Tropicana Entertainment Inc. - FORM 10-Q

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TABLE OF CONTENTS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended June 30, 2018



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from to .

Commission file number 000-53831

TROPICANA ENTERTAINMENT INC.

(Exact name of registrant as specified in its charter)



Delaware		27-0540158
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
8345 W. Sunset Road, Las Vegas, Nevada 89113 (Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: 702-589-3900

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o
		Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o

As of July 31, 2018, there were 23,834,512 shares outstanding of the registrant's common stock, $.01 par value per share.

TABLE OF CONTENTS




PART I—FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	2

ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	45

ITEM 4.	CONTROLS AND PROCEDURES	46

PART II—OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	47

ITEM 1A.	RISK FACTORS	47

ITEM 6.	EXHIBITS	48

	SIGNATURES	49

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TROPICANA ENTERTAINMENT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)



	June 30, 2018		December 31, 2017
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	98,040	$	103,069
Restricted cash	16,366		15,918
Receivables, net	31,804		37,472
Income tax receivable from related party	—		6,960
Inventories	8,283		7,573
Prepaid expenses and other assets	17,259		23,807
Total current assets	171,752		194,799
Property and equipment, net	810,828		810,688
Goodwill	15,857		15,857
Intangible assets, net	77,727		79,290
Investments	7,123		7,253
Deferred tax assets, net	57,908		58,313
Long-term prepaid rent and other assets	33,361		33,902
Total assets	$	1,174,556	$	1,200,102

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	36,733	$	42,495
Accrued expenses and other current liabilities	79,248		94,455
Total current liabilities	115,981		136,950
Long-term debt, net	87,333		136,721
Other long-term liabilities	8,290		7,257
Deferred tax liabilities	3,963		3,963
Total liabilities	215,567		284,891
Commitments and contingencies
Shareholders' equity:
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, 23,834,512 shares issued and outstanding at June 30, 2018 and December 31, 2017	238		238
Additional paid-in capital	521,553		521,553
Retained earnings	435,688		393,420
Accumulated other comprehensive income	1,510		—
Total shareholders' equity	958,989		915,211
Total liabilities and shareholders' equity	$	1,174,556	$	1,200,102

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TROPICANA ENTERTAINMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)



	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Revenues:
Casino	$	148,592		$	140,895		$	299,507		$	286,369
Room	43,952			42,515			80,296			78,053
Food and beverage	30,976			29,701			59,744			56,198
Other	7,900			8,065			15,293			15,332
Management fee from related party	—			—			—			1,250
Net revenues	231,420			221,176			454,840			437,202
Operating costs and expenses:
Casino	59,115			57,422			119,155			113,505
Room	17,039			16,925			32,817			32,291
Food and beverage	24,948			24,884			48,200			46,927
Other	5,178			5,037			9,652			9,997
Marketing, advertising and promotions	18,623			17,458			36,213			35,182
General and administrative	37,584			38,014			74,267			74,968
Maintenance and utilities	17,589			17,724			35,146			34,536
Depreciation and amortization	20,482			19,174			40,652			36,794
Impairment charges, other write-downs and recoveries	144			28			114			(1,103		)
Real estate tax settlement	—			—			(880		)	—
Total operating costs and expenses	200,702			196,666			395,336			383,097
Operating income	30,718			24,510			59,504			54,105

Other income (expense):
Interest expense	(1,617		)	(3,016		)	(3,333		)	(5,981		)
Interest income	160			214			322			467
Termination fee from related party	—			—			—			15,000
Term loan discount/cost write down	(362		)	—			(362		)	—
Other non-operating income	76			—			76			—
Total other income (expense)	(1,743		)	(2,802		)	(3,297		)	9,486
Income before income taxes	28,975			21,708			56,207			63,591
Income tax expense	(7,131		)	(8,315		)	(13,939		)	(24,352		)
Net income	$	21,844		$	13,393		$	42,268		$	39,239

Basic and diluted income per common share:
Net income	$	0.92		$	0.54		$	1.77		$	1.59

Weighted-average common shares outstanding:
Basic and diluted	23,835			24,635			23,835			24,635

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TROPICANA ENTERTAINMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)



	Three months ended June 30,					Six months ended June 30,
	2018			2017		2018			2017
Net income	$	21,844		$	13,393	$	42,268		$	39,239
Components of other comprehensive income:
Actuarial gain related to defined benefit pension plan, net of taxes of $405	—			—		1,540			—
Amortization of net actuarial gain	(15		)	—		(30		)	—
Other comprehensive income	(15		)	—		1,510			—

Comprehensive income	$	21,829		$	13,393	$	43,778		$	39,239

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

TROPICANA ENTERTAINMENT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



	Six months ended June 30,
	2018			2017
Cash flows from operating activities:
Net income	$	42,268		$	39,239
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on insurance recoveries	—			(1,387		)
Insurance proceeds	—			109
Depreciation and amortization	40,652			36,794
Amortization of debt discount and debt issuance costs	250			515
Term loan discount/cost write down	362			—
Change in investment reserves	651			(1,472		)
Loss on disposition of asset	(69		)	284
Changes in operating assets and liabilities:
Receivables, net	5,668			6,884
Income tax receivable from related party	6,960			—
Inventories, prepaids and other assets	5,838			(4,798		)
Accrued interest	(28		)	(1,000		)
Accounts payable, accrued expenses and other liabilities	(15,694		)	5,515
Long term prepaid rent and other noncurrent assets and liabilities, net	3,664			791
Net cash provided by operating activities	90,522			81,474
Cash flows from investing activities:
Additions of property and equipment	(46,356		)	(55,407		)
Approved CRDA Project Funds received	—			6,422
Proceeds from sale of investment	—			6
Insurance proceeds	—			1,278
Intangible assets acquired	—			(8,050		)
Other	1,253			1,174
Net cash used in investing activities	(45,103		)	(54,577		)
Cash flows from financing activities:
Payments on debt	(50,000		)	(1,500		)
Net cash used in financing activities	(50,000		)	(1,500		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(4,581		)	25,397
Cash, cash equivalents and restricted cash, beginning of period	118,987			254,457
Cash, cash equivalents and restricted cash, end of period	$	114,406		$	279,854

Supplemental cash flow disclosure:
Cash paid for interest, net of interest capitalized	$	3,104		$	6,461
Cash paid for income taxes, net of refunds received	756			9,090
Supplemental disclosure of non-cash items:
Capital expenditures included in accrued expenses and other current liabilities	6,092			9,918

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1—ORGANIZATION AND BACKGROUND

Organization

Tropicana Entertainment Inc. (the "Company," "TEI," "we," "us," or "our"), a Delaware corporation, is an owner and operator of regional casino and entertainment properties located in the United States and one hotel, timeshare and casino resort located on the island of Aruba.

The Company's United States properties include two casinos in Nevada and one casino in each of Indiana, Louisiana, Mississippi, Missouri and New Jersey. In addition, the Company owns a property in Aruba. The Company views each property as an operating segment which it aggregates by region in order to present its reportable segments: (i) East, (ii) Central, (iii) West and (iv) South. The current operations of the Company, by region, include the following:


•	East—Tropicana Casino and Resort, Atlantic City ("Tropicana AC") located in Atlantic City, New Jersey;


•	Central—Tropicana Evansville ("Tropicana Evansville") located in Evansville, Indiana; and Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis (collectively, "Lumière Place") located in Saint Louis, Missouri;


•	West—Tropicana Laughlin Hotel and Casino ("Tropicana Laughlin") located in Laughlin, Nevada; and MontBleu Casino Resort & Spa ("MontBleu") located in South Lake Tahoe, Nevada; and


•	South—Belle of Baton Rouge Casino and Hotel ("Belle of Baton Rouge") located in Baton Rouge, Louisiana; Trop Casino Greenville ("Tropicana Greenville") located in Greenville, Mississippi; and Tropicana Aruba Resort & Casino ("Tropicana Aruba") located near Eagle Beach, Aruba.

The Company, through its wholly-owned subsidiary, TEI Management Services LLC, also provided management services to the Taj Mahal Casino Hotel property ("Taj Mahal") in Atlantic City through its sale in March 2017 and provides services to the closed Plaza Hotel in Atlantic City (see Note 12 - Related Party Transactions). In addition, the Company, through its wholly-owned subsidiary, TropWorld Games LLC, operates an online social gaming site. The operating results of all other subsidiaries of the Company are reported under the heading of "Corporate and other" as they have been determined to not meet the aggregation criteria as separately reportable segments.

Background

The Company 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 ("CP Vicksburg"), JMBS Casino, LLC ("JMBS Casino") and CP Laughlin Realty, LLC ("CP Laughlin Realty"), all of which were part of the same plan of reorganization (the "Plan") as TEH (collectively, the "Predecessors"). 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 Tropicana AC. 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. Adamar was not a party to the Predecessors' bankruptcy. 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.

