Tropicana Entertainment Inc. - FORM 10-Q

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TABLE OF CONTENTS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended September 30, 2014



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 000-53831

TROPICANA ENTERTAINMENT INC.

(Exact name of registrant as specified in its charter)



Delaware		27-0540158
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
8345 W. Sunset Road, Las Vegas, Nevada 89113 (Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: 702-589-3900

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 x 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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer x

Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o

As of November 3, 2014, there were 26,312,500 shares outstanding of the registrant's common stock, $.01 par value per share.

TABLE OF CONTENTS




PART I—FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	2

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34

ITEM 4.	CONTROLS AND PROCEDURES	34

PART II—OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	34

ITEM 1A.	RISK FACTORS	34

ITEM 6.	EXHIBITS	36

	SIGNATURES	37

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TROPICANA ENTERTAINMENT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)



	September 30, 2014		December 31, 2013
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	183,971	$	356,755
Restricted cash	15,867		30,856
Receivables, net	31,026		28,786
Inventories	7,386		4,435
Prepaid expenses and other assets	14,422		11,243
Assets held for sale	—		9,249
Total current assets	252,672		441,324
Property and equipment, net	724,255		460,745
Goodwill	15,857		24,928
Intangible assets, net	75,256		67,014
Investments	32,433		33,640
Other assets, net	11,469		15,970
Total assets	$	1,111,942	$	1,043,621

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	3,000	$	3,000
Liabilities related to assets held for sale	—		1,648
Accounts payable	51,381		38,865
Accrued expenses and other current liabilities	81,480		64,355
Total current liabilities	135,861		107,868
Long-term debt, net	292,686		294,771
Other long-term liabilities	6,894		7,198
Deferred tax liabilities	19,659		19,659
Total liabilities	455,100		429,496

Commitments and contingencies

Shareholders' equity:
Tropicana Entertainment Inc. preferred stock at $0.01 par value; 10,000,000 shares authorized, no shares issued	—		—
Tropicana Entertainment Inc. common stock at $0.01 par value; 100,000,000 shares authorized, 26,312,500 shares issued and outstanding at September 30, 2014 and December 31, 2013	263		263
Additional paid-in capital	600,359		600,359
Retained earnings	56,220		13,503
Total shareholders' equity	656,842		614,125
Total liabilities and shareholders' equity	$	1,111,942	$	1,043,621

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TROPICANA ENTERTAINMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenues:
Casino	$	167,283		$	112,003		$	443,351		$	340,020
Room	37,299			27,661			87,818			68,689
Food and beverage	30,034			20,669			76,773			58,494
Other	7,626			6,186			19,430			16,324
Gross revenues	242,242			166,519			627,372			483,527
Less promotional allowances	(25,143		)	(17,772		)	(68,142		)	(52,668		)
Net revenues	217,099			148,747			559,230			430,859
Operating costs and expenses:
Casino	74,455			51,248			200,609			150,055
Room	12,769			9,778			31,033			24,967
Food and beverage	14,468			10,331			36,604			28,801
Other	4,693			4,446			12,602			11,772
Marketing, advertising and promotions	15,663			10,113			42,522			29,543
General and administrative	39,626			24,890			106,101			75,487
Maintenance and utilities	18,914			15,425			52,266			42,761
Depreciation and amortization	13,752			8,831			36,225			25,429
Impairment charges, other write-downs and recoveries	961			(198		)	4,229			500
Property tax settlement	—			—			(31,725		)	—
Total operating costs and expenses	195,301			134,864			490,466			389,315
Operating income	21,798			13,883			68,764			41,544

Other income (expense):
Interest expense	(3,203		)	(3,636		)	(9,564		)	(10,816		)
Interest income	132			190			1,749			593
Total other expense	(3,071		)	(3,446		)	(7,815		)	(10,223		)
Income from continuing operations before income taxes	18,727			10,437			60,949			31,321
Income tax expense	(6,655		)	(1,308		)	(19,940		)	(3,073		)
Income from continuing operations	12,072			9,129			41,009			28,248
Income (loss) from discontinued operations, net	1,605			(783		)	1,708			(1,567		)
Net income	$	13,677		$	8,346		$	42,717		$	26,681

Basic and diluted income per common share:
Income from continuing operations	$	0.46		$	0.35		$	1.56		$	1.07
Income (loss) from discontinued operations, net	0.06			(0.03		)	0.06			(0.06		)
Net income	$	0.52		$	0.32		$	1.62		$	1.01

Weighted-average common shares outstanding:
Basic and diluted	26,313			26,313			26,313			26,313

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TROPICANA ENTERTAINMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



	Nine months ended September 30,
	2014			2013
Cash flows from operating activities:
Net income	$	42,717		$	26,681
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on insurance recoveries	(5,843		)	—
Insurance proceeds from business interruption	1,250			—
Loss on sale of discontinued operations	233			—
Impairment of discontinued operations	—			1,454
Depreciation and amortization (including discontinued operations)	36,225			25,546
Amortization of debt discount and debt issuance costs	768			961
Impairment charges	9,071			439
Loss on disposition of asset (including discontinued operations)	1,001			61
Changes in current assets and current liabilities:
Receivables, net	(6,658		)	352
Inventories, prepaids and other assets	(2,269		)	(732		)
Accounts payable, accrued expenses and other liabilities	20,082			(133		)
Other	4,390			2,129
Net cash provided by operating activities	100,967			56,758
Cash flows from investing activities:
Additions of property and equipment	(52,020		)	(42,989		)
Restricted cash for acquisition	—			(15,002		)
Insurance proceeds	5,200			700
Proceeds from sale of discontinued operations	6,750			—
Lumière Place acquisition, net of $11,015 cash acquired	(237,317		)	—
Other	3,768			4,092
Net cash used in investing activities	(273,619		)	(53,199		)
Cash flows from financing activities:
Payments on debt	(2,250		)	(1,402		)
Restricted cash	(20		)	(20		)
Net cash used in financing activities	(2,270		)	(1,422		)
Net increase (decrease) in cash and cash equivalents	(174,922		)	2,137
(Increase) decrease in cash and cash equivalents related to assets held for sale	2,138			(132		)
Cash and cash equivalents, beginning of period	356,755			240,381
Cash and cash equivalents, end of period	$	183,971		$	242,386

Supplemental cash flow disclosure (including discontinued operations):
Cash paid for interest, net of interest capitalized	$	8,838		$	9,425
Cash paid for income taxes	16,396			2,848
Supplemental disclosure of non-cash items:
Capital expenditures included in accrued expenses and other current liabilities	4,570			1,699

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1—ORGANIZATION AND BACKGROUND

Organization

Tropicana Entertainment Inc. (the "Company," "TEI," "we," "us," or "our"), a Delaware corporation, is an owner and operator of regional casino and entertainment properties located in the United States and one casino resort development located on the island of Aruba. In April 2014, the Company acquired Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis and related excess land parcels in St. Louis, Missouri (collectively, "Lumière Place") for a cash purchase price of approximately $261.3 million, which includes an adjustment for working capital as of the acquisition date (see Note 3 - Lumière Place Acquisition).

The Company's United States properties include two casinos in Nevada and one casino in each of Indiana, Louisiana, Mississippi, Missouri and New Jersey. In addition, the Company owns a property in Aruba. The Company views each property as an operating segment which it aggregates by region in order to present its reportable segments: (i) East, (ii) Central, (iii) West and (iv) South and other. The current operations of the Company, by region, include the following:


•	East—Tropicana Casino and Resort, Atlantic City ("Tropicana AC") located in Atlantic City, New Jersey;


•	Central—Tropicana Evansville ("Tropicana Evansville") located in Evansville, Indiana; and Lumière Place located in Saint Louis, Missouri;


•	West—Tropicana Laughlin Hotel and Casino ("Tropicana Laughlin") located in Laughlin, Nevada; and MontBleu Casino Resort & Spa ("MontBleu") located in Lake Tahoe, Nevada; and


•	South and other—Belle of Baton Rouge ("Belle of Baton Rouge") located in Baton Rouge, Louisiana; Trop Casino Greenville ("Tropicana Greenville") located in Greenville, Mississippi and Tropicana Aruba Resort & Casino ("Tropicana Aruba") located in Noord, Aruba.

In addition, through June 30, 2014, the Company owned River Palms Hotel and Casino ("River Palms") located in Laughlin, Nevada, which is presented as discontinued operations in the accompanying condensed consolidated statements of income for all periods presented while the assets and liabilities are presented as held for sale in the accompanying condensed consolidated balance sheet as of December 31, 2013. On July 1, 2014, the Company sold River Palms to Nevada Restaurant Services, Inc. and its affiliate, Laughlin Hotel, LLC (see Note 16 - Discontinued Operations for further discussion).

Background

The Company was formed on May 11, 2009 to acquire certain assets of Tropicana Entertainment Holdings, LLC ("TEH"), and certain of its subsidiaries pursuant to their plan of reorganization under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). The Company also acquired Columbia Properties Vicksburg ("CP Vicksburg"), JMBS Casino, LLC ("JMBS Casino") and CP Laughlin Realty, LLC ("CP Laughlin Realty"), all of which were part of the same plan of reorganization (the "Plan") as TEH (collectively, the "Predecessors"). In addition, the Company acquired certain assets of Adamar of New Jersey, Inc. ("Adamar"), an unconsolidated subsidiary of TEH, pursuant to an amended and restated asset purchase agreement, including Tropicana AC. The reorganization of the Predecessors and the acquisition of Tropicana AC (together, the "Restructuring Transactions") were consummated and became effective on March 8, 2010 (the "Effective Date"), at which time the Company acquired Adamar and several of the Predecessors' gaming properties and related assets. Adamar was not a party to the Predecessors' bankruptcy. Prior to March 8, 2010, the Company conducted no business, other than in connection with the reorganization of the Predecessors and the acquisition of Tropicana AC, and had no material assets or liabilities.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain disclosures required by generally accepted accounting principles in the United States ("GAAP") are omitted or condensed in these condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) that are necessary to present fairly the Company's financial position, results of operations and cash flows for the interim periods have been made. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

December 31, 2013, from which the accompanying condensed consolidated balance sheet information as of that date was derived.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates incorporated in the Company's financial statements include the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, the estimated valuation allowance for deferred tax assets, certain tax liabilities, estimated cash flows in assessing the impairment of long-lived assets, intangible assets, Casino Reinvestment Development Authority (the "CRDA") investments, self-insured liability reserves, customer loyalty program reserves, contingencies, litigation, claims, assessments and loss contingencies. Actual results could differ from these estimates.

Restricted Cash

Restricted cash consisted primarily of funds invested in money market funds. At September 30, 2014 and December 31, 2013, $9.7 million was restricted by the United States Bankruptcy Court for the District of Delaware ("Bankruptcy Court") in connection with the reorganization of the Predecessors for the purpose of satisfying liabilities related to professional services incurred in connection with the Restructuring Transactions, and $6.2 million was restricted to collateralize letters of credit. In addition, at December 31, 2013, $15.0 million was held in escrow in connection with the agreement to purchase Lumière Place. The acquisition was consummated on April 1, 2014 (see Note 3 - Lumière Place Acquisition).

Fair Value of Financial Instruments

The carrying values of the Company's cash and cash equivalents, restricted cash, receivables and accounts payable approximate fair value because of the short term maturities of these instruments. The carrying values of investments, which include deposits and bonds, approximate fair value as items are presented net of a valuation allowance and in the case of the bonds, net of an unamortized discount.

The fair value of our long-term debt is based on the quoted market prices for similar issues. The estimated fair value of our long-term debt as of September 30, 2014 is approximately $290.5 million.

Revenue Recognition and Promotional Allowances

Casino revenue represents the difference between wins and losses from gaming activities. Room, food and beverage and other operating revenues are recognized at the time the goods or services are provided. The Company collects taxes from customers at the point of sale on transactions subject to sales and other taxes. Revenues are recorded net of any taxes collected. The majority of the Company's casino revenue is counted in the form of cash and chips and, therefore, is not subject to any significant or complex estimation. The retail value of rooms, food and beverage and other services provided to customers on a complimentary basis is included in gross revenues and then deducted as promotional allowances. Promotional allowances also include incentives earned in our slot bonus program such as cash, complimentary play, and the estimated retail value of goods and services (such as complimentary rooms and food and beverages). We reward customers, through the use of bonus programs, with points based on amounts wagered that can be redeemed for a specified period of time, principally for complimentary play, and to a lesser extent for goods or services, depending upon the property.

