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Article by DailyStocks_admin    (12-18-08 03:39 AM)

Filed with the SEC from Dec 04 to Dec 10:

Pinnacle Entertainment (PNK)
Funds managed by Mario Gabelli's Gamco Investors (GBL) reported ownership of 3,025,200 shares (5.04%), after buying 1,599,760 from Oct. 8 to Dec. 3, at prices ranging from $2.85 to $6.59 apiece.

BUSINESS OVERVIEW

Pinnacle Entertainment, Inc. (“Pinnacle”) is a leading developer, owner and operator of casinos and related hospitality and entertainment facilities. Domestically, we currently operate six casino destinations, we have four other casino developments in various stages of planning and construction, and we are pursuing two other casino development opportunities. In addition, we have several small casino facilities in foreign markets.



Our long-term strategy is to maintain and improve each of our existing casinos; to build new resorts that produce returns above our cost of capital; and to develop the systems to tie all of our casinos together into a national gaming network. Hence, we are developing new, high-quality gaming properties in attractive gaming markets; we are maintaining and improving our existing properties with disciplined capital expenditures; we are developing a customer loyalty program designed to motivate customers to continue to patronize our casinos; and we may make strategic acquisitions at reasonable valuations, when and if available.



Highlights of 2007 and early 2008 include the following:


•

A solid year of operating performance, particularly at our three highest-earning properties;


•

The successful opening in December of Lumière Place in downtown St. Louis, Missouri. This was our largest and most ambitious investment to date;


•

Completion of an approximately $67 million expansion project at L’Auberge du Lac, our most profitable casino location;


•

Ongoing construction of our 32-guestroom hotel adjoining our casino in Neuquén, Argentina;


•

Ongoing construction of our River City casino-hotel in south St. Louis County, which we expect to open in mid-2009;


•

Continued planning and design of our casino resort in Atlantic City, including demolition of several buildings on our site;


•

Approval by gaming and municipal authorities in 2007 and by voters in a local referendum in February 2008, permitting construction of our proposed casino-hotel in Baton Rouge, Louisiana;


•

Becoming one of the several finalists for a proposed new gaming complex to be located in Kansas City, Kansas;


•

Continuing development of the technology and infrastructure required to create a national customer-loyalty program; and


•

Issuance of $353 million (net proceeds) of common stock to supplement our equity capital, and the issuance of $379 million (net proceeds) of 7.50% senior subordinated debt to refinance and extend a portion of our debt capital, both to help fund the Company’s development pipeline.

Company Overview

(a) We opened 208 of the 252 new guestrooms at L’Auberge du Lac in December 2007. All of the guestrooms were available by the end of January 2008, bringing the total number of guestrooms to approximately 995.
(b) We have announced plans to build a hotel and replace our casino barge at Boomtown New Orleans, and are currently in the design phase of the process.
(c) We opened the Lumière Place Casino in December 2007. We opened the 200-guestroom Four Seasons Hotel St. Louis and the 294-guestroom HoteLumière (formerly the Embassy Suites Hotel, which has been extensively renovated) in early 2008.
(d) As of February 2008, we have reduced the number of slot machines at our Boomtown Reno property to approximately 650 slot machines.
(e) The data in the table represent the combined operations of the several casinos we operate in Argentina. We are in the process of constructing a 32-guestroom hotel that adjoins our casino in the city of Neuquén, which we plan to open in early 2008. For the year ended December 31, 2007, the Neuquén casino comprised approximately 87.9% of revenues of our Argentine operations.
(f) We expect River City to open in mid-2009, subject to, among other things, final approval of the Missouri Gaming Commission (the “MGC”).
(g) We are underway with site preparation for our Sugarcane Bay casino-hotel. The project is subject to certain conditions and various approvals.
(h) On February 9, 2008, the voters of East Baton Rouge Parish approved our casino-resort to be built on real estate that we own or control. The project is subject to certain conditions and various other approvals.
(i) The specific attributes of our Atlantic City project have not yet been determined, but considering the size of the market and the site, location and cost of our site, this is expected to be significantly larger than any of our existing facilities.
(j) We are seeking a license for a new gaming entertainment complex to be located on land we have optioned in Kansas City, Kansas. We have one of several proposals for the one license expected to be issued in this jurisdiction.
(k) We own land and have an option to purchase additional land in Central City, Colorado.

Our Principal Properties



Our largest casino resort is L’Auberge du Lac in Lake Charles, Louisiana, which opened in May 2005. Lake Charles offers the closest full-scale casino-hotel facilities to Houston (the seventh-largest metropolitan statistical area in the United States), as well as the Austin and San Antonio metropolitan areas. Lake Charles is approximately 145 miles from Houston and approximately 300 miles and 335 miles from Austin and San Antonio, respectively.



L’Auberge du Lac offers approximately 995 guestrooms and suites, inclusive of our recent expansion. The expansion project, in which we invested approximately $67 million as of the year ended December 31, 2007, includes 252 additional guestrooms (10 of which are new private garden villas), additional retail shops, an expanded pool area and other amenities. The facility also offers several restaurants, approximately 28,000 square feet of meeting space, a championship golf course designed by Tom Fazio, and a full-service spa. Unlike most other riverboat casinos, all of the public areas at L’Auberge du Lac (except the parking garage), and in particular the casino, are situated entirely on one level. The casino is surrounded on three sides by the hotel tower and other guest amenities. The hotel at L’Auberge du Lac is the largest in Louisiana outside of New Orleans.



L’Auberge du Lac competes with other full-service regional and national casinos, including those in New Orleans, Louisiana, Biloxi, Mississippi, and Las Vegas, Nevada. It also competes with another casino-hotel in Lake Charles; a land-based Native American casino, which is approximately 43 miles east of Lake Charles; a racetrack slot operation located approximately 25 miles to the west; and numerous truck stops with slot machines in many parishes of Louisiana, some of which call themselves “casinos”.



Our Boomtown New Orleans property is the only casino in the West Bank neighborhood, across the Mississippi River from downtown New Orleans. It currently features a dockside riverboat casino, two restaurants, a delicatessen, a 350-seat nightclub, 4,600 square feet of meeting space, an arcade and approximately 1,700 parking spaces. The property opened in 1994.



The West Bank generally did not flood as a result of the levee breaches that occurred in connection with the hurricanes in 2005 and has experienced substantial growth during the regional reconstruction. Responding to the growth within our community, we have been designing a 200-guestroom upscale hotel, the first guestrooms at this property, and other upgrades. We also plan to replace the three-level casino riverboat with a large single-deck casino boat, similar to the casino at L’Auberge du Lac. These projects are estimated to involve an investment of approximately $150 million.



Boomtown New Orleans competes with one other riverboat casino, a racetrack with slot machines, numerous truck stop casinos and a large land-based casino and entertainment facility in downtown New Orleans.



Our southern Indiana property, Belterra Casino Resort (“Belterra”) , opened in October 2000, and is located along the Ohio River near Vevay, Indiana, approximately one hour from downtown Cincinnati, Ohio and 80 minutes from Louisville, Kentucky. Belterra is approximately two hours from Indianapolis, which is the third-largest market for Belterra. Management estimates that residents of the Indianapolis metropolitan area account for approximately 10% of Belterra’s casino revenues and approximately 11% of the guests staying at Belterra’s 608-guestroom hotel. The total population within 300 miles of Belterra is approximately 48 million.



Belterra attracts customers by offering amenities that are generally superior to those at competing regional properties, several of which are closer to the population centers than Belterra. Belterra features a large casino and a 608-guestroom hotel, six restaurants, 33,000 square feet of meeting and conference space, a 1,750-seat entertainment showroom, retail shops, a swimming pool, a championship golf course designed by Tom Fazio and a full-service spa. The resort provides approximately 2,000 parking spaces, most of which are in a multi-level parking structure.

Belterra currently competes with four dockside riverboats and a casino resort that opened in November 2006 in French Lick, Indiana, approximately 100 miles west of Belterra. In addition, two racetrack casinos plan to open in 2008 in the Indianapolis metropolitan area. Each racetrack is authorized to offer 2,000 slot machines. A major competitor in the Cincinnati area has announced plans to replace its dockside riverboat with a larger gaming facility and expand its parking facilities. There are also proposals to legalize casinos in Ohio and Kentucky.



In August 2007, we added five retail shops. In December 2007, we completed the refurbishment of 11 of the high-end suites at Belterra. In light of the approval in May 2007 of legislation allowing two large slot machine casinos at racetracks in Indianapolis, we postponed indefinitely our planned construction of a 250-guestroom addition at the property.



Our Boomtown Bossier City property in Bossier City, Louisiana, features a regional hotel built around a dockside riverboat casino. The property opened in October 1996 on a site directly adjacent to, and easily visible from, Interstate 20. The Bossier City/Shreveport region is a three-hour drive from the Dallas/Fort Worth metropolitan area along Interstate 20. The property includes 188 guestrooms, including four master suites and 88 junior suites, four restaurants and approximately 1,860 parking spaces.



In 2006, we acquired a barge that we intend to convert to an arrival facility for guests of our riverboat casino. The arrival facility will adjoin our casino and offer escalators, making it easier for customers to travel among the three levels of our riverboat casino.



Boomtown Bossier City competes with four dockside riverboat casino-hotels and a racetrack slot operation. Current state regulations do not permit table games at the racetrack. Boomtown Bossier City also competes with Native American casinos in southern Oklahoma. Such facilities are approximately one hour north of Dallas and offer both slot machines and table games.