Merger Agreement

On April 15, 2018, the Company entered into (i) a Real Estate Purchase Agreement (the “Real Estate Purchase Agreement”) with GLP Capital, L.P., a Pennsylvania limited partnership (“GLP”), and (ii) an Agreement and Plan of Merger (the “Merger Agreement”) with Eldorado Resorts, Inc., a Nevada corporation (“Parent”), Delta Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and GLP, pursuant to which the Company has agreed to sell its real estate assets to GLP and its gaming and hotel operations to Parent for an aggregate consideration of approximately $1.85 billion in cash, which amount is subject to adjustment, including for certain tax distributions payable by the Company under the Disaffiliation Agreement (as defined below).

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

will be merged with and into the Company, with the Company continuing as the surviving corporation in the merger (the “Merger”). Following the consummation of the Merger, the Company will be a wholly-owned subsidiary of Parent.

In connection with the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement, the Company has agreed to use its reasonable efforts to cause the Aruba Operations to be distributed, transferred or disposed of by the Company prior to the closing of the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement.

The closing of the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement are subject to customary conditions, including, among other things, the receipt of certain regulatory and gaming approvals, and the transfer or disposal of the Aruba operations. The transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement are expected to close in the second half of 2018. We cannot assure you that these transactions will be consummated in a timely manner, if at all.

Under certain circumstances, a termination of the Merger Agreement may result in a termination fee in the amount of $92.5 million payable by the Company to Parent and GLP, or by GLP and Parent to the Company.

In addition, prior to the closing of the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement, the Company will terminate its relationship with Insight Portfolio Group, LLC (see Note 12 - Related Party Transactions, Insight Portfolio Group, LLC).

Disaffiliation Agreement

In connection with the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement, the Company, on behalf of itself and its subsidiaries, entered into a disaffiliation agreement with AEPC, a significant stockholder of the Company and Parent (the “Disaffiliation Agreement”), pursuant to which the parties thereto agreed to address certain tax and other matters relating to the separation of the Company from AEPC and its affiliates and to address the existing agreements between the Company and its subsidiaries, on the one hand, and AEPC and its affiliates, on the other, under the Tax Allocation Agreement that was entered into on September 16, 2017 (see Note 12 - Related Party Transactions, Tax Allocation Agreement).

The Company is part of the AEPC affiliated group (as such term is defined in the Internal Revenue Code of 1986, as amended) and from and after September 16, 2017, AEPC and its subsidiaries file consolidated federal tax returns with the Company and its subsidiaries. The relationship of the parties thereto with respect to tax preparation, tax payments and certain other matters is currently governed by the Tax Allocation Agreement between the Company and AEPC. Pursuant to the terms of the Disaffiliation Agreement, at the effective time of the transactions contemplated by the Merger Agreement (the “Effective Time”), the Tax Allocation Agreement will terminate and the terms and conditions of the Disaffiliation Agreement will govern the relationship of the parties from and after the Effective Time with respect to the matters set forth therein.

As the Real Estate Purchase will be a taxable transaction, pursuant to Section 5(c) of the Disaffiliation Agreement, AEPC will be entitled to receive a tax distribution from the Company in respect of the federal income tax expected to result from or be attributable to the Real Estate Purchase pursuant to the terms of the Real Estate Purchase Agreement.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain disclosures required by generally accepted accounting principles in the United States ("GAAP") are omitted or condensed in these condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) that are necessary to present fairly the Company's financial position, results of operations and cash flows for the interim periods have been made. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, from which the accompanying condensed consolidated balance sheet information as of that date was derived.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Principles of Consolidation

The accompanying condensed consolidated financial statements include the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with 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 the Company's 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, Casino Reinvestment Development Authority (the "CRDA") investments, self-insured liability reserves, customer loyalty program reserves, contingencies, litigation, claims, assessments and loss contingencies. Actual results could differ from these estimates.

Restricted Cash

Restricted cash consists primarily of cash held in separate bank accounts designated for specific purposes. At both June 30, 2018 and December 31, 2017, $7.4 million was restricted to collateralize letters of credit. Also at each of June 30, 2018 and December 31, 2017, $6.6 million was held in a separate bank account to be used for purchases of replacement furniture, fixtures and equipment at the Four Seasons Hotel St. Louis, as required by contract. In addition, at June 30, 2018 and December 31, 2017, a total of $2.4 million and $1.9 million, respectively, was held as restricted cash as required by gaming regulatory agencies in Nevada, New Jersey and Missouri.

Fair Value of Financial Instruments

As defined under GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or in the most advantageous market when no principal market exists. Adjustments to transaction prices or quoted market prices may be required in illiquid or disorderly markets in order to estimate fair value. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange. See Note 3 - Fair Value for further detail related to the fair value of financial instruments.

Revenue Recognition

The Company's revenue contracts with customers consist primarily of gaming wagers, hotel room sales, food and beverage transactions, and sales of other retail goods and services. Casino revenue represents the difference between wins and losses from gaming activities. The Company applies a practical expedient by accounting for gaming contracts on a portfolio basis, rather than as individual contracts, as gaming wagers have similar characteristics and the Company reasonably expects the effects on the financial statements will not differ materially from that which would result if applying the revenue recognition standard to each individual wagering transaction. Room, food and beverage and other operating revenues are recognized at the time the goods or services are provided, and are recorded net of any sales, use and other applicable taxes that are collected by the Company at the point of sale.

The Company’s gaming wager contracts involve multiple performance obligations for those customers who participate in the Company’s loyalty programs (the “Programs”). Under the Programs, customers earn points from their gaming wager activities, which may be redeemed, subject to certain limitations and the terms of the programs, for free slot play, cash, food, beverages, rooms or merchandise. For purposes of allocating the transaction price in a wagering transaction between the gaming performance obligation and the obligation associated with the loyalty points earned, the Company determines the stand-alone selling price of the loyalty points earned, which is the retail value of the free slot play, services or merchandise for which points can be redeemed. Since the stand-alone selling price for wagers is highly variable and no set established price can be determined for such wagers, the amount of revenue allocated to the gaming wager is determined using the residual approach, after determining the value of the loyalty points. The gaming revenue is recognized when the wagers occur; the loyalty point liability amount is deferred and recognized as revenue when the customer redeems their points, at the retail value of rooms, food and beverage or other goods and services. See "Adoption of New Accounting Standards" below, for discussion of the impact of the adoption of ASC Topic 606 as of January 1, 2018 and Note 19 - Segment Information, for disaggregation of revenue detail for our reportable segments.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Timeshare Sales

The Company accounts for sales of timeshare intervals at the Tropicana Aruba in accordance with ASC 978, Real Estate - Time Sharing Activity. Sales of timeshare intervals, the majority of which are sold under a credit arrangement, are recorded net of an estimated allowance for bad debt. Costs associated with the timeshare units, including building and renovation costs, furniture, fixtures and equipment, and other costs directly attributable to the timeshare units are recorded as timeshare inventory. In addition, incremental revenue over related costs generated from the daily rental of the designated timeshare units is recorded as a reduction of the timeshare inventory, as opposed to hotel revenue. A cost of sales is calculated, using the total timeshare inventory as a percentage of the potential timeshare interval sales, and a portion of the inventory is recorded as cost of sales expense as each timeshare interval is sold.

Customer Contract Liabilities

The Company provides numerous goods and services to its customers. There is often a timing difference between payments by customers and recognition of revenue for each of the related performance obligations. The Company’s primary types of liabilities associated with contracts with customers are (1) loyalty program liabilities, (2) outstanding chip and slot voucher liability and (3) customer deposits and other deferred revenue for gaming and non-gaming products and services to be provided in the future. The loyalty program liabilities represent a deferral of casino revenue until the customer redeems the incentives earned, and are typically expected to be redeemed and recognized within one year or sooner of being earned. The Program liabilities are recorded net of an estimated "breakage" factor, which assumes that some points will expire without being redeemed; the breakage is estimated based on historical redemption rates at each Tropicana property, as redemption and expiration periods of Program incentives vary at each property. Outstanding chip and slot voucher liabilities represents amounts owed to customers for gaming chips and slot tickets in their possession, which are expected to be recognized as revenue or redeemed within one year. Customer deposits and other deferred revenue includes cash deposits made by customers for future services to be provided by the Company, including deposits for services such as gaming and internet gaming activities, timeshare sales and maintenance fees and hotel room stays, which are expected to be recognized as revenue or refunded to the customer within one year of the date the deposit was recorded. In the case of a hotel contract involving multiple days, the transaction price is recognized as revenue over the days based on the contract rate for each night's stay.

The following table summarizes the liabilities related to contracts with customers (in thousands):



	Loyalty Program Liabilities						Outstanding Chip and Voucher Liabilities					Customer Deposits and Other Deferred Revenue
	2018			2017			2018		2017			2018			2017
Balances at January 1	$	7,947		$	9,234		$	4,718	$	4,689		$	5,019		$	4,358
Balances at June 30	6,638			8,617			6,295		4,004			4,551			4,430
Increase (decrease), net	$	(1,309	)	$	(617	)	$	1,577	$	(685	)	$	(468	)	$	72

Income Taxes

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. 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.

