |
|
|
|
|
|
|
|
265.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
|
|
|
|
|
134.4 |
|
|
|
3.2 |
|
|
|
|
|
|
|
137.6 |
|
Food and beverage |
|
|
|
|
|
|
15.1 |
|
|
|
1.0 |
|
|
|
|
|
|
|
16.1 |
|
General and administrative and other |
|
|
11.7 |
|
|
|
65.6 |
|
|
|
1.9 |
|
|
|
|
|
|
|
79.2 |
|
Depreciation and amortization |
|
|
1.4 |
|
|
|
23.4 |
|
|
|
1.0 |
|
|
|
|
|
|
|
25.8 |
|
Write-downs, reserves and recoveries, net |
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.1 |
|
|
|
238.8 |
|
|
|
7.1 |
|
|
|
|
|
|
|
259.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(13.1 |
) |
|
|
17.5 |
|
|
|
2.0 |
|
|
|
|
|
|
|
6.4 |
|
Equity in subsidiaries |
|
|
18.3 |
|
|
|
1.5 |
|
|
|
|
|
|
|
(19.8 |
) |
|
|
|
|
Loss on early extinguishment of debt |
|
|
(8.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.8 |
) |
Interest (expense) and non-operating income, net |
|
|
(22.5 |
) |
|
|
3.8 |
|
|
|
|
|
|
|
|
|
|
|
(18.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
inter-company activity and income taxes |
|
|
(26.1 |
) |
|
|
22.8 |
|
|
|
2.0 |
|
|
|
(19.8 |
) |
|
|
(21.1 |
) |
Management fee & inter-company interest |
|
|
4.7 |
|
|
|
(4.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
|
|
(0.5 |
) |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(21.9 |
) |
|
|
18.1 |
|
|
|
1.9 |
|
|
|
(19.8 |
) |
|
|
(21.7 |
) |
Income (loss) from discontinued operations, net
of taxes |
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(21.9 |
) |
|
$ |
17.9 |
|
|
$ |
1.9 |
|
|
$ |
(19.8 |
) |
|
$ |
(21.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
$ |
|
|
|
$ |
670.0 |
|
|
$ |
24.5 |
|
|
$ |
|
|
|
$ |
694.5 |
|
Food and beverage |
|
|
|
|
|
|
45.8 |
|
|
|
2.3 |
|
|
|
|
|
|
|
48.1 |
|
Other |
|
|
0.1 |
|
|
|
57.5 |
|
|
|
0.4 |
|
|
|
|
|
|
|
58.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
773.3 |
|
|
|
27.2 |
|
|
|
|
|
|
|
800.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
|
|
|
|
|
398.9 |
|
|
|
9.2 |
|
|
|
|
|
|
|
408.1 |
|
Food and beverage |
|
|
|
|
|
|
44.4 |
|
|
|
3.2 |
|
|
|
|
|
|
|
47.6 |
|
General and administrative and other |
|
|
37.9 |
|
|
|
186.7 |
|
|
|
5.7 |
|
|
|
|
|
|
|
230.3 |
|
Depreciation and amortization |
|
|
4.1 |
|
|
|
71.1 |
|
|
|
3.0 |
|
|
|
|
|
|
|
78.2 |
|
Write-downs, reserves and recoveries, net |
|
|
|
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42.0 |
|
|
|
702.1 |
|
|
|
21.1 |
|
|
|
|
|
|
|
765.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(41.9 |
) |
|
|
71.2 |
|
|
|
6.1 |
|
|
|
|
|
|
|
35.4 |
|
Equity in subsidiaries |
|
|
77.9 |
|
|
|
2.1 |
|
|
|
|
|
|
|
(80.0 |
) |
|
|
|
|
Gain on sale of equity securities |
|
|
6.0 |
|
|
|
|
|
|
|
6.9 |
|
|
|
|
|
|
|
12.9 |
|
Loss on early extinguishment of debt |
|
|
(8.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.8 |
) |
Interest (expense) and non-operating income, net |
|
|
(59.9 |
) |
|
|
8.8 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
(51.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
inter-company activity and income taxes |
|
|
(26.7 |
) |
|
|
82.1 |
|
|
|
12.9 |
|
|
|
(80.0 |
) |
|
|
(11.7 |
) |
Management fee & inter-company interest |
|
|
11.4 |
|
|
|
(11.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
|
|
(1.0 |
) |
|
|
|
|
|
|
(2.8 |
) |
|
|
|
|
|
|
(3.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(16.3 |
) |
|
|
70.7 |
|
|
|
10.1 |
|
|
|
(80.0 |
) |
|
|
(15.5 |
) |
Income (loss) from discontinued operations, net
of taxes |
|
|
|
|
|
|
(0.7 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(16.3 |
) |
|
$ |
70.0 |
|
|
$ |
10.0 |
|
|
$ |
(80.0 |
) |
|
$ |
(16.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% Owned |
|
|
Consolidating |
|
|
Pinnacle |
|
|
|
Pinnacle |
|
|
100% Owned |
|
|
Non- |
|
|
and |
|
|
Entertainment, |
|
|
|
Entertainment, |
|
|
Guarantor |
|
|
Guarantor |
|
|
Eliminating |
|
|
Inc. |
|
|
|
Inc. |
|
|
Subsidiaries(a) |
|
|
Subsidiaries(b) |
|
|
Entries |
|
|
Consolidated |
|
|
|
(in millions) |
|
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
$ |
|
|
|
$ |
207.2 |
|
|
$ |
14.9 |
|
|
$ |
|
|
|
$ |
222.1 |
|
Food and beverage |
|
|
|
|
|
|
15.8 |
|
|
|
1.2 |
|
|
|
|
|
|
|
17.0 |
|
Other |
|
|
|
|
|
|
23.3 |
|
|
|
0.4 |
|
|
|
|
|
|
|
23.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246.3 |
|
|
|
16.5 |
|
|
|
|
|
|
|
262.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
|
|
|
|
|
124.1 |
|
|
|
8.1 |
|
|
|
|
|
|
|
132.2 |
|
Food and beverage |
|
|
|
|
|
|
16.1 |
|
|
|
1.7 |
|
|
|
|
|
|
|
17.8 |
|
General and administrative and other |
|
|
16.7 |
|
|
|
67.0 |
|
|
|
5.8 |
|
|
|
|
|
|
|
89.5 |
|
Write-down reserve and recovery |
|
|
|
|
|
|
0.7 |
|
|
|
0.3 |
|
|
|
|
|
|
|
1.0 |
|
Depreciation and amortization |
|
|
1.0 |
|
|
|
25.5 |
|
|
|
3.2 |
|
|
|
|
|
|
|
29.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.7 |
|
|
|
233.4 |
|
|
|
19.1 |
|
|
|
|
|
|
|
270.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(17.7 |
) |
|
|
12.9 |
|
|
|
(2.6 |
) |
|
|
|
|
|
|
(7.4 |
) |
Equity in subsidiaries |
|
|
5.2 |
|
|
|
1.2 |
|
|
|
|
|
|
|
(6.4 |
) |
|
|
|
|
Interest (expense) and non-operating income, net |
|
|
(19.3 |
) |
|
|
8.5 |
|
|
|
0.6 |
|
|
|
|
|
|
|
(10.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
inter-company activity and income taxes |
|
|
(31.8 |
) |
|
|
22.6 |
|
|
|
(2.0 |
) |
|
|
(6.4 |
) |
|
|
(17.6 |
) |
Management fee & inter-company interest |
|
|
9.4 |
|
|
|
(9.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
|
|
10.6 |
|
|
|
|
|
|
|
(1.3 |
) |
|
|
|
|
|
|
9.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(11.8 |
) |
|
|
13.2 |
|
|
|
(3.3 |
) |
|
|
(6.4 |
) |
|
|
(8.3 |
) |
Income (loss) from discontinued operations, net
of taxes |
|
|
|
|
|
|
2.5 |
|
|
|
(6.0 |
) |
|
|
|
|
|
|
(3.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(11.8 |
) |
|
$ |
15.7 |
|
|
$ |
(9.3 |
) |
|
$ |
(6.4 |
) |
|
$ |
(11.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
$ |
|
|
|
$ |
633.9 |
|
|
$ |
46.1 |
|
|
$ |
|
|
|
$ |
680.0 |
|
Food and beverage |
|
|
|
|
|
|
43.4 |
|
|
|
3.8 |
|
|
|
|
|
|
|
47.2 |
|
Other |
|
|
0.2 |
|
|
|
57.5 |
|
|
|
0.9 |
|
|
|
|
|
|
|
58.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
734.8 |
|
|
|
50.8 |
|
|
|
|
|
|
|
785.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gaming |
|
|
|
|
|
|
384.2 |
|
|
|
25.8 |
|
|
|
|
|
|
|
410.0 |
|
Food and beverage |
|
|
|
|
|
|
44.0 |
|
|
|
4.9 |
|
|
|
|
|
|
|
48.9 |
|
General and administrative and other |
|
|
47.6 |
|
|
|
203.7 |
|
|
|
14.3 |
|
|
|
|
|
|
|
265.6 |
|
Write-down reserve and recovery |
|
|
|
|
|
|
7.8 |
|
|
|
0.4 |
|
|
|
|
|
|
|
8.2 |
|
Depreciation and amortization |
|
|
2.6 |
|
|
|
77.3 |
|
|
|
9.3 |
|
|
|
|
|
|
|
89.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50.2 |
|
|
|
717.0 |
|
|
|
54.7 |
|
|
|
|
|
|
|
821.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(50.0 |
) |
|
|
17.8 |
|
|
|
(3.9 |
) |
|
|
|
|
|
|
(36.1 |
) |
Equity in subsidiaries |
|
|
43.0 |
|
|
|
3.7 |
|
|
|
|
|
|
|
(46.7 |
) |
|
|
|
|
Interest (expense) and non-operating income, net |
|
|
(56.9 |
) |
|
|
23.0 |
|
|
|
1.6 |
|
|
|
|
|
|
|
(32.3 |
) |
Impairment of investment in equity securities |
|
|
(8.4 |
) |
|
|
|
|
|
|
(14.2 |
) |
|
|
|
|
|
|
(22.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before
inter-company activity and income taxes |
|
|
(72.3 |
) |
|
|
44.5 |
|
|
|
(16.5 |
) |
|
|
(46.7 |
) |
|
|
(91.0 |
) |
Management fee & inter-company interest |
|
|
25.6 |
|
|
|
(25.4 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
Income tax (expense) benefit |
|
|
21.8 |
|
|
|
|
|
|
|
(3.2 |
) |
|
|
|
|
|
|
18.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
|
(24.9 |
) |
|
|
19.1 |
|
|
|
(19.9 |
) |
|
|
(46.7 |
) |
|
|
(72.4 |
) |
Income (loss) from discontinued operations, net
of taxes |
|
|
|
|
|
|
54.5 |
|
|
|
(7.0 |
) |
|
|
|
|
|
|
47.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(24.9 |
) |
|
$ |
73.6 |
|
|
$ |
(26.9 |
) |
|
$ |
(46.7 |
) |
|
$ |
(24.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% Owned |
|
|
Consolidating |
|
|
Pinnacle |
|
|
|
Pinnacle |
|
|
100% Owned |
|
|
Non- |
|
|
and |
|
|
Entertainment, |
|
|
|
Entertainment, |
|
|
Guarantor |
|
|
Guarantor |
|
|
Eliminating |
|
|
Inc. |
|
|
|
Inc. |
|
|
Subsidiaries(a) |
|
|
Subsidiaries(b) |
|
|
Entries |
|
|
Consolidated |
|
|
|
(in millions) |
|
As of September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
34.1 |
|
|
$ |
97.7 |
|
|
$ |
74.6 |
|
|
$ |
|
|
|
$ |
206.4 |
|
Property and equipment, net |
|
|
16.8 |
|
|
|
1,653.7 |
|
|
|
38.2 |
|
|
|
|
|
|
|
1,708.7 |
|
Other non-current assets |
|
|
47.9 |
|
|
|
65.7 |
|
|
|
1.6 |
|
|
|
|
|
|
|
115.2 |
|
Investment in subsidiaries |
|
|
1,740.4 |
|
|
|
22.8 |
|
|
|
10.0 |
|
|
|
(1,773.2 |
) |
|
|
|
|
Inter-company |
|
|
1.2 |
|
|
|
(0.2 |
) |
|
|
|
|
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,840.4 |
|
|
$ |
1,839.7 |
|
|
$ |
124.4 |
|
|
$ |
(1,774.2 |
) |
|
$ |
2,030.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
54.8 |
|
|
|
148.7 |
|
|
|
4.3 |
|
|
|
|
|
|
|
207.8 |
|
Notes payable, long term |
|
|
1,025.4 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
1,026.2 |
|
Other non-current liabilities |
|
|
28.4 |
|
|
|
36.0 |
|
|
|
0.2 |
|
|
|
|
|
|
|
64.6 |
|
Inter-company |
|
|
|
|
|
|
|
|
|
|
0.9 |
|
|
|
(0.9 |
) |
|
|
|
|
Equity |
|
|
731.8 |
|
|
|
1,654.2 |
|
|
|
119.0 |
|
|
|
(1,773.3 |
) |
|
|
731.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,840.4 |
|
|
$ |
1,839.7 |
|
|
$ |
124.4 |
|
|
$ |
(1,774.2 |
) |
|
$ |
2,030.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
17.9 |
|
|
$ |
85.3 |
|
|
$ |
64.1 |
|
|
$ |
|
|
|
$ |
167.3 |
|
Property and equipment, net |
|
|
18.3 |
|
|
|
1,565.0 |
|
|
|
46.7 |
|
|
|
|
|
|
|
1,630.0 |
|
Other non-current assets |
|
|
47.4 |
|
|
|
68.4 |
|
|
|
10.3 |
|
|
|
(4.2 |
) |
|
|
121.9 |
|
Investment in subsidiaries |
|
|
1,661.4 |
|
|
|
23.0 |
|
|
|
|
|
|
|
(1,684.4 |
) |
|
|
|
|
Inter-company |
|
|
1.2 |
|
|
|
0.2 |
|
|
|
|
|
|
|
(1.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,746.2 |
|
|
$ |
1,741.9 |
|
|
$ |
121.1 |
|
|
$ |
(1,690.0 |
) |
|
$ |
1,919.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
38.6 |
|
|
|
129.4 |
|
|
|
6.5 |
|
|
|
0.1 |
|
|
|
174.6 |
|
Notes payable, long term |
|
|
942.4 |
|
|
|
0.8 |
|
|
|
4.3 |
|
|
|
(4.3 |
) |
|
|
943.2 |
|
Other non-current liabilities |
|
|
25.9 |
|
|
|
36.0 |
|
|
|
0.2 |
|
|
|
|
|
|
|
62.1 |
|
Inter-company |
|
|
|
|
|
|
|
|
