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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2003

Commission file number 001-13641

PINNACLE ENTERTAINMENT, INC.

(Exact Name of Registrant as Specified in Its Charter)

3800 Howard Hughes Parkway, Suite 1800

Las Vegas, Nevada 89109

(Address of Principal Executive Offices) (Zip Code)

(702) 784-7777

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

PINNACLE ENTERTAINMENT, INC.

Common Stock, $.10 par value

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.  YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  YES  x    NO  ¨

The aggregate market value of the common stock held by non-affiliates (therefore excludes officers, directors and beneficial owners of 10% or more) of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, was $171,794,000 based on a closing price of $6.80 per share of common stock. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant’s common stock, as of the close of business on March 9, 2004: 35,506,810.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive 2004 proxy statement, anticipated to be filed with the Securities and Exchange Commission within 120 days after the close of the Registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K.

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PINNACLE ENTERTAINMENT, INC.

TABLE OF CONTENTS

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PART I

Item 1.    Description of Business

Pinnacle Entertainment, Inc. (the “Company” or “Pinnacle”) is a leading diversified, multi-jurisdictional owner and operator of gaming entertainment facilities that owns and operates five properties in the United States, located in southeastern Indiana; Reno, Nevada; Bossier City and New Orleans, Louisiana; and Biloxi, Mississippi. The Company is also building a major casino resort in Lake Charles, Louisiana. In addition, the representative authorities of the City of St. Louis and St. Louis County chose the Company’s proposals for the development of a major casino in downtown St. Louis and another major casino in south St. Louis County, respectively, subject to negotiation of development agreements and the final approval of the Missouri Gaming Commission. In addition, the Company operates casinos in Argentina and receives lease income from two card clubs in southern California. All of the properties primarily cater to customers who live within driving distance of the properties.

The Company is the successor to the Hollywood Park Turf Club, organized in 1938. The Company was incorporated in 1981 under the name Hollywood Park Realty Enterprises, Inc. In 1992, as part of a restructuring, the Company changed its name to Hollywood Park, Inc. In February 2000, the Company changed its name to Pinnacle Entertainment, Inc.

The Company’s strategy is to grow profitability through the strategic development of new gaming properties in attractive gaming markets and a disciplined capital expenditure program at its existing locations, as well as through recently introduced cost reduction initiatives.

In early September 2003, the Company commenced construction of its $325,000,000 Lake Charles casino resort, which the Company believes will be larger, and offer more amenities, than any other resort in the southwest Louisiana/east Texas market. Lake Charles is the closest significant gaming jurisdiction to the Houston, Austin and San Antonio metropolitan areas. The Company’s resort will be located on 227 acres and will feature approximately 700 guestrooms (including four villas, 41 suites and 59 junior suites), several restaurants and other amenities. Unlike most other riverboat casinos, the casino at the Company’s Lake Charles resort will be entirely on one level and surrounded on three sides by the hotel facility, providing convenient access to approximately 1,500 slot machines and 60 table games. The Company is also building a $37,000,000, 300-guestroom hotel tower and other amenity expansion at Belterra Casino Resort, its southeastern Indiana property.

The representative authorities of the City of St. Louis and St. Louis County recently chose the Company’s proposals for the development of an approximately $208,000,000 casino and luxury hotel in downtown St. Louis, near the Edward Jones domed stadium and America’s Center convention center, and the development of an approximately $300,000,000 casino complex located in the County of St. Louis, approximately ten miles south of downtown St. Louis, respectively. These developments are subject to the negotiation of development agreements and approval of the Missouri Gaming Commission, which will make the final decision in its discretion on whether to allow the projects to proceed and to whom to issue one or more licenses.

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Company Overview

The following is an overview of the Company’s gaming operations as of December 31, 2003:

Business Strategy and Competitive Strengths

Pinnacle’s strategy is to grow profitability through the strategic development of new gaming properties in attractive gaming markets and a disciplined capital expenditure program at its existing locations, as well as through recently introduced cost reduction initiatives. Management believes that the following key competitive strengths will contribute to the successful implementation of its strategy:

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The representative authorities of the City of St. Louis and the St. Louis County recently selected the Company to negotiate development agreements based on the proposals to develop an approximately $208,000,000 casino and luxury hotel in downtown St. Louis and an approximately $300,000,000 casino complex in south St. Louis County, respectively. Gaming licenses for each project will ultimately require the approval of the Missouri Gaming Commission, which will make the final licensing decision in its discretion.

Current Operations

Boomtown New Orleans is a locals-oriented dockside riverboat casino. The dockside riverboat features a casino containing approximately 1,522 slot machines and 51 table games and an approximately 88,000-square-foot adjoining building with two restaurants, a delicatessen, a 350-seat nightclub, 21,000 square feet of meeting space, an amusement center and 1,729 parking spaces. The property opened in 1994 and is located on 54 acres in Harvey, Louisiana, approximately 10 miles from downtown New Orleans and across the Mississippi River in the “West Bank” suburban area.

In early 2002, the Company completed a $10,000,000 renovation, which included adding 300 new slot machines, construction of a high-limit table games area and the renovation of various food and beverage outlets in the adjoining building. In December 2002, the property opened its poker area, adding 54 gaming positions, and added an additional 60 slot machines in 2003.

Boomtown New Orleans competes with two other dockside riverboat casinos and a large land-based casino and entertainment facility in downtown New Orleans. During 2003, according to the Louisiana Gaming Control Board, gaming revenues grew 1.8% in 2003 to $564,900,000 in the New Orleans market, of which 49.9% was

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accounted for by the land-based casino and 19.8% by Boomtown New Orleans. Boomtown New Orleans is the only casino on the west bank of the Mississippi River and there are a limited number of bridges across the river, which the Company believes provides it with a competitive advantage amongst West Bank residents. Recently passed state legislation would permit, subject to a local referendum, the introduction of slot machines at a racetrack located on the east side of the river and approximately 20 miles from the Boomtown New Orleans property.

Belterra Casino Resort (“Belterra”) is a regional resort built around a dockside riverboat casino. It opened in October 2000 and is located on 315 acres of land along the Ohio River near Vevay, Indiana, approximately 50 miles southwest of downtown Cincinnati, Ohio, and 65 miles northeast of Louisville, Kentucky. The total population within 300 miles of Belterra is approximately 39 million people. By comparison, some 26 million people live within 300 miles of Las Vegas.

The resort features a riverboat casino with 38,000 square feet of casino space, approximately 1,554 slot machines and 41 table games. It also features a 15-story, 308-guestroom hotel with 11 suites, six restaurants, a retail shopping pavilion, a 1,750-seat entertainment showroom, a spa and an 18-hole championship golf course designed by Tom Fazio. The resort provides 2,000 parking spaces, most of which are in a multi-level parking structure. In February 2003, the Company broke ground on a $37,000,000, 300-guestroom hotel expansion project (see “Belterra Hotel Tower Expansion” below), which is expected to be completed in April 2004.

Indiana law was revised to permit dockside gaming operations as of August 1, 2002, with a new graduated tax structure. Customers strongly prefer dockside operations due to the convenience of being able to enter and leave the casino at any time and the reduction of customer surges and the resultant lines at the facility’s restaurants, valet parking and other services that happen with cruising riverboat casinos.

Belterra competes with four other dockside riverboats. According to the Indiana Gaming Commission, 2003 gross gaming revenues from the five riverboats in this market grew 8.1% over the prior year, to $1,080,000,000. Belterra grew its gaming revenues by 12.2% during the same period. Current Indiana law does not permit any additional casinos to be built along the Ohio River, although there are no legal limitations as to the size of the riverboats operated by each licensee. State law was however, recently amended to permit a casino operation in the town of French Lick, Indiana, which is between Louisville and Indianapolis, approximately 95 miles from Belterra.

Boomtown Bossier City is a regional resort built around a dockside riverboat casino. The resort opened in October 1996 on a site directly off, and highly visible from, Interstate 20. The Bossier City/Shreveport region offers the closest casinos to the Dallas/Fort Worth metropolitan area, which is a three-hour drive to the west along Interstate 20. The resort offers approximately 1,224 slot machines and 34 table games. The resort also includes a 188-guestroom hotel, with four master suites and 88 junior suites, four restaurants and 1,867 parking spaces.

In November 2002, the Company completed a $24,000,000 renovation of the Boomtown Bossier City property. This renovation included re-branding the facility to the Boomtown name, adding new restaurants and re-designing the hotel lobby and porte-cochere.

According to the Louisiana Gaming Control Board, gaming revenues in the Bossier City/Shreveport region were $816,900,000 for 2003, down slightly (0.8%) compared to the prior year. Boomtown Bossier City, however, was up slightly (1.5%) for the same period. The market currently consists of five dockside riverboat casino hotels, including Boomtown, and a racetrack slot operation located approximately eight miles east of Boomtown Bossier City. The racetrack opened with approximately 900 slot machines in mid-2003. The racetrack is currently building a larger, free-standing slot-only casino, with approximately 1,500 slot machines, currently scheduled to open in May 2004. Current state regulations do not permit table games at the racetrack. In mid-2003, a Native American casino opened in Oklahoma, approximately one hour north of Dallas, providing competition for the Bossier City/Shreveport casinos.