The amounts included in promotional allowances consist of the following (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Room	$	9,521	$	7,007	$	25,611	$	19,754
Food and beverage	13,413		9,464		35,449		27,031
Other	2,209		1,301		7,082		5,883
Total	$	25,143	$	17,772	$	68,142	$	52,668

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

The estimated departmental costs and expenses of providing these promotional allowances, for continuing operations, are included in casino operating costs and expenses and consist of the following (in thousands):



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Room	$	4,551	$	3,586	$	13,816	$	11,140
Food and beverage	12,143		9,209		32,362		25,390
Other	967		703		2,401		1,495
Total	$	17,661	$	13,498	$	48,579	$	38,025

Recently Issued Accounting Standards

In August 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, an amendment to FASB Accounting Standards Codification ("ASC") Topic 205, Presentation of Financial Statements. This update provides guidance on management's responsibility in evaluating whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. This ASU is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company does not expect the adoption of this ASU to have a material impact on its financial statement disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The standard will be effective for the first interim period within fiscal years beginning after December 15, 2016, using one of two retrospective application methods. The Company is evaluating the impacts, if any, the adoption of ASU No. 2014-09 will have on the Company's financial position or results of operations.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changes the criteria for reporting discontinued operations. Under the amendment a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when any of the following occurs: (i) the component of an entity or group of components of an entity meets the criteria to be classified as held for sale; (ii) the component of an entity or group of components of an entity is disposed of by sale; and (iii) the component of an entity or group of components of an entity is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spinoff). This new guidance is effective prospectively for all disposals (or classifications as held for sale) of components of an entity and all business activities, on acquisition, that are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years.

A variety of proposed or otherwise potential accounting standards are currently under consideration 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 such proposed standards would have on our condensed consolidated financial statements.

Reclassifications

The unaudited condensed consolidated financial statements reflect certain reclassifications to prior year amounts in order to conform with current year presentation. The reclassifications have no effect on previously reported net income.

NOTE 3—LUMIÈRE PLACE ACQUISITION

Overview

As discussed in Note 1 - Organization and Background, on April 1, 2014, the Company completed its previously announced acquisition of all of the outstanding stock of Casino One Corporation (the “Target”) and all of the outstanding membership interests of PNK (ES), LLC (“ES”), PNK (ST. LOUIS RE), LLC (“RE”), and PNK (STLH), LLC (“STLH” and

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

together with ES, RE and the Target, the “Companies”), pursuant to the terms of an Equity Interest Purchase Agreement (the “Purchase Agreement”), dated as of August 16, 2013, by and among Tropicana St. Louis LLC (the “Buyer”), a wholly owned subsidiary of the Company, and Pinnacle Entertainment, Inc. (“Pinnacle”), Casino Magic, LLC (“Casino Magic” and together with Pinnacle, the “Sellers”) and the Companies. Upon consummation of the acquisition, the Buyer acquired the Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis and related excess land parcels in St. Louis, Missouri.

Consideration Transferred

The cash purchase price was approximately $261.3 million, which includes an adjustment for working capital as of the acquisition date. The Company funded the net purchase price using cash, which included proceeds from the New Credit Facilities issuance on November 27, 2013. Acquisition-related costs included in the accompanying condensed consolidated statements of income for the three and nine months ended September 30, 2014 was $0.2 million and $1.3 million, respectively.

Allocation of Purchase Price

The Company is required to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The determination of the fair values of the acquired assets and assumed liabilities requires significant judgment. The fair value of Lumière Place's assets acquired and liabilities assumed utilized for purchase price allocation are considered preliminary as we continue to finalize the valuation in accordance with the Purchase Agreement.

The preliminary purchase price allocation was as follows (in thousands):



	Fair Value
Current assets	$	15,931
Property and equipment	249,097
Intangible assets	8,848
Other assets	657
Total assets	274,533
Total liabilities	(13,227		)
Total purchase price	$	261,306

The fair value of the intangible assets as of the acquisition date is primarily associated with the casino's gaming license which is not subject to amortization (see Note 6 - Goodwill and Intangible Assets).

Condensed Consolidated Statements of Income for the period from April 1, 2014 through September 30, 2014

The results of operations for Lumière Place have been included in the Company's financial statements since the acquisition date. The amounts of revenue and earnings of Lumière Place included in the Company's condensed consolidated statements of income for the three and nine months ended September 30, 2014 are as follows (in thousands):



	Three months ended September 30, 2014			Period from April 1 to September 30, 2014
Net revenues	$	42,911		$	85,702
Net loss	(1,295		)	(5,163		)

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Supplemental Unaudited Pro Forma Information

The following unaudited pro forma information reflects the consolidated results of operations of the Company as though the acquisition had taken place at the beginning of the respective periods presented. The unaudited pro forma information has been presented for illustrative purposes only and is not indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of the Company. The unaudited pro forma information is as follows (in thousands, except per share data):



	Three months ended September 30,		Nine months ended September 30,
	2013		2014		2013
Net Revenues	$	192,619	$	600,225	$	568,830
Net Income	12,336		43,176		40,420
Basic and diluted net income per common share	$	0.47	$	1.64	$	1.54

The pro forma results include adjustments to general and administrative expense to exclude the Company's non-recurring transaction costs related to the acquisition and to interest expense due to lower interest rates on the New Credit Facilities issued to refinance the Company's existing debt and fund a portion of the purchase price. Lastly, the pro forma results include adjustments to depreciation and amortization expense, based on the fair values of the property and equipment and definite life intangible assets acquired.

NOTE 4—RECEIVABLES

Receivables consist of the following (in thousands):



	September 30, 2014			December 31, 2013
Casino	$	16,253		$	18,000
Hotel	7,033			4,539
Predecessors' administrative tax claim	2,181			10,478
Income tax receivable	2,929			1,266
Other	13,830			6,308
Receivables, gross	42,226			40,591
Allowance for doubtful accounts	(11,200		)	(11,805		)
Receivables, net	$	31,026		$	28,786

The Predecessors' administrative tax claim amounts represent tax refund claims filed related to our Predecessors. The timing of any collections on these claims is uncertain and is pending litigation. In September 2014, the Company partially settled certain Predecessors' administrative tax claims resulting in an adjustment to receivables of $8.3 million (see Note 13 - Commitments and Contingencies for further discussion).

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

NOTE 5—PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):



	Estimated life (years)	September 30, 2014			December 31, 2013
Land	—	$	114,136		$	89,724
Buildings and improvements	10 - 40	533,306			335,050
Furniture, fixtures and equipment	3 - 7	174,044			130,174
Riverboats and barges	5 - 15	18,605			18,990
Construction in progress	—	43,243			12,708
Property and equipment, gross		883,334			586,646
Accumulated depreciation		(159,079		)	(125,901		)
Property and equipment, net		$	724,255		$	460,745

The increase in property and equipment from December 31, 2013 to September 30, 2014 is primarily attributed to the acquisition of Lumière Place on April 1, 2014 (see Note 3 - Lumière Place Acquisition).

NOTE 6—GOODWILL AND INTANGIBLE ASSETS

Goodwill and other indefinite-life 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.

Changes in the carrying amount of Goodwill by segment are as follows (in thousands):



	Central		South and other			Corporate			Total
Balance as of January 1, 2014
Gross carrying value	$	14,224	$	1,731		$	10,704		$	26,659
Accumulated impairment losses	—		(1,731		)	—			(1,731		)
Net carrying value	14,224		—			10,704			24,928

Impairment losses	—		—			(9,071		)	(9,071		)

Balance as of September 30, 2014
Gross carrying value	14,224		1,731			10,704			26,659
Accumulated impairment losses	—		(1,731		)	(9,071		)	(10,802		)
Net carrying value	$	14,224	$	—		$	1,633		$	15,857

During the first quarter of 2014, the Company determined there was an indication of impairment related to goodwill recorded at its Corporate segment which is tested at the Tropicana AC reporting unit level. The Company recognized a $9.1 million impairment of goodwill in the accompanying condensed consolidated statement of income for the nine months ended September 30, 2014, due to Tropicana AC's carrying value exceeding its fair value.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Intangible assets consist of the following (in thousands):



	Estimated life (years)	September 30, 2014			December 31, 2013
Trade name	Indefinite	$	25,500		$	25,500
Gaming licenses	Indefinite	37,387			28,700
Customer lists	3	3,021			2,861
Favorable lease	5 - 42	15,645			15,645
Total intangible assets		81,553			72,706
Less accumulated amortization:
Customer lists		(2,887		)	(2,861		)
Favorable lease		(3,410		)	(2,831		)
Total accumulated amortization		(6,297		)	(5,692		)
Intangible assets, net		$	75,256		$	67,014

Upon the adoption of fresh-start reporting, the Company recognized an indefinite life trade name related to the "Tropicana" trade name and indefinite life gaming licenses related to entities that are located in gaming jurisdictions where competition is limited to a specified number of licensed gaming operators. In April 2014, indefinite life gaming licenses increased related to the acquisition of Lumière Place (see Note 3 - Lumière Place Acquisition). At September 30, 2014 the indefinite life gaming licenses consists of $28.7 million and $8.7 million related to Tropicana Evansville and Lumière Place, respectively. At December 31, 2013, the indefinite life gaming licenses of $28.7 million is related to Tropicana Evansville.

The gaming license associated with Lumière Place is valued based on the Greenfield method, which is the function of the cost to build a new casino operation, build-out period, projected cash flows attributed to the business once operational and a discount rate. The projected cash flows assumed a revenue growth rate of 2.0% and a effective tax rate of 38.1%. The discount rate assumed was 12.0%, based on the weighted average cost of capital plus a premium to reflect the risk of construction costs and timing.

Customer lists represent the value associated with customers enrolled in our customer loyalty programs and are amortized on a straight-line basis over three years. The customer lists valued upon adoption of fresh-start reporting and in connection with the Tropicana AC acquisition were fully amortized as of February 2013. In April 2014, customer lists increased related to the acquisition of Lumière Place (see Note 3 - Lumière Place Acquisition). Amortization expense related to customer lists, which was amortized to depreciation and amortization expense, for the three and nine months ended September 30, 2014 was less than $0.1 million. The amortization expense related to the nine months ended September 30, 2013 was $0.2 million. There was no amortization expense recorded for the three months ended September 30, 2013. Estimated annual amortization related to the Lumière Place customer list is anticipated to be $0.1 million in 2015 and 2016 and less than $0.1 million in 2017.

The customer list associated with Lumière Place is valued based on a market approach which considers the price that would be negotiated between a hypothetical buyer and seller. The price was calculated by using market rates for leased customer lists and multiplying it by a value multiple to convert the lease rates into purchase rates.

Favorable lease arrangements were valued upon adoption of fresh-start reporting and are being amortized to rental expense on a straight-line basis over the remaining useful life of the respective leased facility. In connection with the Tropicana AC acquisition, the Company also recognized intangible assets relating to favorable lease arrangements which are being amortized to tenant income on a straight-line basis over the terms of the various leases. Additionally, in connection with the acquisition of Tropicana Aruba, the Company recognized intangible assets relating to a favorable land lease arrangement which is amortized to rental expense on a straight-line basis over the remaining term of the land lease. Amortization expense related to favorable lease arrangements, which is amortized to rental expense or tenant income, as applicable, for the three months ended September 30, 2014 and 2013, was $0.2 million. Amortization expense for the nine months ended September 30, 2014 and 2013 was $0.6 million.

NOTE 7—INVESTMENTS

The New Jersey Casino Control Act provides, among other things, for an assessment of licensees equal to 1.25% of gross gaming revenues and 2.5% of Internet gaming gross revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues and 5% on Internet gaming gross revenues. The Company may satisfy this investment obligation by investing in qualified eligible direct investments, by making qualified contributions or by depositing funds with the CRDA. Funds deposited with the CRDA may be used to purchase bonds designated by the CRDA or, under certain circumstances, may be

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

donated to the CRDA in exchange for credits against future CRDA investment obligations. The carrying value of the total investments at September 30, 2014 and December 31, 2013 approximates their fair value.

Investments consist of the following (in thousands):



	September 30, 2014			December 31, 2013
Investment in bonds—CRDA	$	16,435		$	16,542
Less unamortized discount	(4,362		)	(4,417		)
Less valuation allowance	(3,482		)	(3,463		)
Deposits—CRDA	31,710			29,538
Less valuation allowance	(7,868		)	(7,201		)
Direct investment—CRDA	1,002			4,022
Less valuation allowance	(1,002		)	(1,381		)
Total investments	$	32,433		$	33,640

The CRDA bonds have various contractual maturities that range from 2 to 40 years. Actual maturities may differ from contractual maturities because of prepayment rights. The Company treats CRDA bonds as held-to-maturity since the Company has the ability and the intent to hold these bonds to maturity and under the CRDA, the Company is not permitted to do otherwise. As such, the CRDA bonds are initially recorded at a discount to approximate fair value.

After the initial determination of fair value, the Company will analyze the CRDA bonds for recoverability on a quarterly basis based on management's historical collection experience and other information received from the CRDA. If indications exist that the CRDA bond is impaired, additional valuation allowances will be recorded.

Funds on deposit with the CRDA are held in an interest bearing account by the CRDA. Interest is earned at the stated rate that approximates two-thirds of the current market rate for similar assets. The Company records charges to expense to reflect the lower return on investment and records the deposit at fair value on the date the deposit obligation arises. During the three months ended September 30, 2014 and 2013, the Company charged $0.4 million to general and administrative expenses on the accompanying condensed consolidated statements of income. During the nine months ended September 30, 2014 and 2013, the Company charged $1.2 million and $0.4 million, respectively, to general and administrative expenses on the accompanying condensed consolidated statements of income.