|
|
1.4 |
|
|
|
(1.4 |
) |
|
|
|
|
Equity |
|
|
739.3 |
|
|
|
1,575.7 |
|
|
|
108.7 |
|
|
|
(1,684.4 |
) |
|
|
739.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,746.2 |
|
|
$ |
1,741.9 |
|
|
$ |
121.1 |
|
|
$ |
(1,690.0 |
) |
|
$ |
1,919.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% Owned |
|
|
Consolidating |
|
|
Pinnacle |
|
|
|
Pinnacle |
|
|
100% Owne |
|
|
Non- |
|
|
and |
|
|
Entertainment, |
|
|
|
Entertainment, |
|
|
Guarantor |
|
|
Guarantor |
|
|
Eliminating |
|
|
Inc. |
|
|
|
Inc. |
|
|
Subsidiaries(a) |
|
|
Subsidiaries(b) |
|
|
Entries |
|
|
Consolidated |
|
|
|
(in millions) |
|
For the nine months ended September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by operating activities |
|
$ |
(60.2 |
) |
|
$ |
150.9 |
|
|
$ |
0.7 |
|
|
$ |
|
|
|
$ |
91.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures and other |
|
|
(2.5 |
) |
|
|
(143.0 |
) |
|
|
(0.7 |
) |
|
|
|
|
|
|
(146.2 |
) |
Proceeds from sale of equity securities |
|
|
10.1 |
|
|
|
|
|
|
|
13.6 |
|
|
|
|
|
|
|
23.7 |
|
Other |
|
|
(0.1 |
) |
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by investing activities |
|
|
7.5 |
|
|
|
(142.7 |
) |
|
|
12.9 |
|
|
|
|
|
|
|
(122.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in notes payable and other |
|
|
70.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities |
|
|
70.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
(0.5 |
) |
|
|
|
|
|
|
(0.5 |
) |
Increase (decrease) in cash and cash equivalents |
|
|
17.9 |
|
|
|
8.2 |
|
|
|
13.1 |
|
|
|
|
|
|
|
39.2 |
|
Cash and cash equivalents, beginning of period |
|
|
6.7 |
|
|
|
51.0 |
|
|
|
58.0 |
|
|
|
|
|
|
|
115.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
24.6 |
|
|
$ |
59.2 |
|
|
$ |
71.1 |
|
|
$ |
|
|
|
$ |
154.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% Owned |
|
|
Consolidating |
|
|
Pinnacle |
|
|
|
Pinnacle |
|
|
100% Owned |
|
|
Non- |
|
|
and |
|
|
Entertainment, |
|
|
|
Entertainment, |
|
|
Guarantor |
|
|
Guarantor |
|
|
Eliminating |
|
|
Inc. |
|
|
|
Inc. |
|
|
Subsidiaries(a) |
|
|
Subsidiaries(b) |
|
|
Entries |
|
|
Consolidated |
|
|
|
(in millions) |
|
For the nine months ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Cash Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in) operating activities |
|
$ |
(73.3 |
) |
|
$ |
201.3 |
|
|
$ |
(2.4 |
) |
|
$ |
|
|
|
$ |
125.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure and other |
|
|
(7.1 |
) |
|
|
(255.5 |
) |
|
|
(4.7 |
) |
|
|
|
|
|
|
(267.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities |
|
|
(7.1 |
) |
|
|
(255.5 |
) |
|
|
(4.7 |
) |
|
|
|
|
|
|
(267.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in notes payable |
|
|
75.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by financing activities |
|
|
75.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|
0.06 |
|
|
|
|
|
|
|
0.06 |
|
Increase (decrease) in cash and cash equivalents |
|
|
(5.3 |
) |
|
|
(54.2 |
) |
|
|
(7.0 |
) |
|
|
|
|
|
|
(66.5 |
) |
Cash and cash equivalents, beginning of period |
|
|
15.3 |
|
|
|
106.0 |
|
|
|
69.8 |
|
|
|
|
|
|
|
191.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
10.0 |
|
|
$ |
51.8 |
|
|
$ |
62.8 |
|
|
$ |
|
|
|
$ |
124.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The following material subsidiaries are identified as guarantors of the 7.50% Notes, 8.25%
Notes, 8.75% Notes and 8.625% Notes: Belterra Resort Indiana, LLC; Boomtown, LLC; PNK (RENO),
LLC; LouisianaI Gaming; PNK (LAKE CHARLES), L.L.C.; Casino Magic Corp.; Biloxi Casino Corp.;
PNK (BOSSIER CITY), Inc.; Casino One Corporation; PNK (ES), LLC; PNK (ST. LOUIS RE), LLC; AREP
Boardwalk Properties LLC; PNK (Baton Rouge) Partnership; PNK (SCB), L.L.C.; PNK Development 7,
LLC; PNK Development 8, LLC; PNK Development 9, LLC; PNK Development 13, LLC; President
Riverboat Casino-Missouri, Inc.; and ACE Gaming, LLC. In addition, certain other immaterial
subsidiaries are also guarantors of the 7.50% Notes, 8.25% Notes, 8.75% Notes and 8.625%
Notes. |
|
(b) |
|
Casino Magic Neuquén SA and PNK Development 11, LLC, which as of September 30, 2009 held
approximately $56.0 million in cash and cash equivalents, are our only material non-guarantors
of the 7.50% Notes, 8.25% Notes, 8.75% Notes and 8.625% Notes. Other non-guarantor
subsidiaries include, but are not limited to, a subsidiary that owns our corporate airplane
and a subsidiary that held approximately $10.0 million in cash and cash equivalents as of
September 30, 2009. On July 15, 2009, Casino Magic Neuquén SA became a restricted subsidiary
under our bond indentures, but is not a guarantor of the 7.50% Notes, 8.25% Notes, 8.75% Notes
and 8.625% Notes. |
Note 8Segment Information
We use Adjusted EBITDA (as defined below) to compare operating results among our segments and
allocate resources. The following table highlights our Adjusted EBITDA and reconciles Adjusted
EBITDA to loss from continuing operations for the three and nine months ended September 30, 2009
and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAuberge du Lac |
|
$ |
85.8 |
|
|
$ |
81.8 |
|
|
$ |
260.8 |
|
|
$ |
253.3 |
|
Boomtown New Orleans |
|
|
32.6 |
|
|
|
37.4 |
|
|
|
106.4 |
|
|
|
118.9 |
|
Lumière Place |
|
|
55.6 |
|
|
|
45.7 |
|
|
|
162.9 |
|
|
|
127.0 |
|
Belterra Casino Resort |
|
|
41.7 |
|
|
|
43.9 |
|
|
|
125.4 |
|
|
|
130.3 |
|
Boomtown Bossier City |
|
|
23.3 |
|
|
|
22.5 |
|
|
|
70.8 |
|
|
|
68.2 |
|
Casino Magic Argentina |
|
|
9.1 |
|
|
|
11.4 |
|
|
|
27.2 |
|
|
|
30.5 |
|
Boomtown Reno |
|
|
11.5 |
|
|
|
14.9 |
|
|
|
29.7 |
|
|
|
37.1 |
|
President Casino |
|
|
5.0 |
|
|
|
5.2 |
|
|
|
15.8 |
|
|
|
20.3 |
|
Other |
|
|
0.8 |
|
|
|
|
|
|
|
1.6 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
265.4 |
|
|
$ |
262.8 |
|
|
$ |
800.6 |
|
|
$ |
785.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Adjusted EBITDA (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAuberge du Lac |
|
$ |
19.2 |
|
|
$ |
18.6 |
|
|
$ |
64.2 |
|
|
$ |
59.9 |
|
Boomtown New Orleans |
|
|
7.8 |
|
|
|
11.3 |
|
|
|
32.0 |
|
|
|
40.3 |
|
Lumière Place |
|
|
11.0 |
|
|
|
3.2 |
|
|
|
31.5 |
|
|
|
3.9 |
|
Belterra Casino Resort |
|
|
7.2 |
|
|
|
8.5 |
|
|
|
23.2 |
|
|
|
23.7 |
|
Boomtown Bossier City |
|
|
5.0 |
|
|
|
4.5 |
|
|
|
15.9 |
|
|
|
13.2 |
|
Casino Magic Argentina |
|
|
2.4 |
|
|
|
3.8 |
|
|
|
7.4 |
|
|
|
9.6 |
|
Boomtown Reno |
|
|
(0.1 |
) |
|
|
0.5 |
|
|
|
(1.4 |
) |
|
|
(2.9 |
) |
President Casino |
|
|
(0.7 |
) |
|
|
(1.7 |
) |
|
|
(1.3 |
) |
|
|
(3.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51.8 |
|
|
|
48.7 |
|
|
|
171.5 |
|
|
|
144.3 |
|
Corporate expenses (b) |
|
|
(8.7 |
) |
|
|
(8.9 |
) |
|
|
(26.1 |
) |
|
|
(30.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43.1 |
|
|
|
39.8 |
|
|
|
145.4 |
|
|
|
114.0 |
|
Other benefits (costs): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
(25.8 |
) |
|
|
(29.7 |
) |
|
|
(78.1 |
) |
|
|
(89.2 |
) |
Pre-opening and development costs |
|
|
(8.6 |
) |
|
|
(14.6 |
) |
|
|
(21.1 |
) |
|
|
(45.9 |
) |
Non-cash share-based compensation |
|
|
(2.1 |
) |
|
|
(2.0 |
) |
|
|
(9.8 |
) |
|
|
(6.9 |
) |
Write-downs, reserves and recoveries, net |
|
|
(0.3 |
) |
|
|
(0.9 |
) |
|
|
(1.0 |
) |
|
|
(8.2 |
) |
Other non-operating income |
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.3 |
|
|
|
2.5 |
|
Interest expense, net of capitalized interest |
|
|
(18.7 |
) |
|
|
(11.0 |
) |
|
|
(51.5 |
) |
|
|
(34.7 |
) |
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
12.9 |
|
|
|
|
|
Impairment of investment in equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22.6 |
) |
Loss on early extinguishment of debt |
|
|
(8.8 |
) |
|
|
|
|
|
|
(8.8 |
) |
|
|
|
|
Income tax (expense) benefit |
|
|
(0.6 |
) |
|
|
9.3 |
|
|
|
(3.8 |
) |
|
|
18.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(21.7 |
) |
|
$ |
(8.3 |
) |
|
$ |
(15.5 |
) |
|
$ |
(72.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Capital expenditures: |
|
|
|
|
|
|
|
|
LAuberge du Lac |
|
$ |
3.9 |
|
|
$ |
22.5 |
|
Boomtown New Orleans |
|
|
3.2 |
|
|
|
7.6 |
|
Lumière Place |
|
|
8.2 |
|
|
|
72.8 |
|
Belterra Casino Resort |
|
|
5.0 |
|
|
|
4.9 |
|
Boomtown Bossier City |
|
|
2.6 |
|
|
|
2.4 |
|
Casino Magic Argentina |
|
|
0.7 |
|
|
|
4.5 |
|
Boomtown Reno |
|
|
1.6 |
|
|
|
6.1 |
|
President Casino |
|
|
0.1 |
|
|
|
0.3 |
|
Corporate and other, including properties under development(c) |
|
|
120.9 |
|
|
|
146.6 |
|
|
|
|
|
|
|
|
|
|
$ |
146.2 |
|
|
$ |
267.7 |
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Assets: |
|
|
|
|
|
|
|
|
LAuberge du Lac |
|
$ |
336.1 |
|
|
$ |
356.2 |
|
Boomtown New Orleans |
|
|
72.4 |
|
|
|
75.3 |
|
Lumière Place |
|
|
519.3 |
|
|
|
542.8 |
|
Belterra Casino Resort |
|
|
196.2 |
|
|
|
200.7 |
|
Boomtown Bossier City |
|
|
92.2 |
|
|
|
91.8 |
|
Casino Magic Argentina |
|
|
27.6 |
|
|
|
31.3 |
|
Boomtown Reno |
|
|
53.7 |
|
|
|
54.6 |
|
President Casino |
|
|
6.2 |
|
|
|
8.2 |
|
Corporate and other, including new properties |
|
|
726.6 |
|
|
|
558.3 |
|
|
|
|
|
|
|
|
|
|
$ |
2,030.3 |
|
|
$ |
1,919.2 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
We define Adjusted EBITDA for each segment as earnings before interest income and
expense, income taxes, depreciation, amortization, pre-opening and development expenses,
non-cash share-based compensation, asset impairment costs, write-downs, reserves,
recoveries, gain (loss) on sale of certain assets, gain (loss) on sale of equity
securities, loss on early extinguishment of debt and discontinued operations. We use
Adjusted EBITDA to compare operating results among our properties and between accounting
periods. |
|
(b) |
|
Corporate expenses represent unallocated payroll, professional fees, travel expenses
and other general and administrative expenses not directly incurred by our casino and
hotel operations. |
|
(c) |
|
Includes capital expenditures for our various development projects not yet reflected
as operating segments, including $1.0 million for Atlantic City, $108 million for River
City and $10.4 million for Sugarcane Bay for the nine months ended September 30, 2009. |
Note 9Subsequent Events
In accordance with accounting standards for subsequent events, we have evaluated subsequent
events through November 5, 2009, which is the issuance date of these unaudited Condensed
Consolidated Financial Statements. Events regarding the repayment of debt are discussed in Note 2,
Long-Term Debt.