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Casino Magic Biloxi is a regional resort on the Mississippi Gulf Coast that features a dockside riverboat casino and hotel tower. The property, which began operations in 1993, is situated in the center of a cluster of three casinos known as “Casino Row.” In 1998, the Company opened a 378-guestroom hotel, including 86 suites, at the resort. The resort features a 48,920-square-foot dockside riverboat casino containing approximately 1,255 slot machines and 30 table games. The facility also features four restaurants, 6,600 square feet of convention space, a health club and 1,315 parking spaces.

The property is smaller than some of the other area casinos, but offers superior quality guestrooms and facilities. Since the end of 2001, the property has enjoyed a four-diamond rating from AAA, the first hotel/casino in Mississippi to receive such a designation. In June 2003, Casino Magic Biloxi completed renovating its high-roller area and casino entrance, at a cost of approximately $1,200,000.

The principal markets for the Mississippi Gulf Coast region are the nearby cities of Mobile, Alabama; Pensacola and Tallahassee, Florida; the interior areas of the South, whose residents visit the Mississippi Gulf Coast to escape the summer heat; and the numerous other cities of central and northern Florida, for whom the Mississippi Gulf Coast also offers the closest casinos. According to the Mississippi Gaming Commission, the Gulf Coast market generated gaming revenues of $1,170,000,000 during 2003, a 1.4% increase over the prior year. Casino Magic’s gaming revenue fell by approximately 3.8% in the same period. A competing casino located near the Casino Magic Biloxi property has announced an expansion project, including guestrooms, a restaurant and other amenities. Completion is expected in late 2004 or early 2005. In addition, another competitor recently commenced construction of a new facility.

The nearby city of New Orleans is also a significant market for the Mississippi Gulf Coast, even though New Orleans has its own casinos. The State of Mississippi opted to legalize casinos in a fashion similar to Nevada and New Jersey, where tax rates are lower, but there is no limit as to the number of casinos. Such states therefore have a greater number of casinos, with most of such casinos offering more extensive accommodations and food, beverage, entertainment and other amenities than many of the casinos in jurisdictions where tax rates are high and the number of casinos is limited. Many New Orleans residents prefer to drive the short distance to Mississippi to enjoy the greater amenities offered along the Mississippi Gulf Coast as an alternative to the casinos available in New Orleans itself.

Boomtown Reno is a land-based casino hotel that has been operating for more than 35 years and is located on a portion of the Company’s 569 acres 11 miles west of downtown Reno, Nevada, directly off Interstate 80, the primary east-west interstate highway serving northern California.

The property features 318 guestrooms and a 45,000-square-foot casino containing approximately 1,140 slot machines and 30 table games. The property features four restaurants, an 80-seat lounge, a 30,000-square-foot amusement center and an indoor pool. In addition to the main casino/hotel, the property also includes a full-service truck stop with a satellite casino containing approximately 109 slot machines, a gas station/mini-mart, a 203-space recreational vehicle park and 1,548 parking spaces.

Reno’s gaming market is primarily a drive-in market that attracts visitors from northern California. In March 2000, California voters passed Proposition 1A, a ballot initiative that allows Native American groups to conduct various gaming activities, including slot machines, card games and lotteries. Each Native American group in California may operate slot machines, and up to two gaming facilities may be operated on any one reservation. The number of machines each group is allowed to operate is subject to change pursuant to negotiations which have been initiated between the tribes and the State of California.

In mid-2003, new Native American casino developments opened in California that compete with the Reno gaming properties. These casino developments are significantly closer to several primary feeder markets than is the Boomtown Reno property. From the time certain new Native American casinos opened in mid-2003 through December 2003, revenues at Boomtown Reno have declined approximately 12.9% compared to the

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corresponding 2002 period. Numerous Native American groups are at various stages of planning new or significantly expanded facilities in the northern California area and an initiative has been proposed in California that, under certain circumstances, would legalize slot machines at certain California racetracks and card clubs, including the two card clubs owned by the Company. This adverse impact on the Reno gaming properties from expanded gaming in California is expected to continue. Boomtown Reno contributed approximately 15.7% of Pinnacle’s net revenues in the year ended December 31, 2003.

Casino Magic Argentina:    The Company operates three land-based casinos in the Patagonia region of Argentina. The largest of the three casinos is located in the city of Neuquen and contains approximately 500 slot machines, 29 table games and a 384-seat bingo facility. The second largest facility, located in San Martin de los Andes, has 107 slot machines and 13 table games. The Company began operating the smallest of the three facilities in November 2003, which is located in Junin de los Andes and has 39 slot machines. The Company does not own any real property at these sites, but does own approximately 20 acres of vacant land in the city of Neuquen, where it plans to build a new facility.

The first two casinos opened in 1995 and the Company began operating the third casino in November 2003. All three casinos are operated under a 12-year concession agreement with the Province of Neuquen that expires in December 2006. In July 2003, the Company modified its concession agreement with the Province, so that the concession agreement was extended through December 2016, provided that, among other things, the Argentine subsidiary builds as much of a planned new facility and related amenities as possible utilizing the subsidiary’s cash and retained earnings through 2006. Also, the Company received an additional five-year extension to 2021 if the Argentine subsidiary invests five million pesos (or US$1,672,000 based on December 31, 2003 dollar-to-peso exchange rates) in a three-star hotel facility with a minimum of 10 guestrooms.

The Company’s current concession agreement with the Province of Neuquen provides for its exclusive operation of casinos within approximately 33 miles of its facilities. In the Province of Rio Negro, immediately adjacent to the Province of Neuquen, there is a casino approximately 10 miles from the Company’s Neuquen operations.

California Card Club Leases:    The Company receives lease income from two card clubs in Los Angeles County: the Hollywood Park-Casino and the Crystal Park Casino. The Company leases the Hollywood Park-Casino under a long-term lease agreement that, including a 10-year renewal option, expires in 2019. It then subleases it to an unaffiliated third party operator under a year-to-year lease. The Company owns the furniture, fixtures, equipment and leasehold improvements within the Hollywood Park-Casino. The Company owns the Crystal Park Casino and leases it to the same card club operator that leases and operates the Hollywood Park-Casino. The third party operator is not believed to have substantial assets other than the two card clubs. The lease payments under the year-to-year leases are believed to be a substantial portion of the card clubs’ income.

The Hollywood Park-Casino opened in 1994. The facility contains approximately 30,000 square feet of card club gaming space with 102 gaming tables and 21,000 square feet of retail and restaurant space.

The Crystal Park Casino opened in October 1996. The Crystal Park Casino contains approximately 40,000 square feet of gaming and banquet space with 14 gaming tables. The adjoining hotel contains 238 rooms, including 36 suites.

The Hollywood Park-Casino and the Crystal Park Casino face significant competition from other card club casinos in neighboring cities, as well as competition from other forms of gaming around southern California, including horse racing and Native American gaming. Although the Company does not operate these card club casinos, the operator, who is its lessee, is affected by local market conditions.

A voter initiative intended for the 2004 California November ballot has been approved by the California Secretary of State which, under certain circumstances, would permit slot machines to be installed at certain

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California card clubs and racetracks, including the Company’s Los Angeles-area card clubs. There can be no assurance this initiative will receive enough qualified signatures to be placed on the ballot or that its passage will be successful.

New Developments and Expansion Plans

Lake Charles:    In early September 2003, the Company commenced construction of its $325,000,000 Lake Charles casino resort, which the Company believes will be larger, and offer more amenities, than any other resort in the southwest Louisiana/east Texas market. Lake Charles is the closest significant gaming jurisdiction to the Houston, Austin and San Antonio metropolitan areas. The Company’s resort will feature approximately 700 guestrooms (including four villas, 41 suites and 59 junior suites), several restaurants, approximately 28,000 square feet of meeting space, a championship golf course designed by Tom Fazio, an expansive outdoor pool area, retail shops and a full-service spa. Unlike most other riverboat casinos, the Company’s Lake Charles casino will be entirely on one level and surrounded on three sides by the hotel facility, providing convenient access to approximately 1,500 slot machines and 60 table games. Issuance of the gaming license from the Louisiana Gaming Control Board is subject to continued compliance with gaming regulations and other conditions.

The principal market for the Lake Charles area is the City of Houston, with a population of 4.5 million located approximately two hours to the west of Lake Charles. The local market in Lake Charles is comprised of the Lake Charles/Sulphur area with a population base of 72,000 people, and the Port Arthur and Beaumont areas with a combined population of 385,000 people. Houston is comparable in population to Dallas/Ft. Worth, but is located significantly closer to Lake Charles than Dallas/Ft. Worth is to Bossier/Shreveport (a two-hour vs. three-hour drive). The Company believes that the potential customer draw to the Lake Charles market is significantly larger than that of Bossier/Shreveport, even though the current gaming revenues of the Bossier/Shreveport market are believed to exceed those of Lake Charles. In addition, Lake Charles is the closest gaming alternative for the Austin and San Antonio markets, each less than five hours away. These two cities have a combined population of approximately two million people and are comparable in distance from Lake Charles as the highly populated areas of southern California are from Las Vegas.

The Lake Charles gaming market currently consists of four properties, including two dockside riverboat casinos (each operating two boats at each of their respective locations); a large land-based Native American casino; and a nearby racetrack that offers slot machines. According to the Louisiana Gaming Control Board, gaming revenue for the Lake Charles market was $447,900,000 in 2003, an increase of 1.4% over the prior year. Such published results do not include the gaming revenues of the Native American casino, which results are generally not available. The Company believes this Native American property to be the largest casino operation in the market even though it is approximately one hour further from Houston than the other Lake Charles facilities.

