Attached files
file | filename |
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EX-23.3 - ICAHN ENTERPRISES L.P. | v204322_ex23-3.htm |
EX-23.4 - ICAHN ENTERPRISES L.P. | v204322_ex23-4.htm |
EX-23.2 - ICAHN ENTERPRISES L.P. | v204322_ex23-2.htm |
EX-23.1 - ICAHN ENTERPRISES L.P. | v204322_ex23-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K/A
CURRENT
REPORT
Pursuant to Section
13 or 15(d) of the Securities Exchange
Act of 1934
Date
of Report (Date of earliest event reported): November 15, 2010
ICAHN
ENTERPRISES L.P.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
1-9516
|
13-3398766
|
(State
or Other Jurisdiction of Incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
767
Fifth Avenue, Suite 4700, New York, NY 10153
(Address
of Principal Executive Offices) (Zip Code)
(212)
702-4300
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
|
Written communication pursuant to
Rule 425 under the Securities Act (17 CFR
230.425)
|
o
|
Soliciting material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
o
|
Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
o
|
Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Section
2 – Financial Information
Item
2.01 Completion of Acquisition or Disposition of
Assets.
On
November 17, 2010, Icahn Enterprises L.P. (“Icahn Enterprises”) filed a Current
Report on Form 8-K under Item 2.01 to report the acquisition on November 15,
2010, through its Investment Management segment, of 668,000 shares of common
stock (“Tropicana Shares”) of Tropicana Entertainment Inc. (“Tropicana”). As a
result of this purchase, the Investment Management segment of Icahn Enterprises
holds, in the aggregate, 13,538,446 Tropicana Shares, representing approximately
51.5% of the outstanding Tropicana Shares.
Icahn
Enterprises will consolidate Tropicana’s financial results effective November
15, 2010.
This
Current Report on Form 8-K/A is being filed to provide the financial
statements of Tropicana and pro forma financial data for Icahn
Enterprises.
Section
9 - Financial Statements and Exhibits
Item
9.01 Financial Statements and Exhibits.
Financial
Statements of Businesses Acquired.
|
Page
|
Tropicana
Entertainment Inc.
|
|
Condensed
Balance Sheets as of September 30, 2010 (Unaudited) and December 31,
2009
|
F-1
|
Condensed
Statements of Operations for the Three and Nine Months Ended September 30,
2010 and 2009 (Unaudited)
|
F-2
|
Condensed
Statements of Changes in Shareholders’ Equity/Members’ Equity (Deficit)
for the Nine Months Ended September 30, 2010 (Unaudited)
|
F-3
|
Condensed
Statements of Cash Flows for the Nine Months Ended September 30, 2010 and
2009 (Unaudited)
|
F-4
|
Notes
to Condensed Financial Statements
|
F-5
|
Predecessors
and Tropicana Casino and Resort Atlantic City
|
|
The
following Audited Financial Statements as of December 31, 2009 and 2008
and for the Years Ended December 31, 2009, 2008 and 2007 are incorporated
by reference into Icahn Enterprises’ Current Report on Form 8-K/A, filed
with the Securities and Exchange Commission on April 13,
2010:
|
|
Tropicana
Entertainment Holdings, LLC Audited Consolidated Financial
Statements
|
|
Adamar
of New Jersey, Inc. d/b/a Tropicana Casino and Resort Audited
Financial Statements
|
|
Columbia
Properties Vicksburg, LLC Audited Financial
Statements
|
|
JMBS
Casino, LLC Audited Financial Statements
|
|
Pro
Forma Financial Information.
|
|
Unaudited
Pro Forma Condensed Combined Financial Information for Icahn Enterprises
L.P. and Subsidiaries:
|
|
Unaudited
Pro Forma Condensed Combined Financial Information
|
F-40
|
Unaudited
Pro Forma Condensed Combined Balance Sheet as of September 30,
2010
|
F-41
|
Unaudited
Pro Forma Condensed Combined Statement of Operations for the Nine Months
Ended September 30, 2010
|
F-42
|
Unaudited
Pro Forma Condensed Combined Statement of Operations for the Year Ended
December 31, 2009
|
F-43
|
Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
|
F-44
|
(d)
Exhibits.
|
|
Exhibit No.
|
|
23.1
Consent of Ernst & Young LLP
|
|
23.2
Consent of Ernst & Young LLP
|
|
23.3
Consent of Ernst & Young LLP
|
|
23.4
Consent of Ernst & Young LLP
|
[Remainder
of page intentionally left blank; signature page follows]
2
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
ICAHN
ENTERPRISES L.P.
(Registrant)
|
|||
|
|||
By:
|
Icahn
Enterprises G.P. Inc.,
its
general partner
|
||
|
|||
By:
|
/s/ Dominick
Ragone
|
||
Dominick
Ragone
|
|||
Chief
Financial Officer
|
Date:
December 3, 2010
3
TROPICANA
ENTERTAINMENT INC.
CONDENSED
BALANCE SHEETS
(amounts
in thousands)
Successor
|
Predecessors
|
|||||||||||||||
September 30,
2010
|
December 31,
2009
|
|||||||||||||||
Tropicana
Entertainment
Inc.
|
Tropicana
Entertainment
Holdings,
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS
Casino,
LLC
|
|||||||||||||
(unaudited)
|
||||||||||||||||
ASSETS
|
||||||||||||||||
Current
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 158,497 | $ | 50,904 | $ | 2,372 | $ | 3,844 | ||||||||
Restricted
cash
|
21,596 | 2,772 | — | — | ||||||||||||
Receivables,
net
|
34,965 | 14,514 | 31 | 22 | ||||||||||||
Due
from affiliates
|
— | 4,790 | 139 | 579 | ||||||||||||
Inventories
|
3,736 | 1,749 | — | — | ||||||||||||
Prepaid
expenses and other assets
|
11,782 | 9,017 | 244 | 231 | ||||||||||||
Total
current assets
|
230,576 | 83,746 | 2,786 | 4,676 | ||||||||||||
Property
and equipment, net
|
457,057 | 423,650 | 10,558 | 16,229 | ||||||||||||
Beneficial
interest in Trust
|
— | 200,000 | — | — | ||||||||||||
Goodwill
|
63,935 | 16,802 | 590 | 8,432 | ||||||||||||
Intangible
assets, net
|
99,368 | 73,888 | 320 | 20 | ||||||||||||
Investments
|
32,734 | — | — | — | ||||||||||||
Receivable
from affiliate
|
— | — | 9,798 | 10,976 | ||||||||||||
Reserve
related to receivable from affiliate
|
— | — | (7,478 | ) | (5,451 | ) | ||||||||||
Other
assets, net
|
27,429 | 20,126 | 157 | 87 | ||||||||||||
Total
assets
|
$ | 911,099 | $ | 818,212 | $ | 16,731 | $ | 34,969 | ||||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY/MEMBERS' DEFICIT
|
||||||||||||||||
Current
liabilities not subject to compromise:
|
||||||||||||||||
Current
portion of debt—related party
|
$ | 1,345 | $ | 65,669 | $ | — | $ | — | ||||||||
Accounts
payable
|
56,772 | 24,639 | 577 | 450 | ||||||||||||
Due
to affiliates
|
— | 2,897 | 2,601 | 767 | ||||||||||||
Accrued
expenses and other current liabilities
|
65,563 | 30,175 | 2,145 | 1,277 | ||||||||||||
Notes
payable to affiliate guarantors
|
— | 7,000 | — | — | ||||||||||||
Total
current liabilities not subject to compromise
|
123,680 | 130,380 | 5,323 | 2,494 | ||||||||||||
Long-term
debt, net—related party
|
105,672 | — | — | — | ||||||||||||
Other
long-term liabilities
|
9,451 | 31,891 | 1,950 | — | ||||||||||||
Deferred
tax liabilities
|
63,935 | 29,980 | — | — | ||||||||||||
Total
liabilities not subject to compromise
|
302,738 | 192,251 | 7,273 | 2,494 | ||||||||||||
Liabilities
subject to compromise
|
— | 2,449,900 | 3,455 | 1,434 | ||||||||||||
Liabilities
subject to compromise—guarantee of affiliate debt
|
— | — | 2,289,249 | 2,289,249 | ||||||||||||
Total
liabilities
|
302,738 | 2,642,151 | 2,299,977 | 2,293,177 | ||||||||||||
Commitments
and contingencies
|
||||||||||||||||
Shareholders'
equity/Members' deficit:
|
||||||||||||||||
Predecessors
members' deficit
|
— | (1,842,035 | ) | (2,283,246 | ) | (2,258,208 | ) | |||||||||
Tropicana
Entertainment Inc. preferred stock at $0.01 par value; 10,000,000
shares authorized, no shares issued
|
— | — | — | — | ||||||||||||
Tropicana
Entertainment Inc. common stock at $0.01 par value; 100,000,000
shares authorized, 26,312,500 shares issued and outstanding at
September 30, 2010
|
263 | — | — | — | ||||||||||||
Additional
paid-in capital
|
607,346 | — | — | — | ||||||||||||
Accumulated
deficit
|
(447 | ) | — | — | — | |||||||||||
Tropicana
Entertainment Inc. shareholders' equity
|
607,162 | — | — | — | ||||||||||||
Noncontrolling
interest
|
1,199 | 18,096 | — | — | ||||||||||||
Total
shareholders' equity/members' deficit
|
608,361 | (1,823,939 | ) | (2,283,246 | ) | (2,258,208 | ) | |||||||||
Total
liabilities and shareholders' equity/members' deficit
|
$ | 911,099 | $ | 818,212 | $ | 16,731 | $ | 34,969 |
The
accompanying notes are an integral part of these condensed financial
statements.
F-1
TROPICANA
ENTERTAINMENT INC.
CONDENSED
STATEMENTS OF OPERATIONS
(amounts
in thousands, except per share data)
(unaudited)
Successor
|
Predecessors
|
Successor
|
Predecessors
|
Predecessors
|
||||||||||||||||||||||||||||||||||||||||
Three
Months
ended
September 30,
2010
|
Three
Months ended
September 30,
2009
|
Period
from
March 8,
2010
through
September 30,
2010
|
Period
from January 1, 2010
through
March 7, 2010
|
Nine
Months ended
September 30,
2009
|
||||||||||||||||||||||||||||||||||||||||
Tropicana
Entertainment
Inc.
|
Tropicana
Entertainment
Holdings,
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS
Casino,
LLC
|
Tropicana
Entertainment
Inc.
|
Tropicana
Entertainment
Holdings,
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS
Casino,
LLC
|
Tropicana
Entertainment
Holdings,
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS
Casino,
LLC
|
||||||||||||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||||||||||||||
Casino
|
$ | 159,790 | $ | 76,967 | $ | 2,603 | $ | 3,367 | $ | 347,249 | $ | 55,416 | $ | 1,189 | $ | 3,498 | $ | 239,327 | $ | 9,414 | $ | 12,413 | ||||||||||||||||||||||
Room
|
30,843 | 11,249 | 225 | 101 | 64,633 | 7,101 | 86 | 45 | 32,918 | 745 | 253 | |||||||||||||||||||||||||||||||||
Food
and beverage
|
25,141 | 14,458 | 157 | 97 | 53,854 | 9,306 | 75 | 78 | 45,114 | 811 | 296 | |||||||||||||||||||||||||||||||||
Other
|
7,103 | 2,572 | 56 | 44 | 15,540 | 1,559 | 16 | 30 | 7,652 | 223 | 151 | |||||||||||||||||||||||||||||||||
Gross
revenues
|
222,877 | 105,246 | 3,041 | 3,609 | 481,276 | 73,382 | 1,366 | 3,651 | 325,011 | 11,193 | 13,113 | |||||||||||||||||||||||||||||||||
Less
promotional allowances
|
(44,961 | ) | (14,199 | ) | (102 | ) | (112 | ) | (93,335 | ) | (8,863 | ) | (95 | ) | (99 | ) | (45,409 | ) | (678 | ) | (887 | ) | ||||||||||||||||||||||
Net
revenues
|
177,916 | 91,047 | 2,939 | 3,497 | 387,941 | 64,519 | 1,271 | 3,552 | 279,602 | 10,515 | 12,226 | |||||||||||||||||||||||||||||||||
Operating
costs and expenses:
|
||||||||||||||||||||||||||||||||||||||||||||
Casino
|
65,663 | 37,373 | 1,576 | 1,356 | 147,533 | 22,559 | 622 | 1,087 | 111,374 | 5,225 | 4,664 | |||||||||||||||||||||||||||||||||
Room
|
8,657 | 5,148 | 291 | 73 | 18,513 | 2,819 | 62 | 24 | 15,434 | 876 | 197 | |||||||||||||||||||||||||||||||||
Food
and beverage
|
11,264 | 7,907 | 161 | 6 | 24,417 | 5,373 | 81 | 13 | 24,279 | 519 | 17 | |||||||||||||||||||||||||||||||||
Other
|
2,490 | 1,387 | 27 | — | 5,623 | 1,081 | 7 | — | 4,380 | 69 | — | |||||||||||||||||||||||||||||||||
Marketing,
advertising and promotions
|
17,109 | 2,682 | 115 | 147 | 37,167 | 2,199 | 78 | 72 | 8,857 | 542 | 564 | |||||||||||||||||||||||||||||||||
General
and administrative
|
30,865 | 18,546 | 1,286 | 996 | 73,429 | 14,327 | 673 | 764 | 57,867 | 3,756 | 3,048 | |||||||||||||||||||||||||||||||||
Maintenance
and utilities
|
16,936 | 7,437 | 404 | 347 | 35,186 | 5,628 | 248 | 227 | 20,429 | 1,121 | 1,038 | |||||||||||||||||||||||||||||||||
Depreciation
and amortization
|
10,795 | 10,104 | 580 | 596 | 24,871 | 6,112 | 374 | 432 | 30,124 | 1,822 | 1,779 | |||||||||||||||||||||||||||||||||
Impairment
charges and other write-downs
|
127 | 28 | — | — | 127 | — | — | — | 154,358 | — | — | |||||||||||||||||||||||||||||||||
Total
operating costs and expenses
|
163,906 | 90,612 | 4,440 | 3,521 | 366,866 | 60,098 | 2,145 | 2,619 | 427,102 | 13,930 | 11,307 | |||||||||||||||||||||||||||||||||
Operating
income (loss)
|
14,010 | 435 | (1,501 | ) | (24 | ) | 21,075 | 4,421 | (874 | ) | 933 | (147,500 | ) | (3,415 | ) | 919 | ||||||||||||||||||||||||||||
Other
income (expense):
|
||||||||||||||||||||||||||||||||||||||||||||
Interest
expense
|
(8,239 | ) | (3,654 | ) | — | — | (18,545 | ) | (2,005 | ) | — | (2 | ) | (10,996 | ) | (5 | ) | — | ||||||||||||||||||||||||||
Interest
income
|
281 | — | 65 | 125 | 552 | 11 | 40 | 103 | — | 186 | 292 | |||||||||||||||||||||||||||||||||
Loss
related to guarantee of affiliate debt
|
— | — | — | — | — | — | — | — | — | (8,010 | ) | (8,010 | ) | |||||||||||||||||||||||||||||||
Total
other income (expense)
|
(7,958 | ) | (3,654 | ) | 65 | 125 | (17,993 | ) | (1,994 | ) | 40 | 101 | (10,996 | ) | (7,829 | ) | (7,718 | ) | ||||||||||||||||||||||||||
Income
(loss) from continuing operations before reorganization items and income
taxes .
|
6,052 | (3,219 | ) | (1,436 | ) | 101 | 3,082 | 2,427 | (834 | ) | 1,034 | (158,496 | ) | (11,244 | ) | (6,799 | ) | |||||||||||||||||||||||||||
Reorganization
items, net
|
— | (3,087 | ) | (21 | ) | (13 | ) | — | 2,093,098 | 2,288,185 | 2,266,609 | (22,819 | ) | (44 | ) | (31 | ) | |||||||||||||||||||||||||||
Income
(loss) from continuing operations before income
taxes
|
6,052 | (6,306 | ) | (1,457 | ) | 88 | 3,082 | 2,095,525 | 2,287,351 | 2,267,643 | (181,315 | ) | (11,288 | ) | (6,830 | ) | ||||||||||||||||||||||||||||
Income
tax benefit (expense)
|
(4,618 | ) | (1,024 | ) | — | — | (3,618 | ) | 26,654 | — | — | (6,001 | ) | — | — | |||||||||||||||||||||||||||||
Income
(loss) from continuing operations, including noncontrolling
interest
|
1,434 | (7,330 | ) | (1,457 | ) | 88 | (536 | ) | 2,122,179 | 2,287,351 | 2,267,643 | (187,316 | ) | (11,288 | ) | (6,830 | ) | |||||||||||||||||||||||||||
Gain
(loss) from discontinued operations,
net
|
— | 277,717 | — | — | — | — | — | — | (38,829 | ) | — | — | ||||||||||||||||||||||||||||||||
Net
income (loss), including noncontrolling
interest
|
1,434 | 270,387 | (1,457 | ) | 88 | (536 | ) | 2,122,179 | 2,287,351 | 2,267,643 | (226,145 | ) | (11,288 | ) | (6,830 | ) | ||||||||||||||||||||||||||||
Less
net (income) loss attributable to noncontrolling
interests
|
70 | (983 | ) | — | — | 89 | 845 | — | — | (3,148 | ) | — | — | |||||||||||||||||||||||||||||||
Net
income (loss)
|
$ | 1,504 | $ | 269,404 | $ | (1,457 | ) | $ | 88 | $ | (447 | ) | $ | 2,123,024 | $ | 2,287,351 | $ | 2,267,643 | $ | (229,293 | ) | $ | (11,288 | ) | $ | (6,830 | ) | |||||||||||||||||
Earnings
(loss) per common share:
|
||||||||||||||||||||||||||||||||||||||||||||
Basic
|
$ | 0.06 | $ | (0.02 | ) | |||||||||||||||||||||||||||||||||||||||
Diluted
|
$ | 0.06 | $ | (0.02 | ) | |||||||||||||||||||||||||||||||||||||||
Weighted-average
shares outstanding:
|
||||||||||||||||||||||||||||||||||||||||||||
Basic
|
26,313 | 26,313 | ||||||||||||||||||||||||||||||||||||||||||
Diluted
|
26,313 | 26,313 |
The
accompanying notes are an integral part of these condensed financial
statements.
F-2
TROPICANA
ENTERTAINMENT INC.
CONDENSED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/MEMBERS' EQUITY
(DEFICIT)
(amounts
in thousands, unaudited)
Successor
|
Predecessors
|
|||||||||||||||||||||||||||||||||||||||||||
Tropicana
Entertainment Inc.
|
||||||||||||||||||||||||||||||||||||||||||||
Common
Stock
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Shareholders'
Equity
|
Noncontrolling
Interest
|
Total
Shareholders'
Equity
|
Tropicana
Entertainment
Holdings,
LLC
Members'
Equity
(Deficit)
|
Noncontrolling
Interest
|
Total
Members'
Equity
(Deficit)
|
Columbia
Properties
Vicksburg,
LLC
Members'
Equity
(Deficit)
|
JMBS
Casino,
LLC
Members'
Equity
(Deficit)
|
||||||||||||||||||||||||||||||||||
Balances, January 1, 2010
(Predecessors)
|
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (1,842,035 | ) | $ | 18,096 | $ | (1,823,939 | ) | $ | (2,283,246 | ) | $ | (2,258,208 | ) | ||||||||||||||||||
Net
income (loss)
|
— | — | — | — | — | — | 2,123,024 | (845 | ) | 2,122,179 | 2,287,351 | 2,267,643 | ||||||||||||||||||||||||||||||||
Balances,
March 7, 2010 (Predecessors) (unaudited)
|
— | — | — | — | — | — | 280,989 | 17,251 | 298,240 | 4,105 | 9,435 | |||||||||||||||||||||||||||||||||
Elimination
of Predecessors equity
|
— | — | — | — | — | — | (280,989 | ) | (17,251 | ) | (298,240 | ) | (4,105 | ) | (9,435 | ) | ||||||||||||||||||||||||||||
Issuance
of 12,098,053 shares of common stock and 3,750,000 Ordinary Warrants upon
emergence from Chapter 11
|
121 | 305,883 | — | 306,004 | 1,288 | 307,292 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Issuance
of 1,312,500 Penny Warrants in connection with Exit
Facility
|
— | 19,464 | — | 19,464 | — | 19,464 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Balances,
March 7, 2010 (Successor) (unaudited)
|
121 | 325,347 | — | 325,468 | 1,288 | 326,756 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Issuance
of 12,901,947 shares of common stock in connection with Tropicana AC
acquisition
|
129 | 281,999 | — | 282,128 | — | 282,128 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Issuance
of 1,312,500 shares of common stock for Penny Warrants
exercised
|
13 | — | — | 13 | — | 13 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net
loss
|
— | — | (447 | ) | (447 | ) | (89 | ) | (536 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||
Balances, September 30, 2010
(Successor) (unaudited)
|
$ | 263 | $ | 607,346 | $ | (447 | ) | $ | 607,162 | $ | 1,199 | $ | 608,361 | $ | — | $ | — | $ | — | $ | — | $ | — |
The
accompanying notes are an integral part of these condensed financial
statements.
F-3
TROPICANA
ENTERTAINMENT INC.