Adoption of New Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASU was amended by ASU No. 2015-14, issued in August 2015, which deferred the original effective date by one year; the effective date is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2017, using one of two retrospective application methods. In addition, the FASB issued several other amendments during 2016 to FASB ASC Topic 606, Revenue from Contracts with Customers that include implementation guidance to principal versus agent considerations, guidance to identifying performance obligations, licensing guidance, technical guidance and other narrow scope improvements.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

This standard provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services provided to the customer. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The Company adopted this standard on January 1, 2018, using the full retrospective method, which required the restatement of prior period results reported. The adoption of this standard principally affects the presentation of rewards earned and redeemed by our customers under our loyalty programs. Under the new standard, incentives earned by our customers as a result of their gaming activity under our loyalty programs creates a separate performance obligation, which requires the deferral of a portion of the gaming revenue for the value of that obligation. When the customer redeems the incentives and the performance obligation is fulfilled, the deferred revenue is recognized in the venue that provides the goods or services (for example, hotel, food, beverage, or other) at the retail value of the goods or services provided. Before the adoption of this standard, loyalty program redemptions were recorded as complimentary revenues within the venue of redemption, with a corresponding deduction through promotional allowances. As a result of the adoption of this standard, the deduction for promotional allowances is eliminated.

The standard also requires the deferred revenue obligation to be measured at the expected retail value of the benefits owed to the customer, adjusted for expected redemptions ("breakage") by customers; previously, the liability for loyalty program incentives was measured at the anticipated cost of the benefits to be provided, adjusted for expected breakage. As a result of the adoption of this standard, the deferred revenue obligation for incentives earned but not yet redeemed by our customers increased by approximately $3 million.

In addition, the adoption of this standard requires certain adjustments and other reclassifications within revenue and expense categories on our statement of income, which did not impact our previously reported operating income or net income.

The tables below provide a reconciliation of results as previously reported and the resulting impacts from the adoption of ASC 606 and ASU No. 2016-18, Restricted Cash, which is described below (in thousands except per share data):



Consolidated Balance Sheet	Balance at December 31, 2017
	As Previously Reported		Adoption of ASC 606			As Adjusted
Deferred tax assets, net	$	57,693	$	620		$	58,313
Total assets	1,199,482		620			1,200,102
Accrued expenses and other current liabilities	91,694		2,761			94,455
Total liabilities	282,130		2,761			284,891
Retained earnings	395,561		(2,141		)	393,420
Total shareholders' equity	917,352		(2,141		)	915,211
Total liabilities and shareholders' equity	$	1,199,482	$	620		$	1,200,102



Consolidated Statements of Income	Three months ended June 30, 2017									Six months ended June 30, 2017
	As Previously Reported			Adoption of ASC 606			As Adjusted			As Previously Reported			Adoption of ASC 606			As Adjusted
Casino revenue	$	175,968		$	(35,073	)	$	140,895		$	353,388		$	(67,019	)	$	286,369
Rooms, food, beverage and other revenue	70,293			9,988			80,281			132,700			18,133			150,833
Promotional allowances	(23,965		)	23,965			—			(46,405		)	46,405			—
Net revenue	222,296			(1,120		)	221,176			439,683			(2,481		)	437,202
Operating costs and expenses	197,862			(1,196		)	196,666			385,776			(2,679		)	383,097
Operating income	24,434			76			24,510			53,907			198			54,105
Income before taxes	21,632			76			21,708			63,393			198			63,591
Income tax expense	(8,285		)	(30		)	(8,315		)	(24,279		)	(73		)	(24,352		)
Net income	$	13,347		$	46		$	13,393		$	39,114		$	125		$	39,239
Income per common share	$	0.54		$	—		$	0.54		$	1.59		$	—		$	1.59

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



Consolidated Statement of Cash Flows	Six months ended June 30, 2017
	As Previously Reported			Adoption of ASC 606			Adoption of ASU No. 2016-18		As Adjusted
Net income	$	39,114		$	125		$	—	$	39,239
Restricted cash funded - operating activities	(71		)	—			71		—
Accounts payable, accrued expenses and other liabilities	5,640			(125		)	—		5,515
Net cash provided by operating activities	81,403			—			71		81,474
Restricted cash funded - investing activities	(321		)	—			321		—
Net cash used in investing activities	(54,898		)	—			321		(54,577		)
Restricted cash funded - financing activities	(5		)	—			5		—
Net cash used in financing activities	(1,505		)	—			5		(1,500		)
Net increase in cash	25,000			—			397		25,397
Cash, cash equivalents and restricted cash, beginning of period	239,615			—			14,842		254,457
Cash, cash equivalents and restricted cash, end of period	$	264,615		$	—		$	15,239	$	279,854

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends FASB ASC Topic 230, Statement of Cash Flows. This ASU seeks to reduce the diversity currently in practice by providing guidance on the presentation of eight specific cash flow issues in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted ASU No. 2016-15 on January 1, 2018; the adoption of this standard did not have any impact on our consolidated statement of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which amends FASB ASC Topic 740, Income Taxes. This ASU requires the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Current U.S. GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU No. 2016-16 on January 1, 2018; the adoption of this standard did not have any impact on our consolidated financial position, results of operations, cash flows and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, which amends FASB ASC Topic 230, Statement of Cash Flows. This ASU requires that the statement of cash flows explain the change during the period of total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU No. 2016-18 on January 1, 2018. The adoption of this standard resulted in a restatement of our statement of cash flows for the prior year, to show the change in total cash, including amounts included as restricted cash, and to include restricted cash in the beginning and ending period cash balances

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes FASB ASC Topic 840, Leases. This ASU requires the recognition of right-of-use assets and lease liabilities, measured at the present value of the future minimum lease payments, by lessees for those leases classified as operating leases under previous guidance. In addition, among other changes to the accounting for leases, this ASU retains the distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous guidance. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The amendments in this ASU should be applied using a modified retrospective approach. Early application is permitted. The Company continues to evaluate the impact of this guidance. We believe the most significant impact will relate to the recognition of right-of-use assets and lease liabilities on our consolidated balance sheets for long-term operating leases. We anticipate our assessment and implementation plan to be ongoing during the remainder of 2018.

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 consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

NOTE 3—FAIR VALUE

The carrying values of the Company's cash and cash equivalents, restricted cash, receivables and accounts payable approximate fair value because of the short term maturities of these instruments. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:


•	Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•

Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).


•	Level 3 - Unobservable inputs reflect the Company's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.

The following table presents a summary of fair value measurements by level for certain assets measured at fair value on a recurring basis included in the accompanying condensed consolidated balance sheets at June 30, 2018 and December 31, 2017 (in thousands):



	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Total
June 30, 2018
Assets:
CRDA deposits, net	$	—	$	—	$	491	$	491

December 31, 2017
Assets:
CRDA deposits, net	$	—	$	—	$	587	$	587

Funds on deposit with the CRDA are held in an interest bearing account by the CRDA. Interest is earned at the stated rate that approximates two-thirds of the current market rate for similar assets. The Company records charges to expense to reflect the lower return on investment and records the deposits at fair value. As of June 30, 2018 and December 31, 2017, the remainder of funds on deposit with the CRDA which are not attributable to the amended CRDA grant agreement, as discussed further in Note 7 - Investments, are classified in the fair value hierarchy as Level 3, and estimated using valuation allowances calculated based on market rates for similar assets and other information received from the CRDA.

The following table summarizes the changes in fair value of the Company's Level 3 CRDA deposits (in thousands):



	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Beginning Balance	$	505		$	1,134		$	587		$	1,202
Realized or unrealized gains/(losses)	(335		)	(55		)	(613		)	(62		)
Additional CRDA deposits	341			339			648			665
Purchases of CRDA investments	(20		)	(395		)	(131		)	(782		)
Ending Balance	$	491		$	1,023		$	491		$	1,023

Realized or unrealized gains/(losses) related to the Level 3 investments held at the end of the reporting period are included in general and administrative expenses on the accompanying condensed consolidated statements of income. There were no transfers between fair value levels during the periods ended June 30, 2018 and 2017.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Long-term Debt

The Company's long-term debt is carried at amortized cost in the accompanying consolidated balance sheets. The fair value of the Company's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices for similar issues. The estimated fair value of long-term debt as of June 30, 2018 and December 31, 2017 is approximately $88.4 million and $139.4 million, respectively. See Note 10 - Debt for the discussion regarding the Company's optional prepayments of long-term debt.

CRDA Bonds

The Company's CRDA bonds are classified as held-to-maturity since the Company has the ability and intent to hold these bonds to maturity and under the CRDA, the Company is not permitted to do otherwise. The CRDA bonds are initially recorded at a discount to approximate fair value. After the initial determination of fair value, the Company will analyze the CRDA bonds quarterly for recoverability based on management's historical collection experience and other information received from the CRDA. If indications exist that the CRDA bond is impaired, additional allowances will be recorded. The fair value of the Company's CRDA bonds is considered a Level 3 fair value measurement. The CRDA bonds carrying value as of June 30, 2018 and December 31, 2017 net of the unamortized discount and allowances was $6.6 million and $6.5 million, respectively, which approximates fair value. See Note 7 - Investments for more detail related to the CRDA bonds.