The Company has entered into contracts for construction of a substantial portion of the Lake Charles resort. One contract requires the Company to pay a total of $145,000,000 over the construction period (subject to various contingent adjustments, exclusions and allowances) for the principal structures. The Company has also entered into a vessel construction contract with a shipbuilder for construction services for the single level casino vessel portion of the Lake Charles resort, for a total of $40,240,000 (subject to certain exceptions).

Belterra Hotel Tower Expansion:    In February 2003, the Company commenced construction on its $37,000,000 hotel tower expansion project that will add 300 guestrooms (for a total of 608), approximately 33,000 square feet of meeting and conference space, a year-round swimming pool and other amenities. The Company believes the new hotel tower expansion will enhance Belterra’s status as a regional resort and will leverage the property’s existing infrastructure, including the casino and other facilities. The Company expects to complete construction in April 2004.

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St. Louis Development Proposals:    In October 2003, the Company purchased approximately 4.0 acres of vacant land in downtown St. Louis, Missouri, adjacent to a 3.3 acre parcel of vacant land the Company already owned. The property is within 1,000 feet of the Mississippi River.

On January 15, 2004, at the conclusion of a competitive process, the City of St. Louis Port Authority, the Land Clearance for Redevelopment Authority and the St. Louis Development Corporation (the “City of St. Louis Authorities”) selected the Company to negotiate a development agreement based on its proposal for an approximately $208,000,000 casino and luxury hotel development in downtown St. Louis at Laclede’s Landing. The project would be located on the Company’s approximately 7.3 acres near the Edward Jones domed stadium and America’s Center convention center, the Mississippi River, the Gateway Arch and the main downtown business and tourism area.

On February 10, 2004, at the conclusion of a competitive process, the St. Louis County gaming selection committee (the “St. Louis County Authority”) selected the Company to negotiate a development agreement based on its proposal for a second casino complex to be located in the County in the community of Lemay. As proposed, this $300,000,000 project would feature a range of non-gaming amenities alongside the casino, including a park, a multiplex movie theater, a bowling alley and a first-class hotel.

In each case, the Missouri Gaming Commission will make the final decision in its discretion on whether to allow any of the projects to proceed and to whom to issue one or more gaming licenses in the St. Louis market based in part on the decisions of the City of St. Louis Authorities and the St. Louis County Authority. If the Missouri Gaming Commission ultimately were to approve the Company for either or both development opportunities, it is anticipated that construction would begin as soon as the Company receives all necessary building approvals and permits. There can be no assurance either project will ultimately be approved by the Missouri Gaming Commission and other relevant governmental authorities.

Competition

The Company faces significant competition in each of the jurisdictions in which it has established gaming operations. Such competition may intensify in some of these jurisdictions as new gaming operations enter these markets and existing competitors expand their operations. The Company’s properties compete directly with other gaming properties in Indiana, Louisiana, Mississippi, Nevada, and Argentina, as well as in states adjacent to the Company’s properties. To a lesser extent, the Company also competes for customers with other casino operators in North American markets, including casinos located on Native American reservations, and other forms of gaming, such as lotteries and Internet gaming. Many of the Company’s competitors are larger and have substantially greater name recognition and marketing resources, as well as access to lower cost sources of financing, and sometimes, particularly for Native American casinos, lower or non-existent tax rates. In addition, the Company believes that increased legalized gaming in other states, particularly in areas close to its existing gaming properties, such as Alabama, Arkansas, California, Kentucky, Ohio, Oklahoma or Texas, or the expansion of Native American gaming in or near the states in which the Company operates, could create additional competition for the Company and could adversely affect its operations.

Government Regulation and Gaming Issues

The ownership and operation of gaming facilities are subject to extensive state and local regulation. The states and localities in which the Company and its subsidiaries conduct gaming operations require the Company to hold various licenses, findings of suitability, registrations, permits and approvals. The various regulatory authorities, including the Indiana Gaming Commission, the Louisiana Gaming Control Board, the Mississippi Gaming Commission, the Nevada State Gaming Control Board and the Nevada Gaming Commission, may, among other things, limit, condition, suspend, revoke or fail to renew a license or approval to own any of the gaming subsidiaries for any cause deemed reasonable by such licensing authorities. Substantial fines or

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forfeitures of assets for violations of gaming laws or regulations may be levied against the Company, its subsidiaries and the persons involved.

To date, the Company and its subsidiaries have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the operation of its gaming facilities. However, there can be no assurance that the Company and its subsidiaries will be able to obtain any new licenses, findings of suitability, registrations, permits and approvals that may be required in the future or that existing ones will be renewed or will not be suspended or revoked. Any expansion of gaming operations in the existing jurisdictions or into new jurisdictions, including St. Louis, Missouri, will 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 has no assurance of success.

For a more detailed description of gaming regulations to which the Company is subject, see Exhibit 99.1 to this Annual Report on Form 10-K, “Government Regulation and Gaming Issues”, which is incorporated herein by reference.

Employees

The following is a summary of the Company’s employees by property at December 31, 2003, some of which are part-time:

The Company does not employ the staff at the Hollywood Park-Casino or the Crystal Park Casino. Additionally, during busier months, each casino property supplements its permanent staff with seasonal employees.

Other Information

Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment have not had a material effect upon capital expenditures, earnings or the competitive position of the Company.

The Company operates land-based casinos in Argentina. Casino Magic Argentina’s contribution to the Company’s net income is immaterial as compared with the contributions of the Company’s domestic gaming operations. Casino Magic Argentina’s assets held in Argentina were $10,662,000 at December 31, 2003, or approximately 1% of the Company’s consolidated assets on that date.

Pinnacle pays significant taxes in the communities in which it operates. In 2003, Pinnacle paid or accrued $110,600,000 in gaming taxes, $10,900,000 in payroll taxes, $7,100,000 in property taxes, and $5,100,000 in sales taxes during the year. Setting aside income taxes, Pinnacle paid or accrued $133,700,000 for taxes paid to state and local authorities in 2003.

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Available Information

The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available free of charge as soon as reasonably practicable after they are filed or furnished to the Securities and Exchange Commission (“SEC”), through its Internet website, www.pinnacle-entertainment-inc.com. The Company’s filings also are available through a database maintained by the SEC at www.sec.gov.

Item 2.    Properties

The following describes the Company’s principal real estate properties:

Pinnacle Entertainment, Inc.:    The Company leases approximately 14,000 square feet for its corporate offices in Las Vegas, Nevada under lease agreements that expire in October 2005, with renewal options through 2011.

Boomtown New Orleans:    The Company owns approximately 54 acres in Harvey, Louisiana that are utilized by Boomtown New Orleans. The Company owns the facilities and associated improvements at the property, including the riverboat casino.

Belterra Casino Resort:    The Company owns 167 acres and leases 148 acres that are utilized by Belterra Casino Resort. The Company owns the facilities and associated improvements at the property, including the dockside riverboat. In addition, the Company owns the Ogle Haus Inn, a 54-room hotel operation in Vevay, Indiana, approximately 10 miles from the Belterra Casino Resort. The Ogle Haus is used primarily for overflow capacity during peak visitation periods.

Boomtown Bossier City:    The Company owns 23 acres on the banks of the Red River in Bossier City, Louisiana. The property contains a dockside riverboat casino, hotel, parking structure and other land-based facilities, all of which are owned by the Company. The Company also leases approximately one acre of water bottoms from the State of Louisiana pursuant to a lease due to expire in September 2006.

Casino Magic Biloxi:    Casino Magic Biloxi is located on approximately 10.6 acres, of which 5.5 acres are owned and approximately 5.1 acres are leased. The leases expire in June 2008. The Company has options to extend the terms of each lease for 15 additional five-year periods. The Company also leases approximately 6.4 acres of submerged tidelands from the State of Mississippi. The tidelands are under a lease that expires in May 2008. Thereafter, the Company has the prior right, exclusive of all other persons, to release the tidelands at the expiration of the lease, as may be agreed upon between the Company and the State of Mississippi. The Company owns the dockside casino and all of the land-based facilities, including the hotel.

Boomtown Reno:    The Company owns 569 acres near Verdi, Nevada, with current operations presently utilizing approximately 61 acres. The Company owns all of the improvements and facilities at the property, including the casino, hotel, truck stop, recreational vehicle park and service station, along with the related water rights and sewage treatment plant.

During 2002, the property was annexed into the City of Reno, Nevada, which will allow the facility to be connected to the City of Reno’s municipal sewer system. Currently, development of the additional acreage is restricted by the existing sewage treatment plant. It is anticipated that the sewer line connection will be completed in 2004.

The Company also owns 290 acres in the mountains outside Reno, Nevada, which are surrounded by federal land.

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Casino Magic Argentina:    The Company operates casinos in southern Argentina, in the cities of Neuquen, San Martin de los Andes and Junin de los Andes. All three casinos are currently in leased facilities. In 2001, the Company acquired approximately 20 acres in the city of Neuquen, which Pinnacle intends to use as a site for a new casino facility.

Hollywood Park-Casino:    The Company leases the Hollywood Park-Casino under a long-term lease agreement that, including a 10-year renewal option, expires in 2019. It then subleases it to an unaffiliated third party operator under a year-to-year lease.