CONDENSED
STATEMENTS OF CASH FLOWS
(in
thousands, unaudited)
Successor
|
Predecessors
|
Predecessors
|
||||||||||||||||||||||||||
Period
from
March 8,
2010
through
September 30,
2010
|
Period
from January 1, 2010
through
March 7, 2010
|
Nine
Months ended
September 30,
2009
|
||||||||||||||||||||||||||
Tropicana
Entertainment
Inc.
|
Tropicana
Entertainment
Holdings,
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS
Casino,
LLC
|
Tropicana
Entertainment
Holdings,
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS
Casino,
LLC
|
||||||||||||||||||||||
Cash
flows from operating activities:
|
||||||||||||||||||||||||||||
Net
income (loss), including noncontrolling interest
|
$ | (536 | ) | $ | 2,122,179 | $ | 2,287,351 | $ | 2,267,643 | $ | (226,145 | ) | $ | (11,288 | ) | $ | (6,830 | ) | ||||||||||
Adjustments
to reconcile net income (loss), including noncontrolling interest, to net
cash provided by (used in) operating activities
|
||||||||||||||||||||||||||||
Non-cash
reorganization items and fresh start reporting adjustments
|
— | (2,098,064 | ) | (2,288,191 | ) | (2,266,614 | ) | — | — | — | ||||||||||||||||||
Gain
from dsposal of discontinued operations, net
|
— | — | — | — | (276,912 | ) | — | — | ||||||||||||||||||||
Depreciation
and amortization (including discontinued operations)
|
24,871 | 6,112 | 374 | 432 | 33,217 | 1,822 | 1,779 | |||||||||||||||||||||
Amortization
of debt discount and debt issuance costs
|
7,233 | 137 | — | — | 3,564 | — | — | |||||||||||||||||||||
Impairment
charges and other write-downs
|
— | — | — | — | 586,177 | — | — | |||||||||||||||||||||
Deferred
income tax
|
— | (30,838 | ) | — | — | (129,219 | ) | — | — | |||||||||||||||||||
Loss
related to guarantee of affiliate debt
|
— | — | — | — | — | 8,010 | 8,010 | |||||||||||||||||||||
Changes
in current assets and current liabilities:
|
||||||||||||||||||||||||||||
Receivables,
net
|
(2,954 | ) | 2,942 | 8 | (79 | ) | 3,292 | (17 | ) | 27 | ||||||||||||||||||
Inventories,
prepaids and other assets
|
2,933 | 1,698 | 34 | 47 | 7,585 | 206 | 130 | |||||||||||||||||||||
Accrued
interest
|
(1 | ) | (239 | ) | — | — | (10,807 | ) | — | — | ||||||||||||||||||
Accounts
payable, accrued expenses and other liabilities
|
3,113 | (1,994 | ) | (479 | ) | (432 | ) | (15,756 | ) | (529 | ) | (125 | ) | |||||||||||||||
Due
from affiliates
|
— | (672 | ) | 934 | 3 | 97 | 854 | (1,324 | ) | |||||||||||||||||||
Other
|
(4,336 | ) | 662 | (25 | ) | — | (1,642 | ) | (169 | ) | (1 | ) | ||||||||||||||||
Net
cash provided by (used in) operating activities
|
30,323 | 1,923 | 6 | 1,000 | (26,549 | ) | (1,111 | ) | 1,666 | |||||||||||||||||||
Cash
flows from investing activities:
|
||||||||||||||||||||||||||||
Additions
of property and equipment
|
(10,899 | ) | (1,057 | ) | — | (11 | ) | (7,001 | ) | (475 | ) | (238 | ) | |||||||||||||||
Aruban
acquisition, net of $240 cash acquired
|
(11,789 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Other
|
248 | — | 3 | — | 194 | — | (1 | ) | ||||||||||||||||||||
Net
cash (used in) provided by investing activities
|
(22,440 | ) | (1,057 | ) | 3 | (11 | ) | (6,807 | ) | (475 | ) | (239 | ) | |||||||||||||||
Cash
flows from financing activities:
|
||||||||||||||||||||||||||||
Proceeds
from issuance of debt
|
— | 120,900 | — | — | 8,010 | — | — | |||||||||||||||||||||
Repayments
of debt
|
(391 | ) | (65,311 | ) | — | — | (1,220 | ) | — | — | ||||||||||||||||||
Restricted
cash
|
(2,720 | ) | (16,075 | ) | — | — | 3,344 | — | — | |||||||||||||||||||
Payment
of financing costs
|
— | (1,500 | ) | — | — | (9,399 | ) | — | — | |||||||||||||||||||
Proceeds
from exercise of Penny Warrants
|
13 | — | — | — | — | — | — | |||||||||||||||||||||
Net
cash (used in) provided by financing activities
|
(3,098 | ) | 38,014 | — | — | 735 | — | — | ||||||||||||||||||||
Net
increase (decrease) in cash and cash equivalents
|
4,785 | 38,880 | 9 | 989 | (32,621 | ) | (1,586 | ) | 1,427 | |||||||||||||||||||
Increase
in cash and cash equivalents related to Tropicana AC
acquisition
|
56,714 | — | — | — | — | — | — | |||||||||||||||||||||
Decrease
in cash and cash equivalents related to assets held for
sale
|
— | — | — | — | 9,683 | — | — | |||||||||||||||||||||
Cash
and cash equivalents, beginning of period
|
96,998 | 50,904 | 2,372 | 3,844 | 76,869 | 4,303 | 3,322 | |||||||||||||||||||||
Cash
and cash equivalents, end of period
|
$ | 158,497 | $ | 89,784 | $ | 2,381 | $ | 4,833 | $ | 53,931 | $ | 2,717 | $ | 4,749 | ||||||||||||||
Supplemental
cash flow disclosure (including discontinued operations):
|
||||||||||||||||||||||||||||
Cash
paid for interest
|
$ | 11,315 | $ | 1,964 | $ | — | $ | 5 | $ | 18,239 | $ | — | $ | — | ||||||||||||||
Cash
paid for reorganization items
|
— | 4,465 | 6 | 7 | 26,520 | 44 | 31 | |||||||||||||||||||||
Cash
received related to reorganization items
|
— | 1 | — | — | 371 | — | — | |||||||||||||||||||||
Cash
paid for income taxes
|
1,164 | — | — | — | — | — | — | |||||||||||||||||||||
Supplemental
disclosure of non-cash items:
|
||||||||||||||||||||||||||||
Common
stock and Ordinary Warrants issued in exchange for discharge of
liabilities subject to compromise
|
— | 307,292 | — | — | — | — | — | |||||||||||||||||||||
Common
stock issued in connection with acquisition of Tropicana
AC
|
282,128 | — | — | — | — | — | — | |||||||||||||||||||||
Property
and equipment financed by debt
|
— | — | — | — | 1,201 | — | — |
The
accompanying notes are an integral part of these condensed financial
statements.
F-4
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
1—ORGANIZATION AND BACKGROUND
Organization
Tropicana
Entertainment Inc. ("TEI") is a Delaware corporation that was formed on
May 11, 2009 to acquire certain assets of Tropicana Entertainment
Holdings, LLC ("TEH"), and certain of its subsidiaries pursuant to their
plan of reorganization under Chapter 11 of Title 11 of the United
States Code (the "Bankruptcy Code"). The Company also acquired Columbia
Properties Vicksburg, LLC ("CP Vicksburg"), JMBS Casino, LLC ("JMBS
Casino") and CP Laughlin Realty ("Realty", collectively with CP Vicksburg and
JMBS Casino, the "Affiliate Guarantors"), all of whom were part of the same plan
of reorganization (the "Plan") as TEH (collectively, the "Predecessors"). Except
where the context suggests otherwise, the terms "we," "us," "our," and "the
Company" refer to TEI and its subsidiaries.
In
addition, the Company acquired certain assets of Adamar of New Jersey, Inc.
("Adamar"), an unconsolidated subsidiary of TEH, pursuant to an amended and
restated asset purchase agreement, including the Tropicana Casino and Resort,
Atlantic City ("Tropicana AC"). The results of operations of Tropicana AC are
not presented for the Predecessor Period (as defined below). The results of
operations of Tropicana AC are included in the Successor Period (as defined
below).
The
reorganization of the Predecessors and the acquisition of Tropicana AC
(together, the "Restructuring Transactions") were consummated and became
effective on March 8, 2010 (the "Effective Date"), at which time the
Company acquired Adamar and several of the Predecessors' gaming properties and
related assets. Prior to March 8, 2010, the Company conducted no business,
other than in connection with the reorganization of the Predecessors and the
acquisition of Tropicana AC, and had no material assets or
liabilities.
On
August 31, 2010 the Company, through its subsidiary New Tropicana
Opco, Inc., purchased all of the issued and outstanding shares of capital
stock of Tropicana Entertainment Cayman Holdings Co. Ltd., formerly
known as Icahn Fund Sub 1D Ltd. ("Cayman Company"), a Cayman Islands exempt
company with limited liability, for a total purchase price of approximately
$12.0 million, of which approximately $10.3 million was allocated to
intangible assets relating to a favorable lease arrangement for a land lease. In
accordance with Accounting Standards Codification Topic 805, Business
Combinations ("ASC 805"), the purchase price was allocated to the fair
values of the assets acquired and liabilities assumed which were determined by
the Company's management after input from an independent third party valuation
expert. The purchase price allocation is preliminary and subject to refinement
and completion within one year of the acquisition date as provided under
ASC 805. Cayman Company was an entity controlled by Carl C. Icahn, Chairman
of our Board of Directors and the beneficial owner of approximately 48.9% of the
Company's common stock. Pursuant to the Securities Purchase Agreement, the
Company indirectly acquired all of the membership interests of Cayman Company's
wholly owned subsidiary Abura Development Corp. VBA, a limited liability company
created and existing under the laws of Aruba, Netherlands Antilles, which in
June 2010 acquired out of bankruptcy The Aruban Resort & Casino at
Eagle Beach, an approximately 360-unit timeshare casino resort in Aruba,
including the unsold fractional timeshares attached to such property, a
temporary casino currently not in operation and an unfinished permanent casino
structure. The Company will rename the property Tropicana Aruba
Resort & Casino ("Tropicana Aruba").
The
Company views each property as an operating segment which we aggregate by region
in order to present our reportable segments: (i) East, (ii) Central,
(iii) West, (iv) South and (v) Corporate and other. The
operations of the Company after March 8, 2010, by region include the
following:
|
•
|
East— Tropicana AC
located in Atlantic City, New
Jersey;
|
|
•
|
Central— Casino Aztar
Evansville ("Casino Aztar") located in Evansville,
Indiana;
|
|
•
|
West— Tropicana
Laughlin Hotel and Casino ("Tropicana Laughlin") located in Laughlin,
Nevada; River Palms Hotel and Casino ("River Palms") located in Laughlin,
Nevada; and MontBleu Casino Resort & Spa ("MontBleu") located in
Lake Tahoe, Nevada;
|
F-5
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
|
•
|
South— Belle of Baton
Rouge ("Belle of Baton Rouge") located in Baton Rouge, Louisiana; Bayou
Caddy's Jubilee Casino ("Jubilee") located in Greenville, Mississippi;
Lighthouse Point Casino ("Lighthouse Point") located in Greenville,
Mississippi; and Horizon Vicksburg Casino ("Horizon Vicksburg") located in
Vicksburg, Mississippi; and
|
|
•
|
Corporate and other—
Corporate overhead and Tropicana
Aruba.
|
Background
The
following details the events leading up to the acquisition of the Predecessors
and Tropicana AC by the Company.
In
December 2006, TEH issued $960 million of 9 5 / 8 % Senior Subordinated Notes
(the "Notes") and in January 2007, entered into a Senior Credit Facility
(the "Credit Facility") comprised of a $1.53 billion senior secured term
loan and a $90 million senior secured revolving credit facility. The Notes
and Credit Facility were guaranteed by certain of TEH's subsidiaries as well as
by the Affiliate Guarantors.
On
December 12, 2007, the New Jersey Casino Control Commission (the "NJ
Commission") denied the renewal of Adamar's license to operate Tropicana AC and
denied TEH plenary qualification as a holding company of Adamar (collectively,
the "New Jersey License Denial") and declared operative the interim casino
authorization trust (the "ICA Trust"). A trustee (the "Trustee") was assigned
under the ICA Trust to assume management responsibility of Tropicana AC until it
could be sold to a third party. The sale of Tropicana AC was in the control of
the Trustee. Under New Jersey law, TEH was entitled to receive upon the eventual
sale of Tropicana AC an amount equal to the lower of the value of the property
as of the date the ICA Trust became operative or its original cost to acquire
the property. As a result of the New Jersey License Denial and the actions taken
by the NJ Commission, TEH determined that Tropicana AC should not be
consolidated subsequent to December 12, 2007. This determination was made
in accordance with accounting guidance for consolidation of all majority owned
subsidiaries, insofar as the government-imposed restrictions on TEH's continued
management and control of Tropicana AC were so severe they cast significant
doubt on TEH's ability to control the subsidiary. Consequently, TEH accounted
for its beneficial interest in the ICA Trust under the cost method, which was
then adjusted to fair value in accordance with accounting guidance for
investments in debt and equity securities.
The
New Jersey License Denial caused an immediate default under the Credit Facility
and the subsequent transfer of assets of Tropicana AC to the Trustee caused a
default under the Notes. In addition, TEH's operating results were under
significant financial pressure given the depressed state of the gaming industry in general, which
was exacerbated by TEH's subsequent loss of control and cash flows from
Tropicana AC. These events ultimately culminated in the Predecessors filing
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (the
"Chapter 11 Cases") in order to preserve their assets and the value of the
estates on May 5, 2008 (the "Petition Date"). Adamar was not a party to the
Predecessors' bankruptcy.
At
a meeting of the NJ Commission conducted on February 18, 2009, the steering
committee of the lenders under the Credit Facility advised the NJ Commission
that the lenders under the Credit Facility were willing to make a credit bid of
$200.0 million (the "Credit Bid") whereby the lenders offered to exchange a
portion of the loans owed under the Credit Facility to acquire the assets of
Tropicana AC from the Trustee, which offer led to the negotiation of the asset
purchase agreement. By November 2009, all necessary approvals had been
obtained for the lenders to acquire Tropicana AC in exchange for the Credit Bid
and for the lenders to transfer those assets to the Company in exchange for
equity in the Company.
Pursuant
to the Plan, on the Effective Date, a series of restructuring transactions were
consummated through which the Company acquired the Predecessors in exchange for
(i) the issuance of 12,098,053 shares of the Company's common stock, $0.01
par value per share ("Common Stock"), and warrants to purchase an additional
3,750,000 shares of Common Stock (the "Ordinary Warrants") in accordance with
the Plan and (ii) the entering into new debt in accordance with the Plan,
which included the issuance to certain lenders of warrants to purchase an
additional 1,312,500 shares of our Common Stock at $0.01 per share (the "Penny
Warrants"). As a result of the restructuring transaction the Company also
applied fresh-start reporting. Additionally, on the Effective Date, certain
subsidiaries of the Company acquired Tropicana AC, and the lenders under the
Credit Facility each received their pro rata share of 12,901,947 shares of the
Company's Common Stock in exchange for the Credit Bid.
F-6
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying condensed financial statements have been prepared, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"). Accordingly, certain disclosures required by generally accepted
accounting principles are omitted or condensed in these condensed financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) that are necessary to present fairly the Company's and
the Predecessors' financial position, results of operations and cash flows for
the interim periods have been made. The interim results reflected in these
financial statements are not necessarily indicative of results to be expected
for the full fiscal year. The accompanying condensed financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2009.
As
of the Effective Date, the Company adopted the "fresh start" provisions in
accordance with accounting guidance on reorganizations, which require that all
assets and liabilities be recorded at their reorganization values and fair
values, respectively, as of such Effective Date. Certain of these values
differed materially from the values recorded on the Predecessors' balance sheets
as of December 31, 2009. In addition, the Company's accounting practices
and policies may not be the same as that of the Predecessors. For all of these
reasons, our condensed financial statements for periods subsequent to the
Effective Date are not comparable with the Predecessors' prior
periods.
References
in this Quarterly Report on Form 10-Q to "Successor" refer to the Company
on or after March 8, 2010. References to "Predecessors" refer to the
Predecessors prior to March 8, 2010. The accompanying condensed statements
of operations, shareholders' equity/members' deficit and cash flows for the nine
months ended September 30, 2010 are presented for two periods:
January 1, 2010 through March 7, 2010 (the "Predecessor Period") and
March 8, 2010 through September 30, 2010 (the "Successor Period"). The
Predecessor Period reflects the historical accounting basis in the Predecessors'
assets and liabilities, while the Successor Period reflects assets and
liabilities at fair value by allocating the Company's enterprise value to its
assets and liabilities pursuant to accounting guidance related to business
combinations.
For
the periods prior to the Effective Date, the accompanying condensed financial
statements of the Predecessors have been prepared in accordance with accounting
guidance for financial reporting by entities in reorganization under the
bankruptcy code. Accordingly, all pre-petition liabilities subject to compromise
have been segregated in the accompanying condensed balance sheets as of
December 31, 2009 and are classified as liabilities subject to compromise
at the estimated amounts of allowable claims. Liabilities not subject to
compromise are separately classified as current and non-current. Reorganization
items include the expenses, realized gains and losses, and provisions for losses
resulting from the reorganization under the Bankruptcy Code, and are reported
separately as reorganization items in the accompanying condensed statements of
operations. Cash received and payments for reorganization items are disclosed
separately in the accompanying condensed statements of cash flows.
Principles
of Consolidation
The
accompanying condensed financial statements include the Company and its
majority-owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.
Noncontrolling
interest in the condensed financial statements of the Company represents the
noncontrolling equity ownership of Greenville Riverboat, LLC ("Greenville
Riverboat"), as of September 30, 2010 and for the quarter ended
September 30, 2010 and the Successor Period. The noncontrolling interest of
Greenville Riverboat is allocated in accordance with the terms of the Greenville
Riverboat operating agreement which is based upon an assumed liquidation of
Lighthouse Point as of the end of the reporting periods.
F-7
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
On
September 10, 2010, Greenville Riverboat entered into an Agreement and Plan
of Merger (the "Merger Agreement") with Lighthouse Point, LLC
("Lighthouse"), a wholly owned subsidiary of the Company. Pursuant to the Merger
Agreement, Greenville Riverboat merged with and into Lighthouse, with Lighthouse
as the surviving company (the "Merger"). Upon consummation of the Merger, which
occurred on October 28, 2010 immediately following Mississippi Gaming
Commission approval, Lighthouse became the owner of the property and other
assets associated with the operation of Lighthouse Point. Under the Merger
Agreement, the minority owner of Greenville Riverboat (the "Minority Owner") is
entitled to receive $2.5 million, subject to the exercise of its appraisal
rights. The Minority Owner exercised appraisal rights with respect to the Merger
under Mississippi law and therefore may be entitled to additional payment for
its minority interest.
The
accompanying condensed financial statements for TEH include TEH, its
majority-owned subsidiaries and Realty. Noncontrolling interest in the condensed
financial statements of TEH represents the noncontrolling equity interest
ownership of Greenville Riverboat and Realty as of December 31, 2009 and
for the Predecessor Period and the quarter and nine months ended September 30, 2009. The
noncontrolling equity ownership of Realty represents 100% of the earnings of
Realty prior to the Effective Date. In accordance with accounting guidance
related to the consolidation of variable interest entities, the consolidated
financial statements of TEH include Realty, a variable interest entity of which
TEH was the primary beneficiary and was required to be consolidated. Upon the
Effective Date, Realty became a subsidiary of the Company. In addition,
Greenville Riverboat was not a debtor in the Predecessors Chapter 11 Cases
as it did not guarantee TEH's pre-petition debt.
Significant
Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates incorporated in our condensed
financial statements include the estimated useful lives for depreciable and
amortizable assets, the estimated allowance for doubtful accounts receivable,
the estimated valuation allowance for deferred tax assets, certain tax
liabilities, estimated cash flows in assessing the impairment of long-lived
assets, intangible assets, CRDA investments, enterprise allocations made in
connection with fresh-start reporting, fair values of acquired assets and
liabilities, self-insured liability reserves, customer loyalty program reserves,
contingencies, litigation, claims, assessments and loss contingencies. Actual
results could differ from these estimates.
Business
Combinations
The
Company accounts for business combinations in accordance with guidance related
to business combinations using the purchase method of accounting for business
combinations, which requires that the assets acquired and liabilities assumed be
recorded at the date of acquisition at their respective fair value and the
identification and recognition of intangible assets separately from goodwill.
Additionally, the guidance requires, among other things, the buyer to:
(1) expense acquisition-related costs; (2) recognize assets or
liabilities assumed arising from contractual contingencies at the acquisition
date using acquisition-date fair values; (3) recognize goodwill as the
excess of the consideration transferred plus the fair value of any
noncontrolling interest over the acquisition-date fair value of net assets
acquired; (4) recognize at the acquisition date any contingent
consideration using acquisition-date fair values (i.e., fair value
earn-outs in the initial accounting for the acquisition); and (5) eliminate
the recognition of liabilities for restructuring costs expected to be incurred
as a result of the business combination. In addition, if the buyer determines
that some or all of its previously booked deferred tax valuation allowance is no
longer needed as a result of the business combination, the guidance requires
that the reduction or elimination of the valuation allowance be accounted as a
reduction of income tax expense.
Fresh-Start
Reporting
The
adoption of fresh-start reporting results in a new reporting entity. Under
fresh-start reporting, all assets and liabilities are recorded at their
estimated fair values and the predecessor's accumulated deficit is eliminated.
In adopting fresh-start reporting, the Company is required to determine its enterprise value, which
represents the fair value of the entity before considering its interest bearing
debt.
F-8
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Cash
and Cash Equivalents
Cash
and cash equivalents include cash, cash on hand in the casino cages,
certificates of deposit, money market funds and other highly liquid investments
with original maturities of three months or less.
Restricted
Cash
Restricted
cash at September 30, 2010 consists primarily of funds invested in approved
money market funds. These funds were restricted by the Bankruptcy Court in
connection with the reorganization of the Predecessors for the purpose of
satisfying liabilities related to professional services incurred as part of the
Chapter 11 Cases. As of December 31, 2009, restricted cash consists of
cash reserves related to TEH's insurance policies in which the third party
administrator was the beneficiary.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk
consist primarily of cash and cash equivalent accounts maintained in financial
institutions and accounts receivable. Bank accounts are insured by the Federal
Deposit Insurance Corporation up to $250,000 or with the Securities Investor
Protection Corporation up to $500,000. Concentration of credit risk, with
respect to casino receivables, is limited through the Company's credit
evaluation process. The Company issues markers to approved casino customers
following credit checks and investigations of credit worthiness.
Receivables
Receivables
consist primarily of casino, hotel and other receivables, net of an allowance
for doubtful accounts. Receivables are typically non-interest bearing and are
initially recorded at cost. Accounts are written off when management deems the
account to be uncollectible. An estimated allowance for doubtful accounts is
maintained to reduce the Company's receivables to their expected realization,
which approximates fair value. The allowance is estimated based on specific
reviews of customer accounts as well as historical collection experience and
current economic and business conditions. Recoveries of accounts previously
written off are recorded when received.
Inventories
Inventories
consist primarily of food and beverage, retail merchandise and operating
supplies and are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.
CRDA
Investment
The
New Jersey Casino Reinvestment Development Authority ("CRDA") deposits made by
Tropicana AC are carried at cost less a valuation allowance because they have to
be used to purchase CRDA bonds that carry below market interest rates unless an
alternative investment is approved. The valuation allowance is established by a
charge to the statement of operations as part of general and administrative
expense at the time the obligation is incurred to make the deposit unless there
is an agreement with the CRDA for a return of the deposit at full face value. If
the CRDA deposits are used to purchase CRDA bonds, the valuation allowance is
transferred to the bonds as a discount, which is amortized to interest income
using the interest method. If the CRDA deposits are used to make other
investments, the valuation allowance is transferred to those investments and
remains a valuation allowance. The CRDA bonds are classified as held-to-maturity
securities and are carried at amortized cost less a valuation
allowance.
