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EXCEL - IDEA: XBRL DOCUMENT - Gold Merger Sub, LLC | Financial_Report.xls |
EX-32 - EXHIBIT 32 - Gold Merger Sub, LLC | c04815exv32.htm |
EX-31.1 - EXHIBIT 31.1 - Gold Merger Sub, LLC | c04815exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - Gold Merger Sub, LLC | c04815exv31w2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2010
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 | 95-3667491 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
8918 Spanish Ridge Avenue
Las Vegas, NV 89148
(Address of principal executive offices) (Zip Code)
Las Vegas, NV 89148
(Address of principal executive offices) (Zip Code)
(702) 541-7777
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
(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 such 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 þ 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 August 5, 2010, the number of outstanding shares of the
registrants common stock was 61,061,597.
PINNACLE ENTERTAINMENT, INC.
EXPLANATORY NOTE
EXPLANATORY NOTE
The purpose of this Amendment No. 1 to Pinnacle Entertainment, Inc.s Quarterly Report on Form
10-Q (this Amendment No. 1) for the quarterly period ended June 30, 2010 (the Form 10-Q) is to
furnish Exhibit 101 to the Form 10-Q. Exhibit 101 consists of the following materials from Pinnacle
Entertainment, Inc.s Form 10-Q for the quarterly period ended June 30, 2010, filed with the
Securities and Exchange Commission on August 9, 2010 and as amended by this Amendment No. 1,
formatted in XBRL (eXtensible Business Reporting Language):
(i) unaudited Condensed Consolidated Balance Sheets June 30, 2010 and December 31, 2009;
(ii) unaudited Condensed Consolidated Statements of Operations Three and Six Months Ended
June 30, 2010 and 2009;
(iii) unaudited Condensed Consolidated Statements of Cash Flows Six Months Ended June 30,
2010 and 2009; and
(iv) Notes to the unaudited Condensed Consolidated Financial Statements June 30, 2010
In
addition, this Amendment No. 1 is being filed to correct an
inadvertent typographical error contained within the unaudited Condensed Consolidated Balance Sheets as of June 30, 2010
and December 31, 2009 in the Form 10-Q. Specifically, the numbers contained in the line item for Land and land
improvements as of June 30, 2010 and December 31, 2009 were inadvertently repeated in the
subheading Land, buildings, riverboats and equipment. There should have been no numbers in the
subheading line. All of the column totals were correct within the unaudited Condensed Consolidated
Balance Sheets in the Form 10-Q as originally filed. The revised unaudited Condensed Consolidated Balance
Sheets are on Page 4 of this Amendment No. 1. This Amendment
No. 1 is as of the original filing date of the Form 10-Q
and does not reflect events that may have occurred subsequent to the
original filing date, and except as described above, no other changes have
been made to the Form 10-Q.
PART I
Item 1. Financial Statements
PINNACLE ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(UNAUDITED)
For the three months | For the six months | |||||||||||||||
ended June 30, | ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Revenues: |
||||||||||||||||
Gaming |
$ | 236,098 | $ | 217,398 | $ | 466,864 | $ | 440,689 | ||||||||
Food and beverage |
17,801 | 15,559 | 33,087 | 29,415 | ||||||||||||
Lodging |
10,233 | 9,952 | 18,631 | 18,223 | ||||||||||||
Retail, entertainment and other |
9,437 | 9,399 | 17,546 | 17,215 | ||||||||||||
273,569 | 252,308 | 536,128 | 505,542 | |||||||||||||
Expenses and other costs: |
||||||||||||||||
Gaming |
135,558 | 128,996 | 265,391 | 256,033 | ||||||||||||
Food and beverage |
18,137 | 14,847 | 33,845 | 28,761 | ||||||||||||
Lodging |
5,848 | 6,025 | 11,046 | 11,651 | ||||||||||||
Retail, entertainment and other |
5,841 | 5,495 | 10,409 | 9,749 | ||||||||||||
General and administrative |
60,895 | 55,450 | 115,484 | 109,608 | ||||||||||||
Depreciation and amortization |
29,345 | 24,834 | 55,234 | 49,566 | ||||||||||||
Pre-opening and development costs |
2,086 | 4,061 | 10,970 | 6,988 | ||||||||||||
Impairment of indefinite-lived intangible assets |
11,500 | | 11,500 | | ||||||||||||
Impairment of land and construction costs |
18,391 | | 18,391 | | ||||||||||||
Write-downs, reserves and recoveries, net |
1,657 | 304 | (4,378 | ) | 755 | |||||||||||
289,258 | 240,012 | 527,892 | 473,111 | |||||||||||||
Operating income (loss) |
(15,689 | ) | 12,296 | 8,236 | 32,431 | |||||||||||
Interest expense, net of capitalized interest |
(27,417 | ) | (15,915 | ) | (48,369 | ) | (32,490 | ) | ||||||||
Gain on sale of equity securities |
| 12,914 | | 12,914 | ||||||||||||
Loss on early extinguishment of debt |
(434 | ) | | (1,852 | ) | | ||||||||||
Other non-operating income |
132 | 63 | 159 | 148 | ||||||||||||
Income (loss) from continuing operations before income taxes |
(43,408 | ) | 9,358 | (41,826 | ) | 13,003 | ||||||||||
Income tax (expense) benefit |
1,844 | (382 | ) | 2,051 | (561 | ) | ||||||||||
Income (loss) from continuing operations |
(41,564 | ) | 8,976 | (39,775 | ) | 12,442 | ||||||||||
Income (loss) from discontinued operations, net of income taxes |
(7,750 | ) | (4,268 | ) | 27,204 | (6,803 | ) | |||||||||
Net income (loss) |
$ | (49,314 | ) | $ | 4,708 | $ | (12,571 | ) | $ | 5,639 | ||||||
Net income (loss) per common sharebasic |
||||||||||||||||
Income (loss) from continuing operations |
$ | (0.68 | ) | $ | 0.15 | $ | (0.66 | ) | $ | 0.20 | ||||||
Income (loss) from discontinued operations, net of income taxes |
(0.13 | ) | (0.07 | ) | 0.45 | (0.11 | ) | |||||||||
Net income (loss) per common sharebasic |
$ | (0.81 | ) | $ | 0.08 | $ | (0.21 | ) | $ | 0.09 | ||||||
Net income (loss) per common sharediluted |
||||||||||||||||
Income (loss) from continuing operations |
$ | (0.68 | ) | $ | 0.15 | $ | (0.66 | ) | $ | 0.20 | ||||||
Income (loss) from discontinued operations, net of income taxes |
(0.13 | ) | (0.07 | ) | 0.45 | (0.11 | ) | |||||||||
Net income (loss) per common sharediluted |
$ | (0.81 | ) | $ | 0.08 | $ | (0.21 | ) | $ | 0.09 | ||||||
Number of sharesbasic |
60,718 | 60,064 | 60,414 | 60,036 | ||||||||||||
Number of sharesdiluted |
60,718 | 60,851 | 60,414 | 61,331 |
See accompanying notes to the unaudited Condensed Consolidated Financial Statements
3
PINNACLE ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2010 | December 31, 2009 | |||||||
(Unaudited) | ||||||||
(in thousands, except share data) | ||||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 204,301 | $ | 123,431 | ||||
Accounts receivable, net of allowance for doubtful accounts of $10,318 and $12,556 |
24,852 | 13,756 | ||||||
Inventories |
8,018 | 6,313 | ||||||
Prepaid expenses and other assets |
21,064 | 15,412 | ||||||
Assets of discontinued operations held for sale |
65,792 | 96,403 | ||||||
Total current assets |
324,027 | 255,315 | ||||||
Restricted cash |
6,612 | 7,149 | ||||||
Land, buildings,
riverboats and equipment: (Note 1)
|
||||||||
Land and land improvements |
271,020 | 210,810 | ||||||
Buildings, riverboats and improvements |
1,285,252 | 1,070,812 | ||||||
Furniture, fixtures and equipment |
467,382 | 412,159 | ||||||
Construction in progress |
10,789 | 304,353 | ||||||
2,034,443 | 1,998,134 | |||||||
Less: accumulated depreciation |
(546,419 | ) | (498,159 | ) | ||||
1,488,024 | 1,499,975 | |||||||
Assets held for sale |
| 1,661 | ||||||
Goodwill |
16,742 | 16,742 | ||||||
Intangible assets, net (Note 1) |
18,516 | 30,017 | ||||||
Other assets, net |
73,102 | 29,620 | ||||||
Deferred taxes- non current |