Crystal Park Casino:    The Company owns the approximately 20 acres on which the casino facility, adjoining hotel and parking is located.

Lake Charles, Louisiana:    The Company leases 227 acres of unimproved land from the Lake Charles Harbor and Terminal District upon which the Lake Charles resort development is being constructed. The lease calls for annual payments of $835,600 commencing upon opening of the resort complex with increases for inflation thereafter, subject to a maximum annual increase of 5%. The lease has an initial term of ten years, commencing on the opening of the resort casino, with six renewal options of ten years each. In addition, the Company entered into a Cooperative Endeavor Agreement with the City of Lake Charles, Calcasieu Parish and the District requiring Pinnacle to make infrastructure improvements, including, among other things, a road extension and utility improvements, and pay non-specific impact fees, which, collectively, are expected to approximate $11,375,000. The Company has included such obligations in the $325,000,000 project budget. In 2002, the Company also entered into an option to lease an additional 75 acres of unimproved land adjacent to the 227 acres. The one-year lease option currently expires on August 15, 2004, with two remaining one-year renewal options. The terms of the lease, if the option is exercised, would be substantially similar on a per acre basis to the terms of the lease for the 227 acres.

Land in St. Louis, Missouri:    The Company owns approximately 7.3 acres of contiguous land in downtown St. Louis, Missouri near the Edward Jones domed stadium and America’s Center convention center and the Gateway Arch. See “—New Developments and Expansion Plans —St. Louis Development Proposals” for a discussion of the two development proposals the Company submitted to the City of St. Louis and St. Louis County.

Warehouse Leases:    The Company leases warehouse space at various locations close to its operating properties for various operating purposes.

Properties Held For Sale:    As of December 31, 2003, the Company owned approximately 97 acres of surplus land in Inglewood, California. On February 27, 2004, the Company sold 37 of these acres for approximately $22,000,000 in cash to a regional homebuilder, and anticipates recording a gain on the sale of approximately $13,200,000.

On February 13, 2004, the Company amended and reinstated its agreement (which had been terminated by its terms in December 2003) to sell the remaining 60 acres to a retail development company for $36,000,000 in cash. Among other things, the amendment restates the agreement as an option to purchase the land and extends the time for closing the transaction until April 30, 2004 in consideration of a non-refundable payment received by the Company of $2,000,000 which will be credited against the purchase if the transaction closes. The amendment also grants the buyer the option to further extend the closing until May 31, 2004 upon payment of an additional non-refundable payment of $1,000,000 which also would be credited against the purchase price if the transaction closes. There can be no assurance that such sale will ultimately be completed on a timely basis, or at all.

Item 3.    L egal Proceedings

Astoria Entertainment Litigation:    In November 1998, Astoria Entertainment, Inc. filed a complaint in the United States District Court for the Eastern District of Louisiana. Astoria, an unsuccessful applicant for a license

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to operate a riverboat casino in Louisiana, attempted to assert a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), seeking damages allegedly resulting from its failure to obtain a license. Astoria named several companies and individuals as defendants, including Hollywood Park, Inc. (the predecessor to Pinnacle Entertainment), Louisiana Gaming Enterprises, Inc. (“LGE”), then a wholly-owned subsidiary of Pinnacle Entertainment, and an employee of Boomtown, Inc. The Company believed the claims had no merit and, indeed, in February 1999 Astoria voluntarily dismissed its claims against Hollywood Park, LGE, and the Boomtown employee.

On March 1, 2001, Astoria amended its complaint, adding new claims and renaming Boomtown, Inc. and LGE as defendants. Astoria asserted that the defendants (i) conspired to corrupt the process for awarding licenses to operate riverboat casinos in Louisiana, (ii) succeeded in corrupting the process, (iii) violated federal and Louisiana antitrust laws, and (iv) violated the Louisiana Unfair Trade Practices Act. Astoria asserted that it would have obtained a license to operate a riverboat casino in Louisiana, but for these alleged improper acts. On August 21, 2001, the court dismissed Astoria’s federal claims with prejudice and its state claims without prejudice. In May 2002, Astoria refiled its state claims in the Civil District Court for the Parish of Orleans, Louisiana, and the matter is still pending. While the Company cannot predict the outcome of this litigation, management intends to defend it vigorously.

Poulos Lawsuit:    A class-action lawsuit was filed on April 26, 1994, in the United States District Court, Middle District of Florida (the “Poulos Lawsuit”), naming as defendants 41 manufacturers, distributors and casino operators of video poker and electronic slot machines, including Casino Magic. The lawsuit alleges that the defendants have engaged in a course of fraudulent and misleading conduct intended to induce people to play such games based on false beliefs concerning the operation of the gaming machines and the extent to which there is an opportunity to win. The suit alleges violations of RICO, as well as claims of common law fraud, unjust enrichment and negligent misrepresentation, and seeks damages in excess of $6,000,000,000. On May 10, 1994, a second class-action lawsuit was filed in the United States District Court, Middle District of Florida (the “Ahern Lawsuit”), naming as defendants the same defendants who were named in the Poulos Lawsuit and adding as defendants the owners of certain casino operations in Puerto Rico and the Bahamas, who were not named as defendants in the Poulos Lawsuit. The claims in the Ahern Lawsuit are identical to the claims in the Poulos Lawsuit. Because of the similarity of parties and claims, the Poulos Lawsuit and Ahern Lawsuit were consolidated into one case file (the “Poulos/Ahern Lawsuit”) in the United States District Court, Middle District of Florida. On December 9, 1994 a motion by the defendants for change of venue was granted, transferring the case to the United States District Court for the District of Nevada, in Las Vegas. In an order dated April 17, 1996, the court granted motions to dismiss filed by Casino Magic and other defendants and dismissed the complaint without prejudice. The plaintiffs then filed an amended complaint on May 31, 1996 seeking damages against Casino Magic and other defendants in excess of $1,000,000,000 and punitive damages for violations of RICO and for state common law claims for fraud, unjust enrichment and negligent misrepresentation.

At a December 13, 1996 status conference, the Poulos/Ahern Lawsuit was consolidated with two other class-action lawsuits (one on behalf of a smaller, more defined class of plaintiffs and one against additional defendants) involving allegations substantially identical to those in the Poulos/Ahern Lawsuit (collectively, the “Consolidated Lawsuits”) and all pending motions in the Consolidated Lawsuits were deemed withdrawn without prejudice. The plaintiffs in the Consolidated Lawsuits filed a consolidated amended complaint on February 14, 1997, which the defendants moved to dismiss. On December 19, 1997, the court granted the defendants’ motion to dismiss certain allegations in the RICO claim, but denied the motion as to the remainder of such claim; granted the defendants’ motion to strike certain parts of the consolidated amended complaint; denied the defendants’ remaining motions to dismiss and to stay or abstain; and permitted the plaintiffs to substitute one of the class representatives. On January 9, 1998, the plaintiffs filed a second consolidated amended complaint containing claims nearly identical to those in the previously dismissed complaints. The defendants answered, denying the substantive allegations of the second consolidated amended complaint. On June 21, 2002, the court denied plaintiffs’ motion for class certification. On July 11, 2002, the plaintiffs’ filed a petition for permission to appeal the court’s denial of the plaintiffs’ motion for class certification. On August 15, 2002, the United States Court of

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Appeals for the Ninth Circuit granted plaintiffs’ petition. On August 23, 2002, the plaintiffs filed their notice of appeal with the U.S. District Court for the District of Nevada. On or about April 30, 2003, the plaintiffs filed their opening brief on appeal. Defendants’ answering brief was filed on September 18, 2003. The plaintiff’s reply brief was filed on October 20, 2003. Oral argument on the appeal of the order denying class certification was heard on January 15, 2004 and a decision is pending.

The claims are not covered under the Company’s insurance policies. While the Company cannot predict the outcome of this action, management intends to defend it vigorously.

Casino Magic Biloxi Patron Incident:    On January 13, 2001, three Casino Magic Biloxi patrons sustained injuries as a result of an assault by another Casino Magic Biloxi patron, who then killed himself. Several other patrons sustained injuries while attempting to exit the casino. On August 1, 2001, two of the casino patrons injured during the January 13, 2001 incident filed a complaint in the Circuit Court of Harrison County, Mississippi, Second Judicial District. The complaint alleges that Biloxi Casino Corp. failed to exercise reasonable care to keep its patrons safe from foreseeable criminal acts of third persons and seeks unspecified compensatory and punitive damages. The plaintiffs filed an amended complaint on August 17, 2001. The amended complaint added an allegation that Biloxi Casino Corp. violated a Mississippi statute by serving alcoholic beverages to the perpetrator who was allegedly visibly intoxicated and that Biloxi Casino Corp.’s violation of the statute was the proximate cause of or contributing cause to plaintiffs’ injuries. One of the three shooting victims recently alleged that her injuries from the initial incident caused her to suffer additional substantial damage in a subsequent car wreck. Each of the shooting victims alleges permanent total or permanent partial disability. There is no trial date.

On March 20, 2002, the third injured victim filed a subsequent complaint in the Circuit Court of Harrison County, Mississippi, Second Judicial District. The allegations in the complaint are substantially similar to those contained in the August 1, 2001 lawsuit. No trial date has been set for the subsequent suit.

While the Company cannot predict the outcome of these actions, the Company, together with its applicable insurers, intends to defend them vigorously.