F-9
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Property
and Equipment
Property
and equipment under fresh-start reporting and business combination guidance is
stated at fair value as of the Effective Date and acquisition date,
respectively. Property and equipment acquired subsequent to the Effective Date
and the acquisition date are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets or,
for capital leases and leasehold improvements, over the shorter of the asset's
useful life or the term of the lease. Gains or losses on disposals of assets are
recognized as incurred. Costs of major improvements are capitalized, while costs
of normal repairs and maintenance are expensed as incurred.
We
must make estimates and assumptions when accounting for capital expenditures.
Whether an expenditure is considered a maintenance expense or a capital asset is
a matter of judgment. In contrast to normal repair and maintenance costs that
are expensed when incurred, items we classify as maintenance capital are
expenditures necessary to keep our existing properties at their current levels
and are typically replacement items due to the normal wear and tear of our
properties and equipment as a result of use and age. Our depreciation expense is
highly dependent on the assumptions we make about our assets' estimated useful
lives. We determine the estimated useful lives based on our experience with
similar assets, engineering studies and our estimate of the usage of the asset.
Whenever events or circumstances occur that change the estimated useful life of
an asset, we account for the change prospectively.
Long-Lived
Assets
We
evaluate our property and equipment and other long-lived assets for impairment
in accordance with accounting guidance related to impairment or disposal of
long-lived assets. For assets to be held for sale, we recognize the asset to be
sold at the lower of carrying value or fair value less costs to sell. Fair value
for assets held for sale is generally estimated based on comparable asset sales,
solicited offers or a discounted cash flow model. For long-lived assets to be
held and used, we review for impairment whenever indicators of impairment exist.
If an indicator of impairment exists, we compare the estimated undiscounted
future cash flows of the asset to the carrying value of the asset. If the
undiscounted cash flows exceed the carrying value, no impairment is indicated.
If the undiscounted cash flows are less than the carrying value, then impairment
is measured based on estimated fair value compared to carrying value, with fair
value typically based on a discounted cash flow model.
Goodwill
and Intangible Assets
Goodwill
represents the excess of purchase price over fair value of assets acquired and
liabilities assumed in business combinations. In accordance with accounting
guidance related to goodwill and other intangible assets, we test for
impairment of goodwill and indefinite-lived intangible assets annually in the
fourth quarter of each year and in certain situations between those annual
dates.
Goodwill
for relevant reporting units is tested for impairment using a discounted cash
flow model based on the estimated future results of the Company's reporting
units, discounted using the Company's weighted-average cost of capital and
market indicators of terminal year capitalization rates. The implied fair value
of a reporting unit's goodwill is compared to the carrying value of that
goodwill. The implied fair value of goodwill is determined by allocating the
fair value of the reporting unit to its assets and liabilities and the amount
remaining, if any, is the implied fair value of goodwill. If the implied fair
value of the goodwill is less than its carrying value, then it is written down
to its implied fair value.
Indefinite-lived
intangible assets are not subject to amortization but are tested for impairment
using a discounted cash flow approach. Intangible assets with a definite life
are amortized over their useful life, which is the period over which the asset
is expected to contribute directly or indirectly to future cash flows.
Management periodically assesses the amortization period of intangible assets
with definite lives based upon estimated future cash flows from related
operations.
Inherent
in the reviews of the carrying amounts of goodwill and intangible assets are
various estimates. Future cash flow estimates are, by their nature, subjective
and actual results may differ materially from our estimates. If our ongoing
estimates of future cash flows are not met, additional impairment charges may be
recorded in future accounting periods. Estimates of cash flows are based on the
current regulatory, political and economic climates, recent operating
information and budgets of the various properties where we conduct operations.
These estimates could be negatively impacted by changes in federal, state or
local regulations, economic downturns, or other events affecting various forms
of travel and access to our properties.
F-10
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Debt
Issuance Costs
Debt
issuance costs incurred in connection with the issuance of long-term debt are
capitalized and amortized to interest expense over the expected terms of the
related debt agreements, which approximates the effective interest method, and
are included in other assets, net, on our condensed balance sheets.
Self-Insurance
Reserves
The
Company is self-insured up to certain stop loss amounts for employee health
coverage, workers' compensation and general liability cost. Insurance claims and
reserves include accruals of estimated settlements for known claims, as well as
accruals of estimates for claims incurred but not yet reported as provided by a
third party. In estimating these accruals, historical loss experience is
considered and judgments are made about the expected levels of costs per claim.
We believe our estimates of future liability are reasonable based upon our
methodology; however, changes in health care costs, accident frequency and
severity and other factors could materially affect the estimates for these
liabilities. The Company continually monitors changes in claim type and incident
and evaluates the insurance accrual, making necessary adjustments based on the
evaluation of these qualitative data points.
Fair
Value of Financial Instruments
The
carrying values of our cash and cash equivalents, restricted cash, receivables
and accounts payable approximate fair value because of the short term maturities
of these instruments. The carrying values of investments, which include deposits
and bonds, approximate fair value as items are presented net of a valuation
allowance and in the case of the bonds, net of an unamortized
discount.
The
fair value of our long-term debt is based on the quoted market prices for
similar issues. The estimated fair value of our long-term debt as of
September 30, 2010 is approximately $132.6 million.
The
Predecessors' debt instruments incurred prior to the Petition Date were stayed
and subject to compromise as further discussed in Note 3. As such, the
Predecessors believed it was impracticable to determine the fair value of those
pre-petition debt instruments. TEH believed the carrying value of the
Predecessors' $65 million post-petition, debtor-in-possession financing
(the "DIP Credit Facility") at December 31, 2009 approximated fair value as
the instrument was due within the current period and bore a variable interest
rate that would adjust to the market rate. TEH also believed that, while it was
in bankruptcy, the credit risk of TEH did not change significantly and therefore
would not have a material impact on the fair value of the DIP Credit
Facility.
Customer
Loyalty Program
The
Company provides certain customer loyalty programs (the "Programs") at its
casinos, which allow customers to redeem points earned from their gaming
activity for cash, food, beverage, rooms or merchandise. Under the Programs,
customers are able to accumulate points that may be redeemed in the future,
subject to certain limitations and the terms of the Programs. The Company
records a liability for the estimated cost of the outstanding points under the
Programs that it believes will ultimately be redeemed. The estimated cost of the
outstanding points under the Programs is calculated based on estimates and
assumptions regarding marginal costs of the goods and services, redemption rates
and the mix of goods and services for which the points are expected to be
redeemed. For points that may be redeemed for cash, the Company accrues this
cost (after consideration of estimated redemption rates) as they are earned,
which is included in promotional allowances. For points that may only be
redeemed for goods or services but cannot be redeemed for cash, the Company
estimates the cost and accrues for this expense as the points are earned from
gaming play, which is recorded as casino operating costs and
expense.
Revenue
Recognition and Promotional Allowances
Casino
revenue represents the difference between wins and losses from gaming
activities. Room, food and beverage and other operating revenues are recognized
at the time the goods or services are provided. The Company collects taxes from
customers at the point of sale on transactions subject to sales and other taxes.
Revenues are recorded net of any taxes collected. The majority of our casino
revenue is counted in the form of cash and chips and, therefore, is not subject
to any significant or complex estimation. The retail value of rooms, food and
beverage and other services provided to customers on a complimentary basis is
included in gross revenues and then deducted as promotional allowances. The
estimated departmental costs and expenses of providing these promotional
allowances, for
continuing operations, are included in casino operating costs and expenses and
consist of the following (in thousands, unaudited):
F-11
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Successor
|
Predecessor
|
Successor
|
Predecessors
|
|||||||||||||||||||||||||||||||||||||||||
Three
months ended
September 30,
2009
|
Period
January 1, 2010
through
March 7, 2010
|
Nine
Months Ended
September 30,
2009
|
||||||||||||||||||||||||||||||||||||||||||
Three
months
ended
September 30,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
Period
March 8,
2010
through
September 30,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
||||||||||||||||||||||||||||||||||
Room
|
$ | 6,284 | $ | 2,681 | $ | 57 | $ | 10 | $ | 16,665 | $ | 1,340 | $ | 22 | $ | 24 | $ | 7,792 | $ | 176 | $ | 46 | ||||||||||||||||||||||
Food
and beverage
|
11,550 | 5,511 | 328 | 115 | 30,071 | 3,004 | 122 | 92 | 16,905 | 1,020 | 364 | |||||||||||||||||||||||||||||||||
Other
|
418 | 269 | 1 | — | 880 | 162 | 5 | — | 621 | 5 | — | |||||||||||||||||||||||||||||||||
Total
|
$ | 18,252 | $ | 8,461 | $ | 386 | $ | 125 | $ | 47,616 | $ | 4,506 | $ | 149 | $ | 116 | $ | 25,318 | $ | 1,201 | $ | 410 |
Gaming
Taxes
The
Company is subject to taxes based on gross gaming revenues in the jurisdictions
in which we operate, subject to applicable jurisdictional adjustments. These
gaming taxes are an assessment on our gaming revenues and are included in casino
operating costs and expenses on our condensed statements of operations. Gaming
taxes included in continuing operations totaled $21.1 million and
$47.8 million for the quarter ended September 30, 2010 and the
Successor Period, respectively. Gaming taxes included in continuing operations
for TEH totaled $12.1 million, $9.4 million and $41.2 million for
the quarter ended September 30, 2009, the Predecessor Period and the nine
months ended September 30, 2009, respectively. Gaming taxes for CP
Vicksburg totaled $0.3 million, $0.1 million and $1.1 million for
the for the quarter ended September 30, 2009, the Predecessor Period and
the nine months ended September 30, 2009, respectively. Gaming taxes for
JMBS Casino totaled $0.4 million, $0.4 million, and $1.5 million
for the quarter ended September 30, 2009, the Predecessor Period and the
nine months ended September 30, 2009, respectively.
Advertising
The
Company expenses advertising costs as incurred or the first time the advertising
takes place. Advertising expense, included in continuing operations, which is
generally included in marketing, advertising and promotions on our condensed
statements of operations was $2.4 million and $5.1 million for the
quarter ended September 30, 2010 and the Successor Period, respectively.
Advertising expense for TEH was $1.3 million, $0.8 million and
$4.3 million for the quarter ended September 30, 2009, the Predecessor
Period and the nine months ended September 30, 2009, respectively.
Advertising expense for CP Vicksburg was $0.1 million, $40,000 and
$0.5 million for the quarter ended September 30, 2009, the Predecessor
Period and the nine months ended September 30, 2009, respectively.
Advertising expense for JMBS Casino was $36,000, $31,000 and $165,000 for the
quarter ended September 30, 2009, the Predecessor Period and the nine
months ended September 30, 2009, respectively.
Income
Taxes
The
Company accounts for income taxes under accounting guidance for income taxes,
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
the accounting guidance, the effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period that included the
enactment date. Future tax benefits are recognized to the extent that
realization of those benefits is considered more likely than not, and a
valuation allowance is established for deferred tax assets which do not meet
this threshold.
F-12
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Recently
Issued Accounting Standards
In
April 2010, accounting guidance was updated regarding the accounting for
casino base jackpot liabilities. The guidance clarifies that an entity should
not accrue jackpot liabilities (or portions thereof) before a jackpot is won if
the entity can avoid paying the jackpot, but jackpot liabilities should be
accrued and charged to revenue when an entity has the obligation to pay the
jackpot. The guidance applies to both base and progressive jackpots. The effect
of the guidance should be recorded as a cumulative-effect adjustment to opening
retained earnings in the period of adoption. The guidance is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2010. In accordance with accounting guidance related to
fresh-start reporting, the Company adopted the updated guidance on the Effective
Date and the adoption did not have a material impact on the Company's condensed
financial statements.
In
January 2010, accounting guidance was updated regarding fair value
measurements and disclosures. The guidance clarifies and extends the disclosure
requirements about recurring and nonrecurring fair value measurements. The
Company adopted the new accounting guidance in the first quarter of 2010 and the
adoption did not have a material impact on the Company's condensed financial
statements.
In
June 2009, accounting standards were issued regarding the consolidation of
variable interest entities. These new accounting standards address the effects
of elimination of the qualifying special-purpose entity concept from previous
standards. These new accounting standards amend previous guidance in determining
whether an enterprise has a controlling financial interest in a variable
interest entity. This determination identifies the primary beneficiary of a
variable interest entity as the enterprise that has both the power to direct the
activities of a variable interest entity that most significantly impacts the
entity's economic performance and the ability to absorb losses or the right to
receive benefits of the entity that could potentially be significant to the
variable interest entity. The Company adopted the new accounting standards on
January 1, 2010. The adoption of these new accounting standards did not
have a material effect on the Company's condensed financial
statements.
A
variety of proposed or otherwise potential accounting standards are currently
under consideration by standard-setting organizations and certain regulatory
agencies. Because of the tentative and preliminary nature of such proposed
standards, we have not yet determined the effect, if any, that the
implementation of such proposed standards would have on our condensed financial
statements.
Reclassifications
Certain
items in the prior period financial statements were reclassified to conform to
the current year presentation. These reclassifications had no effect on the
previously reported net loss.
NOTE
3—FRESH-START REPORTING
Plan
of Reorganization
Pursuant
to the Plan, on the Effective Date, a series of restructuring transactions were
consummated through which the Company acquired the Predecessors in exchange for
(a) the issuance of shares of its Common Stock and warrants to purchase
additional shares of its Common Stock and (b) the assumption of certain
liabilities of the Predecessors incurred after the Petition Date to the extent
not paid on or prior to the Effective Date other than income tax
liabilities.
The
Plan also provided for, among other things:
|
•
|
the
termination of $1.3 billion of indebtedness under the Credit
Facility;
|
|
•
|
the
cancellation of the Notes in the amount of
$960.0 million;
|
|
•
|
the
cancellation of approximately $165.5 million of other pre-petition
indebtedness;
|
F-13
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
|
•
|
payment
in full of the DIP Credit Facility in the amount of $65.2 million and
related interest;
|
|
•
|
reinstatement,
payment in full, or satisfaction in full by return of collateral of all
Allowed Claims (as defined in the Plan) in the amount of
$21.5 million; and
|
|
•
|
the
entering into a credit facility (the "Exit Facility"), which consists of
(i) a $130 million senior secured term loan credit facility
issued at a discount of 7% (the "Term Loan Facility") and (ii) a
$20 million senior secured revolving credit facility (the "Revolving
Facility") by the Company on December 29, 2009, the funding of the
Term Loan Facility on the Effective Date, and the issuance of the Penny
Warrants to the Exit Facility
lenders.
|
Fresh-Start
Condensed Balance Sheet
In
accordance with accounting guidance related to financial reporting by entities
in reorganization under the bankruptcy code, the Company adopted fresh-start
reporting upon the Effective Date. The Company was required to apply the
provisions of fresh-start reporting to its financial statements because
(i) the reorganization value of the assets on the emerging entity
immediately before the date of confirmation was less than the total of all
post-petition liabilities and allowed claims and (ii) the holders of the
existing voting shares of the Predecessors common stock immediately before
confirmation (i.e., the holders of shares of the common stock of the
Predecessors that were issued and outstanding prior to the commencement of the
Chapter 11 Cases) received less than 50 percent of the voting shares
of the emerging entity. Under the accounting guidance, fresh-start reporting is
required on the date on which the plan of reorganization is confirmed by the
Bankruptcy Court, but further provides that fresh-start reporting should not be
applied until all material conditions to the Plan are satisfied. All material
conditions to the Plan were satisfied as of March 8, 2010, the Effective
Date.
Fresh-start
reporting generally requires resetting the historical net book value of assets
and liabilities to fair value by allocating the entity's enterprise value as set
forth in the Plan to its assets and liabilities pursuant to accounting guidance
related to business combinations as of the Effective Date. As set forth in the
disclosure statement, relating to the Plan, as confirmed by the Bankruptcy Court
on May 5, 2009, the enterprise value of the Predecessors was estimated to
be in the range of $350 million to $425 million. The Predecessors'
enterprise value was estimated using various valuation methods, including
(i) a comparison of the Predecessors and their projected performance to the
market values of comparable companies, and (ii) a calculation of the
present value of the future cash flows of the Predecessors based on financial
projections.
The
enterprise value using the discounted cash flow method, a form of the income
approach, was determined using financial projections for the period 2009 through
2013. Annual growth rates for years 2010, 2011, 2012 and 2013 were projected at
2.8%, (2.7)%, (2.1)% and 0.5%, respectively, which resulted in a four year
compounded annual growth rate of (0.4)%. These financial projections were
provided in the Plan and included anticipated changes associated with the
Company's reorganization plans, general market conditions, including market
segment variations, as well as other factors. The marginal tax rate was assumed
to be 40% and included federal, state and local taxes. The discount rate applied
was in the range of 15% to 17% which was calculated using a weighted average
cost of capital analysis based on comparable statistics of the Company's peer
group. The present value of all cash flows after 2013 were calculated using
terminal values which were calculated by applying exit multiples ranging from
4.5x to 5.5x to the 2013 financial projections which was then discounted in the
range of 15% to 17%. The basis for the exit multiples ranging from 4.5x to 5.5x
was comparable company EBITDA multiples of the Company's peer
group.
Based
upon a reevaluation of relevant factors used in determining the range of
enterprise value and updated expected future cash flow projections, the Company
concluded that $389.1 million should be used for fresh-start reporting
purposes, as it most closely approximated fair value. This amount was adjusted
for cash in excess of normal working requirements. After deducting the fair
value of debt, this resulted in a post-emergence equity value of
$325.5 million calculated as follows (in thousands,
unaudited):
Enterprise
value
|
$ | 389,063 | ||
Less
debt at fair value
|
(101,436 | ) | ||
Plus
excess cash
|
37,841 | |||
Post-emergence
equity value (common stock of $294.5 million and warrants of
$30.9 million)
|
$ | 325,468 |
F-14
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
In
accordance with fresh-start reporting, the Company's enterprise value has been
allocated to existing assets using the measurement guidance provided in
accounting guidance related to business combinations. In addition, liabilities,
other than deferred taxes, have been recorded at the present value of amounts
estimated to be paid. Finally, the Predecessors' accumulated deficit has been
eliminated, and the Company's new debt and equity have been recorded in
accordance with the Plan. Deferred taxes have been determined in accordance with
accounting guidance related to income taxes.
Estimates
of fair value represent the Company's best estimates, which are based on
industry data and trends, and by reference to relevant market rates and
transactions and discounted cash flow valuation methods, among other factors.
The determination of the fair value of assets and liabilities is subject to
significant estimation and assumptions, there can be no assurance that the
estimates, assumptions and values reflected in the valuations will be realized,
and actual results could vary materially. In accordance with accounting guidance
for business combinations, the preliminary allocation is subject to additional
adjustments within one year from the Effective Date as improved information on
asset and liability valuations becomes available.
