UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information presents the unaudited pro forma condensed consolidated balance sheet as of June 30, 2018 and unaudited pro forma condensed consolidated statements of operations as of and for the six months ended June 30, 2018, and for the year ended December 31, 2017 based upon the consolidated historical financial statements of Pinnacle Entertainment, Inc. and its subsidiaries on a consolidated basis, which are collectively referred to as “Pinnacle.”
The unaudited pro forma condensed consolidated balance sheet presents the financial position of Pinnacle as of June 30, 2018 after giving effect to the divestitures of Ameristar Casino Kansas City, LLC, d/b/a Ameristar Kansas City, Ameristar St. Charles, LLC, d/b/a Ameristar St. Charles, Belterra Resort Indiana, LLC, d/b/a Belterra Resort, and PNK (Ohio), LLC, d/b/a Belterra Park (the “Divested Properties”) (the “Divestitures”) as if the Divestitures occurred as of June 30, 2018. The Divested Properties were purchased by Boyd Gaming Corporation (“Boyd”) as part of the Pinnacle merger with Penn National Gaming, Inc. (“Penn National”). The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2018 and for the year ended December 31, 2017 give effect to the Divestitures as if the Divestitures occurred as of January 1, 2017.
The unaudited pro forma condensed consolidated financial information has been prepared based upon currently available information and assumptions deemed appropriate by Pinnacle’s management and is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Divestitures had been completed as of the dates set forth above, nor is it indicative of the future results or current financial conditions that may result from the Divestitures. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the separate historical financial statements and accompanying notes of Pinnacle.
PINNACLE ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
(amounts in thousands, except per share data)
|
| | | | | | | | | | | | | | | |
| | Pinnacle Entertainment, Inc. | | Less: Divested Properties (Note 2) | | Pro Forma Adjustments (Note 2) | | Pro Forma Pinnacle Entertainment, Inc. |
| Revenues: | | | | | | | |
| Gaming | $ | 2,286,881 |
| | $ | (589,282 | ) | | $ | — |
| | $ | 1,697,599 |
|
| Food and beverage | 133,082 |
| | (45,819 | ) | | — |
| | 87,263 |
|
| Lodging | 51,671 |
| | (14,674 | ) | | — |
| | 36,997 |
|
| Retail, entertainment and other | 90,214 |
| | (23,484 | ) | | — |
| | 66,730 |
|
| Total revenues | 2,561,848 |
| | (673,259 | ) | | — |
| | 1,888,589 |
|
| Expenses and other costs: | | | | | | | |
| Gaming | 1,243,187 |
| | (323,196 | ) | | — |
| | 919,991 |
|
| Food and beverage | 126,506 |
| | (40,947 | ) | | — |
| | 85,559 |
|
| Lodging | 25,430 |
| | (7,655 | ) | | — |
| | 17,775 |
|
| Retail, entertainment and other | 40,327 |
| | (10,630 | ) | | — |
| | 29,697 |
|
| General and administrative | 455,525 |
| | (100,767 | ) | | — |
| | 354,758 |
|
| Depreciation and amortization | 217,025 |
| | (73,094 | ) | | — |
| | 143,931 |
|
| Pre-opening, development and other costs | 9,478 |
| | — |
| | (6,855 | ) | | 2,623 |
|
| Write-downs, reserves and recoveries, net | 15,750 |
| | (2,290 | ) | | — |
| | 13,460 |
|
| Total expenses and other costs | 2,133,228 |
| | (558,579 | ) | | (6,855 | ) | | 1,567,794 |
|
| Operating income | 428,620 |
| | (114,680 | ) | | 6,855 |
| | 320,795 |
|
| Interest expense, net | (380,859 | ) | | 88,173 |
| | — |
| | (292,686 | ) |
| Loss on early extinguishment of debt | (516 | ) | | — |
