e424b3
As filed
pursuant to Rule 424(b)(3)
under the Securities Act of 1933
Registration No. 333-172884
PROSPECTUS
Owners Club Stock
Program
Common Stock
Pinnacle Entertainment, Inc. has created the Owners Club
Stock Program within our mychoice customer loyalty
program to provide our customers who are individuals and who
meet certain eligibility standards the opportunity to receive
shares of our common stock as an award for their patronage of
our casinos and as an incentive to continue such patronage. We
believe that this sort of awards program presents a unique
opportunity for our customers to realize value for their loyalty
and to develop a greater proprietary interest in our company.
The following summary of our mychoice customer loyalty
program and the Owners Club Stock Program is qualified by
the description of their material features found elsewhere in
this prospectus. Participants in our mychoice customer
loyalty program earn points based on money spent on specified
gambling activities at our casinos. The points accumulate in
each participants mychoice account. Customers who
have earned or obtained 175,000 points under our mychoice
customer loyalty program and who meet certain eligibility
requirements are eligible to apply for membership in our
Owners Club Stock Program. Those of our customers who are
accepted as members in our Owners Club Stock Program are
granted a one-time award of shares of our common stock, either
in a fixed amount or based on a fixed value, as selected by our
President and Chief Executive Officer in his sole discretion. At
the commencement of the program, it is contemplated that new
members will be awarded either 100 shares of our common
stock or a number of shares of our common stock valued at
$1,500. If the stock award is based on a fixed value, the number
of shares that you will receive will be determined by dividing
the fixed value by the closing sales price of our common stock
on the New York Stock Exchange on the date that you are accepted
into the Owners Club Stock Program, rounded up to the next
whole share. If the date that you are accepted as a member of
the Owners Club Stock Program is not a trading day, then
the closing sales price for the purposes of this calculation
will be the closing sales price of our common stock on the New
York Stock Exchange on the next following trading day. We are
registering an aggregate of 200,000 shares of our common
stock for issuance to new members of the Owners Club Stock
Program.
The mychoice customer loyalty program and the
Owners Club Stock Program may be suspended, discontinued
or canceled at any time. Also, terms and conditions of the
mychoice customer loyalty program and the Owners
Club Stock Program may be changed, limited, modified or
eliminated at any time.
Investing in our common stock involves risks. See Risk
Factors beginning on page 3 for a discussion of
certain factors you should consider before applying for
membership in the Owners Club Stock Program and receiving
shares of our common stock.
Our common stock is listed on the New York Stock Exchange under
the symbol PNK. Our principal executive offices are
located at 8918 Spanish Ridge Avenue, Las Vegas, Nevada 89148,
and our telephone number is
(702) 541-7777.
On July 27, 2011, the last reported sale price of our
common stock on the New York Stock Exchange was $14.40 per share.
None of the Securities and Exchange Commission, the Louisiana
Gaming Control Board, the Indiana Gaming Commission, the
Missouri Gaming Commission, the Nevada Gaming Commission, the
Nevada State Gaming Control Board, the City of Reno, Nevada
gaming authorities, the Ohio State Racing Commission, the Ohio
Lottery Commission or any state securities commission or other
gaming authority, has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
Wunderlich Securities,
Inc.
AGENT
The date of this Prospectus is July 29, 2011
Table of
Contents
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ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement on
Form S-3
that we have filed with the Securities and Exchange Commission,
also referred to herein as the SEC. You should read
carefully the entire prospectus, as well as the documents
incorporated by reference in the prospectus, any applicable
prospectus supplement and any other offering material, before
making an investment decision.
When used in this prospectus, the terms Pinnacle,
the Company, we, us, and
our and words of similar import refer to Pinnacle
Entertainment, Inc., a Delaware corporation, and its
consolidated subsidiaries, unless the context otherwise requires.
You should rely only on the information contained or
incorporated by reference in this prospectus, any prospectus
supplement and any other offering material. We have not
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction
where the offer and sale is not permitted. You should not assume
that the information appearing in this prospectus, any
prospectus supplement, any other offering material or the
documents incorporated by reference herein or therein is
accurate as of any date other than their respective dates,
regardless of the time of delivery of this prospectus, any
prospectus supplement or any other offering material or any sale
of a security.
WHERE YOU
CAN FIND MORE INFORMATION
This prospectus, which constitutes a part of a registration
statement on
Form S-3
that we have filed with the SEC, omits certain of the
information set forth in the registration statement.
Accordingly, you should refer to the registration statement and
its exhibits for further information with respect to us and our
common stock. Copies of the registration statement and its
exhibits are on file at the offices of the SEC. This prospectus
contains statements concerning documents filed as exhibits. For
the complete text of any of these documents, we refer you to the
copy of the document filed as an exhibit to the registration
statement.
We file annual, quarterly and current reports, proxy and
information statements and other information with the SEC. You
may read and copy any materials we file with the SEC at the
SECs Public Reference Room in Washington, D.C. at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549.
You may obtain information about the operation of the Public
Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains a website that contains information we
file electronically with the SEC, which you can access over the
Internet at
http://www.sec.gov.
We maintain a website at
http://www.pnkinc.com
with information about our company. Information contained on our
website or any other website is not incorporated into this
prospectus and does not constitute a part of this prospectus.
Our website address referenced above is intended to be an
inactive textual reference only and not an active hyperlink to
our website. You can also obtain information about us at the
offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference into
this prospectus the information we file with the SEC, which
means that we can disclose important information to you by
referring you to other documents which we have filed. Any
information referenced this way is considered to be part of this
prospectus, and any information that we file later with the SEC
will automatically update and, where applicable, supersede this
information. We incorporate by reference the following documents
that we have filed with the SEC (other than, in each case,
documents or information deemed to have been furnished and not
filed in accordance with SEC rules):
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Our Annual Report on
Form 10-K
for the year ended December 31, 2010 (including, without
limitation, Exhibit 99.1 thereto regarding gaming
regulations);
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Our quarterly report on
Form 10-Q
for the quarter ended March 31, 2011;
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Our current reports on
Form 8-K
(including amendments thereto) filed January 7, 2011,
January 14, 2011, February 1, 2011, March 4,
2011, March 7, 2011, March 15, 2011, March 29,
2011, May 9, 2011, May 26, 2011 and June 1, 2011;
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Our definitive proxy statement filed with the SEC on
April 12, 2011 in connection with our solicitation of
proxies for the annual meeting of stockholders held on
May 24, 2011 (with respect to information contained in such
proxy statement that is incorporated into Part III of our
Annual Report on
Form 10-K
for the year ended December 31, 2010 only); and
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The description of our common stock contained in our
registration statement on
Form 8-A
filed November 21, 1997, as amended by our registration
statement on
Form 8-A
filed on August 10, 2001, our current reports on
Form 8-K
filed on January 26, 2004 and May 9, 2005 and
including any other amendments or reports filed for the purpose
of updating such description (other than any portion of such
filings that are furnished under applicable SEC rules rather
than filed).
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All documents that we file with the SEC after the date of the
initial registration statement and prior to effectiveness of the
registration statement shall be deemed to be incorporated by
reference into this prospectus. We also incorporate by reference
any other future filings we make with the SEC (other than
information furnished pursuant to Item 2.02 or
Item 7.01 of
Form 8-K
or as otherwise permitted by SEC rules) under
Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, until we have distributed all
of the securities to which this prospectus relates or the
offering is otherwise terminated.
This prospectus is part of a registration statement on
Form S-3
that we have filed with the SEC relating to the securities. As
permitted by SEC rules, this prospectus does not contain all of
the information included in the registration statement and the
accompanying exhibits and schedules we file with the SEC. We
have filed certain legal documents that control the terms of the
common stock offered by this prospectus as exhibits to the
registration statement. We may file certain other legal
documents that control the terms of the common stock offered by
this prospectus as exhibits to reports we file with the SEC. You
may refer to the registration statement and the exhibits and
schedules for more information about us and our securities. The
registration statement and exhibits and schedules are also
available at the SECs Public Reference Room or through its
website.
We will provide, without charge and upon oral or written
request, to each person to whom a copy of this prospectus has
been delivered, a copy of any of the documents referred to above
as being incorporated by reference into this prospectus but not
delivered with it. You may obtain a copy of these filings, at no
cost, by writing or calling us at Pinnacle Entertainment, Inc.,
Investor Relations, 8918 Spanish Ridge Avenue, Las Vegas, Nevada
89148,
(702) 541-7777.
Exhibits to the filings will not be provided, however, unless
those exhibits have been specifically incorporated by reference
in this prospectus.
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus, any prospectus
supplement, any other offering material and any documents we
incorporate by reference may constitute forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, referred to as the
Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Private
Securities Litigation Reform Act of 1995 provides certain
safe harbor provisions for forward-looking
statements. All forward-looking statements made in this
prospectus, any prospectus supplement, any other offering
material and any documents we incorporate by reference are made
pursuant to the Private Securities Litigation Reform Act. Words
such as, but not limited to, believe,
expect, anticipate,
estimate, intend, plan,
may, will, should, is
fairly confident, and similar expressions are intended to
identify forward-looking statements. Forward-looking statements
include, without limitation, statements regarding our
anticipated completion and opening schedules of various
projects, expansion plans, construction schedules, cash needs,
cash reserves, adequacy of resources to fund development and
expansion projects, liquidity, operating and capital expenses,
financing options, including the state of the capital markets
and our ability to access the capital markets, expense
reductions, expected receipts of insurance proceeds, including
the amount of any such recovery and sufficiency of such
coverage, the future outlook of Pinnacle and the gaming
iii
industry, operating results, pending regulatory matters and the
tax treatment of awards of shares of our common stock under the
Owners Club Stock Program. Although we believe our plans,
intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you
that we will achieve or realize these plans, intentions or
expectations, and actual results, performance or achievements
may differ materially from those that might be anticipated from
forward-looking statements. This can occur as a result of
inaccurate assumptions or as a consequence of known or unknown
risks and uncertainties. Factors that may cause our actual
results, performance or achievements to differ materially from
that contemplated by such forward-looking statements include,
among others, that:
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our business may be sensitive to reductions in consumers
discretionary spending as a result of recent downturns in the
economy, as well as other factors that are difficult to predict
and beyond our control;
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the gaming industry is very competitive and increased
competition, including through legislative legalization or
expansion of gaming by states such as Texas, Ohio and Illinois
or through Native American gaming facilities and internet
gaming, could adversely affect our profitability;
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video lottery terminals may not become operational at our River
Downs racetrack in Ohio;
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many factors, including the escalation of construction costs
beyond increments anticipated in our construction budgets, could
prevent us from completing our construction and development
projects as planned, on time or on budget, including projects on
which construction has begun;
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our substantial development plans for capital-intensive projects
will require us to borrow significant amounts under our amended
and restated credit facility and, depending on which projects
are pursued to completion, may cause us to incur substantial
additional indebtedness;
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subsequent phases to certain of our existing projects and
potential enhancements at our properties may require us to raise
additional capital;
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operating costs for our gaming properties, including, but not
limited to, increased taxes, capital expenditures and energy
prices, may rise;
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we are subject to risks associated with geographic market
concentration in Louisiana;
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insufficient or
lower-than-expected
results generated from our new developments and acquired
properties may not yield adequate or expected returns on our
substantial investments;
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the loss of management and other key personnel could
significantly harm our business;
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our industry is highly regulated, which makes us dependent on
obtaining and maintaining gaming licenses and subjects us to
potentially significant fines and penalties;
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potential changes in the regulatory environment could harm our
business;
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we may not meet the conditions for the maintenance of the
license that we plan to utilize for our LAuberge
Casino & Hotel Baton Rouge, including completing the
project on time due to circumstances outside our control such as
the Mississippi River water levels;
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we operate in a highly taxed industry and may be subject to
higher taxes in the future;
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we may not realize gains on our proposed investment in a joint
venture that is planning to develop gaming resorts in Vietnam;
our involvement in Vietnam could expose us to risks associated
with violations of the Foreign Corrupt Practices Act or
applicable anti-money laundering regulations, which could have a
negative impact on us;
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the global financial crisis and recession has affected our
business and financial condition, and may continue to affect us
in ways that we currently cannot accurately predict;
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adverse weather conditions, road construction, gasoline
shortages and other factors affecting our facilities and the
areas in which we operate could make it more difficult for
potential customers to travel to our properties and could deter
customers from visiting our properties;
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our results of operations and financial condition could be
materially adversely affected by the occurrence of natural
disasters, such as hurricanes, or other catastrophic events,
including war and terrorism;
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damage and closures caused by hurricanes in the Gulf Region
could make our results less predictable;
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the absence of sufficient electrical power or a failure of the
technology services needed to run our computers may cause us to
be unable to run all or parts of our gaming operations;
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natural disasters have made it more challenging for us to obtain
similar levels of Weather Catastrophe Occurrence/Named
Windstorm, Flood and Earthquake insurance coverage for our
properties compared to the levels before the 2005 hurricane;
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we may incur property and other losses that are not adequately
covered by insurance;
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climate change, climate change regulations and greenhouse
effects could adversely impact our operations and markets;
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work stoppages, organizing drives and other labor problems could
interrupt our operations;
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we are subject to litigation which, if adversely determined,
could cause us to incur substantial losses;
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we face environmental and archaeological regulation of our real
estate;
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we face risks associated with growth and acquisitions;
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even though we have suspended development of our Atlantic City
site, if we determine to proceed with our Atlantic City project,
it will have many risks, and we may not realize the financial
and strategic goals that are contemplated from its acquisition
and development;
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our present indebtedness and future projected borrowings could
adversely affect our financial health; future cash flows may not
be sufficient to meet our obligations, and we might have
difficulty obtaining additional financing; and we may experience
adverse effects of interest-rate fluctuations;
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the terms of our credit facility and the indentures governing
our subordinated indebtedness impose operating and financial
restrictions on us;
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servicing our indebtedness will require a significant amount of
cash, and our ability to generate sufficient cash depends on
many factors; and
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we are subject to extensive laws and governmental regulations
that impose restrictions on the ownership and transfer of our
securities.