During
the quarter ended September 30, 2010, the Company adjusted the fair value
of an unfavorable lease liability recorded in connection with fresh-start
reporting for CP Vicksburg. This adjustment, which was immaterial to the
Predecessor Period for CP Vicksburg, resulted in an understatement of
$1.4 million in reorganization items, net in the Company's condensed
statement of operations
for the Predecessor Period. The recorded balance for the unfavorable lease
liability was, likewise, overstated in the condensed balance sheet for periods
subsequent to the Effective Date. As a result, the Company's enterprise value
was increased to $389.1 million during the quarter ended September 30,
2010. The Company evaluated the effects of this adjustment on prior periods'
financial statements, individually and in the aggregate, in accordance with the
guidance provided by SEC Staff Accounting Bulletin ("SAB") No. 108,
codified as Topic 1.N, "Considering the Effects of Prior Year Misstatements
When Quantifying Misstatements in Current Year Financial Statements," and
concluded that no prior period is materially misstated. However, in accordance
with the provisions of this SAB Topic, the Company is restating CP
Vicksburg's Condensed Statement of Operations for the Predecessor Period as
follows (in thousands):
CP Vicksburg
|
||||||||||||
Period from
January 1,
2010 through
March 7, 2010 as
previously reported
|
Adjustment
|
Period from
January 1,
2010 through
March 7, 2010
as revised
|
||||||||||
Loss
from continuing operations before reorganization items and income
taxes
|
$ | (834 | ) | $ | — | $ | (834 | ) | ||||
Reorganization
items, net
|
2,286,748 | 1,437 | 2,288,185 | |||||||||
Net
income
|
2,285,914 | 1,437 | 2,287,351 |
The
implementation of the Plan and the effects of the consummation of the
transactions contemplated therein, which included the settlement of various
liabilities, repayment of Predecessors' indebtedness, elimination of affiliate
activity amongst the Predecessors, incurrence of new indebtedness and the adoption of fresh-start
reporting in the Company's condensed balance sheet as of March 7, 2010, are
as follows (in thousands, unaudited):
F-15
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Predecessors
|
Successor
|
|||||||||||||||||||||||
March 7,
2010
|
||||||||||||||||||||||||
T EH
|
CP
Vicksburg
|
JMBS
Casino
|
Effects
of
the
Plan(a)
|
Fresh
Start
Adjustments(i)
|
March 7,
2010
|
|||||||||||||||||||
ASSETS
|
||||||||||||||||||||||||
Current
assets:
|
||||||||||||||||||||||||
Cash
and cash equivalents
|
$ | 51,950 | $ | 2,381 | $ | 4,833 | $ | 37,841 | (b) | $ | (7 | ) | $ | 96,998 | ||||||||||
Restricted
cash
|
2,801 | — | — | 16,075 | (b) | — | 18,876 | |||||||||||||||||
Receivables,
net
|
14,441 | 23 | 101 | (2,869 | )(c) | 5,322 | (m) | 17,018 | ||||||||||||||||
Due
from affiliates
|
6,436 | 121 | 629 | (6,771 | )(d) | — | 415 | |||||||||||||||||
Inventories
|
1,533 | 37 | 30 | — | — | 1,600 | ||||||||||||||||||
Prepaid
expenses and other assets
|
7,534 | 173 | 155 | — | — | 7,862 | ||||||||||||||||||
Total
current assets
|
84,695 | 2,735 | 5,748 | 44,276 | 5,315 | 142,769 | ||||||||||||||||||
Property
and equipment, net
|
418,622 | 10,183 | 15,808 | — | (163,664 | )(j) | 280,949 | |||||||||||||||||
Beneficial
interest in Trust
|
200,000 | — | — | (200,000 | )(g) | — | — | |||||||||||||||||
Goodwill
|
16,802 | 590 | 8,432 | — | 4,562 | (k) | 30,386 | |||||||||||||||||
Intangible
assets, net
|
73,806 | 318 | 20 | — | 9,599 | (l) | 83,743 | |||||||||||||||||
Receivable
from affiliate
|
— | 9,838 | 11,076 | (20,914 | )(d) | — | — | |||||||||||||||||
Reserve
related to receivable from affiliate
|
— | (7,478 | ) | (5,451 | ) | 12,929 | (d) | — | — | |||||||||||||||
Other
assets, net
|
19,495 | 157 | 87 | 1,500 | (b) | (91 | ) | 21,148 | ||||||||||||||||
Total
assets
|
$ | 813,420 | $ | 16,343 | $ | 35,720 | $ | (162,209 | ) | $ | (144,279 | ) | $ | 558,995 | ||||||||||
LIABILITIES
AND MEMBERS' DEFICIT/SHAREHOLDERS' EQUITY
|
||||||||||||||||||||||||
Current
liabilities not subject to compromise:
|
||||||||||||||||||||||||
Current
portion of debt
|
$ | 65,588 | $ | — | $ | — | $ | (63,919 | )(b) | $ | — | $ | 1,669 | |||||||||||
Accounts
payable
|
16,643 | 282 | 81 | (750 | ) | 2 | 16,258 | |||||||||||||||||
Due
to affiliates
|
2,203 | 3,557 | 921 | (6,681 | )(d) | — | — | |||||||||||||||||
Accrued
expenses and other current liabilities
|
37,985 | 1,961 | 1,215 | 18,148 | 14,191 | (m) | 73,500 | |||||||||||||||||
Note
payable to affiliate guarantors
|
7,000 | — | — | (7,000 | )(d) | — | — | |||||||||||||||||
Total
current liabilities not subject to compromise
|
129,419 | 5,800 | 2,217 | (60,202 | ) | 14,193 | 91,427 | |||||||||||||||||
Long-term
debt, excluding current portion
|
— | — | — | 100,136 | (b) | — | 100,136 | |||||||||||||||||
Other
long-term liabilities
|
32,041 | 1,925 | — | — | (23,676 | )(m) | 10,290 | |||||||||||||||||
Deferred
tax liabilities
|
29,955 | — | — | (29,955 | )(c) | 30,386 | (m) | 30,386 | ||||||||||||||||
Total
liabilities not subject to compromise
|
191,415 | 7,725 | 2,217 | 9,979 | 20,903 | 232,239 | ||||||||||||||||||
Liabilities
subject to compromise
|
2,449,797 | 3,455 | 1,434 | (2,454,686 | )(e) | — | — | |||||||||||||||||
Liabilities
subject to compromise—guarantee of affiliate debt
|
— | 2,289,249 | 2,289,249 | (4,578,498 | )(f) | — | — | |||||||||||||||||
Total
liabilities
|
2,641,212 | 2,300,429 | 2,292,900 | (7,023,205 | ) | 20,903 | 232,239 | |||||||||||||||||
Members'
Deficit/Shareholders' Equity:
|
||||||||||||||||||||||||
Members'
deficit
|
(1,846,786 | ) | (2,284,086 | ) | (2,257,180 | ) | 6,637,282 | (g) | (249,230 | )(n) | — | |||||||||||||
Successor
common stock
|
— | — | — | 121 | (g) | — | 121 | |||||||||||||||||
Successor
additional paid-in capital
|
— | — | — | 241,604 | (g) | 83,743 | (o) | 325,347 | ||||||||||||||||
Noncontrolling
interest
|
18,994 | — | — | (18,011 | )(h) | 305 | (p) | 1,288 | ||||||||||||||||
Total
members' deficit/shareholders' equity
|
(1,827,792 | ) | (2,284,086 | ) | (2,257,180 | ) | 6,860,996 | (165,182 | ) | 326,756 | ||||||||||||||
Total
liabilities and members' deficit/shareholders' equity
|
$ | 813,420 | $ | 16,343 | $ | 35,720 | $ | (162,209 | ) | $ | (144,279 | ) | $ | 558,995 |
(a) Represents amounts recorded as of the
Effective Date for the consummation of the Plan, including the settlement of
liabilities subject to compromise, elimination of affiliate activity amongst the
Predecessors, the satisfaction of the DIP Credit Facility, the issuance of new
indebtedness and related cash payments, the issuance of Common Stock and
warrants to purchase Common Stock.
(b) Reflects the sources and uses of the
$130.0 million Term Loan Facility (in thousands,
unaudited):
Sources
|
|
Uses
|
|
||||||
Term
Loan Facility
|
$ | 130,000 |
Cash
|
$ | 37,841 | ||||
Term
Loan Facility discount
|
(9,100 | ) |
Restricted
cash(ii)
|
16,075 | |||||
Repayment
of DIP Credit Facility
|
65,219 | ||||||||
Payment
of DIP Credit Facility interest
|
265 | ||||||||
Revolver
fees(iii)
|
1,500 | ||||||||
Total Sources(i)
|
$ | 120,900 |
Total Uses
|
$ | 120,900 |
F-16
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
(i)
|
The
Exit Facility includes the issuance of 1,312,500 Penny Warrants to
participating lenders for an estimated fair value of $19.5 million.
As a result, the fair value of the Term Loan Facility was approximately
$100.1 million, of which $1.3 million is classified as
current.
|
(ii)
|
Amount
consists of funds restricted by the Bankruptcy Court in connection with
the Plan for the purpose of satisfying liabilities related to professional
services incurred as part of the Chapter 11
Cases.
|
(iii)
|
The
terms of the Exit Facility require commitment fees and revolver fees in
the aggregate amount of $8.9 million. As of December 31, 2009,
TEH paid $7.5 million of commitment fees which is included in other
assets. The remaining $1.4 million of revolver fees and the annual
administrative fee of $0.1 million was paid on March 8,
2010.
|
The
following table sets forth the adjustments to current portion of debt based on
the sources and uses (in thousands, unaudited):
Repayment
of DIP Credit Facility
|
$ | (65,219 | ) | |
Current
portion of Term Loan Facility
|
1,300 | |||
Adjustment
to current portion of debt
|
$ | (63,919 | ) |
The
following table sets forth the adjustments to long-term debt, excluding current
portion, based on the sources and uses (in thousands, unaudited):
Long-term
portion of Term Loan Facility
|
$ | 128,700 | ||
Term
Loan Facility discount
|
(9,100 | ) | ||
Penny
Warrants issued(iv)
|
(19,464 | ) | ||
Adjustment
to long-term debt, excluding current portion
|
$ | 100,136 |
(iv)
|
Pursuant to the terms of the Exit
Facility, the Company issued 1,312,500 Penny Warrants to purchase its
common stock at a strike price of $0.01 to participating lenders on the
Effective Date. The Penny Warrants had a term of 3 months. The
Company valued the Penny Warrants using the Black-Scholes option valuation
model assuming a life of 0.24 years, a volatility factor of 41% and a
risk free rate of 0.16%. The resulting value of $19.5 million is
recorded as a debt discount and netted against the carrying value of the
Exit Facility. The discount is amortized at a constant rate applied to the
outstanding balance of the Exit Facility, with a corresponding increase in
non-cash interest
expense.
|
(c)
|
Reflects the income tax
consequences of asset sales related to the
Plan.
|
(d)
|
Reflects the elimination of
affiliated activity of the
Predecessors.
|
(e)
|
Reflects the discharge of the
Predecessors' liabilities subject to compromise in accordance with the
Plan.
|
(f)
|
Reflects the elimination of debt
guarantee obligations related to the affiliate guarantee of the Notes and
Credit Facility, as a result of the
Plan.
|
(g)
|
Reflects the cumulative impact of
the reorganization adjustments as follows (in thousands,
unaudited):
|
Discharge
of liabilities subject to compromise
|
$ | 2,454,686 | ||
Elimination
of Beneficial interest in Trust
|
(200,000 | ) | ||
Discharge
of liabilities subject to compromise—guarantee of affiliate debt
(note f)
|
4,578,498 | |||
Liabilities
subject to compromise to be paid in cash
|
(21,471 | ) | ||
Elimination
of noncontrolling interest
|
18,011 | |||
Implementation
of accounting guidance related to base jackpots
|
1,257 | |||
Discharge
of liabilities subject to compromise—intercompany activity amongst
Predecessors
|
593 | |||
Income
tax impact
|
27,969 | |||
Issuance
of Penny Warrants
|
19,464 | |||
Issuance
of Common Stock and Ordinary Warrants
|
(241,725 | ) | ||
$ | 6,637,282 |
(h)
|
Reflects the effects of the Plan
on noncontrolling interest of $2.0 million and the elimination of the
noncontrolling interest in Realty of $16.0 million as a result of
Realty becoming a subsidiary of the Company under the
Plan.
|
F-17
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
(i)
|
Represents the adjustment of
assets and liabilities to fair value, or other measurement as specified in
accounting guidance related to business combinations, in conjunction with
the adoption of fresh-start
reporting.
|
(j)
|
Reflects the fair values of
property and equipment and intangible assets in connection with
fresh-start reporting. The following table summarizes the components of
property and equipment as a result of the application of fresh-start
reporting at March 8, 2010 and property and equipment, net at
March 7, 2010 (in thousands,
unaudited):
|
Successor
|
Predecessors
|
|||||||||||||||
March 7,
2010
|
||||||||||||||||
March 8,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
|||||||||||||
Property
and equipment:
|
||||||||||||||||
Land
|
$ | 26,220 | $ | 33,990 | $ | 1,380 | $ | 440 | ||||||||
Riverboats
and barges, net
|
20,286 | 29,432 | 1,120 | 9,599 | ||||||||||||
Building
and improvements, net
|
199,672 | 318,960 | 6,597 | 1,920 | ||||||||||||
Furniture,
fixtures and equipment, net
|
31,044 | 32,524 | 1,086 | 3,838 | ||||||||||||
Construction-in-progress
|
3,727 | 3,716 | — | 11 | ||||||||||||
Total
property and equipment, net
|
$ | 280,949 | $ | 418,622 | $ | 10,183 | $ | 15,808 |
Fair
value estimates were based on various valuation methods. Personal property
related to assets with active secondary markets, such as riverboats, barges and
slot machines, were valued using market prices of similar assets. Other personal
property such as furniture, fixtures and other equipment, were valued using a
depreciated replacement cost method. Land was valued using market comparable
data. Where applicable, the income approach was utilized to estimate the fair
value of the income producing land, buildings, building improvements and land
improvements either by direct capitalization or discounted cash flow analysis.
For specific real property assets that were valued using the cost approach, the
income and/or sales comparison approach was utilized to support the value
conclusion of the cost approach.
(k)
|
Reflects the elimination of
historical goodwill of $25.8 million and the establishment of
$30.4 million of goodwill as a result of fresh-start
reporting.
|
(l)
|
Reflects the fair value of
identifiable intangible assets in connection with fresh-start reporting.
The following table summarizes the components of intangible assets as a
result of the application of fresh-start reporting at March 8, 2010
and intangible assets, net at March 7, 2010 (in thousands,
unaudited):
|
Successor
|
Predecessors
|
|||||||||||||||
March 7,
2010
|
||||||||||||||||
March 8,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
|||||||||||||
Intangible
assets, net:
|
||||||||||||||||
Trade
name (indefinite life)
|
$ | 29,500 | $ | 16,700 | $ | — | $ | 20 | ||||||||
Gaming
licenses (indefinite life)
|
43,970 | 50,718 | — | — | ||||||||||||
Trade
name, net
|
— | 175 | — | — | ||||||||||||
Customer
list, net
|
1,703 | 2,268 | — | — | ||||||||||||
Other,
net
|
8,570 | 3,945 | 318 | — | ||||||||||||
Total
intangible assets, net
|
$ | 83,743 | $ | 73,806 | $ | 318 | $ | 20 |
For further information on the
valuation of intangible assets, see Note 9— Goodwill and
Intangible Assets .
(m)
|
Reflects the fair value of
unfavorable lease amounts as well as the re-measurement of the
Predecessors' current and deferred tax assets and liabilities,
unrecognized tax benefits and other tax related accounts as a result of
fresh-start reporting in accordance with accounting
guidance.
|
(n)
|
Reflects the adjustment of assets
and liabilities to fair value, or other measurement as specified in
accounting guidance related to business combinations as follows (in
thousands,
unaudited):
|
Elimination
of Predecessors' goodwill
|
$ | 25,824 | ||
Elimination
of Predecessors' intangible assets
|
74,144 | |||
Property
and equipment adjustment
|
163,664 | |||
Other
asset and liabilities adjustment
|
8,318 | |||
Noncontrolling
interest adjustment
|
305 | |||
Tax
account adjustments
|
(23,025 | ) | ||
Total
elimination of Predecessors, members' deficit
|
$ | 249,230 |
F-18
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
(o)
|
Reflects additional paid in
capital of Successor as a result of intangible assets recognized as a
result of fresh-start
reporting.
|
(p)
|
Reflects the adjustment of the
noncontrolling interest in Greenville Riverboat to its estimated fair
value. Estimated fair values were based on internal and external
valuations using customary valuation methodologies, including comparable
earnings multiples, discounted cash flows and negotiated transaction
values.
|
Liabilities
Subject to Compromise
Liabilities
subject to compromise are certain liabilities of the Predecessors incurred prior
to the Effective Date. In accordance with accounting guidance for financial
reporting by entities in reorganization under the bankruptcy code, liabilities
subject to compromise are recorded at the estimated amount that is expected to
be allowed as pre-petition claims in the Chapter 11 proceedings and are
subject to future adjustments. Adjustments may result from negotiations, actions
of the Bankruptcy Court, further developments with respect to disputed claims,
rejection of executory contracts and unexpired leases, proofs of claim,
implementation of the Plan, or other events. In some individual instances and in
total, claims filed by creditors are in excess of the amounts recorded by the
Predecessors. The Predecessors recorded an estimate of allowed claims based on
the reconciliation work that had been performed.
Liabilities
subject to compromise as of December 31, 2009 consist of the following (in
thousands):
Predecessors
|
||||||||||||
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
||||||||||
9
5 /
8 % Senior
Subordinated Notes
|
$ | 960,000 | $ | — | $ | — | ||||||
Senior
Secured Credit Facility-Term Loan
|
1,300,239 | — | — | |||||||||
Senior
Secured Credit Facility-Revolver
|
29,010 | — | — | |||||||||
Capital
leases
|
11 | — | — | |||||||||
Debt
subject to compromise
|
2,289,260 | — | — | |||||||||
Interest
rate swaps
|
53,158 | — | — | |||||||||
Accrued
expenses and other liabilities
|
23,919 | 407 | 382 | |||||||||
Accounts
payable
|
19,675 | 1,296 | 752 | |||||||||
Accrued
interest
|
36,173 | — | — | |||||||||
Note
payable and accrued interest to affiliate guarantor
|
13,109 | — | — | |||||||||
Due
to affiliates
|
14,606 | 1,752 | 300 | |||||||||
Total
liabilities subject to compromise
|
$ | 2,449,900 | $ | 3,455 | $ | 1,434 |
Liabilities
Subject to Compromise—Guarantee of Affiliate Debt
The
New Jersey License Denial caused an immediate default under the Credit Facility
and the subsequent transfer of asset of Tropicana AC to the Trustee caused a
default under the Notes of which CP Vicksburg and JMBS Casino were Affiliate
Guarantors. As a result of the Chapter 11 Cases, both CP Vicksburg and JMBS
Casino recorded a loss during the nine months ended September 30, 2009 of
$8.0 million, which is included in the accompanying condensed statements of
operations related to the guarantee of affiliate debt. Both CP Vicksburg and
JMBS Casino have a corresponding $2.3 billion liability subject to
compromise related to the guarantee of affiliate debt included as a separate
item in the accompanying condensed balance sheets as of December 31,
2009.
F-19
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Ordinary Warrants
In
accordance with the Plan, holders of the Predecessors' notes and general
unsecured claims received Ordinary Warrants to purchase 3,750,000 shares of the
Company's Common Stock. The Ordinary Warrants have a four year and nine month
term and an exercise price of $52.44 per share. The Company evaluated the
Ordinary Warrants under current accounting pronouncements and determined they
were properly classified as equity on the accompanying condensed balance sheet.
The Company valued the Ordinary Warrants using the Black-Scholes option
valuation model assuming a life of 4.5 years; a volatility factor of 61%
and a risk free interest rate of 2.36%. The resulting value of
$11.5 million was recorded as reorganization items of the Predecessors on
the accompanying condensed statements of operations.
Reorganization
Items
Reorganization
items, excluding amounts included in discontinued operations, represent amounts
incurred as a direct result of the Chapter 11 Cases and were comprised of
the following (in thousands, unaudited):
Predecessors
|
||||||||||||||||||||||||||||||||||||
Period
January 1, 2010
through
March 7, 2010
|
Three
Months Ended
September 30,
2009
|
Nine
Months Ended
September 30,
2009
|
||||||||||||||||||||||||||||||||||
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
||||||||||||||||||||||||||||
Discharge
of liabilities subject to compromise
|
$ | 2,454,648 | $ | 2,293,780 | $ | 2,285,349 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Elimination
of Beneficial interest in Trust
|
(200,000 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Revaluation
of assets and liabilities
|
(140,703 | ) | (5,662 | ) | (18,817 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Elimination
and revaluation of minority interest
|
15,963 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Liabilities
reinstated
|
(21,466 | ) | (3 | ) | (2 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Issuance
of Ordinary Warrants
|
(11,475 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Other
|
1,097 | 76 | 84 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Non-cash
reorganization items, net
|
2,098,064 | 2,288,191 | 2,266,614 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Professional
fees
|
(4,382 | ) | — | — | (2,770 | ) | — | — | (22,448 | ) | — | — | ||||||||||||||||||||||||
Interest
income
|
1 | — | — | 3 | — | — | 66 | — | — | |||||||||||||||||||||||||||
Other
|
(585 | ) | (6 | ) | (5 | ) | (320 | ) | (21 | ) | (13 | ) | (437 | ) | (44 | ) | (31 | ) | ||||||||||||||||||
Total
reorganization items, net
|
$ | 2,093,098 | $ | 2,288,185 | $ | 2,266,609 | $ | (3,087 | ) | $ | (21 | ) | $ | (13 | ) | $ | (22,819 | ) | $ | (44 | ) | $ | (31 | ) |
Professional
fees include financial, tax, legal, real estate and valuation services, among
other items, that are directly associated with the reorganization process. The
Company continues to incur expenses related to the Predecessors' Chapter 11
Cases, including professional fees that were classified as reorganization items
by the Predecessors. Upon the Effective Date, these expenses were classified in
operating costs and expenses, primarily in general and administrative expense in
the condensed statement of operations.
NOTE
4—ACQUISITION OF TROPICANA AC
On
March 8, 2010 (the "Acquisition Date"), as further discussed in
Note 1, the Company acquired certain assets of Adamar, including Tropicana
AC, from the lenders who had made the Credit Bid to acquire those assets from
the Trustee. The lenders transferred those assets to the Company in exchange for
the issuance of shares of the Company's common stock. The results of operations
for Tropicana AC have been included in the Company's condensed financial
statements since the Acquisition Date.
In
accordance with ASC 805, the consideration transferred to acquire Tropicana
AC was measured as the fair value of the assets acquired and the liabilities
assumed as of Acquisition Date. The fair values of the net assets acquired were
determined by the Company's management after input from an independent third
party valuation expert.
Current
assets and liabilities are current in nature and have been carried at fair
value.
F-20
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Property
and equipment were valued based on management's estimates and assumptions
including variations of the income approach, the cost approach, and the market
approach. Real property such as land, land improvements, and buildings were
predominately valued using a combination of the income approach as well as the
cost approach where appropriate. Personal property such as gaming equipment and
tracking systems were predominately valued using the market approach. Where no
market data was readily available, the cost approach was utilized.
For
intangible assets, the income approach was utilized for the favorable lease
interests. For the player relationship intangible asset, insufficient cash flow
was projected in order to utilize the income approach; therefore, the cost
approach was used to establish fair value. Investments consist of CRDA deposits
and were carried at cost less a valuation allowance, which approximates fair
value.
Deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to the differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
The
purchase price allocation is preliminary and subject to refinement and
completion within one year of the acquisition as provided under ASC 805.
The most significant of the items not finalized is the determination of deferred
tax balances associated with differences between the estimated fair values and
the tax bases of assets acquired and liabilities assumed. The Company's
preliminary allocation of the fair value of assets and liabilities of Tropicana
AC is as follows (in thousands, unaudited):
March 8,
2010
|
||||
Cash
and cash equivalents
|
$ | 56,714 | ||
Other
current assets
|
23,552 | |||
Property
and equipment
|
189,451 | |||
Goodwill
|
33,549 | |||
Intangible
assets
|
6,600 | |||
Investments
|
30,985 | |||
Other
noncurrent assets
|
3,639 | |||
Current
portion of long-term debt
|
(37 | ) | ||
Accounts
payable
|
(17,763 | ) | ||
Accrued
expenses and other current liabilities
|
(10,849 | ) | ||
Long-term
debt, net of current portion
|
(164 | ) | ||
Deferred
income taxes
|
(33,549 | ) | ||
Total
purchase price
|
$ | 282,128 |
The
amounts of revenue and earnings of Tropicana AC included in the Company's
condensed statement of operations are as follows (in thousands,
unaudited):
Three
months
ended
September 30,
2010
|
Period
March 8,
2010
through
September 30,
2010
|
|||||||
Net
revenues
|
$ | 86,105 | $ | 183,401 | ||||
Operating
expenses
|
(77,400 | ) | (170,098 | ) | ||||
Net
income
|
8,146 | 12,497 |
The
following details TEI's condensed consolidated opening balance sheet as of
March 8, 2010 which represents the Successor upon emergence from bankruptcy
and the acquisition of Tropicana AC (in thousands, unaudited):
F-21
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Successor
|
Tropicana
AC
|
Eliminations(i)
|
TEI
|
|||||||||||||
Cash
and cash equivalents
|
$ | 96,998 | $ | 56,714 | $ | — | $ | 153,712 | ||||||||
Other
current assets
|
45,771 | 23,552 | (415 | ) | 68,908 | |||||||||||
Property
and equipment
|
280,949 | 189,451 | — | 470,400 | ||||||||||||
Goodwill
|
30,386 | 33,549 | — | 63,935 | ||||||||||||
Intangible
assets
|
83,743 | 6,600 | — | 90,343 | ||||||||||||
Investments
|
— | 30,985 | — | 30,985 | ||||||||||||
Other
noncurrent assets
|
21,148 | 3,639 | — | 24,787 | ||||||||||||
Total
assets
|
$ | 558,995 | $ | 344,490 | $ | (415 | ) | $ | 903,070 | |||||||
Current
liabilities
|
$ | 91,427 | $ | 28,649 | $ | (415 | ) | $ | 119,661 | |||||||
Long-term
debt, net of current portion
|
100,136 | 164 | — | 100,300 | ||||||||||||
Other
noncurrent liabilities
|
40,676 | 33,549 | — | 74,225 | ||||||||||||
Total
liabilities
|
232,239 | 62,362 | (415 | ) | 294,186 | |||||||||||
TEI's
shareholders' equity
|
325,468 | 282,128 | — | 607,596 | ||||||||||||
Noncontrolling
interest
|
1,288 | — | — | 1,288 | ||||||||||||
Total
shareholders' equity
|
326,756 | 282,128 | — | 608,884 | ||||||||||||
Total
liabilities and shareholders' equity
|
$ | 558,995 | $ | 344,490 | $ | (415 | ) | $ | 903,070 |
|
(i)
|
Reflects
the elimination of affiliate activity of
$0.4 million.
|
NOTE
5—PRO FORMA RESULTS
The
following unaudited pro forma results of operations assume that the
Restructuring Transactions, including the acquisition of the Predecessors and
Tropicana AC, occurred at the beginning of the respective periods (in thousands,
except per share data, unaudited):
Three
Months
Ended
September 30,
|
Nine
Months
Ended
September 30,
|
|||||||||||
2009
|
2010
|
2009
|
||||||||||
Net
revenues
|
$ | 190,288 | $ | 510,624 | $ | 552,295 | ||||||
Operating
income
|
15,806 | 28,556 | 36,240 | |||||||||
Net
income
|
3,663 | 1,132 | 3,027 | |||||||||
Basic
and diluted earnings per common share
|
$ | 0.14 | $ | 0.04 | $ | 0.12 |
This
unaudited pro forma information should not be relied upon as necessarily being
indicative of the results that would have been obtained if the Restructuring
Transactions had actually occurred on those dates, nor of the results that may
be reported in the future.