Lumière Place-St. Louis includes our new Lumière Place Casino and The Admiral Riverboat Casino. Lumière Place, which is located in downtown St. Louis, Missouri, offers a 75,000-square-foot casino, a 200-guestroom luxury Four Seasons Hotel St. Louis, the 294 all-suites HoteLumière (formerly the Embassy Suites Hotel, which we have extensively refurbished), seven restaurants, banquet facilities, retail shops and more than 22,000 square feet of convention/meeting space, including a 7,300-square-foot ballroom. The Admiral Riverboat Casino offers approximately 845 slot machines and 30 table games. We own all of the facilities and have entered into a long-term agreement with Four Seasons Hotels Limited to manage our Four Seasons Hotel St. Louis. A group led by famed chef Hubert Keller manages two of our restaurants. Lumière Place is located across from the Edward Jones domed stadium and America’s Center Convention Center and just north of the famous Gateway Arch. A pedestrian tunnel to the America’s Center convention center, the Edward Jones domed stadium and the city’s central business district is expected to open in April 2008. We are currently using approximately nine of the 18 acres that we own in downtown St. Louis for the Lumière Place Casino and Hotels.



In 2005, our affiliate entered into a joint venture agreement with local developers to develop a 10-story luxury condominium project in Laclede’s Landing, near Lumière Place. The joint venture then designed the building, arranged a $19.0 million financing commitment and solicited bids for the building’s construction. The estimated costs of construction turned out to be higher than was originally estimated, while the overall market for residential housing has deteriorated in the interim. As a result, the partners determined that the project would not achieve sufficient returns and our affiliate has terminated the project. Through our affiliate, we have contributed approximately $1.3 million in expenses and our partner has contributed a portion of the project real property. Our affiliate is discussing with the partner and a construction lender regarding dissolving the partnership and the potential transfer of the property to our affiliate’s partner, for reimbursement of $500,000 of the expenses plus the entire purchase price paid by the partnership for the remaining portion of the project real property.



The Lumière Place casinos compete with four other casinos in the St. Louis metropolitan area.

Boomtown Reno is a land-based casino-hotel located approximately 11 miles west of downtown Reno, Nevada, near the California border along Interstate 80. This interstate is the primary east-west interstate highway serving northern California. Boomtown Reno has been operating for more than 40 years.



The property offers 318 guestrooms, which we are planning to refurbish. In addition, the property has three restaurants, a 30,000-square-foot amusement center and approximately 1,300 parking spaces. In addition to the main casino-hotel, the property has a gas station and mini-mart and a 197-space recreational vehicle park.



In the second quarter of 2007, we closed Boomtown Reno’s truck stop to accommodate the construction of a Cabela’s Inc. branded outdoor sporting goods store, which opened in November 2007. We sold approximately 28 acres of land to Cabela’s Inc. in 2006. In the future, we have entitlements to construct a new satellite casino and travel plaza to be built on approximately 23 acres at a different location on the property’s 490 acres of available land. We continue to evaluate other opportunities to develop, sell or otherwise monetize our remaining excess available land.



Historically, Reno has been a drive-in gaming market that attracted visitors from northern California. Our facility also caters to travelers along Interstate 80 and local customers. Since mid-2003, new and expanded Native American casino facilities have opened in California that compete for business with Reno gaming properties. These California casino facilities are significantly closer to several primary customer markets than Boomtown Reno and have had an adverse effect on Boomtown Reno’s performance. Although such competition is likely to continue to expand, we believe that Northern California is now a less important market for Boomtown Reno than it was previously.



Casino Magic Argentina consists of one large and several small casinos in the Patagonia region of Argentina. The principal Casino Magic Argentina property, in the city of Neuquén, opened in July 2005 and replaced a leased facility that had operated for over 20 years. Casino Magic Neuquén includes a large, first-class casino, a restaurant, several bars and an entertainment venue on approximately 20 acres of land. We are constructing a 32-guestroom hotel, consisting of 15 large guestrooms and 17 suites, adjoining our casino. We anticipate investing approximately US$13 million in the hotel project, which is being funded through the property’s existing cash balances and operating cash flows.


CEO BACKGROUND

Mr. Lee has been the Company’s Chairman of the Board of Directors and Chief Executive Officer since April 2002; owner of LVMR, LLC (developer of casino hotels) from 2000 to 2002; Chief Financial Officer and Senior Vice President of HomeGrocer.Com, Inc. (internet grocery service) from 1999 until the sale of the company in 2000; Chief Financial Officer, Treasurer and Senior Vice President of Finance and Development of Mirage Resorts, Incorporated (major operator and developer of casino resorts) from 1992 to 1999; Director-Equity Research of CS First Boston from 1990 to 1992; and held various positions to Managing Director of Drexel Burham Lambert from 1980 to 1990.



Mr. Comer has been one of the Company’s directors since July 2007; Director, Southwest Gas Corporation from January 2007 to present; Managing Partner, Deloitte & Touche LLP (Nevada operations) from 2002 to 2006; Managing Partner and other positions, Arthur Andersen (Los Angeles and Nevada operations) from 1972 to 2002; and Member of the American Institute of Certified Public Accountants and Nevada Society of Certified Public Accountants.



Mr. Giovenco has been lead director of the Company since February 2008 and one of the Company’s directors since February 2003; Director, Great Western Financial Corporation from 1979 to 1993; President and Chief Operating Officer, Sheraton Hotels Corporation during 1993; Director, Hilton Hotels Corporation from 1980 to 1992; President and Chief Operating Officer, Hilton Gaming Corporation from 1985 to 1993; Executive Vice President-Finance, Hilton Hotels Corporation from 1980 to 1993; Chief Financial Officer, Hilton Hotels Corporation from 1974 to 1985; Chief Financial Officer, Hilton Gaming Corporation from 1972 to 1974; and Partner, Harris, Kerr, Forster, Certified Public Accountants (predecessor firm to PKF International) from 1967 to 1971.

Mr. Goeglein has been one of the Company’s directors since December 2003 and was also a Director of the Company from 1997 to 1998; Owner and Managing Member, Evening Star Holdings, LLC (acquirer and operator of non-gaming resort properties) since mid-2005; Owner and Managing Member, Evening Star Hospitality, LLC (acquirer, developer and operator of non-gaming resort properties) from 2003 to early 2005; President and Chief Operating Officer, Holiday Corporation (the parent company of Holiday Inn, Harrah’s Hotels and Casinos, Hampton Inns and Embassy Suites) from 1984 to 1987; Executive Vice President and Director, Holiday Corporation from 1978 to 1984; President and Chief Executive Officer, Harrah’s Hotels and Casinos from 1980 to 1984; and Director, Boomtown, Inc. from 1993 to 1997. Mr. Goeglein served as President from 1997 and Chief Executive Officer from 2000 of Aladdin Gaming, LLC and Aladdin Gaming Holdings, LLC (developer and operator of the Aladdin Resort & Casino in Las Vegas, Nevada), in each case until September 21, 2001.



Mr. Landau has been one of the Company’s directors since January 2007; Executive Vice President and Chief Financial Officer of Boyd Gaming Corporation from 1990 thru 2006; Vice President and Treasurer of Aztar Corporation (formerly Ramada Inc.) from 1971 to early 1990; Assistant Treasurer of U-Haul International from 1969 to 1971; Financial Analyst at the Securities and Exchange Commission from 1968 to 1969; Treasurer and Director of Temple Beth Sholom since mid-2006; and Chairman of the Board of the Anti-Defamation League Nevada Chapter since late 2006.


Mr. Leslie has been one of the Company’s directors since October 2002; Partner, Armstrong Teasdale LLP (law firm) from January 2008; Of Counsel, Beckley, Singleton (law firm) from 2003 to 2008; Partner, Leslie & Campbell (law firm) from 2001 to 2003; Partner, Bernhard & Leslie (law firm) from 1996 to 2001; Partner, Beckley, Singleton from 1986 to 1996; and Partner, Vargas & Bartlett (law firm) from 1979 to 1986.

Mr. Martineau has been one of the Company’s directors since May 1999; President and Founder, Viracon, Inc. (flat glass fabricator) from 1970 to 1996; Executive Vice President, Apogee Enterprises, Inc. (a glass design and development corporation that acquired Viracon, Inc. in 1973) from 1996 to 1998; Director, Apogee Enterprises, Inc. since 1978; Director, Northstar Photonics (telecommunications business) from 1998 to 2002; Chairman, Genesis Portfolio Partners, LLC (start-up company development) since July 1998; Director, Borgen Systems from 1994 to 2005; and Trustee, Owatonna Foundation since 1973.

Mr. Ornest has been one of the Company’s directors since October 1998; private investor since 1983; Director of the Ornest Family Partnership since 1983; Director of the Ornest Family Foundation since 1993; Director of the Toronto Argonauts Football Club from 1988 to 1991; President of the St. Louis Arena and Vice President of the St. Louis Blues Hockey Club from 1983 to 1986; and Managing Director of the Vancouver Canadians Baseball Club, Pacific Coast League from 1979 to 1980.

Mr. Reitnouer has been one of the Company’s directors since 1991; Director, Hollywood Park Operating Company from September 1991 to January 1992; Partner, Crowell Weedon & Co. (stock brokerage) since 1969; Director and Chairman of the Board, COHR, Inc. from 1986 to 1999; Director and Chairman of the Board, Forest Lawn Memorial Parks Association from 1975 to 2006; and Trustee, University of California Santa Barbara Foundation (and former Chairman) since 1992.

MANAGEMENT DISCUSSION FROM LATEST 10K

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, our audited Consolidated Financial Statements and the notes thereto, and other filings with the Securities and Exchange Commission.