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In addition, these statements could be affected by general
domestic and international economic and political conditions,
uncertainty as to the future direction of the economy and
vulnerability of the economy to domestic or international
incidents, as well as market conditions in our industry. Other
factors that could cause our actual results, performance or
achievements to differ materially from that contemplated by
forward-looking statements are those discussed under the heading
Risk Factors and in other sections of our Annual
Report on
Form 10-K
for the year ended December 31, 2010 and our Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2011, as well as in our
other reports filed from time to time with the SEC that are
incorporated by reference into this prospectus and in any
applicable prospectus supplement.
We caution the reader that the factors described above may not
be exhaustive. We operate in a continually changing business
environment, and new risk factors emerge from time to time.
Management cannot predict such new risk factors, nor can it
assess the impact, if any, of such new risk factors on our
business or the extent to which any factor, or combination of
factors, may cause actual results, performance or achievements
to differ materially from those projected in any forward-looking
statements. We undertake no obligation to publicly update or
revise these forward-looking statements, whether as a result of
new information, future events or otherwise. All subsequent
written and oral forward-looking statements attributable to us
or persons acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained throughout this
prospectus or in any prospectus supplement or in the information
incorporated by reference herein or therein.
v
PROSPECTUS
SUMMARY
The following summary highlights selected information from
this prospectus and in the documents incorporated by reference.
Because this is a summary, its does not contain all information
about us that may be important to you. You should read the
following summary in conjunction with the more detailed
information contained in this prospectus and the documents
incorporated by reference herein, including Risk
Factors and our consolidated financial statements and
related notes in our Annual Report on Form
10-K for the
fiscal year ended December 31, 2010 and our Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2011.
Pinnacle
Entertainment, Inc.
We are an owner, operator and developer of casinos and related
hospitality and entertainment facilities in Indiana, Louisiana,
Missouri, Nevada and Ohio. We currently have a casino project in
the process of development in Baton Rouge, Louisiana.
We were incorporated in the State of Delaware in 1981 as the
successor to a business that started in 1938. Our executive
offices are located at 8918 Spanish Ridge Avenue, Las Vegas,
Nevada 89148, and our telephone number is
(702) 541-7777.
Our website address is www.pnkinc.com. Information contained on
our website, including any links contained on our website, does
not constitute part of this prospectus.
The
Owners Club Stock Program
We are offering up to 200,000 shares of our common stock
for issuance to new members of our Owners Club Stock
Program. We created the Owners Club Stock Program within
our mychoice customer loyalty program to provide our
customers who are individuals and who meet certain eligibility
standards the opportunity to receive shares of our common stock
as an award for their patronage of our casinos as an incentive
to continue such patronage.
Participants in our mychoice customer loyalty program
earn points based on money spent on specified gambling
activities at our casinos. The points accumulate in each
participants mychoice account. Customers who have
earned or obtained 175,000 points in their mychoice
account and who meet certain eligibility requirements may
apply for membership in the Owners Club Stock Program.
Upon becoming a member of the Owners Club Stock Program,
we will grant a new member a one-time award of shares of our
common stock, either in a fixed amount or based on a fixed
value, as selected by our President and Chief Executive Officer
in his sole discretion. At the commencement of the program, it
is contemplated that new members will be awarded either
100 shares of our common stock or a number of shares of our
common stock valued at $1,500. The fixed amount of shares that
we award or the fixed value of shares that we award under our
Owners Club Stock Program may change in the future, and we
plan to supplement this prospectus in the event of any such
change in the fixed amount of shares or the fixed value of
shares awarded under the program.
To receive shares of our common stock under the Owners
Club Stock Program, you must submit a membership application
form, a new account application and other documentation to, and
open a brokerage account with, the Agent (as defined below), and
receive the shares in such brokerage account. After receipt into
your brokerage account with the Agent, you are free to transfer,
sell or withdraw the shares of our common stock received under
the program at any time, subject to the terms governing your
brokerage account with the Agent. If you already have a
brokerage account with a broker other than the Agent, you may
instruct the Agent to transfer the shares of our common stock
received under the Owners Club Stock Program to such other
brokerage account.
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We may terminate your membership in the Owners Club Stock
Program under certain specified circumstances. The mychoice
customer loyalty program and the Owners Club Stock
Program may be suspended, discontinued or canceled at any time.
Also, terms and conditions of the mychoice customer
loyalty program and the Owners Club Stock Program may be
changed, limited, modified or eliminated at any time. If your
membership in the Owners Club Stock Program is terminated
or the Owners Club Stock Program is suspended,
discontinued or cancelled after you have received your one-time
award of shares of our common stock, you will not be required to
return those shares of common stock to us.
Risk
Factors
An investment in our common stock involves risk. Before deciding
whether to apply for membership in our Owners Club Stock
Program, you should carefully consider the information under the
caption Risk Factors in this prospectus and the
information included or incorporated by reference in this
prospectus as further described under the caption
Incorporation of Certain Documents by Reference.
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RISK
FACTORS
Before you enroll in the Owners Club Stock Program, you
should be aware that there are risks associated with an
investment in our common stock, including those set forth below.
You should carefully consider these risk factors, together with
all the other information included in or incorporated by
reference in this prospectus, including, but not limited to, our
Annual Report on
Form 10-K
for the year ended December 31, 2010, our Quarterly Report
on
Form 10-Q
for the quarter ended March 31, 2011, and other information
which may be incorporated by reference in this prospectus as
provided under Information Incorporated by
Reference, before you decide to enroll in the Owners
Club Stock Program. If any of the following risks actually
occur, our business, financial condition, operating results or
cash flow could be harmed. As a result, the trading price of our
common stock could decline, and you may lose all or part of your
investment.
Risks
Related to the Owners Club Stock Program
At any
time and in our discretion, we may terminate, suspend or change
the terms and conditions, including the number of shares awarded
or the dollar amount of the shares awarded, of our Owners
Club Stock Program (as well as our mychoice customer loyalty
program), which could result in your realization of
substantially fewer benefits of membership than what you may
expect.
We believe that the Owners Club Stock Program is a unique
form of loyalty program, and we have no prior experience with
the implementation of such a program. Consequently, we may find
that it is substantially more expensive to implement and
maintain than what we currently expect, or it may result in
substantially fewer benefits than what we anticipate for us or
for our customers. As a result, we have reserved the right to
change the terms and conditions of the program or to modify,
suspend or cancel the program in its entirety, as more fully
described in the answer to Question 18 below. Any of these
actions could keep you from realizing any meaningful benefit
from the program, and you could realize substantially fewer
benefits of membership than what you may expect.
The
one-time stock award you receive upon becoming a member of the
Owners Club Stock Program could have adverse tax
consequences to you.
It is possible that the fair market value of the shares of
common stock received by a member in the Owners Club Stock
Program upon becoming a member will be included in the
members gross taxable income for the tax year in which the
shares of common stock are received. However, there is some
uncertainty about the appropriate treatment for income tax
purposes of the grant. This matter is discussed in response to
Question 14 below. Because of the foregoing, receipt of the
stock award could have adverse tax consequences to you.
Risks
Related to Our Business
Our
business is particularly sensitive to reductions in
consumers discretionary spending as a result of downturns
in the economy or other changes we cannot accurately
predict.
Demand for entertainment and leisure activities is sensitive to
consumers disposable incomes, and thus demand can be
affected by changes in the economy that we cannot predict.
Perceived or actual unfavorable changes in general economic
conditions, including recession, economic slowdown, continued
high unemployment levels, the current housing and credit crises,
the potential for bank failures, higher fuel or other
transportation costs, and changes in consumer confidence, may
reduce disposable income of our customers or result in fewer
patrons visiting our casinos. As a result, we cannot ensure that
demand for entertainment and leisure activities will not be
adversely affected. Continued adverse developments affecting
economies throughout the world, including a general tightening
of the availability of credit, potentially rising interest
rates, increasing energy costs, rising prices, inflation, acts
of war or terrorism, natural disasters, declining consumer
confidence or significant declines in the stock market could
lead to a reduction in discretionary spending on entertainment
and leisure activities, which could adversely affect our
business, financial condition and results of operations. A
deterioration in operating results could affect our ability to
comply with financial covenant ratios, other covenants and
requirements in our amended and restated credit facility
discussed in another risk factor below.
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The
gaming industry is very competitive and increased competition,
including through legislative legalization or expansion of
gaming by states such as Texas, Ohio and Illinois or through
Native American gaming facilities and internet gaming, could
adversely affect our financial results.
We face significant competition in all of the markets in which
we operate. With fewer new markets opening for development in
recent years, this competition will intensify if new gaming
operations enter our markets or existing competitors expand
their operations. Increased competitive pressures may adversely
affect our ability to continue to attract customers or require
us to offer a larger number of, or more costly, promotions to
compete more efficiently.
Further, several of our properties are located in jurisdictions
that restrict gaming to certain areas
and/or are
adjacent to states that currently prohibit or restrict gaming
operations. Economic difficulties faced by state governments
could lead to intensified political pressures for the
legalization of gaming in jurisdictions where it is currently
prohibited. The legalization of gaming in such jurisdictions
could be an expansion opportunity for us, or a significant
threat to us, depending on where the legalization occurs and our
ability to capitalize on it. In particular, our ability to
attract customers to our existing casinos would be significantly
affected by the legalization or expansion of gaming in any of
our existing markets and Texas, Ohio, Illinois, Kentucky,
Oklahoma, and California and the development or expansion of
Native American casinos in our markets. The value of our site in
Atlantic City has been adversely affected and may be further
affected by the legislation or expansion of casino gaming in
Delaware, Maryland, Pennsylvania, West Virginia, New York,
northern New Jersey and Connecticut. In 2008 and 2009, we
recorded impairments to the value of our land in Atlantic City
totaling approximately $357 million.
In the past, legislation to legalize or expand gaming has been
introduced in some of these jurisdictions, and federal law
favors the expansion of Native American gaming. In 2007, Indiana
approved casinos with 2,000 slot machines at each of two
racetracks in the Indianapolis area, both of which opened in
2008. In 2008, New York approved a significant reduction in its
gaming tax rate as a specific inducement for a large casino
hotel in the Catskills region. In 2008, Maryland voters approved
a state constitutional amendment allowing 15,000 slot machines
total in five locations. In 2009, legislation to approve up to
12 resort casinos, slot machines at racetracks and Native
American gaming in Texas was rejected during the states
2009 legislative session. Numerous gaming bills were introduced
in the Texas Legislature during its
2010-11
regular session, none of which passed. In January 2010, Delaware
passed legislation that allows table games at three racetracks
in the state, which are currently operational. Also, in January
2010, Pennsylvania passed legislation which allows slots-only
casinos in Pennsylvania to feature table games, which are now
operational. We expect similar proposals to legalize or expand
gaming will be made in the future in various states, and it is
uncertain whether such proposals will be successful. Further,
because the global economic recession has reduced the revenues
of state governments from traditional tax sources, voters and
state legislatures may be more sympathetic to proposals
authorizing or expanding gaming in those jurisdictions.
In June 2011, the Illinois legislature passed an omnibus gaming
bill that would allow, among other items, five new casinos in
the state, including a 4,000-position property in downtown
Chicago and riverboats in Rockford, Park City, Danville and one
of six south Cook County suburbs, pending local approvals, and
slots at six racetracks in the state, five in Chicagoland and
one near St. Louis. The bill is subject to approval from
the Governor of Illinois. Expanded gaming operations in Illinois
may adversely affect our business, particularly our
St. Louis properties.
Even in gaming markets where the state governments do not choose
to increase the maximum number of gaming licenses available, we
face the risk that existing casino licensees will expand their
operations and the risk that Native American gaming will
continue to grow. Furthermore, Native American gaming facilities
frequently operate under regulatory requirements and tax
environments that are less stringent than those imposed on
state-licensed casinos, which could provide such Native American
gaming facilities with a competitive advantage in our markets.
In April 2010, we canceled our Sugarcane Bay casino development
in Lake Charles, Louisiana and, in April 2010, we surrendered
the related gaming license to the Louisiana Gaming Control
Board. In February 2011, the Louisiana Gaming Control Board
granted a license for a new gaming facility in Lake Charles,
which would be adjacent to our LAuberge du Lac casino. On
April 30, 2011, that licensee obtained a successful local
referendum approving gaming operations in Lake Charles,
Calcasieu parish. A new casino in Lake Charles would compete
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directly with LAuberge du Lac and may reduce such
propertys revenues significantly. The number of riverboat
gaming licenses in Louisiana is capped at 15 and all have been
granted.