NOTE 4—RECEIVABLES

Receivables consist of the following (in thousands):



	June 30, 2018			December 31, 2017
Casino	$	10,681		$	11,803
Hotel	7,859			6,287
Income tax receivable	3,068			9,414
Other	18,862			18,429
Receivables, gross	40,470			45,933
Allowance for doubtful accounts	(8,666		)	(8,461		)
Receivables, net	$	31,804		$	37,472

NOTE 5—PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):



	Estimated life (years)	June 30, 2018			December 31, 2017
Land	—	$	118,268		$	118,271
Buildings and improvements	10 - 40	733,971			711,339
Furniture, fixtures and equipment	3 - 7	325,778			310,890
Riverboats and barges	5 - 15	12,315			12,764
Construction in progress	—	13,854			16,435
Property and equipment, gross		1,204,186			1,169,699
Accumulated depreciation		(393,358		)	(359,011		)
Property and equipment, net		$	810,828		$	810,688

NOTE 6—GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the excess of purchase price over fair value of assets acquired and liabilities assumed in business combinations or under fresh-start reporting. Goodwill and other indefinite-life intangible assets are subject to an annual assessment for impairment during the fourth quarter, or more frequently if there are indications of possible impairment, by applying a fair-value-based test. In accordance with accounting guidance related to goodwill and other intangible assets, the Company tests for impairment of goodwill and indefinite-lived intangible assets annually in the fourth quarter of each year and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

in certain situations between those annual dates. See Note 2 - Summary of Significant Accounting Policies in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for more detail related to the goodwill impairment analysis.

The carrying amounts of Goodwill by segment are as follows (in thousands):



	June 30, 2018							December 31, 2017
	Gross Carrying Amount		Accumulated Impairment			Net Carrying Value		Gross Carrying Amount		Accumulated Impairment			Net Carrying Value
Central	$	14,224	$	—		$	14,224	$	14,224	$	—		$	14,224
South	1,731		(1,731		)	—		1,731		(1,731		)	—
Corporate and other	10,704		(9,071		)	1,633		10,704		(9,071		)	1,633
Total	$	26,659	$	(10,802	)	$	15,857	$	26,659	$	(10,802	)	$	15,857

Intangible assets consist of the following (in thousands):



	Estimated life (years)	June 30, 2018			December 31, 2017
Trade name	Indefinite	$	25,500		$	25,500
Gaming licenses	Indefinite	37,387			37,387
Customer lists	3	7,660			7,660
Favorable lease	5 - 42	13,260			13,260
Intellectual property, other	1	550			550
Total intangible assets		84,357			84,357
Less accumulated amortization:
Customer lists		(3,285		)	(2,035		)
Favorable lease		(2,795		)	(2,620		)
Intellectual property, other		(550		)	(412		)
Total accumulated amortization		(6,630		)	(5,067		)
Intangible assets, net		$	77,727		$	79,290

Upon the adoption of fresh-start reporting, the Company recognized an indefinite life trade name related to the "Tropicana" trade name and 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. At both June 30, 2018 and December 31, 2017 the indefinite life gaming licenses consist of $28.7 million and $8.7 million related to Tropicana Evansville and Lumière Place, respectively.

Customer lists represent the value associated with customers enrolled in our customer loyalty programs and are amortized on a straight-line basis over three years. On March 31, 2017, concurrently with the sale of the Taj Mahal (see Note 12 - Related Party Transactions), the Company purchased the Taj Mahal customer database and certain other intellectual property for an aggregate purchase price of $8.05 million. The Company has estimated the value of the customer database to be $7.5 million, which is being amortized over a period of three years commencing April 1, 2017. The remainder of the purchase price, estimated to represent the fair value of the intellectual property, was amortized on a straight line basis over one year, commencing April 1, 2017. Total amortization expense related to customer lists and intellectual property, which is included in depreciation and amortization expense, for the three months ended June 30, 2018 and 2017 was $0.6 million and $0.8 million, respectively, and for the six months ended June 30, 2018 and 2017 was $1.4 million and $0.8 million, respectively. Estimated annual amortization related to customer lists and intellectual property is anticipated to be $2.6 million in 2018, $2.5 million in 2019 and $0.6 million in 2020.

Favorable lease arrangements were valued upon adoption of fresh-start reporting and are being amortized to rental expense on a straight-line basis over the remaining useful life of the respective leased facility. In connection with the Tropicana AC acquisition, the Company also recognized intangible 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. Additionally, in connection with the acquisition of Tropicana Aruba, the Company recognized intangible assets relating to a favorable land lease arrangement which is amortized to rental expense on a straight-line basis over the remaining term of the land lease. Amortization expense related

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

to favorable lease arrangements, which is amortized to rental expense or tenant income, as applicable, for each of the three months ended June 30, 2018 and 2017 was $0.1 million, and for each of the six months ended June 30, 2018 and 2017 was $0.2 million.

NOTE 7—INVESTMENTS

CRDA

The New Jersey Casino Control Act provides, among other things, for an assessment of licensees equal to 1.25% of gross gaming revenues and 2.5% of internet gaming gross revenues in lieu of an investment alternative tax equal to 2.5% of gross gaming revenues and 5% on internet gaming gross 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 June 30, 2018 and December 31, 2017 approximates their fair value.

CRDA investments consist of the following (in thousands):



	June 30, 2018			December 31, 2017
Investment in bonds—CRDA	$	19,342		$	19,211
Less unamortized discount	(8,066		)	(8,089		)
Less valuation allowance	(4,644		)	(4,616		)
Deposits—CRDA	1,848			1,331
Less valuation allowance	(1,357		)	(584		)
Direct investment—CRDA	1,578			1,578
Less valuation allowance	(1,578		)	(1,578		)
Total CRDA investments	$	7,123		$	7,253

The CRDA bonds have various contractual maturities that range up to 40 years. Actual maturities may differ from contractual maturities because of prepayment rights. The Company treats CRDA bonds as held-to-maturity since the Company has the ability and the intent to hold these bonds to maturity and under the CRDA, the Company is not permitted to do otherwise. As such, the CRDA bonds are initially recorded at a discount to approximate fair value.

After the initial determination of fair value, the Company analyzes the CRDA bonds for recoverability on a quarterly basis based on management's historical collection experience and other information received from the CRDA. If indications exist that the CRDA bond is impaired, additional valuation allowances are recorded.

Funds on deposit with the CRDA are held in an interest bearing account by the CRDA. Interest is earned at the stated rate that approximates two-thirds of the current market rate for similar assets. The Company records charges to expense to reflect the lower return on investment and records the deposit at fair value on the date the deposit obligation arises. During the three months ended June 30, 2018 and 2017, the Company recorded a charge of $0.4 million and a reduction of $0.4 million, respectively, to general and administrative expenses on the accompanying condensed consolidated statements of income, representing the changes in these investment reserves. During the six months ended June 30, 2018 and 2017, the Company recorded a charge of $0.7 million and a reduction of $1.5 million, respectively, to general and administrative expenses on the accompanying condensed consolidated statements of income, representing the changes in these investment reserves.

As a result of the NJ PILOT Law, which was enacted in May 2016 (see further discussion in Note 13 - Commitments and Contingencies, NJ PILOT Law), the portion of investment alternative tax payments made by casino operators which are deposited with the CRDA and which have not been pledged for the payment of bonds issued by the CRDA will be allocated to the State of New Jersey for purposes of paying debt service on bonds previously issued by Atlantic City. That portion of the deposits which will be allocated to the State of New Jersey are no longer recorded as an investment with a corresponding valuation allowance, but are charged directly to general and administrative expenses. During each of the three months ended June 30, 2018 and 2017, the Company recorded charges of $0.9 million to general and administrative expenses on the accompanying condensed consolidated statements of income, representing that portion of investment alternative tax payments that will be allocated to the State of New Jersey under the NJ PILOT Law and have no future value to the Company. During the six months ended June 30, 2018 and 2017, the Company recorded charges of $1.8 million and $1.9 million, respectively, to general and administrative expenses on the accompanying condensed consolidated statements of income, representing that

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

portion of investment alternative tax payments that will be allocated to the State of New Jersey under the NJ PILOT Law and have no future value to the Company.

In 2014, the Company was approved to use up to $18.8 million of CRDA deposits ("Approved CRDA Project Funds") for certain capital expenditures relating to Tropicana AC. In April 2016, the CRDA approved an application by the Company to increase the scope of the approved Tropicana AC project to include additional project elements and amend the CRDA grant agreement related to the Tropicana AC project to permit (i) an $8 million increase in the CRDA fund reservation and corresponding increase in the Approved CRDA Project Funds from $18.8 million to $26.8 million, and (ii) a rescheduled substantial completion date for the Tropicana AC project to not later than June 30, 2017. In exchange for the approval, the Company agreed to donate the balance of its CRDA deposits in the amount of approximately $7.1 million to the CRDA pursuant to NJSA 5:12-177. The project was completed by June 30, 2017, and all funds due to Tropicana AC under this agreement were received in full by December 31, 2017.

Ruby Seven Studios, Inc.