Overview and Summary

Pinnacle Entertainment, Inc. is a leading developer, owner and operator of casinos and related hospitality and entertainment facilities. We currently operate six domestic casino destinations, including Lumière Place in downtown St. Louis, where we began the complex’s phased opening with the casino and several restaurants on December 19, 2007, followed by the opening of the two hotels and other amenities in early 2008. Internationally, we operate several small casinos in Argentina and one in The Bahamas.

Our long-term strategy is to maintain and improve each of our existing casinos; to build new resorts that produce returns above our cost of capital; and to develop the systems to tie all of our casinos together into a national gaming network. Hence, we are developing new, high-quality gaming properties in attractive gaming markets; we are maintaining and improving our existing properties with disciplined capital expenditures; we are developing a customer loyalty program designed to motivate customers to continue to patronize our casinos; and we may make strategic acquisitions at reasonable valuations, when and if available. During 2007 and early 2008, we made significant progress toward achieving our long-term strategy.

On December 19, 2007, we opened portions of Lumière Place-St. Louis, our largest and most ambitious investment to date, in downtown St. Louis, Missouri, including the 75,000-square-foot casino and certain restaurants. In the first quarter of 2008, we opened HoteLumière, additional restaurants, retail outlets, and a luxury spa. Also, in the first quarter of 2008, we opened the Four Seasons Hotel St. Louis, which we own and have entered into a long-term agreement with Four Seasons Hotels Limited to manage. A group led by famed chef Hubert Keller manages two of our restaurants. In April 2008, we plan to open a pedestrian tunnel, which will link Lumière Place to the America’s Center convention center, the Edward Jones domed stadium and the city’s central business district.

We have a number of projects at various stages of development. In south St. Louis County, Missouri, we began foundation work for our River City casino, which we expect to open in mid-2009. In Lake Charles, Louisiana, we plan to build the Sugarcane Bay casino and hotel adjacent to L’Auberge du Lac. In East Baton Rouge Parish, Louisiana, we received voter approval in February 2008 permitting construction of our proposed casino-hotel complex on land that we own or control in Baton Rouge. In Atlantic City, New Jersey, we continue to plan and design our casino resort, including demolition of several buildings on our site. We are one of several finalists for a proposed new gaming complex to be located in Kansas City, Kansas. In Central City, Colorado, we own a well-located casino site.

Finally, we are continuing development of the technology and infrastructure required to create a national customer-loyalty program.

In support of our expansion plans and to help fund our development pipeline, we raised $353 million (net proceeds) through a common stock offering. We also received $379 million (net proceeds) from the issuance of 7.50% senior subordinated notes, a portion which was used to refinance and extend a portion of our debt capital. The balance of such proceeds is being used for funding of our development and expansion activities.

We also have an outstanding $297 million insurance claim associated with Hurricane Katrina’s destruction of our former Casino Magic Biloxi operations, of which we have collected $105 million as of December 31, 2007. Pursuant to a recent settlement agreement with one of the insurance carriers, we expect to receive an additional approximately $36.8 million in March. This claim is the subject of pending litigation with the two remaining insurance carriers.

Operating Results Consolidated revenues increased to $924 million for the year ended December 31, 2007, compared to consolidated revenues of $912 million for the year ended December 31, 2006. The 2007 year-end revenues reflect continued strong performances at L’Auberge du Lac and Belterra, as well as the benefit of the December 2006 acquisition of The Admiral Riverboat Casino. Those increases were offset by a revenue decline at Boomtown New Orleans, which continues to perform well despite lower year-over-year comparisons with 2006’s exceptional post-hurricane-affected results. Gaming revenues increased by $28.2 million for the year ended December 31, 2007, while food and beverage increased by $885,000. Hotel and truck stop/service station revenues were lower for the year ended December 31, 2007 by $6.9 million and $11.5 million, respectively. Our Boomtown Reno truck stop closed on June 15, 2007. Other revenue, comprised primarily of retail, arcade and showroom revenue, decreased slightly in 2007 from 2006.

Revenues rose to $912 million for the year ended December 31, 2006 from $668 million for the year ended December 31, 2005. The increase is the result of a full year of operations at L’Auberge du Lac and limited competition for Boomtown New Orleans in 2006, following Hurricane Katrina. Gaming revenues increased by $217 million for the year ended December 31, 2006, while food and beverage increased by $8.3 million. Hotel revenues increased by $8.9 million for the year ended December 31, 2006, reflecting the September 2005 acquisition of the Embassy Suites in downtown St. Louis and the May 2005 opening of L’Auberge du Lac. Other revenue, comprised primarily of retail, arcade and showroom revenue, increased by $8.5 million to $23.7 million for the year ended December 31, 2006, again due primarily to a full year of such operations at L’Auberge du Lac.

Each segment’s contribution to the operating results was as follows:

L’Auberge du Lac revenues increased to $321 million for the year ended December 31, 2007, a 2.9% increase from $312 million for the year ended December 31, 2006. The increase in revenues contributed to an increase in Adjusted EBITDA to $75.2 million for the year ended December 31, 2007, from $72.4 million for the year ended December 31, 2006. In December 2007, L’Auberge du Lac opened 208 guestrooms of its new 252-guestoom expansion. Hotel occupancy, inclusive of the additional guestrooms that opened in late December 2007, was 92.4% for the year ended December 31, 2007.

We opened L’Auberge du Lac on May 26, 2005. Revenues rose to $312 million for the twelve months of operations in 2006, a 111% increase from the $148 million earned in the seven months of operations in 2005. Adjusted EBITDA was $72.4 million for the year ended December 31, 2006 versus $11.3 million for the year ended December 31, 2005.



Boomtown New Orleans revenues and Adjusted EBITDA were $162 million and $54.2 million, respectively, for the year ended December 31, 2007. Such results reflect a considerable improvement in business levels as compared to pre-Hurricane Katrina periods, consistent with both the increase in population in the West Bank community in which Boomtown New Orleans operates and the ongoing regional rebuilding efforts. In comparison, pre-Hurricane Katrina revenues and Adjusted EBITDA for the fiscal year ended December 31, 2004 were $111 million and $32.2 million, respectively.



In 2006, Boomtown New Orleans operated with limited competition in both the New Orleans and the Gulf Coast Region for the first half of the year with business levels moderating at the end of the year, once significant competition had reopened. Consequently, revenues and Adjusted EBITDA for the year ended December 31, 2006 were $201 million and $81.0 million, respectively.



For the year ended December 31, 2005, revenues and Adjusted EBITDA were $143 million and $51.4 million, respectively, including the exceptional post-Hurricane Katrina fourth quarter results.



Belterra Casino Resort revenues increased to $178 million for the year ended December 31, 2007, compared to $173 million for the year ended December 31, 2006. A successful marketing plan designed to increase gaming customers and hotel occupancy contributed to a 1.8% increase in gaming revenues and an 11.1% increase in hotel revenues for the year ended December 31, 2007. The increase in revenues contributed to the 5.3% increase in Adjusted EBITDA to $39.3 million for the year ended December 31, 2007, compared to $37.3 million for the year ended December 31, 2006. In August 2007, five new retail shops opened and in December 2007, the refurbishment of 11 of the high-end suites was completed.



In May 2007, the Governor of Indiana signed legislation approving the installation of 2,000 slot machines in each of two racetracks in the Indianapolis area, thereby significantly expanding the gaming capacity in this market. As a result, we postponed indefinitely our planned 250-guestroom addition, which resulted in a $1.0 million write-off of accumulated project costs, which amount is excluded from the calculation of Adjusted EBITDA.



Belterra’s revenues increased to $173 million for the year ended December 31, 2006, compared to $169 million for the year ended December 31, 2005, while Adjusted EBITDA decreased to $37.3 million for the year ended December 31, 2006 from $40.0 million for the year ended December 31, 2005. The decrease in Adjusted EBITDA was partially due to increased gaming taxes and additional taxes incurred from a previous sales and use tax audit. In November 2006, the new access road opened at Belterra and a new competing resort-casino opened approximately 100 miles from Belterra that competes with us for customers from Louisville and Indianapolis, which are secondary and tertiary markets for Belterra.



Boomtown Bossier City revenues and Adjusted EBITDA decreased to $89.7 million and $17.9 million for the year ended December 31, 2007, compared to $96.3 million and $23.0 million for the year ended December 31, 2006, and $95.4 million and $19.6 million for the year ended December 31, 2005, respectively. The Bossier City/Shreveport gaming market is competitive, with four dockside riverboat casino-hotels and a racetrack operation. In addition, the Bossier City/Shreveport gaming market, which is approximately 188 miles east from Dallas/Fort Worth, competes with Native American gaming in southern Oklahoma located approximately 60 miles north of Dallas/Fort Worth. Such Native American casinos continue to expand, including the addition of table games in early 2005.

In 2006, we acquired a barge that we intend to convert to an arrival facility for guests of our riverboat casino. The arrival facility will adjoin our casino and offer escalators, making it easier for customers to travel among the three levels of our riverboat casino. Our operating results for 2006 reflect the benefit of a temporary increase in the local population due to the hurricanes in southern Louisiana, as well as reduced regional competition.



Our Lumière Place-St. Louis operations include the Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis, The Admiral Riverboat Casino and other amenities. The Four Seasons Hotel St. Louis and HoteLumière began operations in the first quarter of 2008. For the year ended December 31, 2007, the Lumière Place-St. Louis operations generated revenues of $66.1 million, including $5.5 million associated with the first 12 days of operations at Lumière Place Casino. Adjusted EBITDA for the year ended December 31, 2007 was $6.1 million compared to the $2.1 million for the year ended December 31, 2006, primarily from a full year of operations of The Admiral Riverboat Casino.