In 2009, the former Governor of Ohio issued a directive order
authorizing up to 2,500 video lottery terminals at the
states seven existing racetracks. While the directive
order authorized the Ohio Lottery Commission to take the steps
necessary to implement the video lottery terminals, no such
action was taken. In November 2010, the Ohio Governor lost his
re-election bid. On January 28, 2011, we closed on the
acquisition of the River Downs racetrack in Cincinnati, Ohio. In
June 2011, the current Governor of Ohio announced that it is his
intention that each of Ohios racetrack owners be permitted
to apply for a
10-year
license to operate a video lottery terminal facility. While we
expect video lottery terminals to become operational in Ohio, we
cannot predict when the Governors plan will be
implemented, on what terms or at all or whether there will be
legal challenges to its implementation. Nonetheless, our
Belterra and River Downs facilities will face competition from
existing riverboats in Indiana and from four casinos in Ohio,
which are to be developed and located in each of Cincinnati,
Cleveland, Toledo, and Columbus.
From time to time, our competitors refurbish, rebrand or expand
their casino offerings in the markets in which we operate, which
could function to increase competition in those markets. For
example, a large competitor of our Belterra property recently
reopened a rebranded and refurbished riverboat casino in
Lawrenceburg, Indiana replacing a smaller facility.
We face competition from racetracks that offer slot machines. We
also compete with other forms of legalized gaming and
entertainment such as bingo, pull-tab games, card parlors,
sports books, pari-mutuel or telephonic betting on horse and dog
racing, state-sponsored lotteries, video lottery terminals,
video poker terminals and, in the future, we may compete with
gaming at other venues. Furthermore, competition from internet
lotteries and other internet wagering gaming services, which
allow their customers to wager on a wide variety of sporting
events and play Las Vegas-style casino games from home, could
divert customers from our properties and thus adversely affect
our business. Such internet wagering services are often illegal
under federal law but operate from overseas locations, and are
nevertheless sometimes accessible to domestic gamblers. There
are also proposals that would specifically legalize internet
gaming under federal law.
We are
engaged from time to time in one or more construction and
development projects, and many factors could prevent us from
completing them as planned, including the escalation of
construction costs beyond increments anticipated in our
construction budgets.
Construction of major buildings has certain inherent risks,
including the risks of fire, structural collapse, human error
and electrical, mechanical and plumbing malfunction. In
addition, projects entail additional risks related to structural
heights and the required use of cranes. Our development and
expansion projects also entail significant risks, including:
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shortages of materials;
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shortages of skilled labor or work stoppages;
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unforeseen construction scheduling, engineering, excavation,
environmental or geological problems;
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natural disasters, hurricanes, weather interference, changes in
river levels, floods, fires, earthquakes or other casualty
losses or delays;
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unanticipated cost increases or delays in completing the
projects;
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delays in obtaining or inability to obtain or maintain necessary
licenses or permits;
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changes to plans or specifications;
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disputes with contractors;
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disruption of our operations caused by diversion of
managements attention to new development projects and
construction at our existing properties;
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remediation of environmental contamination at some of our
proposed construction sites, which may prove more difficult or
expensive than anticipated in our construction budgets;
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failure to obtain and maintain necessary gaming regulatory
approvals and licenses, or failure to obtain such approvals and
licenses on a timely basis; and
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requirements or government-established goals
concerning union labor or requiring that a portion of the
project expenditures be through companies controlled by specific
ethnic or gender groups, goals that may not be obtainable, or
may only be obtainable at additional project cost.
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Increases in the cost of raw materials for construction, driven
by worldwide demand, higher labor and construction costs and
other factors, may cause price increases beyond those
anticipated in the budgets for our development projects.
Escalating construction costs may cause us to modify the design
and scope of projects from those initially contemplated or cause
the budgets for those projects to be increased. We generally
carry insurance to cover certain liabilities related to
construction, but not all risks are covered, and it is uncertain
whether such insurance will provide sufficient payment in a
timely fashion even for those risks that are insured and
material to us.
It is uncertain whether any of our projects will be completed on
time or within established budgets. In May 2011, we entered into
an amendment to the guaranteed maximum price agreement for our
LAuberge Casino & Hotel Baton Rouge project,
which provides that the guaranteed date of completion for
LAuberge Casino & Hotel Baton Rouge is
May 31, 2012. Management currently expects the opening of
LAuberge Casino & Hotel Baton Rouge to be
delayed until the summer of 2012. However, the ultimate opening
date is dependent upon the Mississippi River water levels
normalizing such that we can proceed with construction and upon
obtaining regulatory and other governmental approvals.
Significant delays or cost overruns related to our construction
projects could significantly reduce any return on our investment
in these projects and adversely affect our earnings and
financial resources. There are also certain tax incentives for
project construction in hurricane-damaged areas and for
economic-oriented reasons that require completion of new
facilities by certain dates. There is no certainty that such
dates will be met. Construction of our development projects
exposes us to risks of cost overruns due to typical construction
uncertainties associated with any project or changes in the
designs, plans or concepts of such projects. For these and other
reasons, construction costs may exceed the estimated cost of
completion, notwithstanding the existence of any guaranteed
maximum price construction contracts.
Our
substantial development plans for capital-intensive projects
will require us to borrow significant amounts under our amended
and restated credit facility and, depending on which projects
are pursued to completion, may cause us to incur substantial
additional indebtedness.
Currently, we are in the process of constructing LAuberge
Casino & Hotel Baton Rouge, our casino hotel project
in Baton Rouge, Louisiana, which is currently expected to open
in the summer of 2012. The budget for the project is
$357 million (exclusive of land costs and capitalized
interest). Additional amounts are also needed to fund the
initial operations of the facility once it opens. As of
March 31, 2011, we have spent approximately
$67 million and we expect to fund the remaining
$290 million of the overall project budget, as well as the
funding of initial operations, with cash on-hand, cash flow from
existing operations, and our $375 million credit facility.
In June 2011, the Governor of Ohio announced that it is his
intention that each of Ohios racetrack owners be permitted
to apply for a
10-year
license to operate a video lottery terminal facility at a cost
of $50 million. He further stated that video lottery
terminal licensees would be required to invest at least
$150 million in their facilities. We cannot predict whether
the Governors plan will be implemented on its terms or at
all or whether there will be legal challenges to its
implementation. If video lottery terminals are ultimately
approved for use at Ohios racetracks and become
operational, we plan to move quickly to revitalize River Downs
and develop a new gaming, racing and entertainment destination
facility for the Cincinnati, Ohio market. We expect to fund the
associated costs and expenses with cash on-hand, cash flow from
existing operations, and our $375 million credit facility.
In the event that our future cash flows from operations do not
match the levels we currently anticipate, whether due to
downturns in the economy or otherwise, we may need to amend the
terms of our credit facility or obtain waivers from our lenders
in order to continue with our current, or implement future,
development plans. We may not be able to obtain such an
amendment or waiver from our lenders. In such event, we may need
to raise funds through the capital markets and may not be able
to do so on favorable terms or on terms acceptable to us.
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Subsequent
phases to certain of our existing projects and potential
enhancements at our properties may require us to raise
additional capital.
We may need to access the capital markets or otherwise obtain
additional funds to complete subsequent phases of our existing
projects in downtown St. Louis and in St. Louis
County, and to fund potential enhancements we may undertake at
our facilities there and elsewhere. We do not know when or if
the capital markets will permit us to raise additional funds for
such phases and enhancements in a timely manner, or on
acceptable terms, or at all. Inability to access the capital
markets, or the availability of capital only on
less-than-favorable
terms, may force us to delay, reduce or cancel our subsequent
phases and enhancement projects. Delay, reduction or
cancellation of the subsequent phases of our projects could
subject us to financial penalties, and the possibility of such
penalties could require us to obtain additional financing on
unfavorable terms.
Our ability to obtain bank financing or to access the capital
markets for future debt or equity offerings may also be limited
by our financial condition, results of operations or other
factors, such as our credit rating or outlook at the time of any
such financing or offering and the covenants in our existing
debt agreements, as well as by general economic conditions and
contingencies and uncertainties that are beyond our control. As
we seek additional financing, we will be subject to the risks of
rising interest rates and other factors affecting the financial
markets.
Rising
operating costs at our gaming properties could have a negative
impact on our business.
The operating expenses associated with our gaming properties
could increase due to, among other reasons, the following
factors:
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changes in the federal, state or local tax or regulations,
including state gaming regulations or taxes, could impose
additional restrictions or increase our operating costs;
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aggressive marketing and promotional campaigns by our
competitors for an extended period of time could force us to
increase our expenditures for marketing and promotional
campaigns in order to maintain our existing customer base and
attract new customers;
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as our properties age, we may need to increase our expenditures
for repairs, maintenance, and to replace equipment necessary to
operate our business in amounts greater than what we have spent
historically;
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an increase in the cost of health care benefits for our
employees could have a negative impact on our financial results;
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our reliance on slot play revenues and the concentration of
relatively few slot play vendors could impose additional costs
on us;
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availability and cost of the many products and services we
provide our customers, including food, beverages, retail items,
entertainment, hotel rooms, spa and golf services;
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availability and costs associated with insurance;
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increases in costs of labor, including due to potential
unionization of our employees;
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our properties use significant amounts of electricity, natural
gas and other forms of energy, and energy price increases may
adversely affect our cost structure; and
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our properties use significant amounts of water, and a water
shortage may adversely affect our operations.
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If our operating expenses increase without any off-setting
increase in our revenues, our results of operations would suffer.
We
derived 52% of our revenues in 2010 from our casinos located in
Louisiana and are especially subject to certain risks, including
economic and competitive risks, associated with the conditions
in that area and in the states from which we draw
patrons.
Three out of our seven gaming properties are located in
Louisiana. During 2010, we derived 52% of our revenues from
these three casinos and 31% from one of them, LAuberge du
Lac in Lake Charles, Louisiana. In
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addition, we are building a casino hotel in Baton Rouge,
Louisiana. Because we derive a significant percentage of our
revenues from a small number of properties concentrated in a
relatively small area, we are subject to greater risks from
local conditions than a gaming company with operating properties
in several different markets. A decrease in revenues from or
increase in costs for one of these locations is likely to have a
proportionally higher impact on our business and operations than
it would for a gaming company with more geographically diverse
operating properties. Risks from local conditions include the
following:
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local economic conditions;
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local competitive conditions, including legalization or
expansion of gaming in Louisiana or in neighboring states;
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reduced land and air travel due to increasing fuel costs or
transportation disruptions;
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inaccessibility of the area due to inclement weather, road
construction or closure of primary access routes;
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the outbreak of public health threats at any of our properties,
or in the areas in which they are located, or the perception
that such threats exist; and
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a decline in the number of visitors to Lake Charles, New Orleans
or Bossier City, Louisiana.
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In February 2011, the Louisiana Gaming Control Board granted a
license for a new gaming facility in Lake Charles, which would
be adjacent to our LAuberge du Lac casino. On
April 30, 2011, that licensee obtained a successful local
referendum approving gaming operations in Lake Charles,
Calcasieu parish. A new casino in Lake Charles would compete
directly with LAuberge du Lac and may reduce such
propertys revenues significantly.
Insufficient
or
lower-than-expected
results generated from our new developments and acquired
properties may negatively affect the market for our securities;
our new properties may compete with our existing
properties.
We cannot assure you that the revenues generated from our new
developments and acquired properties will be sufficient to pay
related expenses if and when these developments are completed;
or, even if revenues are sufficient to pay expenses, that the
new developments and acquired properties will yield an adequate
return on our significant investments. Our projects, if
completed, may take significantly longer than we expect to
generate returns, if any. Moreover,
lower-than-expected
results from the opening of a new facility may negatively affect
us and the market for our securities and may make it more
difficult to raise capital, even as the shortfall increases the
need to raise capital. We are currently developing a new
facility in Baton Rouge, Louisiana.
As our new properties open, they may compete with our existing
properties. For example, our River City Casino in St. Louis
County, Missouri, which opened on March 4, 2010, is located
approximately 12 miles from our Lumière Place facility
in St. Louis, Missouri and may divert business away from
such location.
Our
operations are largely dependent on the skill and experience of
our management and key personnel. The loss of management and
other key personnel could significantly harm our business, and
we may not be able to effectively replace members of management
who have left the company.
Our continued success and our ability to maintain our
competitive position is largely dependent upon, among other
things, the efforts and skills of our senior executives and
management team. Although we have entered into employment
agreements with certain of our senior executives and key
personnel, we cannot guarantee that these individuals will
remain with us. In the past 20 months, we have experienced
significant turnover at both the executive management and
operational level. If we lose the services of any members of our
management team or other key personnel, our business may be
significantly impaired. We cannot assure you that we will be
able to retain our existing senior executive and management
personnel or attract additional qualified senior executive and
management personnel.
In addition, our officers, directors and key employees also are
required to file applications with the gaming authorities in
each of the jurisdictions in which we operate and are required
to be licensed or found suitable by these gaming authorities. If
the gaming authorities were to find an officer, director or key
employee unsuitable for
8
licensing or unsuitable to continue having a relationship with
us, we would have to sever all relationships with that person.
Furthermore, the gaming authorities may require us to terminate
the employment of any person who refuses to file appropriate
applications. Either result could significantly impair our
operations.
Our
industry is highly regulated, which makes us dependent on
obtaining and maintaining gaming licenses and subjects us to
potentially significant fines and penalties.