In March 2015, the Company, through its wholly-owned subsidiary, TropWorld Games LLC ("TWG") entered into an agreement with Ruby Seven Studios, Inc. ("Ruby Seven") to develop an online social gaming site. In accordance with that agreement, in July 2015, TEI R7, a wholly-owned subsidiary of the Company, exercised an option to acquire 1,827,932 shares of Ruby Seven's Series A-1 Preferred Stock for $1.5 million, representing approximately 13.7% of the equity ownership of Ruby Seven. The investment in Ruby Seven was recorded at cost.

Ruby Seven entered into a merger agreement with a third party pursuant to which Ruby Seven merged into the third party in a transaction that closed in February 2016. TEI R7 approved the agreement. As a result of the merger transaction, all of Ruby Seven’s outstanding shares (including the shares held by TEI R7) were canceled and the Ruby Seven shareholders received merger consideration in exchange for their shares. At closing, TEI R7 received cash in the approximate amount of $0.8 million, plus an earn-out consideration over three years following the closing, with a minimum earn-out of approximately $0.7 million, which is included in long-term assets on the accompanying condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017.

NOTE 8—LONG-TERM PREPAID RENT AND OTHER ASSETS

Long-term prepaid rent and other assets consist of the following (in thousands):



	June 30, 2018		December 31, 2017
Tropicana Evansville prepaid rent	$	21,326	$	22,618
Deposits	2,139		2,173
Timeshare inventory	4,449		3,656
Other	5,447		5,455
Long-term prepaid rent and other assets	$	33,361	$	33,902

NOTE 9—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):



	June 30, 2018		December 31, 2017
Accrued payroll and benefits	$	28,783	$	44,644
Accrued gaming and related	17,878		17,391
Accrued taxes	14,629		13,366
Other accrued expenses and current liabilities	17,958		19,054
Total accrued expenses and other current liabilities	$	79,248	$	94,455

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

NOTE 10—DEBT

Debt consists of the following (in thousands):



	June 30, 2018		December 31, 2017
Term Loan Facility, due 2020, interest at 5.1% and 4.6% annually at June 30, 2018 and December 31, 2017, respectively, net of unamortized discount of $0.2 and $0.3 million at June 30, 2018 and December 31, 2017, respectively, and debt issuance costs of $0.5 million and $1.0 million at June 30, 2018 and December 31, 2017, respectively	$	87,333	$	136,721
Less current portion of debt	—		—
Total long-term debt, net	$	87,333	$	136,721

Credit Facilities

On November 27, 2013, the Company entered into (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million, issued at a discount of 0.5% (the “Term Loan Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”). Commencing on December 31, 2013, the Term Loan Facility is amortized in equal quarterly installments of $750,000, with any remaining balance payable on the final maturity date of the Term Loan Facility, which is November 27, 2020.

The Revolving Facility was terminated by the Company effective March 31, 2017, in accordance with the terms of the Credit Agreement. There were no amounts outstanding under the Revolving Facility at the time of the termination.

Approximately $172.4 million of the net proceeds from the Term Loan Facility were used to repay in full the principal amounts outstanding under the Company's then existing credit facilities, which were terminated effective as of November 27, 2013. A portion of the proceeds from the Term Loan Facility was used to finance the Company's acquisition of Lumière Place in April 2014.

The Term Loan Facility accrues interest, at the Company's option, at a per annum rate equal to either (i) the LIBO Rate (as defined in the Credit Agreement) (subject to a 1.00% floor) plus an applicable margin equal to 3.00%, or (ii) the alternate base rate (as defined in the Credit Agreement) (subject to a 2.00% floor) plus an applicable margin equal to 2.00%; such that in either case, the applicable interest rate shall not be less than 4.0% annually. The interest rate increases by 2.00% following certain defaults. As of June 30, 2018, the interest rate on the Term Loan Facility was 5.1% annually.

The Term Loan Facility is guaranteed by all of the Company's domestic subsidiaries, subject to limited exceptions, and additional subsidiaries may be required to provide guarantees, subject to limited exceptions. The Term Loan Facility is secured by a first lien on substantially all assets of the Company and the domestic subsidiaries that are guarantors, with certain limited exceptions. Subsidiaries that become guarantors will be required, with certain limited exceptions, to provide first liens and security interests in substantially all their assets to secure the Term Loan Facility.

At the election of the Company and subject to certain conditions, including a maximum senior secured net leverage ratio of 3.25:1.00, the amount available under the Term Loan Facility may be increased, which increased amount may be comprised of additional term loans and revolving loans.

The Term Loan Facility may be prepaid at the option of the Company at any time without penalty (other than customary LIBO Rate breakage fees). In September 2017 and December 2017, the Company made optional prepayments of principal on the Term Loan Facility of $125 million and $25 million, respectively. In addition, the Company made optional prepayments of principal on the Term Loan Facility of $50 million in May 2018 and $25 million in July 2018. Under the terms of the Term Loan Facility, the optional prepayments are applied first to the next four quarterly mandatory principal payments, and second, to reduce on a pro-rata basis, the remaining scheduled principal payments. As a result of the optional prepayments, the Company wrote off a portion of the debt issuance costs and discount totaling $1.4 million in 2017 and $0.4 million during the six months ended June 30, 2018 (see Note 20 - Subsequent Events).

The Company is required to make mandatory payments of the Term Loan Facility with (i) net cash proceeds of certain asset sales (subject to reinvestment rights), (ii) net cash proceeds from certain issuances of debt and equity (with certain

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

exceptions), (iii) up to 50% of annual excess cash flow (as low as 0% if the Company's total leverage ratio is below 2.75:1.00), and (iv) certain casualty proceeds and condemnation awards (subject to reinvestment rights).

Key covenants binding the Company and its subsidiaries include limitations on indebtedness, liens, investments, acquisitions, asset sales, dividends and other restricted payments, and affiliate and extraordinary transactions. Key default provisions include (i) failure to repay principal, interest, fees and other amounts owing under the facility, (ii) cross default to certain other indebtedness, (iii) the rendering of certain judgments against the Company or its subsidiaries, (iv) failure of security documents to create valid liens on property securing the Term Loan Facility and to perfect such liens, (v) revocation of casino, gambling, or gaming licenses, (vi) the Company's or its material subsidiaries' bankruptcy or insolvency; and (vii) the occurrence of a Change of Control (as defined in the Credit Agreement). 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. The Company was in compliance with the covenants of the Term Loan Facility at June 30, 2018.

NOTE 11—IMPAIRMENT CHARGES, OTHER WRITE DOWNS AND RECOVERIES

Impairment charges, other write-downs and recoveries consist of the following (in thousands):



	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Contract early termination costs	$	183		$	—		$	183		$	—
Gain on insurance recovery	—			(109		)	—			(1,387		)
(Gain) loss on disposal of assets	(39		)	137			(69		)	284
Total impairment charges, other write-downs and recoveries	$	144		$	28		$	114		$	(1,103	)

Hotel Lumière Insurance Recovery

In 2016, we filed a property damage and business interruption claim with our insurance carrier related to our HoteLumière room renovation project which commenced in July 2016. In December 2016 we received insurance proceeds of $1.0 million as a partial payment toward the property damage claim, which was recorded as a gain in 2016. In March 2017, we received notice that the balance of the property damage claim of $1.3 million was approved and was subsequently paid in early April 2017. The business interruption claim was paid in December 2017.

NOTE 12—RELATED PARTY TRANSACTIONS

Insight Portfolio Group LLC

Effective January 1, 2013, the Company acquired a minority equity interest in Insight Portfolio Group LLC (“Insight Portfolio Group”) and agreed to pay a portion of Insight Portfolio Group's operating expenses. In addition to the minority equity interest held by the Company, a number of other entities with which Mr. Icahn has a relationship also acquired equity interests in Insight Portfolio Group and also agreed to pay certain of Insight Portfolio Group's operating expenses. The Company may purchase a variety of goods and services as a member of the buying group at prices and on terms that the Company believes are more favorable than those which would be achieved on a stand-alone basis. Commencing in the second quarter of 2016, an officer of the Company also serves on the Board of Directors of Insight Portfolio Group. During the three months ended June 30, 2018, the Company paid $0.1 million to Insight Portfolio Group; no payment was made during the same period of 2017. During the six months ended June 30, 2018 and 2017, the Company paid $0.2 million and $0.1 million, respectively, to Insight Portfolio Group.

Prior to the closing of the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement, the Company will terminate its relationship with Insight Portfolio Group, LLC.

WestPoint International, LLC

The Company and certain of its subsidiaries purchase sheets, towels and other products from WestPoint International, LLC (formerly WestPoint International, Inc., or "WPI"). WPI is an indirect wholly-owned subsidiary of Icahn Enterprises, which is indirectly controlled by Mr. Icahn. During the three months ended June 30, 2018 and 2017, the Company paid $0.3

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million and $0.4 million, respectively, to WPI for purchases of these products. During the six months ended June 30, 2018 and 2017, the Company paid $0.5 million and $0.9 million, respectively, to WPI for purchases of these products.