F-22
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
6—RECEIVABLES
Receivables
consist of the following (in thousands):
Successor
|
Predecessors
|
|||||||||||||||
December 31,
2009
|
||||||||||||||||
September 30,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
|||||||||||||
(unaudited)
|
||||||||||||||||
Casino
|
$ | 18,252 | $ | 877 | $ | 74 | $ | — | ||||||||
Hotel
|
6,055 | 1,148 | 9 | 8 | ||||||||||||
Income
tax receivable
|
— | 12,787 | — | — | ||||||||||||
Other
|
20,057 | 393 | — | 14 | ||||||||||||
44,364 | 15,205 | 83 | 22 | |||||||||||||
Allowance
for doubtful accounts
|
(9,399 | ) | (691 | ) | (52 | ) | — | |||||||||
Receivables,
net
|
$ | 34,965 | $ | 14,514 | $ | 31 | $ | 22 |
NOTE
7—PROPERTY AND EQUIPMENT
Property
and equipment consist of the following (in thousands):
Successor
|
Predecessors
|
|||||||||||||||||||||||||||
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
||||||||||||||||||||||||||
Estimated
life
(years)
|
September 30,
2010
|
Estimated
life
(years)
|
December 31,
2009
|
Estimated
life
(years)
|
December 31,
2009
|
Estimated
life
(years)
|
December 31,
2009
|
|||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||
Land
|
—
|
$ | 94,240 |
—
|
$ | 33,990 |
—
|
$ | 1,380 |
—
|
$ | 440 | ||||||||||||||||
Buildings
and improvements
|
10 - 40
|
297,262 |
10 - 39
|
377,547 |
5 - 25
|
13,099 |
5 - 25
|
2,965 | ||||||||||||||||||||
Furniture,
fixtures and equipment
|
3 - 7
|
64,228 |
5 - 10
|
107,747 |
3 - 10
|
10,053 |
3 - 10
|
7,843 | ||||||||||||||||||||
Riverboats
and barges
|
25 - 40
|
20,300 |
10
|
47,580 |
10
|
2,554 |
20
|
15,772 | ||||||||||||||||||||
Construction
in progress
|
—
|
5,291 |
—
|
3,417 |
—
|
— |
—
|
— | ||||||||||||||||||||
481,321 | 570,281 | 27,086 | 27,020 | |||||||||||||||||||||||||
Accumulated
depreciation
|
(24,264 | ) | (146,631 | ) | (16,528 | ) | (10,791 | ) | ||||||||||||||||||||
Property
and equipment, net
|
$ | 457,057 | $ | 423,650 | $ | 10,558 | $ | 16,229 |
NOTE
8—BENEFICIAL INTEREST IN TRUST
Prior
to TEH's acquisition of Aztar Corporation, the NJ Commission granted TEH
temporary authority to operate Tropicana AC, requiring Adamar and its
subsidiary's stock be placed in the ICA Trust until completion of the licensing
process. On December 12, 2007, the NJ Commission issued the NJ License
Denial, denying TEH a permanent license to operate Tropicana AC and declaring
operative the ICA Trust. The Trustee was assigned under the ICA Trust to assume
management responsibility of Tropicana AC until it could be sold to a third
party. The sale of Tropicana AC was in the control of the Trustee. Under New
Jersey law, TEH was entitled to receive upon the eventual sale of Tropicana AC
an amount equal to the lower of the value of the property as of the date the
trust became operative or its original cost to acquire the property. Because
Tropicana AC was sold to the lenders under the Credit Facility pursuant to the
$200 million credit bid, as discussed below, the Company and TEH did not
receive any cash proceeds from the sale of Tropicana AC.
F-23
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
As
a result of the actions taken on December 12, 2007, by the NJ Commission,
the Company determined that Tropicana AC should not be consolidated subsequent
to December 12, 2007. This determination was based on the accounting
guidance for consolidation of all majority owned subsidiaries, insofar as the
government-imposed restrictions on TEH's continued management and control of
Tropicana AC were so severe, they cast significant doubt on TEH's ability to
control the subsidiary. TEH has thereafter accounted for its interest in
Tropicana AC, held by the ICA Trust, under the cost method. TEH's cost basis was
then adjusted to fair value in accordance with accounting guidance related to
accounting for certain investments in debt and equity securities.
As
a result, the net cost basis in Tropicana AC is presented as a beneficial
interest in Trust in the accompanying condensed balance sheet of TEH as of
December 31, 2009. As the Trustee had control of the operations of
Tropicana AC from December 12, 2007 until the Company's acquisition of
the property, there are no
results of operations, other than impairment charges associated with the
beneficial interest for Tropicana AC included in the condensed statements of
operations and statements of cash flows of TEH for the three and nine months
ended September 30, 2009.
Impairment
Loss
Under
the accounting guidance related to the meaning of other-than-temporary
impairment and its application to certain investments, cost basis investments
such as the beneficial interest in Trust are evaluated for impairment under a
process that results in an impairment charge reducing the cost basis to fair
value when other-than-temporary impairment exists. To determine the fair value,
TEH utilized a combination of the income approach and market approach. The
income approach incorporates the use of the discounted cash flow method, whereas
the market approach incorporates the use of the guideline company method.
Significant assumptions are used to determine the fair value such as cash flow
projections, working capital requirements and the discount rate which are
considered "Level 3" inputs. The estimated fair value of the beneficial
interest in Trust declined to $200.0 million at December 31, 2009 from
$354.3 million at December 31, 2008 which was based on the
$200 million credit bid by the lenders under the Credit Facility, resulting
in impairment charges of $154.3 million during the nine months ended
September 30, 2009.
NOTE
9—GOODWILL AND INTANGIBLE ASSETS
Goodwill
represents the excess of total acquisition costs over the fair market value of
net assets acquired and liabilities assumed in a business combination. The
Company recorded goodwill of $30.4 million upon the application of
fresh-start reporting and $33.5 million in connection with the acquisition
of Tropicana AC. The Company established deferred tax liabilities for book and
tax differences between assigned values and tax bases of the acquired assets
which resulted in the Company recognizing goodwill. As of December 31,
2009, TEH had $16.8 million of goodwill related to Belle of Baton Rouge, CP
Vicksburg had $0.6 million of goodwill and JMBS Casino had
$8.4 million of goodwill. In connection with fresh-start reporting, the
Predecessors' goodwill of $25.8 million was eliminated.
Intangible
assets consist of the following (in thousands):
Successor
|
Predecessors
|
|||||||||||||||||||||||||||
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
||||||||||||||||||||||||||
Estimated
life
(years)
|
September 30,
2010
|
Estimated
life
(years)
|
December 31,
2009
|
Estimated
life
(years)
|
December 31,
2009
|
Estimated
life
(years)
|
December 31,
2009
|
|||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||
Trade
name
|
Indefinite
|
$ | 29,500 |
Indefinite
|
$ | 16,700 |
—
|
$ | — |
Indefinite
|
$ | 20 | ||||||||||||||||
Gaming
licenses
|
Indefinite
|
43,970 |
Indefinite
|
50,718 |
—
|
— |
—
|
— | ||||||||||||||||||||
Trade
name
|
—
|
— |
1 1 / 2 - 10
|
3,200 |
—
|
— |
—
|
— | ||||||||||||||||||||
Customer
lists
|
3
|
3,103 |
5 - 15
|
7,467 |
5
|
1,795 |
—
|
— | ||||||||||||||||||||
Favorable
lease
|
5 - 42
|
24,100 |
9 - 60
|
4,408 |
5-35
|
747 |
5
|
3,000 | ||||||||||||||||||||
Total
intangible assets
|
100,673 | 82,493 | 2,542 | 3,020 | ||||||||||||||||||||||||
Less
accumulated amortization:
|
||||||||||||||||||||||||||||
Trade
name
|
— | (3,017 | ) | — | — | |||||||||||||||||||||||
Customer
lists
|
(603 | ) | (5,195 | ) | (1,795 | ) | — | |||||||||||||||||||||
Favorable
lease
|
(702 | ) | (393 | ) | (427 | ) | (3,000 | ) | ||||||||||||||||||||
Total
accumulated amortization
|
(1,305 | ) | (8,605 | ) | (2,222 | ) | (3,000 | ) | ||||||||||||||||||||
Intangible
assets, net
|
$ | 99,368 | $ | 73,888 | $ | 320 | $ | 20 |
F-24
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Upon
the Effective Date, in connection with fresh-start reporting, the Predecessors'
intangible assets were eliminated. In connection with the adoption of
fresh-start reporting, the Company recognized $29.5 million in an
indefinite life trade name related to the "Tropicana" trade name and
$44.0 million of indefinite life gaming licenses related to entities that
are located in gaming jurisdictions where competition is limited to a specified
number of licensed gaming operators. Customer lists were valued at
$1.7 million representing the value associated with our customers under our
customer loyalty programs and are being amortized on a straight-line basis over
three years. Favorable lease arrangements were valued at $8.6 million and
are being amortized to rental expense on a straight-line basis over
30 years, which approximates the remaining useful life of the leased
facility.
In
connection with the Tropicana AC acquisition, the Company also recognized
$5.2 million of intangibles assets relating to favorable lease arrangements
which are being amortized to tenant income on a straight-line basis over the
terms of the various leases, and $1.4 million representing the value
associated with customers enrolled in our customer loyalty programs which are
being amortized on a straight-line basis over three years.
Intangible
assets related to the Plan and Tropicana AC acquisition were valued using income
and cost based methods as appropriate. The "Tropicana" trade name was valued
based on the relief from royalty method which is a function of projected
revenue, the royalty rate that would hypothetically be charged by a licensor of
an asset to unrelated licensee, and a discount rate. The royalty rate was based
on factors such as age, market competition, absolute and relative profitability,
market share and prevailing rates for similar assets to reach a 1% royalty rate.
The discount rate applied was 14%, based on the weighted average cost of capital
of the properties benefiting from the trade name. Gaming licenses were valued based on the
Greenfield method, which is the function of the cost to build a new casino
operation, the build out period, projected cash flows attributed to the casino
once operational, and a discount rate. The projected cash flows assumed a
revenue growth rate of 2% and effective tax rate of 40%. The discount rate
assumed was 16%, based on the weighted average cost of capital for the
respective property plus a premium to reflect the additional risks of achieving
individual cash flows. The value assigned to customer lists is based on the
present value of future earnings using the replacement cost method based on
internally developed estimates.
In
connection with the acquisition of Tropicana Aruba, the Company recognized
$10.3 million of intangible assets relating to a favorable lease
arrangement for a land lease which will be amortized to rental expense on a
straight-line basis over approximately 42 years, which is the remaining
term of the land lease.
Amortization
expense related to favorable lease arrangements which is amortized to rental
expense or tenant income, as applicable, was $0.3 million and
$0.7 million for the quarter ended September 30, 2010 and the
Successor Period, respectively. Estimated annual amortization related to the
Company's favorable lease arrangements for the years ended December 31,
2010, 2011, 2012, 2013 and 2014 is anticipated to be $1.1 million,
$1.5 million, $1.5 million, $1.5 million, and $1.5 million,
respectively.
Amortization
expense related to customer lists which is amortized to depreciation and
amortization expense for the quarter ended September 30, 2010 and the
Successor Period was $0.3 million and $0.6 million, respectively.
Estimated annual amortization expense related to the Company's customer lists
for the years ended December 31, 2010, 2011, 2012, and 2013 is anticipated
to be $0.8 million, $1.0 million, $1.0 million, and
$0.2 million, respectively. Amortization expense at TEH for the quarter
ended September 30, 2009, the Predecessor Period and the nine months ended
September 30, 2009 for those assets amortized was $41,000, $27,000 and
$122,000, respectively.
F-25
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
10—INVESTMENTS (SUCCESSOR)
The
New Jersey Casino Control Act provides, among other things, for an assessment of
licenses equal to 1.25% of gross gaming revenues in lieu of an investment
alternative tax equal to 2.5% of gross gaming revenues. The Company may satisfy
this investment obligation by investing in qualified eligible direct
investments, by making qualified contributions or by depositing funds with the
CRDA. Funds deposited with the CRDA may be used to purchase bonds designated by
the CRDA or, under certain circumstances, may be donated to the CRDA in exchange
for credits against future CRDA investment obligations. The carrying value of
the total investments at September 30, 2010 approximates their fair
value.
Investments
consist of the following (in thousands, unaudited):
Successor
|
||||
September 30, 2010
|
||||
Investment
in bonds—CRDA
|
$ | 13,469 | ||
Less
unamortized discount
|
(3,617 | ) | ||
Less
valuation allowance
|
(2,170 | ) | ||
Deposits—CRDA
|
29,548 | |||
Less
valuation allowance
|
(7,529 | ) | ||
Direct
investment—CRDA
|
3,685 | |||
Less
valuation allowance
|
(652 | ) | ||
Total
investments
|
$ | 32,734 |
The
CRDA bonds have various contractual maturities that range from 5 to
40 years. Actual maturities may differ from contractual maturities because
of prepayment rights.
NOTE
11—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses and other current liabilities, excluding liabilities subject to
compromise, consist of the following (in thousands):
Successor
|
Predecessors
|
|||||||||||||||
December 31,
2009
|
||||||||||||||||
September 30,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
|||||||||||||
(unaudited)
|
||||||||||||||||
Accrued
payroll and related
|
$ | 28,227 | $ | 14,036 | $ | 352 | $ | 301 | ||||||||
Accrued
gaming and related
|
7,748 | 8,749 | 834 | 277 | ||||||||||||
Accrued
taxes
|
8,953 | — | 661 | 551 | ||||||||||||
Accrued
interest
|
— | 240 | — | — | ||||||||||||
Deferred
tax liability—current portion
|
— | 858 | — | — | ||||||||||||
Other
accrued expenses and current liabilities
|
21,362 | 6,292 | 298 | 148 | ||||||||||||
Total
accrued expenses and other current liabilities
|
$ | 65,563 | $ | 30,175 | $ | 2,145 | $ | 1,277 |
F-26
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
12—DEBT
Debt
consists of the following (in thousands):
Successor
|
Predecessors
|
|||||||
December 31,
2009
|
||||||||
September 30,
2010
|
TEH
|
|||||||
(unaudited)
|
||||||||
Term
Loan Facility, due 2013, interest at 15% at September 30, 2010, net
of unamortized discount of $23.2 million at September 30,
2010
|
$ | 106,831 | $ | — | ||||
Revolving
Facility, due 2013, interest at 15% at September 30,
2010
|
— | — | ||||||
Debtor-in-Possession
Credit Agreement, interest at 13.3% at December 31,
2009
|
— | 65,219 | ||||||
Senior
Secured Credit Facility—Term Loan, due 2012, interest at 0% at
December 31, 2009 (subject to compromise)
|
— | 1,300,239 | ||||||
Senior
Secured Credit Facility—Revolver, interest at 0% at December 31, 2009
(subject to compromise)
|
— | 29,010 | ||||||
9
5 /
8 % Senior
Subordinated Notes, due 2014 (subject to compromise)
|
— | 960,000 | ||||||
Other
long-term debt
|
186 | 461 | ||||||
Total
debt
|
107,017 | 2,354,929 | ||||||
Less
amounts subject to compromise
|
— | (2,289,260 | ) | |||||
Less
current portion of debt not subject to compromise
|
(1,345 | ) | (65,669 | ) | ||||
Total
long-term debt, net
|
$ | 105,672 | $ | — |
Successor
Exit
Facility
On
December 29, 2009, TEI entered into the Exit Facility with multiple lenders
including Icahn Capital LP ("Icahn Capital"), as further discussed in
Note 14, which consists of (i) a $130 million Term Loan Facility
and (ii) a $20 million Revolving Facility. The Exit Facility matures
on March 8, 2013. The Term Loan Facility requires mandatory principal
payments of $1.3 million annually on March 8, 2011 and 2012. The
Revolving Facility generally does not require mandatory borrowing or principal
payments. Additionally, the Company issued 1,312,500 Penny Warrants to purchase
its Common Stock at a strike price of $0.01 to participating lenders under the
Exit Facility. On the Effective Date the proceeds of the Exit Facility were used
to repay certain indebtedness, including the Predecessors DIP Credit Facility,
to pay Bankruptcy Court-approved administrative claims and expenses, to provide
for working capital, to pay fees and expenses related to the Exit Facility and
for other general corporate purposes. All amounts outstanding under the Exit
Facility bear interest at a rate per annum of 15% so long as no default or event
of default has occurred and is continuing, or at a rate per annum of 17% in the
event that a default or event of default has occurred and is continuing. In
addition, the Company will be required to pay an annual administrative fee of
$100,000 and an unused line fee equal to 0.75% of the daily average undrawn
portion of the Revolving Facility. The Exit Facility is guaranteed by
substantially all the existing and future subsidiaries of TEI.
The
Exit Facility contains mandatory prepayment provisions from proceeds received by
TEI and its subsidiaries as a result of asset sales and the incurrence of
indebtedness (subject in each case to certain exceptions). Key covenants binding TEI
and its subsidiaries include (i) $50 million limitation per annum on
capital expenditures, (ii) compliance with a fixed charge coverage ratio of
not less than 2.00 to 1.00 and (iii) compliance with a total leverage ratio
not to exceed 4.25 to 1.00. Financial covenants will be tested at the end of
each fiscal quarter on a last twelve months basis. Key defaults (termination
provisions) include (i) failure to repay principal, interest, fees and
other amounts owing under the facility, (ii) cross default to other
material indebtedness, (iii) the rendering of a material judgment against
TEI or any subsidiary, (iv) failure of security documents to create valid
liens on property securing the facility and to perfect such liens,
(v) revocation of casino, gambling or gaming licenses, and (vi) the
bankruptcy or insolvency of TEI or any of its subsidiaries. Many defaults are
also subject to cure periods prior to such default giving rise to the right of
the lenders to accelerate the loans and to exercise remedies. TEI was in
compliance with these covenants at September 30,
2010.
F-27
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Predecessors
Debtor-in-Possession
Credit Agreement
On
May 5, 2008, TEH entered into the DIP Credit Facility. In
October 2008, TEH increased its availability under the DIP Credit Facility
from $67 million to $80 million. TEH extended the maturity of the DIP
Credit Facility to the earlier of March 31, 2010 or the Effective Date of
the Plan. Borrowings under the DIP Credit Facility bore interest at a margin
over the Alternate Base Rate or Adjusted LIBO Rate (each as defined in the DIP
Credit Facility), as selected by TEH.
The
DIP Credit Facility provided the administrative agent, collateral agent and
lenders with a senior priming lien on all of TEH's tangible and intangible
assets subject to certain exceptions specified therein. In addition, each of
TEH's subsidiaries, as well as the Affiliate Guarantors, were guarantors under
the DIP Credit Facility.
The
DIP Credit Facility contained certain financial and other covenants and certain
defaults and events of default customary for debtor-in-possession financings of
this type. On the Effective Date the DIP Credit Facility was paid in
full.
Senior
Secured Credit Facility—subject to compromise
On
January 3, 2007, TEH entered into the Credit Facility comprised of a
$1.53 billion senior secured term loan ("Term Loan") and a
$180.0 million senior secured revolving credit facility ("Revolver"). The
Term Loan bore interest at a margin above the LIBO Rate or Alternative Base Rate
(each as defined in the Credit Facility), as selected by TEH. The borrowings
under the Credit Facility were guaranteed by the same guarantors as the Notes;
security interests in all of TEH's and the guarantors' tangible and intangible
assets, including a pledge of all equity interests in TEH and the guarantors;
and a guarantee of Columbia Sussex Corporation ("CSC"), a company related to the
Predecessors by common ownership, to the extent that the Revolver exceeded
$100.0 million. The Credit Facility required additional mandatory principal
payments of, among other things, excess cash flow, as defined in the
agreement.
Subsequent
to the Petition Date, the Bankruptcy Court authorized TEH to make adequate
protection payments that included interest on the Credit Facility. Effective
February 1, 2009, the Bankruptcy Court authorized TEH to suspend the
adequate protection payments with respect to interest, which resulted in no
interest expense in 2009 related to the Credit Facility. The interest
rate was the Adjusted LIBO
Rate plus 2.25% per annum until (but not including) June 30, 2008 and
thereafter, at the Alternate Base Rate plus 1.25% per annum. As of the Effective
Date, the Credit Facility was terminated pursuant to the Plan, with the
exception of the portion related to the Credit Bid as further discussed in
Note 1.
