Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2014 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies |
Basis of Presentation and Organization. Pinnacle Entertainment, Inc. is an owner, operator and developer of casinos and related hospitality and entertainment facilities. References in these footnotes to “Pinnacle,” the “Company,” “we,” “our” or “us” refer to Pinnacle Entertainment, Inc. and its subsidiaries, except where stated or the context otherwise indicates. |
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We own and operate 15 gaming entertainment properties, located in Colorado, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, and Ohio. We also hold a majority interest in the racing license owner, and we are a party to a management contract, for Retama Park Racetrack located outside of San Antonio, Texas. In addition to these properties, we own and operate a live and televised poker tournament series under the trade name Heartland Poker Tour. We view each of our operating properties as an operating segment with the exception of our two properties in Jackpot, Nevada, which we view as one operating segment. For financial reporting purposes, we aggregate our operating segments into the following reportable segments: |
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Midwest segment, which includes: | Location | | | | | | | | | | | | | | | | | | |
Ameristar Council Bluffs | Council Bluffs, Iowa | | | | | | | | | | | | | | | | | | |
Ameristar East Chicago | East Chicago, Indiana | | | | | | | | | | | | | | | | | | |
Ameristar Kansas City | Kansas City, Missouri | | | | | | | | | | | | | | | | | | |
Ameristar St. Charles | St. Charles, Missouri | | | | | | | | | | | | | | | | | | |
River City | St. Louis, Missouri | | | | | | | | | | | | | | | | | | |
Belterra | Florence, Indiana | | | | | | | | | | | | | | | | | | |
Belterra Park | Cincinnati, Ohio | | | | | | | | | | | | | | | | | | |
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South segment, which includes: | Location | | | | | | | | | | | | | | | | | | |
Ameristar Vicksburg | Vicksburg, Mississippi | | | | | | | | | | | | | | | | | | |
Boomtown Bossier City | Bossier City, Louisiana | | | | | | | | | | | | | | | | | | |
Boomtown New Orleans | New Orleans, Louisiana | | | | | | | | | | | | | | | | | | |
L'Auberge Baton Rouge | Baton Rouge, Louisiana | | | | | | | | | | | | | | | | | | |
L'Auberge Lake Charles | Lake Charles, Louisiana | | | | | | | | | | | | | | | | | | |
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West segment, which includes: | Location | | | | | | | | | | | | | | | | | | |
Ameristar Black Hawk | Black Hawk, Colorado | | | | | | | | | | | | | | | | | | |
Cactus Petes and Horseshu | Jackpot, Nevada | | | | | | | | | | | | | | | | | | |
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We have classified certain of our assets and liabilities as held for sale in our Consolidated Balance Sheets and included the related results of operations in discontinued operations. The operating results of Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis, and related excess land parcels (collectively, the “Lumière Place Casino and Hotels”) have been reclassified as discontinued operations for all periods presented. In April 2014, we completed the sale of the ownership interests in the Lumière Place Casino and Hotels. For further information, see Note 8, “Discontinued Operations.” Our Consolidated Statements of Cash Flows have not been adjusted for discontinued operations. |
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In November 2014, we announced that our Board of Directors approved a plan to pursue a separation of our operating assets and real estate assets into two publicly traded companies. We intend to carry out the proposed separation of our real estate assets through the creation of a newly formed, publicly traded, real estate investment trust (“REIT” or “Prop Co”), the common stock of which would be distributed to Pinnacle stockholders in a tax-free spin-off (“REIT transaction”), with Pinnacle remaining an operating entity (“Op Co”) following the transaction. The completion of the REIT transaction is subject to the successful resolution of various contingencies, including, but not limited to, approval by the required gaming regulators, obtaining a private letter ruling from the U.S. Internal Revenue Service (“IRS”), and completion of financing transactions for both Prop Co and Op Co. |
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In November 2014, in connection with our plan to pursue a REIT transaction, our Board of Directors adopted a short-term REIT protection shareholder rights plan to prohibit ownership of 9.8% or more of its outstanding common stock in order to safeguard our ability to pursue a pro rata dividend in the proposed REIT transaction under Section 355 of the Internal Revenue Code of 1986. Under the shareholder rights plan, any person or group that acquires beneficial ownership of |
9.8% or more of Pinnacle common stock without Board approval would be subject to significant dilution. The rights will expire upon the earliest of (i) November 6, 2016, (ii) the first business day after the closing of the proposed Prop Co spin-off transaction, or (iii) the time at which the rights are redeemed or exchanged under the shareholder rights plan. |
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In December 2014, we filed a request for a private letter ruling with the IRS. The private letter ruling seeks guidance on various technical tax matters related to the proposed REIT transaction. We expect to complete the REIT transaction in 2016 with REIT election for corporate tax purposes occurring shortly thereafter. However, there can be no assurance that we will be able to complete the proposed REIT transaction in 2016 or at all. |