On November 3, 2009, Ohio voters passed a constitutional amendment which allows only one
casino to be developed in each of Cincinnati, Columbus, Cleveland and Toledo. In the event a new
casino is developed in Cincinnati, which is likely to take several years to develop, it will
provide additional competition to Belterra Casino Resort. An estimate of its financial effect
cannot be made at this time.
24
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition, results of operations, liquidity
and capital resources should be read in conjunction with, and is qualified in its entirety by, the
unaudited Condensed Consolidated Financial Statements and the notes thereto included in this
Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and
Managements Discussion and Analysis of Financial Condition and Results of Operations contained in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
EXECUTIVE SUMMARY
Pinnacle Entertainment, Inc. is a developer, owner and operator of casinos and related
hospitality and entertainment facilities. We currently operate seven domestic casinos, including
LAuberge du Lac in Lake Charles, Louisiana; Boomtown New Orleans in New Orleans, Louisiana;
Belterra Casino Resort in Vevay, Indiana; Boomtown Bossier City in Bossier City, Louisiana; Lumière
Place in St. Louis, Missouri; the President Casino in St. Louis, Missouri; and Boomtown Reno in
Reno, Nevada. Internationally, we operate one significant and several small casinos in Argentina.
We previously operated a small casino in the Bahamas, which we closed on January 2, 2009.
We have a number of projects at various stages of development. In south St. Louis County,
Missouri, we are building our River City casino, which we expect to open in the spring of 2010. In
Louisiana, we have begun the foundation work for our Sugarcane Bay casino-hotel adjacent to
LAuberge du Lac, and continue to proceed with design and entitlement work for our Baton Rouge
project. We also own well-located casino sites in Atlantic City, New Jersey and in Central City,
Colorado, which projects are on indefinite hold.
We operate casino properties, which include gaming, hotel, dining, retail and other amenities.
Our operating results are highly dependent on the volume of customers at our properties, which in
turn affects the price we can charge for our hotel rooms and other amenities. While we do provide
casino credit in several gaming jurisdictions, most of our revenue is cash-based with customers
wagering with cash or paying for non-gaming services with cash or credit cards. Our properties
generate significant operating cash flow. Our industry is capital intensive and we rely on the
ability of our resorts to generate operating cash flow to pay interest, repay debt financing and
fund maintenance capital expenditures.
Our long-term strategy is to build or acquire new resorts that are expected to produce
favorable returns above our cost of capital; to maintain and improve our existing properties; and
to continue to build our systems and add locations to build a national gaming network. Hence, we
are developing new, high-quality gaming properties in attractive gaming markets; we are maintaining
and improving our existing properties with disciplined capital expenditures; we are developing a
customer-loyalty program designed to motivate customers to continue to patronize our casinos; and
we may make strategic acquisitions, either alone or with third parties, at terms we believe are
reasonable. We continue to make progress toward achieving our long-term strategy.
In July, we successfully amended our bank credit facility to, among other things, permit the
issuance of senior unsecured debt. In August 2009, we closed a private offering of $450 million in
aggregate principal amount of 8.625% senior notes due 2017 (the 8.625% Notes). The $434 million
in net proceeds was used to repay our funded bank borrowings of $206 million, repurchase both our
existing 8.75% senior subordinated notes due 2013 (the 8.75% Notes) and $75.0 million in
aggregate principal amount of our existing 8.25% senior subordinated notes due 2012 (the 8.25%
Notes), and for general corporate purposes.
25
RESULTS OF OPERATIONS
The following table highlights our results of operations for the three and nine months ended
September 30, 2009 and 2008. As discussed in Note 8 to our unaudited Condensed Consolidated
Financial Statements, we report segment operating results based on revenues and Adjusted EBITDA.
Such segment reporting is on a consistent basis with how we measure our business and allocate
resources internally. See Note 8 to our unaudited Condensed Consolidated Financial Statements for
more information regarding our segment information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAuberge du Lac |
|
$ |
85.8 |
|
|
$ |
81.8 |
|
|
$ |
260.8 |
|
|
$ |
253.3 |
|
Boomtown New Orleans |
|
|
32.6 |
|
|
|
37.4 |
|
|
|
106.4 |
|
|
|
118.9 |
|
Lumière Place |
|
|
55.6 |
|
|
|
45.7 |
|
|
|
162.9 |
|
|
|
127.0 |
|
Belterra Casino Resort |
|
|
41.7 |
|
|
|
43.9 |
|
|
|
125.4 |
|
|
|
130.3 |
|
Boomtown Bossier City |
|
|
23.3 |
|
|
|
22.5 |
|
|
|
70.8 |
|
|
|
68.2 |
|
Casino Magic Argentina |
|
|
9.1 |
|
|
|
11.4 |
|
|
|
27.2 |
|
|
|
30.5 |
|
Boomtown Reno |
|
|
11.5 |
|
|
|
14.9 |
|
|
|
29.7 |
|
|
|
37.1 |
|
President Casino |
|
|
5.0 |
|
|
|
5.2 |
|
|
|
15.8 |
|
|
|
20.3 |
|
Other |
|
|
0.8 |
|
|
|
|
|
|
|
1.6 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
$ |
265.4 |
|
|
$ |
262.8 |
|
|
$ |
800.6 |
|
|
$ |
785.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
$ |
6.4 |
|
|
$ |
(7.4 |
) |
|
$ |
35.4 |
|
|
$ |
(36.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(21.7 |
) |
|
$ |
(8.3 |
) |
|
$ |
(15.5 |
) |
|
$ |
(72.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAuberge du Lac |
|
$ |
19.2 |
|
|
$ |
18.6 |
|
|
$ |
64.2 |
|
|
$ |
59.9 |
|
Boomtown New Orleans |
|
|
7.8 |
|
|
|
11.3 |
|
|
|
32.0 |
|
|
|
40.3 |
|
Lumière Place |
|
|
11.0 |
|
|
|
3.2 |
|
|
|
31.5 |
|
|
|
3.9 |
|
Belterra Casino Resort |
|
|
7.2 |
|
|
|
8.5 |
|
|
|
23.2 |
|
|
|
23.7 |
|
Boomtown Bossier City |
|
|
5.0 |
|
|
|
4.5 |
|
|
|
15.9 |
|
|
|
13.2 |
|
Casino Magic Argentina |
|
|
2.4 |
|
|
|
3.8 |
|
|
|
7.4 |
|
|
|
9.6 |
|
Boomtown Reno |
|
|
(0.1 |
) |
|
|
0.5 |
|
|
|
(1.4 |
) |
|
|
(2.9 |
) |
President Casino |
|
|
(0.7 |
) |
|
|
(1.7 |
) |
|
|
(1.3 |
) |
|
|
(3.4 |
) |
|
|
|
(a) |
|
We define Adjusted EBITDA for each segment as earnings before interest income and
expense, income taxes, depreciation, amortization, pre-opening and development expenses,
non-cash share-based compensation, asset impairment costs, write-downs, reserves,
recoveries, gain (loss) on sale of certain assets, gain (loss) on sale of equity
securities, loss on early extinguishment of debt and discontinued operations. |
Segment comparison of the three and nine months ended September 30, 2009 and 2008
LAuberge du Lac
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
75.1 |
|
|
$ |
71.4 |
|
|
|
5.2 |
% |
|
$ |
228.8 |
|
|
$ |
222.8 |
|
|
|
2.7 |
% |
Total revenues |
|
|
85.8 |
|
|
|
81.8 |
|
|
|
4.9 |
% |
|
|
260.8 |
|
|
|
253.3 |
|
|
|
3.0 |
% |
Operating income |
|
|
11.9 |
|
|
|
10.4 |
|
|
|
14.4 |
% |
|
|
42.5 |
|
|
|
33.2 |
|
|
|
28.0 |
% |
Adjusted EBITDA |
|
|
19.2 |
|
|
|
18.6 |
|
|
|
3.2 |
% |
|
|
64.2 |
|
|
|
59.9 |
|
|
|
7.2 |
% |
26
LAuberge du Lac, our largest property, increased revenues and Adjusted EBITDA during the
three and nine months ended September 30, 2009 compared to the prior-year periods, reflecting
improved utilization of the guestroom and amenity expansion which opened in early 2008. In
addition, LAuberge du Lac was closed for nine days during the quarter ended September 30, 2008 due
to Hurricanes Gustav and Ike. There have been no such closures in the current year.
Boomtown New Orleans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
31.2 |
|
|
$ |
35.8 |
|
|
|
(12.8 |
)% |
|
$ |
101.7 |
|
|
$ |
114.0 |
|
|
|
(10.8 |
)% |
Total revenues |
|
|
32.6 |
|
|
|
37.4 |
|
|
|
(12.8 |
)% |
|
|
106.4 |
|
|
|
118.9 |
|
|
|
(10.5 |
)% |
Operating income |
|
|
6.1 |
|
|
|
9.3 |
|
|
|
(34.4 |
)% |
|
|
26.4 |
|
|
|
33.9 |
|
|
|
(22.1 |
)% |
Adjusted EBITDA |
|
|
7.8 |
|
|
|
11.3 |
|
|
|
(31.0 |
)% |
|
|
32.0 |
|
|
|
40.3 |
|
|
|
(20.6 |
)% |
Results during the three and nine months ended September 30, 2009 at Boomtown New Orleans
reflect the heightened competition in the area, principally from the Mississippi Gulf Coast; levee
construction along the primary access road to our property; as well as general economic conditions.
To address the increased competition, Boomtown New Orleans is revisiting certain aspects of its
marketing program, including increased marketing efforts to draw in local customers with events and
promotions, which in the current period has resulted in increased costs and reduced Adjusted
EBITDA.