NOTE 8—OTHER ASSETS

Other assets consist of the following (in thousands):



	September 30, 2014		December 31, 2013
Debt issuance costs	$	4,006	$	4,304
Tropicana Evansville prepaid rent	450		2,475
Deposits	4,032		4,812
Other	2,981		4,379
Other assets	$	11,469	$	15,970

NOTE 9—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):



	September 30, 2014		December 31, 2013
Accrued payroll and benefits	$	30,705	$	24,697
Accrued gaming and related	15,273		10,564
Accrued taxes	19,096		9,587
Predecessors' administrative tax claim	1,495		9,792
Other accrued expenses and current liabilities	14,911		9,715
Total accrued expenses and other current liabilities	$	81,480	$	64,355

The Predecessors' administrative tax claim amounts represent certain tax liabilities related to our Predecessors. The Company is in the process of determining the timing and amount of the Predecessors' claims to be settled. In September 2014,

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

the Company partially settled certain Predecessors' administrative tax claims resulting in an adjustment to accrued expenses and other current liabilities of $8.3 million (see Note 13 - Commitments and Contingencies for further discussion).

NOTE 10—DEBT

Debt consists of the following (in thousands):



	September 30, 2014			December 31, 2013
New Term Loan Facility, due 2020, interest at 4.0% at September 30, 2014 and December 31, 2013, net of unamortized discount of $1.3 million and $1.5 million at September 30, 2014 and December 31, 2013, respectively	$	295,686		$	297,771
Less current portion of debt	(3,000		)	(3,000		)
Total long-term debt, net	$	292,686		$	294,771

New Credit Facilities

On November 27, 2013, the Company entered into (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million, issued at a discount of 0.5% (the “New Term Loan Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the “Revolving Facility” and, together with the New Term Loan Facility, the “New Credit Facilities”). Commencing on December 31, 2013, the New Term Loan Facility will amortize in equal quarterly installments in an amount of $750,000, with any remaining balance payable on the final maturity date of the New Term Loan Facility, which is November 27, 2020. Amounts under the Revolving Facility are available to be borrowed and re-borrowed until its termination on November 27, 2018.

Approximately $172.4 million of the net proceeds from the New Credit Facilities were used to repay in full the principal amounts outstanding under the Company's existing credit facilities which consisted of a $175 million senior secured first lien term loan facility and $15 million cash collateralized letter of credit facility (the "Credit Facilities"). The Credit Facilities were terminated effective as of November 27, 2013.

The New Term Loan Facility accrues interest, at the Company's option, at a per annum rate equal to either (i) the LIBO Rate (as defined in the Credit Agreement) (subject to a 1.00% floor) plus an applicable margin equal to 3.00%, or (ii) the alternate base rate (as defined in the Credit Agreement) (subject to a 2.00% floor) plus an applicable margin equal to 2.00%; such that in either case, the applicable interest rate shall not be less than 4.0%. The Revolving Facility accrues interest, at the Company's option, at a per annum rate equal to either (i) the LIBO Rate plus an applicable margin ranging from 2.00% (if the total net leverage ratio is less than 2.50:1.00) to 2.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00); or (ii) the alternate base rate plus an applicable margin ranging from 1.00% (if the total net leverage ratio is less than 2.50:1.00) to 1.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00). The interest rate increases by 2.00% following certain defaults. As of September 30, 2014, the interest rate on the New Term Loan Facility was 4.0% and no amounts were outstanding under the Revolving Facility.

The New Credit Facilities are guaranteed by all of the Company's domestic subsidiaries, subject to limited exceptions where gaming approval is being sought, and additional subsidiaries may be required to provide guarantees, subject to limited exceptions. The New Credit Facilities are secured by a first lien on substantially all assets of the Company and the domestic subsidiaries that are guarantors, with certain limited exceptions. Subsidiaries that become guarantors will be required, with certain limited exceptions, to provide first liens and security interests in substantially all their assets to secure the New Credit Facilities.

At the election of the Company and subject to certain conditions, including a maximum senior secured net leverage ratio of 3.25:1.00, the amount available under the New Credit Facilities may be increased, which increased amount may be comprised of additional term loans and revolving loans.

The New Term Loan Facility may be prepaid at the option of the Company at any time without penalty (other than customary LIBO Rate breakage fees). The Company is required to make mandatory payments of the New Credit Facilities with (i) net cash proceeds of certain asset sales (subject to reinvestment rights), (ii) net cash proceeds from certain issuances of debt and equity (with certain exceptions), (iii) up to 50% of annual excess cash flow (as low as 0% if the Company's total leverage ratio is below 2.75:1.00), and (iv) certain casualty proceeds and condemnation awards (subject to reinvestment rights).

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Key covenants binding the Company and its subsidiaries include (i) limitations on indebtedness, liens, investments, acquisitions, asset sales, dividends and other restricted payments, and affiliate and extraordinary transactions, and (ii) if, as of the last day of any fiscal quarter, the amount of outstanding revolving loans exceed 35% of the permitted borrowing under the Revolving Facility, compliance with a maximum senior secured net leverage ratio test of 3.25:1.00. Key default provisions include (i) failure to repay principal, interest, fees and other amounts owing under the facility, (ii) cross default to certain other indebtedness, (iii) the rendering of certain judgments against the Company or its subsidiaries, (iv) failure of security documents to create valid liens on property securing the New Credit Facilities and to perfect such liens, (v) revocation of casino, gambling, or gaming licenses, (vi) the Company's or its material subsidiaries' bankruptcy or insolvency; and (vii) the occurrence of a Change of Control (as defined in the Credit Agreement). Many defaults are also subject to cure periods prior to such default giving rise to the right of the lenders to accelerate the loans and to exercise remedies. The Company was in compliance with the covenants of the New Term Loan Facility at September 30, 2014.

NOTE 11—IMPAIRMENT CHARGES, OTHER WRITE DOWNS AND RECOVERIES

Impairment charges, other write-downs and recoveries, included in continuing operations, consist of the following (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Impairment of barge	$	—		$	—		$	—		$	439
Gain on insurance recoveries	(35		)	—			(5,843		)	—
Impairment of goodwill (Note 6)	—			—			9,071			—
(Gain) loss on disposal of assets	996			(198		)	1,001			61
Total impairment charges, other write-downs and recoveries	$	961		$	(198	)	$	4,229		$	500

Jubilee Barge Impairment and Insurance Recovery

In January 2013, the Jubilee barge was damaged as a result of a high-wind storm. Due to the damage sustained the Company initially recorded a $0.4 million write-down of fixed assets which was included in the accompanying condensed consolidated statement of income for the nine months ended September 30, 2013. The Company filed claims with its insurance carriers and received $0.7 million in insurance proceeds as of December 31, 2013. In January 2014, the Company settled the filed claims for $5.9 million and received the remaining $5.2 million in insurance proceeds related to the claims during the first quarter of 2014. As a result of the settlement, a gain of $4.6 million, net of expenses and write-downs, was included in the accompanying condensed consolidated statements of income for the nine months ended September 30, 2014.

Superstorm Sandy Insurance Recovery

In October 2012, Superstorm Sandy forced a city-mandated closure of all casinos in Atlantic City for approximately five days. As a result, the Company filed a claim with the insurance carriers relating to the business interruption caused by Superstorm Sandy. The Company received a cash settlement of $1.3 million during the second quarter of 2014 which was recorded as a gain in the accompanying condensed consolidated statements of income for the three and nine months ended September 30, 2014.

NOTE 12—RELATED PARTY TRANSACTIONS

Insight Portfolio Group LLC

Effective January 1, 2013, the Company acquired a minority equity interest in Insight Portfolio Group LLC (“Insight Portfolio Group”) and agreed to pay a portion of Insight Portfolio Group's operating expenses. In addition to the minority equity interest held by the Company, a number of other entities with which Mr. Icahn has a relationship also acquired equity interests in Insight Portfolio Group and also agreed to pay certain of Insight Portfolio Group's operating expenses. The Company may purchase a variety of goods and services as a member of the buying group at prices and on terms that the Company believes are more favorable than those which would be achieved on a stand-alone basis. During the three months ended September 30, 2014 and 2013, the Company paid $0.1 million to Insight Portfolio Group. During the nine months ended September 30, 2014 and 2013, the Company paid $0.3 million to Insight Portfolio Group.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

NOTE 13—COMMITMENTS AND CONTINGENCIES

Leases

MontBleu Lease

The Company has a lease agreement with respect to the land and building which MontBleu operates, through December 31, 2028. Under the terms of the lease, rent is $333,333 per month, plus 10% of annual gross revenues in excess of $50 million through December 31, 2011. After December 31, 2011, rent is equal to the greater of (i) $333,333 per month as increased by the same percentage that the consumer price index has increased from 2009 thereafter, plus 10% of annual gross revenues in excess of a Breakpoint as defined in the terms of the lease agreement, or (ii) 10% of annual gross revenues. In connection with fresh-start reporting, the Company recognized an unfavorable lease liability of $9.6 million related to this lease that will be amortized on a straight-line basis to rental expense over the remaining term of the lease. As of September 30, 2014 and December 31, 2013, the unfavorable lease liability balance was $7.3 million and $7.7 million, respectively, of which $6.8 million and $7.2 million, respectively, is included in other long-term liabilities on the accompanying consolidated balance sheets.

In October 2014, Columbia Properties Tahoe, LLC (“CPT”), the Company’s subsidiary that owns MontBleu, entered into a lease amendment with Edgewood Companies (“Landlord”) pursuant to which CPT agreed to expend $24.0 million during the next 18 months on a capital renovation project in exchange for certain lease modifications including future capital expenditure requirements and a Landlord acknowledgment that upon completion of the capital renovation project the property will satisfy the “first class” facility requirements of the lease.

Tropicana Evansville Land Lease

The Company leases from the City of Evansville, Indiana approximately ten acres of the approximately 20 acres on which Tropicana Evansville is situated. Under the terms of the lease, the Company may extend the lease term through November 30, 2040 by exercising up to seven five-year renewal options. In March 2010, the Company amended the Tropicana Evansville land lease and exercised its second of its seven renewal options which extends the lease term through November 2015. Under the terms of the lease renewal, effective December 1, 2010, the Company is required to pay a percentage of the adjusted gross receipts ("AGR") for the year in rent with a minimum annual rent of no less than $2.0 million. The percentage rent shall be equal to 2% of the AGR up to $25 million, plus 4% of the AGR in excess of $25 million up to $50 million, plus 6% of the AGR in excess of $50 million up to $75 million, plus 8% of the AGR in excess of $75 million up to $100 million and plus 12% of the AGR in excess of $100 million. In accordance with the lease renewal, during 2010 the Company paid a total of $13.5 million for the prepayment of rent to the City of Evansville for the period between January 2011 and December 2015.

Belle of Baton Rouge Lease

Belle of Baton Rouge leases certain land and buildings under separate leases, with annual payments of $0.2 million. In addition, Belle of Baton Rouge leases a parking lot with annual base rent of approximately $0.4 million, plus 0.94% of annual adjusted gross revenue in excess of $45 million but not to exceed $80 million through August 2015.

Tropicana Greenville Lease

Tropicana Greenville leases approximately four acres of land on which the docking, entry and parking facilities of the casino are situated. Tropicana Greenville is required to pay an amount equal to 2% of its monthly gross gaming revenues in rent, with a minimum monthly payment of $75,000. In addition, in any given year in which annual gross gaming revenues exceed $36.6 million, Tropicana Greenville is required to pay 8% of the excess amount as rent pursuant to the terms of the lease. The current lease expires in 2019 with options to extend its term through 2044.

In October 2013, Tropicana Greenville entered into an additional lease agreement with the City of Greenville, Mississippi, for a parcel of land adjacent to Tropicana Greenville upon which the Company constructed a parking lot in conjunction with its plan to expand the Tropicana Greenville casino. The initial term of the lease expires in August 2020, and the Company has several options to extend the lease for a total term of up to twenty-five years. Initial annual rent is $0.4 million with rent adjustments in option periods based upon the Consumer Price Index.

Jubilee Lease

The Company had a lease agreement with the City of Greenville, Mississippi, for the moorage, docking and berthing of Jubilee. The lease with the City of Greenville required annual rental payments of $0.4 million was due to expire in August 2020 and provided the Company with the option of two five-year renewals. In October 2013 the Company and the City of Greenville

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

entered into an agreement to and subsequently terminated the Jubilee Lease upon execution of the new Tropicana Greenville lease noted above.

Tropicana Aruba Land Lease

The Company assumed a land lease in August 2010 for approximately 14 acres of land on which Tropicana Aruba is situated through July 30, 2051. Under the terms of the land lease, the annual rent is $93,000.

Other Commitments and Contingencies

2011 New Jersey Legislation

On February 1, 2011, New Jersey enacted legislation (the "Tourism District Bill") that delegates redevelopment authority and creation of a master plan to the CRDA and allowed the CRDA the ability to enter into a five year public private partnership with the casinos in Atlantic City that have formed the Atlantic City Alliance ("ACA") to jointly market the city. The legislation obligates the Atlantic City casinos either through the ACA or, if not a member of the ACA, through individual assessments, to provide funding for the Tourism District Bill in the aggregate amount of $30.0 million annually through 2016. Each Atlantic City casino's proportionate share of the assessment will be based on the gross revenue generated in the preceding fiscal year. The Company estimates its portions of these industry obligations to be approximately 8.0% for 2014.