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Principles of Consolidation. The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States and the rules and regulations of the Securities and Exchange Commission (“SEC”). The results for the periods reflect all adjustments that management considers necessary for a fair presentation of operating results. The Consolidated Financial Statements include the accounts of Pinnacle Entertainment, Inc. and its subsidiaries. Investments in the common stock of unconsolidated affiliates in which we have the ability to exercise significant influence are accounted for under the equity method. All intercompany accounts and transactions have been eliminated in consolidation. |
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Use of Estimates. The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. Estimates used by us include, among other things, the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, estimated income tax provisions, the evaluation of the future realization of deferred tax assets, determining the adequacy of reserves for self-insured liabilities and our customer loyalty programs, estimated cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill and intangible assets, contingencies and litigation, and estimates of the forfeiture rate and expected life of share-based awards and stock price volatility when computing share-based compensation expense. Actual results may differ from those estimates. |
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Fair Value. Fair value measurements affect our accounting and impairment assessments of our long-lived assets, investments in unconsolidated affiliates, assets acquired in an acquisition, goodwill, and other intangible assets. Fair value measurements also affect our accounting for certain financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes: “Level 1” inputs, such as quoted prices in an active market for identical assets or liabilities; “Level 2” inputs, which are observable inputs for similar assets; or “Level 3” inputs, which are unobservable inputs. |
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The following table presents a summary of fair value measurements by level for certain liabilities measured at fair value on a recurring basis in the Consolidated Balance Sheets: |
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| | | Fair Value Measurements Using: | | | | |
| Total Fair Value | | Level 1 | | Level 2 | | Level 3 | | | | |
| (in millions) | | | | |
As of December 31, 2014 | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | |
Deferred compensation | $ | 0.6 | | | $ | 0.6 | | | $ | — | | | $ | — | | | | | |
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As of December 31, 2013 | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | |
Deferred compensation | $ | 0.8 | | | $ | 0.8 | | | $ | — | | | $ | — | | | | | |
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The following table presents a summary of fair value measurements by level for certain financial instruments not measured at fair value on a recurring basis in the Consolidated Balance Sheets for which it is practicable to estimate fair value: |
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| | | | | Fair Value Measurements Using: |
| Total Carrying Value | | Total Fair Value | | Level 1 | | Level 2 | | Level 3 |
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As of December 31, 2014 | | | | | | | | | |
Assets: | | | | | | | | | |
Held-to-maturity securities | $ | 14.8 | | | $ | 21.7 | | | $ | — | | | $ | 18.5 | | | $ | 3.2 | |
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Promissory notes | $ | 12 | | | $ | 16.8 | | | $ | — | | | $ | 16.8 | | | $ | — | |
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Liabilities: | | | | | | | | | |
Long-term debt | $ | 3,986.60 | | | $ | 4,029.90 | | | $ | — | | | $ | 4,029.90 | | | $ | — | |
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As of December 31, 2013 | | | | | | | | | |
Assets: | | | | | | | | | |
Held-to-maturity securities | $ | 14.8 | | | $ | 30.1 | | | $ | — | | | $ | 26.7 | | | $ | 3.4 | |
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Promissory notes | $ | 9.5 | | | $ | 16.5 | | | $ | — | | | $ | 16.5 | | | $ | — | |
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Liabilities: | | | | | | | | | |
Long-term debt | $ | 4,380.10 | | | $ | 4,511.90 | | | $ | — | | | $ | 4,511.90 | | | $ | — | |
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The estimated fair values for certain of our long-term held-to-maturity securities and our long-term promissory notes were based on Level 2 inputs using observable market data for comparable instruments in establishing prices. |
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The estimated fair values for certain of our long-term held-to-maturity securities were based on Level 3 inputs using a present value of future cash flow valuation technique that relies on management assumptions and qualitative observations. Key significant unobservable inputs in this technique include discount rate risk premiums and probability-weighted cash flow scenarios. |
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The estimated fair values of our long-term debt include the fair value of our senior notes, senior subordinated notes, senior secured credit facility and term loans were based on Level 2 inputs of observable market data on comparable debt instruments on or about December 31, 2014. |
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Cash and Cash Equivalents. Cash and cash equivalents totaled approximately $164.7 million and $191.9 million at December 31, 2014, and 2013, respectively. Cash equivalents are highly liquid investments with an original maturity of less than three months and are stated at the lower of cost or market value and are valued using Level 1 inputs. |