Lumière Place
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
44.4 |
|
|
$ |
35.1 |
|
|
|
26.5 |
% |
|
$ |
133.0 |
|
|
$ |
103.1 |
|
|
|
29.0 |
% |
Total revenues |
|
|
55.6 |
|
|
|
45.7 |
|
|
|
21.7 |
% |
|
|
162.9 |
|
|
|
127.0 |
|
|
|
28.3 |
% |
Operating income (loss) |
|
|
2.2 |
|
|
|
(6.4 |
) |
|
|
134.4 |
% |
|
|
5.5 |
|
|
|
(28.6 |
) |
|
|
119.2 |
% |
Adjusted EBITDA |
|
|
11.0 |
|
|
|
3.2 |
|
|
|
243.8 |
% |
|
|
31.5 |
|
|
|
3.9 |
|
|
|
707.7 |
% |
Lumière Place includes the Lumière Place Casino, which opened in late 2007, the Pinnacle-owned
Four Seasons Hotel St. Louis and HoteLumière, each of which opened in early 2008, and other
amenities, comprising the Lumière Place complex. Overall operational results at Lumière Place
continued to improve in the three and nine months ended September 30, 2009 as it entered its second
year of operations, consistent with most new casino openings. In addition, Missouris gambling
loss limit, wherein players were required to have player cards and losses were limited to $500 in a
two-hour period, was repealed in November 2008, commensurate with an increase in the gaming tax
rate. Marketing and payroll costs declined during the three and nine months ended September 30,
2009 compared to the prior-year period due to the maturation of the property.
Belterra Casino Resort
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
35.2 |
|
|
$ |
36.3 |
|
|
|
(3.0 |
)% |
|
$ |
107.8 |
|
|
$ |
111.0 |
|
|
|
(2.9 |
)% |
Total revenues |
|
|
41.7 |
|
|
|
43.9 |
|
|
|
(5.0 |
)% |
|
|
125.4 |
|
|
|
130.3 |
|
|
|
(3.8 |
)% |
Operating income |
|
|
3.9 |
|
|
|
5.0 |
|
|
|
(22.0 |
)% |
|
|
13.1 |
|
|
|
12.8 |
|
|
|
2.3 |
% |
Adjusted EBITDA |
|
|
7.2 |
|
|
|
8.5 |
|
|
|
(15.3 |
)% |
|
|
23.2 |
|
|
|
23.7 |
|
|
|
(2.1 |
)% |
27
Results during the three and nine months ended September 30, 2009 at Belterra reflect the
effects of increased competition in the area, as well as general economic conditions. During
mid-2008, two racetrack casinos in the Indianapolis metropolitan area opened, each of which operate
approximately 2,000 slot machines. One of these facilities replaced its temporary casino with a
significantly nicer permanent facility in March 2009. Another competitor opened a new, larger
casino in Lawrenceburg, Indiana in June 2009, replacing a smaller facility. On November 3, 2009,
Ohio voters passed a constitutional amendment which allows only one casino to be developed in each
of Cincinnati, Columbus, Cleveland and Toledo. In the event a new casino is developed in
Cincinnati, which is likely to take several years to develop, it will provide additional
competition to Belterra.
Boomtown Bossier City
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
22.0 |
|
|
$ |
21.1 |
|
|
|
4.3 |
% |
|
$ |
66.7 |
|
|
$ |
64.1 |
|
|
|
4.1 |
% |
Total revenues |
|
|
23.3 |
|
|
|
22.5 |
|
|
|
3.6 |
% |
|
|
70.8 |
|
|
|
68.2 |
|
|
|
3.8 |
% |
Operating income |
|
|
3.4 |
|
|
|
2.6 |
|
|
|
30.8 |
% |
|
|
11.0 |
|
|
|
7.5 |
|
|
|
46.7 |
% |
Adjusted EBITDA |
|
|
5.0 |
|
|
|
4.5 |
|
|
|
11.1 |
% |
|
|
15.9 |
|
|
|
13.2 |
|
|
|
20.5 |
% |
Boomtown Bossier City achieved increased revenues and Adjusted EBITDA despite the competitive
Bossier City/Shreveport gaming market through a refinement of the propertys marketing efforts and
certain cost-cutting measures. Boomtown Bossier competes with four casino-hotels and a racetrack
offering slot machines. In addition, the Bossier City/Shreveport gaming market, which is
approximately 188 miles east of Dallas/Fort Worth, competes with significant and growing Native
American gaming in southern Oklahoma, located approximately 60 miles north of Dallas/Fort Worth.
Casino Magic Argentina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
8.2 |
|
|
$ |
10.1 |
|
|
|
(18.8 |
)% |
|
$ |
24.5 |
|
|
$ |
27.6 |
|
|
|
(11.2 |
)% |
Total revenues |
|
|
9.1 |
|
|
|
11.4 |
|
|
|
(20.2 |
)% |
|
|
27.2 |
|
|
|
30.5 |
|
|
|
(10.8 |
)% |
Operating income |
|
|
1.7 |
|
|
|
2.7 |
|
|
|
(37.0 |
)% |
|
|
5.2 |
|
|
|
6.8 |
|
|
|
(23.5 |
)% |
Adjusted EBITDA |
|
|
2.4 |
|
|
|
3.8 |
|
|
|
(36.8 |
)% |
|
|
7.4 |
|
|
|
9.6 |
|
|
|
(22.9 |
)% |
Casino Magic Argentina includes a sizable casino-hotel facility in Neuquén, which includes
1,076 gaming positions, and several smaller casinos in other parts of the Province of Neuquén, with
an aggregate 361 gaming positions. Revenues have decreased due to a recent decline in the value of
the Argentine peso, as well as weakness in the Argentine economy. The decrease in Adjusted EBITDA
reflects the currency decline and inflation of certain costs, principally payroll costs.
Under terms of our concession agreement with the Province of Neuquén (the province), our
license in Neuquén and San Martin de los Andes is to be extended from 2016 to 2021 with the
completion of a luxury hotel. We opened such hotel in June 2008 and are awaiting the formal
government approval of such extension. The provincial government has passed a resolution calling
for an increase in the gaming tax rate. Our concession agreement with the province caps the gaming
tax rate at current levels. We have had discussions with the province suggesting that the
concession agreement could be renegotiated to incorporate a longer term than 2021 and a somewhat
higher tax rate. There is no certainty that such a revision will be consummated.
28
Boomtown Reno
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
6.6 |
|
|
$ |
7.5 |
|
|
|
(12.0 |
)% |
|
$ |
17.2 |
|
|
$ |
18.9 |
|
|
|
(9.0 |
)% |
Total revenues |
|
|
11.5 |
|
|
|
14.9 |
|
|
|
(22.8 |
)% |
|
|
29.7 |
|
|
|
37.1 |
|
|
|
(19.9 |
)% |
Operating loss |
|
|
(0.8 |
) |
|
|
(0.7 |
) |
|
|
14.3 |
% |
|
|
(4.5 |
) |
|
|
(7.6 |
) |
|
|
(40.8 |
)% |
Adjusted EBITDA loss |
|
|
(0.1 |
) |
|
|
0.5 |
|
|
|
(120.0 |
)% |
|
|
(1.4 |
) |
|
|
(2.9 |
) |
|
|
(51.7 |
)% |
Boomtown Reno has been affected by significant competition from the northern California Native
American gaming market, as well as poor economic conditions in both the region and northern
California. Improvements in operating income and Adjusted EBITDA for the nine-month period are due
to cost-cutting measures. Employee headcount as of September 30, 2009 has decreased 21% from
September 30, 2008.
President Casino
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Gaming revenues |
|
$ |
4.6 |
|
|
$ |
4.8 |
|
|
|
(4.2 |
)% |
|
$ |
14.8 |
|
|
$ |
18.6 |
|
|
|
(20.4 |
)% |
Total revenues |
|
|
5.0 |
|
|
|
5.2 |
|
|
|
(3.8 |
)% |
|
|
15.8 |
|
|
|
20.3 |
|
|
|
(22.2 |
)% |
Operating loss |
|
|
(1.4 |
) |
|
|
(4.0 |
) |
|
|
(65.0 |
)% |
|
|
(3.3 |
) |
|
|
(9.7 |
) |
|
|
(66.0 |
)% |
Adjusted EBITDA loss |
|
|
(0.7 |
) |
|
|
(1.7 |
) |
|
|
(58.8 |
)% |
|
|
(1.3 |
) |
|
|
(3.4 |
) |
|
|
(61.8 |
)% |
Due principally to competition from the neighboring Lumière Place and an expanded competing
property across the river, revenues for the three and nine months ended September 30, 2009 have
decreased from the same period in the prior year. As a result, beginning in late 2008, we
eliminated mid-week table game operations at the President Casino and reduced operating hours for
the entire casino mid-week. These cost-cutting measures have resulted in a decreased Adjusted
EBITDA loss for the three and nine months ended September 30, 2009. During 2008, operations at the
President Casino were also adversely affected due to temporary flood related closures.
The President Casino operates on a vessel known as the Admiral. The hull of the Admiral was
built in 1904. The certification of the hull by ABS Consulting (ABS) expires in July 2010, and
the Admiral may not be used to carry passengers beyond that date without significant repairs and/or
specific approval. We currently intend to repair the hull of the Admiral prior to the expiration
of the ABS certification in July 2010. For further detail regarding the ABS certification, see
Note 6, Commitments and Contingencies, to the unaudited Condensed Consolidated Financial
Statements.
29
Other factors affecting loss from continuing operations
The following are a description of the other costs and benefits for the three months ended
September 30, 2009 and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
For the three months |
|
|
Increase/ |
|
|
For the nine months |
|
|
Increase/ |
|
|
|
ended September 30, |
|
|
(Decrease) |
|
|
ended September 30, |
|
|
(Decrease) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 vs. 2008 |
|
|
|
(in millions) |
|
|
|
|
|
(in millions) |
|
|
|
|
Other benefits (costs): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
$ |
(8.7 |
) |
|
$ |
(8.9 |
) |
|
|
(2.2 |
)% |
|
$ |
(26.1 |
) |
|
$ |
(30.3 |
) |
|
|
(13.9 |
)% |
Depreciation and amortization |
|
|
(25.8 |
) |
|
|
(29.7 |
) |
|
|
(13.1 |
)% |
|
|
(78.1 |
) |
|
|
(89.2 |
) |
|
|
(12.4 |
)% |
Pre-opening and development costs |
|
|
(8.6 |
) |
|
|
(14.6 |
) |
|
|
(41.1 |
)% |
|
|
(21.1 |
) |
|
|
(45.9 |
) |
|
|
(54.0 |
)% |
Non-cash share-based compensation |
|
|
(2.1 |
) |
|
|
(2.0 |
) |
|
|
5.0 |
% |
|
|
(9.8 |
) |
|
|
(6.9 |
) |
|
|
42.0 |
% |
Write-downs, reserves and
recoveries, net |
|
|
(0.3 |
) |
|
|
(0.9 |
) |
|
|
(66.7 |
)% |
|
|
(1.0 |
) |
|
|
(8.2 |
) |
|
|
(87.8 |
)% |
Other non-operating income |
|
|
0.1 |
|
|
|
0.8 |
|
|
|
(87.5 |
)% |
|
|
0.3 |
|
|
|
2.5 |
|
|
|
(88.0 |
)% |
Gain on sale of equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.9 |
|
|
|
|
|
|
|
100 |
% |
Impairment of investment in
equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22.6 |
) |
|
|
100 |
% |
Interest expense, net of
capitalized interest |
|
|
(18.7 |
) |
|
|
(11.0 |
) |
|
|
70.0 |
% |
|
|
(51.5 |
) |
|
|
(34.7 |
) |
|
|
48.4 |
% |
Loss on early extinguishment of
debt |
|
|
(8.8 |
) |
|
|
|
|
|
|
(100 |
)% |
|
|
(8.8 |
) |
|
|
|
|
|
|
(100 |
)% |
Income tax benefit (expense) |
|
|
(0.6 |
) |
|
|
9.3 |
|
|
|
(106.5 |
)% |
|
|
(3.8 |
) |
|
|
18.6 |
|
|
|
(120.4 |
)% |
Corporate expenses represent unallocated payroll, professional fees, rent, travel expenses and
other general and administrative expenses not directly incurred by our casino and hotel operations.
Such expenses decreased in the three and nine months ended September 30, 2009 due to the
relocation of some offices to lower-rent spaces, the decision to reduce the scope of an employee
401(k) matching program for 2008 and the first half of 2009 and other smaller items. Additionally,
the prior-year nine-month period included approximately $1.5 million of compensation expense
related to the resignation of a corporate officer.
Depreciation and amortization expense decreased in the three and nine months ended September
30, 2009 due to the decreased asset basis resulting from our 2008 fourth quarter impairment of
certain long-lived assets.