New Jersey CRDA

Under current New Jersey law, the New Jersey Casino Control Commission imposes an annual tax of 8% on gross casino revenue and, commencing with the operation of Internet gaming, an annual tax of 15% on Internet gaming gross revenue. Pursuant to New Jersey law, casino license holders or Internet gaming permit holders (as applicable) are required to invest an additional 1.25% of gross casino revenue and 2.5% of Internet gaming gross revenue for the purchase of bonds to be issued by the CRDA or to make other approved investments equal to those amounts; and, in the event the investment requirement is not met, the casino license holder or Internet gaming permit holder (as applicable) is subject to a tax of 2.5% on gross casino revenue and 5% on Internet gaming gross revenue. As mandated by New Jersey law, the interest rate of the CRDA bonds purchased by the licensee will be two-thirds of the average market rate for bonds available for purchase and published by a national bond index at the time of the CRDA bond issuance.

Wimar and CSC Administrative Expense Claims

On March 31, 2009, Wimar Tahoe Corporation ("Wimar") and Columbia Sussex Corporation ("CSC") filed separate proceedings with the Bankruptcy Court related to administrative expense claims against the Predecessors. On August 4, 2010, Wimar and CSC separately filed motions for summary judgment seeking payment on account of these claims from the Company totaling approximately $5.4 million, which was recorded as a liability upon emergence from bankruptcy and is included in accounts payable in our accompanying condensed consolidated balance sheet as of September 30, 2014 and December 31, 2013. In its objection to Wimar and CSC's motions for summary judgment, the Company disputes the administrative expense and/or priority status of certain amounts claimed and also contends that any payment to CSC or Wimar should await the resolution of the adversary proceeding instituted by Lightsway Litigation Services, LLC, as Trustee of the Tropicana Litigation Trust established in the voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, against CSC and Wimar. On June 24, 2011, the Company, CSC, and Wimar, along with certain other parties, participated in mediation concerning Wimar and CSC's claims, but the mediation terminated without resolution of the claims. Oral arguments on the summary judgment motions were conducted on September 27, 2011 and November 22, 2011, the parties are awaiting the Court's decision regarding these motions.

Aztar v. Marsh

Aztar Corporation ("Aztar") filed a broker malpractice and breach of contract action in the Superior Court of New Jersey, Atlantic County, Law Division (the “Court”) on August 12, 2010, against Marsh & McLennan Companies, Marsh, Inc., Marsh USA, Inc. and various fictitious Marsh entities (together, the "Marsh Defendants"). The claim seeks $100 million or more in compensatory damages against the Marsh Defendants, Aztar's risk management and insurance brokers at the time of a 2002 expansion of Tropicana AC by Aztar, including, but not limited to, lost profits, expenses arising from the interruption of operations, attorneys' fees, loss of the use of the insurance proceeds at issue, and litigation expenses resulting from the Marsh Defendants' failure to secure for Aztar business interruption and property damage coverage covering losses sustained by Aztar from the collapse of a parking garage that occurred at Tropicana AC on October 30, 2003.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

The Marsh Defendants filed an answer on October 20, 2010 denying the material allegations of the complaint and subsequently filed a Motion to Dismiss for Forum Non Conveniens in December 2010, which motion was denied by the Court on April 12, 2011. On August 18, 2011 the Marsh Defendants filed a Motion for Summary Judgment arguing that the Court should apply the Arizona Statue of Limitations to the action. Aztar filed an objection to the Marsh Defendants' motion on September 23, 2011 arguing, inter alia, that the New Jersey Statute of Limitations applies to the action. The Marsh Defendants filed its Reply on October 3, 2011. The motion was argued in January 2012. In April 2012, the Court granted the Marsh Defendants' Motion for Summary Judgment dismissing Aztar's complaint with prejudice. Aztar subsequently filed a Motion for Reconsideration with the Court, which was denied. In September 2012, Aztar filed an appeal of the Court's decision to dismiss the case with the Superior Court of New Jersey, Appellate Division. In September 2013, the Superior Court of New Jersey, Appellate Division denied Aztar’s appeal substantially for the reasons set forth in the Court’s decision. Aztar filed a Petition for Certification to the New Jersey Supreme Court, which petition was denied by the New Jersey Supreme Court in February 2014, thereby concluding the litigation.

Tropicana AC Tax Appeal Settlement

In January 2013, we settled outstanding real estate tax appeals involving our Tropicana AC property with the City of Atlantic City. The settlement involves the tax years 2008 through 2012 and also covers negotiated real estate assessments for 2013 and 2014. Under the terms of the settlement, Tropicana AC was to receive a $49.5 million refund in the form of credits against annual real estate tax bills beginning in 2013 and ending in 2017. The credits were to be front-loaded in 2013 and 2014 so that after the credits were applied, Tropicana paid $1.8 million in taxes in 2013. The Company utilized $16.0 million of credits as a reduction to operating expenses in the year ended December 31, 2013. In addition, the Company expensed $4.1 million in professional fees related to this settlement in the year ended December 31, 2013. In January 2014, the Company received $31.7 million in cash as payment to satisfy future credits which amount is included in the line item called Property tax settlement in the accompanying condensed consolidated statement of income for the nine months ended September 30, 2014.

UNITE HERE

In September 2011, the collective bargaining agreement between Tropicana AC and UNITE HERE Local 54 expired and Tropicana AC continued to voluntarily contribute to the UNITE HERE National Retirement Fund Rehabilitation Plan (the "NRF") after the September 2011 expiration date through February 25, 2012 (at which time Tropicana AC declared an impasse in the collective bargaining negotiations and ceased contributions to the NRF). UNITE HERE subsequently filed a charge with the National Labor Relations Board (the "NLRB") alleging that Tropicana AC's declarations of an impasse violated the National Labor Relations Act. Tropicana AC contested this charge. In addition, in January 2012 the NRF's legal counsel sent a letter to Tropicana AC asserting that any withdrawal from the NRF would not be entitled to the NRF's "Free Look Rule" and would trigger a withdrawal liability and in November 2013 Tropicana AC was advised by UNITE HERE that the NRF had estimated Tropicana AC’s withdrawal liability from the NRF to be approximately $4 million. In May 2014 Tropicana AC and UNITE HERE Local 54 entered into a new collective bargaining agreement as well as a settlement agreement pursuant to which, among other things, the NLRB charge and related charges filed by both parties were withdrawn. In addition, Tropicana AC entered into a settlement agreement with the NRF pursuant to which Tropicana AC paid approximately $4 million to the NRF in settlement of all outstanding withdrawal liability claims.

In July 2014, Tropicana AC and UNITE HERE each provided notice to the other of their respective intentions to renegotiate their existing collective bargaining agreement due to expire on September 14, 2014. Subsequently, UNITE HERE requested that Tropicana AC extend the collective bargaining agreement for an additional six months, which request was rejected by Tropicana AC. The collective bargaining agreement expired on September 14, 2014. Tropicana AC has requested that UNITE HERE provide Tropicana AC with detailed information related to the UNITE HERE Health Fund, which information is essential for Tropicana AC to prepare for negotiation of a new collective bargaining agreement. UNITE HERE has yet to provide Tropicana AC with any of the requested information.

Indiana Gross Income Tax Appeals and Assessments

In September 2014 we settled gross income tax litigation pending with the State of Indiana related to our Predecessors, Aztar Missouri Gaming Corporation ("AMO") and Aztar Indiana Gaming Corporation and its successor, Aztar Indiana Gaming, LLC (collectively, "AIN") pursuant to which we paid the State of Indiana a settlement in the amount of $0.6 million and withdrew gross income tax refund claims related to AIN and AMO for the tax years 2004 through 2008 in exchange for a dismissal of tax assessments against AIN for the tax year 2008, and an exchange of mutual releases between the parties related to Indiana gross income tax assessments and refund claims for the tax years 2004 through 2008. As a result, the Company recorded adjustments to both its Predecessors' administrative tax claim receivable and accrual in the amount of $8.3 million (see Note 4 - Receivables and Note 9 - Accrued Expenses and Other Liabilities).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Litigation in General

The Company is a party to various litigation that arises in the ordinary course of business. In the opinion of management, all pending legal matters are either adequately covered by insurance or, if not insured, will not have a material adverse effect on the financial position or the results of operations of the Company.

NOTE 14—STOCKHOLDERS' EQUITY

Common Stock

The Company is authorized to issue up to 100 million shares of its common stock, $0.01 par value per share ("Common Stock"), of which 26,312,500 shares were issued and outstanding as of September 30, 2014. Each holder of Common Stock is entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. The holders of Common Stock have no cumulative voting rights, preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. Subject to any preferences that may be granted to the holders of the Company's preferred stock, each holder of Common Stock is entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefore, as well as any distributions to the stockholders and, in the event of the Company's liquidation, dissolution or winding up is entitled to share ratably in all the Company's assets remaining after payment of liabilities.

Preferred Stock

The Company is authorized to issue up to 10 million shares of preferred stock, $0.01 par value per share, of which none were issued as of September 30, 2014. The Board of Directors, without further action by the holders of Common Stock, may issue shares of preferred stock in one or more series and may fix or alter the rights, preferences, privileges and restrictions, including the voting rights, redemption provisions (including sinking fund provisions), dividend rights, dividend rates, liquidation rates, liquidation preferences, conversion rights and the description and number of shares constituting any wholly unissued series of preferred stock. Except as described above, the Board of Directors, without further stockholder approval, may issue shares of preferred stock with rights that could adversely affect the rights of the holders of Common Stock. The issuance of shares of preferred stock under certain circumstances could have the effect of delaying or preventing a change of control of TEI or other corporate action.

Warrants

In accordance with the Plan, holders of the Predecessors' $960 million of 95/8% Senior Subordinated Notes and general unsecured claims received warrants to purchase 3,750,000 shares of Common Stock ("Ordinary Warrants"). The Ordinary Warrants have a four year, six month term and an exercise price of $52.44 per share. The Company evaluated the Ordinary Warrants under current accounting pronouncements and determined they were properly classified as equity on the accompanying condensed consolidated balance sheet. The Company valued the Ordinary Warrants using the Black-Scholes option valuation model assuming a life of 4.5 years, a volatility factor of 61% and a risk free interest rate of 2.36%. The resulting value of $11.5 million was recorded as a reorganization item of the Predecessors statements of operations. As of September 30, 2014, the term on the Ordinary Warrants have expired and the value of the warrants are included in additional paid in capital.

Significant Ownership

At September 30, 2014, Mr. Icahn indirectly controlled approximately 67.9% of the voting power of the Company's Common Stock and, by virtue of such stock ownership, is able to control or exert substantial influence over the Company, including the election of directors. The existence of a significant stockholder may have the effect of making it difficult for, or may discourage or delay, a third party from seeking to acquire a majority of the Company's outstanding Common Stock. Mr. Icahn's interests may not always be consistent with the Company's interests or with the interests of the Company's other stockholders. Mr. Icahn and entities controlled by him may also pursue acquisitions or business opportunities that may or may not be complementary to the Company's business. To the extent that conflicts of interest may arise between the Company and Mr. Icahn and his affiliates, those conflicts may be resolved in a manner adverse to the Company or its other shareholders.

NOTE 15—BASIC AND DILUTED NET INCOME PER SHARE

The Company computes net income per share in accordance with accounting guidance that requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net

income for the period by the weighted average number of shares outstanding during the period. Diluted EPS is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period, increased by potentially dilutive common shares that were outstanding during the period. Potentially dilutive common shares include warrants. Diluted EPS excludes all potential dilutive shares if their effect is anti-dilutive.

Excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2013, are the Ordinary Warrants to purchase 3,750,000 shares of our common stock as they were anti-dilutive. The Ordinary Warrants expired during the third quarter of 2014.

NOTE 16—DISCONTINUED OPERATIONS

As discussed in Note 1 - Organization and Background, in April 2013, the Company entered into an agreement to sell substantially all of the assets and certain liabilities of River Palms. In accordance with accounting guidance for assets held for sale, the results of operations for River Palms are presented as discontinued operations in the accompanying condensed consolidated statements of income while its assets and liabilities are presented as held for sale in the accompanying balance sheet as of December 31, 2013. The cash flows of the discontinued operations are included with the cash flows of continuing operations in the accompanying condensed consolidated statements of cash flows. In October 2013, the Company notified the buyers that it had elected to terminate the agreement to sell River Palms, pursuant to the terms of the agreement.

The Company continued to actively market the property and on July 1, 2014, sold River Palms to Nevada Restaurant Services, Inc. and its affiliate, Laughlin Hotel, LLC. Pursuant to the terms of the asset purchase agreement substantially all of the assets associated with the operation of River Palms were sold for approximately $6.8 million in cash and the assumption of certain liabilities. Concurrently with the sale, the Company leased back River Palms for a period of up to 90 days, subject to an additional 30 day extension, and further subject to early termination rights. The Company terminated the lease and discontinued its operation of River Palms in September 2014. The sale resulted in a loss of $0.2 million which is included in the income from discontinued operations for the three and nine months ended September 30, 2014.