The ownership, management and operation of gaming facilities are
subject to extensive state and local regulation. The statutes,
rules and regulations of the states and local jurisdictions in
which we and our subsidiaries conduct gaming operations require
us to hold various licenses, registrations, permits and
approvals and to obtain findings of suitability. The various
regulatory authorities, including the Indiana Gaming Commission,
the Louisiana Gaming Control Board, the Missouri Gaming
Commission, the Nevada State Gaming Control Board, the Nevada
Gaming Commission, the Ohio State Racing Commission and the Ohio
Lottery Commission, may, among other things, limit, condition,
suspend, revoke or fail to renew a license to conduct gaming
operations or prevent us from owning the securities of any of
our gaming subsidiaries for any cause deemed reasonable by such
licensing authorities. Substantial fines or forfeitures of
assets for violations of gaming laws or regulations may be
levied against us, our subsidiaries and the persons involved,
including, but not limited to, our management, employees and
holders of 5% or more of the Companys securities. In
addition, many of the Companys key vendors must be
licensed and found suitable by regulatory authorities and there
can be no assurance that such vendors will be able to be
licensed and found suitable.
To date, we have obtained all governmental licenses, findings of
suitability, registrations, permits and approvals necessary for
the operation of our existing gaming facilities. It is
uncertain, however, whether we will be able to obtain any new
licenses, registrations, permits, approvals and findings of
suitability that may be required in the future or that existing
ones will be renewed or will not be suspended or revoked. Any
expansion of our gaming operations in our existing jurisdictions
or into new jurisdictions may require various additional
licenses, findings of suitability, registrations, permits and
approvals of the gaming authorities. The approval process can be
time consuming and costly, and there can be no assurance of
success.
We are also subject to a variety of other rules and regulations,
including, but not limited to, laws and regulations governing
payment card information and the serving of alcoholic beverages
at our operating properties. If we are not in compliance with
these laws, it could adversely affect our business.
Potential
changes in the regulatory environment could harm our
business.
Changes in regulations affecting the casino business can affect
our existing or proposed operations. In addition, legislators
and special-interest groups have proposed legislation from time
to time that would restrict or prevent gaming operations.
Moreover, various jurisdictions such as Illinois, Delaware and
New Jersey have restricted smoking on the casino floor and
jurisdictions such as Missouri, Indiana and Louisiana have
considered implementing similar restrictions. Such restrictions
resulted in decreases in gaming revenues. Other regulatory
restrictions or prohibitions on our current or future gaming
operations could curtail our operations and could result in
decreases in income.
We may
not meet the conditions for the maintenance of the license that
we plan to utilize for our LAuberge Casino &
Hotel Baton Rouge.
The Louisiana Gaming Control Board, also referred to herein as
the LGCB, has established numerous conditions for use of the
license for our LAuberge Casino & Hotel Baton
Rouge project, which, if not satisfied, could result in
forfeiture of such license. One such condition is that we
deposit $25 million in an escrow account to be maintained
until the commencement of gaming operations, which amount would
be paid to the State of Louisiana in the event that we surrender
the license due to withdrawal or cancellation of the
LAuberge Casino & Hotel Baton Rouge project or
upon revocation of the license by the LGCB.
Another of the conditions to the license for our LAuberge
Casino & Hotel Baton Rouge is that construction of the
project must be complete within 18 months of the
commencement of construction, which was May 20, 2010.
During construction, we have faced unusually high volatility of
the Mississippi Rivers water levels in Baton Rouge.
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Earlier this year, unusually low river levels prevented
construction progress on the wet side of the flood levee.
Currently, due to unusually high water levels for this time of
year, all construction, including construction on the dry side
of the flood levee, mainly the hotel, is delayed until the river
levels recede. In May 2011, we entered into an amendment to the
guaranteed maximum price agreement for our LAuberge
Casino & Hotel Baton Rouge project, which provides
that the guaranteed date of completion for LAuberge
Casino & Hotel Baton Rouge is May 31, 2012.
Management currently expects the opening of LAuberge
Casino & Hotel Baton Rouge to be delayed until the
summer of 2012. We will have to obtain an extension from the
LGCB for our LAuberge Casino & Hotel Baton Rouge
project to permit a later date for the completion of
construction. There can be no assurance that the LGCB will
approve an extension to permit such later date. Thus, the
ultimate opening date is dependent upon receiving the extension
from the LGCB and the Mississippi River water level normalizing
such that we can proceed with construction, among other factors.
While we intend to fulfill all of the other conditions set by
the LGCB, it is uncertain whether we will be able to do so or
that the LGCB would agree to make any amendments to the
conditions that might be necessary. Forfeiture of the license
for our LAuberge Casino & Hotel Baton Rouge
could adversely affect our expansion plans for the Louisiana
gaming market.
We
operate in a highly taxed industry and it may be subject to
higher taxes in the future. If the jurisdictions in which we
operate increase gaming taxes and fees, our operating results
could be adversely affected.
In gaming jurisdictions in which we operate, state and local
governments raise considerable revenues from taxes based on
casino revenues and operations. We also pay property taxes,
admission taxes, sales and use taxes, payroll taxes, franchise
taxes and income taxes.
Our profitability depends on generating enough revenues to pay
gaming taxes and other largely variable expenses, such as
payroll and marketing, as well as largely fixed expenses, such
as property taxes and interest expense. From time to time, state
and local governments have increased gaming taxes and such
increases can significantly impact the profitability of gaming
operations.
We cannot assure you that governments in jurisdictions in which
we operate, or the federal government, will not enact
legislation that increases gaming tax rates. The global economic
recession has reduced the revenues of state governments from
traditional tax sources, which may cause state legislatures or
the federal government to be more inclined to increase gaming
tax rates.
We
face many risks associated with our proposed investment in a
privately held company that is developing a complex of
integrated resorts in Vietnam, two of which are expected to
include gaming operations; our involvement in Vietnam could
expose us to risks associated with violations of the Foreign
Corrupt Practices Act or applicable anti-money laundering
regulations, which could have a negative impact on
us.
On May 25, 2011, PNK Development 18, LLC, or PNK 18, our
wholly owned unrestricted subsidiary, agreed to purchase 26% of
the common shares and certain preferred shares of Asian Coast
Development (Canada) Ltd., or ACDL, for a total purchase price
of $95 million. ACDL is the owner and developer of the Ho
Tram Strip beachfront complex of destination integrated resorts
and residential developments in southern Vietnam. The investment
is scheduled to close in the summer of 2011 and is subject to
various closing conditions. We cannot assure you that the
investment will close as scheduled or at all. Further, if the
investment is consummated, we will be a minority shareholder of
ACDL and our ability to control the management, operations and
decision-making of ACDL will be limited.
ACDL is in the process of constructing and developing the
entirety of the complex of destination integrated resorts and
residential developments in the Ho Tram Strip. No funding has
been obtained by ACDL for any resorts in the Ho Tram Strip other
than the first phase of the first integrated resort, which is
currently under construction. We cannot predict whether
construction will progress as scheduled or as budgeted. ACDL
also needs to obtain a working capital credit facility for such
first phase upon its opening. If ACDL is unable to build the
resort complex as planned, it will have a negative impact on our
ownership stake in ACDL. There can be no assurance that the
second phase of development of the Ho Tam Strip, in which we
would have the right to manage the second integrated resort,
will be developed. Further, the resorts in the Ho Tram Strip
will be new developments with no history of operations.
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We cannot assure you that ACDL will be able to attract a
sufficient number of hotel guests, gaming customers and other
visitors to the Ho Tram Strip to make its operations profitable.
ACDLs operations will be subject to the significant
business, economic, regulatory and competitive uncertainties and
contingencies frequently encountered by new businesses in new
gaming jurisdictions and other risks associated with this
investment, many of which are beyond ACDLs or our control.
The gaming elements of the businesses will be subject to
regulation by the government of Vietnam and uncertainty exists
as to how such regulation will affect ACDLs gaming
operations. Because ACDL has no operating history, it may be
more difficult for ACDL to prepare for and respond to these
types of risks than for a company with an established business
and operating cash flow. If ACDL is not able to manage these
risks successfully, it could negatively impact our investment.
These and other risks could result in the failure to recover our
investment in ACDL or to realize any gains in respect thereof.
ACDL will have operations outside the United States, which will
expose us, including Pinnacle Entertainment, Inc., to complex
foreign and U.S. regulations inherent in doing business in
Vietnam. We are subject to regulations imposed by the Foreign
Corrupt Practices Act, or the FCPA, and other anti-corruption
laws that generally prohibit U.S. companies and their
intermediaries from offering, promising, authorizing or making
improper payments to foreign government officials for the
purpose of obtaining or retaining business. Violations of the
FCPA and other anti-corruption laws may result in severe
criminal and civil sanctions as well as other penalties. The SEC
and U.S. Department of Justice have increased their
enforcement activities with respect to the FCPA. Internal
control policies and procedures and the compliance program that
ACDL has implemented to deter prohibited practices may not be
effective in prohibiting its employees, contractors or agents
from violating or circumventing our policies and the law. Even
though our investment in ACDL is through an unrestricted
subsidiary, if ACDLs or our employees or agents fail to
comply with applicable laws or company policies governing
ACDLs international operations, Pinnacle and its
subsidiaries may face investigations, prosecutions and other
legal and regulatory proceedings and actions which could result
in civil penalties, administrative remedies and criminal
sanctions which could, in turn, serve as the basis for the
initiation of like proceedings by gaming regulators in one or
more of the states wherein Pinnacle holds gaming licenses. Any
determination that we have violated the FCPA could have a
material adverse effect on our financial condition. Compliance
with international and U.S. laws and regulations that apply
to ACDLs international operations increases the cost of
doing business in foreign jurisdictions. ACDL will also deal
with significant amounts of cash in its operations and we will
be subject to various reporting and anti-money laundering
regulations. Any violation of anti-money laundering laws or
regulations by ACDL could have a negative effect on our results
of operations.
The
global financial crisis and recession has affected our business
and financial condition, and may continue to affect us in ways
that we currently cannot accurately predict.
The continued credit crisis, recession and related turmoil in
the global financial system have had and may continue to have an
effect on our business and financial condition. We do not know
the duration or severity of the current economic downturn. If a
significant percentage of our lenders under our amended and
restated credit facility were to file for bankruptcy or
otherwise default on their obligations to us, we may not have
the liquidity to fund our current or future projects. There is
no certainty that our lenders will continue to remain solvent or
fund their respective obligations under our amended and restated
credit facility. Two of our prior lenders under our previous
credit facility filed for bankruptcy, and one such lender was
unable to fund its pro-rata share of amounts drawn under the
revolving credit commitment post bankruptcy filing.
The significant distress recently experienced by financial
institutions has had and may continue to have far reaching
adverse consequences across many industries, including the
gaming industry. The recent credit and liquidity crisis greatly
restricted the availability of capital and caused the cost of
capital (if available) to be much higher than it had
traditionally been. Volatility in the capital markets is
perceived to be high. The need to access the capital markets
could increase the costs of our projects, which could have an
impact on our flexibility to react to changing economic and
business conditions and our ability or willingness to fund our
development projects. All of these effects could have a material
adverse effect on our business, financial condition and results
of operations.
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Adverse
weather conditions, road construction, gasoline shortages and
other factors affecting our facilities and the areas in which we
operate could make it more difficult for potential customers to
travel to our properties and deter customers from visiting our
properties.
We believe that the vast majority of our customers drive to our
properties. Our continued success depends upon our ability to
draw customers from each of the geographic markets in which we
operate. Adverse weather conditions or road construction can
deter our customers from traveling to our facilities or make it
difficult for them to frequent our properties. In addition,
gasoline shortages or fuel price increases in regions that
constitute a significant source of customers for our properties
could make it more difficult for potential customers to travel
to our properties and deter customers from visiting. Our
dockside gaming facilities in Indiana and Louisiana, as well as
any additional riverboat or dockside casino properties that
might be developed or acquired, are also subject to risks, in
addition to those associated with land-based casinos, which
could disrupt our operations. Although none of our vessels leave
their moorings in normal operations, there are risks associated
with the movement or mooring of vessels on waterways, including
risks of casualty due to river turbulence, flooding, collisions
with other vessels and severe weather conditions.
Our
results of operations and financial condition could be
materially adversely affected by the occurrence of natural
disasters, such as hurricanes, or other catastrophic events,
including war and terrorism.
Natural disasters, such as major hurricanes, floods, fires and
earthquakes, could adversely affect our business and operating
results. Hurricanes are common in the areas in which our
Louisiana properties are located, and the severity of such
natural disasters is unpredictable. Our River City casino is
located in St. Louis, Missouri in an area along the
Mississippi River that has historically experienced flooding.
Although its foundation is built up to be above historical
flooding levels, there is no certainty that this will be
sufficient in future floods. In 2005, Hurricanes Katrina and
Rita caused significant damage in the Gulf Coast region. Our
former Biloxi, Mississippi facility was destroyed by Hurricane
Katrina. Our Boomtown New Orleans casino was forced to close for
34 days as a result of Hurricane Katrina. Hurricane Rita
caused significant damage in the Lake Charles, Louisiana area
and forced our LAuberge du Lac facility to close for
16 days, in addition to causing physical damage. In the
third quarter of 2008, 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
President Casino, and caused a power outage over the course of
two days at our Belterra Casino Resort in Indiana. In March
2011, our River Downs racetrack was forced to delay the opening
of live racing due to flooding from the Ohio River.