3,377 | 3,377 | ||||||
Total assets |
$ | 1,930,400 | $ | 1,843,856 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 46,971 | $ | 71,987 | ||||
Accrued interest |
22,659 | 21,267 | ||||||
Accrued compensation |
40,263 | 41,077 | ||||||
Accrued taxes |
21,560 | 17,217 | ||||||
Other accrued liabilities |
55,060 | 49,922 | ||||||
Deferred income taxes |
1,274 | 1,274 | ||||||
Current portion of long-term debt (Note 2) |
92 | 88 | ||||||
Liabilities of discontinued operations held for sale |
13,734 | 36,754 | ||||||
Total current liabilities |
201,613 | 239,586 | ||||||
Long-term debt less current portion (Note 2) |
1,176,032 | 1,063,283 | ||||||
Other long-term liabilities |
42,252 | 46,578 | ||||||
Total liabilities |
1,419,897 | 1,349,447 | ||||||
Commitments and contingencies (Note 7) |
||||||||
Stockholders Equity |
||||||||
Preferred stock$1.00 par value, 250,000 shares authorized, none issued or outstanding |
| | ||||||
Common stock$0.10 par value, 61,061,097 and 60,079,686 shares outstanding, net of treasury shares |
6,307 | 6,209 | ||||||
Additional paid in capital |
1,025,478 | 1,014,233 | ||||||
Retained deficit |
(500,950 | ) | (488,379 | ) | ||||
Accumulated other comprehensive loss |
(242 | ) | (17,564 | ) | ||||
Treasury stock, at cost, for both periods 2,008,986 of treasury shares |
(20,090 | ) | (20,090 | ) | ||||
Total stockholders equity |
510,503 | 494,409 | ||||||
$ | 1,930,400 | $ | 1,843,856 | |||||
See accompanying notes to the unaudited Condensed Consolidated Financial Statements
4
PINNACLE ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(UNAUDITED)
For the six months | ||||||||
ended June 30, | ||||||||
2010 | 2009 | |||||||
(in thousands) | ||||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | (12,571 | ) | $ | 5,639 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
56,950 | 52,386 | ||||||
Loss on disposal of assets |
1,669 | 345 | ||||||
Impairment of indefinite-lived intangible assets |
11,500 | | ||||||
Impairment of land and construction costs |
18,391 | | ||||||
Impairment of buildings, riverboats, and equipment |
3,435 | 346 | ||||||
Gain on sale of equity securities |
| (12,914 | ) | |||||
Provision for bad debts |
447 | 1,410 | ||||||
Amortization of debt issuance costs |
3,552 | 2,302 | ||||||
Share-based compensation expense |
3,523 | 7,694 | ||||||
Change in accrued taxes |
5,282 | 4,789 | ||||||
Changes in operating assets and liabilities: |
||||||||
Receivables |
304 | 1,083 | ||||||
Prepaid expenses and other |
(7,976 | ) | (10,209 | ) | ||||
Other long-term assets |
(7,184 | ) | 1,880 | |||||
Accounts payable |
(14,334 | ) | (5,125 | ) | ||||
Accrued compensation |
222 | (770 | ) | |||||
Accrued interest |
1,392 | (40 | ) | |||||
Other accrued liabilities |
4,650 | (1,103 | ) | |||||
Other long-term liabilities |
(19,335 | ) | 242 | |||||
Net cash provided by operating activities |
49,917 | 47,955 | ||||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(93,417 | ) | (84,193 | ) | ||||
Change in restricted cash |
790 | (235 | ) | |||||
Proceeds from sale of equity securities |
| 23,674 | ||||||
Proceeds from sale of property and equipment |
13,595 | 368 | ||||||
Baton Rouge escrow deposit |
(25,000 | ) | | |||||
Net proceeds from sale of discontinued operations |
25,094 | | ||||||
Net cash used in investing activities |
(78,938 | ) | (60,386 | ) | ||||
Cash flows from financing activities: |
||||||||
Borrowings under credit facility |
165,379 | 57,225 | ||||||
Repayments under credit facility |
(202,298 | ) | (25,991 | ) | ||||
Proceeds from issuance of 8.75% Notes |
350,000 | | ||||||
Repayment of 8.25% Notes |
(200,000 | ) | | |||||
Payments on other secured and unsecured notes payable |
(9 | ) | (44 | ) | ||||
Proceeds from common stock options exercised |
6,519 | 455 | ||||||
Proceeds from issuance of common stock |
1,166 | | ||||||
Debt issuance and other financing costs |
(15,005 | ) | (605 | ) | ||||
Net cash provided by financing activities |
105,752 | 31,040 | ||||||
Effect of exchange rate changes on cash and cash equivalents |
(379 | ) | (302 | ) | ||||
Increase in cash and cash equivalents |
76,352 | 18,307 | ||||||
Cash and cash equivalents at the beginning of the period |
129,576 | 115,712 | ||||||
Cash and cash equivalents at the end of the period |
$ | 205,928 | $ | 134,019 | ||||
Supplemental Cash Flow Information: |
||||||||
Cash paid for interest, net of amounts capitalized |
$ | 43,455 | $ | 30,500 | ||||
Cash payments related to income taxes, net |
2,929 | 1,350 | ||||||
Increase (decrease) in construction related deposits and liabilities |
(15,608 | ) | 9,942 |
See accompanying notes to the unaudited 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 an
owner, operator and developer of casinos and related hospitality and entertainment facilities. We
operate 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 (River City
Casino and Lumière Place Casino and Hotels). We view each property as an operating segment, with
the exception of our properties located in St. Louis, Missouri, which are aggregated into the St.
Louis reporting segment. References in these footnotes to Pinnacle, the Company, we, our
or us refer to Pinnacle Entertainment, Inc. and its subsidiaries, except where stated or the
context otherwise indicates.
In the first quarter of 2010, we made the decision to sell our Argentina operations and our
Atlantic City entities. On June 30, 2010, we completed the sale of our Argentina operations. In
addition, on June 24, 2010, we closed our President Casino located in St. Louis, Missouri. We have
classified the related assets and liabilities for all of these operations as held for sale in our
unaudited Condensed Consolidated Balance Sheets and have included the results in discontinued
operations. For further information, see Note 6, Discontinued Operations.
We are also developing a casino-hotel in Baton Rouge, Louisiana, which is subject to various
regulatory approvals.
Principles of Consolidation The accompanying unaudited Condensed Consolidated Financial
Statements have been prepared in accordance with the instructions of the Securities and Exchange
Commission (SEC) to the Quarterly Report on Form 10-Q and, therefore, do not include all
information and notes necessary for complete financial statements in conformity with the
instructions for 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, 2009 and our Current
Report on Form 8-K filed on June 21, 2010, including Exhibit 99.1 which was filed to update the
historical financial statements included in the Companys Form 10-K to reflect its Casino Magic
Argentina operations and Atlantic City operations and related assets as held for sale for the year
ended December 31, 2009 and the results of those operations as discontinued operations for all
periods presented.
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 not to 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. |
We measure our liability for deferred compensation on a recurring basis. As of June 30, 2010,
the liability has a balance of $1.7 million and was valued using Level 1 inputs.
Land, Buildings, Riverboats and Equipment Land, buildings, riverboats and equipment are
stated at cost. Land includes land not currently being used in our operations, which totaled $45.3
million at both June 30, 2010 and December 31, 2009. We capitalize the costs of improvements that
extend the life of the asset. Construction in progress at June 30, 2010 relates primarily to our
Baton Rouge project. Interest expense is capitalized on internally constructed assets at our
overall weighted average cost of borrowing.