The assets and liabilities of River Palms are presented as held for sale as follows (in thousands, unaudited):



	December 31, 2013
Cash	$	2,138
Receivables, net	245
Property and equipment, net	6,147
Other assets	719
Total assets held for sale	$	9,249

Accounts payable	$	411
Accrued expenses and other liabilities	1,237
Total liabilities related to assets held for sale	$	1,648

Operating results of discontinued operations are summarized as follows (in thousands, unaudited):



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Net revenues	$	2,799		$	4,421		$	11,929		$	14,013
Operating costs and expenses	(3,898		)	(5,135		)	(12,917		)	(14,427		)
Impairment of discontinued operations	—			—			—			(1,454		)
Loss from operations	(1,099		)	(714		)	(988		)	(1,868		)
Loss from sale of discontinued operations	(233		)	—			(233		)	—
Income tax benefit (expense)	2,937			(69		)	2,929			301
Income (loss) from discontinued operations, net	$	1,605		$	(783	)	$	1,708		$	(1,567	)

Preliminary Loss Related to Sale

The Company compared its carrying value of River Palms to the estimated sale price in the asset purchase agreement signed in April 2013, less estimated costs to complete the sale, and recorded a preliminary loss on the sale of River Palms of $1.5 million which is included in the loss from discontinued operations for the nine months ended September 30, 2013.

NOTE 17—INCOME TAXES

Effective Tax Rate

The Company's effective income tax rate from continuing operations for the three months ended September 30, 2014 and 2013 was 35.5% and 12.5%, respectively. The difference between the federal statutory rate of 35% and the Company's effective tax rate for the three months ended September 30, 2014 was primarily due to the utilization of the Company's deferred tax assets offset by disallowed foreign losses, state income taxes (net of federal benefit), and other permanent differences. The difference between the federal statutory rate of 35% and the Company's effective tax rate for the three months ended September 30, 2013 was primarily due to the utilization of the Company's deferred tax assets and employment credits offset by disallowed foreign losses, state income taxes (net of federal benefit), and other permanent differences. Looking forward, our effective income tax rate may fluctuate due to changes in tax legislation, changes in our estimates of federal tax credits, changes in our assessment of uncertainties as valued under accounting guidance for uncertainty in income taxes, as well as accumulated interest and penalties.

The Company's effective income tax rate from continuing operations for the nine months ended September 30, 2014 and 2013 was 32.7% and 9.8%, respectively. The difference between the federal statutory rate of 35% and the Company's effective tax rate for the nine months ended September 30, 2014 was primarily due to the utilization of the Company's deferred tax assets offset by disallowed foreign losses, the goodwill impairment, state income taxes (net of federal benefit), and other permanent differences. The difference between the federal statutory rate of 35% and the Company's effective tax rate for the nine months ended September 30, 2013 was primarily due to the disallowed foreign losses, state income taxes (net of federal benefit), employment credits, and the change in the valuation allowance. Looking forward, our effective income tax rate may fluctuate due to changes in tax legislation, changes in our estimates of federal tax credits, changes in our assessment of uncertainties as valued under accounting guidance for uncertainty in income taxes, as well as accumulated interest and penalties.

Valuation Allowance

The Company previously disclosed the details of its deferred tax assets, including the amount of its tax loss carryforwards, the expiration dates thereof and the valuation allowance related to its deferred tax assets in the Company's Annual Report on Form 10-K. In assessing the recoverability of the deferred tax assets, management regularly considers whether some portion or all of the deferred tax assets will not be realized based on the recognition threshold and measurement of a tax position in accordance with FASB ASC Topic 740, Income Taxes. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income (exclusive of reversing temporary differences) and tax planning strategies in making this assessment. At December 31, 2013, the Company's net deferred tax assets included approximately $211.1 million of deferred tax assets which were fully offset by a valuation allowance at such date.

In accordance with FASB ASC Topic 740, Income Taxes, based upon the level of historical book and tax operating losses, the Company continues to maintain a deferred tax valuation allowance against its deferred tax assets through September 30, 2014. The Company, however, has experienced improved earnings trends and has had cumulative net book income for 2012 and 2013. The nine-month period ended September 30, 2014 has continued with positive earnings. Additionally, current market conditions in Atlantic City, New Jersey, a location in which the Company derives a significant portion of its revenues, have been volatile, but the Company has currently been able to meet its income projections. If such earnings trends in this volatile market continue, and current expectations for future taxable income are met, the Company is likely to release the valuation allowance on all or a significant portion of its net deferred tax assets in the near term, perhaps as early as the fourth quarter of 2014.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

NOTE 18—SEGMENT INFORMATION

The Company views each property as an operating segment which we aggregate by region in order to present our reportable segments: (i) East, (ii) Central, (iii) West, (iv) and South and other. The Company uses operating income to compare operating results among its segments and allocate resources.

The following table highlights by segment our net revenues and operating income, and reconciles operating income to income from continuing operations before income taxes for the quarters ended September 30, 2014 and 2013 (in thousands, unaudited):




	Three months ended September 30,
	2014			2013
Net revenues:
East	$	92,705		$	69,808
Central	74,441			29,748
West	28,530			27,872
South and other	21,423			21,319
Corporate	—			—
Total net revenues	$	217,099		$	148,747
Operating income (loss):
East	$	13,440		$	8,034
Central	8,471			6,304
West	4,606			3,126
South and other	(493		)	52
Corporate	(4,226		)	(3,633		)
Total operating income	$	21,798		$	13,883
Reconciliation of operating income to income from continuing operations before income taxes:
Operating income	$	21,798		$	13,883
Interest expense	(3,203		)	(3,636		)
Interest income	132			190
Income from continuing operations before income taxes	$	18,727		$	10,437

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

The following table highlights by segment our net revenues and operating income, and reconciles operating income to income from continuing operations before income taxes for the nine months ended September 30, 2014 and 2013 (in thousands, unaudited):




	Nine months ended September 30,
	2014			2013
Net revenues:
East	$	233,542		$	192,506
Central	177,711			91,194
West	78,636			78,530
South and other	69,341			68,629
Corporate	—			—
Total net revenues	$	559,230		$	430,859
Operating income:
East	$	48,647		$	15,299
Central	21,803			21,624
West	11,305			10,126
South and other	9,510			3,708
Corporate	(22,501		)	(9,213		)
Total operating income	$	68,764		$	41,544
Reconciliation of operating income to income from continuing operations before income taxes:
Operating income	$	68,764		$	41,544
Interest expense	(9,564		)	(10,816		)
Interest income	1,749			593
Income from continuing operations before income taxes	$	60,949		$	31,321



Assets by segment:	September 30, 2014		December 31, 2013
East	$	325,530	$	368,317
Central	421,763		151,139
West	113,723		111,786
South and other	127,398		119,142
Corporate	123,528		283,988
Assets held for sale	—		9,249
Total assets	$	1,111,942	$	1,043,621

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act). These statements involve known and unknown risks, uncertainties and other factors, which may cause our or our industry's actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some situations, you may be able to identify such statements by words such as "may," "will," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "project," "continue," "pursue," or the negative thereof or comparable terminology, and may include (without limitation) information regarding our expectations, hopes or intentions regarding the future, including, but not limited to, statements regarding our operating or other strategic plans, including our acquisition of Lumière Place and our disposition of River Palms, our competition (including online gaming), financing, revenues, or tax benefits; our beliefs regarding the sufficiency of our existing cash and credit sources, including our New Credit Facilities (as defined herein) and cash flows from operating activities to meet our projected expenditures (including operating and maintenance capital expenditures) and costs associated with certain of our projects over the next twelve months, our required capital expenditures pursuant to agreements we are party to and our anticipated capital expenditures, including our use of our CRDA project funds, estimated asset and liability values, risk of counterparty nonperformance and our legal strategies and the potential effect of pending legal claims on our business and financial condition, and any financial or other information included herein based upon or otherwise incorporating judgments or estimates based upon future performance or events. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in each such statement. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different manner or extent or at a different time than we have described. All forward-looking statements are qualified in their entirety by reference to the areas of risk and uncertainty described elsewhere in this Quarterly Report on Form 10-Q as well as those discussed under "Item 1A—Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2013. Forward-looking statements represent our estimates and assumptions only as of the date of this report. We operate in a continually changing business environment and new risks emerge from time to time. Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are an owner and operator of regional casino and entertainment properties located in the United States and one casino resort development located on the island of Aruba. As of April 1, 2014, we acquired an additional casino resort in Missouri. Our United States properties include two casinos in Nevada and one casino in each of Indiana, Louisiana, Mississippi, Missouri and New Jersey. We primarily cater to local and regional guests to provide a fun and exciting gaming environment with high quality and high value lodging, dining, retail and entertainment amenities. Our properties offer a broad array of gaming options specifically tailored for our patrons in each market. As of September 30, 2014, our properties collectively included approximately 389,000 square feet of gaming space with 7,800 slot machines, 270 table games and 5,500 hotel rooms.

We view each property as an operating segment which we aggregate by region in order to present our reportable segments: (i) East, (ii) Central, (iii) West and (iv) South and other. As of September 30, 2014, our operations by region include the following:


•	East—Tropicana Casino and Resort, Atlantic City ("Tropicana AC") located in Atlantic City, New Jersey;


•	Central— Tropicana Evansville ("Tropicana Evansville") located in Evansville, Indiana; and Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis ("Lumière Place") located in Saint Louis, Missouri;


•	West—Tropicana Laughlin Hotel and Casino ("Tropicana Laughlin") located in Laughlin, Nevada; and MontBleu Casino Resort & Spa ("MontBleu") located in South Lake Tahoe, Nevada;


•	South and other—Belle of Baton Rouge Casino and Hotel ("Belle of Baton Rouge") located in Baton Rouge, Louisiana; Trop Casino Greenville ("Tropicana Greenville") located in Greenville, Mississippi; and Tropicana Aruba Resort and Casino ("Tropicana Aruba") located in Noord, Aruba.

Further, on April 1, 2014, we acquired Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis and related excess land parcels in St. Louis, Missouri (collectively, "Lumière Place").

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We are a Delaware corporation formed on May 11, 2009 to acquire certain assets of Tropicana Entertainment Holdings, LLC ("TEH"), and certain of its subsidiaries, pursuant to their plan of reorganization (the "Plan") under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). We also acquired Columbia Properties Vicksburg (which we sold in March 2011), JMBS Casino, LLC ("JMBS Casino") and CP Laughlin Realty, LLC ("CP Laughlin Realty"), all of which (collectively, the “Predecessors”) were part of the Plan.

In addition, we acquired certain assets of Adamar of New Jersey, Inc. ("Adamar"), an unconsolidated subsidiary of TEH, pursuant to an amended and restated asset purchase agreement, including Tropicana AC. The reorganization of the Predecessors and the acquisition of Tropicana AC (together, the "Restructuring Transactions") were consummated and became effective on March 8, 2010 (the "Effective Date"), at which time we acquired Adamar and several of the Predecessors' gaming properties and related assets. Adamar was not a party to the Predecessors' bankruptcy. Prior to the Effective Date, we conducted no business, other than in connection with the reorganization of the Predecessors and the acquisition of Tropicana AC, and had no material assets or liabilities.

Except where the context suggests otherwise, the terms "we," "us," "our," and "the Company" refer to Tropicana Entertainment Inc. and its subsidiaries.

Results of Operations

Our financial results are highly dependent upon the number of customers that we attract to our facilities and the amounts those customers spend per visit. Additionally, our operating results may be affected by, among other things, overall economic conditions affecting the discretionary spending of our customers, competitive factors, gaming tax increases and other regulatory changes, the opening or acquisition of new gaming operations, our ability to reinvest in our properties, potential future exposure for liabilities of the Predecessors that we assumed, our limited operating history, and general public sentiment regarding travel. We may experience significant fluctuations in our quarterly operating results due to seasonality and other factors. Historically, our operating results are the strongest in the third quarter and the weakest in the fourth quarter. In addition, weather and long-weekend holidays affect our operating results.

Casino revenues are one of our main performance indicators and account for a significant portion of our net revenues. Casino revenues represent the difference between wins and losses from gaming activities such as slot machines and table games. Key volume indicators include table games volumes and slot volumes, which refer to amounts wagered by our customers. Win or hold percentage represents the percentage of the amounts wagered by the customer that is won by the casino, which is not fully controllable by us, and recorded as casino revenue. Most of our revenues are cash-based, through customers wagering with cash or chips or paying for non-gaming services with cash or credit cards, and therefore are not subject to any significant or complex estimation. As a result, fluctuations in net revenues have a direct impact on cash flows from operating activities. Other performance indicators include hotel occupancy, which is a volume indicator for hotels, and the average daily rate, which is a price indicator for the amount customers paid for hotel rooms.

The following significant factors and trends should be considered in analyzing our operating performance:


•	Lumière Place. In August 2013, we entered into an agreement to purchase Lumière Place and on April 1, 2014 the acquisition was completed for a cash purchase price of $261.3 million, which includes an adjustment for working capital as of the acquisition date. We continue to finalize the purchase price allocation in accordance with the purchase agreement.

•

Tropicana AC. In addition to its traditional guests, one of Tropicana AC's marketing strategies in the prior year period was to target high end table games players to counter the increased competition from Pennsylvania and other surrounding markets. Casino revenues can vary because of table games hold percentage and differences in the odds for different table games. High end play may lead to greater fluctuations in our table games hold percentage and, as a result, we may experience greater revenue fluctuation between reporting periods due to this marketing strategy. For the three months ended September 30, 2014, the table game hold percentage increased 8.4 percentage points compared to the same period in the prior year. For the nine months ended September 30, 2014, the table game hold percentage increased 3.1 percentage points compared to the same period in the prior year. This hold percentage is not necessarily indicative of results that can be expected for future periods.