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Accounts Receivable. Accounts receivable consist primarily of casino, hotel and other receivables. We extend casino credit to approved customers in states where it is permitted following investigations of creditworthiness. Accounts receivable are non-interest bearing and are initially recorded at cost. We have estimated an allowance for doubtful accounts of $5.0 million and $5.2 million as of December 31, 2014, and 2013, respectively, to reduce receivables to their carrying amount, which approximates fair value. The allowance for doubtful accounts is estimated based upon, among other things, collection experience, customer credit evaluations and the age of the receivables. Bad debt expense totaled $2.4 million, $2.2 million, and $3.8 million, for the years ended December 31, 2014, 2013, and 2012, respectively. |
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Inventories. Inventories, which consist primarily of food, beverage and retail items, are stated at the lower of cost or market value. Costs are determined using the first-in, first-out and the weighted average methods. |
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Restricted Cash. Long-term restricted cash of $5.7 million and $11.6 million as of December 31, 2014, and 2013, respectively, consists primarily of indemnification trust deposits. |
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Land, Buildings, Vessels and Equipment. Land, buildings, vessels and equipment are stated at cost. Land includes land not currently being used in our operations that totaled $37.6 million and $39.2 million at December 31, 2014, and 2013, respectively. |
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| For the year ended December 31, | | | | | | | | |
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Depreciation expense | $ | 220.3 | | | $ | 139.1 | | | $ | 82.5 | | | | | | | | | |
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We capitalize the costs of improvements that extend the life of the asset. We expense maintenance and repairs costs as incurred. Gains or losses on the dispositions of land, buildings, vessels or equipment are included in the determination of income. We depreciate our land improvements, buildings, vessels and equipment using the straight-line method over the shorter of the estimated useful life of the asset or the related lease term, as follows: |
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Land improvements | 5 to 20 | | | | | | | | | | | | | | | | | | |
Buildings and improvements | 10 to 35 | | | | | | | | | | | | | | | | | | |
Vessels | 10 to 25 | | | | | | | | | | | | | | | | | | |
Furniture, fixtures and equipment | 3 to 20 | | | | | | | | | | | | | | | | | | |
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Development costs directly associated with the acquisition, development and construction of a project are capitalized as a cost of the project during the periods in which activities necessary to get the property ready for its intended use are in progress. The costs incurred for development projects are carried at cost. Interest costs associated with development projects are capitalized as part of the cost of the constructed asset. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using our weighted-average cost of borrowing. Capitalization of interest ceases when the project, or discernible portions of the project, is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. For further discussion, see Note 3, “Long-Term Debt.” |
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Equity Method Investments. We apply equity method accounting for investments when we do not control the investee, but have the ability to exercise significant influence over its operating and finance policies. Equity method investments are recorded at cost, with the allocable portion of the investee's income or loss reported in earnings, and adjusted for capital contributions to and distributions from the investee. Distributions in excess of equity method earnings, if any, are recognized as a return of investment and recorded as investing cash flows in the Consolidated Statements of Cash Flows. We review our equity investments for impairment whenever events or changes in circumstances indicate that the carrying value of our investment may have experienced an other-than-temporary decline in value. If such conditions exist, we would compare the estimated fair value of the investment to its carrying value to determine if an impairment is indicated. In addition, we would determine if the impairment is other-than-temporary based on our assessment of all relevant factors, including consideration of our intent and ability to retain the investment. To estimate fair value, we would use a discounted cash flow analysis based on estimated future results of the investee and market indicators of terminal year capitalization rates. |
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Goodwill and Indefinite-lived Intangible Assets. Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business combinations. Indefinite-lived intangible assets include gaming licenses, trademarks and a racing license. Goodwill and other indefinite-lived intangible assets are subject to an annual assessment for impairment during the fourth quarter, or more frequently if there are indications of possible impairment. There were no impairments to goodwill for the years ended December 31, 2014, 2013, or 2012. During the third quarter of 2013, we determined there was an indication of impairment for our Boomtown Bossier City gaming license due to a decrease in forecasted financial performance resulting from new competition, and we recorded an impairment charge of $10.0 million. There were no impairments to other indefinite-lived intangible assets for the years ended December 31, 2014, and 2012. For further discussion, see Note 9, “Goodwill and Other Intangible Assets.” |