Pre-opening and Development Costs Pre-opening and development costs are expensed as incurred,
consistent with authoritative guidance, and for the three and nine months ended September 30, 2009
and 2008 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Pre-opening and development costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic City (a) |
|
$ |
2.7 |
|
|
$ |
4.1 |
|
|
$ |
8.3 |
|
|
$ |
15.1 |
|
River City (b) |
|
|
2.1 |
|
|
|
1.2 |
|
|
|
4.9 |
|
|
|
3.7 |
|
Baton Rouge |
|
|
2.8 |
|
|
|
0.9 |
|
|
|
5.5 |
|
|
|
6.5 |
|
Sugarcane Bay |
|
|
0.6 |
|
|
|
0.7 |
|
|
|
1.7 |
|
|
|
2.2 |
|
Kansas City |
|
|
|
|
|
|
1.6 |
|
|
|
|
|
|
|
4.4 |
|
Lumière Place |
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
6.2 |
|
Missouri Proposition A Initiative |
|
|
|
|
|
|
5.8 |
|
|
|
|
|
|
|
7.0 |
|
Other |
|
|
0.4 |
|
|
|
0.1 |
|
|
|
0.7 |
|
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-opening and development costs |
|
$ |
8.6 |
|
|
$ |
14.6 |
|
|
$ |
21.1 |
|
|
$ |
45.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In late 2008, the Company decided to complete certain demolition projects, but to
otherwise suspend substantially all development activities in Atlantic City indefinitely.
The continuing pre-opening and
development costs include property taxes, rent under long-term leases and other costs
associated with ownership of the land. |
30
|
|
|
(b) |
|
Pre-opening costs at the River City project, expected to open in the spring of
2010, include among other items non-cash, straight-lined rent accruals under a lease
agreement of $1.0 million and $2.9 million for the three and nine months ended September
30, 2009, respectively, and $1.0 million and $2.9 million for the three and nine months
ended September 30, 2008, respectively. |
Non-cash Share-based Compensation Expense was $2.1 million and $9.8 million for the three and
nine months ended September 30, 2009, respectively, and $2.0 million and $6.9 million for the three
and nine months ended September 30, 2008, respectively. Such compensation expense relates to the
theoretical value of options on the date of issuance and is not related to actual stock price
performance. The expense for the nine months ended September 30, 2009 has increased compared to
the prior year period due to additional options granted to members of our Board of Directors.
These grants, along with all previously outstanding unvested stock option grants to board members,
became fully vested in May 2009, resulting in a charge of $3.2 million to compensation expense.
Write-downs, reserves and recoveries, net consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Impairment of assets (a) |
|
$ |
0.1 |
|
|
$ |
|
|
|
$ |
0.4 |
|
|
$ |
5.3 |
|
Customer loyalty program related expenses (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.4 |
|
Loss on disposal of assets |
|
|
0.2 |
|
|
|
1.0 |
|
|
|
0.6 |
|
|
|
1.7 |
|
Insurance Proceeds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-downs, reserves and recoveries, net |
|
$ |
0.3 |
|
|
$ |
1.0 |
|
|
$ |
1.0 |
|
|
$ |
8.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
During the three and nine months ended September 30, 2009, we incurred asset
impairment charges related to the value of obsolete gaming equipment in the normal course
of business. During the second quarter of 2008, we incurred impairment charges of $4.5
million related to two riverboats acquired in 2006, and approximately $0.8 million in
connection with certain obsolete gaming equipment. |
|
(b) |
|
During the second quarter of 2008, we expanded our mychoice rewards program to our
LAuberge du Lac and Belterra properties. In doing so, we disclosed to our customers
their reward account balances based on prior play. We had historically maintained such
records to facilitate the provision of complimentary goods and services, but had not
previously disclosed the point balances to customers at these facilities. This
disclosure resulted in a non-cash charge to establish a theoretical liability for such
amounts. |
Other non-operating income consists primarily of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Interest income |
|
$ |
0.1 |
|
|
$ |
0.4 |
|
|
$ |
0.3 |
|
|
$ |
1.9 |
|
Dividend income |
|
|
|
|
|
|
0.4 |
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other non-operating income |
|
$ |
0.1 |
|
|
$ |
0.8 |
|
|
$ |
0.3 |
|
|
$ |
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income has decreased during the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30, 2008 primarily due to lower short-term
interest rates in the current period compared to the same period in 2008. We elect conservative
investment options, resulting in low levels of interest income relative to surplus cash.
Prior-year dividend income relates to our shares held in Ameristar Casinos, which suspended
dividend payments from the third quarter of 2008 to the second quarter of 2009. We sold all shares
held during the three months ended June 30, 2009.
31
Gain on sale of equity securities During the nine months ended September 30, 2009, we sold
all 1.2 million shares that we held in Ameristar Casinos for cash proceeds of $23.7 million and
realized a gain of $12.9 million. The shares were purchased with the intent of proposing a
combination of the two companies. However, with the changes in the financial markets, we
determined that such combination was no longer in the best interests of our shareholders. These
shares had previously been written down as disclosed in accordance with authoritative guidance.
Interest expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Interest expense before capitalization of interest |
|
$ |
22.5 |
|
|
$ |
19.6 |
|
|
$ |
60.2 |
|
|
$ |
58.1 |
|
Less: capitalized interest |
|
|
(3.8 |
) |
|
|
(8.6 |
) |
|
|
(8.7 |
) |
|
|
(23.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense, net of capitalized interest |
|
$ |
18.7 |
|
|
$ |
11.0 |
|
|
$ |
51.5 |
|
|
$ |
34.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in interest expense was principally due to the replacement of less expensive
revolver borrowings with the new, long term 8.625% Notes. We believe the longer maturity, fixed
interest rate and fewer covenants of the 8.625% Notes warranted the higher interest rate,
particularly in planning the capital structure necessary to fund our planned growth. The decrease
in capitalized interest was principally due to the suspension of development activities in Atlantic
City, partially offset by an increase in such activities attributable to our River City project.
Loss on early extinguishment of debt During the three months ended September 30, 2009, we
issued $450 million aggregate principal amount of 8.625% Notes, and used a portion of the net
proceeds to retire early other outstanding debts. Such early retirements resulted in a write-off
of $8.8 million in unamortized premiums, unamortized debt issuance and other costs. We retired
additional outstanding debt on October 1, 2009, resulting in a write-off of $482,000, which will be
recorded in the fourth quarter of 2009.
Income Tax (Expense) Benefit Our effective income tax rate for continuing operations for the
three and nine months ended September 30, 2009, was income tax expense of (2.8)% and (32.5)%,
respectively, as compared to income tax benefit of 52.9% and 20.5% for the same periods in 2008.
Our effective tax rates in the 2009 periods were affected by non-deductible items such as state
gaming revenue taxes that are not deductible for Indiana state income taxes, foreign taxes of our
Argentine subsidiary pursuant to a tax amnesty program currently offered by the Argentine
government and anticipated results for U.S. operations for which no tax benefit is currently
recognized. We determined that the certainty of the amnesty program offered temporarily by the
Argentine government offset the potential economic value of eventually prevailing on certain
disputed tax positions. Additionally, during June 2009, we received an informal notification from a
field agent for the Indiana Department of Revenue challenging whether income and gain from certain
asset sales, including the sale of the Hollywood Park Racetrack in 1999, and other transactions
outside of Indiana, such as the Aztar merger termination fee in 2006, which we reported on our
Indiana state tax returns for the years 2000 through 2007, resulted in business income subject to
apportionment, and proposed a potential assessment of approximately $11 million, excluding interest
and penalties, of additional Indiana income taxes. We disagree with the position suggested by the
field agent as we believe that the income associated with these items is non-business income and we
are in discussion with Indiana tax authorities regarding those preliminary proposed adjustments.
While it is often difficult to predict the final outcome or the timing of resolution of any
particular uncertain tax position, management believes that the reserves for income taxes reflect
the most likely outcome as of September 30, 2009. We adjust these reserves, as well as the related
interest, in light of changing facts and circumstances.
Discontinued Operations consists of our former Casino Magic Biloxi operations and our
operations at The Casino at Emerald Bay in The Bahamas, which we closed on January 2, 2009. We
recorded losses from discontinued operations of $241,000 and $778,000, net of income taxes, for the
three and nine months ended September 30, 2009, respectively, principally related to legal fees.
We recorded a loss from discontinued operations of $3.6 million, net of income taxes, for the three
months ended September 30, 2008 principally due to legal fees and we recorded income from
discontinued operations of $47.5 million, net of income taxes, for the nine months ended September
30, 2008, related to insurance proceeds received.
32
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2009, we held $155 million of cash and cash equivalents. We estimate that
approximately $70 million of such cash is needed to fund our casino cages, slot machines and
day-to-day operating and corporate accounts. This amount is expected to increase to approximately
$80 million with the opening of River City in the spring of 2010. As of September 30, 2009, we had
a $531 million revolving credit facility that matures in December 2010 (the Credit Facility), of
which $12.6 million was committed under various letters of credit and the remainder of which was
unutilized. Lending commitments of approximately $41 million and $24 million of the $531 million
Credit Facility are held by Lehman Commercial Paper, Inc.s (LCPI) and CIT Group, Inc. (CIT),
respectively, each of which has filed bankruptcy in September 2008 and November 2009, respectively.
LCPI has not funded any portion of the revolver drawings since filing bankruptcy. While CIT has
funded its pro rata portion of the Credit Facility as of our last funding date of October 8, 2009,
there can be no assurance that it will do so in the future. As of November 5, 2009, we have
borrowed approximately $18.5 million under the Credit Facility, and anticipate additional
borrowings in the future to fund our development projects and other general corporate needs.
We generally produce significant positive cash flows from operations, though this is not
always reflected in our reported net income due to large non-cash charges such as depreciation.
However, our ongoing liquidity will depend on a number of factors, including available cash
resources, cash flow from operations, funding of construction of our development projects and our
compliance with covenants contained in the Credit Facility and bond indentures.
Summary and Discussion of Certain Net Cash Results
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
Net cash provided by operating activities |
|
$ |
91.4 |
|
|
$ |
125.6 |
|
Net cash used in investing activities |
|
$ |
(122.3 |
) |
|
$ |
(267.3 |
) |
Net cash provided by financing activities |
|
$ |
70.6 |
|
|
$ |
75.1 |
|
Operating Cash Flow
Our cash provided by operating activities in the nine months ended September 30, 2009
decreased from the prior-year period due principally to the receipt of insurance settlement
proceeds in the prior year related to our former Casino Magic Biloxi property.
Investing Cash Flow
The following is a summary of our capital expenditures, by property or project, for the nine
months ended September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended |
|
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(in millions) |
|
River City |
|
$ |
108.0 |
|
|
$ |
25.9 |
|
Sugarcane Bay |
|
|
10.4 |
|
|
|
10.5 |
|
Belterra Casino Resort |
|
|
5.0 |
|
|
|
4.9 |
|
LAuberge du Lac |
|
|
3.9 |
|
|
|
22.5 |
|
Boomtown New Orleans |
|
|
3.2 |
|
|
|
7.6 |
|
Lumière Place Casino |
|
|
8.2 |
|
|
|
72.8 |
|
Boomtown Reno |
|
|
1.6 |
|
|
|
6.1 |
|
Atlantic City |
|
|
1.0 |
|
|
|
102.1 |
|
Boomtown Bossier City |
|
|
2.6 |
|
|
|
2.4 |
|
Casino Magic Argentina |
|
|
0.7 |
|
|
|
4.5 |
|
Other |
|
|
1.6 |
|
|
|
8.4 |
|
|
|
|
|
|
|
|
Total capital expenditures |
|
$ |
146.2 |
|
|
$ |
267.7 |
|
|
|
|
|
|
|
|
33
As of September 30, 2009, we had cumulatively invested approximately $260 million in the River
City project, $36.0 million in the Sugarcane Bay project and $35.9 million in the Baton Rouge
project. These amounts include cash expenditures, land acquisitions, capitalized interest and
pre-opening costs.
In April 2009, the Louisiana Gaming Control Board (LGCB) granted 150-day extensions for
development of our Sugarcane Bay and Baton Rouge projects. The extensions, which were similar to
earlier extensions approved in February 2009, were granted based on the continued disruption in the
global capital markets. We have begun the foundation work for Sugarcane Bay, adjacent to LAuberge
du Lac in Lake Charles, and design and entitlement work for our project in Baton Rouge. Under the
current statement of conditions established by LGCB, Sugarcane Bay is supposed to be completed by
December 27, 2010. Under our tentative construction timeline, Sugarcane Bay is not expected to be
completed by that date. We therefore expect to seek an additional extension from the LGCB. In
October 2009, the LGCB granted an additional extension for entering into a construction contract
for our Baton Rouge project. The deadline is now March 31, 2010. We have indicated to the LGCB
that we may need to seek additional extensions. There is no certainty that such additional
extensions on either project will be granted.
Managements intention is to use existing cash resources, cash flows from operations, funds
available under the Credit Facility and funds from the recently completed senior notes private
offering to fund operations, maintain existing properties, make necessary debt service payments and
fund the development of some of our capital projects. Although the capital markets have improved
significantly in recent months, they remain volatile and subject to change.
