Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR PINNACLE ENTERTAINMENT, INC.
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
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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