In connection with the renovation of HoteLumière, we wrote off $2.8 million related to furniture, fixtures and equipment that had been replaced as part of the hotel refurbishment. Also, we are in discussions with a local partner and a construction lender about dissolving our joint venture to develop a $25 million, 10-story luxury condominium project in Laclede’s Landing near Lumière Place-St. Louis. Through our affiliate, we have contributed approximately $1.3 million in expenses and our local partner has contributed a portion of the project real property. In connection with the anticipated dissolution of the joint venture, we wrote off $1.0 million of accumulated project costs. Such write-offs were excluded from the calculation of Adjusted EBITDA.



Boomtown Reno revenues and Adjusted EBITDA were $67.2 million and $3.5 million, respectively, for the year ended December 31, 2007, compared to $87.1 million and $6.8 million, respectively, for the year ended December 31, 2006. The decreases in revenues and Adjusted EBITDA are primarily due to the June 15, 2007 closure of the Boomtown truck stop, which sold fuel at low margins. The truck stop closure also resulted in fewer casino customers.



We closed the truck stop to facilitate construction of the neighboring Cabela Inc.’s branded sporting goods store, which opened on November 16, 2007. The parking for Cabela’s utilizes the former truck stop location. The Cabela’s store has not resulted in as many incremental casino customers as we envisioned. We have entitlements for a new satellite casino and travel plaza that could be built at a different location on the property’s 490 acres of available land.



Boomtown Reno’s revenues and Adjusted EBITDA decreased to $87.1 million and $6.8 million, respectively, for the year ended December 31, 2006, compared to $88.2 million and $10.4 million, respectively, for the year ended December 31, 2005, primarily from the decrease in gaming revenues due to increased competition. Although truck stop/service station revenues increased, fuel sales have significantly lower margins than gaming revenues. As a result, shifts to fuel sales from gaming revenue adversely affected Adjusted EBITDA. Additionally, medical costs were approximately $1.4 million higher for the year ended December 31, 2006 than for the year ended December 31, 2005.



Our International segment includes Casino Magic Argentina and The Casino at Emerald Bay in The Bahamas. Revenues and Adjusted EBITDA for the year ended December 31, 2007 rose to $39.2 million and $12.7 million, respectively, from $28.6 million and $9.2 million, respectively, for the year ended December 31, 2006. The increase in revenues is primarily due to a $9.3 million increase in gaming revenues, primarily at our Casino Magic Argentina operation. We are building a 32-guestroom hotel adjoining our principal casino in Neuquén, Argentina. The new hotel is expected to cost approximately $13.0 million and is being funded through the property’s existing cash balances and operating cash flows.



For the year ended December 31, 2006, revenues grew 39.5% to $28.6 million from $20.5 million for the year ended December 31, 2005, primarily due to a full year of operations at our larger replacement casino in the city of Neuquén, Argentina. Adjusted EBITDA increased to $9.2 million for the year ended December 31, 2006 from $7.8 million for the year ended December 31, 2005.

Depreciation and amortization expense for the fiscal years ended December 31, 2007, 2006 and 2005 were $81.0 million, $69.1 million, and $55.7 million, respectively. The increase in depreciation expense for the year ended December 31, 2007 is primarily due to the St. Louis segment operations, which includes a full year of depreciation for The Admiral Riverboat Casino, which we acquired in December 2006. The increase in depreciation expense for the year ended December 31, 2006 is primarily due to a full year of depreciation for L’Auberge du Lac, which we opened in May 2005.



Pre-opening and development costs for the fiscal years ended December 31, 2007, 2006 and 2005 were $60.8 million, $29.8 million and $29.6 million, respectively. The pre-opening and development costs for 2007 were primarily related to the St. Louis development activities, the Atlantic City development and our Sugarcane Bay project. The pre-opening and development costs for 2006 were primarily related to the St. Louis development activities and our other acquisitions and expansions during 2006. In 2005, pre-opening and developments costs were primarily related to the opening of L’Auberge du Lac, as well as early stages of the St. Louis development activities.



Corporate expenses were $39.8 million for the year ended December 31, 2007, compared to $29.2 million and $23.2 million for the years ended December 31, 2006 and 2005, respectively. The increase in corporate expenses is due to the hiring of additional corporate staff in support of our expanding operations.



Write-off and other charges, net We incurred asset write-downs and other charges of $4.5 million associated with the postponed 250-guestroom addition at Belterra Casino Resort ($1.0 million), the renovation activities at HoteLumière ($2.8 million) and the cancelled St. Louis condominium project ($1.0 million). Partially offsetting these charges was a gain on the sale of a corporate aircraft of $488,000. All of these transactions were excluded from the calculation of Adjusted EBITDA.



2006 litigation settlement reserve In the fourth quarter ended December 31, 2006, we recorded a $2.2 million litigation settlement reserve involving our former chairman. The suit was settled in the first quarter of 2007 for an amount approximating the litigation reserve.



Other non-operating income consists primarily of interest income of $15.5 million, $14.2 million and $3.7 million for fiscal years ended December 31, 2007, 2006 and 2005, respectively. The 2007 increase reflects higher interest rates and higher cash levels in the first half of the year. The 2006 period also includes a gain of $1.8 million on the sale of Aztar Corporation common stock sold in the third quarter of 2006.



Interest expense, net of capitalized interest was $25.7 million, $53.7 million and $49.5 million for the fiscal years ended December 31, 2007, 2006 and 2005, respectively. The decrease in 2007 from 2006 is the result of a significant increase in the portion of interest expense that was capitalized in the 2007 period. Such increase primarily reflected amounts invested into Lumière Place, which opened late in the year, and Atlantic City.



Loss on early extinguishment of debt During the 2007 second quarter, we issued fixed-rate eight-year 7.50% senior subordinated debt at an effective yield of 7.75% to maturity. A majority of the proceeds were used to retire $275 million of floating rate secured term debt and to purchase $25.0 million in principal amount of our 8.25% senior subordinated notes. These transactions resulted in a write-off of $6.1 million of debt issuance costs in 2007. There were no debt issuance costs written off in 2006.



In December 2005, we entered into (and subsequently amended) a new credit facility that reduced our borrowing costs and provided more flexible covenants. In early 2005, we retired the remaining portion of our 9.25% senior subordinated notes using borrowings from the prior credit facility. Although advantageous to our overall capital structure, we incurred charges of $3.8 million in 2005 related to unamortized debt issuance costs and similar items associated with the retired debt.

Merger termination proceeds The 2006 results reflect net proceeds of approximately $44.7 million related to our terminated merger agreement with Aztar Corporation. The gross breakup fee from the merger agreement was $78.0 million. The difference reflects legal, financing fees and other costs related to the terminated merger agreement.



Income tax (expense) benefit Our 2007 effective income tax rate for continuing operations was 25.1%, or a benefit of approximately $0.5 million, as compared to 39.9%, or an expense of $41.1 million, in the prior year. While our rate benefited from the reversal of certain FIN 48 accruals resulting from the final resolution of tax matters with taxing authorities and federal hiring tax credits, the lower than expected rate was primarily due to the effects of nondeductible expenses such as the gaming tax add-back for Indiana income tax purposes, certain lobbying expenditures and the recording of a valuation allowance against certain deferred tax assets associated with our Argentine subsidiary.



Discontinued operations We completed the sale of our Crystal Park Casino card club in April 2006, our leasehold interest and related receivables in the Hollywood Park Casino card club in July 2006 and our Casino Magic Biloxi site and certain related assets in November 2006.



LIQUIDITY AND CAPITAL RESOURCES



As of December 31, 2007, we had $191 million of cash, and cash equivalents and approximately $279 million of availability under our Credit Facility (see discussion below). We estimate that approximately $100 million of cash is currently used to fund our casino cages, slot machines and day-to-day operating accounts. We generally produce significant positive cash flows from operations, though this is not always reflected in our reported net income due to large depreciation charges and other non-cash costs.



Our working capital (current assets less current liabilities, excluding restricted cash) was $69.5 million at December 31, 2007, versus $75.5 million at December 31, 2006.



Cash provided by operations was $153 million for the year ended December 31, 2007, compared to $207 million for the 2006 period, which included net merger termination proceeds of $44.7 million and excess insurance proceeds of approximately $16.7 million.



Cash invested in property and equipment for the year ended December 31, 2007 was $546 million, including approximately $321 million for Lumière Place-St. Louis, $18.3 million for our River City casino-hotel, $69.8 million for L’Auberge du Lac and $21.4 million for Baton Rouge, compared to $187 million for the year ended December 31, 2006, which included approximately $103 million for construction at Lumière Place (including the purchase of land adjacent to the project) and $19 million at River City project. Additionally, in 2006, we invested approximately $334 million for acquisitions of the Atlantic City site and the two Harrah’s entities, and approximately $41.0 million to purchase The Admiral Riverboat Casino, in each case, including working capital and net of cash acquired in the transactions.