Prior
to the Petition Date, the Company had approximately $8.0 million in letters
of credit issued under the Credit Facility, of which $7.5 million was paid
to the beneficiary in the quarter ended March 31, 2009 and the remaining
$0.5 million was paid to the beneficiary during the quarter ended
June 30, 2009. Accordingly, these payments increased the outstanding
balance of the Credit Facility during 2009. As a result, CP Vicksburg and JMBS
Casino recorded a loss related to the increase during nine months ended
September 30, 2009 of $8.0 million, which is included in the
accompanying condensed statements of operations.
Senior
Subordinated Notes—subject to compromise
On
December 28, 2006, TEH issued the Notes. Interest on the Notes was payable
semi-annually on June 15 and December 15 of each year.
The
Notes were guaranteed by certain of TEH's subsidiaries, as well as by the
Affiliate Guarantors. The Notes contained certain restrictive covenants
regarding, among other things, TEH's and the guarantors' ability to incur or
guarantee additional indebtedness, pay dividends, sell or transfer assets, make
certain investments, create or incur certain liens, enter into merger,
consolidation or sale transactions and to enter into transactions with
affiliates that are not described in the agreements. Upon a change in control of
TEH, the holders of each Note had the right to require TEH to repurchase the
Notes at 101% of the principal amount plus any unpaid interest to the date of
purchase. As of the Effective Date the Notes were cancelled pursuant to the
Plan.
F-28
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
13—DERIVATIVE INSTRUMENTS (PREDECESSORS)
TEH
had entered into interest rate swap agreements to effectively convert a portion
of its variable interest rate to a fixed interest rate. Prior to the Effective
Date, TEH had two interest rate swap agreements for an aggregate notional amount
of $1.0 billion, each converting a portion of its floating-rate debt to a
fixed rate of 5.0% based on three-month LIBO Rate. The filing for bankruptcy
protection on May 5, 2008 caused an early termination of these interest
swap agreements. The interest rate swap agreements provided that upon an early
termination, the market value of the interest rate swap agreement as of the date
of the early termination was due and interest payable on this amount was owed at
the prime rate plus 2%. The fair value of the interest rate swap agreements as
of May 5, 2008 was approximately $53.2 million, which was included in
liabilities subject to compromise at December 31, 2009 and was discharged
on the Effective Date upon consummation of the Plan.
NOTE
14—RELATED PARTY TRANSACTIONS
Cayman
Company
On
August 31, 2010 the Company, through its subsidiary New Tropicana
Opco, Inc., purchased all of the issued and outstanding shares of capital
stock of Tropicana Entertainment Cayman Holdings Co. Ltd., formerly
known as Icahn Fund Sub 1D Ltd. ("Cayman Company"), a Cayman Islands exempt
company with limited liability, for a total purchase price of approximately
$12.0 million. Cayman
Company was an entity controlled by Carl C. Icahn, Chairman of our Board of
Directors and the beneficial owner of approximately 48.9% of the Company's
common stock. Pursuant to the Securities Purchase Agreement, the Company
indirectly acquired all of the membership interests of Cayman Company's wholly
owned subsidiary Abura Development Corp. VBA, which in June 2010 acquired
out of bankruptcy The Aruban Resort & Casino at Eagle Beach as
discussed in Note 1.
Icahn
Capital
On
May 4, 2009, pursuant to the Plan, the Company entered into a commitment
letter (the "Commitment Letter") with Icahn Capital, an affiliate of
Mr. Carl C. Icahn, Chairman of our Board of Directors, pursuant to which
Icahn Capital committed to provide, on a fully underwritten basis, the Exit
Facility. Furthermore, entities affiliated with Mr. Icahn are lenders under
the Exit Facility and hold more than 50% of the loans extended under the Exit
Facility. In addition, an entity affiliated with Mr. Icahn is the
administrative agent and collateral agent under the Exit Facility. Pursuant to
the Commitment Letter, the Company is also responsible for various professional
fees, including legal costs and gaming license costs, on behalf of
Mr. Icahn. The Company and TEH expensed $0 and $1.2 million during the
quarters ended September 30, 2010 and 2009, respectively. The Company and
TEH expensed $0.3 million, $1.1 million and $2.3 million during
the Successor Period, the Predecessor Period and the nine months ended
September 30, 2009, respectively, related to these costs. The Company paid
$9.5 million in debt issuance costs related to the Exit Facility.
Unamortized debt issuance costs of $7.7 million were included in other long
term assets, net on the accompanying condensed balance sheet as of
September 30, 2010.
Icahn
Sourcing, LLC
Icahn
Sourcing, LLC ("Icahn Sourcing") is an entity formed and controlled by
Mr. Icahn in order to maximize the potential buying power of a group of
entities with which Mr. Icahn has a relationship in negotiating with a wide
range of suppliers of goods, services and tangible and intangible property. We
are a member of the buying group and, as such, are afforded the opportunity to
purchase goods, services and property from vendors with whom Icahn Sourcing has
negotiated rates and terms. Icahn Sourcing does not guarantee that we will
purchase any goods, services or property from any such vendors, and we are under
no obligation to do so. We do not pay Icahn Sourcing any fees or other amounts
with respect to the buying group arrangement. We may purchase a variety of goods
and services as members of the buying group at prices and on terms that we
believe are more favorable than those which would be achieved on a stand-alone
basis.
F-29
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
15—AFFILIATE TRANSACTIONS (PREDECESSORS)
Tahoe
Horizon
In
June 2009, TEH and certain of its subsidiaries entered into a Master
Restructuring Agreement with CSC and the landlord of its Horizon Casino Resort
("Tahoe Horizon") operations, agreeing to assign the leases, certain related
assets, rights and obligations of the Tahoe Horizon operations to affiliates of
CSC. Assignment of the leases was approved by the Bankruptcy Court concurrently
with the confirmation of the Plan. The terms of the assignment provided for the
Company to assign the hotel lease on June 15, 2009, while continuing to
operate the casino on a limited basis until CSC or a third party designee was
licensed by the Nevada Gaming Commission. In October 2009, the
gaming assets and all
remaining rights and certain obligations related to Tahoe Horizon were assigned
to entity affiliated with CSC, and TEH no longer had any involvement with this
property.
Notes
Payable to Affiliate Guarantors
In
2009, JMBS Casino loaned $2.5 million to TEH. The loan accrued interest at
an annual rate of 12.0%. No principal or interest payments were due under the
loans until the maturity date of January 1, 2015. In September 2008,
JMBS Casino and CP Vicksburg loaned $2.5 million and $2.0 million,
respectively, to TEH. The loans accrued interest at an annual rate of 12.0%. No
principal or interest payments were due under the loans until the maturity date
of January 1, 2015. Pursuant to the Plan, these loans and accrued interest
were cancelled on the Effective Date.
In
2007, JMBS Casino and CP Vicksburg loaned $5.0 million and
$7.0 million, respectively, to TEH. The loans accrued interest at an annual
rate of 12.0%. No principal or interest payments were due under these loans
until maturity, which was January 1, 2015. Due to the bankruptcy filing in
May 2008, the total of these pre-petition loans and accrued interest of
$13.1 million is included in liabilities subject to compromise on TEH's
accompanying December 31, 2009 condensed balance sheets. Pursuant to the
Plan, these loans and accrued interest were discharged on the Effective
Date.
Wimar
and Columbia Sussex Corporation
Wimar
Tahoe Corporation ("Wimar"), the Predecessors' ultimate parent, provided various
support services through September 2008 which were charged to the
Predecessors. The services provided by Wimar to the Predecessors under casino
services agreements primarily related to casino operations, employment matters,
staffing, marketing, advertising, casino layout, compliance, internal audit and
purchasing of gaming related equipment and supplies. The operations of the
Predecessors were separate and apart from Wimar. Any costs incurred by Wimar for
the benefit of or related to the Predecessors' operations were charged to the
Predecessors. Wimar charged the Predecessors its allocated portion of the
corporate overhead costs for these services based on the ratio of the
Predecessors' net operating revenues to the total aggregate net operating
revenue of all casino operations owned by Wimar.
CSC
provided, until April 30, 2009, various administrative and accounting
services to the Predecessors under a series of administrative services
agreements. In addition, the Predecessors also occasionally bought and sold slot
machines and other equipment at net book value from and to subsidiaries of Wimar
and CSC.
The
services provided by CSC were primarily related to accounting and administrative
services in the areas of accounts payable, cash management, payroll processing,
purchasing, human resources, marketing, risk management, tax and accounting.
Also, the Predecessors participated in general liability, workers' compensation,
property and health insurance programs facilitated by CSC. In addition, certain
of the Predecessors adopted CSC's 401(k) pension savings plan. The operations of
the Predecessors were separate and apart from CSC. Any costs incurred by CSC for
the benefit of or related to the Predecessors' operations were charged to the
Predecessors. Effective April 30, 2009, the Predecessors terminated the
administrative services agreements with CSC in anticipation of the
Plan.
CP
Vicksburg
CP
Vicksburg licensed the use of the name "Horizon" from a wholly owned subsidiary
of TEH, an affiliate through common ownership. The trademark license agreement
term was for ten years, terminating in October 2013 with an annual fee of
$12,000. Payments were to be made annually on the anniversary date. The
agreement allowed for six ten-year renewals at CP Vicksburg's option. Pursuant
to the Plan, on the Effective Date, such costs become intercompany transactions
and are eliminated upon consolidation as CP Vicksburg is a subsidiary of the
Company.
F-30
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
JMBS
Casino
JMBS
Casino shares the cost of operating shuttle buses owned by Greenville Riverboat.
The shuttle buses service both casinos and various food and beverage
establishments in downtown Greenville. Pursuant to the Plan, on the Effective
Date, such costs become intercompany transactions and are eliminated upon
consolidation as JMBS Casino and Greenville Riverboat are subsidiaries of the
Company.
NOTE
16—COMMITMENTS AND CONTINGENCIES
Leases
MontBleu
Lease
The
Company has a lease agreement with respect to the land and building which
MontBleu operates, through December 31, 2028. Under the terms of the lease,
rent is $333,333 per month beginning May 1, 2009, plus 10% of gross
revenues in excess of $50 million through December 31, 2011. After
December 31, 2011, rent will be equal to the greater of (i) $333,333
per month as increased by the same percentage that the consumer price index has
increased from 2009 thereafter, or (ii) 10% of gross revenues. In
connection with fresh-start reporting, the Company recognized an unfavorable
lease liability of $9.6 million related to this lease that will be
amortized on a straight-line basis to rental expense over the remaining term of
the lease. The unfavorable lease liability balance was $9.4 million on the
accompanying condensed balance sheets as of September 30,
2010.
Casino
Aztar Land Lease
The
Company leases from the City of Evansville, Indiana approximately four and a
half acres of the eight and a half acres on which Casino Aztar is situated.
Under the terms of the lease, the Company has the option to extend the lease for
up to seven five-year renewal options until November 30, 2040. In
March 2010, the Company exercised the second of seven renewal options,
which extended the lease term through November 2015. Under the terms of the
lease as amended, the Company is required to pay a percentage of the adjusted
gross receipts ("AGR") for the year in rent, with a minimum annual rent of no
less than $2 million. The percentage rent is equal to 2% of the AGR up to
$25 million, plus 4% of the AGR in excess of $25 million up to
$50 million, plus 6% of the AGR in excess of $50 million up to
$75 million, plus 8% of the AGR in excess of $75 million up to
$100 million, plus 12% of the AGR in excess of $100 million. In
addition, the Company must make two prepayments of percentage rent to the City
of Evansville for the period between January 2011 and December 2015.
The first payment of $5.0 million was paid in April 2010 with the
second payment of $5.0 million due no later than December 31, 2010.
The Company was also required to pay $3.5 million to the City of Evansville within
30 days after the Effective Date for city development projects, which was
paid in April 2010, and has agreed to construct a pedestrian bridge to
Casino Aztar, at an estimated cost of approximately $3.0 million, to be
completed within three years after the Effective Date.
Belle
of Baton Rouge Lease
Belle
of Baton Rouge leases certain land, buildings and airspace rights under separate
leases, one of which runs through 2019 and the other of which runs through 2013
with options to extend for up to 70 years. In addition, Belle of Baton
Rouge leases a parking lot with annual rent of $0.6 million through
August 2012.
Lighthouse
Point Lease
Lighthouse
Point leases approximately four acres of land on which the docking, entry and
parking facilities of the casino are situated. Lighthouse Point is required to
pay an amount equal to 2% of its monthly gross gaming revenues in rent, with a
minimum monthly payment of $75,000. In addition, in any given year in which
annual gross gaming revenues exceed $36.6 million, Lighthouse Point is
required to pay 8% of the excess amount as rent pursuant to the terms of the
lease. The current lease expires in 2014, with an option to extend its term
through 2044.
F-31
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
CP
Vicksburg Lease
CP
Vicksburg assumed an agreement with the City of Vicksburg (the "City") that
permitted the development of the Company's hotel and casino and provided for
ongoing payments to the City. The agreement expires in 2033 and provides that
certain parcels of land, primarily including parking, casino dockage and casino
entry parcels, revert back to the City upon termination of the agreement.
Monthly amounts owed include a fixed annual payment of $563,000, subject to
adjustment for changes in the consumer price index (base year 2003), and 1.5% of
net revenue, as defined in the agreement (primarily gaming and food and beverage
revenues). In connection with fresh-start reporting, the Company recognized an
unfavorable lease liability of $0.6 million related to this lease that will
be amortized on a straight-line basis to rental expense over the remaining term
of the lease. The unfavorable lease liability balance was $0.6 million on
the accompanying condensed balance sheets as of September 30,
2010.
JMBS
Casino Lease
JMBS
Casino leases land, buildings and equipment used in its operations, including a
lease with the City of Greenville, Mississippi, for rights for land used in
connection with JMBS Casino's riverboat gaming operation for moorage, docking
and berthing. JMBS Casino's current lease with the City of Greenville terminated
in August 2010, but it entered into a new lease agreement with the City of
Greenville for the same moorage, docking and berthing rights, the term of which
is from September 2010 to August 2020 (with the option of two
five-year renewals) with annual rent payments of $420,000.
Tropicana
Aruba Land Lease
The
Company assumed a land lease in August 2010 for approximately 14 acres
of land on which the Tropicana Aruba is situated through July 30, 2051.
Under the terms of the land lease, the annual rent is $93,000.
Other
Commitments
2008
NJSEA Subsidy Agreement
Effective
August 14, 2008, the casinos located in Atlantic City ("Casinos"),
including Tropicana AC, executed a new subsidy agreement with New Jersey Sports
and Exposition Authority ("NJSEA") for the benefit of the horse racing industry
for $30.0 million annually for a three-year period ("2008 NJSEA Subsidy
Agreement"). In addition, the NJ Commission adopted regulations effective
September 22, 2008 that established procedures by which the Casinos may
implement the promotional gaming credit tax deduction. The 2008 NJSEA Subsidy
Agreement provides that the Casinos will pay the NJSEA $90.0 million to be
used solely for purse enhancements, breeder's purses and expenses to establish
off-track wagering facilities which it incurs through 2011. The payments will be
made in eleven installments from September 29, 2008 through
November 15, 2011 and will total $30.0 million in 2010 and
$7.5 million in 2011. Each Casino will pay a share equal to a percentage
representing the gross gaming revenue it reported for the prior calendar year
compared to that reported by all Casinos for that year. The Company estimates
its portion of this industry obligation is approximately 7.9%.
The
2008 NJSEA Subsidy Agreement also provides that the NJSEA, all other entities
which receive any portion of the payments and affiliates of either shall not
operate, conduct, maintain or permit any casino gaming, including video lottery
gaming, in any New Jersey location other than Atlantic City prior to 2012 and
that the Casinos may bring an action in New Jersey Superior Court against any
entity that does so to enforce this prohibition by specific
performance.
The
2008 NJSEA Subsidy Agreement further provides that if, prior to 2011, a
statewide public question to authorize casino gaming at any New Jersey location
other than Atlantic City is approved by the New Jersey Legislature or if, prior
to 2012, any such statewide public question is approved by New Jersey voters or
any New Jersey legislation is enacted or other New Jersey governmental action is
taken authorizing such gaming or any such gaming is actually operated, conducted
or maintained, then the Casinos shall make no further payments to NJSEA and, in
certain circumstances, NJSEA shall return some or all of the payments it
previously received from the Casinos.
F-32
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
The
2008 NJSEA Subsidy Agreement acknowledges the publicly announced intention of
the Governor to, by executive order, create a commission to study and report its
recommendations for the long term stability of the horse racing industry to the
Governor and the Legislature. In July 2010, Pursuant to Executive Order
No. 11, the Governor's Advisory Commission (the "Advisory Commission")
issued a report on New Jersey Gaming, Sports and Entertainment (the "Report")
which set forth a number of recommendations that would not require outside
funding to subsidize the horse racing industry's continued viability and
stabilization.
New
Jersey CRDA
The
NJ Commission imposes an annual tax of eight percent on gross casino revenue.
Pursuant to legislation adopted in 1984, casino licensees are required to invest
an additional one and one-quarter percent of gross casino revenue for the
purchase of bonds to be issued by the CRDA or make other approved investments
equal to that amount; in the event the investment requirement is not met, the
casino licensee is subject to a tax of two and one-half percent on gross casino
revenue. As mandated by the legislation, the interest rate of the CRDA bonds
purchased by the licensee will be two-thirds of the average market rate for
bonds available for purchase and published by a national bond index at the time
of the CRDA bond issuance.
Contingencies
Tropicana
Trademark Litigation
Certain
parties (the "Plaintiffs") affiliated with the new owners of Tropicana
Hotel & Casino ("Tropicana LV") filed a declaratory judgment action in
the District Court, Clark County, Nevada, on July 20, 2009, against Aztar
Corporation ("Aztar") and Tropicana Entertainment, LLC ("TE") originally
seeking only a declaratory judgment that Tropicana LV had the right to operate a
hotel and casino under the name "Tropicana" without any interference by or
payment to Aztar or TE (together, the "Defendants"). The Plaintiffs' complaint
sought no damages or injunctive relief. On August 10, 2009, Defendants
removed the action to the District of Nevada and filed an answer and
counterclaim asserting Plaintiffs' use of "Tropicana" infringes upon Defendants'
rights in three federally registered trademarks. The Plaintiffs filed a motion
to remand the action to Nevada state court, which was granted on
January 21, 2010. The parties are currently engaged in
discovery.
During
the course of proceedings, the Plaintiffs and Defendants each filed a motion for
summary judgment claiming ownership of the "Tropicana" trademark. Both motions
were denied, although the Nevada state court preliminarily found that the
Plaintiffs might have an unexercised reversionary ownership interest in the
trademark as a result of an agreement that is 30 years old. Nonetheless,
because any exercise of this purported reversionary interest by Tropicana LV
could potentially deprive the Company, as successor to TE, of its asserted
ownership of the Tropicana trademark, the Defendants filed a motion in the
Chapter 11 Cases for an order rejecting the 1980 trade name agreement. In
addition, the Company, together with its subsidiary, New Tropicana
Holdings, Inc. ("New Tropicana"), and certain affiliates of Icahn
Capital LP, as secured lenders to the Company, filed a complaint in the
Chapter 11 Cases against the Plaintiffs, seeking a declaration that,
consistent with prior, uncontested orders of the Bankruptcy Court, New Tropicana
is the owner of the "Tropicana" trademark, the Exit Facility lenders have a
perfected security interest in that property, and the Nevada state court action,
to the extent it seeks to assert ownership over the trademark or question the
validity of the security interest, violates the automatic stay. The complaint
also demands an injunction against any further efforts by the Plaintiffs to
re-litigate the ownership issue, and seeks other remedies on behalf of the Exit
Facility lenders. A motion by the Plaintiffs to dismiss the complaint is
pending.
If
the Plaintiffs are successful in either court, the Company's right to continued
use of the "Tropicana" name, in a particular geographic area, on an exclusive
basis, or at all, could be adversely affected. In the event the Plaintiffs
prevail, they would also have the right to continued use of the "Tropicana"
trademark in perpetuity without payment of any royalty or license fee to the
Company, and their continued use of the trademark without restriction could
dilute the "Tropicana" brand and be detrimental to the Company's future
properties that utilize that brand.
Wimar
and CSC Administrative Expense Claims
On
March 31, 2009, Wimar and CSC filed separate proceedings with the
Bankruptcy Court related to administrative expense claims in which the
Predecessors were a party. The total claim filed by Wimar and CSC is in excess
of the amounts recorded by the Predecessors. The Company intends to contest
claims to the extent that they exceed the amounts the Company believes are
due.
F-33
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Aztar
v. Marsh
Aztar
filed a broker malpractice and breach of contract action in the Superior Court
of New Jersey, Atlantic County, on August 12, 2010, against
Marsh & McLennan Companies, Marsh, Inc., Marsh USA, Inc. and
various fictitious Marsh entities (together, the "Marsh Defendants"). The claim
seeks $100 million or more in compensatory damages against the Marsh
Defendants, Aztar's risk management and insurance brokers at the time of a 2002
expansion of Tropicana AC by Aztar, including, but not limited to, lost profits,
expenses arising from the interruption of operations, attorneys' fees, loss of
the use of the insurance proceeds at issue, and litigation expenses resulting
from the Marsh Defendants' failure to secure for Aztar business interruption and
property damage coverage covering losses sustained by Aztar from the collapse of
a parking garage that occurred at Tropicana AC on October 30, 2003. The
Marsh Defendants filed an answer on October 20, 2010 denying the material
allegations of the Complaint. Any recovery obtained by Casino Aztar in this
action will be recoverable by the Company as the current owner of
Tropicana AC.
Litigation
in General
The
Company is a party to various litigation that arises in the ordinary course of
business. In the opinion of management, all pending legal matters are either
adequately covered by insurance or, if not insured, will not have a material
adverse effect on the financial position or the results of operations of the
Company.
NOTE
17—STOCKHOLDERS' EQUITY (SUCCESSOR)
Common
Stock
We
are authorized to issue up to 100 million shares of our Common Stock, of
which 26,312,500 shares were issued and outstanding as of September 30,
2010. Each holder of the Common Stock is entitled to one vote for each share
held of record on each matter submitted to a vote of stockholders. The holders
of our Common Stock have no cumulative voting rights, preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to our Common Stock. Subject to any preferences that may
be granted to the holders of our preferred stock, each holder of Common Stock is
entitled to receive ratably, such dividends as may be declared by the Board of
Directors out of funds legally available therefore, as well as any distributions
to the stockholders and, in the event of our liquidation, dissolution or winding
up is entitled to share ratably in all our assets remaining after payment of
liabilities.