Trump Entertainment Resorts, Inc. Agreements

The Company and its subsidiaries have been a party to several agreements with Trump Entertainment Resorts, Inc. ("TER") and its subsidiaries.

Management Agreement

On March 1, 2016, TEI Management Services LLC, a wholly owned subsidiary of the Company, entered into a management agreement with Trump Taj Mahal Associates, LLC (“TTMA”), an indirect wholly-owned subsidiary of TER and IEH Investments LLC (“IEH Investments”) (the "Management Agreement") pursuant to which TEI Management Services LLC managed the Taj Mahal in Atlantic City, New Jersey, owned by TTMA, and provided consulting services relating to the former Plaza Hotel and Casino in Atlantic City, New Jersey, owned by Trump Plaza Associates LLC (“Plaza Associates”). The Management Agreement, which commenced upon receipt of required New Jersey regulatory approvals on April 13, 2016, was effective for an initial five year term. TTMA, IEH Investments and Plaza Associates are indirect wholly owned subsidiaries of Icahn Enterprises (see Note 14 - Stockholders' Equity).

In October 2016, the Taj Mahal discontinued its operation as a casino hotel. TTMA exercised its right to terminate the Management Agreement without Cause (as defined in the Management Agreement), effective March 31, 2017, concurrently with the sale of the Taj Mahal to a third party and the surrender of TTMA's New Jersey casino license, at which time TEI Management Services LLC was paid a termination fee of $15 million pursuant to the provisions of the Management Agreement. The termination fee is reflected as "Termination fee from related party" in the accompanying condensed consolidated statements of income for the six months ended June 30, 2017.

For the six months ended June 30, 2017, the Company recorded $1.3 million of management fee income as a result of the Management Agreement, which is included in Management fee from related party in the accompanying condensed consolidated statements of income. Due to the termination of the Management Agreement on March 31, 2017, there was no management fee income for the three months ended June 30, 2017.

Services Agreement

Effective April 1, 2017, Tropicana AC entered into a services agreement with TER (the "Services Agreement"), pursuant to which Tropicana AC performs certain administrative services for TER related to TTMA and Plaza Associates on a month to month basis in exchange for a one-time service fee in the amount of $0.6 million, which was paid on March 31, 2017. The Services Agreement, which originally had a one year term, was amended in March 2018 to extend the expiration to December 31, 2018. During the extension period, TER will pay Tropicana AC a service fee of $50,000 per month for each month during the extended term. Either party may terminate the Services Agreement during the extended term upon thirty days advance written notice to the other party.

Slot Lease and Purchase Agreements

Under a lease agreement dated September 12, 2016, with TTMA, Tropicana AC leased 250 slot machines commencing after the closing of the Taj Mahal. On January 18, 2017, TTMA agreed to terminate the slot lease agreement and Tropicana AC purchased the slot machines from TTMA for a purchase price of $2.5 million, less the amount of the monthly lease payments in the aggregate amount of $0.2 million made by Tropicana AC to TTMA under the lease agreement.

Database License and IP Sales Agreements

Effective October 1, 2016, the Company and TER entered into a Database License Agreement pursuant to which the Company licensed the Taj Mahal customer database from TER. On March 31, 2017 the Company and TER agreed to terminate the Database License Agreement and enter into a Customer Database and IP Sales Agreement, pursuant to which the Company purchased the Taj Mahal customer database and certain other intellectual property owned by TER, including the Taj Mahal trademark, for an aggregate purchase price of $8.05 million.

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New Jersey Division of Gaming Enforcement Surplus Credit

In the second quarter of 2017, the New Jersey Division of Gaming Enforcement ("NJDGE") distributed refunds to the Atlantic City casinos, in the form of credits which could be used to offset future monthly NJDGE operating cost charges. The refunds represented the excess of the NJDGE monthly costs paid by the operating Atlantic City casinos over the actual NJDGE operating costs incurred for the period July 1, 2015 through June 30, 2016. The Taj Mahal received a credit for approximately $0.4 million. The NJDGE agreed to allow Tropicana AC to purchase this credit from the Taj Mahal and apply it to payments for future NJDGE monthly charges by Tropicana AC. Tropicana AC purchased this credit from the Taj Mahal for $0.4 million in the second quarter of 2017.

In 2018, a similar credit for approximately $0.3 million was issued by the NJDGE to the Taj Mahal related to the NJDGE's fiscal year ended June 30, 2017, and Tropicana AC was allowed to purchase this credit for $0.3 million in the second quarter of 2018, and similarly may apply it to payments for future NJDGE monthly charges by Tropicana AC.

IEP Morris LLC

On June 27, 2017, IEP Morris LLC ("IEP Morris"), an affiliate of Icahn Enterprises, and Tropicana AC entered into a short term triple net lease agreement with annual rent of ten dollars ($10) (the "Lease Agreement"), pursuant to which Tropicana AC leased the property formerly known as The Chelsea Hotel, located in Atlantic City ("The Chelsea") from IEP Morris. The Lease Agreement was terminated on July 6, 2017, at which time Tropicana AC paid IEP Morris approximately $5.5 million for an assignment of a mortgage on The Chelsea and rights under certain other related agreements, pursuant to which The Chelsea was acquired by IEP Morris. On July 6, 2017, Tropicana AC recorded a deed from IEP Morris conveying title to The Chelsea to Tropicana AC.

Icahn Enterprises Holdings L.P.

Tender Offer

On June 23, 2017, the Company and Icahn Enterprises Holdings L.P., a Delaware limited partnership ("Icahn Enterprises") commenced a tender offer to purchase severally, and not jointly, up to 5,580,000 shares of common stock in the aggregate, at a price not greater than $45.00 nor less than $38.00 per share, by means of a "modified" Dutch auction, on the terms and subject to the conditions set forth in the Offer to Purchase dated June 23, 2017 and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constituted the "Offer"). The Offer was completed on August 9, 2017. The Offer was made severally, and not jointly, by the Company and Icahn Enterprises and upon the terms and subject to the conditions of the Offer, first, the Company severally, and not jointly, purchased 800,000 of the shares properly tendered, and second, Icahn Enterprises severally, and not jointly, purchased the remaining shares properly tendered, totaling 2,121,712 shares. All shares purchased by the Company and Icahn Enterprises were purchased at the maximum offer price per share of $45. As a result of the completion of the Offer, as of June 30, 2018, Mr. Icahn indirectly controlled approximately 83.9% of the voting power of the Company’s Common Stock (see Note 14 - Stockholders’ Equity, Significant Ownership).

Tender Offer Agreement

In connection with the Offer, the Company and Icahn Enterprises entered into a Tender Offer Agreement, dated as of June 23, 2017 (the "Tender Offer Agreement"), pursuant to which Icahn Enterprises and the Company agreed that any amendment, extension, termination, waiver or other change or action under the terms of the Offer could not be made by either party without the consent of the other party.

Upon consummation of the Offer, Icahn Enterprises has agreed, pursuant to the Tender Offer Agreement, among other things:


•	not to, and to take all actions necessary to cause the Icahn controlled affiliates not to, propose, or engage in, any transaction to acquire all of the outstanding shares of common stock for a period of two years from August 2, 2017;

•

other than in connection with a repurchase, redemption, retirement, cancellation, or other similar action with respect to the shares of common stock by the Company that is approved by the Special Committee of the Board of Directors (the “Special Committee”), for so long as Icahn Enterprises or any of its affiliates beneficially own (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act), in the aggregate, in excess of 50% of the shares of common

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stock, not to, and to take all actions necessary to cause the Icahn controlled affiliates not to, take any action, directly or indirectly, to cause Icahn Enterprises to increase its beneficial ownership in the Company above 95.0% of all outstanding shares unless any such transaction is approved by (i) first, the Special Committee and (ii) second, an informed vote of the holders of a majority of the shares held by stockholders who are not affiliated with Icahn Enterprises or its affiliates;

•

for so long as (x) Icahn Enterprises or any of its affiliates beneficially own (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act), in the aggregate, in excess of 50% of the shares of common stock, and (y) any shares of common stock are beneficially owned (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) by a person other than Icahn Enterprises, not to take any action to, and to take all actions necessary to cause the Icahn controlled affiliates not to, without Special Committee approval, cause the Company to (a) cease to be quoted on the OTCQB; (b) deregister the common stock of the Company under the Exchange Act; (c) cease filing reports with the SEC required by Section 13 and/or Section 15(d) of the Exchange Act, even if the Company may not be subject to such reporting requirements; or (d) cease to maintain an audit committee comprising at least two independent directors, the composition and authority of which complies with any state gaming laws or regulations applicable to the Company;

•

for a period of two years from August 2, 2017, not to take any action to, and to take all actions necessary to cause the Icahn controlled affiliates not to, transfer, sell, convey or otherwise dispose of shares of common stock, by merger, sale of equity, operation of law or otherwise, if, as a result of such transfer or sale, Icahn Enterprises would beneficially own (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act) less than 50.0% of the outstanding shares of common stock, other than in connection with a transaction for the sale of all outstanding shares of common stock, a transaction involving the merger of the Company or as otherwise consented to by the Special Committee;


•	that the Company and Icahn Enterprises would bear certain expenses (including but not limited to SEC filing fees, and expenses and fees of financial printers, information agents and depositaries) pro rata in proportion to the number of shares purchased by each party in the Offer;


•	to enter into a Tax Allocation Agreement upon the consummation of the Offer, which was entered into on September 16, 2017; and

•

that Icahn Enterprises would indemnify the Company for (i) any liability arising from being an offeror with respect to any liability to purchase any shares over 800,000 shares in the Offer and (ii) any and all liability imposed upon the Company and any of its direct and indirect subsidiaries that are eligible to be included in a consolidated return with the Company (such subsidiaries, collectively with the Company, the "Tropicana Group") resulting from any member of the Tropicana Group being considered a member of a controlled group (within the meaning of §4001(a)(14) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) of which Icahn Enterprises is a member (the "Controlled Group"), except with respect to liability in respect of any employee benefit plan, as defined in ERISA §3(3), maintained by any member of the Tropicana Group. See Note 13 - Commitments and Contingencies, Affiliate Pension Obligations for further discussion.