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During the year ended December 31, 2014, we recorded a $50.0 million indefinite-lived intangible asset related to Belterra Park's video lottery terminal (“VLT”) license. As of December 31, 2014, we have made payments of $25.0 million for Belterra Park's VLT license and have accrued $25.0 million for the remaining amount due in 2015, which is included in “Other accrued liabilities” in our Consolidated Balance Sheet. |
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During the year ended December 31, 2013, we recorded a total of $864.1 million of goodwill and $529.2 million of intangible assets related to our acquisitions of Ameristar Casinos, Inc. (“Ameristar”) and Pinnacle Retama Partners, LLC. In November 2013, we completed the sale of our equity interests in the entity developing the Ameristar Casino Lake Charles project, and as a result, we no longer hold a $29.8 million gaming license acquired through the Ameristar acquisition. For further discussion, see Note 7, “Investments and Acquisition Activities” and Note 8, “Discontinued Operations.” |
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Debt Issuance Costs and Debt Discounts/Premiums. Debt issuance costs include costs incurred in connection with the issuance of debt and are capitalized and amortized over the contractual term of the debt to interest expense. Debt issuance costs of the revolving credit facility are amortized on a straight-line basis, while all other debt issuance costs are amortized using the effective interest method. Unamortized debt issuance costs were $44.1 million and $54.1 million at December 31, 2014 and 2013, respectively, and are included in “Other assets, net” in our Consolidated Balance Sheets. Debt discounts/premiums incurred in connection with the issuance of debt have been included as a component of the carrying value of debt and are being amortized to interest expense using the effective interest method. Amortization of debt issuance costs and debt discounts/premiums included in interest expense was $9.7 million, $6.4 million, and $6.5 million, for the years ended December 31, 2014, 2013, and 2012, respectively. |
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Self-Insurance Accruals. We are self-insured up to certain limits for costs associated with general liability, workers’ compensation and employee health coverage. Insurance claims and reserves include accruals of estimated settlements for known claims, legal costs related to settling such claims and accruals of actuarial estimates of incurred but not reported claims. At December 31, 2014, and 2013, we had total self-insurance accruals of $24.4 million and $26.2 million, respectively, which are included in “Other accrued liabilities” in our Consolidated Balance Sheets. In estimating these accruals, we consider historical loss experience and make judgments about the expected level of costs per claim. We believe the estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity could materially affect the estimate for these liabilities. |
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Customer Loyalty Program. We offer incentives to our customers through our mychoice customer loyalty program. Under the mychoice customer loyalty program, customers earn points based on their level of play that may be redeemed for various benefits, such as cash back, dining, or hotel stays, among others. The reward credit balance under the plan will be forfeited if the customer does not earn any reward credits over the prior six-month period. In addition, based on their level of play, customers can earn additional benefits without redeeming points, such as a car lease, among other items. In April 2014, we expanded the mychoice loyalty program to all Ameristar properties as part of the integration of the Ameristar properties, and now we offer benefits solely through the mychoice customer loyalty program. |
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We accrue a liability for the estimated cost of providing these benefits as the benefits are earned. Estimates and assumptions are made regarding cost of providing the benefits, breakage rates, and the mix of goods and services customers will choose. We use historical data to assist in the determination of estimated accruals. Changes in estimates or customer redemption habits could produce significantly different results. At December 31, 2014, and 2013, we had accrued $26.6 million and $18.9 million, respectively, for the estimated cost of providing these benefits. As of December 31, 2013, we had accrued $12.8 million for the estimated cost of providing benefits under Ameristar customer loyalty program. Such amounts are included in “Other accrued liabilities” in our unaudited Consolidated Balance Sheets. |
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Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are provided against deferred tax assets when it is deemed more likely than not that some portion or all of the deferred tax asset will not be realized within a reasonable time period. We assess tax positions using a two-step process. A tax position is recognized if it meets a "more likely than not" threshold, and is measured at the largest amount of benefit that is greater than 50.0% percent of being realized. Uncertain tax positions are reviewed each balance sheet date. Liabilities recorded as a result of this analysis are classified as current or long-term based on the timing of expected payment. See Note 4, “Income Taxes,” for additional information. |
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Revenue Recognition. Gaming revenues consist of the net win from gaming activities, which is the difference between amounts wagered and amounts paid to winning patrons. Cash discounts and other cash incentives to customers related to gaming play are recorded as a reduction to gaming revenue. Food and beverage, lodging, retail, entertainment, and other operating revenues are recognized as products are delivered or services are performed. Advance deposits on lodging are recorded as accrued liabilities until services are provided to the customer. |