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Depreciation expense |
$ | 29.3 | $ | 24.8 | $ | 55.2 | $ | 49.6 | ||||||||
Capitalized interest |
$ | | $ | 2.7 | $ | 3.5 | $ | 4.9 |
In April 2010, we cancelled our planned $305 million Sugarcane Bay project in Lake Charles,
Louisiana and surrendered the related gaming license to the Louisiana Gaming Control Board. In
connection with this decision, we recorded an impairment charge of $18.4 million during the second
quarter of 2010, which includes all previously capitalized construction in progress and costs to
terminate the construction contract with the general contractor. We expect to incur additional
contract termination costs, which amounts are not determinable as of June 30, 2010, as we are still
negotiating these amounts.
Goodwill and Other Intangible Assets Goodwill and other indefinite-lived intangible assets
are subject to an annual assessment for impairment during the fourth quarter, or more frequently if
there are indications of possible impairment, by applying a fair-value-based test. There were no
impairments to goodwill during the three and six months ended June 30, 2010 and 2009, respectively.
As the result of the cancellation of our planned $305 million Sugarcane Bay project in Lake
Charles, Louisiana we surrendered the related gaming license to the Louisiana Gaming Control Board.
In connection with this decision, we fully impaired our gaming license by $11.5 million during the
second quarter of 2010, which amount comprises impairment of indefinite-lived intangible assets in
the unaudited Condensed Consolidated Statements of Operations.
7
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.
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Gaming taxes |
$ | 71.0 | $ | 64.8 | $ | 139.0 | $ | 131.0 |
Pre-opening and Development Costs Pre-opening and development costs are expensed as
incurred, consistent with authoritative guidance. For the three and six months ended June 30, 2010
and 2009, they consist of the following:
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
River City (a) |
$ | 1.2 | $ | 1.6 | $ | 9.4 | $ | 2.8 | ||||||||
Baton Rouge |
0.2 | 1.6 | 0.4 | 2.7 | ||||||||||||
Sugarcane Bay (b) |
0.6 | 0.6 | 1.1 | 1.2 | ||||||||||||
Other |
0.1 | 0.2 | 0.1 | 0.3 | ||||||||||||
Total pre-opening and development costs |
$ | 2.1 | $ | 4.0 | $ | 11.0 | $ | 7.0 | ||||||||
(a) | Pre-opening expenses include $0.7 million for non-cash straight-lined rent accruals under a lease agreement for the six months ended June 30, 2010, and there were no rent accrual charges in the three months ended June 30, 2010, as River City opened in March 2010. Non-cash straight-lined rent accruals were $1.0 million and $1.9 million for three and six months ended June 30, 2009, respectively. | |
(b) | Sugarcane Bay development expenses are costs associated with the process of ending the project. |
Comprehensive Income Our comprehensive income is as follows:
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Net income (loss) |
$ | (49.3 | ) | $ | 4.7 | $ | (12.6 | ) | $ | 5.6 | ||||||
Post-retirement plan benefit obligation,
net of income taxes (a) |
0.1 | | 0.2 | 0.8 | ||||||||||||
Foreign currency translation gain (loss) (b) |
17.4 | (0.4 | ) | 17.1 | (2.1 | ) | ||||||||||
Comprehensive income (loss) |
$ | (31.8 | ) | $ | 4.3 | $ | 4.7 | $ | 4.3 | |||||||
(a) | Included in the balance are benefit obligations related to both the executive deferred compensation plan and directors health and medical plan. | |
(b) | On June 30, 2010, we completed the sale of our Argentina operations. |
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 June 30, 2010 and 2009, our
share-based awards issued under our stock option plans consisted primarily of common stock option
grants.
8
Reclassification During the quarter, we reclassified $1.0 million from assets held for sale
as of December 31, 2009 to assets of discontinued operations held for sale, to conform to the
current year presentation. This reclassification had no effect on net income as previously
reported.
Recently Issued Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (the FASB) issued new
authoritative guidance regarding disclosures about fair value measurements. An entity is now
required to disclose separately the amounts of significant transfers in and out of Level 1 and 2
fair value measurements, and describe the reasons for the transfers and additional disclosure is
required regarding purchases, sales, issuances and settlements of Level 3 measurements. The
guidance is effective for interim and annual periods beginning after December 15, 2009, except for
the additional disclosure of Level 3 measurements, which is effective for fiscal years beginning
after December 15, 2010. The adoption of this guidance did not have, and is not expected to have,
a material effect on our unaudited Condensed Consolidated Financial Statements.
In April 2010,
the FASB issued authoritative accounting guidance for companies that generate
revenue from gaming activities that involve base jackpots, which requires
companies to accrue for a liability at the time the company has the obligation
to pay the jackpot and record such obligation as a reduction of gaming revenue
accordingly. The guidance is effective for interim and annual reporting periods
beginning on or after December 15, 2010. We are still assessing the impact
this guidance will have on our unaudited Condensed 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
unaudited Condensed Consolidated Financial Statements.
Note 2Long-Term Debt
Long-term debt at June 30, 2010 and December 31, 2009 consists of the following:
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Senior Secured Credit Facility |
$ | | $ | 36.9 | ||||
8.625% Senior Notes due 2017 |
444.2 | 443.9 | ||||||
8.25% Senior Subordinated Notes due 2012 |
| 200.9 | ||||||
7.50% Senior Subordinated Notes due 2015 |
381.1 | 380.8 | ||||||
8.75% Senior Subordinated Notes due 2020 |
350.0 | | ||||||
Other secured and unsecured notes payable |
0.8 | 0.9 | ||||||
1,176.1 | 1,063.4 | |||||||
Less current maturities |
(0.1 | ) | (0.1 | ) | ||||
$ | 1,176.0 | $ | 1,063.3 | |||||
Senior Secured Credit Facility: On February 5, 2010, we entered into an amended and restated
credit agreement for a $375 million revolving credit facility (the Credit Facility), which
matures on March 31, 2014. As of June 30, 2010, we had no borrowings outstanding under the Credit
Facility, and had $9.6 million committed under letters of credit for various self-insurance
programs.
The Credit Facility has, among other things, restrictive financial covenants and capital
spending limits and other affirmative and negative covenants. In April 2010, we modified certain
covenants of our Credit Facility. Previously, there was a provision in the Credit Facility that we
could not spend more than $25 million in construction and development costs on the Baton Rouge
project after January 1, 2010 unless we had received at least $100 million in the aggregate from
permitted sales or other dispositions of assets (including receipt of insurance proceeds), cash tax
refunds, litigation settlements, and/or gross proceeds received by us from the issuance and sale of
non-debt capital, and/or dividends and distributions received from unrestricted subsidiaries net of
investments made after January 1, 2010 in such unrestricted subsidiaries that have not been charged
to an investment basket. In the modification to our Credit Facility, this amount was reduced from
$100 million in the aggregate to $40 million, and we have the funds available to meet this
requirement.
9
Loss on Early Extinguishment of Debt: During the six months ended June 30, 2010, we incurred
a loss on early extinguishment of debt of $1.9 million related to the write off of unamortized debt
issuance costs related to the modification of our Credit Facility and the early retirement of our
8.25% Senior Subordinated Notes due 2012 (the 8.25% Notes).
8.75% Senior Subordinated Notes due 2020: On May 6, 2010, we closed an offering of $350
million in aggregate principal amount of new 8.75% senior subordinated notes due 2020 (the 8.75%
Notes). The 8.75% 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 equal to par. Net of the
initial purchasers fees and various costs and expenses, net proceeds from the offering were
approximately $341.5 million. Using the net proceeds, we redeemed all of our then existing 8.25%
Notes, of which $200 million in aggregate principal amount was outstanding, and repaid $80 million
in revolving credit borrowings under the Credit Facility. The remaining net proceeds from the
offering are expected to be used for general corporate purposes, including the funding of our Baton
Rouge project.
Interest expense, net of capitalized interest was as follows:
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Interest expense before capitalization of interest |
$ | 27.4 | $ | 18.6 | $ | 51.9 | $ | 37.4 | ||||||||
Less: capitalized interest |
| (2.7 | ) | (3.5 | ) | (4.9 | ) | |||||||||
Total interest expense, net of capitalized interest |
$ | 27.4 | $ | 15.9 | $ | 48.4 | $ | 32.5 | ||||||||
The increase in interest expense before capitalized interest for the three and six months
ended June 30, 2010 from the same 2009 period was due to the replacement of less expensive revolver
borrowings with new, long-term notes. We believe the longer maturity, fixed interest rate and
less-restrictive covenants of the new long-term notes warranted the higher interest rate. The
decrease in capitalized interest was due to the opening of our River City project in March 2010.
