EX-99.2 4 c03036exv99w2.htm EXHIBIT 99.2 Exhibit 99.2
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR PINNACLE ENTERTAINMENT, INC.
On June 30, 2010, Pinnacle Entertainment, Inc. (the “Company”) completed the sale of the Company’s Argentine businesses for approximately $40 million in cash. The sale was completed pursuant to a Sale and Purchase Agreement dated April 29, 2010, between Casino Magic Corp. and Casino Magic Management Services Corp. (collectively, the “Sellers”) and Casino Club S.A., Da Silvano S.A., Compañía Gerenciadora de Inversiones S.A. and Correon S.A. (collectively, the “Buyers”). Pursuant to the terms of the Agreement, the Buyers agreed to purchase from the Sellers all of the outstanding shares of Casino Magic Neuquén S.A. for a total purchase price of approximately $40 million. The Sellers are the sole shareholders of Casino Magic Neuquén S.A. and are wholly-owned subsidiaries of the Company. Casino Magic Neuquén S.A. operates the Company’s Argentine businesses. In the unaudited pro forma condensed consolidated financial information below, we refer to these assets as the “Argentine business”.
The unaudited pro forma condensed consolidated financial information shown below is based on historical consolidated financial statements of the Company. The unaudited pro forma financial information presented reflects the estimated pro forma effect of the disposition on the Company. The unaudited pro forma condensed consolidated financial information as follows:
  •   An unaudited pro forma condensed consolidated balance sheet as of March 31, 2010, giving effect to the disposition as if it occurred as of March 31, 2010;
 
  •   An unaudited pro forma consolidated statement of operations for the year ended December 31, 2009 and three months ended March 31, 2010 giving effect to the disposition as if it occurred on January 1, 2009; and
 
  •   Notes to unaudited pro forma condensed consolidated financial statements
The unaudited pro forma condensed consolidated financial statements include specific assumptions and adjustments related to the disposition. These pro forma adjustments have been made to illustrate the anticipated financial effect of the disposition on the Company. The adjustments are based upon available information and assumptions that the Company believes are reasonable as of the date of this filing. However, actual adjustments may differ materially from the information presented. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial statements. The pro forma financial statements, including notes thereto, should be read in conjunction with the historical financial statements of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 (the “Form 10-K”), Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010 and Current Report on Form 8-K filed on June 21, 2010, which was filed to update the historical financial statements included in the Company’s Form 10-K to reflect its Casino Magic Argentina operations and Atlantic City operations and related assets as held for sale for the year ended December 31, 2009 and the results of those operations as discontinued operations for all periods presented.
The unaudited pro forma condensed consolidated financial information presented herein is for informational purposes only. It is not intended to represent or be indicative of the consolidated results of operations or financial position that would have been reported had the disposition been completed as of the dates presented. The information is not representative of future results of operations or financial position.

 

 

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
                         
    March 31, 2010  
            Business     Pro Forma  
    As Reported     Disposition     Adjusted  
    (in thousands, except share data)  
ASSETS
                        
Current Assets:
                        
Cash and cash equivalents
   $ 133,925     $ 40,000     $ 173,925  
Accounts receivable
     12,259       —       12,259  
Inventories
     6,899       —       6,899  
Prepaid expenses and other assets
     12,018       —       12,018  
Assets of discontinued operations held for sale
     94,342       (22,154 )     72,188  
 
                  
Total current assets
     259,443       17,846       277,289  
 
                  
Restricted cash
     6,612       —       6,612  
Land, buildings, riverboats and equipment, net
     1,506,814       —       1,506,814  
Assets held for sale
     79       —       79  
Goodwill
     16,742       —       16,742  
Intangible assets, net
     30,017       —       30,017  
Other assets, net
     32,262       —       32,262  
Deferred income taxes
     3,377       —       3,377  
 
                  
 
   $ 1,855,346     $ 17,846     $ 1,873,192  
 
                  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
Current Liabilities:
                        
Accounts payable
   $ 32,132     $ —     $ 32,132  
Accrued legal fees
     —       2,500       2,500  
Accrued interest
     15,816       —       15,816  
Accrued compensation
     40,656       —       40,656  
Accrued taxes
     14,828       —       14,828  
Other accrued liabilities
     51,264       —       51,264  
Deferred income taxes
     1,274       —       1,274  
Current income taxes payable
     —       1,111       1,111  
Current portion of long-term debt
     81       —       81  
Liabilities of discontinued operations held for sale
     16,019       (5,190 )     10,829  
 