Our substantial funding needs in connection with our development projects will require us to
raise substantial additional capital from outside sources. On July 21, 2009, we amended our Credit
Facility to, among other things, adjust certain of the financial covenant ratios (see discussion
below). Our ability to borrow under our Credit Facility is contingent upon, among other things,
meeting customary covenants. If we are unable to borrow under our Credit Facility, or if our
operating results are adversely affected because of a reduction in consumer spending, or for any
other reason, this may affect our ability to complete our projects unless we sell assets, enter
into leasing facilities, or take other measures to find additional resources. There is no certainty
that we will be able to do so on terms that are favorable to the Company or at all.
In August 2009, we closed an offering of $450 million in aggregate principal amount of new
8.625% Notes. See discussion of the 8.625% Notes in the Financing Cash Flow section below. A
portion of the proceeds of the 8.625% Notes were used to repay approximately $206 million in
revolving credit borrowings under the Credit Facility. As of September 30, 2009, the Credit
Facility was unutilized, other than $12.6 million committed under various letters of credit.
Although the capital markets have improved recently, as evidenced by our ability to issue $450
million in aggregate principal amount of 8.625% Notes discussed below, we cannot accurately predict
our ability to access the capital markets again in the future. The need for additional capital
during periods of difficult market conditions may force us to delay, reduce or cancel planned
development and expansion projects, sell assets or obtain such capital on potentially unfavorable
terms. Management intends to proceed with construction of its various projects only when it
believes that reasonably sufficient funding is available on terms favorable to the Company.
In addition to the effect that the global financial crisis has already had on us, we may face
significant challenges if conditions in the financial markets do not continue to improve, or if
they worsen. The credit crisis has adversely affected overall consumer demand, which could have a
negative effect on our revenues. Furthermore, the effects of the recent disruption to the overall
economy could adversely affect consumer confidence and the willingness of consumers to spend money
on leisure activities. Because of the current economic environment, certain of our customers may
curtail the frequency of their visits to our casinos and may reduce the amounts they wager and
spend during those visits below what they would normally wager and spend in better economic times.
All of these effects could have a material adverse effect on our liquidity.
For a detailed discussion of our projects and associated capital needs, see the section
Managements Discussion and Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources within our Annual Report on Form 10-K for the fiscal year ended December 31,
2008.
34
Financing Cash Flow
On August 10, 2009, we closed an offering of $450 million in aggregate principal amount of new
8.625% Notes. The 8.625% Notes were issued in a private offering conducted pursuant to Rule 144A
and Regulation S under the Securities Act of 1933, as amended, at a price of 98.597% of par to
yield 8.875% to maturity. Net of the original issue discount, initial purchasers fees and various
costs and expenses, net proceeds from the offering were approximately $434 million. Net proceeds
from the offering were used to repurchase $75.0 million in aggregate principal amount of our 8.25%
Notes, repurchase all $135 million in aggregate principal amount of our then existing 8.75% Notes,
and repay approximately $206 million in revolving credit borrowings under the Credit Facility. We
expect to use the remaining net proceeds from the offering for general corporate purposes,
including funding our development projects.
As of September 30, 2009, for borrowings under the Credit Facility, the interest rate is
computed as either LIBOR plus a margin of 2.25% or the prime rate plus a margin of 0.75% based on
our Consolidated Leverage Ratio as defined in the Credit Facility. As of September 30, 2009,
1-month LIBOR was 0.24% and the prime rate was 3.25%. The letters of credit bear facility fees of
2.25% per annum as of September 30, 2009. The Credit Facility also bears commitment fees based on
our Consolidated Leverage Ratio. Under the Credit Facility, at least 40% of our total funded debt
obligations must be subject to fixed interest rates or hedge agreements or other interest rate
protection agreements. As of September 30, 2009, all of our debt was fixed rate debt.
The Credit Facility has, among other things, restrictive financial covenants and capital
spending limits and other affirmative and negative covenants. The Credit Facility provides for
permitted capital expenditures for our River City project, maintenance of our existing casinos and
hotels and various other new projects, all up to certain limits. In certain circumstances, our
Credit Facility permits those limits to be increased through asset sales or equity transactions.
We believe we were in compliance with all of the financial covenants in our Credit Facility as of
September 30, 2009.
On July 21, 2009, we amended our Credit Facility to, among other things, adjust certain
financial covenant ratios, including the maximum permitted rolling four quarter consolidated
leverage ratio (as defined in the Credit Facility), to not exceed 6.50x for the quarterly periods
ended September 30, 2009 and December 31, 2009; not exceed 6.75x for the quarterly period ended
March 31, 2010; not exceed 6.50x for the quarterly period ended June 30, 2010; not exceed 6.00x for
the quarterly period ended September 30, 2010, and not to exceed 5.00x for all fiscal quarters
ending thereafter. Our consolidated leverage ratio for the four quarters ended September 30, 2009
was 5.17x and we expect it to rise slightly as River City nears completion, which is expected to
occur in the spring of 2010. In addition, the amendment to our Credit Facility lowered the
required minimum consolidated interest coverage ratio (as defined in the Credit Facility) for each
of our fiscal quarters ending on and after December 31, 2009 through June 30, 2010 by 0.25
percentage points. The amendment also increased the applicable margin by 0.50 percentage points
for all revolving credit loans that mature prior to December 14, 2010.
In addition, the amendment to the Credit Facility reduced each lenders commitment by 15.0%,
so that the aggregate commitment under the Credit Facility, as amended, is approximately $531
million. Under the amendment to the Credit Facility, we may from time to time request lenders, in
their discretion, to convert their existing revolving loan commitments to a new tranche of
extending revolving loan commitments that mature on a date beyond the existing maturity date of
December 14, 2010 on such pricing terms in an extending revolving credit commitment agreement,
and/or request extending revolving loan commitments or term loans from new lenders, in each case
without increasing the total amount of loans that may be outstanding under the Credit Facility
beyond $625 million. Existing lenders are not required to extend the current maturity of their
commitments or to provide additional commitments.
As contemplated by the amendment to the Credit Facility, Lehman Commercial Paper, Inc.s
(LCPI) resigned as the administrative agent and Barclays Bank PLCs was appointed as the
administrative agent under the Credit Facility effective as of July 24, 2009. We released LCPI
from claims and damages under the Credit Facility and agreed not to institute action against LCPI
under the Credit Facility, which release and agreement became effective as of such replacement
date, but LCPIs commitment as a lender under the Credit Facility will remain formally in place.
LCPI has not funded its commitment under the Credit Facility since it entered bankruptcy on October
5, 2008, and we have no effective remedy to require LCPI to fund its commitment. Pursuant to the
Credit Facility, any reduction in the commitments of the lenders must be pro rata in accordance with the commitment
of each lender as a percentage of the lenders aggregate commitments. Because LCPIs commitment
remains formally in place and because the release merely reflects the actual status of the LCPI
commitment, we believe that our release of LCPI does not constitute a non-pro rata reduction of the
revolver commitment that would be prohibited under the Credit Facility. As of November 5, 2009,
the unfunded portion of LCPIs commitment was approximately $41 million. The credit crisis has
affected another lender under our Credit Facility. On November 1, 2009, CIT Group, Inc. (CIT),
one of the existing lenders under our Credit Facility, filed for bankruptcy under Chapter 11 of the
Bankruptcy Code. As of September 30, 2009, CIT was a 4.6% participant in our Credit Facility and
had funded its pro rata portion of the approximately $18.5 million in outstanding borrowings as of
November 5, 2009, or approximately $0.8 million. While CIT has funded its pro rata portion of our
outstanding borrowings under our Credit Facility as of our last funding date of October 8, 2009,
there can be no assurance that it will continue to do so in the future.
35
In addition, even though our existing Credit Facility matures in December 2010, if we have not
made arrangements to extend the maturity of our Credit Facility, entered into a new Credit Facility
or arranged alternate refinancing by the filing of our annual report on Form 10-K for the 2009
year, and if we have substantial amounts drawn under the Credit Facility, generally accepted
accounting principles will require that such amounts outstanding under the Credit Facility as of
the 2009 year-end, be treated as a current liability as of the 2009 year-end. As of September 30,
2009, we had no outstanding borrowings under our Credit Facility, other than $12.6 million
outstanding under letters of credit. As of November 5, 2009, we have $18.5 million outstanding
under our Credit Facility in addition to the outstanding letters of credit and do not currently
expect to have substantially greater amounts outstanding at the 2009 year-end. If, however, the
outstanding borrowings under our Credit Facility at the 2009 year-end were substantial, treating
them as a current liability may lead to a going concern or like qualification from our auditors
with respect to our 2009 audited financial statements. Such a qualification would result in a
default under our Credit Facility that potentially could lead to an acceleration of our Credit
Facility borrowings and then cross-defaults under our indentures. We are discussing with certain
existing and prospective lenders, among other things, an extension of the maturity of our Credit
Facility or a new credit facility, but there can be no assurance that we will be able to obtain any
such extension or new credit facility, and if we are able to do so, the terms may be materially
less favorable or the facility may be smaller than the existing Credit Facility. If we cannot make
such arrangements with our existing lenders or new lenders, we may need to make other financing
arrangements to obtain a longer maturity on our senior secured debt. Such arrangements might be on
unfavorable terms.
As of September 30, 2009, in addition to $12.6 million in letters of credit under our Credit
Facility, we had outstanding $450 million aggregate principal amount of 8.625% Notes, $385 million
aggregate principal amount of 7.50% senior subordinated notes due 2015 (7.50% Notes), $200
million aggregate principal amount of 8.25% Notes, $9.5 million aggregated principal amount of
8.75% Notes and certain other debt. On October 1, 2009, we redeemed the remaining $9.5 million
aggregate principal amount of 8.75% Notes. As the remaining $9.5 million of 8.75% Notes were not
purchased until October 1, 2009, the $9.5 million is classified as a current liability on the
unaudited Condensed Consolidated Financial Statements as of September 30, 2009.
In August 2009, we purchased $75.0 million in aggregate principal amount of our 8.25% Notes
pursuant to a cash tender offer. Tendering holders were paid an aggregate of approximately $79.1
million, representing 102.063% of par, plus accrued and unpaid interest, using proceeds from the
8.625% Notes.
In July 2009, we commenced a cash tender offer for the entire $135 million aggregate principal
amount of 8.75% Notes. In August 2009, using proceeds from the 8.625% Notes, we purchased $125.5
million aggregate principal amount of such notes pursuant to such cash tender offer. Tendering
holders were paid an aggregate of approximately $133.4 million, representing 103.167% of par, plus
accrued and unpaid interest.
On August 31, 2009, The Bank of New York Mellon Trust Company, N.A. (the Trustee), as
trustee under the indenture governing the 8.75% Notes, issued a notice of redemption on our behalf
for the remaining $9.5 million in aggregate principal amount of 8.75% Notes. Pursuant to the
notice of redemption, we exercised our option to call for redemption such remaining notes at a
redemption price of 102.917% of aggregate principal amount of the notes, together with accrued and
unpaid interest. Using proceeds from the 8.625% Notes, on the redemption date of
October 1, 2009, we purchased the remaining $9.5 million aggregate principal amount of 8.75%
Notes, and on October 7, 2009, we formally discharged the indenture governing the 8.75% Notes.
36
The 8.625% Notes are senior unsecured obligations and rank equally in right of payment with
all of our existing and future senior debt, including debt under our Credit Facility. The 8.625%
Notes are, however, effectively subordinated to our Credit Facility, which is secured by a first
priority lien, as well as any other secured debt which may be issued in the future. The 8.625%
Notes are guaranteed on a senior basis by certain of our current and future domestic restricted
subsidiaries. The 8.625% Notes rank senior to our existing 7.50% Notes and 8.25% Notes, and prior
to the discharge of the indenture governing the 8.75% Notes, to our 8.75% Notes.
Under the indenture governing the 8.625% Notes, among other debt baskets, we are permitted to
incur the greater of $750 million or 3.5x Consolidated EBITDA (as defined in the Indenture) in
senior secured indebtedness, in addition to the 8.625% Notes. Under the indentures governing the
7.50% Notes and 8.25% Notes, we are permitted to incur up to $1.5 billion and $475 million in
senior secured indebtedness, respectively. As of September 30, 2009, these senior secured
indebtedness baskets were substantially unutilized. Under these
senior secured indebtedness baskets, the Company is permitted in
certain circumstances to incur unsecured indebtedness. In addition, the indentures governing the
8.625% Notes, the 7.50% Notes and the 8.25% Notes include other debt incurrence baskets, including
a permitted refinancing basket and a general debt basket, the permitted size of the latter of which
is the greater of $250 million or 5% of Consolidated Total Assets (as defined in the indentures)
under the 8.625% Notes and 7.50% Notes, and $50 million under the 8.25% Notes. Under all three
indentures, we may also incur additional indebtedness if, after giving effect to the indebtedness
proposed to be incurred, our Consolidated Coverage Ratio (essentially, a ratio of adjusted EBITDA
to interest) for a trailing four-quarter period on a pro forma basis (as defined in each of the
three currently existing indentures) would be at least 2 to 1. As a result of the recent amendment
to the Credit Facility and the issuance of the 8.625% Notes, resulting in higher interest expense
on a pro-forma basis, our Consolidated Coverage Ratio under all three currently existing indentures
is below 2 to 1 as of September 30, 2009. Hence, under the most restrictive of our bond
indentures, the indenture governing the 8.25% Notes, which are currently callable, we are currently
restricted to borrowing no more than $525 million of senior indebtedness, which includes the
general debt basket amount of $50 million. The Credit Facility, of which $18.5 million is
outstanding as of November 5, 2009, has a tighter restriction of approximately $220 million of
additional indebtedness, based on the Consolidated Leverage Ratio at September 30, 2009.