Preferred
Stock
We
are authorized to issue up to 10 million shares of our preferred stock,
$0.01 par value per share, of which none were issued as of September 30,
2010. The Board of Directors, without further action by the holders of Common Stock,
may issue shares of preferred stock in one or more series and may fix or alter
the rights, preferences, privileges and restrictions, including the voting
rights, redemption provisions (including sinking fund provisions), dividend
rights, dividend rates, liquidation rates, liquidation preferences, conversion
rights and the description and number of shares constituting any wholly unissued
series of preferred stock. Except as described above, the Board of Directors,
without further stockholder approval, may issue shares of preferred stock with
rights that could adversely affect the rights of the holders of Common Stock.
The issuance of shares of preferred stock under certain circumstances could have
the effect of delaying or preventing a change of control of TEI or other
corporate action.
Warrants
In
accordance with the Plan, holders of the Predecessors notes and general
unsecured claims received Ordinary Warrants to purchase 3,750,000 shares of our
Common Stock. The Ordinary Warrants have a four year, six month term and an
exercise price of $52.44 per share. The Company evaluated the Ordinary Warrants
under current accounting pronouncements and determined they were properly
classified as equity on the accompanying condensed balance sheet. The Company
valued the Ordinary Warrants using the Black-Scholes option valuation model
assuming a life of 4.5 years, a volatility factor of 61% and a risk free
interest rate of 2.36%. The resulting value of $11.5 million was recorded
as a reorganization item of the Predecessors on the accompanying condensed
statements of operations.
F-34
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
In
addition, pursuant to the terms of the Exit Facility, we issued Penny Warrants
to purchase 1,312,500 shares of our Common Stock at a strike price of $0.01 to
participating lenders on the Effective Date. The Penny Warrants have a term of
3 months. The Company valued the Penny Warrants using the Black-Scholes
option valuation model assuming a life of 0.24 years, a volatility factor
of 41% and a risk free rate of 0.16%. The resulting value of $19.5 million
is treated as a debt discount and netted against the carrying value of the Exit
Facility on the accompanying condensed balance sheet as of September 30,
2010. The discount is amortized at a constant rate applied to the outstanding
balance of the Exit Facility with a corresponding increase in non-cash interest
expense. During the Successor Period, all 1,312,500 warrants were exercised at
$0.01 per share.
Significant
Ownership
At
September 30, 2010, Mr. Icahn indirectly controlled approximately
48.9% of the voting power of the Company's Common Stock and, by virtue of such
stock ownership, is able to exert substantial influence over the Company,
including the election of directors. The existence of a significant stockholder
may have the effect of making it difficult for, or may discourage or delay, a
third party from seeking to acquire a majority of the Company's outstanding
Common Stock. Mr. Icahn's interests may not always be consistent with the
Company's interests or with the interests of the Company's other stockholders.
Mr. Icahn and entities controlled by him may also pursue acquisitions or
business opportunities that may or may not be complementary to the Company's
business. To the extent that conflicts of interest may arise between the Company
and Mr. Icahn and his affiliates, those conflicts may be resolved in a
manner adverse to the Company or its other shareholders.
NOTE 18—BASIC AND
DILUTED NET INCOME PER SHARE (SUCCESSOR)
The
Company computes net income per share in accordance with accounting guidance
that requires presentation of both basic and diluted earnings per share ("EPS")
on the face of the income statement. Basic EPS is computed by dividing net
income for the period by the weighted average number of shares outstanding
during the period. Diluted EPS is computed by dividing net income for the period
by the weighted average number of common shares outstanding during the period,
increased by potentially dilutive common shares that were outstanding during the
period. Potentially dilutive common shares include warrants. Diluted EPS
excludes all potential dilutive shares if their effect is
anti-dilutive.
Excluded
from the calculation of diluted earnings per share are the Ordinary Warrants to
purchase 3,750,000 shares of our common stock as they were out-of-the-money as
of September 30, 2010.
NOTE
19—DISCONTINUED OPERATIONS (PREDECESSORS)
TEH
disposed of Tropicana LV, located in Las Vegas, Nevada, during the year
ended December 31, 2009. As a result, Tropicana LV was no longer owned or
operated by TEH subsequent to June 30, 2009. In addition, TEH assigned the
leases and all rights and certain obligations related to Tahoe Horizon located
in Lake Tahoe, Nevada, in two phases effective June 15, 2009 and
October 16, 2009. As a result, TEH no longer had any involvement with
operating Tahoe Horizon subsequent to October 16, 2009. Accordingly, the
results of operations of Tropicana LV and Tahoe Horizon are presented as
discontinued operations in the condensed statements of operations for the
quarter and nine months ended September 30, 2009. The cash flows of the
discontinued operations are included with the cash flows of continuing
operations in the accompanying condensed statements of cash flows.
Operating
results of discontinued operations are summarized as follows (in thousands,
unaudited):
Predecessor
|
||||||||
TEH
|
||||||||
Three Months
|
Nine Months
|
|||||||
Ended
|
Ended
|
|||||||
September 30,
|
September 30,
|
|||||||
2009
|
2009
|
|||||||
Net
revenues
|
$ | 1,076 | $ | 54,556 | ||||
Operating
costs and expenses
|
519 | 64,089 | ||||||
Impairment
charge
|
— | 427,948 | ||||||
Income
(loss) from operations
|
557 | (437,481 | ) | |||||
Interest
expense, net (contractual interest was $4,889)
|
— | (2,560 | ) | |||||
Reorganization
items, net
|
(12 | ) | (1,540 | ) | ||||
Gain
from disposal of discontinued operations, net
|
276,912 | 273,041 | ||||||
Income
tax benefit
|
260 | 129,711 | ||||||
Gain
(loss) from discontinued operations, net
|
$ | 277,717 | $ | (38,829 | ) |
F-35
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Impairment
Charge in Discontinued Operations, Net
In
accordance with Accounting Standards Codification subtopic 360-10,
Property, plant and equipment ("ASC 360-10"), when the Tropicana LV Plan
was confirmed on May 5, 2009, and it was determined that Tropicana LV would
no longer be owned or operated by TEH, the assets held for sale were reviewed for impairment. TEH
recorded an impairment charge during the nine months ended September 30,
2009 of $427.0 million related to the property and equipment at Tropicana
LV as it exceeded its estimated fair value.
In
June 2009, TEH assigned the non-gaming assets of the Tahoe Horizon lease to
an affiliated of CSC. As a result, in accordance with ASC 360-10, TEH
recorded an impairment loss of approximately $0.9 million related to the
gaming assets at Tahoe Horizon during the nine months ended September 30,
2009.
Gain
on Disposal of Discontinued Operations, Net
TEH
no longer owned or operated Tropicana LV as of July 1, 2009. As a result,
TEH recorded a gain on the disposition of Tropicana LV in the three and nine
months ended September 30, 2009 of $276.9 million.
As
a result of the assignment of non-gaming assets of the Tahoe Horizon lease
discussed above, TEH recorded $3.9 million in loss on asset disposals
related to the non-gaming assets at Tahoe Horizon during the nine months ended
September 30, 2009.
Reorganization
Items in Discontinued Operations, Net
Reorganization
items related to discontinued operations represent amounts incurred since the
Petition Date as a direct result of the Chapter 11 Cases for Tropicana LV
and Tahoe Horizon, and were comprised of the following (in thousands,
unaudited):
Predecessor
|
||||||||
TEH
|
||||||||
Three Months
Ended
September 30,
2009
|
Nine Months
Ended
September 30,
2009
|
|||||||
Professional
fees
|
$ | — | $ | (1,565 | ) | |||
Interest
income
|
— | 77 | ||||||
Other
|
(12 | ) | (52 | ) | ||||
Total
reorganization items included in loss from discontinued operations,
net
|
$ | (12 | ) | $ | (1,540 | ) |
F-36
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
NOTE
20—INCOME TAXES
The
Company's effective income tax rate for the three months ended
September 30, 2010 and the Successor Period was 76.3% and 117.4%,
respectively. The difference between the federal statutory rate of 35% and the
Company's effective tax rate for both the three months ended September 30,
2010 and the Successor Period was primarily related to state income taxes (net
of federal benefit), non-deductible meals and entertainment and other permanent
differences. Looking forward, our effective income tax rate may fluctuate due to
changes in tax legislation, changes in our estimates of federal tax credits,
changes in our assessment of uncertainties as valued under accounting guidance
for uncertainty in income taxes, as well as accumulated interest and
penalties.
TEH's
effective tax rate for the quarter ended September 30, 2009, the
Predecessor Period, and the nine months ended September 30, 2009 was
(16.2)%, (1.3)% and (3.3)%, respectively. The difference between the federal
statutory rate of 35% and TEH's tax rate for the Predecessor Period was
primarily due to reorganization charges for which no tax benefit was recognized.
The difference between the federal statutory rate of 35% and TEH's tax rate for
the quarter ended September 30, 2009 was primarily due to changes in the
Company's valuation allowance. The difference between the federal statutory rate
of 35% and TEH's tax rate for the nine months ended September 30, 2009 was
primarily due to changes in the Company's valuation allowance and the impairment
charge related to the beneficial interest in Trust.
CP
Vicksburg and JMBS Casino were pass-through entities for federal and state
income tax purposes. As pass-through entities, the tax attributes of CP
Vicksburg and JMBS Casino would pass through to its members who owed any related
income taxes. As a result, no provision for income taxes was recorded in the
accompanying financial statements for CP Vicksburg and JMBS Casino.
NOTE
21—SEGMENT INFORMATION
The
Company views each property as an operating segment which we aggregate by region
in order to present our reportable segments: (i) East, (ii) Central,
(iii) West, (iv) South and (v) Corporate and other. The Company
uses operating income to compare operating results among its segments and
allocate resources. The following table highlights by segment our net revenues
and operating income (loss), and reconciles operating income (loss) to loss from
continuing operations before income taxes for the quarters ended
September 30, 2010 and 2009 (in thousands, unaudited):
Successor
|
Predecessors
|
|||||||||||||||
Three months ended
September 30, 2009
|
||||||||||||||||
Three months
ended
September 30,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
|||||||||||||
Net
revenues:
|
||||||||||||||||
East
|
$ | 86,105 | $ | — | $ | — | $ | — | ||||||||
Central
|
31,768 | 30,631 | — | — | ||||||||||||
West
|
34,440 | 38,367 | — | — | ||||||||||||
South
|
25,500 | 22,049 | 2,939 | 3,497 | ||||||||||||
Corporate
and other
|
103 | — | — | — | ||||||||||||
Total
net revenues
|
$ | 177,916 | $ | 91,047 | $ | 2,939 | $ | 3,497 | ||||||||
Operating
income (loss):
|
||||||||||||||||
East
|
$ | 8,705 | $ | — | $ | — | $ | — | ||||||||
Central
|
5,809 | 4,370 | — | — | ||||||||||||
West
|
2,642 | (639 | ) | — | — | |||||||||||
South
|
655 | 2,015 | (1,501 | ) | (24 | ) | ||||||||||
Corporate
and other
|
(3,801 | ) | (5,311 | ) | — | — | ||||||||||
Total
operating income (loss)
|
$ | 14,010 | $ | 435 | $ | (1,501 | ) | $ | (24 | ) | ||||||
Reconciliation
of operating income (loss) to income (loss) from continuing operations
before income taxes:
|
||||||||||||||||
Operating
income (loss)
|
$ | 14,010 | $ | 435 | $ | (1,501 | ) | $ | (24 | ) | ||||||
Interest
expense
|
(8,239 | ) | (3,654 | ) | — | — | ||||||||||
Interest
income
|
281 | — | 65 | 125 | ||||||||||||
Reorganization
items, net
|
— | (3,087 | ) | (21 | ) | (13 | ) | |||||||||
Income
(loss) from continuing operations before income taxes
|
$ | 6,052 | $ | (6,306 | ) | $ | (1,457 | ) | $ | 88 |
F-37
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
The
following table highlights by segment our net revenues and operating income
(loss), and reconciles operating income (loss) to income (loss) from continuing
operations before income taxes for the Successor Period, the Predecessor
Period and the nine months ended September 30, 2009 (in thousands,
unaudited):
Successor
|
Predecessors
|
|||||||||||||||||||||||||||
Period January 1, 2010
through March 7, 2010
|
Nine Months Ended
September 30, 2009
|
|||||||||||||||||||||||||||
Period
March 8,
2010 through
September 30,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
||||||||||||||||||||||
Net
revenues:
|
||||||||||||||||||||||||||||
East
|
$ | 183,401 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Central
|
69,876 | 22,432 | — | — | 91,083 | — | — | |||||||||||||||||||||
West
|
75,137 | 25,999 | — | — | 114,895 | — | — | |||||||||||||||||||||
South
|
59,385 | 16,043 | 1,271 | 3,552 | 73,621 | 10,515 | 12,226 | |||||||||||||||||||||
Corporate
and other
|
142 | 45 | — | — | 3 | — | — | |||||||||||||||||||||
Total
net revenues
|
$ | 387,941 | $ | 64,519 | $ | 1,271 | $ | 3,552 | $ | 279,602 | $ | 10,515 | $ | 12,226 | ||||||||||||||
Operating
income (loss):
|
||||||||||||||||||||||||||||
East
|
$ | 13,303 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Central
|
12,641 | 4,691 | — | — | 13,370 | — | — | |||||||||||||||||||||
West
|
4,528 | 1,731 | — | — | (242 | ) | — | — | ||||||||||||||||||||
South
|
3,274 | 2,603 | (874 | ) | 933 | 11,492 | (3,415 | ) | 919 | |||||||||||||||||||
Corporate
and other
|
(12,671 | ) | (4,604 | ) | — | — | (17,820 | ) | — | — | ||||||||||||||||||
Impairment
of beneficial interest in Trust
|
— | — | — | — | (154,300 | ) | — | — | ||||||||||||||||||||
Total
operating income (loss)
|
$ | 21,075 | $ | 4,421 | $ | (874 | ) | $ | 933 | $ | (147,500 | ) | $ | (3,415 | ) | $ | 919 | |||||||||||
Reconciliation
of operating income (loss) to income (loss) from continuing operations
before income taxes:
|
||||||||||||||||||||||||||||
Operating
income (loss)
|
$ | 21,075 | $ | 4,421 | $ | (874 | ) | $ | 933 | $ | (147,500 | ) | $ | (3,415 | ) | $ | 919 | |||||||||||
Interest
expense
|
(18,545 | ) | (2,005 | ) | — | (2 | ) | (10,996 | ) | (5 | ) | — | ||||||||||||||||
Interest
income
|
552 | 11 | 40 | 103 | — | 186 | 292 | |||||||||||||||||||||
Loss
related to guarantee of affiliate debt
|
— | — | — | — | — | (8,010 | ) | (8,010 | ) | |||||||||||||||||||
Reorganization
items, net
|
— | 2,093,098 | 2,288,185 | 2,266,609 | (22,819 | ) | (44 | ) | (31 | ) | ||||||||||||||||||
Income
(loss) from continuing operations before income taxes
|
$ | 3,082 | $ | 2,095,525 | $ | 2,287,351 | $ | 2,267,643 | $ | (181,315 | ) | $ | (11,288 | ) | $ | (6,830 | ) |
F-38
TROPICANA
ENTERTAINMENT INC.
NOTES
TO CONDENSED FINANCIAL STATEMENTS
September
30, 2010
Successor
|
Predecessors
|
|||||||||||||||
December 31, 2009
|
||||||||||||||||
September 30,
2010
|
TEH
|
CP
Vicksburg
|
JMBS
Casino
|
|||||||||||||
Assets
by segment:
|
||||||||||||||||
East
|
$ | 366,783 | $ | — | $ | — | $ | — | ||||||||
Central
|
163,193 | 207,646 | — | — | ||||||||||||
West
|
116,906 | 265,277 | — | — | ||||||||||||
South
|
124,322 | 137,127 | 16,731 | 34,969 | ||||||||||||
Corporate
and other
|
139,895 | 208,162 | — | — | ||||||||||||
Total
assets
|
$ | 911,099 | $ | 818,212 | $ | 16,731 | $ | 34,969 |
NOTE
22—SUBSEQUENT EVENTS
We
have evaluated all activity of the Company through the date the condensed
financial statements were issued, and concluded that no material subsequent
events would require recognition in the condensed financial statements or
disclosure in the notes to the condensed financial statements other than
discussed below.
On
October 28, 2010, the Merger became effective upon the Mississippi Gaming
Commission's approval of the Merger. As a result, Greenville Riverboat was
merged with and into Lighthouse, with Lighthouse as the surviving
company.
On
October 29, 2010, Scott C. Butera notified the Company of his intention to
resign from his position as President and Chief Executive Officer and from the
Board of Directors of Tropicana Entertainment Inc. As a result,
Mr. Butera's employment agreement with the Company will terminate on the
date that Mr. Butera's resignation becomes effective. Mr. Butera has
agreed to continue his current position for a transition period and until a
replacement has been identified by the Board of Directors.
F-39
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On
November 15, 2010, Icahn Enterprises, through its Investment Management segment,
acquired 668,000 Tropicana Shares. As a result of this purchase, the Investment
Management segment holds, in the aggregate, 13,538,446 Tropicana Shares,
representing approximately 51.5% of the outstanding Tropicana
Shares.
We will
consolidate Tropicana’s financial results effective November 15,
2010.
The
unaudited pro forma condensed combined balance sheet as of September 30, 2010 is
presented as if the acquisition of the controlling interest in Tropicana
occurred on September 30, 2010. The unaudited pro forma condensed combined
statements of operations for the nine months ended September 30, 2010 and the
fiscal year ended December 31, 2009 (“fiscal 2009”) have been prepared as if the
acquisition of the controlling interest in Tropicana had occurred on
January 1, 2009. The unaudited pro forma condensed combined balance sheet
and statements of operations of Tropicana have been derived from the financial
statements of Tropicana, the Predecessors and Tropicana AC which are included or
incorporated by reference in this Form 8-K/A.
The
preliminary allocation of the purchase price of Tropicana used in the unaudited
pro forma condensed combined financial statements is based upon preliminary
estimates. The estimates and assumption are subject to change upon completion of
the valuation of Tropicana’s assets and liabilities. Upon completion of the
valuation, we expect to make additional adjustments, and these valuations could
change significantly from those used in the pro forma condensed combined
financial statements presented below.
The pro
forma condensed combined financial statements are unaudited and are not
necessarily indicative of the results that actually would have occurred if the
above transactions had been consummated as of the dates indicated above, nor do
they purport to represent the financial position and results of operations for
future periods. The pro forma adjustments are based upon currently available
information and upon certain assumptions that we believe are reasonable. The
unaudited pro forma condensed combined financial statements should be read in
conjunction with the historical consolidated financial statements of Icahn
Enterprises and Tropicana included in their respective annual reports on Form
10-K and quarterly reports on Form 10-Q and related amendments, and Icahn
Enterprises’ amended and adjusted financial statements and related notes for
fiscal 2009 contained in its Current Report on Form 8-K filed with the SEC on
June 9, 2010.