                  
Total current liabilities
     172,070       (1,579 )     170,491  
 
                  
Long-term debt less current portion
     1,106,554       —       1,106,554  
Other long-term liabilities
     43,091       —       43,091  
Commitments and contingencies
                        
Stockholders’ Equity
                        
Common stock—$0.10 par value, 60,079,686 shares outstanding, net of treasury shares
     6,222       —       6,222  
Additional paid-in capital
     1,016,859       —       1,016,859  
Accumulated deficit
     (451,636 )     2,064       (449,572 )
Accumulated other comprehensive loss
     (17,724 )     17,361       (363 )
Treasury stock, at cost,2,008,986 of treasury shares
     (20,090 )     —       (20,090 )
 
                  
Total stockholders’ equity
     533,631       19,425       553,056  
 
                  
 
   $ 1,855,346     $ 17,846     $ 1,873,192  
 
                  

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                         
    For the year ended December 31, 2009  
    As Reported     Business
Disposition		     Pro Forma
Adjusted		  
    (in thousands, except per share data)  
Revenues:
                        
Gaming
   $ 876,197     $ —     $ 876,197  
Food and beverage
     58,697       —       58,697  
Lodging
     36,846       —       36,846  
Retail, entertainment and other
     35,938       —       35,938  
 
                  
 
     1,007,678       —       1,007,678  
 
                  
Expenses and other costs:
                        
Gaming
     530,386       —       530,386  
Food and beverage
     57,647       —       57,647  
Lodging
     23,365       —       23,365  
Retail, entertainment and other
     21,250       —       21,250  
General and administrative
     230,939       —       230,939  
Depreciation and amortization
     102,391       —       102,391  
Pre-opening and development costs
     16,607       —       16,607  
Impairment of indefinite-lived intangible assets
     1,850       —       1,850  
Impairment of land and development costs
     28,409       —       28,409  
Impairment of buildings, riverboats and equipment
     16,492       —       16,492  
Write-downs, reserves and recoveries, net
     1,708       —       1,708  
 
                  
 
     1,031,044       —       1,031,044  
 
                  
Operating loss
     (23,366 )     —       (23,366 )
Other non-operating income
     179       —       179  
Interest expense, net of capitalized interest
     (70,239 )     —       (70,239 )
Gain on sale of equity securities
     12,914       —       12,914  
Gain on sale of discontinued operation
     —       2,515       2,515  
Loss on early extinguishment of debt
     (9,467 )     —       (9,467 )
 
                  
Income (loss) from continuing operations before income taxes
     (89,979 )     2,515       (87,464 )
Income tax benefit (expense)
     558       (880 )     (322 )
 
                  
Income (loss) from continuing operations
     (89,421 )     1,635       (87,786 )
Loss from discontinued operations, net of income taxes
     (168,881 )     (2,730 )     (171,611 )
 
                  
Net loss
   $ (258,302 )   $ (1,095 )   $ (259,397 )
 
                  
Net income (loss) per common share—basic
                        
Income (loss) from continuing operations
   $ (1.49 )   $ 0.03     $ (1.46 )
Loss from discontinued operations, net of income taxes
     (2.81 )     (0.05 )     (2.86 )
 
                  
Net income (loss) per common share—basic
   $ (4.30 )   $ (0.02 )   $ (4.32 )
 
                  
Net income (loss) per common share—diluted
                        
Income (loss) from continuing operations
   $ (1.49 )   $ 0.03     $ (1.46 )
Loss from discontinued operations, net of income taxes
     (2.81 )     (0.05 )     (2.86 )
 
                  
Net income (loss) per common share—diluted
   $ (4.30 )   $ (0.02 )   $ (4.32 )
 
                  
Number of shares—basic
     60,056       60,056       60,056  
Number of shares—diluted
     60,056       60,056       60,056  

 

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                         
    For the three months ended March 31, 2010  
    As Reported     Business
Disposition		     Pro Forma
Adjusted		  
    (in thousands, except per share data)  
Revenues:
                        
Gaming
   $ 235,485     $ —     $ 235,485  
Food and beverage
     15,367       —       15,367  
Lodging
     8,398       —       8,398  
Retail, entertainment and other
     8,176       —       8,176  
 
                  
 
     267,426       —       267,426  
 
                  
Expenses and other costs:
                        