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The retail value of food and beverage, lodging and other services furnished to guests on a complimentary basis is included in revenues and then deducted as promotional allowances in calculating total revenues. The estimated cost of providing such promotional allowances is primarily included in gaming expenses. Complimentary revenues that have been excluded from the accompanying Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012, were as follows: |
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| For the year ended December 31, | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | |
| (in millions) | | | | | | | | |
Food and beverage | $ | 135.3 | | | $ | 94.7 | | | $ | 58.1 | | | | | | | | | |
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Lodging | 61.1 | | | 49.3 | | | 28.1 | | | | | | | | | |
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Retail, entertainment and other | 18.2 | | | 13.4 | | | 9.6 | | | | | | | | | |
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Total promotional allowances | $ | 214.6 | | | $ | 157.4 | | | $ | 95.8 | | | | | | | | | |
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The cost to provide such complimentary benefits for the years ended December 31, 2014, 2013, and 2012, were as follows: |
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| For the year ended December 31, | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | |
| (in millions) | | | | | | | | |
Promotional allowance costs included in gaming expense | $ | 160.9 | | | $ | 111.2 | | | $ | 72.4 | | | | | | | | | |
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Gaming Taxes. We are subject to taxes based on gross gaming revenues in the jurisdictions in which we operate, subject to applicable jurisdictional adjustments. These gaming taxes are an assessment on our gaming revenues and are recorded as a gaming department expense in the Consolidated Statements of Operations. These taxes for the years ended December 31, 2014, 2013, and 2012, were as follows: |
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| For the year ended December 31, | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | |
| (in millions) | | | | | | | | |
Gaming taxes | $ | 557.3 | | | $ | 378.6 | | | $ | 261.8 | | | | | | | | | |
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Advertising Costs. We expense advertising costs the first time the advertising takes place. These costs are included in gaming expenses in the accompanying Consolidated Statements of Operations. In addition, advertising costs associated with development projects are included in pre-opening, development and other costs until the project is completed. These costs for the years ended December 31, 2014, 2013, and 2012, consist of the following: |
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| For the year ended December 31, | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | |
| (in millions) | | | | | | | | |
Advertising costs | $ | 30.6 | | | $ | 20.9 | | | $ | 22.1 | | | | | | | | | |
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Pre-opening, Development and Other Costs. Pre-opening, development and other costs consist of payroll costs to hire, employ and train the workforce prior to opening an operating facility; marketing campaigns prior to and commensurate with the opening; master planning and conceptual design fees; legal and professional fees related to the project but not otherwise attributable to depreciable assets; lease payments; real estate taxes; acquisition costs; restructuring costs; and other general and administrative costs related to our projects. Pre-opening, development and other costs are expensed as incurred and for the years ended December 31, 2014, 2013, and 2012, consist of the following: |
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| For the year ended December 31, | | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | | |
| (in millions) | | | | | | | | |
Ameristar acquisition (1) | $ | 2.2 | | | $ | 85.3 | | | $ | — | | | | | | | | | |
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Belterra Park (2) | 8.2 | | | 1.2 | | | 0.4 | | | | | | | | | |
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Other (3) | 2.6 | | | 2.5 | | | 21.1 | | | | | | | | | |
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Total pre-opening, development and other costs | $ | 13 | | | $ | 89 | | | $ | 21.5 | | | | | | | | | |
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-1 | Amounts principally comprised of legal and advisory expenses, severance charges and other costs and expenses related to the financing and integration of the acquisition of Ameristar. | | | | | | | | | | | | | | | | | | |
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-2 | Belterra Park opened on May 1, 2014. | | | | | | | | | | | | | | | | | | |
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-3 | Costs in 2014 include $1.7 million of costs in 2014 associated with our evaluation and plan to pursue a REIT spin-off transaction. The 2012 total includes costs incurred in connection with our L'Auberge Baton Rouge property, which opened in 2012. | | | | | | | | | | | | | | | | | | |
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Share-based Compensation. We measure the cost of awards of equity instruments to employees based on the grant-date fair value of the award. The grant-date fair value is determined using the Black-Scholes model. The fair value, net of estimated forfeitures, is amortized as compensation cost on a straight-line basis over the vesting period. See Note 6, “Employee Benefit Plans.” |