We stopped capitalizing interest on our River City project upon its opening.
Note 3Income Taxes
Our effective income tax rate for continuing operations for the three and six months ended
June 30, 2010 was 4.3% and 4.9%, respectively, as compared to 4.1% and 4.3% for the same periods
last year. Our effective tax rates in 2010 differ from the statutory rate due to the effects of
permanent items, the recording of a valuation allowance against a portion of our deferred tax
assets generated in the current year, and the recording of a reserve for unrecognized tax benefits.
It is reasonably possible that the total amount of unrecognized tax benefits may decrease by
approximately $1.0 million to $3.0 million during the next twelve months.
Note 4Employee Benefit and Other Plans
Share-based Compensation: As of June 30, 2010, we had approximately 6.3 million share-based
awards issued, 263,500 of which are restricted stock awards and the rest of which are common stock
options, and approximately 2.2 million share-based awards available for grant.
Pursuant to authoritative guidance, we recorded share-based compensation expense as follows:
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Share-based compensation expense |
$ | 2.1 | $ | 5.3 | $ | 3.5 | $ | 7.5 |
10
Theoretical compensation costs not yet amortized related to stock options granted totaled
approximately $21.1 million and $19.4 million at June 30, 2010 and 2009, respectively, and the
weighted average period over which the costs are expected to be recognized is approximately three
years.
The aggregate amount of cash we received from the exercise of stock options was as follows.
The associated shares were newly issued common stock.
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Cash received from exercise of stock options |
$ | 6.5 | $ | 0.1 | $ | 6.5 | $ | 0.5 |
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, 2010 |
6,342,007 | $ | 14.56 | |||||
Granted |
1,523,000 | $ | 9.37 | |||||
Exercised |
(846,411 | ) | $ | 7.80 | ||||
Cancelled, Forfeited |
(727,158 | ) | $ | 18.65 | ||||
Options outstanding at June 30, 2010 |
6,291,438 | $ | 13.74 | |||||
Vested or expected to vest at a point in the future as of June 30, 2010 |
6,092,502 | |||||||
Options exercisable at June 30, 2010 |
3,951,013 | $ | 14.79 | |||||
Weighted-average value per granted option calculated using the
Black-Scholes option-pricing model for options granted during the six
months ended June 30, 2010 |
$ | 5.74 |
Note 5Write-downs, reserves and recoveries, net
Write-downs, reserves and recoveries, net consist of the following:
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Impairment of assets |
$ | 0.5 | $ | 0.2 | $ | 0.5 | $ | 0.4 | ||||||||
Loss on disposal of assets |
1.2 | 0.1 | 1.6 | 0.4 | ||||||||||||
Legal settlement recoveries |
| | (6.5 | ) | | |||||||||||
Write-downs, reserves and recoveries, net |
$ | 1.7 | $ | 0.3 | $ | (4.4 | ) | $ | 0.8 | |||||||
Impairment of assets: In July 2006, we sold land to Cabelas Retail, Inc. for the
construction of a branded sporting goods store. Cabelas Retail, Inc. financed its retail store
construction and certain road access improvements that also benefited our Boomtown Reno property
through the issuance of sales tax increment bonds through local or state governmental authorities.
In April 2010, we purchased $5.3 million face amount of these bonds from Cabelas Retail, Inc. for
$5.0 million. During the quarter ended June 30, 2010, we recorded an impairment of $0.2 million
related to these bonds.
We impaired the fair value of leasehold improvements related to vacated office space by $0.3
million during the quarter ended June 30, 2010.
Loss on disposal of assets: During the six months ended June 30, 2010, we sold our corporate
jet, two seaplanes, a warehouse and slot equipment at our properties for a net loss of $1.6
million. During the six months ended June 30, 2009, we sold slot equipment for a loss of $0.4
million.
11
Legal settlement recoveries: In March 2010, we received a $6.5 million legal settlement
related to the recovery of legal fees.
Note 6Discontinued Operations
Discontinued operations as of June 30, 2010 consist of our former Casino Magic Argentina
operations, the Atlantic City operations, the former President Casino operations, former Casino
Magic Biloxi operations and former operations at The Casino at Emerald Bay in The Bahamas.
Casino Magic Argentina: On April 29, 2010, we entered into an agreement to sell our Argentina
operations. We had previously reflected the business as a discontinued operation and the related
assets and liabilities as held for sale. On June 30, 2010, we completed the sale of our Argentina
operations for approximately $40 million and recognized a loss on disposal of approximately $0.2
million, which amount has been included in income (loss) from discontinued operations, net of
income taxes, in the unaudited Condensed Consolidated Statements of Operations.
Atlantic City: In the first quarter of 2010, we made the decision to sell our Atlantic City
operations. We have reflected our Atlantic City entities as discontinued operations and the
related assets and liabilities as held for sale.
President Casino: On March 10, 2010, we reached a settlement agreement with the Missouri
Gaming Commission (MGC) to close the President Casino. The property closed on June 24, 2010, and
as such, is considered a discontinued operation. In connection with the closure, we expect to
incur costs associated with the removal and disposal of The Admiral Riverboat, on which the
President Casino resides. However, at this time the amount of costs to be incurred cannot be
reasonably estimated and no accrual has been booked as of June 30, 2010. In addition, as part of
our removal process, we are required to perform certain tests on all underground and above ground
storage tanks to ensure the area complies with environmental standards. We may incur additional
costs to remove or repair any tanks that fail such tests.
Casino Magic Biloxi: Casino Magic Biloxi closed after significant damage from Hurricane
Katrina in 2005. In February 2010, we settled all remaining insurance claims in exchange for a
final payment of approximately $23.4 million. We have received payments totaling approximately
$215 million from our insurers related to this asset. Prior insurance advances that exceeded the
book value of destroyed assets and certain insured expenses were recorded as a deferred gain of
$18.3 million. As a result of this final settlement, we recognized this deferred gain in February
2010 in addition to the gain associated with the proceeds.
The Casino at Emerald Bay: The Casino at Emerald Bay in The Bahamas was closed during the
first quarter of 2009. We are actively marketing one remaining asset associated with our former
Bahamas operation; however, events and circumstances beyond our control have extended the period to
complete the sale of this asset beyond a year. The operation continues to be classified as a
discontinued operation and the related assets of discontinued operations held for sale.
12
Revenue, expense and net income for entities and operations included in discontinued
operations are summarized as follows:
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Revenues |
$ | 13.5 | $ | 13.9 | $ | 28.5 | $ | 29.7 | ||||||||
Operating loss |
(3.9 | ) | (2.0 | ) | (9.7 | ) | (3.7 | ) | ||||||||
Non-operating income (loss) |
(0.2 | ) | (0.2 | ) | 41.5 | (0.2 | ) | |||||||||
Income (loss) before income taxes |
(4.1 | ) | (2.2 | ) | 31.8 | (3.9 | ) | |||||||||
Income tax expense |
(3.7 | ) | (2.1 | ) | (4.6 | ) | (2.9 | ) | ||||||||
Income (loss) from discontinued operations |
$ | (7.8 | ) | $ | (4.3 | ) | $ | 27.2 | $ | (6.8 | ) | |||||
Net assets for entities and operations included in discontinued operations are summarized as
follows:
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Assets: |
||||||||
Land, buildings, riverboats and equipment, net |
$ | 38.4 | $ | 57.4 | ||||
Other assets, net |
27.4 | 39.0 | ||||||
$ | 65.8 | $ | 96.4 | |||||
Liabilities: |
||||||||
Accounts payable and other accrued liabilities |
$ | 13.4 | $ | 17.4 | ||||
Long term liabilities |
0.3 | 19.3 | ||||||
13.7 | 36.7 | |||||||
Net Assets |
$ | 52.1 | $ | 59.7 | ||||
Note 7Commitments and Contingencies
Redevelopment Agreement for Lumière Place: 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 Lumière Place Casino and Hotels. 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 any
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 an
Agreement for Guaranteed Maximum Price Construction Services 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, plus approved change orders. River City opened on March 4, 2010. We agreed to pay the contractor
$152 million, of which approximately $10.0 million was outstanding as of June 30, 2010, which
amount was paid subsequent to quarter end.