| | — |
| | (516 | ) |
| Loss from equity method investment | (90 | ) | | — |
| | — |
| | (90 | ) |
| Income before income taxes | 47,155 |
| | (26,507 | ) | | 6,855 |
| | 27,503 |
|
| Income tax benefit | 14,603 |
| | (8,399 | ) | | — |
| | 6,204 |
|
| Net income | 61,758 |
| | (34,906 | ) | | 6,855 |
| | 33,707 |
|
| Less: net loss attributable to non-controlling interest | 1,346 |
| | — |
| | — |
| | 1,346 |
|
| Net income attributable to Pinnacle Entertainment, Inc. | $ | 63,104 |
| | $ | (34,906 | ) | | $ | 6,855 |
| | $ | 35,053 |
|
| Net income per common share: | | | | | | | |
| Basic | $ | 1.12 |
| | | | | | $ | 0.62 |
|
| Diluted | $ | 1.02 |
| | | | | | $ | 0.57 |
|
| Weighted average common shares outstanding: | | | | | | | |
| Basic | 56,518 |
| | | | | | 56,518 |
|
| Diluted | 61,911 |
| | | | | | 61,911 |
|
PINNACLE ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(amounts in thousands, except per share data)
|
| | | | | | | | | | | | | | | |
| | Pinnacle Entertainment, Inc. | | Less: Divested Properties (Note 2) | | Pro Forma Adjustments (Note 2) | | Pro Forma Pinnacle Entertainment, Inc. |
| Revenues: | | | | | | | |
| Gaming | $ | 1,005,166 |
| | $ | (260,682 | ) | | $ | — |
| | $ | 744,484 |
|
| Food and beverage | 142,088 |
| | (39,314 | ) | | — |
| | 102,774 |
|
| Lodging | 80,371 |
| | (20,875 | ) | | — |
| | 59,496 |
|
| Retail, entertainment and other | 48,404 |
| | (11,725 | ) | | — |
| | 36,679 |
|
| Total revenues | 1,276,029 |
| | (332,596 | ) | | — |
| | 943,433 |
|
| Expenses and other costs: | | | | | | | |
| Gaming | 524,718 |
| | (132,956 | ) | | — |
| | 391,762 |
|
| Food and beverage | 126,459 |
| | (37,041 | ) | | — |
| | 89,418 |
|
| Lodging | 29,797 |
| | (8,137 | ) | | — |
| | 21,660 |
|
| Retail, entertainment and other | 24,732 |
| | (6,613 | ) | | — |
| | 18,119 |
|
| General and administrative | 227,850 |
| | (51,549 | ) | | — |
| | 176,301 |
|
| Depreciation and amortization | 99,664 |
| | (35,947 | ) | | — |
| | 63,717 |
|
| Pre-opening, development and other costs | 2,525 |
| | — |
| | (2,397 | ) | | 128 |
|
| Write-downs, reserves and recoveries, net | 4,998 |
| | (1,185 | ) | | — |
| | 3,813 |
|
| Total expenses and other costs | 1,040,743 |
| | (273,428 | ) | | (2,397 | ) | | 764,918 |
|
| Operating income | 235,286 |
| | (59,168 | ) | | 2,397 |
| | 178,515 |
|
| Interest expense, net | (193,482 | ) | | 45,613 |
| | — |
| | (147,869 | ) |
| Loss from equity method investment | (89 | ) | | — |
| | — |
| | (89 | ) |
| Income before income taxes | 41,715 |
| | (13,555 | ) | | 2,397 |
| | 30,557 |
|
| Income tax benefit | 1,845 |
| | 851 |
| | — |
| | 2,696 |
|
| Net income | 43,560 |
| | (12,704 | ) | | 2,397 |
| | 33,253 |
|
| Less: net loss attributable to non-controlling interest | 280 |
| | — |
| | — |
| | 280 |
|
| Net income attributable to Pinnacle Entertainment, Inc. | $ | 43,840 |
| | $ | (12,704 | ) | | $ | 2,397 |
| | $ | 33,533 |
|
| Net income per common share: | | | | | | | |
| Basic | $ | 0.77 |
| | | | | | $ | 0.59 |
|
| Diluted | $ | 0.70 |
| | | | | | $ | 0.54 |
|
| Weighted average common shares outstanding: | | | | | | | |
| Basic | 57,225 |
| | | | | | 57,225 |
|
| Diluted | 62,255 |
| | | | | | 62,255 |
|
PINNACLE ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2018
(amounts in thousands)
|
| | | | | | | | | | | | | | | |
| | Pinnacle Entertainment, Inc. | | Less: Divested Properties (Note 2) | | Pro Forma Adjustments (Note 2) | | Pro Forma Pinnacle Entertainment, Inc. |
| ASSETS | | | | | | | |
| Current Assets: | | | | | | | |