Gaming
     133,058       —       133,058  
Food and beverage
     15,909       —       15,909  
Lodging
     5,198       —       5,198  
Retail, entertainment and other
     4,568       —       4,568  
General and administrative
     56,812       —       56,812  
Depreciation and amortization
     26,080       —       26,080  
Pre-opening and development costs
     8,884       —       8,884  
Write-downs, reserves and recoveries, net
     (3,068 )     —       (3,068 )
 
                  
 
     247,441       —       247,441  
 
                  
Operating income
     19,985       —       19,985  
Other non-operating income
     27       —       27  
Interest expense, net of capitalized interest
     (20,952 )     —       (20,952 )
Loss on early extinguishment of debt
     (1,418 )     —       (1,418 )
 
                  
Loss from continuing operations before income taxes
     (2,358 )     —       (2,358 )
Income tax benefit
     207       —       207  
 
                  
Loss from continuing operations
     (2,151 )     —       (2,151 )
Income (loss) from discontinued operations, net of income taxes
     38,894       (630 )     38,264  
 
                  
Net income (loss)
   $ 36,743     $ (630 )   $ 36,113  
 
                  
Net income (loss) per common share—basic
                        
Loss from continuing operations
   $ (0.04 )   $ —     $ (0.04 )
Income (loss) from discontinued operations, net of income taxes
     0.65       (0.01 )     0.64  
 
                  
Net income (loss) per common share—basic
   $ 0.61     $ (0.01 )   $ 0.60  
 
                  
Net income (loss) per common share—diluted
                        
Loss from continuing operations
   $ (0.04 )   $ —     $ (0.04 )
Income (loss) from discontinued operations, net of income taxes
     0.64       (0.01 )     0.63  
 
                  
Net income (loss) per common share—diluted
   $ 0.60     $ (0.01 )   $ 0.59  
 
                  
Number of shares—basic
     60,107       60,107       60,107  
Number of shares—diluted
     60,936       60,936       60,936  

 

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Pinnacle Entertainment, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1—Basis of Presentation
The unaudited pro forma financial information of Pinnacle Entertainment, Inc. (the “Company”) is presented to illustrate the effect of the Company’s June 30, 2010 sale of the Company’s Argentine business on its historical financial position and operating results. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2010 is based on the historical statements of the Company as of March 31, 2010 after giving effect to the transaction as if it had occurred as of March 31, 2010. The unaudited pro forma condensed consolidated statement of operations for the fiscal year ended December 31, 2009 and March 31, 2010 is based on the historical financial statement of the Company after giving effect to the transaction as if it had occurred on January 1, 2009. The unaudited pro forma financial information should be read in conjunction with the Company’s historical consolidated financial statements and notes thereto contained in the Company’s 2009 Annual Report on Form 10-K filed on February 26, 2010 (the “Form 10-K”), Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010 filed on May 7, 2010 and Current Report on Form 8-K filed on June 21, 2010, which was filed to update the historical financial statements included in the Company’s Form 10-K to reflect its Casino Magic Argentina operations and Atlantic City operations and related assets as held for sale for the year ended December 31, 2009 and the results of those operations as discontinued operations for all periods presented.
The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations or the financial position of the Company would have been had the transactions occurred on the respective dates assumed, nor is it necessarily indicative of the Company’s future operating results or financial position. However, pro forma adjustments reflected in the accompanying unaudited pro forma condensed consolidated financial information reflect estimates and assumptions that the Company’s management believes to be reasonable.
Note 2—Pro Forma Adjustments
The unaudited pro forma condensed consolidated Balance Sheet at March 31, 2010 reflects the following adjustments:
  •   Reflects cash proceeds from sale of our casino-hotel facility in Argentina
  •   Reflects accrued legal fees related to sale of Argentine business
  •   Reflects elimination of current assets associated with Argentina facility
  •   Reflects elimination of current liability associated with Argentina facility
  •   Reflects recognition of accumulated foreign currency translation loss associated with Argentine business
  •   Reflects recognition of gain and related income tax expenses associated with the sale of Argentine business
The unaudited pro forma condensed consolidated Statement of Operations for the year ended December 31, 2009 reflects the following adjustments:
  •   Reflects recognition of gain and related income tax expenses associated with the sale of Argentine business
  •   Reflects elimination of revenues, operating expenses, interest expenses, and related income taxes of the Argentine business
The unaudited pro forma condensed consolidated Statement of Operations for the three months ended March 31, 2010, reflects the following adjustments:
  •   Reflects elimination of revenues, operating expenses, interest expenses, and related income taxes of the Argentine business

 

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