13
Lease and Development Agreement for River City: 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).
We are required to invest a minimum of $375 million to: (a) construct a gaming and multi-use
facility, which opened on March 4, 2010; (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 within eighteen months of March 4, 2010; and (e) construct a
roadway into the project, which construction is complete. We are required to pay rent in the amount
of $2.5 million from May 1, 2009 to March 31, 2010, which amount has been paid. From April 1, 2010
through the expiration of the term of the lease and development agreement, we are required to pay
to St. Louis County as annual rent the greater of (a) $4.0 million, or (b) 2.5% of annual adjusted
gross receipts, as that term is defined in the lease and development agreement. We are also
required to 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, to be mutually agreed upon by us and
St. Louis County. The second phase must be opened within three years of March 4, 2010. In each of
the five subsequent years that the second phase is not opened, the amount of liquidated damages
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 liquidated damages that we would have
to pay if the second phase is not completed is $20.0 million.
Self-Insurance: We self-insure various levels of general liability, workers compensation and
medical coverage. 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 unaudited Condensed Consolidated Balance
Sheets.
Legal
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 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 moved for
dismissal of the state-court claims. On January 29, 2010, the state court judge dismissed Jebacos
complaint in its entirety. On April 16, 2010, Jebaco moved the district civil court for leave to
appeal the dismissal of its claims. On April 23, 2010, the district court granted Jebacos motion
for an order of appeal.
14
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 other things, 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 March 17, 2010, Madison House moved to dismiss its Complaint and ACEs Counterclaim without
prejudice, which motion was heard on April 28, 2010. The Court ruled that it was granting the
motion to dismiss Madison Houses Complaint, without prejudice, but that it was denying the motion
to dismiss ACEs Counterclaim. The Court also ruled that the case would be moved from the Chancery
Division to the Law Division. While the Company cannot predict the outcome of this litigation, it
intends to pursue its Counterclaim 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 the City of 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.
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. The NLRB
dismissed the charge filed against HoteLumière.
In October 2009, the Union again changed its affiliation, and again requested recognition,
which was denied. In December 2009, the Union filed charges with the NLRB alleging that Lumière
Place and President Casino acted unlawfully when they refused to recognize and deal with the Union.
In January 2010, the NLRB issued a Complaint and Notice of Hearing against Lumière Place and
President Casino.
On April 13, 2010, following the resolution of the competing claims for recognition, Lumière
Place and President Casino agreed to settle the NLRB matters by, among other things, agreeing to
recognize the Union as the bargaining representative of bargaining units of Lumière Place and
President Casino employees, bargaining with the Union upon request, and recognizing the validity of
the collective bargaining agreement between President Casino and the Union. The settlement
agreements with the NLRB specifically provide that neither Lumière Place nor President Casino admit
to having violated the National Labor Relations Act. Pursuant to the settlement agreements, we
have commenced bargaining in good faith with the Union.
15
Indiana Tax Dispute: In 2008, the Indiana Department of Revenue (IDR) 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 IDR
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. During the fourth quarter of 2009, the Company submitted additional information to
the IDR for consideration. On February 9, 2010, the Company received a revised proposed assessment
in the amount of $7.3 million, excluding interest and penalties of $2.3 million. On March 17,
2010, the Company timely filed a protest with the IDR requesting abatement of all tax, interest and
penalties.
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 8Consolidating Condensed Financial Information
Our subsidiaries (excluding a subsidiary with approximately $10.5 million in cash and cash
equivalents as of June 30, 2010; a subsidiary with approximately $66.3 million in cash and cash
equivalents as of June 30, 2010; and certain non-material subsidiaries) have fully and
unconditionally and jointly and severally guaranteed the payment of all obligations under the 7.50%
Notes, 8.625% Notes and 8.75% Notes, as well as our Credit Facility. Our Atlantic City entities do
not guarantee 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:
16
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 three months ended June 30, 2010
|
||||||||||||||||||||
Statement of Operations |
||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Gaming |
$ | | $ | 236.1 | $ | | $ | | $ | 236.1 | ||||||||||
Food and beverage |
| 17.8 | | | 17.8 | |||||||||||||||
Other |
| 19.7 | | | 19.7 | |||||||||||||||
| 273.6 | | | 273.6 | ||||||||||||||||
Expenses: |
||||||||||||||||||||
Gaming |
| 135.6 | | | 135.6 | |||||||||||||||
Food and beverage |
| 18.1 | | | 18.1 | |||||||||||||||
General and administrative and other |
12.1 | 62.6 | | | 74.7 | |||||||||||||||
Depreciation and amortization |
1.4 | 27.9 | | | 29.3 | |||||||||||||||
Write-downs, reserves and recoveries |
0.4 | 31.6 | (0.4 | ) | | 31.6 | ||||||||||||||
13.9 | 275.8 | (0.4 | ) | | 289.3 | |||||||||||||||
Operating income (loss) |
(13.9 | ) | (2.2 | ) | 0.4 | | (15.7 | ) | ||||||||||||
Equity earnings of subsidiaries |
(14.1 | ) | 1.5 | | 12.6 | | ||||||||||||||
Interest expense and non-operating income, net |
(27.3 | ) | | | | (27.3 | ) | |||||||||||||
Loss on early extinguishment of debt |
(0.4 | ) | | | | (0.4 | ) | |||||||||||||
Income (loss) from continuing operations before
inter-company activity and income taxes |
(55.7 | ) | (0.7 | ) | 0.4 | 12.6 | (43.4 | ) | ||||||||||||
Management fee & inter-company interest |
4.6 | (4.6 | ) | | | | ||||||||||||||
Income tax benefit |
1.8 | | | | 1.8 | |||||||||||||||
Income (loss) from continuing operations |
(49.3 | ) | (5.3 | ) | 0.4 | 12.6 | (41.6 | ) | ||||||||||||
Income (loss) from discontinued operations, net
of taxes |
| (9.2 | ) | 1.5 | | (7.7 | ) | |||||||||||||
Net income (loss) |
$ | (49.3 | ) | $ | (14.5 | ) | $ | 1.9 | $ | 12.6 | $ | (49.3 | ) | |||||||
For the six months ended June 30, 2010
|
||||||||||||||||||||
Statement of Operations |
||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Gaming |
$ | | $ | 466.9 | $ | | $ | | $ | 466.9 | ||||||||||
Food and beverage |
| 33.1 | | | 33.1 | |||||||||||||||
Other |
| 36.1 | | | 36.1 | |||||||||||||||
| 536.1 | | | 536.1 | ||||||||||||||||
Expenses: |
||||||||||||||||||||