The 7.50% Notes, 8.25% Notes and 8.625% Notes become or became callable at a premium over
their face amount on June 15, 2011, March 15, 2008 and August 1, 2013, respectively. Such premiums
decline periodically as the Notes progress towards their respective maturities. The 7.50% Notes and
8.625% Notes are redeemable prior to such time at a price that reflects a yield to the first call
that is equivalent to the applicable Treasury bond yield plus 0.5 percentage points.
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
The following material changes occurred during the quarterly period ended September 30, 2009,
to our contractual obligations and commitments as disclosed in our Annual Report on Form 10-K for
the year ended December 31, 2008. On July 21, 2009, we entered into the Fourth Amendment to the
Credit Facility. On August 10, 2009, we closed an offering of $450 million aggregate principal
amount of 8.625% senior unsecured notes due 2017. For more detailed descriptions of the Fourth
Amendment to the Credit Facility and the issuance of 8.625% senior notes due 2017, see Note 2 to
our unaudited Condensed Consolidated Financial Statements.
CRITICAL ACCOUNTING POLICIES
A description of our critical accounting policies and estimates can be found in Item 7 of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008. For a more extensive
discussion of our accounting policies, see Note 1, Summary of Significant Accounting Policies, in
the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2008. There were no newly identified significant changes during the nine
months ended September 30, 2009, nor were there any material changes to the critical accounting
policies and estimates discussed in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.
37
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the Act) provides certain safe
harbor provisions for forward-looking statements. Except for the historical information contained
herein, the matters addressed in this Quarterly Report on Form 10-Q, as well as in other reports
filed with or furnished to the SEC or statements made by us, may constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may provide
oral or written forward-looking statements in our other periodic reports on Form 10-K, Form 10-Q,
Form 8-K, press releases and other materials released to the public. All forward-looking statements
made in this Quarterly Report on Form 10-Q and any documents we incorporate by reference are made
pursuant to the Act. Words such as, but not limited to, believes, expects, anticipates,
estimates, intends, plans, could, may, will, should, and similar expressions are
intended to identify forward-looking statements. Such forward-looking statements, which may
include, without limitation, statements regarding Pinnacles future operating performance, future
growth, anticipated milestones, completion and opening schedules of various projects, expansion
plans, construction schedules, cash needs, cash reserves, adequacy of resources to fund development
and expansion projects, liquidity, compliance with required financial ratios, operating and capital
expenses, financing options, including the state of the credit markets, our ability to access the
capital markets, our ability to repair The Admiral and retain the gaming license for the President
Casino, expected receipts of insurance proceeds including the amount of any such recovery and
sufficiency of such coverage, the future outlook of Pinnacle and the gaming industry, operating
results and pending regulatory and legal matters, are all subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those anticipated by us.
This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks
and uncertainties. Factors that may cause our actual performance to differ materially from that
contemplated by such forward-looking statements include, among others:
|
|
|
our substantial funding needs in connection with our development projects and
other capital-intensive projects will require us to raise substantial amounts of funding
from outside sources; |
|
|
|
|
we may not be able to renew or extend our Credit Facility or enter into a new
credit facility in todays difficult bank credit markets. In addition, our ability to
renew or extend our Credit Facility or to enter into a new credit facility may be
impaired further if current market conditions continue or worsen. If we are able to
renew or extend our Credit Facility, it may be on terms substantially less favorable
than the current Credit Facility. We may face similar risks with respect to our
outstanding bonds; |
|
|
|
|
our business may be sensitive to reductions in consumers discretionary spending
as a result of recent downturns in the economy; |
|
|
|
|
the global financial crisis and recession may have an effect on our business and
financial condition in ways that we currently cannot accurately predict; |
|
|
|
|
our present indebtedness and projected future borrowings could have adverse
consequences to us; future cash flows may not be sufficient to meet our obligations and
we might have difficulty obtaining additional financing; we may experience adverse
effects of interest-rate and exchange-rate fluctuations; |
|
|
|
|
insufficient or lower-than-expected results generated from our new developments
and any acquired properties may negatively affect the market for our securities; |
|
|
|
|
many factors could prevent us from completing our construction and development
projects as planned, including the escalation of construction or other costs beyond
increments anticipated in our construction budgets; |
|
|
|
|
the gaming industry is very competitive and increased competition, including by
Native American gaming facilities and the recent expansion of gaming in Ohio, could
adversely affect our profitability; |
|
|
|
|
issues with respect to our insurance policies could affect our recovery of
further insurance proceeds associated with the 2005 hurricane damage and related
business interruption; |
|
|
|
|
natural disasters have made it more challenging for us to obtain similar levels
of Weather Catastrophe Occurrence/Named Windstorm, Flood and Earthquake insurance
coverage for our properties compared to the levels before the 2005 hurricane; |
|
|
|
|
we operate in a highly taxed industry and may be subject to higher taxes in the
future; |
38
|
|
|
we may not meet the conditions for the maintenance of the licenses that we plan
to utilize for our Sugarcane Bay and Baton Rouge projects; |
|
|
|
|
we may not obtain further extensions from the Louisiana Gaming Control Board for
our Sugarcane Bay and Baton Rouge projects; |
|
|
|
|
we could lose the right to open our River City project if we fail to meet the
conditions imposed by the Missouri Gaming Commission; |
|
|
|
|
we could lose our gaming license for the President Casino if we are unable to
repair the hull of the Admiral prior to the expiration of the ABS certification and we
have exhausted all of our legal remedies; |
|
|
|
|
the loss of management and other key personnel could significantly harm our
business; |
|
|
|
|
state legislatures from time to time consider legislation that could increase our
competition or taxes; and |
|
|
|
|
our results of operations and financial condition could be materially adversely
affected by the occurrence of natural disasters, such as hurricanes, or other
catastrophic events, including war and terrorism. |
For a further list and description of various risks, relevant factors and uncertainties that
could cause future results or events to differ materially from those expressed or implied in our
forward-looking statements, please see the Managements Discussion and Analysis of Financial
Condition and Results of Operations section contained in this Quarterly Report on Form 10-Q, as
well as the Risk Factors and Management Discussion and Analysis of Financial Condition and
Results of Operations sections contained in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 and review our other filings (other than any portion of such filings that
are furnished under applicable SEC Rules rather than filed) with the SEC, which are hereby
incorporated by reference into this Quarterly Report on Form 10-Q. Management attempts to use its
best efforts to disclose all risks that might be pertinent to an investment in the Company, but
such disclosure requires judgment as to risk and materiality and different people, or even the same
people at different times, may gauge such risks and materiality differently. All forward-looking
statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Form
10-Q. We undertake no obligation to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
At times, we are exposed to market risk from adverse changes in interest rates with respect to
the short-term floating interest rate on borrowings under our Credit Facility. As of September 30,
2009, our Credit Facility, remained unutilized, other than $12.6 million committed under various
letters of credit. As of September 30, 2009, any borrowings outstanding under our Credit Facility
would have accrued interest at LIBOR plus a margin determined by our current consolidated leverage
ratio, which margin was 2.25%. As of September 30, 2009, if LIBOR rates were to increase or
decrease by one percentage point, our interest expense would have not changed as we had no
borrowings outstanding.
We are also exposed to market risk from adverse changes in the exchange rate of the dollar to
the Argentine peso, which has fluctuated significantly in recent months. The total assets of Casino
Magic Argentina at September 30, 2009 were $27.6 million, or approximately 1.4% of our consolidated
assets.
39
The table below provides the principal cash flows and related weighted average interest rates
by contractual maturity dates for our debt obligations at September 30, 2009. At September 30,
2009, we did not hold any material investments in market-risk-sensitive instruments of the type
described in Item 305 of Regulation S-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair |
|
Liabilities |
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
Thereafter |
|
|
Total |
|
|
Value |
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolver Loan Facility |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Rate |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
|
|
7.50% Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
385,000 |
|
|
$ |
385,000 |
|
|
$ |
340,244 |
|
Fixed rate |
|
|
7.50 |
% |
|
|
7.50 |
% |
|
|
7.50 |
% |
|
|
7.50 |
% |
|
|
7.50 |
% |
|
|
7.50 |
% |
|
|
7.50 |
% |
|
|
|
|
8.25% Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
200,000 |
|
|
|
|
|
|
|
|
|
|
$ |
200,000 |
|
|
$ |
199,250 |
|
Fixed rate |
|
|
8.25 |
% |
|
|
8.25 |
% |
|
|
8.25 |
% |
|
|
8.25 |
% |
|
|
8.25 |
% |
|
|
8.25 |
% |
|
|
8.25 |
% |
|
|
|
|
8.75% Notes |
|
$ |
9,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,535 |
|
|
$ |
9,785 |
|
Fixed rate |
|
|
8.75 |
% |
|
|
8.75 |
% |
|
|
8.75 |
% |
|
|
8.75 |
% |
|
|
8.75 |
% |
|
|
8.75 |
% |
|
|
8.75 |
% |
|
|
|
|
8.625% Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
450,000 |
|
|
$ |
450,000 |
|
|
$ |
450,563 |
|
Fixed rate |
|
|
8.625 |
% |
|
|
8.625 |
% |
|
|
8.625 |
% |
|
|
8.625 |
% |
|
|
8.625 |
% |
|
|
8.625 |
% |
|
|
8.625 |
% |
|
|
|
|
All Other |
|
$ |
23 |
|
|
$ |
97 |
|
|
$ |
98 |
|
|
$ |
102 |
|
|
$ |
110 |
|
|
$ |
443 |
|
|
$ |
873 |
|
|
$ |
873 |
|
Avg. Interest rate |
|
|
7.33 |
% |
|
|
7.33 |
% |
|
|
7.33 |
% |
|
|
7.25 |
% |
|
|
7.25 |
% |
|
|
7.25 |
% |
|
|
7.25 |
% |
|
|
|
|
Item 4. Controls and Procedures
The Companys management, with the participation of the Chief Executive Officer (the CEO)
and the Chief Financial Officer (the CFO), evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of September 30, 2009. Based on this evaluation, the Companys management, including the
CEO and the CFO, concluded that, as of September 30, 2009, the Companys disclosure controls and
procedures were effective, in that they provide a reasonable level of assurance that information
required to be disclosed by the Company in the reports filed or submitted by it under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the SECs
rules and forms. The Companys disclosure controls and procedures are designed to provide
reasonable assurance that information required to be disclosed by the Company in the reports that
it files or submits under the Exchange Act is accumulated and communicated to the Companys
management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding
required disclosure.
Notwithstanding the foregoing, there can be no assurance that the Companys disclosure
controls and procedures will detect or uncover all failures of persons within the Company and its
consolidated subsidiaries to disclose material information otherwise required to be set forth in
the Companys periodic reports. There are inherent limitations to the effectiveness of any system
of disclosure controls and procedures, including the possibility of human error and the
circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure
controls and procedures can only provide reasonable, not absolute, assurance of achieving their
control objectives.
No change in the Companys internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September
30, 2009 that has materially affected, or is reasonably likely to materially affect, the Companys
internal control over financial reporting.
40
PART II
Item 1. Legal Proceedings
The following is a material development and a material update to the litigation described in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and our Quarterly
Reports on Form 10-Q for the quarterly periods ended March 31, 2009 and June 30, 2009, under the
heading Legal Proceedings and which reference should be made.