F-40
ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
September
30, 2010
(in
millions)
Historical
Icahn
Enterprises
|
Historical
Tropicana
|
Icahn
Enterprises
Pro Forma
Adjustments
|
Icahn
Enterprises Pro
Forma Results
|
||||||||||||||
ASSETS
|
|||||||||||||||||
Cash
and cash equivalents
|
$ | 2,261 | $ | 158 | $ | - | $ | 2,419 | |||||||||
Cash
held at consolidatd affiliated partnerships and resticted
cash
|
1,943 | 22 | (9 | ) |
(2a)
|
1,956 | |||||||||||
Investments
|
6,882 | 33 | (249 | ) |
(2b)
|
6,666 | |||||||||||
Accounts
receivable, net
|
1,384 | 35 | - | 1,419 | |||||||||||||
Inventories,
net
|
1,175 | 4 | - | 1,179 | |||||||||||||
Property,
plant and equipment, net
|
3,015 | 457 | - | 3,472 | |||||||||||||
Goodwill
|
1,095 | 64 | (64 | ) |
(2c)
|
1,095 | |||||||||||
Intangible
assets, net
|
979 | 99 | - | 1,078 | |||||||||||||
Other
assets
|
589 | 39 | - | 628 | |||||||||||||
Total
assets
|
$ | 19,323 | $ | 911 | $ | (322 | ) | $ | 19,912 | ||||||||
LIABILITIES
AND EQUITY
|
|||||||||||||||||
Accounts
payable
|
$ | 764 | $ | 57 | $ | - | $ | 821 | |||||||||
Accrued
expenses and other liabilities
|
1,922 | 139 | (34 | ) |
(2d)
|
2,027 | |||||||||||
Securities
sold, not yet purchased, at fair value
|
887 | - | - | 887 | |||||||||||||
Due
to broker
|
803 | - | - | 803 | |||||||||||||
Postemployment
benefit liability
|
1,228 | - | - | 1,228 | |||||||||||||
Debt
|
5,966 | 107 | (57 | ) |
(2e)
|
6,016 | |||||||||||
Total
liabilities
|
11,570 | 303 | (91 | ) | 11,782 | ||||||||||||
Equity
attributable to Tropicana shareholders
|
- | 607 | (607 | ) |
(2f)
|
- | |||||||||||
Equity
attributable to Icahn Enterprises
|
3,149 | - | 35 |
(2f)
|
3,184 | ||||||||||||
Equity
attributable to non-controlling interests
|
4,604 | 1 | 341 |
(2f)
|
4,946 | ||||||||||||
Total
equity
|
7,753 | 608 | (231 | ) | 8,130 | ||||||||||||
Total
liabilities and equity
|
$ | 19,323 | $ | 911 | $ | (322 | ) | $ | 19,912 |
F-41
ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Nine
Months Ended September 30, 2010
(in
millions, except per unit data)
Historical
Icahn
Enterprises
|
Pro Forma
Tropicana
Entertainment(3)
|
Icahn
Enterprises
Pro Forma
Adjustments
|
Icahn
Enterprises Pro
Forma Results
|
||||||||||||||
Revenues:
|
|||||||||||||||||
Net
sales
|
$ | 5,884 | $ | - | $ | - | $ | 5,884 | |||||||||
Other
revenues from operations
|
87 | 510 | - | 597 | |||||||||||||
Net
gain from investment activities
|
540 | - | 21 |
(2g)
|
561 | ||||||||||||
Interest
and dividend income
|
155 | 1 | (6 | ) |
(2h)
|
150 | |||||||||||
Other
loss, net
|
(35 | ) | - | - | (35 | ) | |||||||||||
6,631 | 511 | 15 | 7,157 | ||||||||||||||
Expenses:
|
|||||||||||||||||
Cost
of goods sold
|
4,990 | - | - | 4,990 | |||||||||||||
Other
expenses from operations
|
58 | 256 | - | 314 | |||||||||||||
Selling,
general and administrative
|
759 | 227 | - | 986 | |||||||||||||
Restructuring
|
13 | - | - | 13 | |||||||||||||
Impairment
|
13 | - | - | 13 | |||||||||||||
Interest
expense
|
286 | 24 | (13 | ) |
(2i)
|
297 | |||||||||||
6,119 | 507 | (13 | ) | 6,613 | |||||||||||||
Income
from continuing operations before income tax (expense)
benefit
|
512 | 4 | 28 | 544 | |||||||||||||
Income
tax (expense) benefit
|
(19 | ) | (4 | ) | - | (23 | ) | ||||||||||
Income
from continuing operations
|
493 | - | 28 | 521 | |||||||||||||
Net
(income) loss from continuing operations attributable to non-controlling
interests
|
(376 | ) | - | (18 | ) |
(2f)
|
(394 | ) | |||||||||
Net
income from continuing operations attributable to Icahn
Enterprises
|
$ | 117 | $ | - | $ | 10 | $ | 127 | |||||||||
Net
income from continuing operations attributable to Icahn Enterprises
allocable to limited partners
|
$ | 115 | $ | - | $ | 10 | $ | 125 | |||||||||
Basic
income per LP unit from continuing operations
|
$ | 1.39 | $ | 1.51 | |||||||||||||
Basic
weighted average LP units outstanding
|
83 | 83 | |||||||||||||||
Diluted
income per LP unit from continuing operations
|
$ | 1.39 | $ | 1.51 | |||||||||||||
Diluted
weighted average LP units outstanding
|
83 | 83 |
F-42
ICAHN
ENTERPRISES L.P. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year
Ended December 31, 2009
(in
millions, except per unit data)
Historical
Icahn
Enterprises
|
Pro Forma
Tropicana
Entertainment(3)
|
Icahn
Enterprises
Pro Forma
Adjustments
|
Icahn
Enterprises Pro
Forma Results
|
||||||||||||||
Revenues:
|
|||||||||||||||||
Net
sales
|
$ | 6,790 | $ | - | $ | - | $ | 6,790 | |||||||||
Revenues
from other operations
|
104 | 716 | - | 820 | |||||||||||||
Net
gain from investment activities
|
1,382 | - | (28 | ) |
(2g)
|
1,354 | |||||||||||
Interest
and dividend income
|
244 | 1 | (5 | ) |
(2h)
|
240 | |||||||||||
Other
income, net
|
85 | - | - | 85 | |||||||||||||
8,605 | 717 | (33 | ) | 9,289 | |||||||||||||
Expenses:
|
|||||||||||||||||
Cost
of goods sold
|
5,844 | - | - | 5,844 | |||||||||||||
Expenses
from other operations
|
73 | 374 | - | 447 | |||||||||||||
Selling,
general and administrative
|
1,097 | 315 | - | 1,412 | |||||||||||||
Restructuring
|
51 | - | - | 51 | |||||||||||||
Impairment
|
41 | 3 | - | 44 | |||||||||||||
Interest
expense
|
319 | 32 | (17 | ) |
(2i)
|
334 | |||||||||||
7,425 | 724 | (17 | ) | 8,132 | |||||||||||||
Income
(loss) from continuing operations before income tax
benefit
|
1,180 | (7 | ) | (16 | ) | 1,157 | |||||||||||
Income
tax benefit
|
44 | - | - | 44 | |||||||||||||
Income
(loss) from continuing operations
|
1,224 | (7 | ) | (16 | ) | 1,201 | |||||||||||
Net
income from continuing operations attributable to non-controlling
interests
|
(972 | ) | 7 | 11 |
(2f)
|
(954 | ) | ||||||||||
Net
income (loss) from continuing operations attributable to Icahn
Enterprises
|
$ | 252 | $ | - | $ | (5 | ) | $ | 247 | ||||||||
Net
income (loss) from continuing operations attributable to Icahn Enterprises
allocable to limited partners
|
$ | 228 | $ | - | $ | (5 | ) | $ | 223 | ||||||||
Basic
income per LP unit from continuing operations
|
$ | 3.04 | $ | 2.98 | |||||||||||||
Basic
weighted average LP units outstanding
|
75 | 75 | |||||||||||||||
Diluted
income per LP unit from continuing operations
|
$ | 2.96 | $ | 2.90 | |||||||||||||
Diluted
weighted average LP units outstanding
|
79 | 79 |
F-43
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
1.
|
Basis
of Presentation
|
On March
8, 2010, (the “Effective Date”), Tropicana completed the acquisition of certain
assets of Tropicana Entertainment Holdings, LLC (“Tropicana LLC”) and certain
subsidiaries and affiliates thereof. Tropicana also acquired certain assets of
Tropicana Casino and Resort Atlantic City (“Tropicana AC”). Such transactions,
referred to as the “Restructuring Transactions,” were effected pursuant to the
Joint Plan of Reorganization of Tropicana LLC and Certain of Its Debtor
Affiliates Under Chapter 11 of the Bankruptcy Code, filed with the United States
Bankruptcy Court for the District of Delaware on January 8, 2009, as amended
(the “Plan”). Prior to the Restructuring Transactions, Icahn Enterprises’
Investment Management segment held positions in certain debt securities and
instruments in Tropicana LLC and certain subsidiaries and affiliates thereof. As
a result of the Restructuring Transactions pursuant to the Plan, Icahn
Enterprises’ Investment Management segment received a combined amount of
11,880,021 Tropicana Shares. See Note 3 for further discussion.
In
addition, in connection with Tropicana’s completion of the Restructuring
Transactions, Tropicana entered into a credit agreement, dated as of December
29, 2009 (the “Exit Facility”). Certain entities within the Investment
Management segment are lenders under the Exit Facility and, in the aggregate,
hold over 50% of the loans under the Exit Facility. Pursuant to the terms of the
Exit Facility, the lenders, including certain entities within the Investment
Management segment, were issued warrants to purchase Tropicana Shares (the
“Warrants”). On March 9, 2010, Icahn Enterprises’ Investment
Management segment exercised the Warrants in their entirety and received an
additional combined amount of 784,158 Tropicana Shares.
Through
November 15, 2010, Icahn
Enterprises’ Investment Management segment applied the fair value option
to its investment in the Tropicana Shares that would have otherwise been subject
to the equity method of accounting.
On
November 15, 2010, Icahn
Enterprises’ Investment Management segment purchased 668,000 Tropicana
Shares resulting in Icahn
Enterprises’ Investment Management segment holding, in the aggregate,
13,538,446 Tropicana Shares, representing approximately 51.5% of the
outstanding Tropicana Shares. As a result, Icahn Enterprises will
consolidate Tropicana’s financial results effective November 15,
2010.
Icahn
Enterprises accounts for acquisitions under the Business Combinations Topic
of the Financial Accounting Standards Board (“FASB”) ASC. In
accordance with business combination accounting, Icahn Enterprises will allocate
the purchase price of Tropicana to the tangible and intangible assets acquired
and liabilities assumed based on their estimated fair values. Icahn Enterprises’
management has not yet determined the fair value of the assets and liabilities
acquired as the valuation of Tropicana’s assets and liabilities has not yet been
completed.
F-44
2.
|
Icahn
Enterprise L.P. Pro Forma
Adjustments
|
Preliminary
Purchase Price Allocation
For
purposes of the pro forma financial statements, Icahn Enterprises has used
Tropicana’s assets and liabilities as of September 30, 2010 as the basis for
developing Tropicana’s fair value estimates.
The total
preliminary purchase price will be allocated to Tropicana’s tangible and
intangible assets acquired, and liabilities assumed based on their estimated
fair values as of the acquisition date. The excess of the net tangible and
identifiable intangible assets over the carrying value of the investment will be
recorded as a gain on acquisition. For purposes of the accompanying pro forma
condensed combined financial statements, the total preliminary purchase price
for each major class of assets and liabilities was allocated as follows (in
millions):
September 30,
2010
|
||||
Cash
and cash equivalents
|
$ | 158 | ||
Restricted
cash
|
22 | |||
Receivables
|
35 | |||
Property
and equipment
|
457 | |||
Intangible
assets
|
99 | |||
Other
assets
|
76 | |||
Total
acquired assets
|
$ | 847 | ||
Accounts
payable
|
57 | |||
Accrued
expenses and other liabilities
|
105 | |||
Debt
|
107 | |||
Total
assumed liabilities
|
$ | 269 | ||
Fair
value of Tropicana consolidated net assets acquired
|
$ | 578 | ||
Less:
Net assets attributable to non-controlling interests in
Tropicana
|
(1 | ) | ||
Fair
value of nets assets acquired attributable to Tropicana
shareholders
|
$ | 577 | ||
Fair
value of Investment Management segment's 51.5% interest
|
$ | 297 | ||
Less:
|
||||
Carrying
value of equity investment in Tropicana at September 30,
2010
|
(177 | ) | ||
Cost
of additional Tropicana Shares purchased on November 15,
2010
|
(9 | ) | ||
(186 | ) | |||
Gain
on acquisition attributable to the Investment Management
segment
|
$ | 111 | ||
Gain
on acquisition attributable to Icahn Enterprises
|
$ | 40 |
Icahn
Enterprises Pro Forma Adjustments
(2a) Represents
the cash paid by Icahn Enterprises’ Investment Management segment for the
additional 668,000 Tropicana Shares purchased on November 15, 2010.
(2b) Represents
Icahn Enterprises’ Investment Management segment’s carrying value of its
investment in Tropicana Shares of $177 million and Tropicana debt of $72
million, recorded at fair value, which are eliminated in
consolidation.
(2c) Elimination
of historical goodwill of Tropicana in accordance with Accounting Standards
Codification Topic 805, “Business Combinations.”
(2d) Represents
adjustment to Tropicana’s deferred tax liability relating to its acquisition of
Tropicana AC.
F-45
(2e) Elimination
of Tropicana debt that is held by Icahn Enterprises’ Investment Management
segment.
(2f) Allocation
of pro forma adjustments and historical balances to non-controlling
interests.
(2g) Represents
the gains and losses recorded by Icahn Enterprises’ Investment Management
segment on its debt and equity investment in Tropicana.
(2h) Represents
interest income recorded by Icahn Enterprises’ Investment Management segment on
its investment in Tropicana debt securities.
(2i) Represents
the portion of interest expense incurred by Tropicana on its Exit Facilities
that is held by Icahn Enterprises’ Investment Management segment.
3.
|
Pro
Forma Tropicana Entertainment Inc.
|
Basis
of Presentation
Tropicana
is a Delaware corporation that was formed on May 11, 2009 to acquire
certain assets of Tropicana LLC, and certain of its subsidiaries pursuant to
their plan of reorganization under Chapter 11 of Title 11 of the
United States Code (the “Bankruptcy Code”). Tropicana also acquired Columbia
Properties Vicksburg, LLC (“CP Vicksburg”), JMBS Casino, LLC (“JMBS Casino”) and
CP Laughlin Realty (“Realty”, collectively with CP Vicksburg and JMBS Casino,
the “Affiliate Guarantors”), all of whom were part of the same plan of
reorganization (the “Plan”) as Tropicana LLC (collectively, the
“Predecessors”).
In
addition, Tropicana acquired certain assets of Adamar of
New Jersey, Inc. (“Adamar”), an unconsolidated subsidiary of Tropicana
LLC, pursuant to an amended and restated asset purchase agreement, including
Tropicana AC. The results of operations of Tropicana AC are included
in Tropicana’s historical results for the period from March 8, 2010 through
September 30, 2010.
The
reorganization of the Predecessors and the acquisition of Tropicana AC
(together, the “Restructuring Transactions”) were consummated and became
effective on March 8, 2010, at which time Tropicana acquired Adamar and
several of the Predecessors’ gaming properties and related assets. Prior to
March 8, 2010, Tropicana conducted no business, other than in connection
with the reorganization of the Predecessors and the acquisition of Tropicana AC,
and had no material assets or liabilities.
As of
March 8, 2010, the Effective Date, Tropicana was required to adopt the “fresh
start” provisions in accordance with accounting guidance for reorganizations, as
it relates to the Predecessors. Under fresh start reporting, a new reporting
entity is deemed created. Fresh start reporting generally requires resetting the
historical net book value of assets and liabilities to fair value by allocating
the entity’s enterprise value as set forth in the Plan to its assets and
liabilities pursuant to accounting guidance related to business combinations as
of the Effective Date. An independent third-party appraiser assisted Tropicana’s
management in performing a valuation of these assets and liabilities as of the
Effective Date.
On March
8, 2010, the Acquisition Date, Tropicana acquired Tropicana AC from the lenders
who had made the Credit Bid to acquire those assets from the Trustee. The
lenders transferred those assets to Tropicana in exchange for the issuance of
shares of Tropicana’s common stock. The results of operations for Tropicana AC
have been included in Tropicana’s condensed financial statements since the
Acquisition Date. In accordance with accounting guidance related to business
combinations, the net assets acquired were booked at fair value determined by
Tropicana’s management with the assistance of an independent third-party
appraiser as of the Acquisition Date.
The
unaudited pro forma condensed combined financial statements for the nine months
ended September 30, 2010 and the year ended December 31, 2009 presented below
for Tropicana have been prepared as if the reorganization of the Predecessors
and the acquisition of Tropicana AC occurred on January 1, 2009.
F-46
Tropicana
Entertainment Inc.
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For
the nine months ended September 30, 2010 and the year ended December 31,
2009
(in
thousands)
Period from March
8, 2010 through
September 30, 2010
|
Period from January 1, 2010 through March 7, 2010
|
|||||||||||||||||||||||||||||||||
Successor
|
Historical Predecessor
|
Historical
|
Tropicana Pro Forma Adjustments
|
|||||||||||||||||||||||||||||||
Tropicana
Entertainment Inc.
|
Tropicana
Entertainment
Holdings
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS Casino,
LLC
|
Tropicana
Atlantic City
|
Reorganization
of Predecessors
|
Acquisition of
Tropicana AC
|
Pro Forma
Tropicana
Entertainment
Inc.
|
|||||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||||||
Revenues
from gaming operations
|
$ | 387,941 | $ | 64,519 | $ | 1,271 | $ | 3,552 | $ | 53,341 | $ | - | $ | - | $ | 510,624 | ||||||||||||||||||
Interest
income
|
552 | 11 | 40 | 103 | 77 | - | - | 783 | ||||||||||||||||||||||||||
Reorganization
items
|
- | 2,093,098 | 2,288,185 | 2,266,609 | (10,084 | ) | (6,647,892 | ) |
(3a)
|
10,084 |
(3a)
|
- | ||||||||||||||||||||||
Other
loss, net
|
(127 | ) | - | - | - | - | - | - | (127 | ) | ||||||||||||||||||||||||
388,366 | 2,157,628 | 2,289,496 | 2,270,264 | 43,334 | (6,647,892 | ) | 10,084 | 511,280 | ||||||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||||||
Expenses
from gaming operations
|
196,086 | 31,832 | 772 | 1,124 | 26,452 | - | - | 256,266 | ||||||||||||||||||||||||||
Selling,
general and administrative
|
170,653 | 28,266 | 1,373 | 1,495 | 33,183 | (2,376 | ) |
(3b)
|
(5,894 | ) |
(3b)(3c)
|
226,700 | ||||||||||||||||||||||
Interest
expense
|
18,545 | 2,005 | - | 2 | 3 | 3,943 |
(3d)
|
- | 24,498 | |||||||||||||||||||||||||
385,284 | 62,103 | 2,145 | 2,621 | 59,638 | 1,567 | (5,894 | ) | 507,464 | ||||||||||||||||||||||||||
Income
(loss) from continuing operations before income tax (benefit)
expense
|
3,082 | 2,095,525 | 2,287,351 | 2,267,643 | (16,304 | ) | (6,649,459 | ) | 15,978 | 3,816 | ||||||||||||||||||||||||
Income
tax (expense) benefit
|
(3,618 | ) | 26,654 | - | - | 1,208 | (26,654 | ) |
(3e)
|
(1,208 | ) |
(3e)
|
(3,618 | ) | ||||||||||||||||||||
(Loss)
income from continuing operations
|
(536 | ) | 2,122,179 | 2,287,351 | 2,267,643 | (15,096 | ) | (6,676,113 | ) | 14,770 | 198 | |||||||||||||||||||||||
Less:
net loss from continuing operastions attributable to non-controlling
interests
|
89 | 845 | - | - | - | (910 | ) |
(3f)
|
- | 24 | ||||||||||||||||||||||||
Net
(loss) income from continuing operations attributable to Tropicana
shareholders
|
$ | (447 | ) | $ | 2,123,024 | $ | 2,287,351 | $ | 2,267,643 | $ | (15,096 | ) | $ | (6,677,023 | ) | $ | 14,770 | $ | 222 |
F-47
Year Ended December 31, 2009
|
||||||||||||||||||||||||||||||
Historical Predecessor
|
Historical
|
Tropicana Pro Forma
Adjustments
|
||||||||||||||||||||||||||||
Tropicana
Entertainment
Holdings
LLC
|
Columbia
Properties
Vicksburg,
LLC
|
JMBS
Casino, LLC
|
Tropicana
Atlantic
City
|
Reorganization
of Predecessors
|
Acquisition
of Tropicana
AC
|
Pro Forma
Tropicana
Entertainment
Inc.
|
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||
Revenues
from gaming operations
|
$ | 366,214 | $ | 12,448 | $ | 15,694 | $ | 321,629 | $ | - | $ | - | $ | 715,985 | ||||||||||||||||
Interest
income
|
- | 241 | 438 | 550 | (665 | ) |
(3g)
|
- | 564 | |||||||||||||||||||||
Reorganization
items
|
(26,997 | ) | (54 | ) | (31 | ) | (1,950 | ) | 27,082 |
(3a)
|
1,950 |
(3a)
|
- | |||||||||||||||||
Loss
related to guarantee of affiliate debt
|
- | (8,010 | ) | (8,010 | ) | - | 16,020 |
(3h)
|
- | - | ||||||||||||||||||||
339,217 | 4,625 | 8,091 | 320,229 | 42,437 | 1,950 | 716,549 | ||||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||
Expenses
from gaming operations
|
201,450 | 9,302 | 6,868 | 156,496 | - | - | 374,116 | |||||||||||||||||||||||
Selling,
general and administrative
|
163,930 | 7,821 | 7,545 | 191,068 | (20,234 | ) |
(3b)
|
(35,581 | ) |
(3b)(3c)
|
314,549 | |||||||||||||||||||
Impairment
|
154,330 | 2,599 | - | - | - | (154,300 | ) |
(3i)
|
2,629 | |||||||||||||||||||||
Interest
expense
|
13,960 | - | - | 17,983 | 470 |
(3d)
|
- | 32,413 | ||||||||||||||||||||||
533,670 | 19,722 | 14,413 | 365,547 | (19,764 | ) | (189,881 | ) | 723,707 | ||||||||||||||||||||||
Loss
from continuing operations before income tax
benefit
|
(194,453 | ) | (15,097 | ) | (6,322 | ) | (45,318 | ) | 62,201 | 191,831 | (7,158 | ) | ||||||||||||||||||
Income
tax benefit
|
5,146 | - | - | 833 | (5,146 | ) |
(3e)
|
(833 | ) |
(3e)
|
- | |||||||||||||||||||
Loss
from continuing operations
|
(189,307 | ) | (15,097 | ) | (6,322 | ) | (44,485 | ) | 57,055 | 190,998 | (7,158 | ) | ||||||||||||||||||
Less:
net loss from continuing operastions attributable to non-controlling
interests
|
(4,193 | ) | - | - | - | 4,208 |
(3f)
|
- | 15 | |||||||||||||||||||||
Net
loss from continuing operations attributable to Tropicana
shareholders
|
$ | (193,500 | ) | $ | (15,097 | ) | $ | (6,322 | ) | $ | (44,485 | ) | $ | 61,263 | $ | 190,998 | $ | (7,143 | ) |
Pro
Forma Adjustments—Reorganization of Predecessors and Tropicana AC
Acquisition
(3a)—
|
Represents
the elimination of reorganization items of the Predecessors and Tropicana
AC.
|
(3b)—
|
Represents
the reduction in depreciation expense related to the lower fair values of
property and equipment and intangible assets in connection with fresh
start reporting and the fair value purchase
allocation.
|
(3c)—
|
Represents
the elimination of intercompany activity as part of the acquisition of
Tropicana AC of $808 thousand and $4,845 thousand for the nine months
ended September 30, 2010 and the fiscal year ended December 31, 2009,
respectively.
|
(3d)—
|
Represents
the adjustment to interest expense as a result of Tropicana entering into
the Exit Facility and the elimination of historical interest expense
related to the DIP financing, calculated as follows (in
thousands):
|
Nine months
ended
September 30,
2010
|
Year ended
December 31,
2009
|
|||||||
Interest
expense on $130 million Term Loan Facility at 15.0%
|
$ | 14,625 | $ | 19,500 | ||||
Amortization
of the fair value of Penny Warrants issued related to the Term Loan
Facility of $19.5 million over 36 months
|
4,874 | 6,498 | ||||||
Amortization
of Term Loan Facility 7% discount of $9.1 million over
36 months
|
2,275 | 3,033 | ||||||
Revolving
Facility undrawn commitment fee
|
113 | 150 | ||||||
Amortization
of deferred financing costs(i)
|
2,424 | 3,232 | ||||||
Total
pro forma interest expense on Exit Facility
|
24,311 | 32,413 | ||||||
Less:
combined historical interest expense
|
(20,368 | ) | (31,943 | ) | ||||
Pro
forma interest expense adjustment
|
$ | 3,943 | $ | 470 |
|
(i)
|
Represents
the amortization of $9.4 million in deferred financing costs over the
3-year term of the Exit Facility and a $0.1 million annual
administrative fee.
|
F-48
(3e)—
|
Represents
the elimination of historical income tax benefit. Tropicana has determined there would be no income tax benefit
recorded.
|
(3f)—
|
Represents
the elimination of non-controlling interest that became a subsidiary of
Tropicana on the Effective
Date.
|
(3g)—
|
Represents
the elimination of affiliated activity of the
Predecessors.
|
(3h)—
|
Represents
the elimination of debt guarantee obligation and related losses related to
the affiliate guarantee of Tropicana LLC debt that was discharged on the
Effective Date.
|
(3i)—
|
Represents
the elimination of goodwill impairment relating to write-down of
beneficial interest in trust of Tropicana
AC.
|
F-49