Wage and Hour Dispute:    A class-action lawsuit was filed on March 11, 2003, in Los Angeles Superior Court, naming as defendants certain entities related to the Hollywood Park facility, including the Company. The lawsuit, filed by one plaintiff on behalf of himself and a purported class of non-exempt “Hollywood Park Casino Food and Beverage Department Employees,” alleges violations of wage and hour laws and tort claims to recover wages and punitive damages for work allegedly performed during meal periods without compensation. The case was dismissed as to the Company on October 14, 2003.

Actions by Greek Authorities:    In 1995, a subsidiary of Casino Magic Corp., Casino Magic Europe B.V. (“CME”), performed management services for Porto Carras Casino, S.A. (“PCC”), a joint venture in which CME had a minority interest. Effective December 31, 1995, CME, with the approval of PCC, assigned its interests and obligations under the PCC management agreement to a Greek subsidiary, Casino Magic Hellas S.A. (“Hellas”). Hellas issued invoices to PCC for management fees that accrued during 1995, but had not been billed by CME.

In September 1996, local Greek tax authorities in Thessaloniki assessed a penalty of approximately $3,500,000 against Hellas, and an equal amount against PCC, arising out of the presentation and payment of the invoices. The Thessaloniki tax authorities asserted that the Hellas invoices were fictitious, representing an effort to reduce the taxable income of PCC.

The assessment of the fine against PCC was overturned by the Administrative Court of Thessaloniki on December 11, 2000. While Hellas’ appeal of its assessment was dismissed for technical procedural failures and has not been reinstated, Greek counsel has advised the Company that the rationale of the court in the PCC fine matter would bar enforcement of a fine levied against Hellas. On March 31, 2003, the Administrative Court of

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Appeals affirmed the Administrative Court of Thessaloniki’s decision to overturn the fine against PCC. The taxing authorities have appealed this ruling to the Supreme Court, but the date of this hearing has not been set.

In June 2000, Greek authorities issued a warrant to appear at a September 29, 2000 criminal proceeding to Marlin Torguson (a member of the Company’s board of directors and Chairman of the Board of CME in 1995) and Robert Callaway (former Associate General Counsel for the Company and, prior to its acquisition by the Company, CME’s General Counsel). They were convicted in absentia as being culpable criminally for corporate misconduct based solely on the issuance of invoices by Hellas to PCC and on their status as alleged executive board members of PCC. On April 10, 2003, the Court of Misdemeanors of Thessaloniki ruled in favor of Messrs. Torguson and Callaway on appeal from the criminal proceeding and overturned their criminal convictions. The due date for filing an appeal to such ruling expired on October 1, 2003.

Shareholder Derivative Action:    On December 13, 2002, William T. Kelsey, an individual shareholder of the Company, filed a derivative lawsuit purportedly on behalf of the Company against the Company’s former Chairman R.D. Hubbard, former CEO and President Paul R. Alanis, current Chairman and CEO Daniel R. Lee, various other current and former directors of the Company, and named the Company as a nominal defendant. The lawsuit, brought in California Superior Court in Los Angeles County, alleges, among other things, breaches of fiduciary duty, negligence and mismanagement against all of the defendants and violations of the RICO Act by Mr. Hubbard in connection with the events surrounding a golf tournament held at the Company’s Belterra Casino Resort in June 2001. The complaint alleged that the Company was entitled to recover unspecified damages in excess of $10,000,000, plus exemplary, punitive and treble damages and that the shareholder plaintiff should recover fees and costs. The Company authorized a Special Committee of the Board of Directors, consisting of two independent directors, to perform an investigation and determine whether pursuit of the derivative lawsuit against the individual defendants was in the best interests of the Company and its shareholders.

On July 28, 2003, the Court approved an Agreement for Settlement of the derivative lawsuit which provides for, among other things (i) a payment to the Company by the D&O insurer for the Company and the individual defendants, (ii) payment of legal fees by the Company to counsel for the plaintiff, (iii) a payment by the Company to Mr. Kelsey and (iv) a separate agreement and Specific Mutual Release by and between the Company and R.D. Hubbard (the “Hubbard Settlement”). The payment received from the directors and officers liability insurance carrier offset the payments to the plaintiff, his counsel and related legal fees, as well as costs, incurred by the Company. Pursuant to the Hubbard Settlement, Mr. Hubbard granted to the Company an Option to Purchase (the “Option”) all or a portion of certain of his shares of the Company at any time during the two years following the settlement, with the option price set at $10 per share in Year One and $15 per share in Year Two and agreed not to participate in a contest for control of the Company for a three-year period. The Company paid or reimbursed certain of Mr. Hubbard’s legal costs. On December 17, 2003 the Company exercised its right to purchase all of the 1,758,996 shares of the common stock of the Company subject to the Option, at a price of $10 per share. The Agreement for Settlement and the Hubbard Settlement were each subject to any applicable regulatory approvals, which have now been obtained. In connection with the final regulatory approval, the Company received net proceeds from the insurance carrier (after deducting for payments to the plaintiff and plaintiff’s counsel noted above) which exceeded its legal expenses and resulted in a benefit for the year ended December 31, 2003. The Company does not anticipate further costs.

Alanis Suit:    On or about December 3, 2002, Paul Alanis, the Company’s former Chief Executive Officer and President and a former Company director, filed a lawsuit against the Company, R.D. Hubbard and Daniel R. Lee, claiming, among other things, wrongful termination and defamation and seeking unspecified compensatory and punitive damages. On February 10, 2003, the court granted the Company’s motion to send the matter to binding arbitration, with the exception of the defamation claims and stayed the action pending completion of the arbitration. On December 29, 2003, the arbitrator granted summary judgment in favor of the Company and Mr. Hubbard. (No claims were asserted against Mr. Lee in the arbitration.) The arbitrator also determined that the Company and Mr. Hubbard were entitled to reimbursement from Mr. Alanis for their costs, expenses and attorneys’ fees. The Company’s legal fees incurred in this matter through December 31, 2003 were

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approximately $1,100,000. The trial on the defamation claims has been set for March 22, 2004. While the outcome of this action cannot be predicted, the Company and Mr. Lee intend to defend it vigorously.

Indiana State Tax Dispute:    The State of Indiana conducted a sales and use tax audit at the Company’s Belterra entity in 2001. In October 2002, the Company received a proposed assessment in the amount of $3,070,000 with respect to the Miss Belterra casino riverboat, including interest and a penalty. A protest was filed by the Company in December of 2002. On June 16, 2003, the Indiana Tax Court issued two favorable rulings for other taxpayers with claims similar to the Company’s. While the court’s rulings and the similarity of the issues suggest that the Company would receive a similar result from that court, one of these rulings is currently being appealed by the state. The Company’s protest has been stayed pending the outcome of this appeal. The Company intends to pursue this matter vigorously.

Other:    The Company is party to a number of other pending legal proceedings, though management does not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material effect on the Company’s financial results.

Item 4.     Submission of Matters to a Vote of Security Holders

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Item 5.    Market for the Registrant’s Common Equity and Related Stockholder Matters

The Company’s common stock is listed on the New York Stock Exchange and is traded under the name Pinnacle Entertainment, Inc., identified by the symbol “PNK”. Prior to February 28, 2000, the Company’s common stock was traded on the New York Stock Exchange under the name Hollywood Park, Inc., identified by the symbol “HPK.”

The following table sets forth the high and low closing sales prices per common share of the Company’s common stock on the New York Stock Exchange:

As of March 9, 2004, there were 2,813 stockholders of record of the Company’s common stock.

Dividends:    The Company did not pay any dividends in 2003 or 2002. The Company’s 8.75% Notes (as defined herein), 9.25% Notes (as defined herein) and existing credit facility limit the amount of dividends that the Company is permitted to pay. The Board of Directors does not anticipate paying any cash dividends on the Company’s common stock in the foreseeable future, as its financial resources are being reinvested into its business, including the Belterra hotel tower expansion, the Lake Charles resort and, if approved, the St. Louis development proposals.

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Item 6.    Selected Financial Data

The following selected financial information for the years 1999 through 2003 was derived from the consolidated financial statements of the Company. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the consolidated financial statements and related notes thereto.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, the Company’s audited Consolidated Financial Statements and the notes thereto, and other filings with the Securities and Exchange Commission.

Overview and Summary

The Company is a leading diversified, multi-jurisdictional owner and operator of gaming entertainment facilities. The Company owns and operates casinos in Nevada, Mississippi, Louisiana, Indiana and Argentina. In addition, the Company receives lease income from two card clubs in southern California. Finally, the Company is building a $325,000,000 casino resort in Lake Charles, Louisiana and has been selected to develop two new casino hotel projects in St. Louis, Missouri.

The Company recently entered into a new credit facility, issued approximately $120,400,000 (net of expenses) of common stock in February 2004, sold some surplus land in Inglewood, California in February 2004 and refinanced a significant portion of its long-term debt. As a result, the Company believes it has the resources, together with its cash on hand and its expected ongoing earnings, to fund the remaining construction costs of the $325,000,000 Lake Charles resort without having to depend on asset sales, additional financing or other infusions of cash.

The Company has also undertaken several initiatives designed to increase earnings from its existing operations. Primary among these is a 300-guestroom addition being built at the Belterra property and scheduled to open in April. The Company also is gradually upgrading the slot machines at most of its facilities to the new “ticket-in, ticket-out” technology; intends to award a construction contract during 2004 for a replacement facility for its casino in Neuquen, Argentina; and has corporate-wide efforts to centralize certain services and control staffing levels. Such improvements are expected to be partially offset during the first half of 2004 (when compared to the first half of 2003) by the competitive impact on the Company’s Reno property of large Native American casinos that opened in California in mid-2003.