•

General Economic Conditions. Current economic conditions continue to adversely impact us and the gaming industry as a whole. We believe our guests have reduced their discretionary spending as a result of uncertainty and instability relating to employment and the investment and housing markets. While general economic conditions have modestly improved, we cannot assure that they will continue to improve or will not worsen in the future.


•	Cost Efficiencies. As a result of economic conditions, we continue to focus on efficiency initiatives. These cost saving initiatives include decreased payroll and benefits expense related to our company-sponsored health insurance plans.

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•

Debt and Interest Expense. In November 2013, we entered into the credit facilities (the "New Credit Facilities"), which consist of (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million issued at a discount of 0.5% (the "New Term Loan Facility") and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the "Revolving Facility"). Commencing on December 31, 2013, the New Term Loan Facility requires quarterly principal payments of $750,000 through September 2020 with the remaining outstanding amounts due on November 27, 2020, the maturity date. The obligations under the New Term Loan Facility accrue interest at a floating rate which was 4.00% as of September 30, 2014. A portion of the net proceeds from the New Term Loan Facility was used to repay in full the amounts outstanding under the existing Term Loan Facility which totaled approximately $172.4 million in repaid principal, accrued and unpaid interest. We used a portion of the proceeds from the New Term Loan Facility to repay in full the amounts outstanding under the credit facilities we entered into in March 2012 (the "Credit Facilities").

The Credit Facilities, which consisted of (i) a senior secured first lien term loan facility in an aggregate principal amount of $175 million issued at a discount of 2% (the "Term Loan Facility") and (ii) a cash collateralized letter of credit facility in a maximum aggregate amount of $15 million (the "Letter of Credit Facility"). Commencing on June 30, 2012, the Term Loan Facility required quarterly principal payments of $437,500 through December 2017 with the remaining outstanding amounts due on March 16, 2018, the maturity date. The obligations under the Term Loan Facility accrued interest at a floating rate which was 7.5% as of September 30, 2013. A portion of the net proceeds from the Term Loan Facility was used to repay in full approximately $107.7 million in repaid principal, accrued and unpaid interest and the applicable prepayment penalty under the exit facility, which consisted of a $130 million senior secured term loan credit facility and a $20 million senior secured revolving credit facility (the "Exit Facility"). An entity affiliated with Carl C. Icahn, the chairman of our Board of Directors and, through Icahn Enterprises, our principal beneficial stockholder, was a lender under the Exit Facility and held more than 50% of the loans extended under the Exit Facility.

Our interest expense was $3.2 million and $3.6 million for the three months ended September 30, 2014 and 2013, respectively, which includes amortization of the related debt discounts and debt issuance costs of $0.3 million for the three months ended September 30, 2014 and 2013 and capitalized interest of $0.1 million for the three months ended September 30, 2014. Our interest expense was $9.6 million and $10.8 million for the nine months ended September 30, 2014 and 2013, respectively, which includes amortization of the related debt discounts and debt issuance costs of $0.8 million and $1.0 million for the nine months ended September 30, 2014 and 2013, respectively.

•

Atlantic City Market. In October 2012, Superstorm Sandy forced a city-mandated closure of all casinos in Atlantic City for approximately five days. Although Tropicana AC did not incur any significant property damage, the severity of the property damage to a large portion of the Atlantic City feeder markets including New Jersey, New York and Pennsylvania resulted in long term business interruption that continued into 2013 and materially affected operating results. In addition to Superstorm Sandy, competitive pressure in Atlantic City and the regional market continue to adversely affect Tropicana AC. Based on market data, the Atlantic City market experienced period over period declines in casino revenue of 9.3% and 7.5% for the three and nine months ended September 30, 2014, respectively. In January 2014, the Atlantic Club Casino, one of our competitors, ceased operations and Tropicana AC purchased various gaming equipment and the casino's patron database for $9.1 million. Tropicana AC has experienced increased slot customer volumes during the three and nine months ended September 30, 2014 due, in part, to the closure of this competitor and the purchase of their patron database. In the third quarter of 2014, three additional competitors ceased operations in Atlantic City.

•

River Palms. On July 1, 2014, we sold substantially all of the assets constituting River Palms to Nevada Restaurant Services, Inc. and its affiliate, Laughlin Hotel, LLC, for approximately $6.8 million in cash and the assumption of certain liabilities. Concurrently with the sale, we leased back River Palms. We terminated the lease and discontinued operations at River Palms in September 2014. Due to the sale of River Palms and the termination of its operations in September 2014, the results of operations for River Palms are presented as discontinued operations while its assets and liabilities are presented as held for sale as of December 31, 2013. In addition, River Palms is not included in management's discussion and analysis of financial condition and results of operations.

•

Insurance Recoveries. In January 2013 the Jubilee barge was damaged as a result of a high-wind storm. Due to the damage sustained we initially recorded a $0.4 million write-down of fixed assets which was included in the accompanying condensed consolidated statement of income for the nine months ended September 30, 2013. We filed claims with our insurance carriers and received $0.7 million in insurance proceeds as of December 31, 2013. In January 2014, the Company settled the filed claims for $5.9 million and received the remaining $5.2 million in insurance proceeds related to the claims. As a result of the settlement, a gain of $4.6 million was included in the accompanying condensed consolidated statement of income for the nine months ended September 30, 2014.

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Our 2013 results were adversely affected due to the business interruption encountered as a result of Superstorm Sandy. We filed a claim with our insurance carriers relating to business interruption as a result of Superstorm Sandy and received a cash settlement of $1.3 million during the second quarter of 2014.

•

Internet Gaming. In November 2013, pursuant to approvals from the New Jersey Division of Gaming Enforcement, Tropicana AC commenced continuous, 24-hour Internet gaming on its online gaming site, TropicanaCasino.com. Tropicana Atlantic City Online showcases a variety of slot game options and classic casino table games. Players have the opportunity to participate in community jackpots and to be rewarded with both on-property and online incentives and have the chance to participate in a variety of promotions. All participants must be 21 or older and physically located in New Jersey to play. The 2013 New Jersey legislation to authorize various forms of intrastate internet gaming has a 10 year sunset provision.


•	Tropicana Aruba. We opened a temporary casino at Tropicana Aruba in December 2011 and we are considering development of a permanent casino. However, our development plans have not been finalized and we may decide not to proceed.

Three months ended September 30, 2014 compared to three months ended September 30, 2013

The following table sets forth certain information concerning our results of operations (dollars in thousands):



	Three months ended September 30,
	2014			2013
Net revenues:
East	$	92,705		$	69,808
Central	74,441			29,748
West	28,530			27,872
South and other	21,423			21,319
Corporate	—			—
Total net revenues	$	217,099		$	148,747
Operating income:
East	$	13,440		$	8,034
Central	8,471			6,304
West	4,606			3,126
South and other	(493		)	52
Corporate	(4,226		)	(3,633		)
Total operating income	$	21,798		$	13,883
Operating income margin(a):
East	14.5		%	11.5		%
Central	11.4		%	21.2		%
West	16.1		%	11.2		%
South and other	(2.3		)%	0.2		%
Total operating income margin	10.0		%	9.3		%

(a)Operating income margin is operating income as a percentage of net revenues.

The following table presents detail of our net revenues (in thousands):



	Three months ended September 30,
	2014			2013
Revenues:
Casino	$	167,283		$	112,003
Room	37,299			27,661
Food and beverage	30,034			20,669
Other	7,626			6,186
Gross revenues	242,242			166,519
Less promotional allowances	(25,143		)	(17,772		)
Net revenues	$	217,099		$	148,747

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Net Revenues

In the East region, net revenues were $92.7 million for the three months ended September 30, 2014, an increase of $22.9 million, or 32.8%, when compared to the three months ended September 30, 2013. Tropicana AC's net revenues increased from the prior year period primarily due to a $21.0 million increase in casino revenues as a result of the increased customer volumes due, in part, to the closure of one of our competitors in Atlantic City in January 2014 and a increase in Internet gaming revenue. In the third quarter of 2014, three additional competitors ceased operations in Atlantic City. Based on market data, the Atlantic City market experienced year over year declines in casino revenue of 9.3% in the three months ended September 30, 2014. Tropicana AC casino revenues increased due to $3.9 million in Internet gaming which commenced in November 2013, coupled with 18.8% higher slot volumes partially offset by 12.0% lower table game volumes, including lower volumes of high-end play for the three months ended September 30, 2014. The average daily room rate increased to $100 for the three months ended September 30, 2014 from $97 for the three months ended September 30, 2013. The occupancy rate for the three months ended September 30, 2014 at Tropicana AC was 92%, up from 86% for the three months ended September 30, 2013.

In the Central region, net revenues were $74.4 million for the three months ended September 30, 2014, an increase of $44.7 million from the three months ended September 30, 2013. In April 2014, the Company completed its acquisition of Lumière Place which contributed $42.9 million in net revenues for the three months ended September 30, 2014. Casino revenues at Tropicana Evansville increased compared to the prior year period primarily due to a 6.6% increase in slot volumes and a 5.4% increase in table games volumes. The occupancy rate for the three months ended September 30, 2014 in the Central Region was 80%, an increase from 75% in the three months ended September 30, 2013. The increased occupancy reflects higher complimentary rooms being provided to our guests at Tropicana Evansville and the acquisition of Lumière Place. The average daily room rate in the Central Region increased to $188 for the three months ended September 30, 2014, compared to $90 for the three months ended September 30, 2013. Room rates increased in three months ended September 30, 2014 due to the acquisition of Lumiére Place.

In the West region, net revenues were $28.5 million for the three months ended September 30, 2014, an increase of $0.7 million, or 2.4%, compared to the three months ended September 30, 2013. The increase was primarily driven by increases in casino and hotel revenues. Casino revenues in the West region increased due to a 11.9% increase in slot volumes and a 0.8% increase in table games volumes, partially offset by an increase in promotional slot play which is recorded as a reduction in revenues. At Tropicana Laughlin, net revenues increased $1.2 million for the three months ended September 30, 2014 primarily due to increased marketing incentives given to our casino patrons. At MontBleu, net revenues decreased $0.6 million due to decreased customer visitation related to fewer entertainment offerings in the three months ended September 30, 2014. Despite the decreased food and beverage and entertainment revenues, MontBleu's casino revenues for the three months ended September 30, 2014 were up from the comparable period and their average daily room rate increased 11% from the three months ended September 30, 2013. At the end of March 2014 a competitor in the South Lake Tahoe market temporarily closed for renovations. We currently anticipate that this competitor will reopen in early 2015. The average daily room rate for the West region was $58 for the three months ended September 30, 2014, an increase from $55 for the three months ended September 30, 2013. The occupancy rate in the West region was 62% for the three months ended September 30, 2014 an increase from 59% for the three months ended September 30, 2013.

In the South and other region, net revenues were $21.4 million for the three months ended September 30, 2014, an increase of $0.1 million, or 0.5%, compared to the three months ended September 30, 2013. Casino revenues for the South and other region decreased $0.1 million offset by a $0.3 million increase in hotel revenues and a $0.1 million increase in promotional allowances for the three months ended September 30, 2014 compared to the three months ended September 30, 2013. Net revenues at the Belle of Baton Rouge were relatively flat for the three months ended September 30, 2014, compared to the three months ended September 30, 2013, primarily due to an increase in promotional slot play which is recorded as a reduction in revenues, partially offset by a 9.7% increase in slot volumes and 3.3% increase in table games volumes. Tropicana Greenville's net revenues were relatively flat for the three months ended September 30, 2014 compared to the three months ended September 30, 2013, primarily due to a 6.0% higher slot volumes offset by 7.3% lower table games volumes. Increased hotel occupancy at Tropicana Aruba contributed an increase of $0.1 million in net revenues during the three months ended September 30, 2014 compared to the three months ended September 30, 2013. The occupancy rate at our properties in the South and other region was 74% and 73% for the three months ended September 30, 2014 and 2013, respectively. The average daily room rate for the South and other region was $73 and $61 for the three months ended September 30, 2014 and 2013, respectively.

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Operating Income

In the East region, the operating income for the three months ended September 30, 2014 was $13.4 million, a $5.4 million increase compared to the three months ended September 30, 2013. The operating income in the East region was higher than the prior year primarily due to the net revenue increases discussed above offset by increased payroll and operating costs. The current period includes increased costs related to Internet gaming which commenced in November 2013 as well as an increase in real estate taxes due to the favorable effects in the prior period related to a real estate tax settlement. Under the terms of the original real estate tax settlement in January 2013, Tropicana AC applied $4.0 million of credits to the 2013 real estate tax bills during the three months ended September 30, 2013. In the first quarter of 2014, the real estate tax settlement was fully satisfied when Tropicana AC received a one-time cash payment.

In the Central region, the operating income for the three months ended September 30, 2014 was $8.5 million, a $2.2 million increase compared to the three months ended September 30, 2013. In April 2014, we completed the acquisition of Lumière Place which contributed $1.1 million in operating income for the three months ended September 30, 2014. In addition, the increase in operating income is related to the net revenue increases at Tropicana Evansville discussed above, partially offset by increased gaming taxes and rental expense at Tropicana Evansville during the three months ended September 30, 2014.