In 2008 and for the next several years, our anticipated capital needs include the following:


•

In connection with our River City project, we have entered into a lease and development agreement with the St. Louis County Port Authority. Pursuant to the terms of the lease and development agreement, the project is to be developed in two phases. In the first phase, we are required to invest $375 million, and in the second phase $75 million. The gaming facilities are scheduled to be completed and open to the public by May 1, 2009. We have cumulatively invested approximately $49.7 million in capital expenditures and pre-opening costs as of December 31, 2007, on the River City project;


•

In June 2007, the LGCB approved our architectural plans for the proposed $350 million Sugarcane Bay project to be built adjacent to our L’Auberge du Lac facility in Lake Charles, Louisiana. We are required to complete specific milestones within certain timeframes and complete construction within 18 months of commencing excavating and grading work for the foundations, subject to certain approvals by the LGCB;

•

In February 2008, voters in the East Baton Rouge Parish approved the site for our proposed casino-hotel entertainment complex in Baton Rouge, Louisiana, named Rivière. We had previously received approval from the LGCB for this project. Construction will still require zoning and other local approvals. The first phase of Rivière, which is expected to cost approximately $250 million, is designed to include a casino, a 100-guestroom high-end hotel and several entertainment and dining options. Subsequent phases (which may be developed in partnership with others) are currently designed to include additional hotel rooms, a health club, spa and pool area, championship golf course, an equestrian center, and a creative residential and retail district. Similar to Sugarcane Bay, we are required to complete specific milestones within certain timeframes and complete construction of the first phase within 18 months of commencing excavating and grading work for the foundations, subject to certain approvals by the LGCB;


•

In December 2007, the Unified Government of Wyandotte County/Kansas City, Kansas endorsed our plan as one of three proposals sent to state officials for consideration. The State’s enabling legislation calls for one casino license in Wyandotte County and that license must have local approval. There are also other proposals competing for the same gaming license in Wyandotte County, including proposals from the neighboring city of Edwardsville. Our proposed entertainment resort features a 100,000-square-foot casino and a 500-guestroom hotel. The gaming complex anchors a 100,000-square-foot convention center, including a 50,000-square-foot venue for concerts and live events. Our development proposal is currently expected to involve an investment of approximately $650 million;


•

We continue to design our Atlantic City project, which for a resort of this size is expected to take at least two to three years from the date of our acquisition of the site in November 2006. The construction will then require approximately three to four additional years to complete at an anticipated investment substantially larger than any of our other projects;


•

We intend to oversee the development at a future date of at least $50 million for real estate projects in downtown St. Louis, Missouri, which we are required to complete by December 2012. The total cost of such projects must be at least $50 million; however, our investment in such projects can be substantially less, as such projects may be developed in partnership with others;


•

We have plans for $150 million of capital spending for an expansion project at Boomtown New Orleans. Such plans would include an upscale hotel, the first guestrooms at this property, and other upgrades. This also includes replacing the three-level casino riverboat with a large single-deck casino boat, similar to the casino at L’Auberge du Lac;


•

In the second quarter of 2007, we closed Boomtown Reno’s truck stop to accommodate the construction of a Cabela’s Inc. branded outdoor sporting goods store, which opened in November 2007. During the third quarter of 2007, we completed the demolition of the truck stop and have entitlements for a new satellite casino and travel plaza to be built on approximately 23 acres at a different location on the property’s 490 acres of available land. We continue to evaluate other opportunities to develop, sell or otherwise monetize our remaining excess acres of available land. We are also currently evaluating a potential investment to refurbish the existing casino-hotel;


•

We are building a 32-guestroom hotel adjoining our principal casino in Neuquén, Argentina. Our investment is expected to be approximately US$13 million and is being funded through the property’s existing cash balances and operating cash flows; and


•

We intend to continue to maintain our current properties in good condition and estimate that this will require maintenance capital spending of approximately $35 million per year.



In January 2007, we consummated the public offering of 11.5 million newly issued common shares (including over-allotment shares) at $32.00 per share, resulting in net proceeds to us of approximately $353 million after underwriters’ fees and expenses, which funds are for general corporate purposes and to fund one or more of our capital projects.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, the unaudited Condensed Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.
Overview and Summary
Pinnacle Entertainment, Inc. is a developer, owner and operator of casinos and related hospitality and entertainment facilities. We currently operate six domestic casino destinations, including Lumière Place in downtown St. Louis, where we began the complex’s phased opening with the casino and several restaurants in mid-December 2007, followed by the opening of the two hotels and other amenities in early 2008. Internationally, we operate several small casinos in Argentina and one in The Bahamas. We plan to close our casino in The Bahamas in early 2009.
Our long-term strategy is to build or acquire new resorts that are expected to produce favorable returns above our cost of capital; to maintain and improve each of our existing casinos; and to develop the systems to tie all of our casinos together into a national gaming network. Hence, we are developing new, high-quality gaming properties in attractive gaming markets; we are maintaining and improving our existing properties with disciplined capital expenditures; we are developing a customer-loyalty program designed to motivate customers to continue to patronize our casinos; and we may make strategic acquisitions at reasonable valuations, when and if available. We continue to make progress toward achieving our long-term strategy.
We have a number of projects at various stages of development. In south St. Louis County, Missouri, we have begun construction of our River City casino, which we expect to open in early 2010. In Lake Charles, Louisiana, we plan to build the Sugarcane Bay casino-hotel adjacent to L’Auberge du Lac. In East Baton Rouge Parish, Louisiana, we received voter approval in February 2008 permitting construction of a proposed casino-hotel complex on land that we own. We own well-located casino sites in Atlantic City, New Jersey and Central City, Colorado.

Comparison of the Three and Nine Months Ended September 30, 2008 and 2007
Operating Results Revenues from continuing operations for the three and nine months ended September 30, 2008 were $263 million and $786 million, respectively, compared to $238 million and $703 million in the same 2007 periods, primarily reflecting the benefit of the December 2007 opening of the Lumière Place Casino and a 252-guestroom addition at L’Auberge du Lac, partially offset by the third quarter hurricanes, heightened competition in central and southern Indiana, and the mid-2007 closure of the truck stop at our Boomtown Reno property. Revenue attributable to properties open for a year or more decreased by $20.1 million (or 8.5%) and $41.1 million (or 5.9%) for the three and nine months ended September 30, 2008, respectively, primarily due to the two hurricanes in the most recent quarter. Hurricanes Gustav and Ike, which struck during two key weekends, affected our Louisiana operations and our Texas customer base. Hurricane Ike also caused flooding in St. Louis necessitating the temporary closure of The Admiral Riverboat Casino and caused a power outage over the course of two days at Belterra. Gaming revenues increased by $13.2 million and $64.7 million for the three and nine months ended September 30, 2008 compared to the same periods last year primarily due to incremental revenues associated with the opening of the Lumière Place Casino. Food and beverage revenue increased by $4.6 million and $12.3 million for the three and nine months ended September 30, 2008, respectively, compared to the same periods in 2007 due to the new hotels and other amenities at Lumière Place-St. Louis. Hotel and recreational vehicle park revenues increased by $5.7 million and $8.8 million for the three and nine months ended September 30, 2008, respectively, compared to the same periods in 2007 due to the hotel expansion at L’Auberge du Lac and the opening of the Four Seasons Hotel St. Louis and HoteLumière. Truck stop/service station revenue, which includes a service station and the previously operated truck stop in Reno, increased by $994,000 in the 2008 quarterly period primarily due to increased fuel sale prices, and decreased by $4.7 million for the nine months ended September 30, 2008, due to the aforementioned closure of the truck stop. Other income, comprised primarily of retail, arcade and showroom revenue, increased by $766,000 and $2.1 million for the three and nine months ended September 30, 2008 from the same periods in 2007, primarily due to the opening of Lumière Place-St. Louis.
Each property’s contribution to these results was as follows:
At L’Auberge du Lac , revenues for the three and nine months ended September 30, 2008 were $81.8 million and $253 million, respectively, compared to $84.5 million and $244 million in the same 2007 periods. Adjusted EBITDA was $18.6 million and $59.9 million for the three and nine months ended September 30, 2008, respectively, compared to $21.8 million and $59.4 million in the same 2007 periods. Reflecting the benefits of the guestroom expansion in late 2007, results for the property in July and August 2008 were very strong, including record gaming revenues for the month of July. Such improvement over prior-year results was interrupted by Hurricane Gustav over the Labor Day weekend and Hurricane Ike over a historically profitable mid-September Asian holiday weekend. The casino was closed for nine days during the quarter, which we estimate affected net revenues by approximately $9 million. In addition, the property incurred approximately $780,000 of physical damage, which is below the deductible limits for our insurance. Therefore, such repairs were expensed in the quarter. Post-hurricane trends at the property suggest that it is returning to the business levels seen in earlier quarters.
Revenues for Boomtown New Orleans were $37.4 million and $119 million for the three and nine months ended September 30, 2008, respectively, compared to $40.3 million and $123 million in the same 2007 periods. Adjusted EBITDA was $11.3 million and $40.3 million for the three and nine months ended September 30, 2008, respectively, compared to $13.4 million and $42.4 million in the same 2007 periods. Results at this West Bank property had been relatively stable for several quarters. Management attributes most of the declines in revenues and Adjusted EBITDA to the temporary closure and other hurricane disruptions. Post-hurricane trends at Boomtown New Orleans suggest that the major source of the property’s revenues—the slot machines—have returned to levels seen immediately prior to Hurricane Gustav, while the table games business seems to be recovering a bit more slowly. Slot machines accounted for more than 80% of Boomtown New Orleans’ total revenues for the three and nine months ended September 30, 2008. Management estimates that the two hurricanes negatively affected Boomtown New Orleans’ net revenues by approximately $2.7 million in the quarter.
At Belterra Casino Resort , revenues were $43.9 million and $130 million for the three and nine months ended September 30, 2008, respectively, compared to $46.9 million and $136 million for the same 2007 periods. Adjusted EBITDA was $8.5 million and $23.7 million for the three and nine months ended September 30, 2008, respectively, compared to $10.5 million and $31.5 million for the same 2007 periods. The reduction in Adjusted EBITDA in the current quarter compared to the prior-year period is primarily due to increased marketing activities in this competitive market. In June 2008, each of two racetracks in the Indianapolis area began operating approximately 2,000 slot machines. Another competitor also heavily marketed its refurbished and rebranded facility. To address this new competition, Belterra increased its marketing efforts relative to prior years.