Catastrophic events, such as terrorist and war activities in the
United States and elsewhere, have had a negative effect on
travel and leisure expenditures, including lodging, gaming (in
some jurisdictions) and tourism. We cannot accurately predict
the extent to which such events may affect us, directly or
indirectly, in the future. We also cannot assure you that we
will be able to obtain or choose to purchase any insurance
coverage with respect to occurrences of terrorist acts and any
losses that could result from these acts. If there is a
prolonged disruption at our properties due to natural disasters,
terrorist attacks or other catastrophic events, our results of
operations and financial condition would be materially adversely
affected.
Our
gaming operations rely heavily on technology services and an
uninterrupted supply of electrical power. Our security system
and all of our slot machines are controlled by computers and
reliant on electrical power to operate.
The absence of sufficient electrical power or a failure of the
technology services needed to run our computers may cause us to
be unable to run all or parts of gaming operations. Any
unscheduled interruption in our technology services or
interruption in the supply of electrical power is likely to
result in an immediate, and possibly substantial, loss of
revenues due to a shutdown of our gaming operations. Such
interruptions may occur as a result of, for example,
catastrophic events or rolling blackouts. Our systems are also
vulnerable to damage or interruption from earthquakes, floods,
fires, telecommunication failures, terrorist attacks, computer
viruses, computer
denial-of-service
attacks and similar events.
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Natural
disasters have made it more challenging for us to obtain similar
levels of Weather Catastrophe Occurrence/Named Windstorm, Flood
and Earthquake insurance coverage for our properties compared to
the levels before the 2005 hurricanes.
Because of significant loss experience caused by hurricanes and
other natural disasters over the last several years, a number of
insurance companies have stopped writing insurance in
Class 1 hurricane areas, including Louisiana. Others have
significantly limited the amount of coverage they will write in
these markets and have dramatically increased the premiums
charged for this coverage. As a result, our policy limits for
Weather Catastrophe Occurrences/Named Windstorms, as well as
other losses, are significantly less than the policy limits we
had during the 2005 hurricane season. During that period, our
aggregate Weather Catastrophe Occurrence coverage was
$400 million per occurrence. Our coverage for a Named
Windstorm today is $200 million per occurrence, with a
deductible of 5% of stated values (up to a maximum
$20 million deductible). In addition, as a result of the
worldwide economic conditions, there has been uncertainty as to
the viability of certain insurance companies. While we believe
that the insurance companies from which we have purchased
insurance policies will remain solvent, there is no certainty
that this will be the case.
We may
incur property and other losses that are not adequately covered
by insurance, which may harm our results of
operations.
Although we maintain insurance that our management believes is
customary and appropriate for our business, we cannot assure you
that insurance will be available or adequate to cover all loss
and damage to which our business or our assets might be
subjected. The lack of adequate insurance for certain types or
levels of risk could expose us to significant losses in the
event that a catastrophe occurred for which we are uninsured or
underinsured. Any losses we incur that are not adequately
covered by insurance may decrease our future operating income,
require us to find replacements or repairs for destroyed
property and reduce the funds available for payments of our
obligations.
Climate
change, climate change regulations and greenhouse effects may
adversely impact our operations and markets.
There is a growing political and scientific consensus that
emissions of greenhouse gases, also referred to herein as
GHGs continue to alter the composition of the global
atmosphere in ways that are affecting and are expected to
continue affecting the global climate.
Climate change, including the impact of global warming, creates
physical and financial risk. Physical risks from climate change
include an increase in sea level and changes in weather
conditions, such as an increase in changes in precipitation and
extreme weather events. Climate change could have a material
adverse effect on our results of operations, financial
condition, and liquidity. We have described the risks to us
associated with extreme weather events above.
We may become subject to legislation and regulation regarding
climate change, and compliance with any new rules could be
difficult and costly. Concerned parties, such as legislators and
regulators, stockholders and non-governmental organizations, as
well as companies in many business sectors, are considering ways
to reduce GHG emissions. Many states have announced or adopted
programs to stabilize and reduce GHG emissions and federal
legislation has been proposed in Congress. While little progress
has been made on these proposals in Congress, it is likely that
federal legislation limiting GHG emissions may be imposed in the
United Sates soon. If such legislation is enacted, we could
incur increased energy, environmental and other costs and
capital expenditures to comply with the limitations. Unless and
until legislation is enacted and its terms are known, we cannot
reasonably or reliably estimate its impact on our financial
condition, operating performance or ability to compete. Further,
regulation of GHG emissions may limit our customers
ability to travel to our properties as a result of increased
fuel costs or restrictions on transport related emissions.
We could face increased costs related to defending and resolving
legal claims and other litigation related to climate change and
the alleged impact of our operations on climate change.
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Work
stoppages, organizing drives and other labor problems could
negatively impact our future profits.
We are currently a party to two collective bargaining agreements
at our River Downs facility. We are currently negotiating two
collective bargaining agreements with certain employees of
Lumière Place Casino and Hotel that are union-represented.
In addition, other of our employees have been approached by
unions. A lengthy strike or other work stoppages at any of our
casino properties or construction projects could have an adverse
effect on our business and results of operations. Labor unions
are making a concerted effort to recruit more employees in the
gaming industry. In addition, organized labor may benefit from
new legislation or legal interpretations by the current
presidential administration. We cannot provide any assurance
that we will not experience additional and more aggressive union
activity in the future.
We are
subject to litigation which, if adversely determined, could
cause us to incur substantial losses.
From time to time during the normal course of operating our
businesses, we are subject to various litigation claims and
legal disputes. Some of the litigation claims may not be covered
under our insurance policies, or our insurance carriers may seek
to deny coverage. As a result, we might also be required to
incur significant legal fees, which may have a material adverse
effect on our financial position. In addition, because we cannot
accurately predict the outcome of any action, it is possible
that, as a result of current
and/or
future litigation, we will be subject to adverse judgments or
settlements that could significantly reduce our earnings or
result in losses.
We
face environmental and archaeological regulation of our real
estate.
Our business is subject to a variety of federal, state and local
governmental statutes and regulations relating to activities or
operations that may have adverse environmental effects, such as
discharges to air and water and use, storage, discharge,
emission and disposal of hazardous materials and concentrated
animal feeding operations. These laws and regulations are
complex, and subject to change, and failure to comply with such
laws could result in the imposition of severe penalties or
restrictions on our operations by government agencies or courts
of law or the incurrence of significant costs of remediation of
spills, disposals or other releases of hazardous or toxic
substances or wastes. Under certain of these laws and
regulations, a current or previous owner or operator of property
may be liable for the costs of remediating contamination on its
property, without regard to whether the owner or operator knew
of, or caused, the presence of the contaminants, and regardless
of whether the practices that resulted in the contamination were
legal at the time that they occurred. We endeavor to maintain
compliance with environmental laws, but from time to time,
current or historical operations on, or adjacent to, our
property may have resulted or may result in noncompliance with
environmental laws or liability for cleanup pursuant to
environmental laws. A material fine or penalty, severe
operational or development restriction, or imposition of
material remediation costs could adversely affect our business.
In addition, the locations of our current or future developments
may coincide with sites containing archaeologically significant
artifacts, such as Native American remains and artifacts.
Federal, state and local governmental regulations relating to
the protection of such sites may require us to modify, delay or
cancel construction projects at significant cost to us.
We
face risks associated with growth and
acquisitions.
We regularly evaluate opportunities for growth through
development of gaming operations in existing or new markets,
through acquiring other gaming entertainment facilities or
through redeveloping our existing facilities. The expansion of
our operations, whether through acquisitions, development or
internal growth, could divert managements attention and
could also cause us to incur substantial costs, including legal,
professional and consulting fees. It is uncertain that we will
be able to identify, acquire, develop or profitably manage
additional companies or operations or successfully integrate
such companies or operations into our existing operations
without substantial costs, delays or other problems.
Additionally, it is uncertain that we will receive gaming or
other necessary licenses or governmental approvals for our new
projects or that gaming will be approved in jurisdictions where
it is not currently approved. Further, we may not have adequate
financing for such opportunities on acceptable terms.
For example, on January 28, 2011, we acquired the River
Downs racetrack in Cincinnati, Ohio for approximately
$45 million with the expectation that video lottery
terminals will become operational in Ohio. Before our
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acquisition of the River Downs racetrack, it had been operating
at a loss and may continue doing so in the future. If the video
lottery terminals do not become operational in Ohio, we will
likely incur further losses in connection with the River Downs
racetrack.
Risks
Related to our Indebtedness
Our
present indebtedness and projected future borrowings could
adversely affect our financial health; future cash flows may not
be sufficient to meet our obligations, and we may have
difficulty obtaining additional financing; and we may experience
adverse effects of interest rate fluctuations.
As of March 31, 2011, we had indebtedness of approximately
$1.2 billion. Our amended and restated credit facility
consists of a $375 million revolving credit facility, which
was undrawn as of March 31, 2011. Letters of credit of
$9.3 million were outstanding as of March 31, 2011
under our amended and restated credit facility.
While we believe that we have sufficient cash and
cash-generating resources to meet our debt service obligations
during the next 12 months, it is uncertain in the future
whether we will generate sufficient cash flow from operations or
through asset sales to meet our long-term debt service
obligations. Our present indebtedness and projected future
borrowings could have important adverse consequences to us, such
as:
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making it more difficult for us to satisfy our obligations with
respect to our existing indebtedness;
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limiting our ability to obtain additional financing without
restructuring the covenants in our existing indebtedness to
permit the incurrence of such financing;
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requiring a substantial portion of our cash flow to be used for
payments on the debt and related interest, thereby reducing our
ability to use cash flow to fund working capital, capital
expenditures and general corporate requirements;
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limiting our ability to respond to changing business, industry
and economic conditions and to withstand competitive pressures,
which may affect our financial condition;
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causing us to incur higher interest expense in the event of
increases in interest rates on our borrowings that have variable
interest rates or in the event of refinancing existing debt at
higher interest rates;
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limiting our ability to make investments, dispose of assets, pay
cash dividends or repurchase stock;
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increasing our vulnerability to downturns in our business, our
industry or the general economy and restricting us from making
improvements or acquisitions or exploring business opportunities;
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placing us at a competitive disadvantage to competitors with
less debt or greater resources; and
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subjecting us to financial and other restrictive covenants in
our indebtedness, the non-compliance with which could result in
an event of default.
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If we fail to generate sufficient cash flow from future
operations to meet our debt service obligations, we may need to
refinance all or a portion of our debt on or before its
maturity. In such circumstances, it is uncertain that we will be
able to refinance any of our debt. Our future operating
performance and our ability to service or refinance our debt
will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond our control.
Our borrowings under our revolving amended and restated credit
facility are at variable rates of interest, and to the extent
not protected with interest rate hedges, could expose us to
market risk from adverse changes in interest rates. We currently
have no such interest rate hedges. If interest rates increase,
our debt service obligations on the variable-rate indebtedness
could increase significantly even though the amount borrowed
would remain the same. This may only be partially offset by
earning higher rates of interest on surplus cash balances, if
any.
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Our
indebtedness imposes restrictive covenants on us.
Our amended and restated credit facility and the indentures
governing our senior notes and senior subordinated notes impose
various customary covenants on us and our subsidiaries. The
restrictions that are imposed under these debt instruments
include, among other obligations, limitations on our and our
subsidiaries ability to:
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incur additional debt;
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make payments on subordinated obligations;
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make dividends or distributions and repurchase stock;
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make investments;
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grant liens on our property to secure debt;
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enter into certain transactions with affiliates;
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sell assets or enter into mergers or consolidations;
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sell equity interests in our subsidiaries;
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create dividend and other payment restrictions affecting our
subsidiaries;
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change the nature of our lines of business;
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make capital expenditures;
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designate restricted and unrestricted subsidiaries; and
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amend or modify our subordinated indebtedness without obtaining
consents from the holders of our senior indebtedness.
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Our amended and restated credit facility imposes various
customary affirmative covenants on us and our restricted
subsidiaries, including, among others, reporting covenants,
covenants to maintain insurance, comply with laws and maintain
properties and other covenants customary in senior credit
financings of this type. In addition, our amended and restated
credit facility requires that we comply with various restrictive
maintenance financial covenants, including an interest coverage
ratio, a debt to annualized Adjusted EBITDA (as defined) ratio,
and capital spending limits.
Furthermore, the covenants in our amended and restated credit
facility include a requirement that an in-balance
test be satisfied for each development project involving a
commitment of funds equal to or exceeding $75 million. In
general, the in-balance test requires that, as of
the date of determination prior to commencement of construction,
as such term is defined in our amended and restated credit
facility, the estimated sources of funds for the project exceed
the estimated projected uses of funds for such project and for
all other projects for which construction has commenced for the
period from such date of determination through the date six full
months after the scheduled opening date of such project. We
cannot assure you that we will be able to meet the
in-balance test for each of our projects on the
applicable determination date.
Our ability to comply with the covenants contained in the
instruments governing our indebtedness may be affected by
general economic conditions, industry conditions, and other
events beyond our control, including delay in the completion of
new projects under construction. As a result, we cannot assure
you that we will be able to comply with these covenants. Our
failure to comply with the covenants contained in the
instruments governing our indebtedness, including our amended
and restated credit facility and the indentures governing our
senior notes and senior subordinated notes, including failure to
comply as a result of events beyond our control, could result in
an event of default, which could materially and adversely affect
our operating results and our financial condition and our
ability to comply with the conditions of the Louisiana Gaming
Control Board in connection with our LAuberge
Casino & Hotel Baton Rouge project discussed in
another risk factor above.