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Earnings per Share. Diluted earnings per share reflects the addition of potentially dilutive securities, which include in-the money stock options, restricted stock units and phantom stock units. We calculate the effect of dilutive securities using the treasury stock method. A total of 1.6 million, 1.0 million, and 4.4 million out-of-money stock options were excluded from the calculation of diluted earnings per share for the years ended December 31, 2014, 2013, and 2012, respectively, because including them would have been anti-dilutive. |
For the years ended December 31, 2013, and 2012, we recorded a net loss from continuing operations. Accordingly, the potential dilution from the assumed exercise of stock options is anti-dilutive. As a result, basic earnings per share is equal to diluted earnings per share for such years. Options and securities that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share were 1.7 million and 0.5 million, respectively. |
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Business Combinations. We allocate the business combination purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill. We determined the fair value of identifiable intangible assets, such as customer relationships and trademarks, as well as any other significant tangible assets or liabilities, such as long-lived property. The fair value allocation methodology requires management to make assumptions and apply judgment to estimate the fair value of acquired assets and liabilities assumed. Management estimates the fair value of assets and liabilities primarily using discounted cash flows and replacement cost analysis. Provisional fair value measurements of acquired assets and liabilities assumed may be retrospectively adjusted during the measurement period. The measurement period ends once we are able to determine we have obtained all necessary information that existed as of the acquisition date or once we determine that such information is unavailable. The measurement period does not extend beyond one year from the acquisition date. See Note 7, “Investment and Acquisition Activities,” for additional information. |
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Reclassifications. The Consolidated Financial Statements reflect certain reclassifications to prior year amounts to conform to classification in the current period. These reclassifications had no effect on previously reported net income or losses. |
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Recently Issued Accounting Pronouncements |
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In July 2013, the Financial Accounting Standards Board (“FASB”) issued an amendment to the accounting guidance for income taxes which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The objective in issuing this amendment is to eliminate diversity in practice resulting from a lack of guidance on this topic in current GAAP. Under the amendment, an entity must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward except under certain conditions. The amendment is effective for fiscal years beginning after December 15, 2013, and for interim periods within those years, and should be applied to all unrecognized tax benefits that exist as of the effective date. We adopted this guidance during the first quarter of 2014 and it did not have a material impact on our consolidated financial statements. |
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In April 2014, the FASB issued an accounting standards update in connection with reporting discontinued operations and disclosures of disposals of components of entities. The accounting standards update changes the criteria for reporting discontinued operations. Under the amendment, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when any of the following occurs: (i) the component of an entity or group of components of an entity meets the criteria to be classified as held for sale; (ii) the component of an entity or group of components of an entity is disposed of by sale; and (iii) the component of an entity or group of components of an entity is disposed of other than by sale. This new guidance is effective prospectively for all disposals (or classifications as held for sale) of components of an entity and all business activities, on acquisition, that are classified as held for sale that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. The adoption of this standard is not expected to have an impact on our financial position, results of operations or cash flows. |
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In May 2014, as part of its ongoing efforts to assist in the convergence of GAAP and International Financial Reporting Standards, the FASB issued a new standard related to revenue recognition. Under the new standard, recognition of revenue occurs when a customer obtains control of promised services or goods in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. The new standard will be effective for fiscal years beginning after December 15, 2016. We are currently evaluating the impact of adopting this accounting standard on our consolidated financial statements. |
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In June 2014, the FASB issued an accounting standards update with respect to performance share awards. This accounting standards update requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period or periods for which the requisite service has already been rendered. The effective date for this update is for the annual and interim periods beginning after December 15, 2015. Early application is permitted. We are currently evaluating the impact of adopting this accounting standards update on our consolidated financial statements. |
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A variety of proposed or otherwise potential accounting standards are currently under review and study by standard-setting organizations and certain regulatory agencies. Given the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of any such proposed or revised standards would have on our consolidated financial statements. |