Revenues for Boomtown Bossier City for the three and nine months ended September 30, 2008 were $22.5 million and $68.2 million, respectively, compared to $22.6 million and $69.3 million in the same 2007 periods. Adjusted EBITDA was $4.5 million and $13.2 million for the three and nine months ended September 30, 2008, respectively, compared to $4.4 million and $14.4 million for the same 2007 periods. This was achieved despite the regional disruption of the hurricanes, which resulted in very heavy rainfall in northwest Louisiana on two key weekends. In October 2008, a large Native American casino on the Oklahoma/Texas border opened portions of a casino expansion, and is expected to open the remainder of its expansion by the end of 2008. Such casino competes with the Shreveport/Bossier City casinos for the Dallas/Fort Worth market.
For the three and nine months ended September 30, 2008, revenues at Lumière Place-St. Louis were $50.9 million and $147 million, respectively, which results include Lumière Place Casino, the Pinnacle-owned Four Seasons Hotel St. Louis, HoteLumière (the renovated former Embassy Suites Hotel) and The Admiral Riverboat Casino. Overall performance measures at the segment continue to improve. Consistent with the ramp-up of operations at almost all new casino hotels, Lumière Place has incurred higher marketing costs and payroll during 2008 than is anticipated in future periods. Hotel occupancy at the Four Seasons Hotel St. Louis improved to 54% for the third quarter versus 42% in the second quarter. Hotel occupancy at HoteLumière was 89% for the 2008 third quarter versus 82% in the second quarter. The Lumière Place Casino itself has been consistently profitable on a property level Adjusted EBITDA basis since January, with profits increasing sequentially in most months since opening. This, however, has been offset by growing losses at The Admiral Riverboat Casino caused by periodic closures due to flooding and augmented competition. We are evaluating the feasibility, subject to gaming commission and other regulatory approvals, of relocating The Admiral Riverboat Casino to another location within the city of St. Louis. For the quarter ended September 30, 2007, which results primarily included only The Admiral Riverboat Casino, revenues were $15.1 million and Adjusted EBITDA was $1.5 million.
On November 4, 2008, Missouri voters approved Proposition A, the Schools First Initiative, a ballot referendum designed to protect economic benefits and thousands of jobs created by Missouri casinos, as well as to increase funding for Missouri schools by more than $100 million in new net revenue each year. Proposition A allows for the removal of certain betting restrictions, places a limit on the number of gaming licenses available in the state and increases the tax on casino revenues from 20 percent to 21 percent. We believe the approval will be beneficial, as it will allow Lumière Place-St. Louis to expand its marketing from a local customers’ complex to a regional entertainment destination. Proposition A became effective on November 7, 2008.
Revenues at Boomtown Reno were $14.9 million and $37.1 million for the three and nine months ended September 30, 2008, respectively. Boomtown Reno had Adjusted EBITDA of $505,000 for three months ended September 30, 2008 and an Adjusted EBITDA loss of $2.9 million for the nine months ended September 30, 2008. For the three and nine months ended September 30, 2007, revenues were $17.3 million and $53.5 million, respectively, while Adjusted EBITDA was $2.1 million and $4.6 million for the same 2007 periods. Such declines represent increased competition in California and a decline in general economic conditions, reflected in a decrease in traffic on the major interstate alongside Boomtown Reno.
The International segment includes several small casinos in Argentina. We have reclassified The Casino at Emerald Bay as discontinued operations and the property’s revenues and Adjusted EBITDA have been excluded from the International segment. Revenues for the third quarter of 2008 rose to $11.4 million from $10.8 million in the same quarter of the prior year due to a higher slot win at our Casino Magic property in Neuquén, Argentina. For the nine months ended September 30, 2008 and 2007, revenues were $30.5 million and $27.9 million, respectively. For the three months ended September 30, 2008 and 2007, Adjusted EBITDA was at $3.8 million and $4.4 million, respectively, reflecting inflation of certain cost factors and the impact of a smoking ban imposed within the city of Neuquén, Argentina effective November 15, 2007. Our principal competitor in this market is in a neighboring province, where a similar smoking ban is being imposed effective November 3, 2008. For the nine months ended September 30, 2008 and 2007, Adjusted EBITDA was $9.6 million and $10.3 million, respectively.
In June 2008, the remaining 16 guestrooms of the 32-guestroom hotel that adjoins the principal casino in Neuquén, Argentina were opened. Under terms of our concession agreement with the Province of Neuquén, our exclusivity rights in the Province of Neuquén are to be extended from 2016 to 2021 with the completion of such luxury hotel. We are awaiting the formal government approval of such extension.

Corporate Expenses for the three months ended September 30, 2008 and 2007, were $8.9 million and $11.1 million, respectively, while such expenses for the nine months ended September 30, 2008 and 2007, were $30.3 million and $31.1 million, respectively. Corporate expenses represent unallocated payroll, professional fees, rent, travel expenses and other general and administrative expenses not directly related to our casino and hotel operations. The decrease in corporate expenses reflects the recent benefit of cost cutting measures related to professional services and travel expenses, the impact of which was partially offset by increases in payroll related expenses and office rent associated with our expanded base of operations and centralization efforts.
Depreciation and Amortization Expense for the three and nine months ended September 30, 2008 was $29.7 million and $89.2 million, respectively, and $18.7 million and $57.9 million in the same 2007 periods. The increase is primarily attributed to the openings of Lumière Place-St. Louis and the expansion at L’Auberge du Lac.

CONF CALL

Chris Plant

Good morning everyone and thank, welcome to our third quarter 2008 earnings conference call. Earlier this morning we released our third quarter and year-to-date 2008 financial results. If you do not have a copy of the announcement and would like one sent to you please contact us at 702-784-7777 or investors@pnkmail.com.

In a few moments you will hear from and have an opportunity to ask questions of our chairman and CEO Dan Lee, CFO Steve Capp, and Chief Operating Officer Alain Uboldi. Now let me remind you that during the course of this conference call management may state beliefs and make projections or other forward-looking statements regarding the future events and future financial performance of the company.

We wish to caution you that such statements are just projections and expectations and that actual events and results may differ materially. I refer to you the safe harbor statement that’s included in today’s press release and to our annual report on foreign 10-K, quarterly reports on foreign 10-Q and to other press releases and documents filed with the SEC.

With that said I will turn the call over to our Chief Operating Officer, Alain Uboldi.

Alain Uboldi – Pinnacle Entertainment Inc.

Ladies and gentlemen good morning. The third quarter 2008 total revenue of $268 million, with consolidated, adjusted EBITDA $39.9 million compared with revenue of 238 million and an EBITDA $47 million in 2007.

The third quarter started very strongly. July was an excellent month as was August until the very end of the month when Hurricane Gustav forced us to close our properties in New Orleans and Lake Charles during the important Labor Day weekend.

Hurricane Ike came two weeks later forcing us to close L'Auberge for several days and also disrupting operation in New Orleans. Ike moved up the Mississippi and caused flooding in San Louis and power-related outage at Belterra.

The loss of revenue due to the weather events and the repairs incurred at the properties afterwards reduced EBITDA for the quarter by approximately 7.3 million. The result of the company was otherwise very encouraging given the other things happening in the U.S. economy.

At L'Auberge du Lac adjusted EBITDA was$ 21.8 million and the revenue was $81.9 million. We estimated a loss of revenue for the properties from the hurricanes was approximately $10 million. That equates to about an EBITDA of $5 million, which includes some repairs due to the damage of the hurricanes.

If it was not for the two hurricanes we believe L'Auberge income would have been at ninety in the quarter as it was in the second quarter. Results to date in October suggest that the properties are returning to the expected level of business prior to the two hurricanes.

Boomtown New Orleans, the revenue for the property was, an EBITDA of $11.2 million compared to $13.5 million in 2007. Again, we believe results would have been up except for the hurricanes.

Based on the preliminary October results our property has been performing extremely well considering the circumstances. In fact the slow business has returned to the same level as the level prior to the hurricanes and, the table game business is recovering as expected. The [Altera], as an increase in competition with introduction of slot machines at two racetracks in Indianapolis, which start in June 2008.

The Harris Horseshoe property in Louisville also was marketed heavily as refurbished and re-branded facility in recent periods. Our objective has been to preserve market share, which we did and we increased our marketing for it accordingly.

During the quarter the EBITDA was slightly affected by the passage of Hurricane Ike with very high wind as well as some problem for another weekend when we had a problem with the supply of water to the property. That decline was about $300,000. In Bossier the Shrimp Boat Bossier Casino competes with several large Native American casinos at the border with Texas and Oklahoma. One of them has opened a portion of the expansion already and the full opening for 6,000 machines will be complete by the end of 2008.

We have been able to maintain our revenue very close to 2007 and our EBITDA was slightly up at $4.5 million compared to $4.4 million in 2007. At Lumiere Place in Saint Louis we are making great progress even before passage of Proposition A on Tuesday.

The total revenue for Lumiere Place was $5.9 million in the quarter, which includes Lumiere Place Casino, Four Seasons Saint Louis Hotel, Hotel Lumiere and the Admiral Riverboat Casino.