If there were an event of default under one of our debt
instruments, the holders of the defaulted debt could cause all
amounts outstanding with respect to that debt to be due and
payable, subject to applicable grace periods. This could trigger
cross-defaults under our other debt instruments. We cannot
assure you that our assets or cash flow
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would be sufficient to repay borrowings under our outstanding
debt instruments if accelerated upon an event of default, or
that we would be able to repay, refinance or restructure the
payments on any of those debt instruments.
Servicing
our indebtedness will require a significant amount of cash, and
our ability to generate sufficient cash depends on many factors,
some of which are beyond our control.
We cannot assure you that our business will generate sufficient
cash flow from operations, that our anticipated revenue growth
will be realized, or that future borrowings will be available to
us under our amended and restated credit facility in amounts
sufficient to enable us to pay our indebtedness or to fund our
other liquidity needs. In addition, as we undertake substantial
new developments or facility renovations or if we consummate
significant acquisitions in the future, our cash requirements
and our debt service requirements may increase significantly.
If we fail to generate sufficient cash flow from future
operations to meet our debt service obligations, we may need to
refinance all or a portion of our debt on or before maturity. We
cannot assure you that we will be able to refinance any of our
debt, including our amended and restated credit facility, the
senior notes and the senior subordinated notes, on attractive
terms, commercially reasonable terms or at all, particularly
because of our anticipated high levels of debt and the debt
incurrence restrictions imposed by the agreements governing our
debt. Our amended and restated revolving credit facility matures
in March 2014. Our future operating performance and our ability
to service, extend or refinance our indebtedness will be subject
to future economic conditions and to financial, business and
other factors, many of which are beyond our control.
Risks
Related to Ownership of our Common Stock
The
market price for our common stock may be volatile, and you may
not be able to sell our stock at a favorable price or at
all.
Many factors could cause the market price of our common stock to
rise and fall, including:
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actual or anticipated variations in our quarterly results of
operations;
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changes in market valuations of companies in our industry;
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changes in expectations of future financial performance;
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fluctuations in stock market prices and volumes;
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issuances of common stock or other securities in the future;
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the addition or departure of key personnel; and
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announcements by us or our competitors of acquisitions,
investments, dispositions, joint ventures or other significant
business decisions.
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It is possible that the proceeds from sales of our common stock
may not equal or exceed the costs and fees of making the sales
or the taxes required to be paid, if any, upon receipt of shares
of our common stock under the Owners Club Stock Program.
The federal income tax consequences of membership in the
Owners Club Stock Program are more fully discussed in
response to Question 14 below.
Substantial
sales of our common stock, or the perception that such sales
might occur, could depress the market price of our common
stock.
Substantially all of the shares of our common stock are eligible
for immediate resale in the public market. We cannot predict
whether future issuances of our common stock or resales in the
open market will decrease the market price of our common stock.
The exercise of any options or the vesting of any restricted
stock units granted to directors, executive officers and other
employees under our 2005 Equity and Performance Incentive Plan,
the issuance of common stock or units in connection with
property, portfolio or business acquisitions and other issuances
of our common stock could have an adverse effect on the market
price of our common stock. In addition, future issuances of our
common stock may be dilutive to existing stockholders. Any sales
of substantial amounts of
17
our common stock in the public market, or the perception that
such sales might occur, could lower the market price of our
common stock.
Since
our ability to pay cash dividends on our common stock is limited
under our debt agreements, our stock may be less desirable as an
investment and have a lower market price than it might if we
paid dividends.
Our ability to pay cash dividends on our common stock is limited
under our debt agreements. As a result, we intend to apply any
available cash flow to repay indebtedness and to the expansion
and development of our business. Our failure to pay dividends on
our common stock may make it less desirable as an investment,
which could impact the market price for our common stock.
We are
subject to extensive laws and governmental regulations that
impose restrictions on the ownership and transfer of our
securities.
We are subject to extensive laws and governmental regulations
that relate to our current or future gaming operations and that
impose certain restrictions on the ownership and transfer of our
securities, including our common stock. Ownership and transfer
of our securities could be subjected at any time to additional
or more restrictive laws and regulations, including laws and
regulations in applicable jurisdictions where there are no
current restrictions on the ownership and transfer of our
securities or in new jurisdictions where we may conduct our
operations in the future. A summary of such laws and
regulations, including requirements under gaming laws of the
jurisdictions in which we operate, can be found in the reports
we file with the SEC and is incorporated by reference into this
prospectus.
USE OF
PROCEEDS
We will not receive any proceeds from the offering of our common
stock to the members of our Owners Club Stock Program.
Customers who have earned or obtained 175,000 points in their
mychoice account and who meet certain eligibility
requirements are eligible to apply for membership in our
Owners Club Stock Program. Those of our customers who are
accepted as members in our Owners Club Stock Program are
granted a one-time award of shares of our common stock, either
in a fixed amount or based on a fixed value, as selected by our
President and Chief Executive Officer in his sole discretion. At
the commencement of the program, it is contemplated that new
members will be awarded either 100 shares of our common
stock or a number of shares of our common stock valued at
$1,500. The fair value of the shares awarded under the
Owners Club Stock Program is not based on the amount of
points that a member of the Owners Club Stock Program has
earned or obtained in their mychoice account or the
amount of money spent by the member on specified gambling
activities at our casinos. Upon issuance of the shares, we will
incur an expense based on the fair value of the shares on the
date issued.
INFORMATION
ABOUT THE PROGRAM
We are offering participants in our mychoice customer
loyalty program who are individuals and who meet certain
eligibility standards the opportunity to apply for membership in
the Owners Club Stock Program. Upon becoming a member of
the Owners Club Stock Program, we will award a member a
one-time grant of shares of our common stock as further
described below. The information presented in the following
question and answer format constitutes all of the terms and
conditions of membership in the Owners Club Stock Program.
Information
about the Owners Club Stock Program and its
Purpose
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1.
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What is
the Owners Club Stock Program and its purpose?
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The Owners Club Stock Program offers incentives to
customers who gamble at our casinos throughout the United
States. Upon becoming a member of the Owners Club Stock
Program, a customer will be granted a one-time award of shares
of our common stock as further described below.
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To be eligible for membership in the Owners Club Stock
Program, an individual must be a participant in our mychoice
customer loyalty program. Our mychoice customer
loyalty program rewards our customers by awarding them mycash
and tier points based on money spent on specified gambling
activities at our casinos. Participants may use their earned
mycash to pay for hotel stays, food, retail purchases and
gambling and may also convert it into cash. Tier points allow a
participant to reach higher tiers of benefits under the
mychoice customer loyalty program. Our mychoice
customer loyalty program has five tiers, and the
Owners Club is the highest tier. Participants start
earning tier points at the start of each calendar year, and
their tier point totals are reset to zero on January 1 of each
year. Once a participant accumulates the tier points necessary
to achieve a new tier, such participant is eligible to be
upgraded to such new tier for the rest of the calendar year.
Each participant starts each new year at a tier based on such
participants previous years point total.
Participants earn one tier point per $5 slot coin-in or $10
video poker coin-in. In addition, participants earn tier points
for table games based on the particular game, the length of play
and the bet amount. The tier points accumulate in each
participants mychoice account.
Customers who have earned or obtained 175,000 tier points in
their mychoice account are eligible to be upgraded to the
Owners Club tier of the mychoice customer loyalty
program, and, after being upgraded to the Owners Club
tier, may apply for membership in the Owners Club Stock
Program. It is possible to become a member of the Owners
Club tier of the mychoice customer loyalty program
without also applying for membership in or being a member of the
Owners Club Stock Program.
Many of our competitors have loyalty programs that give
customers credits or points which may be used for free hotel
stays, meals or merchandise, or other types of awards for their
brand loyalty. Our research has indicated that awards programs
are a feature that many potential customers consider in
selecting casinos. We believe that our Owners Club Stock
Program provides its members with a unique and valuable reward
for their loyalty to our brands that is more immediate and
tangible than most of the awards under our competitors
programs.
Benefits
and Disadvantages
2. What
are the benefits and disadvantages of becoming a member of the
Owners Club Stock Program?
Benefits
Award of Shares of Common Stock. Upon becoming
a member of the Owners Club Stock Program, a new member
will be granted a one-time award of shares of our common stock,
either in a fixed amount of shares of our common stock or based
on a fixed value, as selected by our President and Chief
Executive Officer in his sole discretion. At the commencement of
the program, it is contemplated that new members will be awarded
either 100 shares of our common stock or a number of shares
of our common stock valued at $1,500 (as further described
below). The fixed amount of shares that we award or the fixed
value of shares that we award under the Owners Club Stock
Program may change in the future, and we plan to supplement this
prospectus in the event of such a change in the fixed amount of
shares or the fixed value of shares awarded under the program.
Brokerage Account. To receive your award of
our common stock under the Owners Club Stock Program, you
must first open a brokerage account with the Agent at no cost to
you.
Sales and Withdrawals of Shares. Shares held
in your brokerage account with the Agent may be sold or
withdrawn at any time by notifying the Agent. You may not sell
or withdraw any shares until they have actually been credited to
your brokerage account with the Agent. No shares will be
credited to your brokerage account with the Agent until after
you have been accepted as a member of the Owners Club
Stock Program. You may instruct the Agent to sell all or any
portion of the shares of common stock in your brokerage account
with the Agent, with the proceeds from such sale being delivered
to you in the manner you specify. Pursuant to the terms of the
Agent Agreement we have entered into with the Agent, the Agent
will not charge you any fees for activity (or inactivity) in
your brokerage account with the Agent with respect to the shares
received under the Owners Club Stock Program. See
Questions 11 and 12 below with respect to the procedure to
withdraw shares from your brokerage account with the Agent.
Book Entry Form Ownership Protects against
Loss. All shares of common stock held in your
brokerage account with the Agent will be held in book entry
form. Book entry ownership provides protection against
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certificates being lost, misplaced or stolen. You may request a
certificate for all or a portion of the shares of common stock
credited to your account as further described in response to
Questions 10, 11 and 12 below.
Disadvantages
There are several potential disadvantages of being a member of
the Owners Club Stock Program. These include:
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If your stock award is based on a fixed value, as opposed to a
fixed amount of shares of our common stock, you will not know
the number of shares of common stock you are eligible to receive
as a one-time stock award in the Owners Club Stock Program
at the time of applying for membership because the number of
shares is determined by dividing the fixed value of your stock
award by the closing sales price of our common stock on the New
York Stock Exchange, also referred to herein as the
NYSE, on the day on which you are accepted as a
member of the program (if the day is a trading day; if the day
is not a trading day, we will use the closing sales price of our
common stock on the NYSE for the next following trading day),
rounded up to the nearest whole share.
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Receipt of the one-time award of shares of our common stock may
have adverse tax consequences to you, as further discussed in
response to Question 14.
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Your membership in our Owners Club Stock Program may be
cancelled for the reasons noted in the response to Question 13,
such as violating the terms and conditions of the program or
applicable laws or the commission of fraud or abuse involving
the program. Further, we may unilaterally, and in our sole
discretion, suspend, discontinue or cancel our Owners Club
Stock Program (as well as the mychoice customer loyalty
program; if your mychoice account is canceled or
terminated, any points you may have accumulated in your
mychoice account will be automatically cancelled and
forfeited without any consideration) at any time. Also, we may
unilaterally and in our sole discretion change, limit, modify or
eliminate terms and conditions of our Owners Club Stock
Program (as well as the mychoice customer loyalty
program) at any time.
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Marketing
and Administration
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3.
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Who will
administer the Owners Club Stock Program and act as
Pinnacles Agent?
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Our Owners Club Stock Program will be operated and
administered by Pinnacle by its Office of General Counsel. The
members of Pinnacles Office of General Counsel are the
only officers and employees of Pinnacle authorized to respond to
questions about the Owners Club Stock Program. We will not
compensate the members of our Office of General Counsel
specifically for their services in administering the
Owners Club Stock Program. You may direct questions to our
Office of General Counsel at:
Pinnacle Entertainment, Inc.
Office of General Counsel
8918 Spanish Ridge Avenue
Las Vegas, Nevada 89148
1-877-764-8750
We have engaged Wunderlich Securities, Inc., a Tennessee
corporation and registered broker-dealer, to act as our agent in
connection with the enrollment of members and the issuance of
shares of our common stock to new members. We refer to
Wunderlich Securities, Inc. in this capacity as the
Agent in this prospectus.
We will pay the Agent a fee for its services in administering
the Owners Club Stock Program in an amount equal to $500
per brokerage account set up by the Agent under the Owners
Club Stock Program, which fee is capped at $275,000 during the
three-year term of the Agents engagement, assuming that
the Agent sets up no more that 550 brokerage accounts under the
program during this time. In the event that the Agent sets up
more than 550 brokerage accounts under the Owners
Club Stock Program during the three-year term, we will pay the
Agent an amount not to exceed $450 per brokerage account for
each account in excess of 550. The described fees are intended
to cover all of the Agents costs and expenses in
administering the Owners Club Stock Program, except that
we will reimburse the
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Agent for the Agents reasonable
out-of-pocket
costs and expenses of legal counsel in an amount not to exceed
$35,000. These fees may change from time to time upon mutual
agreement between us and the Agent.