Pursuant to the Tender Offer Agreement, Icahn Enterprises and the Company have also agreed to indemnify the other for (i) any untrue statement or alleged untrue statement by the indemnifying party of a material fact contained in the Schedule TO, the Offer to Purchase and the related Letter of Transmittal (or any document incorporated by reference therein) and (ii) the omission or alleged omission by the indemnifying party to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

For purposes of the Tender Offer Agreement, (i) "Icahn controlled affiliates" means Mr. Carl C. Icahn and any of his Affiliates in which he beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the Exchange Act), in the aggregate, in excess of 50% of the equity interests of such Affiliate and (ii) "Affiliate" means any person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified. For purposes of the definition of "Affiliate", "control" means possession, directly or indirectly, of the power to elect a majority of the board of directors or other governing body of an entity (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) and, without limiting the generality of the foregoing, (x) a person who possesses, directly or indirectly, the power to control the general partner of a limited partnership shall be deemed to control such limited partnership, and (y) a person who possesses, directly or indirectly, the power to control the manager or managing member of a limited liability company shall be deemed to control such limited liability company.

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Tax Allocation Agreement

Upon consummation of the Offer, the Company became eligible, for U.S. federal income tax purposes, to consent to be a member of the consolidated group of companies of which Icahn Enterprises is a member. On September 16, 2017, the Company and American Entertainment Properties Corp. ("AEPC"), an indirect wholly-owned subsidiary of Icahn Enterprises Holdings L.P., entered into a Tax Allocation Agreement pursuant to which AEPC and the Company and its subsidiaries agreed to the allocation of certain income tax items. The Company and its subsidiaries consented to join AEPC in the filing of AEPC's federal consolidated return and, if elected by AEPC, certain state consolidated returns. In those jurisdictions where the Company and its subsidiaries will file consolidated returns with AEPC, the Company will pay to AEPC any tax it would have owed had it and its subsidiaries continued to file as a separate consolidated group. To the extent that the AEPC consolidated group is able to reduce its tax liability as a result of including the Company and its subsidiaries in its consolidated group, AEPC will pay the Company 20% of such reduction on a current basis and the Company will be treated as if it would carry forward for its own use under the Tax Allocation Agreement, 80% of the items that caused the tax reduction (the "Excess Tax Benefits"). Moreover, if the Company and its subsidiaries should ever become unconsolidated from AEPC, AEPC will reimburse the Company for any tax liability in post-consolidation years that the Company and its subsidiaries would have avoided had they actually had the Excess Tax Benefits for their own consolidated group use. The cumulative payments to the Company by AEPC post-consolidation will not exceed the cumulative reductions in tax to the AEPC group resulting from the use of the Excess Tax Benefits by the AEPC group. In connection with the transactions contemplated by the Merger Agreement, on April 15, 2018, the Company entered into a disaffiliation agreement with AEPC and Parent pursuant to which the parties thereto agreed to address certain tax and other matters relating to the separation of the Company from AEPC and its affiliates and to address the existing agreements between the Company and its subsidiaries, on the one hand, and AEPC and its affiliates, on the other, under the Tax Allocation Agreement. See Note 1 - Disaffiliation Agreement.

NOTE 13—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 was $333,333 per month, plus 10% of annual gross revenues in excess of $50 million through December 31, 2011. After December 31, 2011, rent is 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, plus 10% of annual gross revenues in excess of a Breakpoint as defined in the terms of the lease agreement, or (ii) 10% of annual gross revenues. In connection with fresh-start reporting, the Company recognized an unfavorable lease liability of $9.6 million related to this lease that is amortized on a straight-line basis to rental expense over the remaining term of the lease. As of June 30, 2018 and December 31, 2017, the unfavorable lease liability balance was $5.4 million and $5.6 million, respectively, of which $4.9 million and $5.1 million, respectively, is included in other long-term liabilities on the accompanying condensed consolidated balance sheets.

Tropicana Evansville Land Lease

The Company leases from the City of Evansville, Indiana approximately ten acres of the approximately 20 acres on which Tropicana Evansville is situated. In January 2016 the Company and the City of Evansville entered into a sixth amendment to the lease agreement (the "Sixth Amendment"), which was approved by the Indiana Gaming Commission in February 2016, along with the Company's application to move its casino operations from its dockside gaming vessel to a landside gaming facility. Under the Sixth Amendment, in exchange for the Company's commitment to expend at least $50 million to develop a landside gaming facility (the "Tropicana Development Project") along with a pre-payment of lease rent in the amount of $25 million (the "Rental Pre-Payments"), the City of Evansville granted the Company a $20 million redevelopment credit (the "Redevelopment Credit"). In December 2015, the Company paid the first $12.5 million Rental Pre-Payment, and the second $12.5 million Rental Pre-Payment was paid in October 2017 immediately following the opening of the Tropicana Development Project. The Rental Pre-Payments will be applied against future rent in equal monthly amounts over a period of one hundred and twenty (120) months which commenced upon the opening of the Tropicana Development Project, and the Redevelopment Credit will be applied against future rent in equal monthly amounts over a period of one hundred and twenty (120) months, commencing with the payment made in January 2018. The current term of the lease commenced December 1, 2015 and expires November 30, 2027 under the terms of the Sixth Amendment. Thereafter, the

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Company may extend the lease term through November 30, 2055 by exercising renewal options. The current term commenced December 1, 2015 and expires November 30, 2027 under the terms of the Sixth Amendment. Thereafter, the Company may extend the lease for a three (3) year term through November 30, 2030, followed by five (5) five-year renewal options through November 30, 2055. Under the terms of the Sixth Amendment, in the event the Company decides not to exercise its renewal option(s) and continues to conduct gaming operations in the City of Evansville, the lease may not be terminated and will continue through November 30, 2055, unless the Company and the City of Evansville enter into a replacement agreement that includes payments to the City of Evansville in the amount equal to rent payments under the lease. Under the terms of the lease, as amended by the Sixth Amendment, 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 shall be 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 and plus 10% of the AGR in excess of $100 million.

Pursuant to the terms of the Sixth Amendment, the Company completed construction of the new landside gaming facility in October 2017. The facility encompasses 75,000 square feet of enclosed space (including approximately 45,000 square feet of casino floor, two new food and beverage outlets, an entertainment lounge and back of house space). In addition, pursuant to the Sixth Amendment, the Company sold its riverboat casino to a third party and it was removed from its moorings so that the Evansville LST 325 Maritime vessel, an historic warship, can be docked in its place.

Belle of Baton Rouge Lease

Belle of Baton Rouge leases certain land and buildings under separate leases, with combined annual payments of $0.2 million. The current lease term for one of the leases expires in July 2023, with an option to renew for an additional five years. The other lease contains multiple options to renew through 2083. In addition, Belle of Baton Rouge leases a parking lot with annual base rent of approximately $0.4 million, plus 0.94% of annual adjusted gross revenue in excess of $45 million but not to exceed $80 million through August 2020.

Tropicana Greenville Lease

Tropicana Greenville leases approximately four acres of land on which the casino and parking facilities of the casino are situated. Tropicana Greenville 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, Tropicana Greenville is required to pay 8% of the excess amount as rent pursuant to the terms of the lease. The current lease expires in 2019 with options to extend its term through 2044.

Tropicana Greenville also leases, from the Board of Mississippi Levee Commissioners, and operates the Greenville Inn and Suites, a 40-room hotel, located less than a mile from the casino. The original lease contains multiple options to extend the lease term, with the current lease term expiring in February 2021. The current lease for the property calls for lease payments which increase annually based on the consumer price index, subject to a minimum annual increase of 3.3%. For the current lease year ending February 28, 2019, the annual rent was less than $0.1 million.

In October 2013, Tropicana Greenville entered into an additional lease agreement with the City of Greenville, Mississippi, for a parcel of land adjacent to Tropicana Greenville upon which the Company constructed a parking lot in conjunction with its expansion of the Tropicana Greenville casino. The initial term of the lease expires in August 2020, and the Company has several options to extend the lease for a total term of up to twenty-five years. Initial annual rent is $0.4 million with rent adjustments in option periods based upon the Consumer Price Index.