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RESULTS OF OPERATIONS

The following table highlights the Company’s results of operations for the three years ended December 31, 2003, 2002 and 2001.

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Comparisons of the Years Ended December 31, 2003, 2002 and 2001

The following commentary reflects the Company’s results in accordance with several GAAP measures. An additional, supplemental analysis of the Company’s results using EBITDA, including the Company’s definition of EBITDA and a reconciliation of such EBITDA to GAAP accounting measures is provided in the “Other Supplemental Data” section below.

Operating Results    Operating income (excluding in all cases properties sold in 2001) increased to $38,042,000 in 2003 from $28,411,000 in 2002 and an operating loss of $8,791,000 in 2001. Revenues increased to $531,515,000 in 2003 from $514,001,000 in 2002 and $505,547,000 in 2001. Operating income for 2003, 2002 and 2001 includes certain non-routine items of $5,577,000, $10,963,000 and $23,676,000, respectively (see notes (g) and (h) to Item 6 above). Each property’s contribution to these results is as follows:

The Company’s Boomtown New Orleans property continues to produce consistent results. Revenues in 2003 grew to $106,398,000 from $100,403,000 in 2002, due to a small expansion of gaming capacity, improved slot product and new player loyalty programs. Comparatively, combined gross gaming revenue for the three competitors in the New Orleans market increased by only 0.5% according to data from the Louisiana Gaming Commission. Boomtown New Orleans operating income grew by 11.5% to $22,814,000 in 2003 from $20,470,000. The operating margin improved to 21.4% from 20.4%.

Revenues in 2002 improved to $100,403,000 from $99,927,000 in 2001. A full-year benefit of slot machines added in June 2001 and dockside operations that began in April 2001 were offset by higher tax rates. An increase in state gaming taxes at Boomtown New Orleans from 18.5% to 21.5% that became effective April 1, 2001 meant a higher tax rate during all of 2002 as compared to only nine months of 2001. Finally, the property incurred higher depreciation charges in 2002 due to improvements completed throughout 2001. As a result, operating income declined slightly to $20,470,000 in 2002 compared to $21,553,000 for 2001.

Belterra Casino Resort produced the largest growth in both revenue and operating income for the Company in 2003. Revenues grew by $11,586,000 to $133,704,000 in 2003 from $122,118,000. A full year of dockside gaming (commenced in August 2002) and enhanced marketing campaigns and player development events all contributed to the revenue growth. For the year, Belterra increased its gross gaming revenue by 12.2%, while gross gaming revenue for the four other dockside riverboat operators in the market increased by 7.6% during the same period. Operating income in 2003 also grew substantially, improving to $9,474,000 from $2,616,000, despite a $1,550,000 one-time retroactive gaming tax charge imposed by the State of Indiana in 2003 related to the effective date of 2002 tax changes. The Indiana State Department of Revenue, interpreting tax legislation passed by the Indiana General Assembly in the 2003 legislative session, has assessed this retroactive tax on all riverboats, without providing an offset for taxes paid at a higher tax rate during the period of July 1, 2002 to August 1, 2002. Belterra and most other Indiana casinos have filed protests with the state, asserting the interpretation of the legislation is erroneous and should be set aside. Excluding the one-time tax charge, operating income would have improved by $8,408,000.

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Belterra also produced the Company’s biggest revenue and operating income improvement in 2002, growing operating income by $21,289,000 on revenue improvement of $17,733,000. The revenue growth reflected the maturation of the property, improved marketing programs and the benefits of commencing dockside operations on August 1, 2002. In addition to growing revenues, the property implemented cost containment measures in late 2001 that helped improve operating margins.

At Boomtown Bossier City, revenues grew by $2,728,000 to $105,408,000 in 2003 from $102,680,000, as the property benefited from a full year of the renovation and expansion work that was completed in 2002, offset by the opening of slot operations at a nearby racetrack in May 2003. Excluding Boomtown Bossier City, gross gaming revenues for the Bossier City/ Shreveport market fell by 1.0% in 2003 compared to 2002. Exclusive of both Boomtown and the racetrack, gross gaming revenues fell by 5.7% for the year. Boomtown Bossier City’s operating income for the year improved to $8,366,000 from $5,568,000, despite an increase in depreciation charges of $736,000 from capital improvements completed in 2002. The Company implemented more efficient marketing programs and staffing levels during 2003, resulting in significant margin and operating income improvement.

On July 1, 2002, the Bossier City facility was re-branded “Boomtown Bossier City” from the former Casino Magic brand and motif. The renovation and expansion work was completed in 2002. Despite construction disruption for much of 2002, revenues grew 1.6% to $102,680,000 in 2002 compared to $101,019,000 in 2001. Operating income grew to $5,568,000 from $987,000. Re-branding charges in 2002 of $2,129,000 were offset by reduced marketing costs and the absence of a $2,600,000 working capital valuation charge that occurred in 2001. Boomtown Bossier City operating income for the year ended December 31, 2002 also benefited from the absence of approximately $1,602,000 of amortization of capitalized licensing expenses, related to the implementation of SFAS No. 142 on January 1, 2002, which costs were incurred in and prior to 2001.

At Casino Magic Biloxi, 2003 revenues were $83,603,000 compared to $86,500,000 in 2002, reflecting the competitive gaming market in the region and a shift in marketing strategy to respond to the competitive environment by eliminating marginally profitable marketing programs and promotions. Operating income was $8,127,000 for 2003 versus $10,570,000 in 2002, as the transition period between strategies caused some customer disruption during the 2003 second and third quarters.

For 2002, revenues and operating income improved by 4.2% and 15.3%, respectively, versus the year ended December 31, 2001.

At Boomtown Reno, revenues for the year ended December 31, 2003 were $83,645,000, compared to $89,021,000 for the year ended December 31, 2002. In mid-2003, new Native American casinos that are closer to several of Boomtown Reno’s primary feeder markets opened in California. For the year, operating income was $6,538,000 versus $10,208,000 in 2002. In response to the increased competition, Boomtown Reno began redirecting its marketing resources and implementing aggressive cost containment measures.

For the year ended December 31, 2002 gaming revenues were consistent with 2001, while the overall Reno market was off almost 4%. Overall, revenues for the property for 2002 declined by 1.2%, principally due to the lower retail fuel prices at the property’s gas stations. Operating income was down 10.1%, principally due to increased medical insurance costs.

Casino Magic Argentina benefited from a stronger peso in 2003 versus 2002 and an improved economic and political environment. Revenues improved by $5,478,000 to $12,517,000 from $7,039,000. Operating income also improved for the year, increasing $2,999,000 to $4,455,000 from $1,456,000.

Results for 2002 reflect the devaluation of the Argentine currency, which devaluation occurred at the beginning of the year. For 2002, revenues denominated in pesos increased 10.44% compared to the 2001 period. Pesos-denominated results are affected by the Argentine inflation rate, which was both high and volatile during

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the year. Operating results denominated in dollars, declined substantially from the year-earlier periods due to the devaluation of the Argentine currency. For the twelve months ended December 31, 2002, currency devaluation caused substantially all of the 65.1% and 74.1% decline in revenues and operating income, respectively, as compared to 2001.

Revenues and operating income from the Company’s Card Clubs in 2003 were consistent with results of 2002, as there was no change in the monthly lease income from either facility.

The decline in 2002 revenues and operating income compared to 2001 was due to a full year of reduced monthly lease payments from the Crystal Park Casino, compared to only three months of the lower lease structure in 2001.

Corporate Costs    Corporate costs in 2003 were $17,517,000, including non-routine benefits of $2,255,000. Corporate costs in 2002 were $23,346,000, including non-routine charges of $8,210,000. See “Non-Routine Items” below and notes (g) and (h) to Item 6 above. When excluding the non-routine items note, corporate costs increased in 2003 versus 2002 primarily due to litigation defense costs, development costs associated with the Company’s Lake Charles project and St. Louis development proposals, and corporate staffing that replaced executive positions vacated in early 2002.

Corporate costs were $18,124,000 in 2001, including a non-routine benefit of $464,000. Corporate costs decreased in 2002 compared to 2001 primarily due to the executive positions vacated in early 2002 and lower professional service fees related to acquisition-related consulting contracts that expired in 2001.

Non-Routine Items

Indiana Regulatory Matters:    In 2002, the Company recorded estimated regulatory, legal, severance and other settlement costs of $6,609,000 in connection with an investigation by the Indiana Gaming Commission into events surrounding a golf tournament in 2001. In December 2002, the Company’s former CEO filed a lawsuit against, among others, the Company, claiming wrongful termination, among other things. In February 2003, the court granted the Company’s motion to send the wrongful termination matter to binding arbitration. In December 2003, the arbitrator granted summary judgment in favor of the Company. During 2003, the Company also received funds exceeding its legal expenses for settlement of other litigation resulting from the golf tournament. The effect of the resolution of this litigation was to reduce corporate expenses during 2003 by $1,858,000.