Your relationship with the Agent will be governed by the terms
of the new account application you submitted to the Agent to
open your brokerage account with the Agent. Pursuant to the
terms of the Agent Agreement we have entered into with the
Agent, the Agent will not charge you any fees for the
maintenance of and activity (or inactivity) in your brokerage
account with the Agent with respect to the shares received under
the Owners Club Stock Program. You must contact
the Agent to receive further information about your relationship
with the Agent and its services. You may direct questions to the
Agent at:
Wunderlich Securities, Inc.
6000 Poplar Avenue, Suite 150
Memphis, Tennessee 38119
1-800-726-0557
Pursuant to the terms of the Agent Agreement between Pinnacle
and the Agent, the Agent will process membership applications,
conduct know-your-client checks on applicants and establish a
brokerage account on its records for each member of the
Owners Club Stock Program. The Agent will not have any
duties or responsibilities for the maintenance of the
mychoice program or mychoice accounts, or any
determination by us to terminate a member. We have agreed to
indemnify the Agent against certain liabilities, including
liabilities under the Securities Act, or to contribute to
payments the Agent may be required to make, related to the
Agents services in administering the Owners Club
Stock Program.
Our transfer agent, American Stock Transfer and
Trust Company, LLC, will provide customary transfer agent
services to us in our administration of the program, but will
not provide any services specifically tailored to the
Owners Club Stock Program. We pay our transfer agent a fee
for providing transfer agent services to us, but will not
compensate our transfer agent specifically for any services
provided related to our Owners Club Stock Program.
In administering the Owners Club Stock Program, neither
the Agent nor Pinnacle will be liable for any act or omission to
act done in good faith, including, without limitation, any claim
for liability arising out of failure to terminate your account
upon your death prior to receipt of written notice of such
death. Neither the Agent nor Pinnacle will have any duties,
responsibilities or liabilities with respect to the Owners
Club Stock Program except those which are expressly set forth in
this prospectus.
Membership
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4.
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Who is
eligible to apply for membership in the Owners Club Stock
Program?
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All individuals who (i) are participants in our mychoice
customer loyalty program and have been admitted into the
Owners Club tier of our mychoice customer loyalty
program, (ii) are U.S. citizens or permanent residents
of the United States, and (iii) have not been convicted of
a felony are eligible to apply for membership in our
Owners Club Stock Program.
All individuals who are customers of any of our casinos and at
least 21 years of age are eligible to become participants
of the mychoice customer loyalty program. All individuals
who (i) are participants in our mychoice customer
loyalty program, and (ii) have earned or obtained 175,000
tier points under our mychoice customer loyalty program
are eligible to be admitted into the Owners Club tier of
our mychoice customer loyalty program. We reserve the
right to deny admitting any eligible participant in our
mychoice customer loyalty program into the Owners
Club tier of our mychoice customer loyalty program if
such participant (i) is indebted to us and any part of the
indebtedness is past due, or (ii) is barred from being on
the premises of any of our facilities.
Legal entities, such as corporations, are prohibited from
enrolling.
Some employers may prohibit or restrict employee participation
in the Owners Club Stock Program. We assume no
responsibility or liability for compliance with any of these
prohibitions or restrictions.
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5.
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How do I
apply for membership in and become a member of the Owners
Club Stock Program?
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The Agent will deliver a copy of this prospectus together with a
membership application form, the Agents new account
application and other documentation required by the Agent to
each individual who we believe is eligible for membership in the
Owners Club Stock Program. Individuals who want to find
out more information about the Owners Club Stock Program
may also contact us directly to request copies of this
prospectus and the application materials by calling toll-free
1-877-764-8750.
To apply, an individual must complete the membership application
form, the Agents new account application and other
documentation required by the Agent and send them to the Agent
at the address listed in the application materials or as
otherwise instructed by the Agent or us. Before you are admitted
as a member, the Agent must first determine that the Agent and
we are not barred from doing business with you (a so-called
know-your-client process). If we plan to accept you
as a member, the Agent will contact you to set up a brokerage
account with the Agent. You must set up a brokerage account with
the Agent before you can receive your award of shares of our
common stock under the Owners Club Stock Program.
You must deliver a fully-completed set of the application
materials to the Agent or us within 180 days after your
receipt of the application materials from the Agent or us to
remain eligible for membership in the Owners Club Stock
Program.
We reserve the right to deny any eligible applicant admission to
the Owners Club Stock Program if (i) such applicant
resides in a jurisdiction where the offering, selling or
soliciting offers on sales of our common stock would be
unlawful, (ii) admitting such applicant would cause us or
the Agent to violate any federal, state or local law or
regulation, (iii) such applicant is indebted to us and any
part of the indebtedness is past due, (iv) such applicant
is barred from being on the premises of any of our facilities,
or (v) we or the Agent do not receive a complete set of
fully-completed application materials from such participant
within 180 days after such applicants receipt of the
application materials from the Agent or us.
Because membership in our Owners Club Stock Program is
open only to U.S. citizens and permanent residents of the
United States, we will not deliver application materials to
individuals whose primary address on our records is outside of
the United States. Individuals with primary addresses outside of
the United States who believe that they are eligible for
membership in our Owners Club Stock Program should contact
our Office of General Counsel at the address or telephone number
listed above for instructions on how to apply for membership.
To become a participant in the mychoice customer loyalty
program, you may enroll at one of our casinos.
Stock
Award and Costs, Expenses and Fees
6. When
will my stock be issued upon becoming a member of the
Owners Club Stock Program, and how many shares will I
receive?
We expect that the Agent will deliver stock awards to new
members of the Owners Club Stock Program within
10 days of the last business day of each calendar month
with respect to new members who have successfully completed the
application process through the last business day of such month.
Each new member will receive a one-time stock award of shares of
our common stock either in a fixed amount or based on a fixed
value, as selected by our President and Chief Executive Officer
in his sole discretion. At the commencement of the program, it
is contemplated that new members will be awarded 100 shares
of our common stock or shares of our common stock valued at
$1,500. If your stock award is based on a fixed value, as
opposed to a fixed amount of shares of our common stock, the
number of shares you will receive as a one-time stock award upon
first becoming a member of the Owners Club Stock Program
will be determined by dividing the fixed value by the closing
sales price of our common stock on the NYSE on the day on which
you are accepted as a member of the program (if that day is a
trading day; if that day is not a trading day, we will use the
closing sales price of our common stock on the NYSE for the next
following trading day), rounded up to the nearest whole share.
We will not issue any fractional shares in connection with the
one-time stock award. The Agent will act as our agent in
connection with the issuance of our shares of common stock under
the Owners Club Stock Program and will deposit your shares
into your brokerage account with the Agent.
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7. How
will I receive my shares under the Owners Club Stock
Program?
To receive your award of shares of our common stock under the
Owners Club Stock Program, you must first open a brokerage
account with the Agent at no cost to you.
8. What
are the costs, expenses and fees I will have to pay in
connection with my membership in the Owners Club Stock
Program?
Membership in our Owners Club Stock Program (as well as
participation in our mychoice customer loyalty program)
is free. Pursuant to the terms of the Agent Agreement, the Agent
will not charge you any fees for the maintenance of and activity
(or inactivity) in your brokerage account with the Agent with
respect to the shares received under the Owners Club Stock
Program. If you transfer the shares of our common stock received
under the Owners Club Program into a brokerage account
with another broker, you may incur fees imposed by such broker
for the maintenance of and activity (or inactivity) in your
brokerage account.
Question 14 addresses the tax consequences of participation in
the Owners Club Stock Program.
Reports
to Members
9. What
information will I be provided regarding my membership in the
Owners Club Stock Program after applying for
membership?
The Agent will notify you upon setting up your brokerage account
with the Agent. The Agent will also deliver to you a welcome kit
containing information about the account and the Agents
services.
So long as you hold your shares of our common stock issued under
the Owners Club Stock Program in a brokerage account with
the Agent or another broker, the Agent or such other broker will
send you recurring statements of account as required by
applicable laws and regulations and in accordance with their
respective customary procedures.
All notices sent from the Agent to you will be mailed to you at
the address shown on the records of the Agent or you may request
to receive email notifications by completing the Agents
email notification form. It is important that you inform the
Agent of any changes in your contact information.
Members in our Owners Club Stock Program who hold shares
of our common stock through their brokerage accounts with the
Agent or another broker are beneficially owning shares through a
nominee (often referred to as being street name
holders). All of our stockholders who hold shares of our common
stock through nominees receive stockholder communications from
their respective nominees and are able to vote their shares in
accordance with applicable securities laws and regulations. See
Question 16 below for more information about voting shares
received under the Owners Club Stock Program.
A participant in our mychoice customer loyalty program
who was not a holder of our common stock before becoming a
member of the Owners Club Stock Program will become a
member of the Owners Club Stock Program and a stockholder
upon the date on which we issue the one-time stock award to such
participant. This date will be a date later than the date on
which such participant accumulated 175,000 points in his or her
mychoice account and applied for membership because of
the time it takes to report accumulated points in your
mychoice account and to thereafter complete the
application process and distribute the award of shares under our
Owners Club Stock Program.
Share
Certificates
10. Will
I receive certificates for shares of common stock awarded under
the Owners Club Stock Program?
Unless you request them, certificates for shares of our common
stock awarded under the Owners Club Stock Program will not
be issued to you. In fact, to accept your award of shares of our
common stock under the Owners Club Stock Program, you must
receive them in a brokerage account with the Agent. This
safekeeping feature protects against loss, theft or destruction
of stock certificates. Certificates may be issued to you upon
your request for whole shares withdrawn from the program. See
Question 11.
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Transfer,
Sale and Withdrawal of Shares
11. How
may I transfer, sell or receive certificates for shares received
under the Owners Club Stock Program?
After we have issued shares of our common stock under the
Owners Club Stock Program, you are free to dispose of the
shares in your discretion. You should contact the Agent if you
desire to transfer your shares from your brokerage account with
the Agent into a brokerage account with another broker, sell
your shares or have your shares certificated. Pursuant to the
terms of the Agent Agreement, the Agent will not charge you any
fees for such services with respect to the shares received under
the Owners Club Stock Program. After you have transferred
the shares of our common stock received under the Owners
Club Stock Program from your brokerage account with the Agent
into a brokerage account with another broker, you should contact
such other broker if you desire to transfer your shares, sell
your shares or have your shares certificated.
12. What
happens to any fractional interest when I transfer, sell or
certificate shares received under the Owners Club Stock
Program?
If you hold your shares of our common stock received under the
Owners Club Stock Program in a brokerage account with the
Agent or another broker, you should contact the Agent or such
other broker regarding the treatment of any fractional interest
in your brokerage account. In no case will certificates
representing a fractional interest be issued.
Discontinuation
of Membership
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13.
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How will
my membership in the Owners Club Stock Program be
terminated?
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We may terminate your membership in our Owners Club Stock
Program for any of the following reasons:
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You violate the terms and conditions then in effect;
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You misrepresent any information or misuse the program;
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You violate any federal, state or local law or regulation in
connection with your membership in the program, or cause us or
the Agent to violate any federal, state or local law or
regulation by having you as a member of the program;
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You commit a fraud or abuse involving any portion of the
Owners Club Stock Program or the mychoice customer
loyalty program; or
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You act, in any other way, to the detriment of the program.
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If your membership in the Owners Club Stock Program is
terminated after you have received your one-time award of shares
of our common stock, you will not be required to return those
shares of common stock to us.
Federal
Tax Information
14. What
are the federal income tax consequences of membership in the
Owners Club Stock Program?
Your membership in the Owners Club Stock Program will have
certain consequences from a U.S. federal income tax
standpoint. Because the Owners Club Stock Program is
unique, there are limited applicable legal precedents, and we
are not able to describe all of the material U.S. federal
income tax consequences with certainty. The following discussion
is what we expect the U.S. federal income tax consequences
to be, but you should check with your own tax advisers regarding
the tax treatment of your membership in the Owners Club
Stock Program.
A member may be required to include in the members gross
taxable income, for the tax year in which the shares of common
stock are received, the fair market value of the shares of
common stock received by a member in the Owners Club Stock
Program.
Under certain customer loyalty programs, customers may not be
required to include the fair market value of program benefits
received in their gross taxable income, either because,
(i) in some instances, the fair market value
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of the benefit received by the customer is viewed under
U.S. federal income tax law as a rebate which merely
adjusts the price of the goods or services purchased by the
customer, or, (ii) in other instances, the Internal Revenue
Service has announced it will not enforce its position that a
benefit received by the customer (or the customers
employee) is a taxable benefit under federal income tax law.
The receipt of shares of our common stock by members in the
Owners Club Stock Program should be analogous to the
receipt by casino patrons of other types of
complimentary benefits, commonly referred to as
comps. Current industry practice is to treat
complimentary benefits of this kind, which are granted in
connection with a rewards program of which the patron was aware
prior to his or her patronage, as a rebate which adjusts the
price paid by the patron for the casinos services. Under
this result, the member should not be required to include in his
gross taxable income the value of the shares of common stock
received under the Owners Club Stock Program.