Gaming |
| 265.4 | | | 265.4 | |||||||||||||||
Food and beverage |
| 33.8 | | | 33.8 | |||||||||||||||
General and administrative and other |
22.0 | 126.6 | (0.6 | ) | | 148.0 | ||||||||||||||
Depreciation and amortization |
2.8 | 52.3 | 0.1 | | 55.2 | |||||||||||||||
Write-downs, reserves and recoveries |
(6.1 | ) | 32.1 | (0.5 | ) | | 25.5 | |||||||||||||
18.7 | 510.2 | (1.0 | ) | | 527.9 | |||||||||||||||
Operating income (loss) |
(18.7 | ) | 25.9 | 1.0 | | 8.2 | ||||||||||||||
Equity earnings of subsidiaries |
48.6 | 2.1 | | (50.7 | ) | | ||||||||||||||
Interest (expense) and non-operating income, net |
(51.6 | ) | 3.4 | | | (48.2 | ) | |||||||||||||
Loss on early extinguishment of debt |
(1.9 | ) | | | | (1.9 | ) | |||||||||||||
Income (loss) from continuing operations before
inter-company activity and income taxes |
(23.6 | ) | 31.4 | 1.0 | (50.7 | ) | (41.9 | ) | ||||||||||||
Management fee & inter-company interest |
8.9 | (8.9 | ) | | | | ||||||||||||||
Income tax benefit |
2.1 | | | | 2.1 | |||||||||||||||
Income (loss) from continuing operations |
(12.6 | ) | 22.5 | 1.0 | (50.7 | ) | (39.8 | ) | ||||||||||||
Income from discontinued operations, net of taxes |
| 25.1 | 2.1 | | 27.2 | |||||||||||||||
Net income (loss) |
$ | (12.6 | ) | $ | 47.6 | $ | 3.1 | $ | (50.7 | ) | $ | (12.6 | ) | |||||||
17
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 three months ended June 30, 2009
|
||||||||||||||||||||
Statement of Operations |
||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Gaming |
$ | | $ | 217.4 | $ | | $ | | $ | 217.4 | ||||||||||
Food and beverage |
| 15.6 | | | 15.6 | |||||||||||||||
Other |
| 19.3 | | | 19.3 | |||||||||||||||
| 252.3 | | | 252.3 | ||||||||||||||||
Expenses: |
||||||||||||||||||||
Gaming |
| 129.0 | | | 129.0 | |||||||||||||||
Food and beverage |
| 14.8 | | | 14.8 | |||||||||||||||
General and administrative and other |
14.0 | 57.7 | (0.6 | ) | | 71.1 | ||||||||||||||
Depreciation and amortization |
1.4 | 23.1 | 0.3 | | 24.8 | |||||||||||||||
Write-downs, reserves and recoveries |
| 0.3 | | | 0.3 | |||||||||||||||
15.4 | 224.9 | (0.3 | ) | | 240.0 | |||||||||||||||
Operating income (loss) |
(15.4 | ) | 27.4 | 0.3 | | 12.3 | ||||||||||||||
Equity earnings of subsidiaries |
29.4 | (0.7 | ) | | (28.7 | ) | | |||||||||||||
Interest (expense) and non-operating income, net |
(18.6 | ) | 2.7 | | | (15.9 | ) | |||||||||||||
Gain on sale of equity securities |
6.0 | | 6.9 | | 12.9 | |||||||||||||||
Income (loss) from continuing operations before
inter-company activity and income taxes |
1.4 | 29.4 | 7.2 | (28.7 | ) | 9.3 | ||||||||||||||
Management fee & inter-company interest |
3.6 | (3.6 | ) | | | | ||||||||||||||
Income tax benefit (expense) |
(0.3 | ) | | | | (0.3 | ) | |||||||||||||
Income (loss) from continuing operations |
4.7 | 25.8 | 7.2 | (28.7 | ) | 9.0 | ||||||||||||||
Income from discontinued operations, net of taxes |
| (3.7 | ) | (0.6 | ) | | (4.3 | ) | ||||||||||||
Net income (loss) |
$ | 4.7 | $ | 22.1 | $ | 6.6 | $ | (28.7 | ) | $ | 4.7 | |||||||||
For the six months ended June 30, 2009
|
||||||||||||||||||||
Statement of Operations |
||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Gaming |
$ | | $ | 440.7 | $ | | $ | | $ | 440.7 | ||||||||||
Food and beverage |
| 29.4 | | | 29.4 | |||||||||||||||
Other |
0.1 | 35.4 | | | 35.5 | |||||||||||||||
0.1 | 505.5 | | | 505.6 | ||||||||||||||||
Expenses: |
||||||||||||||||||||
Gaming |
| 256.0 | | | 256.0 | |||||||||||||||
Food and beverage |
| 28.8 | | | 28.8 | |||||||||||||||
General and administrative and other |
26.3 | 112.9 | (1.2 | ) | | 138.0 | ||||||||||||||
Depreciation and amortization |
2.7 | 46.3 | 0.6 | 49.6 | ||||||||||||||||
Write-downs, reserves and recoveries |
| 0.7 | | | 0.7 | |||||||||||||||
29.0 | 444.70 | (0.6 | ) | | 473.1 | |||||||||||||||
Operating income (loss) |
(28.9 | ) | 60.8 | 0.6 | | 32.5 | ||||||||||||||
Equity earnings of subsidiaries |
59.7 | 0.7 | | (60.4 | ) | | ||||||||||||||
Interest (expense) and non-operating income, net |
(37.3 | ) | 4.9 | | | (32.4 | ) | |||||||||||||
Gain on sale of equity securities |
6.0 | | 6.9 | | 12.9 | |||||||||||||||
Income (loss) from continuing operations before
inter-company activity and income taxes |
(0.5 | ) | 66.4 | 7.5 | (60.4 | ) | 13.0 | |||||||||||||
Management fee & inter-company interest |
6.7 | (6.7 | ) | | | | ||||||||||||||
Income tax benefit (expense) |
(0.6 | ) | | | | (0.6 | ) | |||||||||||||
Income (loss) from continuing operations |
5.6 | 59.7 | 7.5 | (60.4 | ) | 12.4 | ||||||||||||||
Income (loss) from discontinued operations, net of taxes |
| (7.4 | ) | 0.6 | | (6.8 | ) | |||||||||||||
Net income (loss) |
$ | 5.6 | $ | 52.3 | $ | 8.1 | $ | (60.4 | ) | $ | 5.6 | |||||||||
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) | ||||||||||||||||||||
As of June 30, 2010 |
||||||||||||||||||||
Balance Sheet |
||||||||||||||||||||
Current assets |
$ | 49.6 | $ | 131.7 | $ | 77.0 | $ | | $ | 258.3 | ||||||||||
Property and equipment, net |
15.8 | 1,471.8 | 0.5 | | 1,488.1 | |||||||||||||||
Other non-current assets |
65.1 | 53.2 | | | 118.3 | |||||||||||||||
Investment in subsidiaries |
1,631.5 | (0.6 | ) | | (1,630.9 | ) | | |||||||||||||
Assets of discontinued operations held for sale |
| 65.3 | 0.4 | | 65.7 | |||||||||||||||
Inter-company |
1.2 | | | (1.2 | ) | | ||||||||||||||
$ | 1,763.2 | $ | 1,721.4 | $ | 77.9 | $ | (1,632.1 | ) | $ | 1,930.4 | ||||||||||
Current liabilities |
49.0 | 138.8 | | | 187.8 | |||||||||||||||
Notes payable, long term |
1,175.3 | 0.8 | | | 1,176.1 | |||||||||||||||
Other non-current liabilities |
28.4 | 13.8 | | | 42.2 | |||||||||||||||
Liabilities of discontinued operations held for sale |
| 13.7 | | | 13.7 | |||||||||||||||
Inter-company |
| | 1.2 | (1.2 | ) | | ||||||||||||||
Equity |
510.5 | 1,554.3 | 76.7 | (1,630.9 | ) | 510.6 | ||||||||||||||
$ | 1,763.2 | $ | 1,721.4 | $ | 77.9 | $ | (1,632.1 | ) | $ | 1,930.4 | ||||||||||
As of December 31, 2009 |
||||||||||||||||||||
Balance Sheet |
||||||||||||||||||||
Current assets |
$ | 5.2 | $ | 86.9 | $ | 66.8 | $ | | $ | 158.9 | ||||||||||
Property and equipment, net |
16.9 | 1,472.6 | 10.5 | | 1,500.0 | |||||||||||||||
Other non-current assets |
50.6 | 39.1 | (1.2 | ) | | 88.5 | ||||||||||||||
Investment in subsidiaries |
1,576.5 | 23.3 | | (1,599.8 | ) | | ||||||||||||||
Assets of discontinued operations held for sale |
| 67.8 | 28.6 | | 96.4 | |||||||||||||||
Inter-company |
| | 1.2 | (1.2 | ) | | ||||||||||||||
$ | 1,649.2 | $ | 1,689.7 | $ | 105.9 | $ | (1,601.0 | ) | $ | 1,843.8 | ||||||||||
Current liabilities |
63.4 | 139.3 | | | 202.7 | |||||||||||||||
Notes payable, long term |
1,062.5 | 0.8 | | | 1,063.3 | |||||||||||||||
Other non-current liabilities |
28.9 | 17.7 | | | 46.6 | |||||||||||||||
Liabilities of discontinued operations held for sale |
| 32.4 | 4.4 | | 36.8 | |||||||||||||||
Inter-company |
| | 1.2 | (1.2 | ) | | ||||||||||||||
Equity |
494.4 | 1,499.5 | 100.3 | (1,599.8 | ) | 494.4 | ||||||||||||||
$ | 1,649.2 | $ | 1,689.7 | $ | 105.9 | $ | (1,601.0 | ) | $ | 1,843.8 | ||||||||||
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) | ||||||||||||||||||||
For the six months ended June 30, 2010 |
||||||||||||||||||||
Statement of Cash Flows |
||||||||||||||||||||