Corporate Relocation Expenses and Related Benefits:    In December 2002, the Company relocated its corporate headquarters to Las Vegas, Nevada from Glendale, California and recorded relocation costs of $1,601,000, including costs attributed to the Glendale office space leased through May 2005. In November 2003, the Company executed a sub-lease agreement for the remainder of the Glendale lease term and as such recorded a benefit of $199,000.

Goodwill and Asset Impairment Charges:    During 2003, the Company identified certain pre-acquisition deferred tax assets related to Casino Magic Corp. whose estimated future realization had changed based on facts identified in the year (see Notes 1 and 7 to the Consolidated Financial Statements). Pursuant to SFAS No. 109, “Accounting for Income Taxes,” pre-acquisition contingent tax matters, including changes in a deferred tax asset’s estimated future realization, that are resolved beyond the one-year post-acquisition period are required to be reclassified from the deferred tax accounts to goodwill. Pursuant to SFAS No. 142, the Company included such amounts in its annual goodwill assessment. Based on the evaluation completed, the Company recorded a goodwill impairment charge of $7,832,000 in 2003.

In 2002 and 2001, the Company incurred asset impairment charges of $2,753,000 and $23,530,000, respectively (see Note 5 to the Consolidated Financial Statements).

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2001 Sold Properties    In 2001, the Company terminated various lease agreements with a Native American tribe under which the Company derived income from the Legends Casino in Yakima, Washington.

Interest Income    Interest income in 2003 was consistent with 2002, as additional cash and equivalents for a majority of the year were offset by lower interest rates throughout the year. Interest income in 2002 was $2,206,000 versus $5,021,000 in 2001, the lower amount due primarily to lower interest rates in 2002 and the early repayment of a promissory note from the Legends casino.

Interest Expense    Interest expense in 2003 before capitalized interest was $56,394,000, compared to $50,683,000 in 2002, with the increase primarily due to the funding of the term loan facility in May 2003 (see Note 6 to the Consolidated Financial Statements). Interest expense in 2002 (before capitalized interest) was approximately equal with the prior year period. Capitalized interest was $1,513,000, $995,000 and $481,000 in 2003, 2002 and 2001, respectively.

Loss on Early Extinguishment of Debt    During 2003, the Company retired its 9.50% Senior Subordinated Notes and entered into new credit facilities (see Note 6 to the Consolidated Financials Statements). In connection with the resultant early extinguishment of debt, the Company incurred charges of $8,744,000 and $11,164,000, respectively.

Income Tax Benefit    The effective tax rate in 2003 was 18.5%, or a tax benefit of $6,394,000. During 2003, the Company revised its estimate of tax reserves to cover certain tax exposures. The Company recorded a tax provision of $4,248,000 in 2003 in connection with such activity. Excluding the goodwill impairment charge from pre-tax losses and the non-routine tax charge noted above, the effective tax rate in 2003 was 39.7%.

The effective tax rate in 2002 was 32.2%, or a tax benefit of $6,146,000. A portion of the 2002 Indiana regulatory settlement costs was not tax deductible, resulting in the lower-than-statutory tax rate. The effective tax rate in 2001 was 43.3%, or a tax benefit of $21,906,000. The 2001 year includes a $3,705,000 tax benefit from the settlement of certain federal income tax matters.

Change in Accounting Principle    The charge in the first quarter of 2002 for the cumulative change in accounting principle of $56,704,000 related to the write-down of goodwill and other intangible assets. This charge reflected the adoption of SFAS No. 142 as of January 1, 2002 (see Note 1 to the Consolidated Financial Statements).

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2003, the Company had $229,036,000 of cash, cash equivalents and restricted cash. Management currently estimates that approximately $45,000,000 is currently used to fund the Company’s casino cages, slot machines, operating accounts and day-to-day working capital needs. By consolidating certain accounts and services, and introducing more “ticket-in, ticket-out” slot machines, management believes that it can gradually reduce the required operating cash balances to less than $45,000,000, despite the Company’s anticipated growth.

Included in cash, cash equivalents and restricted cash at December 31, 2003 and 2002 is restricted cash of $128,929,000 and $30,100,000, respectively. The increase in restricted cash as of December 31, 2003 is due to net proceeds from the term loan portion of the Credit Facility (see Note 6 to the Consolidated Financial Statements), offset by the reclassification of $22,500,000 to cash and cash equivalents for funds set aside in 2002 for the Lake Charles project, which set aside was no longer required by the Louisiana Gaming Control Board in 2003.

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Working capital for the Company (current assets less current liabilities) was $50,000,000 at December 31, 2003, versus $87,719,000 at December 31, 2002, the decrease being primarily attributed to the cash provided from operations and the reclassification of the $22,500,000 set aside in 2002, offset by capital spending for the Lake Charles and Belterra projects and routine maintenance capital spending activity.

Cash provided by operations was $55,386,000 in 2003, compared to $39,030,000 in 2002. The increase is primarily attributed to the improved operations in 2003 compared to 2002, as well as additional cash income tax receipts in 2003 versus 2002. For the year ended December 31, 2003, the Company invested $82,931,000 in property and equipment, approximately $53,643,000 of which was for the Lake Charles and Belterra projects. In addition, during 2003, the Company improved its overall capital structure through refinancing its credit facility in December and May (lowering interest rate levels and improving covenant requirements in both financings) and issuing new 8.75% senior subordinated notes to replace the 9.50% senior subordinated notes. In connection with improving the capital structure, the Company expended approximately $21,698,000 to refinance its debt. Finally, in December 2003, the Company repurchased shares of its common stock for approximately $20,090,000 in cash —see Note 8 to the Consolidated Financial Statements. Overall, cash from operations was sufficient to finance maintenance capital spending, with the remaining cash flow from operations and restricted cash financing the project spending and cash resources financing a portion of the debt issuance costs.

As noted above, cash provided by operations in 2002 was $39,030,000, consistent with the $39,517,000 provided for in 2001, with improved operating results in 2002 versus 2001 offset by reduced cash tax refunds for the year. In 2002, the Company benefited from cash generated from stock option exercises of $4,067,000 and the collection of a $1,000,000 note receivable. During the year, the Company invested $48,596,000 in property and equipment and repaid $3,649,000 of debt. Unrestricted cash and cash equivalents were also reduced due to the transfer of $30,100,000 of cash to restricted cash. The cash invested in current and future construction exceeded the cash generated from operations, resulting in a decline in cash and cash equivalents of $39,198,000.

As of December 31, 2003, the Company’s debt consists primarily of the term loan portion of the Credit Facility (defined below) of $147,000,000 and the two issues of senior subordinated indebtedness: $135,000,000 aggregate principal amount of 8.75% Senior Subordinated Notes due October 2013 (the “8.75% Notes”) and $350,000,000 aggregate principal amount of 9.25% Senior Subordinated Notes due February 2007 (the “9.25% Notes”).

In December 2003, the Company entered into a new $300,000,000 credit facility (the “Credit Facility”), which provides for a six-year $225,000,000 term loan facility (which was subsequently reduced to approximately $215,000,000), of which $147,000,000 was drawn immediately and approximately $68,000,000 can be drawn on a delayed basis in increments of at least $25,000,000 through September 30, 2004, and a five-year $75,000,000 revolving credit facility. The Credit Facility is larger and allows the Company to borrow at lower interest rates than the Prior Credit Facility (defined below). As required by the Credit Facility, upon the Company’s sale of 37 acres of land in Inglewood, California, on February 27, 2004, the Company deposited the net cash proceeds it received into a completion reserve account established under the Credit Facility and the delayed draw loan commitment was reduced by 50% of this amount from $78,000,000, to approximately $68,000,000. The Company believes that the benefit of the lower interest rates has a significantly higher net present value than the up-front costs of the Credit Facility.

Upon the closing of the Credit Facility the Company borrowed $147,000,000 in term loans and deposited approximately $139,604,000 of the net term loan proceeds into the completion reserve account. These funds, subject to satisfying conditions to withdrawal from the completion reserve account, are permitted to be used to pay a portion of the construction costs of the Lake Charles resort, to pay up to $20,000,000 in capital expenditures for the Belterra hotel tower expansion and to fund up to $21,000,000 in certain approved stock repurchases, including the December 2003 stock repurchases (aggregating approximately $20,090,000—see Note 8 to the Consolidated Financial Statements). Proceeds of the delayed draw term loan facility are required to be funded into the completion reserve account and are also available subject to satisfying conditions to withdrawal from such account. The proceeds of the revolving credit facility may be used for general corporate purposes.

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Under the Credit Facility, the term loans mature in December 2009 and the revolving credit facility matures in December 2008. These maturity dates will advance to August 15, 2006 if the Company has not before such date repaid, refinanced or extended the maturity of the 9.25% Notes beyond the term loan maturity date. In addition, the term loans are repayable in quarterly installments of 0.25% of the principal amount of the term loans outstanding on October 1, 2004, commencing in March 2005.

The Company is obligated to make mandatory prepayments of indebtedness under the Credit Facility from the net proceeds of certain debt offerings, certain asset sales and dispositions and certain equity issuances. In addition, commencing with the Company’s fiscal year ending December 31, 2005, the Company is required to prepay borrowings under the Credit Facility with a percentage (based on certain “leverage ratios”) of its “excess cash flow” (each as defined in the Credit Facility).

The Credit Facility has, among other things, restrictive financial covenants and capital spending limits and other affirmative and negative covenants. The obligations under the Credit Facility are secured by substantially all of the assets of the Company and its domestic restricted subsidiaries, including a pledge of the equity interests in the Company’s domestic subsidiaries. The Company’s obligations under the Credit Facility are also guaranteed by the Company’s domestic restricted subsidiaries.