In the West region, the operating income for the three months ended September 30, 2014 was $4.6 million, a $1.5 million increase compared to the three months ended September 30, 2013. The increase is mainly attributable to the increased revenues discussed above, as well as decreased employee benefits costs during the three months ended September 30, 2014. In addition, at MontBleu, operating costs were lower during the current period related to lower customer visitation and fewer entertainment offerings.

In the South and other region operating loss for the three months ended September 30, 2014 was $0.5 million, a $0.5 million decrease compared to the three months ended September 30, 2013. This decrease is primarily due to pre-opening expenses at our Tropicana Greenville property related to its expansion that opened in October 2014. Tropicana Greenville’s expansion includes hundreds of new gaming options, a VIP Lounge, a casual dining restaurant, a live entertainment stage and covered casino parking. In addition, the South and other region recorded increased taxes and promotional spending during the three months ended September 30, 2014.

Corporate expenses were $4.2 million for the three months ended September 30, 2014, a $0.6 million increase from the three months ended September 30, 2013, driven primarily by an unfavorable tax settlement related to certain of our Predecessor entities during the current quarter.

Interest Expense

Interest expense for the three months ended September 30, 2014 and 2013 was $3.2 million and $3.6 million, respectively. The interest expense for the three months ended September 30, 2014 decreased compared to the prior year period primarily due to our New Term Loan Facility which was funded in November 2013 and accrues interest at a floating rate, which was 4.0% per annum as of September 30, 2014. Cash paid for interest, net of interest capitalized, decreased to $2.9 million from $3.0 million for the three months ended September 30, 2014 and 2013, respectively, related to the lower interest rate under the New Term Loan Facility and the capitalization of interest in 2014. Under our previous Term Loan Facility, interest accrued at a floating rate of 7.5% per annum for the three months ended September 30, 2013.

Income Taxes

Income tax expense from continuing operations was $6.7 million for the three months ended September 30, 2014 and our effective income tax rate was 35.5%. The difference between the federal statutory rate of 35% and the effective tax rate for the three months ended September 30, 2014 was primarily due to the utilization of the Company's deferred tax assets offset by disallowed foreign losses, state income taxes (net of federal benefit), and other permanent differences. For the three months ended September 30, 2013, the income tax expense from continuing operations was $1.3 million and our effective tax rate was 12.5%. The difference between the federal statutory rate of 35% and the effective tax rate for the three months ended September 30, 2013, was primarily due to the utilization of the Company's deferred tax assets and employment credits offset by disallowed foreign losses, state income taxes (net of federal benefit), and other permanent differences.

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Nine months ended September 30, 2014 compared to nine months ended September 30, 2013

The following table sets forth certain information concerning our results of operations (dollars in thousands):



	Nine months ended September 30,
	2014			2013
Net revenues:
East	$	233,542		$	192,506
Central	177,711			91,194
West	78,636			78,530
South and other	69,341			68,629
Corporate	—			—
Total net revenues	$	559,230		$	430,859
Operating income (loss):
East	$	48,647		$	15,299
Central	21,803			21,624
West	11,305			10,126
South and other	9,510			3,708
Corporate	(22,501		)	(9,213		)
Total operating income	$	68,764		$	41,544
Operating income margin(a):
East	20.8		%	7.9		%
Central	12.3		%	23.7		%
West	14.4		%	12.9		%
South and other	13.7		%	5.4		%
Total operating income margin	12.3		%	9.6		%

(a)Operating income margin is operating income as a percentage of net revenues.

The following table presents detail of our net revenues (in thousands):



	Nine months ended September 30,
	2014			2013
Revenues:
Casino	$	443,351		$	340,020
Room	87,818			68,689
Food and beverage	76,773			58,494
Other	19,430			16,324
Gross revenues	627,372			483,527
Less promotional allowances	(68,142		)	(52,668		)
Net revenues	$	559,230		$	430,859

Net Revenues

In the East region, net revenues were $233.5 million for the nine months ended September 30, 2014, an increase of $41.0 million, or 21.3%, when compared to the nine months ended September 30, 2013. Net revenue increases for Tropicana AC are primarily due to a $38.4 million increase in casino revenues and a $2.3 million increase in room revenues as a result of the increased customer volumes due, in part, to the closure of one of our competitors in Atlantic City in January 2014. In the third quarter of 2014, three additional competitors ceased operations in Atlantic City. Based on market data, the Atlantic City market experienced year over year declines in casino revenue of 7.5% in the nine months ended September 30, 2014. Tropicana AC casino revenues increased primarily due to $10.2 million in Internet gaming which commenced in November 2013, coupled with 17.4% higher slot volumes partially offset by 16.0% lower table game volumes, including lower volumes of high-end play for the nine months ended September 30, 2014. Net revenues for our hotel also increased due to higher occupancy rates in the nine months ended September 30, 2014. The average daily room rate was $89 and $88 for the nine months ended September 30, 2014 and 2013, respectively. The occupancy rate increased to 78% for the nine months ended September 30, 2014 compared to 74% for the nine months ended September 30, 2013.

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In the Central region, net revenues were $177.7 million for the nine months ended September 30, 2014, an increase of $86.5 million, compared to the nine months ended September 30, 2013. In April 2014, the Company completed its acquisition of Lumière Place which contributed $85.7 million in net revenues for the nine months ended September 30, 2014. Unfavorable weather conditions early in the first quarter impacted Tropicana Evansville during the nine months ended September 30, 2014. Casino revenues at Tropicana Evansville increased $1.0 million compared to the prior year period primarily due to a 1.0% increase in slot volumes and increased promotional slot play and other incentives given to our customers, as well as a 9.6% increase in table games volumes. The occupancy rate for the nine months ended September 30, 2014 in the Central region was 77%, an increase from 68% in the nine months ended September 30, 2013. The increased occupancy rate reflects higher customer visitation due to more complimentary rooms being provided to our guests at Tropicana Evansville in the current period compared to the prior year period and the acquisition of Lumière Place. The average daily room rate in the Central region was $172 for the nine months ended September 30, 2014, compared to $93 for the nine months ended September 30, 2013. Room rates increased in the nine months ended September 30, 2014 due to the acquisition of Lumière Place.

In the West region, net revenues were $78.6 million for the nine months ended September 30, 2014, an increase of $0.1 million, or 0.1%, compared to the nine months ended September 30, 2013. The increase was primarily driven by increases in casino revenues, partially offset by increased promotional allowances. Casino revenues in the West region increased due to a 6.2% increase in slot volumes partially offset by a 0.3% decrease in table games volumes and an increase in promotional slot play, which is recorded as a reduction in revenues. Net revenues at Tropicana Laughlin increased $1.4 million for the nine months ended September 30, 2014 compared to the same period in the prior year primarily due to increased marketing incentives given to our casino patrons. At MontBleu, net revenues decreased $1.3 million due to decreased customer visitation related to fewer entertainment offerings as well as increased promotional allowances for the nine months ended September 30, 2014 compared to the prior year period. The average daily room rate for the West region was $51 and $50 for the nine months ended September 30, 2014 and September 30, 2013, respectively. The occupancy rate for the nine months ended September 30, 2014 and 2013 at our properties in the West region was 58% and 55%, respectively.

In the South and other region, net revenues were $69.3 million for the nine months ended September 30, 2014, an increase of $0.7 million, or 1.0%, compared to the nine months ended September 30, 2013. Casino revenues for the South and other region decreased $2.4 million, partially offset by a $2.3 million decrease in promotional allowances for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. Net revenues at the Belle of Baton Rouge increased $0.9 million for the nine months ended September 30, 2014, primarily due to decreased complimentary items provided to our guests, a 3.7% increase in slot volumes, and a 12.9% increase in table games volumes, partially offset by a 2.1 percentage point decline in the table game hold percentage. The increased gaming volumes at the Belle of Baton Rouge were offset by an increase in promotional slot play which is recorded as a reduction in revenues. Tropicana Greenville's net revenues decreased $0.5 million due to 0.1% higher slot volumes offset by 29.1% lower table games volumes. Increased hotel occupancy at Tropicana Aruba contributed to an increase of $0.3 million in net revenues during the nine months ended September 30, 2014. The occupancy rate at our properties in the South and other region was 71% and 70% for the nine months ended September 30, 2014 and 2013, respectively. The average daily room rate for the South and other region was $79 and $71 for the nine months ended September 30, 2014 and 2013, respectively.

Operating Income

In the East region, the operating income for the nine months ended September 30, 2014 was $48.6 million, compared to an operating income of $15.3 million for the nine months ended September 30, 2013. The operating income in the East region was favorable compared to the prior year primarily due to the increase in net revenues discussed above and a favorable real estate tax settlement which resulted in a $31.7 million one-time cash payment received at Tropicana AC during the nine months ended September 30, 2014. This refund was partially offset by an increase in real estate taxes due to and increase in the real estate tax assessed in the current period and the favorable effects in the prior period related to the original real estate tax settlement. Under the terms of the original settlement in January 2013, Tropicana AC applied $12.0 million of credits to the 2013 real estate tax bills during the nine months ended September 30, 2013 and expensed $4.1 million in professional fees related to this settlement in the nine months ended September 30, 2013. In the nine months ended September 30, 2014, Tropicana AC also recorded higher payroll and benefits expense as well as increased costs related to Internet gaming which commenced in November 2013.

In the Central region, the operating income for the nine months ended September 30, 2014 was $21.8 million, a $0.2 million increase compared to the nine months ended September 30, 2013. In April 2014, we completed the acquisition of Lumière Place which contributed a $0.1 million operating income for the nine months ended September 30, 2014. The additional increase in operating income is related to the increase in net revenues at Tropicana Evansville discussed above, and increased promotional costs during the nine months ended September 30, 2014.

In the West region, the operating income for the nine months ended September 30, 2014 was $11.3 million, a $1.2 million increase compared to the nine months ended September 30, 2013. The increase in operating income is mainly attributable to the

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increased net revenues discussed above, as well as decreased payroll benefits costs and operating expenses consistent with our focus on cost-saving initiatives during the nine months ended September 30, 2014. Additionally, the West region properties realized a $0.3 million increase in depreciation and amortization expense related to new capital projects placed in service after the comparable period in the prior year.

In the South and other region operating income for the nine months ended September 30, 2014 was $9.5 million, a $5.8 million increase compared to the nine months ended September 30, 2013. This increase is primarily due to a gain on insurance recoveries of $4.6 million, net of expenses and write-downs, in the nine months ended September 30, 2014. The increase from the prior year also relates to the net revenue increases discussed above, as well as decreased payroll costs and decreased operating expenses consistent with lower customer volumes at Tropicana Greenville and reduced advertising and promotional costs at Belle of Baton Rouge during the nine months ended September 30, 2014. Tropicana Greenville opened its new gaming operations expansion in October 2014, which includes hundreds of new gaming options, a VIP Lounge, a casual dining restaurant, a live entertainment stage and covered casino parking

Corporate expenses were $22.5 million for the nine months ended September 30, 2014, a $13.3 million increase from the nine months ended September 30, 2013, driven primarily by a $9.1 million goodwill impairment recognized during the nine months ended September 30, 2014 due to Tropicana AC's carrying value exceeding its fair value. In addition, we recorded a $3.3 million increase in professional fees during the nine months ended September 30, 2014, including fees associated with our acquisition of Lumière Place which was announced in August 2013 and completed in April 2014.

Interest Expense

Interest expense for the nine months ended September 30, 2014 and 2013 was $9.6 million and $10.8 million, respectively. The interest expense for the nine months ended September 30, 2014 decreased compared to the prior year period primarily due to our New Term Loan Facility which was funded in November 2013 and accrues interest at a floating rate, which was 4.0% per annum as of September 30, 2014. Cash paid for interest, net of interest capitalized, decreased to $8.8 million from $9.4 million for the nine months ended September 30, 2014 and 2013, respectively, related to the lower interest rate and payment timing under the New Term Loan Facility and the capitalization of interest in 2014. Under our previous Term Loan Facility, interest accrued at a floating rate of 7.5% per annum for the nine months ended September 30, 2013. Interest expense also includes approximately $0.8 million and $1.0 million of amortization of debt issuance costs and discounts for the nine months ended September 30, 2014 and 2013, respectively. Unamortized debt issuance costs and discounts related to the previous Term Loan Facility were written off in November 2013 in connection with the repayment of that debt.

Income Taxes

Income tax expense from continuing operations was $19.9 million for the nine months ended September 30, 2014 and our effective income tax rate was 32.7%. The difference between the federal statutory rate of 35% and the effective tax rate for the nine months ended September 30, 2014 was primarily due to the utilization of our deferred tax assets offset by disallowed foreign losses, the goodwill impairment, state income taxes (net of federal benefit), and other permanent differences. For the nine months ended September 30, 2013, the income tax expense from continuing operations was $3.1 million and our effective tax rate was 9.8%. The difference between the federal statutory rate of 35% and the effective tax rate for the nine months ended September 30, 2013, was primarily due to the disallowed foreign losses, state income taxes (net of federal benefit), employment credits, and the change in the valuation allowance.