Cash provided by (used in) operating activities |
$ | (59.4 | ) | $ | 138.8 | $ | (29.5 | ) | $ | | $ | 49.9 | ||||||||
Cash provided by (used in) investing activities |
||||||||||||||||||||
Capital expenditures and other |
(1.5 | ) | (112.9 | ) | 35.5 | | (78.9 | ) | ||||||||||||
Cash provided by (used in) investing activities |
(1.5 | ) | (112.9 | ) | 35.5 | | (78.9 | ) | ||||||||||||
Cash provided by financing activities |
||||||||||||||||||||
Change in notes payable and other |
105.8 | | | | 105.8 | |||||||||||||||
Cash provided by financing activities |
105.8 | | | | 105.8 | |||||||||||||||
Effect of exchange rate changes on cash |
| | (0.4 | ) | | (0.4 | ) | |||||||||||||
Increase in cash and cash equivalents |
44.9 | 25.9 | 5.6 | | 76.4 | |||||||||||||||
Cash and cash equivalents, beginning of period |
1.5 | 56.7 | 71.4 | | 129.6 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 46.4 | $ | 82.6 | $ | 77.0 | $ | | $ | 206.0 | ||||||||||
For the six months ended June 30, 2009 |
||||||||||||||||||||
Statement of Cash Flows |
||||||||||||||||||||
Cash provided by (used in) operating activities |
$ | (40.0 | ) | $ | 85.3 | $ | 2.7 | $ | | $ | 48.0 | |||||||||
Cash provided by (used in) investing activities |
||||||||||||||||||||
Capital expenditure and other |
(2.6 | ) | (81.2 | ) | (0.3 | ) | (84.1 | ) | ||||||||||||
Proceeds from sale of equity securities |
10.1 | | 13.6 | | 23.7 | |||||||||||||||
Cash provided by (used in) investing activities |
7.5 | (81.2 | ) | 13.3 | | (60.4 | ) | |||||||||||||
Cash provided by financing activities |
||||||||||||||||||||
Change in notes payable |
31.0 | | | | 31.0 | |||||||||||||||
Cash provided by financing activities |
31.0 | | | | 31.0 | |||||||||||||||
Effect of exchange rate changes on cash |
| | (0.3 | ) | | (0.3 | ) | |||||||||||||
Increase (decrease) in cash and cash equivalents |
(1.5 | ) | 4.1 | 15.7 | | 18.3 | ||||||||||||||
Cash and cash equivalents, beginning of period |
6.7 | 51.0 | 58.0 | | 115.7 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 5.2 | $ | 55.1 | $ | 73.7 | $ | | $ | 134.0 | ||||||||||
(a) | The following material subsidiaries are identified as guarantors of the 7.50% Notes, 8.625% Notes and 8.75% 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 (River City), LLC, 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, 8.625% Notes and 8.75% Notes. | |
(b) | PNK Development 11, LLC, which as of June 30, 2010 held approximately $66.3 million in cash and cash equivalents, is our only material non-guarantor of the 7.50% Notes, 8.625% Notes and 8.75% Notes. Other non-guarantor subsidiaries include, but are not limited to, a subsidiary with $10.5 million in cash and cash equivalents as of June 30, 2010. |
20
Note 9Segment 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 income (loss) from continuing operations for the three and six months ended June 30, 2010
and 2009.
For the three months ended | For the six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Revenues: |
||||||||||||||||
LAuberge du Lac |
$ | 83.7 | $ | 86.6 | $ | 170.0 | $ | 175.0 | ||||||||
St. Louis (a) |
85.4 | 54.2 | 157.2 | 107.3 | ||||||||||||
Boomtown New Orleans |
34.2 | 35.5 | 69.0 | 73.7 | ||||||||||||
Belterra Casino Resort |
38.8 | 42.8 | 75.2 | 83.8 | ||||||||||||
Boomtown Bossier City |
21.1 | 22.7 | 45.5 | 47.5 | ||||||||||||
Boomtown Reno |
10.4 | 10.5 | 19.2 | 18.2 | ||||||||||||
Total Revenue |
$ | 273.6 | $ | 252.3 | $ | 536.1 | $ | 505.5 | ||||||||
Adjusted EBITDA (b): |
||||||||||||||||
LAuberge du Lac |
$ | 22.1 | $ | 21.5 | $ | 46.1 | $ | 45.0 | ||||||||
St. Louis (a) |
14.2 | 9.9 | 29.7 | 20.5 | ||||||||||||
Boomtown New Orleans |
10.4 | 10.6 | 21.1 | 24.1 | ||||||||||||
Belterra Casino Resort |
7.7 | 8.2 | 14.2 | 16.0 | ||||||||||||
Boomtown Bossier City |
4.7 | 4.7 | 11.2 | 10.9 | ||||||||||||
Boomtown Reno |
0.5 | 0.1 | (0.5 | ) | (1.2 | ) | ||||||||||
59.6 | 55.0 | 121.8 | 115.3 | |||||||||||||
Corporate expenses (c) |
(10.2 | ) | (8.2 | ) | (18.3 | ) | (18.0 | ) | ||||||||
49.4 | 46.8 | 103.5 | 97.3 | |||||||||||||
Other benefits (costs): |
||||||||||||||||
Depreciation and amortization |
(29.3 | ) | (24.8 | ) | (55.2 | ) | (49.6 | ) | ||||||||
Pre-opening and development costs |
(2.1 | ) | (4.1 | ) | (11.0 | ) | (7.0 | ) | ||||||||
Non-cash share-based compensation |
(2.1 | ) | (5.3 | ) | (3.5 | ) | (7.5 | ) | ||||||||
Impairment of indefinite-lived intangible assets |
(11.5 | ) | | (11.5 | ) | | ||||||||||
Impairment of land and construction costs |
(18.4 | ) | | (18.4 | ) | | ||||||||||
Write-downs, reserves and recoveries, net |
(1.7 | ) | (0.3 | ) | 4.4 | (0.8 | ) | |||||||||
Interest expense, net of capitalized interest |
(27.4 | ) | (15.9 | ) | (48.4 | ) | (32.5 | ) | ||||||||
Gain on sale of equity securities |
| 12.9 | | 12.9 | ||||||||||||
Loss on early extinguishment of debt |
(0.4 | ) | | (1.9 | ) | | ||||||||||
Other non-operating income |
0.1 | 0.1 | 0.1 | 0.2 | ||||||||||||
Income tax benefit (expense) |
1.8 | (0.4 | ) | 2.1 | (0.6 | ) | ||||||||||
Income (loss) from continuing operations |
$ | (41.6 | ) | $ | 9.0 | $ | (39.8 | ) | $ | 12.4 | ||||||
21
For the six months ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Capital expenditures: |
||||||||
LAuberge du Lac |
$ | 7.5 | $ | 2.8 | ||||
St. Louis (a) |
58.8 | 63.2 | ||||||
Boomtown New Orleans |
1.4 | 2.6 | ||||||
Belterra Casino Resort |
3.0 | 3.5 | ||||||
Boomtown Bossier City |
2.8 | 1.0 | ||||||
Boomtown Reno |
0.2 | 1.4 | ||||||
Corporate and other, including properties under development(d) |
19.7 | 9.7 | ||||||
$ | 93.4 | $ | 84.2 | |||||
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Assets |
||||||||
LAuberge du Lac |
$ | 317.5 | $ | 331.0 | ||||
St. Louis (a) |
836.8 | 806.7 | ||||||
Boomtown New Orleans |
68.3 | 74.3 | ||||||
Belterra Casino Resort |
190.0 | 193.6 | ||||||
Boomtown Bossier City |
91.3 | 92.1 | ||||||
Boomtown Reno |
42.5 | 41.9 | ||||||
Corporate and other, including new properties and discontinued operations |
384.0 | 304.3 | ||||||
$ | 1,930.4 | $ | 1,843.9 | |||||
(a) | Our St. Louis segment consists of Lumière Place, which includes the Lumière Place Casino, the Pinnacle-owned Four Seasons Hotel St. Louis and HoteLumière, and River City. | |
(b) | 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, loss on early extinguishment of debt, loss on sale of discontinued operations, and discontinued operations. We use Adjusted EBITDA to compare operating results among our properties and between accounting periods. | |
(c) | Corporate expenses represent unallocated payroll, professional fees, travel expenses and other general and administrative expenses not directly related to our casino and hotel operations. | |
(d) | Includes capital expenditures for our various development projects not yet reflected as operating segments, including the following: |
For the six months ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Sugarcane Bay |
$ | 10.5 | $ | 6.4 | ||||
Baton Rouge |
4.0 | |
22
PART II
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 April 2,
2010. (SEC File No. 001-13641). |
|||
4.1 | Indenture dated as of May 6, 2010, governing the 8.75% Senior Subordinated Notes due
2020, 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 May 12, 2010. (SEC File No.