The Credit Facility requires that the Company first expend $36,579,000 of its excess cash on the Lake Charles resort before the proceeds of the term loans and certain other amounts in the completion reserve account are permitted to be withdrawn for Lake Charles construction.

Borrowing under the Credit Facility and access to funds in the completion reserve account are also subject to other conditions customary for construction-related loans. The Credit Facility requires the Company to diligently pursue construction of the Lake Charles resort so as to cause the opening to occur on or prior to the earlier of June 30, 2005 and the date required by the Louisiana Gaming Control Board. The Company is also required to certify monthly and each time it borrows under the Credit Facility or accesses funds in the completion reserve account that it is in compliance with a “Liquidity Requirement”, which requires that the sum of the undrawn portion of the revolving and term commitments, the balance in the completion reserve account and the Company’s excess cash, exceed the unexpended costs to complete the Lake Charles resort.

In addition to permitted capital expenditures for maintenance expenses at existing facilities and amounts permitted to be applied to the costs and expenses of the Lake Charles resort and the Belterra hotel tower expansion, the Credit Facility permits the Company to expend funds, during the term of the Credit Facility, on various new capital projects in an amount up to $65,000,000.

In May 2003, the Company amended, expanded and restated its prior credit facility (the “Prior Credit Facility”), which was executed in October 1998. This facility was replaced with the Credit Facility in December.

On September 25, 2003, the Company issued $135,000,000 aggregate principal amount of the 8.75% Notes, which notes were issued at 98.369% of par to yield 9% to maturity. The net proceeds of the offering were used to retire the Company’s 9.50% Notes through a cash tender offer and exercise of the Company’s right to call the bonds for redemption.

The 8.75% Notes are unsecured obligations of the Company, guaranteed by all material restricted subsidiaries (excluding foreign subsidiaries) of the Company, as defined in the indenture. The indenture governing the 8.75% Notes contains certain covenants limiting the ability of the Company and its restricted subsidiaries to incur additional indebtedness, issue preferred stock, pay dividends or make certain distributions, repurchase equity interests or subordinated indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets, issue or sell equity interests in its subsidiaries, or enter into certain mergers and consolidations. Among other things, the Company is permitted, under indentures governing both the 8.75% Notes and the 9.25% Notes, to amend, restate, modify, renew, refund, replace or refinance its senior indebtedness

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up to a maximum of $350,000,000 of such debt outstanding. The indentures governing the 8.75% Notes and the 9.25% Notes permit the incurrence of additional indebtedness pursuant to certain baskets, such as the credit facility indebtedness described above. The indentures also permit the incurrence of additional indebtedness outside the baskets if at the time the indebtedness is proposed to be incurred, the Company’s consolidated coverage ratio on a pro forma basis, as defined in those indentures (essentially the ratio of EBITDA to interest), would be at least 2.00 to 1.00.

The Company’s consolidated coverage ratio is currently under 2.00 to 1.00 and the Company expects that this will remain the case at least until the Lake Charles resort has opened. Accordingly, without the consent of the holders of the required principal amount of the respective 8.75% Notes and 9.25% Notes, the Company’s ability to incur additional indebtedness is limited to the baskets outlined in the indentures. The Company is also permitted to put up to 50% of its undeveloped real estate, measured in acres, into an unrestricted subsidiary. The proceeds of any subsequent sale of the land would also remain unrestricted. The Inglewood land which is currently held for sale (see Note 3 to the Consolidated Financial Statements) comprises less than half of the Company’s undeveloped land.

The 8.75% Notes become callable at a premium over their face amount on October 1, 2008; the 9.25% Notes became callable at a premium over their face amount on February 15, 2003. Such premiums decline periodically as the bonds near their respective maturities. Neither series of notes has any required sinking fund or other principal payments prior to their maturities.

On February 2, 2004, the Company consummated the public offering of 11,500,000 shares of its common stock at $11.15 per share and received approximately $120,400,000 of net proceeds. Under the terms of the Credit Facility, the Company deposited 25% of the net proceeds of the equity offering into the completion reserve account. The Company expects to use the remaining 75% of the net proceeds of the equity offering for general corporate purposes, which may include the construction of the Lake Charles resort, the Belterra hotel tower expansion and new capital projects, including the Company’s pending development proposals in St. Louis if the Company is awarded the licenses.

On February 27, 2004 the Company priced a private offering of $200,000,000 aggregate principal amount of new 8.25% senior subordinated notes due 2012, which notes are to be issued at 99.282% of par to yield 8.375% to maturity. The offering is scheduled to close on March 15, 2004, subject to closing conditions. The Company intends to use the net proceeds from the offering to repurchase or redeem a portion of its outstanding 9.25% Notes, as described below. The new senior subordinated notes will not be registered under the Securities Act of 1933 or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This shall not constitute an offer to sell or a solicitation of an offer to buy the new senior subordinated notes.

On February 20, 2004 the Company commenced a cash tender offer, as amended, to purchase $188,000,000 in aggregate principal amount of the 9.25% Notes at an offer price of 103.208% of principal amount plus accrued and unpaid interest. Completion of the private offering of the new senior subordinated notes is a condition to the closing of the tender offer. The tender offer is scheduled to expire at 12:00 midnight, on March 18, 2004. Following the completion of the tender offer, the Company currently intends to exercise its right to redeem a principal amount of 9.25% Notes which, when added to the 9.25% Notes purchased in the tender offer, would result in up to a total of approximately $189,000,000 in aggregate principal amount of the 9.25% Notes having been purchased and redeemed. The redemption price for the 9.25% Notes is 103.083% of principal amount, plus the accrued and unpaid interest to the date of redemption. This statement of intent does not constitute a notice of redemption under the indenture governing the 9.25% Notes. Under the governing indenture, the written notice of redemption must be given at least 30 days and no more than 60 days prior to the redemption date.

The Company also has a $4,400,000 stand-by letter of credit outstanding at December 31, 2003, which letter of credit is cash-collateralized and for the benefit of the Company’s self-funded workers’ compensation insurance program.

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On February 13, 2004, the Company amended and reinstated its agreement (which had been terminated by its terms in December 2003) to sell 60 acres it owns in Inglewood, California to a retail development company for $36,000,000 in cash. Among other things, the amendment restates the agreement as an option to purchase the land and extends the time for closing the transaction until April 30, 2004 in consideration of a non-refundable payment received by the Company of $2,000,000 which will be credited against the purchase if the transaction closes. The amendment also grants the buyer the option to further extend the closing until May 31, 2004 upon payment of an additional non-refundable payment of $1,000,000 which also would be credited against the purchase price if the transaction closes. There can be no assurance that such sale will ultimately be completed on a timely basis, or at all.

On February 27, 2004, the Company closed on the sale of the remaining 37 acres it owns in Inglewood, California for approximately $22,000,000 in cash, and anticipates recording a gain on the sale of approximately $13,200,000.

The Company intends to continue to maintain its current properties in good condition and estimates that this will require maintenance and miscellaneous capital spending of approximately $20,000,000 to $25,000,000 per year.

In October 2002, the Company’s shelf registration statement with the Securities and Exchange Commission became effective, permitting the issuance of up to $500,000,000 of debt, equity or other securities. In September 2003, availability was reduced to $365,000,000 in connection with the issuance of the $135,000,000 aggregate principal amount of 8.75% Senior Subordinated Notes (see Note 6 to the Consolidated Financial Statements). Availability was further reduced in February 2004 to $236,775,000 in connection with the 2004 equity offering (see Note 8 to the Consolidated Financial Statements). There can be no assurance, however, that the Company will be able to issue any of additional securities on terms acceptable to the Company.

The Company currently believes that its existing cash resources and cash flows from operations and funds available under the Credit Facility, without regard to asset sales, will be sufficient to fund operations, maintain existing properties, make necessary debt service payments and fund construction of the Belterra hotel tower expansion and to fund the construction costs anticipated for the Lake Charles resort.

OTHER SUPPLEMENTAL DATA

EBITDA:    The Company defines EBITDA as earnings before interest expense and income, provision for income taxes, depreciation, amortization, loss on early extinguishment of debt and cumulative effect of a change in accounting principles. Management uses EBITDA as a relevant and useful measure to compare operating results among its properties and between accounting periods. The presentation of EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of the Company’s business segments. EBITDA is specifically relevant in evaluating large, long-lived hotel casino projects because it provides a perspective on the current effects of operating decisions separated from the substantial, non-operational depreciation charges and financing costs of such projects. Additionally, management believes some investors consider EBITDA to be a useful measure in determining a company’s ability to service or incur indebtedness and for estimating a company’s underlying cash flow from operations before capital costs, taxes and capital expenditures. EBITDA, subject to certain adjustments, is also a measure used in debt covenants in the Company’s debt agreements. EBITDA is not a measure of financial performance under the promulgations of generally accepted accounting principles or “GAAP.” Unlike net income, EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. Management compensates for these limitations by using EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance and to measure cash flow generated by ongoing operations. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. EBITDA is not calculated in the same manner by

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all companies and accordingly, may not be an appropriate measure of comparing performance amongst different companies. See Notes (g) and (h) to the “Selected Financial Data” for a reconciliation from net income (loss) to EBITDA and for details regarding certain costs that are included in this table.