The Lumiere Place Casino, Hotel Lumiere and Four Seasons showed significant improvement of revenue and bottom line during the third quarter. Hotel Lumiere, which had 89% occupancy for the quarter.

The Four Season had the large increased occupancy to 64% in September when July was only 49%. Lumiere Place stabilizes marketing costs and payroll after the usual push for both types of expenses common to any opening.

This improvement however, was somewhat offset by increasing loss of the President, which had to close for 22 days in the quarter due to flooding. I’ll let Dan address the President problem in greater detail in a minute.

Boomtown Reno, the increased competition for the Native American Casino in California and the California economy has impacted Reno market in general. Our property returned to profitability in somewhat EBITDA in the seasonally better quarter, although such profit was less than a year ago. On the international market the Casino at Emerald Bay in The Bahamas is now classified as discontinued operation for all periods and therefore is excluded from our international segment. It is scheduled to close just after New Year’s weekend.

In Argentina, the third quarter revenue was $11.4 million compared to $10.7 in 2007, while the EBITDA was 3.7 in 2008 compared to 4.4 in 2007. We have been hampered by a smoking ban since November 15, 2007 that did not apply to our principal competitor in the neighboring province.

Effective November 3, 2008 the adjoining province, Rio Negro would impose the same smoking ban as our province on Neuquen and therefore will ultimately help us compete with our nearby competitors. On that I would like Dan to take over.

Dan Lee

I will just reiterate a couple of things. I mean we operate a number of casinos in the gulf regions so Hurricanes are a bit of a fact of life for us. It seems like on average you get one a year or one every other year, nonetheless this year we had two which is unusual and the two both fell on weekends.

I mean one fell on Labor Day weekend and the second one fell on an Asian Holiday Weekend later in September and so I think the quarter had kind of unusually bad weather if you just kind of assumed we always get one Hurricane and there is a two-seventh's chance that it’s going to be on a weekend you can kind of see how all of a sudden you get two and they are both on weekends and that’s kind of a tough quarter.

A part from the Hurricanes it was actually a very good quarter and I think even with the Hurricanes relative to what we see elsewhere in the casino business we seem to be doing pretty well. Proposition A passed in Missouri. We always felt like the general population thought that the loss limits were a little bit silly.

The industry had tried for years to go through the legislature, could not quite get there. Usually part of the problem as I stated on earlier calls is the senate of Missouri has a tradition of not stopping filibusters and so all it really took was one senator to block a bill.


So we took the more expensive route of going directly to the people with a proposition and it passed quite handily. And now we’re working wit the gaming commission to implement it as quickly as possible.

Obviously it takes a new set of regulations. They’ve already published kind of a draft of it. My guess is it will be 30 to 60 days. We’re trying to deal with it before New Year’s Eve because it would be nice to pick up a New Year’s weekend. But we’ll see, but I think it’s somewhere in that timeframe.

There’s another aspect of it as well, part of our early polling in trying to draft Proposition A we discovered that they’re large parts of Missouri that are quite conservative and they really don’t want casinos in their neighborhoods and so we knew we would pick up some votes for Proposition A by putting a cap on the number of licenses.

We actually weren’t concerned about the competition we’ve got; we have lots of competition. We have no problem competing with the casinos we compete with. But we knew that having a cap in the number of licenses would help get some votes.

That in effect creates some value at the President Casino which we bought a couple of years ago. And the President has been loosing money kind of steadily all year and the losses actually have been increasing almost exponentially.

It’s had to close twice this year for flooding and each time it closed when it re-opened didn’t get back to the levels of business it had before. And, so, we’ve basically kept the casino open just because we didn’t want to loose the license especially with an initiative coming down the road that would cap the number of licenses.

So now the license has some value. We had previously assured the Mayor, Mayor Slay of Saint Louis that we would not seek to move that license out of the city and in fact the Proposition A legally restricts it.


The licenses have to stay within the city or county in which they are in. Now we have an option on a piece of land just to the north of the Chain of Rocks at the extreme north end of the city of Saint Louis and on the west bank of the Mississippi.

And, we intend to work with the city and ask the gaming commission for permission to move the President River boat up to that location. Now the President River boat is a very old boat. The hull was actually over a hundred years old now.

And it has a limited life, there is a point where you would have to re-hull the boat and that wouldn’t be economical to do so but we think there is a few more years left on that hull and we would like to move it up to the Chain of Rocks and see what sort of business we could generate.

The population density up there isn’t all that high but that is the major east west corridor of Interstate 70 and there is something in the neighborhood of 30,000 cars a day crossing the Chain of Rocks Bridge that are not commuters, that are just traveling.


The actual vehicle count is quite a bit higher than that. But if you take out people that might just be commuting across the river there seems to be about 30,000 cars a day that are traveling across the country or they’re driving from Indianapolis to Kansas City or something and that traffic today misses all the casinos in St. Louis.

It’s routed onto 279, I think the highway is called 370, and it goes north of the stuff at Maryland Heights and St. Charles and it’s well north of Lumiere Place and so we would like to move the President up there and see what’s sort of business there is and if there is decent business which there might be then we would contemplate building a more permanent structure to replace the President when the hull is no longer viable.

But what that facility would be, would depend on how much business we generate. So that’s kind of the game plan for the President and frankly just moving it would improve the results of the downtown complex because it’s loosing money and it looses half as much money as everything else earns.


So it, just moving it out of there would help the results pretty significantly. The rest of the property project in Lumiere Place is doing very well. The Four Seasons made money in September; the hotel Lumiere has made money steadily. The casinos had increase in profits virtually every month and of course we think Proposition A will only help even more.

We’re actually positioned to become the higher roller venue in the Midwest. There’s great air service into St. Louis. It’s centrally located. We’ve got a wonderful, two wonderful hotels, one is a Four Seasons the other is the hotel Lumiere. We’ve got beautiful casinos, great restaurants, and then in our neighborhood are great restaurants and museums.

And sporting events, there’s a sporting event almost one of two nights in downtown St. Louis whether it’s a baseball game, football game, or hockey game and so if a team is down from Chicago we’ve got the perfect excuse to invite somebody to come down and see a ball game and stay at the Four Seasons Hotel and you couldn't do that with a $500 lost limit, you had no hope of recouping what you had spent on somebody from Chicago when they hit the $500 loss limit.

In fact, it's pretty funny, on Monday night, I was walking through the casino with [Andrew Zarnet] and we were in the high roller part of the slot machines, and a customer comes up to me and says, "Do you work here?" and I said, "Yes, kind of," He said, "My slot machine stopped working, what do I do, I'm not from here, it just stopped."

And I looked at my watch and it was 9:58 and I said, "Believe it or not, if you wait two minutes, it'll start working again." He said, "What?", and I said, "Yes, you just have to wait two minutes, and I know it's really silly and stupid, and that's why I've got this button on, but let us get you a drink and we'll just stand here and it'll start working in two minutes, I promise." And that's what we've been dealing with for a year, and it's going to be great to get rid of it, so.

In River City, south of there, I just realized I jumped ahead of Steve, but we'll go back to Steve in a minute. In River City, steel work, is going up, you can see it on our website. The road is nearing completion. The contractor under the guaranteed maximum price contract tested to deliver back to us, I think in January 10, if I remember the date, no later than. It'll take us a little while to train the employees to get open, so it's probably at first quarter, 2010 opening. It's really starting to take shape now.

Now, we have an informal policy, of trying not to start serious construction on something unless we're reasonably certain of having the money to finish it. Seems like a pretty good policy when I look out my window and see Echelon with $500 million sitting over there baking in the sun. So, just to take you through some of the numbers, that's a $375 million project, about $25 million of that project budget is capitalized interest, or there's some screwy accounting dealing with the lease. We have a 99 year lease, and the rent doesn't begin until we open.

The accountants, for some reason, add up the 99 years without any discount factor, divided by 103, and we have to take the charge during construction, related to a 1% of the sum of all the future rent payments, so we are taking a charge now, even though we are not paying anything. And then when we actually open, we will have a smaller charge than what we actually pay. I happen to think it is totally absurd accounting.

But it's a little bit of that $375 that is a non cash item, so if you take out the non cash stuff, or capitalized interest, obviously, we're actually paying interest, but you either account for it as a project cost, or you account for it as a reduction in pre cash flow from operations. I've seen some analysts make the mistake of deducting it both places, and you shouldn't do that. But if you take off capitalized interest, and the lease stuff, there's about $350 of cash costs, we're in at about $100, so there's about $250 to go.

Our credit facility is $625. With Lehman gone, it shrinks to about $590. You know, Lehman was a small piece with credit facility, a piece, they were about $45 million, and about $10 of that was drawn, so we lost about $35 million. So it's $590, all of which is pretty irrelevant because we have a bond covenant that limits us to borrowing $350, so we could actually have about half our banks go bankrupt before it starts to really affect our liquidity, and so what we can borrow is $350, about $125 is drawn, there's about $125 million of letters of credit.

So we have about $200 million of availability today under the credit facility. Now, obviously we have to stay within the covenants and meet all, the other borrowing requirements, to be able to do that, and we plan and expect to do that. One of the things, and it was mentioned in the press release, is the credit facility had anticipated River City being opened by now, so some of the ratios start coming down, or have been coming down, and it gets a little closer than we'd like in the middle of next year. So we may seek to go change some of those covenants.