It is not certain, however, that this is the proper treatment
under current U.S. federal income tax law. The United
States Tax Court has held that the complimentary benefits
provided to a single casino patron constituted taxable income to
that patron, and that, because the complimentary benefits in
that instance bore a close relationship to gambling activities,
the taxable income from those benefits also constituted gains
from wagering for the purposes of deducting gambling losses from
such income, as discussed in more detail below.
In general, a taxpayer may deduct his or her gambling losses
only to the extent of his or her gambling winnings. If the
gambler does not use losses in a given tax year, the tax
benefits associated with gambling losses are lost forever, as
there is no ability to carry forward or carry back such losses.
For married couples filing jointly, the combined gambling losses
of the spouses from gambling activities are allowed to the
extent of the combined gambling winnings of the spouses.
As discussed above, it is possible that the value of the shares
of our common stock received by our customers under the
Owners Stock Club Program may constitute gambling winnings
for the purposes of determining the amount of gambling losses
available for deduction in the applicable tax year.
Alternatively, it is possible that the value of shares of our
common stock received may offset against the purchase price of
the members patronage as a rebate. If this is the correct
result under U.S. federal income tax law, then the amount
of losses otherwise available for deduction should be reduced by
the fair market value of the stock on the date of grant.
A member in the Owners Stock Club Program should have a
tax basis in the shares of common stock he or she receives. This
tax basis may be equal to the fair market value of such shares
of common stock on the date they are received by the members.
Upon a sale of the members stock acquired through
membership in the Owners Stock Club Program, the member
should realize a capital gain or loss equal to the difference
between the amount of his or her net sales proceeds and his or
her tax basis, if any, in the stock sold. If the member holds
the shares for more than one year, then his or her gain or loss
should be long-term and taxed, if it is a gain, at the then
applicable long-term capital gains rate. If the member holds the
shares for less than one year, his or her gain or loss should be
short-term and taxed, if it is a gain, at the then applicable
short-term capital gains rate.
Gains from wagering transactions are subject to withholding. If
we determine that we are required to withhold taxes with respect
to any transfer of common stock under the Owners Stock
Club Program, we may do so by withholding from such transfer a
number of shares of common stock (otherwise to be issued to the
member under the Owners Stock Club Program) which equal in
value the amount of any taxes required to be withheld by us.
Alternatively, we may require you to fund with cash from other
sources the amount of required withholding.
The above is intended only as a general discussion of the
current U.S. federal income tax consequences of membership
in the Owners Club Stock Program by an individual who is a
U.S. resident. No attempt has been made to discuss any
state or foreign tax consequences, or consequences to persons
who are not U.S. resident individuals. For a more detailed
discussion regarding the federal, state, and foreign tax
consequences of membership in the Owners Club Stock
Program, you should consult your own tax advisers. If you hold
your shares of our common stock received under the Owners
Club Stock Program in a brokerage account with the Agent or
another broker, the Agent or such other broker may provide
certain account information to you, including information
regarding your tax basis in the shares, as may be required by
U.S. federal income tax law.
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Other
Information
15. What
happens if we issue a stock dividend, declare a stock split or
have a rights offering with respect to our common
stock?
Any shares of common stock resulting from a stock dividend or
stock split of our common stock (including whole shares and any
fractional shares) held by you will be credited to you. The
basis for any rights offering will include the shares of common
stock and any fractional interest credited to you. The terms of
the Owners Club Stock Program will be adjusted to reflect
stock dividends, stock splits, recapitalizations and similar
changes. We note that trading in our common stock, as well as
processing of transactions in our common stock, may either be
curtailed or suspended until the completion of any such stock
dividend, stock split or other corporate action.
16. How
will I vote shares received under the Owners Club Stock
Program at a meeting of stockholders?
If you hold shares of our common stock in a brokerage account
with the Agent or another broker, the Agent or such other broker
will send you a voting instruction form and other proxy
materials in connection with any meeting of stockholders with
respect to shares of our common stock in your brokerage account.
If the voting instruction form with respect to the shares of our
common stock in your brokerage account is returned properly
signed and marked for voting, all shares (including whole shares
and fractional interests) held in your brokerage account will be
voted in accordance with your instructions. If you do not give
proper voting instructions to the Agent or such other broker,
the Agent or such other broker may vote the shares in your
brokerage account with respect to discretionary
items, but not with respect to non-discretionary
items. Discretionary items are proposals considered routine
under the rules of the NYSE. On non-discretionary items for
which you do not give the Agent or such other broker
instructions, your shares will not be voted.
If you are a record owner of any shares of our common stock,
that is, you hold shares of our common stock directly in your
name and not in a brokerage account with the Agent or another
broker, you will receive a proxy card and proxy materials
directly from us for those shares. If the proxy card with
respect to the shares of our common stock you own of record is
returned properly signed and marked for voting, all such shares
(including whole shares and fractional interests) will be voted
in accordance with your instructions. If you do not sign your
proxy card, the person(s) identified on the proxy card as your
proxy will not be able to vote your shares in accordance with
your instructions. If you sign your proxy card but do not give
proper voting instructions, the person(s) identified on the
proxy card as your proxy will vote your shares in a manner
disclosed in the proxy materials for the stockholders
meeting in question. You may also vote your shares in person by
attending the stockholders meeting.
17. What
is the relationship between you, the Agent or your broker, us
and our transfer agent?
Your brokerage account with the Agent or, if you transfer the
shares of our common stock received under the Owners Club
Program into a brokerage account with another broker, such
brokerage account, will be governed by the terms of any client
agreement, if any, between you and the Agent or such other
broker, respectively. We and our transfer agent are not parties
to that agreement, nor are we or our transfer agent involved in
the relationship between you and the Agent or such other broker.
You should direct all questions regarding your brokerage account
to the Agent or such other broker. Pursuant to the terms of the
Agent Agreement we have entered into with the Agent, the Agent
will not charge you any fees for the maintenance of or activity
(or inactivity) in your brokerage account with the Agent with
respect to the shares received under the Owners Club Stock
Program. If you transfer the shares of our common stock received
under the Owners Club Program into a brokerage account
with another broker, you may incur fees imposed by such broker
for the maintenance of and activity (or inactivity) in your
brokerage account
18. May
the Owners Club Stock Program be discontinued or
modified?
We reserve the right to suspend, discontinue or cancel the
Owners Club Stock Program (as well as the mychoice
customer loyalty program) at any time. In the event that the
Owners Club Stock Program is suspended, discontinued or
cancelled, you will cease to be a member of the program, and
will no longer have any of the rights of a member under the
program. If the Owners Club Stock Program is suspended,
discontinued or cancelled after you have received your one-time
award of shares of our common stock, you will not be required to
return those shares of common stock to us.
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The terms and conditions of our Owners Club Stock Program
are described in full in this prospectus under the caption
Information about the Program. We reserve the right
to change, limit, modify or eliminate such terms and conditions
(including the number of shares of common stock issued upon
becoming a member of the program), regulations, benefits,
conditions of participation, rewards and reward levels in whole
or in part at any time. You will be bound by any such changes.
Any such changes in the terms or conditions will be shown in a
supplement to this prospectus, which will be mailed to you at
the address shown on our records, and will be effective
immediately unless stated otherwise. Therefore, it is important
that you inform both our Office of General Counsel and the Agent
at the addresses or telephone numbers listed above of any
changes in your contact information.
The Agent is a registered broker-dealer and subject to laws and
regulations governing its activities and its relationship with
you. Changes in such laws and regulations may affect the
Agents relationship with you or require modification of
the terms of the Owners Club Stock Program. The Agent will
notify you of any changes in its relationship with you to the
extent required by such laws and regulations.
19. May
I pledge shares received under the Owners Club Stock
Program?
You will be able to pledge as collateral for security based
lending (margin debt) your shares of our common stock received
under the Owners Club Stock Program held in your brokerage
account with the Agent or another broker on the terms offered by
the Agent or such other broker, if any.
20. What
is the source of the shares of our common stock issued under the
Owners Club Stock Program?
Shares of our common stock issued under the Owners Club
Stock Program will be issued directly by us.
21. How
will the terms and conditions of the Owners Club Stock
Program be interpreted?
Any question of interpretation of the terms or conditions of the
Owners Club Stock Program (as well as the mychoice
customer loyalty program) will be determined by us, and that
determination will be final. We may adopt additional terms and
conditions, or we may modify or eliminate any of the existing
terms and conditions. The operation of, and all transactions in
connection with, the Owners Club Stock Program will be
governed by the laws of the State of Delaware.
INDEMNIFICATION
Section 145 of the General Corporation Law of the State of
Delaware, also referred to herein as DGCL, provides
that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact
that the person is or was a director, officer, employee or agent
of the corporation or is or was serving at its request in such
capacity in another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including
attorneys fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the persons
conduct was unlawful.
Section 145 further authorizes a Delaware corporation to
indemnify any person serving in such capacity who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor against expenses
(including attorneys fees) actually and reasonably
incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good
faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation, except
that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent
that the Delaware Court of Chancery or such other court in which
such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is
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fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem
proper.
To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to above, or
in defense of any claim, issue or matter, such person shall be
indemnified against expenses, including attorneys fees,
actually and reasonably incurred by such person.
Our Restated Certificate of Incorporation, as amended, also
referred to herein as the Restated Certificate,
provides that we shall indemnify our officers and directors to
the fullest extent permitted by the DGCL. As permitted by
Section 145 of the DGCL, our Restated Bylaws provide that
directors and elected officers who are made, or are threatened
to be made, parties to, or are otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a
director or an officer of the Company or such director or
officer of the Company is or was serving at our request as a
director, officer, manager, employee, agent or trustee of
another corporation or of a partnership, limited liability
company, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan, whether the
basis of such proceeding is an alleged action in an official
capacity as a director, officer, manager, employee, agent,
trustee or in any other capacity while serving as a director,
officer, manager, employee, agent or trustee, will be
indemnified and held harmless by us to the fullest extent
authorized by the DGCL against all expenses, liability and loss
(including attorneys fees, judgments, fines, Employee
Retirement Income Security Act excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by
such person in connection therewith. Our Restated Bylaws require
us to advance expenses to our directors and elected officers,
provided that, if the DGCL so requires, they undertake to repay
the amount advanced if it is ultimately determined by a court
that they are not entitled to indemnification.
The Restated Bylaws also provide that the Chief Executive
Officer may also appoint officers. Such appointed officers will
serve at the pleasure of the Chief Executive Officer and hold
officer titles solely for purposes of identification and
business convenience. Unless otherwise expressly provided by the
Chief Executive Officer and except as required by law, such
appointed officers shall not be considered officers for any
purpose, including, without limitation, for purposes of
indemnification under the Restated Bylaws or otherwise.
We maintain insurance policies under which our directors and
officers and the directors and officers of our subsidiaries are
insured, within the limits and subject to the limitations of the
policies, against expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities that
might be imposed as a result of such actions, suits or
proceedings, to which they are parties by reason of being or
having been directors or officers of the Company or our
subsidiaries, as applicable. The employment agreements of
certain of our executive officers contain indemnification
provisions that provide for the maximum protection permitted
under applicable law.
We entered into an Indemnification Trust Agreement, also
referred to herein as the Indemnification
Trust Agreement, on August 16, 2005, to create
an indemnification trust to provide a source of funds for (i)
indemnification of and advancement of expenses to our present
and future directors and certain executive officers arising
under the DGCL, the Restated Certificate, our Restated Bylaws or
any agreement that we may enter into with a beneficiary under
the Indemnification Trust Agreement and (ii) payments
for the premiums for directors and officers insurance purchased
by us from time to time, in the event that we do not or are not
financially able to fulfill such obligations or make such
payments. At the time of creation, we irrevocably deposited
$5 million in the trust and pursuant to its terms would be
obligated in certain circumstances to contribute up to an
additional $5 million. The beneficiaries
representative under the trust will have the exclusive right to
convey payment demands from time to time on the trustee to
direct payment to one or more of the beneficiaries. The term of
the Indemnification Trust Agreement expires on
August 16, 2015, at which time any remaining trust funds
will be distributed to us, except to the extent necessary to
make full and adequate provision for claims made prior to such
expiration date or any threatened or anticipated claims.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that in the opinion
of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable.
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Pursuant to the terms of the Agent Agreement, we have agreed to
indemnify the Agent against certain liabilities, including
liabilities under the Securities Act, related to the
Agents services in administering the Owners Club
Stock Program or to contribute to payments the Agent may be
required to make related thereto.
LEGAL
MATTERS
The validity of the shares of our common stock being offered
hereby has been passed upon for us by Brownstein Hyatt Farber
Schreck, LLP.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of Pinnacle Entertainment, Inc. (i) at
December 31, 2010 and 2009, and for each of the two years
in the period ended December 31, 2010, and the report on
the effectiveness of Pinnacle Entertainment Inc.s internal
control over financial reporting as of December 31, 2010
appearing in Pinnacle Entertainment, Inc.s Annual Report
on
Form 10-K
for the year ended December 31, 2010, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, and, (ii) for the year ended
December 31, 2008, appearing in Pinnacle Entertainment,
Inc.s Annual Report on
Form 10-K
filed on March 1, 2011, have been audited by
Deloitte & Touche LLP, independent registered public
accounting firm, as set forth in their respective reports
thereon incorporated in this Prospectus and Registration
Statement, and are incorporated in reliance upon such reports
given on the authority of such firms as experts in accounting
and auditing.
29
Owners Club Stock
Program
Common Stock
PROSPECTUS
July 29, 2011