001-13641). |
|||
4.2 | Form of 8.75% Senior Subordinated Note due 2020 is hereby incorporated by reference to
Exhibit 4.2 to the Companys Current Report on Form 8-K filed on May 12, 2010. (SEC File
No. 001-13641). |
|||
4.3 | Registration Rights Agreement, dated as of May 6, 2010, among the Company, the
guarantors identified therein and J.P. Morgan Securities Inc., Banc of America
Securities LLC, Barclays Capital Inc., Credit Agricole Securities (USA) Inc., Deutsche
Bank Securities Inc. and UBS Securities LLC 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 May 12, 2010. (SEC File No. 001-13641). |
|||
10.1 | Agreement for Guaranteed Maximum Price Construction Services, effective as of March 30,
2010, by and between PNK (Baton Rouge) Partnership and Manhattan Construction Company is
hereby incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on April 5, 2010. (SEC File No. 001-13641). |
|||
10.2 | | First Amendment to Amended and Restated Employment Agreement, dated as of April 15,
2010, between Pinnacle Entertainment, Inc. and Alain Uboldi is hereby incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on April 19,
2010. (SEC File No. 001-13641). |
||
10.3 | Purchase Agreement, dated as of April 29, 2010, by and among Pinnacle Entertainment,
Inc. and J.P. Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital
Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc. and UBS
Securities LLC, 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 May 5, 2010. (SEC File No. 001-13641). |
|||
10.4 | First Amendment to Third Amended and Restated Credit Agreement, dated as of April 28,
2010, by and between Pinnacle Entertainment, Inc., Barclays Bank PLC, 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 April 29, 2010. (SEC
File No. 001-13641). |
|||
10.5 | Sale and Purchase Agreement, dated April 29, 2010, between Casino Magic Corp., Casino
Magic Management Services Corp., Casino Club S.A., Da Silvano S.A., Compañía
Gerenciadora de Inversiones S.A. and Correon S.A. is hereby incorporated by reference to
Exhibit 2.1 to the Companys Current Report on Form 8-K filed on July 7, 2010. (SEC File
No. 001-13641). |
|||
10.6 | | Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan, As Amended
is hereby incorporated by reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K filed on May 17, 2010. (SEC File No. 001-13641). |
||
11 | Statement re: Computation of Earnings Per Share is hereby incorporated by reference to
Exhibit 11 to the Companys Quarterly Report on Form 10-Q filed on August 9, 2010.
(SEC File No. 001-13641). |
23
Exhibit | ||||
Number | Description of Exhibit | |||
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. |
||
101 | ** | The following financial statements from Pinnacle Entertainment, Inc.s Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2010, formatted in XBRL (eXtensible
Business Reporting Language): |
||
(i) unaudited Condensed Consolidated Balance Sheets June 30, 2010 and December 31,
2009. |
||||
(ii) unaudited Condensed Consolidated Statements of OperationsThree and Six Months
Ended June 30, 2010 and 2009. |
||||
(iii) unaudited Condensed Consolidated Statements of Cash Flows Six Months Ended June
30, 2010 and 2009. |
||||
(iv) Notes to unaudited Condensed Consolidated Financial Statements June 30, 2010. |
* | Filed herewith. | |
** | Furnished herewith. | |
| Management contract or compensatory plan or arrangement. |
24
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: August 31, 2010 | By: | /s/ Stephen H. Capp | ||
Stephen H. Capp | ||||
Executive Vice President and Chief Financial Officer (Authorized Officer, Principal Financial Officer) |
25
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 April 2,
2010. (SEC File No. 001-13641). |
|||
4.1 | Indenture dated as of May 6, 2010, governing the 8.75% Senior Subordinated Notes due
2020, 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 May 12, 2010. (SEC File No.
001-13641). |
|||
4.2 | Form of 8.75% Senior Subordinated Note due 2020 is hereby incorporated by reference to
Exhibit 4.2 to the Companys Current Report on Form 8-K filed on May 12, 2010. (SEC File
No. 001-13641). |
|||
4.3 | Registration Rights Agreement, dated as of May 6, 2010, among the Company, the
guarantors identified therein and J.P. Morgan Securities Inc., Banc of America
Securities LLC, Barclays Capital Inc., Credit Agricole Securities (USA) Inc., Deutsche
Bank Securities Inc. and UBS Securities LLC 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 May 12, 2010. (SEC File No. 001-13641). |
|||
10.1 | Agreement for Guaranteed Maximum Price Construction Services, effective as of March 30,
2010, by and between PNK (Baton Rouge) Partnership and Manhattan Construction Company is
hereby incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on April 5, 2010. (SEC File No. 001-13641). |
|||
10.2 | | First Amendment to Amended and Restated Employment Agreement, dated as of April 15,
2010, between Pinnacle Entertainment, Inc. and Alain Uboldi is hereby incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on April 19,
2010. (SEC File No. 001-13641). |
||
10.3 | Purchase Agreement, dated as of April 29, 2010, by and among Pinnacle Entertainment,
Inc. and J.P. Morgan Securities Inc., Banc of America Securities LLC, Barclays Capital
Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc. and UBS
Securities LLC, 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 May 5, 2010. (SEC File No. 001-13641). |
|||
10.4 | First Amendment to Third Amended and Restated Credit Agreement, dated as of April 28,
2010, by and between Pinnacle Entertainment, Inc., Barclays Bank PLC, 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 April 29, 2010. (SEC
File No. 001-13641). |
|||
10.5 | Sale and Purchase Agreement, dated April 29, 2010, between Casino Magic Corp., Casino
Magic Management Services Corp., Casino Club S.A., Da Silvano S.A., Compañía
Gerenciadora de Inversiones S.A. and Correon S.A. is hereby incorporated by reference to
Exhibit 2.1 to the Companys Current Report on Form 8-K filed on July 7, 2010. (SEC File
No. 001-13641). |
|||
10.6 | | Pinnacle Entertainment, Inc. 2005 Equity and Performance Incentive Plan, As Amended
is hereby incorporated by reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K filed on May 17, 2010. (SEC File No. 001-13641). |
||
11 | Statement re: Computation of Earnings Per Share is hereby incorporated by reference to
Exhibit 11 to the Companys Quarterly Report on Form 10-Q filed on August 9, 2010.
(SEC File No. 001-13641). |
26
Exhibit | ||||
Number | Description of Exhibit | |||
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. |
||
101 | ** | The following financial statements from Pinnacle Entertainment, Inc.s Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2010, formatted in XBRL (eXtensible
Business Reporting Language): |
||
(i) unaudited Condensed Consolidated Balance Sheets June 30, 2010 and December 31,
2009. |
||||
(ii) unaudited Condensed Consolidated Statements of OperationsThree and Six Months
Ended June 30, 2010 and 2009. |
||||
(iii) unaudited Condensed Consolidated Statements of Cash Flows Six Months Ended June
30, 2010 and 2009. |
||||
(iv) Notes to unaudited Condensed Consolidated Financial Statements June 30, 2010. |
* | Filed herewith. | |
** | Furnished herewith. | |
| Management contract or compensatory plan or arrangement. |
27