| Cash and cash equivalents | $ | 148,558 |
| | $ | (42,415 | ) | | $ | 621,200 |
| | $ | 727,343 |
|
| Accounts receivable, net | 46,492 |
| | (9,067 | ) | | — |
| | 37,425 |
|
| Inventories | 10,644 |
| | (3,082 | ) | | — |
| | 7,562 |
|
| Prepaid expenses and other assets | 35,941 |
| | (7,952 | ) | | — |
| | 27,989 |
|
| Total current assets | 241,635 |
| | (62,516 | ) | | 621,200 |
| | 800,319 |
|
| Land, buildings, vessels and equipment, net | 2,567,506 |
| | (938,220 | ) | | — |
| | 1,629,286 |
|
| Goodwill | 610,889 |
| | (159,783 | ) | | — |
| | 451,106 |
|
| Other intangible assets, net | 380,351 |
| | (195,600 | ) | | — |
| | 184,751 |
|
| Deferred incomes taxes | 1,117 |
| | 4,098 |
| | — |
| | 5,215 |
|
| Other assets, net | 57,521 |
| | (123 | ) | | — |
| | 57,398 |
|
| Total assets | $ | 3,859,019 |
| | $ | (1,352,144 | ) | | $ | 621,200 |
| | $ | 3,128,075 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | |
| Current Liabilities: | | | | | | | |
| Accounts payable | $ | 55,182 |
| | $ | (14,269 | ) | | $ | — |
| | $ | 40,913 |
|
| Accrued interest | 6,482 |
| | — |
| | — |
| | 6,482 |
|
| Accrued compensation | 56,392 |
| | (11,464 | ) | | — |
| | 44,928 |
|
| Accrued taxes | 56,063 |
| | (14,108 | ) | | — |
| | 41,955 |
|
| Current portion of long-term financing obligation | 11,003 |
| | (2,931 | ) | | — |
| | 8,072 |
|
| Other accrued liabilities | 90,133 |
| | (18,810 | ) | | — |
| | 71,323 |
|
| Total current liabilities | 275,255 |
| | (61,582 | ) | | — |
| | 213,673 |
|
| Long-term debt less current portion | 749,221 |
| | — |
| | — |
| | 749,221 |
|
| Long-term financing obligation less current portion | 3,083,272 |
| | (821,217 | ) | | — |
| | 2,262,055 |
|
| Other long-term liabilities | 32,732 |
| | (208 | ) | | — |
| | 32,524 |
|
| Total liabilities | 4,140,480 |
| | (883,007 | ) | | — |
| | 3,257,473 |
|
| Total stockholders’ equity (deficit) | (281,461 | ) | | (469,137 | ) | | 621,200 |
| | (129,398 | ) |
| Total liabilities and stockholders’ equity (deficit) | $ | 3,859,019 |
| | $ | (1,352,144 | ) | | $ | 621,200 |
| | $ | 3,128,075 |
|
PINNACLE ENTERTAINMENT, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Note 1. Basis of Presentation
The historical financial information has been adjusted to give pro forma effect to events that are (i) directly attributable to the Divestitures, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed consolidated statements of income, expected to impact results. The pro forma adjustments have been prepared to illustrate the estimated effect of the Divestitures and certain other adjustments.
This information should be read in conjunction with Pinnacle’s historical financial statements and accompanying notes in its Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on March 1, 2018 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, as filed with the SEC on August 7, 2018. All pro forma adjustments and their underlying assumptions are described more fully in the notes to the unaudited pro forma condensed combined financial information.
Note 2. Divestitures
The Divested Properties were purchased by Boyd as part of the Pinnacle merger with Penn National. The unaudited financial condensed consolidated information reflects the effect of the Divestitures on assets, liabilities, revenues and expenses directly attributable to the Divested Properties and removes acquisition expenses related to the Divestitures. The aggregate purchase price for the Divestitures is approximately $621.2 million, subject to certain final adjustments.