Jebaco Litigation: On August 9, 2006, Jebaco, Inc. (Jebaco) filed suit in the U.S. District
Court for the Eastern District of Louisiana against Harrahs Operating Co., Inc., Harrahs Lake
Charles, LLC, Harrahs Star Partnership, Players LC, LLC, Players Riverboat Management, LLC,
Players Riverboat II, LLC, and Pinnacle Entertainment, Inc. The lawsuit arises out of an agreement
between Jebaco and Harrahs (as successor in interest to
the various Players defendants) whereby Harrahs was obligated to pay Jebaco a fee based on
the number of patrons entering Harrahs two Lake Charles, Louisiana riverboat casinos. In November
2006, we acquired the Harrahs Lake Charles subsidiaries, including the two riverboats. The lawsuit
filed by Jebaco asserts that Harrahs, in ceasing gaming operations in Lake Charles and ceasing
payments to Jebaco, breached its contractual obligations to Jebaco and asserts damages of
approximately $34.0 million. Jebaco also asserts that our agreement with Harrahs violates state
and federal antitrust laws. The lawsuit seeks antitrust damages jointly and severally against both
us and Harrahs and seeks a trebling of the $34.0 million in damages Jebaco alleges it has
suffered. The defendants answered the complaint, denying all claims and asserting that the lawsuit
is barred, among other reasons, because of the approval of our transaction with Harrahs by the
Louisiana Gaming Control Board and the lack of antitrust injury to Jebaco. In January 2007, all of
the defendants moved to dismiss all of the claims of the complaint, which motions were heard on
July 18, 2007. The motions to dismiss were granted with prejudice as to the federal antitrust
claims and the state-law claims were dismissed without prejudice. Judgment of dismissal was entered
on March 5, 2008. Jebaco has appealed the dismissal of the federal antitrust claims to the U.S.
Court of Appeals for the Fifth Circuit. Further, on March 13, 2008, Jebaco filed a new lawsuit
against the same parties in the Louisiana district civil court for Orleans Parish. This lawsuit
seeks unspecified damages arising out of the same circumstances as the federal lawsuit based on
claims for breach of the duty of good faith, negligent breach of contract, breach of contract,
unfair trade practices, unjust enrichment, and subrogation to Harrahs insurance proceeds. In May
2009, the Louisiana district civil court extended the stay of the state case indefinitely pending
the decision of the Fifth Circuit on Jebacos appeal. On October
30, 2009, the Fifth Circuit affirmed the district courts
dismissal of the federal antitrust claims. Jebaco
has not yet indicated if it intends to appeal the Fifth Circuit decision. We intend to move for
dismissal of the state-court claims, but cannot predict at this time when that motion will be
scheduled for hearing by the state district court.
41
President Casino: The President Casino operates on a vessel known as the Admiral. The hull
of the Admiral was built in 1904. The current certification of the hull by the American Bureau of
Shipping (ABS) expires on July 19, 2010, and the Admiral may not be used to carry passengers
beyond that date without significant repairs and/or specific approval. On July 28, 2009, the
Missouri Gaming Commission (MGC) held a public hearing to discuss our plans to address the
expiration of the ABS certification in 2010. At such hearing, we proposed, subject to MGC review
and ABS and other approvals, to replace the Admiral with a different vessel, specifically a
riverboat built in 1993, which we acquired in 2006. Such boat has been out-of-service since
Hurricane Rita in 2005. At this July 28, 2009 hearing, the Executive Director of the MGC, through
counsel, made a recommendation that the MGC issue a ruling to prohibit Pinnacle from repairing,
replacing or moving the Admiral. On August 26, 2009, the MGC approved a resolution that it is not
practicable for us to repair the President Casino and prohibits us from relocating the President,
or any other vessel, from the current location of the President Casino. The MGCs resolution also
provided that a new license would be needed to replace the President Casino with another vessel at
its present site. On September 24, 2009, Pinnacle Entertainment, Inc. and its wholly-owned
subsidiary President Riverboat Casino-Missouri, Inc. filed a petition for judicial review with the
Missouri Court of Appeals, Western District (CAWD) regarding the MGCs resolution. The petition
requests that the CAWD (1) set aside the MGCs resolution; (2) stay the resolution, or
alternatively, issue a writ of prohibition which would prevent the MGC from enforcing the
resolution. On September 25, 2009, Pinnacle Entertainment, Inc. and President Riverboat Casino
Missouri, Inc. filed a motion in the CAWD requesting that the CAWD (1) stay the enforcement of the
resolution, (2) grant us the specific right, pending the appeal, to make and execute all necessary
plans to repair or replace the President Casino and (3) order expedited briefing, argument, and
review of the appeal. On October 7, 2009, the MGC responded to the motion to stay by arguing that
the MGC is not trying to prohibit the repair of the Admiral and that whether the hull of the
Admiral can be recertified is between us and the ABS. On October 15, 2009, the CAWD denied the
motion to stay and set an accelerated briefing schedule for the appeal. On October 22, 2009 the
MGC moved to dismiss our appeal. We currently intend to repair the hull of the Admiral prior to the
expiration of the ABS certification in July 2010. In the event that we are unsuccessful in
repairing the hull of the Admiral prior to the expiration of the ABS certification and we are
unsuccessful in our lawsuit and we have exhausted all other legal remedies, we could lose the
gaming license for the President Casino. We intend to vigorously pursue all avenues that would
allow us to continue the gaming activities of the President Casino, which we purchased in December
2006 at a cost of approximately $45 million.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in the Risk Factors
section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
42
Item 6. Exhibits
|
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
|
3.1
|
|
|
Restated Certificate of Incorporation of Pinnacle Entertainment, Inc., as amended, is
hereby incorporated by reference to Exhibit 3.3 to the Companys Current Report on Form
8-K filed on May 9, 2005. (SEC File No. 001-13641). |
|
|
|
|
3.2
|
|
|
Restated Bylaws of Pinnacle Entertainment, Inc., as amended, are hereby incorporated by
reference to Exhibit 3.2 to the Companys Current Report on Form 8-K filed on December
15, 2008. (SEC File No. 001-13641). |
|
|
|
|
4.1
|
|
|
Seventh Supplemental Indenture, dated as of July 16, 2009, governing the 8.25% Senior
Subordinated Notes due 2012, by and among Pinnacle Entertainment, Inc., the guarantors
identified therein and The Bank of New York Mellon Trust Company, N.A., is hereby
incorporated by reference to Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q
filed on August 4, 2009. (SEC File No. 001-13641). |
|
|
|
|
4.2
|
|
|
First Supplemental Indenture, dated as of July 16, 2009, governing the 7.50% Senior
Subordinated Notes due 2012, by and among Pinnacle Entertainment, Inc., the guarantors
identified therein and The Bank of New York Mellon Trust Company, N.A. , is hereby
incorporated by reference to Exhibit 4.2 to the Companys Quarterly Report on Form 10-Q
filed on August 4, 2009. (SEC File No. 001-13641). |
|
|
|
|
4.3
|
|
|
Indenture dated as of August 10, 2009,
governing the 8.625% Senior Notes due
2017, by and among the Company, the
guarantors identified therein and The
Bank of New York Mellon Trust Company,
N.A. is hereby incorporated by reference
to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed on August 13,
2009. (SEC File No. 001-13641). |
|
|
|
|
4.4
|
|
|
Form of 8.625% Senior Note due 2017 is
hereby incorporated by reference to
Exhibit A contained in Exhibit 4.1 to the
Companys Current Report on Form 8-K
filed on August 13, 2009. (SEC File No.
001-13641). |
|
|
|
|
4.5
|
|
|
Registration Rights Agreement, dated as
of August 10, 2009, among the Company,
the guarantors identified therein and
J.P. Morgan Securities Inc., Banc of
America Securities LLC, Barclays Capital
Inc., Deutsche Bank Securities Inc. as
representatives of the several initial
purchasers is hereby incorporated by
reference to Exhibit 4.3 to the Companys
Current Report on Form 8-K filed on
August 13, 2009. (SEC File No.
001-13641). |
|
|
|
|
10.1
|
|
|
Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of July 21,
2009, by and between Pinnacle Entertainment, Inc., Lehman Commercial Paper Inc., as the
administrative agent, and the Required Lenders is hereby incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on July 24, 2009. (SEC
File No. 001-13641). |
|
|
|
|
10.2
|
|
|
Amendment, Resignation, Waiver, Consent and Appointment Agreement, dated as of July 24,
2009, by and between Pinnacle Entertainment, Inc., Lehman Commercial Paper Inc. and
Barclays Bank PLC is hereby incorporated by reference to Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q filed on August 4, 2009. (SEC File No. 001-13641). |
|
|
|
|
10.3
|
|
|
Purchase Agreement, dated as of July 27, 2009, by and among Pinnacle Entertainment, Inc.
and J.P. Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital Inc.,
Deutsche Bank Securities Inc., as representatives of the several Initial Purchasers named
in Schedule 1 of the Purchase Agreement is hereby incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K filed on July 31, 2009. (SEC File No.
001-13641). |
|
|
|
|
11
|
* |
|
Statement re: Computation of Earnings Per Share. |
|
|
|
|
31.1
|
* |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
|
|
|
|
31.2
|
* |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
|
|
|
|
32
|
* |
|
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer. |
43
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
PINNACLE ENTERTAINMENT, INC.
(Registrant)
|
|
Date: November 5, 2009 |
By: |
/s/ Stephen H. Capp
|
|
|
|
Stephen H. Capp |
|
|
|
Executive Vice President and Chief Financial Officer
(Authorized Officer, Principal Financial Officer) |
|
44
EXHIBIT INDEX
|
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
|
3.1
|
|
|
Restated Certificate of Incorporation of Pinnacle Entertainment, Inc., as amended, is
hereby incorporated by reference to Exhibit 3.3 to the Companys Current Report on Form
8-K filed on May 9, 2005. (SEC File No. 001-13641). |
|
|
|
|
3.2
|
|
|
Restated Bylaws of Pinnacle Entertainment, Inc., as amended, are hereby incorporated by
reference to Exhibit 3.2 to the Companys Current Report on Form 8-K filed on December
15, 2008. (SEC File No. 001-13641). |
|
|
|
|
4.1
|
|
|
Seventh Supplemental Indenture, dated as of July 16, 2009, governing the 8.25% Senior
Subordinated Notes due 2012, by and among Pinnacle Entertainment, Inc., the guarantors
identified therein and The Bank of New York Mellon Trust Company, N.A., is hereby
incorporated by reference to Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q
filed on August 4, 2009. (SEC File No. 001-13641). |
|
|
|
|
4.2
|
|
|
First Supplemental Indenture, dated as of July 16, 2009, governing the 7.50% Senior
Subordinated Notes due 2012, by and among Pinnacle Entertainment, Inc., the guarantors
identified therein and The Bank of New York Mellon Trust Company, N.A. , is hereby
incorporated by reference to Exhibit 4.2 to the Companys Quarterly Report on Form 10-Q
filed on August 4, 2009. (SEC File No. 001-13641). |
|
|
|
|
4.3
|
|
|
Indenture dated as of August 10, 2009,
governing the 8.625% Senior Notes due
2017, by and among the Company, the
guarantors identified therein and The
Bank of New York Mellon Trust Company,
N.A. is hereby incorporated by reference
to Exhibit 4.1 to the Companys Current
Report on Form 8-K filed on August 13,
2009. (SEC File No. 001-13641). |
|
|
|
|
4.4
|
|
|
Form of 8.625% Senior Note due 2017 is
hereby incorporated by reference to
Exhibit A contained in Exhibit 4.1 to the
Companys Current Report on Form 8-K
filed on August 13, 2009. (SEC File No.
001-13641). |
|
|
|
|
4.5
|
|
|
Registration Rights Agreement, dated as
of August 10, 2009, among the Company,
the guarantors identified therein and
J.P. Morgan Securities Inc., Banc of
America Securities LLC, Barclays Capital
Inc., Deutsche Bank Securities Inc. as
representatives of the several initial
purchasers is hereby incorporated by
reference to Exhibit 4.3 to the Companys
Current Report on Form 8-K filed on
August 13, 2009. (SEC File No.
001-13641). |
|
|
|
|
10.1
|
|
|
Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of July 21,
2009, by and between Pinnacle Entertainment, Inc., Lehman Commercial Paper Inc., as the
administrative agent, and the Required Lenders is hereby incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on July 24, 2009. (SEC
File No. 001-13641). |
|
|
|
|
10.2
|
|
|
Amendment, Resignation, Waiver, Consent and Appointment Agreement, dated as of July 24,
2009, by and between Pinnacle Entertainment, Inc., Lehman Commercial Paper Inc. and
Barclays Bank PLC is hereby incorporated by reference to Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q filed on August 4, 2009. (SEC File No. 001-13641). |
|
|
|
|
10.3
|
|
|
Purchase Agreement, dated as of July 27, 2009, by and among Pinnacle Entertainment, Inc.
and J.P. Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital Inc.,
Deutsche Bank Securities Inc., as representatives of the several Initial Purchasers named
in Schedule 1 of the Purchase Agreement is hereby incorporated by reference to Exhibit
10.1 to the Companys Current Report on Form 8-K filed on July 31, 2009. (SEC File No.
001-13641). |
|
|
|
|
11
|
* |
|
Statement re: Computation of Earnings Per Share. |
|
|
|
|
31.1
|
* |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
|
|
|
|
31.2
|
* |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
|
|
|
|
32
|
* |
|
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer. |
45