And we've talked with our banks, and don't see a problem in doing that. They will want to improve the pricing, because we pay LIBOR plus two, which is today what, 4.35 % or less than that, so, you know, frankly in this environment I'm astounded that we can borrow money at 4% so, I think we end up modifying the pricing a little bit but I do think we get that done. It's not completely clear that we need to, but I think that it would be prudent to do so, because we're all wondering what the hell the economy is going to do. Clearly, we're in a recession, but so far, or properties seem to doing ok, but I don't want to bank on that, so I think there's a pretty good chance we'll seek to modify some of those covenants, and the cost of the bank loan will jump to something like 6 or 7, or 8% instead of 4.

So that leaves $50 million, we've got some pretty good surplus cash today, and then we have some pretty good cash flow from our operations. The last construction bills wouldn't be paid until about 18 months from today. So we're in pretty good shape, building River City if you kind of factor all that through.

So, Sugarcane Bay, we're working on putting together the funding. It is a difficult market, but in our case, we have very little senior debt, in fact, at the opening of River City, I would expect about $300 million, maybe $325 to be drawn under the bank facility. That is our only senior indebtedness, and so it'd be roughly one and half times cash flow or something like that. Generally you can go to three or three and a half times cash flow in senior indebtedness, and that's really the key to financing Sugarcane Bay, and figuring out how to do that.

And the average term of our debt if somewhere around four and a half years. We have the bank line maturing December of 2010, and then our bonds are 2012, 2013, and 2015. The bonds maturing in 2012 and 2013 are both (callable) today if we chose to, although high yield market today would be ridiculously expensive to go refinance those, so we probably won't do that until we have to.

And the biggest bond deal matures in 2015, which is quite a ways out. And then Baton Rouge, we're continuing to design it, and it's a ways behind Sugarcane Bay. We still have to work out zoning approvals, and a development agreement with the city. We intentionally waited a little bit to get past the election because we figured if we started negotiating with the prior city council we'd just end up negotiating with the new one anyway. The mayor, who is very popular in Baton Rouge, won reelection handily, and he's a big fan of our project, and we think we'll get all that resolved, but Baton Rouge is a ways off.

Atlantic City, I think even if we could get the money today, we would put it on hold just watching what's going on in the environmental. And in the environment, in Maryland, legalizing slots, frankly the step in Philadelphia had a bigger impact on Atlantic City than we thought. There's two more casinos coming in, in Philadelphia, then you've got Bat Works in eastern Pennsylvania coming, a pretty big place. Now there's going to be slots at Aqueduct in New York State, and then Atlantic City puts out a request for proposals at Bader Field and I think over a year ago, we indicated that if they did that it would be problem for us. They did it. It's a problem for us.

So, we are just going to sit in Atlantic City. We own a great wonderful piece of land that Caesar sat on for 30 years, so we've sat on it two years, so I guess we're just starting. So, we'll just sit, and there'll be some ongoing costs, principally for real estate taxes, which are about $5 million a year, and there's one leased piece that has four years to go at $2 million a year.

But you'll see the Atlantic City spend rate came down in this quarter and will come down pretty dramatically in the next couple of quarters, as we kind of moth ball the project until we see what happens. And it might be that somebody buys Bader Field and builds a casino, and we'll wait and see, and when it gets open, we'll see if the casinos on the Boardwalk are still in business, and reevaluate, and so we may be sitting there for a very long period of time.

Let me turn it over to Steve to kind of address capitalization, to the extent I didn't already. Sorry, Steve. And then we'll take questions and answers.

Steve Capp

All well said, and in addition to that, I'll just maybe point out a couple of obvious things on the income statement. It's obviously it's reflective as was Q2 of this year, of substantial increase in revenues, while we a wait the significant turn to profitability at Lumiere Place. Obviously it has now turned that corner of profitability and we're very appreciative of that.

Depreciation is up about $10 million in the quarter, obviously attributed the vast majority to Lumiere Place and to a lesser extent, the [Lavarious Tower] which is in service for the first year. Pre opening and development is dominated as outlined in the table by $6 million for Prop A in Missouri which we now look back and think was money very well spent, and $4 million for AC as Dan just outlined a bit.

Did have some [discop] activity, as we shut down, or intend to resume operations in the near term and our tax rate is as normal – a little bit disjointed, but it's about 53% attributable – there are a lot of moving parts in that from some of the typical items that we site from quarter to quarter, namely non-deductibility for income tax return purposes of certain expenses including lobbying costs, of which we have had some in recent periods because of the activities down at Sugarcane Bay for the referendum and to move the license, the lobbying for Proposition A, and as well at Baton Rouge in prior quarters.

So that continues to be in the numbers. We also have in the State of Indiana, once again the non-deductibility of gaming revenue taxes for state income tax purposes, which becomes their permanent item for income tax return purposes and hurts us. And then some Argentina tax payments as well that we're currently working to get a foreign tax credit for.

Actually the largest item is actually a FIN 48 valuation adjustment, which sent our effective tax rate to 53% for the quarter. Call me back if you want more exciting details on the tax provision later. And in interest, total interest spent for the quarter, about $19.6 million versus – about $20 million in the quarter versus about $18 million in the prior. And then CapEx – CapEx at the River City, which is probably the biggest question anybody had was about $13, a little north of $13 million for the quarter.

And Dan kind of went through what's left in the budget there versus liquidity and we're in pretty good shape there. That CapEx as it lays forward is about – we expect about $20 million in Q4 at River City and the balance through Q1 of 2010 as we would anticipate opening that facility at about that time, perhaps earlier if possible.

The total of CapEx in the quarter was 64 and want much more detail in the queue on that. Then from a balance sheet perspective, I think Dan covered it. We got $125 million of cash. We do use about $60 or $65 of that in operations. The balance of that is really off to the side, rainy day money if you will and we choose to endure the carry cost of that in this very unpredictable credit environment and make sure that we have liquidity for the business at all times, even though that's a little bit expensive at the moment.

We have $125 drawn under the bank deal, about $22 million fees. If you round those numbers you get to about a buck fifty of total utilization. That leaves us 200 of the 350 we were able to draw and so at the end of the day, liquidity, present liquidity, is pretty good. We're pretty pleased to be in the shape that we're in.

That's all I have.

Dan Lee

I've got just a few other wrap-ups and then get to questions. We didn't mention much on Argentina. We recognize our casinos in Argentina are in the Province of Neuquen, which is more or less the New Mexico of Argentina. It's quite remote, it has a lot of energy, a lot of energy-driven business – oil companies, oil company workers, and so on – they're not tourists.

And so our results there are really quite stable in pesos and so what you'll see in dollars will depend on the exchange rate and that economy down there can be pretty volatile sometimes, but the exchange rate has actually been remarkably stable even today. So it's actually been pretty stable.

But I mention that. It's a very nice place if anybody gets to Neuquen. Argentina. It's an 11-hour drive from Buenos Aires. At FIN 48, which Steve mentioned, our tax provision jumps all over the place. If anybody cares, you can try to figure it out. I certainly don't waste my time trying to figure it out.

We don't actually pay any taxes. We may actually get a little tax refund this year. We get big depreciation charges from building the new places. We didn't acquire any company in the recent past that would give us low tax basis relative to what we paid for it. And in particular, the expansion at L'Auberge was a non-gaming expansion of the hotel towers, swimming pools, and retail shops and that qualified for the accelerated depreciation under the go tax credits.

So we were allowed to take 50% of that $60 million project cost from the year it was put into service. So, we're pretty careful to try to shelter our taxes, drive the accountant's nuts trying to figure out how to account for it under FIN 48, but the real bottom line is we don't pay any taxes and haven't paid it in quite some time and don't anticipate paying it as far as we can see.

I don't really care what they do with the tax rate. If you can avoid paying any taxes, the tax rate can do what it wants. At Belterra, the other thing that I'd put out is everybody knows we have this big development pipeline, but it's all in bite size pieces, which is kind of nice because we can move things around as we need to.

And I'll just reference a number of things because we're going ahead with River City and we're trying to line up Sugarcane Bay and Baton Rouge, but at one point we we're going to build a third tower at Belterra, and when we saw the slot machines coming in Indianapolis, we said, hmm, maybe we shouldn't do that and we stopped it. It was all designed and ready to go and we stopped.

And with hindsight, those slot machines when into those race tracks in Indianapolis. I don't think either one of them make as much money as they'd hoped to make, but they've certainly impacted the other casinos in southern Indiana. With hindsight, it was the right thing to do. We had plans at one time to build a non-casino hotel in New Orleans. We still have those architectural drawings around somewhere, but in the current credit markets, that doesn't rise to the expected return that you'd need, given the cost of capital these days.

In Kansas City, I think we were – I'm a little biased on this, but I think we were likely to win that contest. I think we had the best proposal and the best design. We had an option on the best land. We had the best experience and like three days before they made this selection, we looked around and said, holy cow, we don't want to be committed to build a $625 million place if the financial markets are this turbulent.

And frankly, we pulled out and then the financial markets got even more turbulent. So we looked very prescient, but we were concerned about it and I think we did the right thing by pulling back. Similarly with Atlantic City, we recognize that this isn't an environment to go dream big for something in Atlantic City, and there doesn't seem to be anything there encouraging us to do so and so we'll sit on the land.

Obviously if somebody made us a decent offer for the land, we would consider it. We also own a piece of land we bought some time ago in Central City, Colorado. We have no current plans to build on it, but it was literally the best undeveloped casino site in the State of Colorado and we happened to get there the day after somebody had put up a for sale sign on it and we spun around and bought it for not all that much money.

So the changes that were approved by voters just two days ago in Colorado are a plus for us, even though we have no current plans to develop that land. And in fact, there's an adjoining piece of land that we have the rights to buy, but it's been tied up in litigation for literally, decades. But as long as that litigation is out there, we can sit quietly and just see how it gets resolved.

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