We previously disclosed the details of our deferred tax assets, including the amount of its tax loss carryforwards, the expiration dates thereof and the valuation allowance related to our deferred tax assets in our Annual Report on Form 10-K. In assessing the recoverability of its deferred tax assets, management regularly considers whether some portion or all of the deferred tax assets will not be realized based on the recognition threshold and measurement of a tax position in accordance with FASB ASC Topic 740, Income Taxes. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income (exclusive of reversing temporary differences) and tax planning strategies in making this assessment. At December 31, 2013, our net deferred tax assets included approximately $211.1 million of deferred tax assets that were fully offset by a valuation allowance at such date.

In accordance with FASB ASC Topic 740, Income Taxes, based upon the level of historical book and tax operating losses, we continue to maintain a deferred tax valuation allowance against our deferred tax assets through September 30, 2014. We, however, have experienced improved earnings trends and have had cumulative net book income for 2012 and 2013. The nine-month period ended September 30, 2014 has continued with positive earnings. Additionally, current market conditions in Atlantic City, New Jersey, a location in which we derive a significant portion of our revenues, has been volatile, but we have currently been able to meet our income projections. If such earnings trends in this volatile market continue, and current expectations for

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future taxable income are met, it is likely we will release the valuation allowance on all or a significant portion of our net deferred tax assets in the near term, perhaps as early as the fourth quarter of 2014.

Discontinued Operations

During 2013, we entered into an agreement to sell River Palms and subsequently notified the buyers that we had elected to terminate the agreement to sell River Palms, effective immediately, pursuant to the terms of the agreement. We continued to actively market the property and on July 1, 2014, entered into and closed an asset purchase agreement with Laughlin Hotel, LLC and Nevada Restaurant Services, Inc. Pursuant to the terms of the asset purchase agreement substantially all of the assets associated with the operation of River Palms were sold for $6.8 million in cash and the assumption of certain liabilities. Concurrently with the execution and closing of the asset purchase agreement, we leased back River Palms. We terminated the lease and discontinued operations at River Palms in September 2014. Accordingly, the results of operations of River Palms are presented as discontinued operations in the accompanying condensed consolidated statements of income for all periods presented.

Liquidity and Capital Resources

Our cash flows are and will continue to be affected by a variety of factors, many of which are outside of our control, including regulatory restrictions, competition, financial markets and other general business conditions. In November 2013, we repaid the then outstanding Term Loan Facility with a portion of the proceeds from the New Term Loan Facility as discussed below. We believe that we will have sufficient liquidity through available cash, credit facilities and cash flow from our properties to fund our cash requirements and capital expenditures for our normal operating activities for at least twelve months. However, we cannot provide assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements and other obligations as our results for future periods are subject to numerous uncertainties that may result in liquidity problems that could affect our ability to meet our obligations while attempting to meet competitive pressures or adverse economic conditions. In addition, we continually evaluate our financing needs and we may refinance all or a portion of our indebtedness on or before maturity.

Part of our overall strategy includes consideration of expansion opportunities in new gaming jurisdictions, underserved markets and acquisition and other strategic opportunities that may arise periodically. We may require additional funds in order to execute on such strategic growth, and we may incur additional debt or issue additional equity to finance any such transactions. We cannot assure you that we will be able to incur such debt or issue any such additional equity on acceptable terms or at all. In April 2014, we completed our purchase of Lumière Place for a cash purchase price of $261.3 million, which includes an adjustment for working capital as of the acquisition date. We used a portion of the proceeds from the New Term Loan Facility.

In addition to our acquisition of Lumière Place, our material cash requirements for our existing properties for 2014 are expected to include (i) principal and interest payments related to our New Term Loan Facility of $3.0 million and $12.1 million, respectively, (ii) maintenance capital expenditures expected to be between $40 million and $50 million, (iii) growth capital expenditures expected to be approximately $20 million, a portion of which will be reimbursed in 2015 through Approved CRDA Project Funds (defined below), and (iv) minimum lease payments under our operating leases of approximately $6.5 million. Except for the $24 million MontBleu capital renovation project (see Note 13 - Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements), the majority of our planned capital expenditures are discretionary and we may decide to spend more or less than the amounts described above. We have been approved to use $18.8 million of our CRDA deposits ("Approved CRDA Project Funds") for certain capital expenditures relating to Tropicana AC. In addition we have been approved for approximately $4.8 million in grants through the New Jersey Economic Development Authority, ERG Grant Program ("ERG Grants") and plan to spend an additional $16.2 million toward capital improvements at Tropicana AC.

The following table summarizes our cash flows, which includes cash flows generated from discontinued operations within operating and investing activities (in thousands):



	Nine months ended September 30,
	2014			2013
Cash Flow Information:
Net cash provided by operating activities	$	100,967		$	56,758
Net cash used in investing activities	(273,619		)	(53,199		)
Net cash used in financing activities	(2,270		)	(1,422		)
Net increase (decrease) in cash and cash equivalents	$	(174,922	)	$	2,137

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During the nine months ended September 30, 2014, our operating activities provided $101.0 million in cash. Cash paid for interest, net of interest capitalized, was $8.8 million and $9.4 million for the nine months ended September 30, 2014 and 2013, respectively. This decrease primarily relates to decreased interest rates under our New Term Loan Facility and the capitalization of interest in 2014. Net cash provided by operating activities for the nine months ended September 30, 2014 includes the increased operating results compared to prior year as well as a $9.1 million impairment of goodwill. Operating cash provided by (used in) discontinued operations was $(1.7) million for the nine months ended September 30, 2014 and $2.7 million for the nine months ended September 30, 2013.

During the nine months ended September 30, 2014, our investing activities used $273.6 million in cash. Net cash used in investing activities primarily consisted of $237.3 million related to the Lumière Place acquisition, net of cash acquired, $52.0 million for capital expenditures, offset by $5.2 million in insurance proceeds and $2.5 million in sales and luxury tax rebates included in other investing activities in the nine months ended September 30, 2014. Net cash used in investing activities consists of $43.0 million for capital expenditures and a $15.0 million restricted cash deposit held in escrow in connection with the proposed acquisition of Lumiére Place, offset by $2.6 million in sales and luxury tax rebates included in other investing activities in the nine months ended September 30, 2013. Capital expenditures relate to expenditures necessary to keep our existing properties at their current levels and are typically replacement items due to the normal wear and tear of our properties and equipment as a result of use and age. Investing cash used in discontinued operations for capital expenditures was $0.4 million for the nine months ended September 30, 2014 and $2.5 million for the nine months ended September 30, 2013.

During the nine months ended September 30, 2014, our financing activities used $2.3 million in cash. Net cash used in financing activities for the nine months ended September 30, 2014 primarily consisted of payments on the New Term Loan Facility. Net cash provided by financing activities for the nine months ended September 30, 2013 consisted of the payments on the then outstanding Term Loan Facility.

New Credit Facilities

On November 27, 2013, we entered into (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million, issued at a discount of 0.5% (the “New Term Loan Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the “Revolving Facility” and, together with the New Term Loan Facility, the “New Credit Facilities”). Commencing on December 31, 2013, the New Term Loan Facility will amortize in equal quarterly installments in an amount of $750,000, with any remaining balance payable on the final maturity date of the New Term Loan Facility, which is November 27, 2020. Amounts under the Revolving Facility are available to be borrowed and re-borrowed until its termination on November 27, 2018.

Approximately $172.4 million of the net proceeds from the New Credit Facilities were used to repay in full the principal amounts outstanding under our existing Credit Facilities. The Credit Facilities were terminated effective as of November 27, 2013. A portion of the proceeds from the New Credit Facilities was used to finance our previously announced acquisition of Lumière Place. This acquisition was completed in April 2014.

The New Term Loan Facility accrues interest, at our option, at a per annum rate equal to either (i) the LIBO Rate (as defined in the Credit Agreement) (subject to a 1.00% floor) plus an applicable margin equal to 3.00%, or (ii) the alternate base rate (as defined in the Credit Agreement) (subject to a 2.00% floor) plus an applicable margin equal to 2.00%; such that in either case, the applicable interest rate shall not be less than 4.0%. The Revolving Facility accrues interest, at our option, at a per annum rate equal to either (i) the LIBO Rate plus an applicable margin ranging from 2.00% (if the total net leverage ratio is less than 2.50:1.00) to 2.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00); or (ii) the alternate base rate plus an applicable margin ranging from 1.00% (if the total net leverage ratio is less than 2.50:1.00) to 1.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00). The interest rate increases by 2.00% following certain defaults. As of September 30, 2014, the interest rate on the New Term Loan Facility was 4.0% and no amounts were outstanding under the Revolving Facility.

At our election and subject to certain conditions, including a maximum senior secured net leverage ratio of 3.25:1.00, the amount available under the New Credit Facilities may be increased, which increased amount may be comprised of additional term loans and revolving loans.

The New Term Loan Facility may be prepaid at our option at any time without penalty (other than customary LIBO Rate breakage fees). We are required to make mandatory payments of the New Credit Facilities with (i) net cash proceeds of certain asset sales (subject to reinvestment rights), (ii) net cash proceeds from certain issuances of debt and equity (with certain exceptions), (iii) up to 50% of annual excess cash flow (as low as 0% if our total leverage ratio is below 2.75:1.00), and (iv) certain casualty proceeds and condemnation awards (subject to reinvestment rights).

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Our interest expense for the nine months ended September 30, 2014 and 2013 was $9.6 million and $10.8 million, respectively, which includes $0.8 million and $1.0 million, respectively, of amortization of the related debt discounts and debt issuance costs for the nine months ended September 30, 2014 and 2013.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies

There have been no material changes to our critical accounting policies during the nine months ended September 30, 2014 compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our New Term Loan Facility that bears interest based on floating rates. Based on our borrowings as of September 30, 2014, assuming a 1% increase over the 4.0% minimum interest rate specified in our New Term Loan Facility, our annual interest cost would increase by approximately $3.0 million.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Our Chief Executive Officer (principal executive officer) and Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are effective as of September 30, 2014. This conclusion is based on an evaluation conducted under the supervision and with the participation of our management, including the principal executive officer and principal financial officer. Disclosure controls and procedures include, without limitation, controls and procedures which ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

For a description of our previously reported legal proceedings, refer to "Item 3-Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material developments with respect to the legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2013, except as discussed in Note 13- Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS.

"Item 1A.—Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2013 includes a discussion of our risk factors. There have been no material changes to those risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2013, except as noted below. The risks described in our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Our acquisition of Lumière Place exposes us to additional risks.

including those included in “Item 1A.-Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2013 ("2013 Annual Report"). Our acquisition, integration, ownership and operation of Lumière Place-which we acquired on April 1, 2014 and which comprises Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis and related excess land parcels in St. Louis, Missouri-is subject to the risks included in our 2013 Annual Report, as well as other risks attendant to operating gaming and hotel properties in a new geographic market, including regulatory risks. Our failure to realize the expected benefits of acquiring Lumière Place, whether because we do not achieve anticipated cost efficiencies or synergies, we are not successful at integrating the business with the rest of our operations, or otherwise, could materially adversely affect our business, financial condition and results of operations.

ITEM 6. EXHIBITS.

(a) Exhibits



Exhibit Number		Exhibit Description
2.1		First Amended Joint Plan of Reorganization of Tropicana Entertainment, LLC and Certain of its Debtor Affiliates Under Chapter 11 of the Bankruptcy Code. (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)

2.2		Amended and Restated Purchase Agreement, dated as of November 20, 2009, among Adamar of New Jersey, Inc., Manchester Mall, Inc., the Honorable Gary S. Stein, Tropicana Entertainment, LLC, Ramada New Jersey Holdings Corporation, Atlantic-Deauville, Inc., Adamar Garage Corporation, Ramada New Jersey, Inc., Credit Suisse, Tropicana Entertainment Inc., Tropicana Atlantic City Corp., and Tropicana AC Sub Corp. (Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K; the Registrant will furnish supplementally a copy of the omitted schedules to the Commission upon request.) (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)

3.1		Amended and Restated Certificate of Incorporation of Tropicana Entertainment Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)

3.2		Second Amended and Restated Bylaws of Tropicana Entertainment Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated January 7, 2011)

4.1		Specimen Certificate for shares of Common Stock, par value $0.01 per share, of the Registrant. (Incorporated by reference to the Company's Post-Effective Amendment No. 1 to Form 10 dated January 25, 2010)

4.2		Form of Stock Purchase Warrant issued to general unsecured creditors of the Predecessors. (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)

4.3		Form of Stock Purchase Warrant issued to lenders under the Exit Facility. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)

10.1*		Fourth Amendment to Lease Agreement dated October 1, 2014 by and between the Edgewood Companies, a Nevada corporation formerly known as Park Cattle Co., as Landlord, and Columbia Properties Tahoe, LLC, a Nevada limited liability company, as Tenant.

31.1*		Certification by Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification by Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32**		Certification by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.IN*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition

*	Filed herewith
**	This exhibit is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

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.



		TROPICANA ENTERTAINMENT INC.

Date:	November 4, 2014	By:	/s/ LANCE J. MILLAGE
		Name:	Lance J. Millage
		Title:	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

Tropicana Entertainment Inc. - FORM 10-Q - November 4, 2014

Attached files

Tropicana Entertainment Inc. Reports