Tropicana Aruba Land Lease

The Company assumed a land lease in August 2010 for approximately 14 acres of land on which Tropicana Aruba is situated through July 30, 2051. Under the terms of the land lease, the current annual rent is approximately $0.1 million.

Other Commitments and Contingencies

2011 New Jersey Legislation

In February 2011, New Jersey enacted legislation (the "Tourism District Law") that delegated redevelopment authority and creation of a master plan to the CRDA and allowed the CRDA the ability to enter into a five year public private partnership with the casinos in Atlantic City that have formed the Atlantic City Alliance ("ACA") to jointly market the city. The law obligated the Atlantic City casinos either through the ACA or, if not a member of the ACA, through individual assessments, to

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provide funding for marketing under the Tourism District Law in the aggregate amount of $30.0 million annually through 2016. Each Atlantic City casino's proportionate share of the assessment was based on the gross revenue generated in the preceding fiscal year (see NJ Pilot Law for further discussion of the ACA, below).

New Jersey Gross Casino Revenue Tax and Casino Investment Alternative Tax

Under current New Jersey law, the New Jersey Casino Control Commission imposes an annual tax of 8% on gross casino revenue and, commencing with the operation of Internet gaming, an annual tax of 15% on Internet gaming gross revenue. In addition, under New Jersey law, casino license holders or Internet gaming permit holders (as applicable) are currently required to invest an additional 1.25% of gross casino revenue and 2.5% of Internet gaming gross revenue ("Casino Investment Alternative Tax", or "IAT") for the purchase of bonds to be issued by the CRDA or to make other approved investments equal to those amounts; and, in the event the investment requirement is not met, the casino license holder or Internet gaming permit holder (as applicable) is subject to a tax of 2.5% on gross casino revenue and 5.0% on Internet gaming gross revenue. As mandated by New Jersey law, 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. As more fully described below, commencing on May 27, 2016, the effective date of the NJ PILOT Law, future IAT that have not been pledged for the payment of bonds issued by the CRDA, or any bonds issued to refund such bonds, will be allocated to the City of Atlantic City for the purposes of paying debt service on bonds issued by the City of Atlantic City.

NJ PILOT LAW

On May 27, 2016, New Jersey enacted the Casino Property Tax Stabilization Act (the "NJ PILOT Law") which exempted Atlantic City casino gaming properties from ad valorem property taxation in exchange for an agreement to make annual payment in lieu of tax payments ("PILOT Payments") to the City of Atlantic City, made certain changes to the NJ Tourism District Law and redirected certain IAT payments to assist in the stabilization of Atlantic City finances. Under the NJ PILOT Law, commencing in 2017 and for a period of ten (10) years, each Atlantic City casino gaming property (as defined in the NJ PILOT Law) is required to pay its prorated share of an aggregate amount of PILOT Payments based on an equal weighted formula that includes the following criteria: (i) the gross gaming revenues ("GGR") of the casino, (ii) the total number of hotel guest rooms and (iii) the geographic footprint of the real property owned by each casino gaming property. For calendar year 2017, the aggregate amount of PILOT Payments owed to the City of Atlantic City by Atlantic City casino gaming properties is $120 million, prorated among casino properties based upon the above factors. Commencing in 2018 and for each year thereafter, the aggregate amount of PILOT Payments owed will be determined based on a sliding scale of Atlantic City casino industry GGR from the applicable prior year, subject to certain adjustments. For each year from 2017 through 2021, each casino gaming property's prorated share of PILOT Payments is capped (the "PILOT CAP") at an amount equal to the real estate taxes due and payable in calendar year 2015, which is calculated based upon the assessed value of the casino gaming property for real estate tax purposes and tax rate.

On August 1, 2017, Tropicana AC, the City of Atlantic City and the New Jersey Department of Community Affairs entered into a Real Estate Tax Appeal Settlement Agreement (the "Settlement Agreement") pursuant to which the parties agreed to settle Tropicana AC's 2015 and 2016 real estate tax appeals pending before the Tax Court of New Jersey (the "Pending Tax Appeals"). The Settlement Agreement, among other things, provided for refunds in the aggregate amount of approximately $36.8 million in respect of the Pending Tax Appeals and Tropicana AC's 2017 PILOT Payment. Tropicana AC received full payment of the refunds in early October 2017. In addition, the Settlement Agreement provided for a reduction in the assessed value of Tropicana AC for real estate tax purposes for calendar year 2015, including a corresponding reduction of Tropicana AC's PILOT CAP for each of calendar years 2018 through 2021, from approximately $19.8 million to approximately $8.4 million.

The NJ PILOT Law also provides for the abolishment of the ACA effective as of January 1, 2015 and redirection of the $30 million in ACA funds paid by the casinos for each of the years 2015 and 2016 under the Tourism District Law to the State of New Jersey for Atlantic City fiscal relief and further payments of $15 million in 2017, $10 million in 2018 and $5 million for each year between 2019 and 2023 to Atlantic City. Pursuant to the NJ PILOT Law, the 2015 and 2016 ACA payments were remitted to the State.

In addition, the NJ PILOT Law also provides for IAT payments made by the casino operators since the effective date of the NJ PILOT Law, which were previously deposited with the CRDA and which have not been pledged for the payment of bonds issued by the CRDA, or any bonds issued to refund such bonds, to be allocated to the State of New Jersey for purposes of paying debt service on bonds previously issued by Atlantic City.

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The NJ PILOT Law is the subject of litigation pending in the Superior Court of New Jersey, Law Division: Atlantic County challenging the validity of the law and/or portions of it. In the event the litigation is successful in overturning the NJ PILOT Law (or portions of it), such a ruling, if upheld on appeal, could have a future financial impact on the Company, including whether Tropicana AC continues to make PILOT Payments under the current law, is subject to future ad valorem property taxation, or some other mechanism for payments in lieu of taxes, and the amount of payments under any such alternative statutory schemes.

Indiana Gaming Tax Law Change

In May 2017, Indiana enacted changes to its gaming tax structure that will have an impact on Tropicana Evansville tax payments to Indiana. Effective July 1, 2017, in accordance with Indiana P.L. 268, for gaming operations that have relocated to an inland casino by December 31, 2017, Indiana law eliminates the $3 per person per admission charge, replacing it with a supplemental wagering tax in the amount of 3% of adjusted gross receipts commencing from the date of opening the inland casino through June 30, 2018. Tropicana Evansville qualified under this provision, as the construction of the landside gaming facility was completed and became operational in October 2017. Beginning July 1, 2018 the supplemental wagering tax is to be calculated as the casino's adjusted gross receipts multiplied by the percentage of the total casino’s admissions tax that the riverboat paid beginning July 1, 2016 and ending June 30, 2017, divided by the casino’s adjusted gross receipts beginning July 1, 2016 and ending June 30, 2017, with the supplemental wagering tax not to exceed 4% beginning July 1, 2018 and ending June 30, 2019, and 3.5% thereafter. In addition, under the new law, commencing in 2018 and phased-in over a seven (7) year period, Indiana casino operators will be able to deduct gaming taxes when calculating Indiana corporate income tax.

Wimar and CSC Administrative Expense Claims

On March 31, 2009, Wimar Tahoe Corporation ("Wimar") and Columbia Sussex Corporation ("CSC") filed separate proceedings with the Bankruptcy Court related to administrative expense and priority claims against the Predecessors. On August 4, 2010, Wimar and CSC separately filed motions for summary judgment seeking payment on account of these claims from the Company totaling approximately $5.4 million, which was recorded as a liability upon emergence from bankruptcy and is included in accounts payable in our accompanying condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017. In its objection to Wimar and CSC's motions for summary judgment, the Company disputed the administrative expense and/or priority status of certain amounts claimed and also contended that any payment to CSC or Wimar should await the resolution of the adversary proceeding instituted by Lightsway Litigation Services, LLC, as Trustee of the Tropicana Litigation Trust established by the bankruptcy reorganization plan, against CSC and Wimar (the "Litigation Trust Proceeding"), and be set off against any judgment against Wimar and CSC in the Litigation Trust Proceeding against them.

In October 2015, the Bankruptcy Court issued an opinion order and entered an order (1) denying Wimar's and CSC's Motions for Summary Judgment seeking allowance and payment of administrative expense claims, and (2) granting, in part, CSC's Motion for Summary Judgment to allow priority status under Bankruptcy Code Section 507(a)(5) for certain contributions made to employee benefit plans and (3) denying, in part, CSC's request for prepayment of the priority claims. The Company has motion pending with the Bankruptcy Court seeking clarification of certain aspects of the Bankruptcy Court's opinion and order. Any further litigation on the Wimar and CSC administrative expense claim has been consensually continued until after the Litigation Trust Proceeding is resolved. The Company continues to dispute any payment obligation to Wimar or CSC.

Affiliate Pension Obligations

Mr. Icahn, through certain affiliates, owns approximately 83.9% of the Company's common stock. Applicable pension and tax laws make each member of a "controlled group" of entities, generally defined as entities in which there are at least an 80% common ownership interest, jointly and severally liable for certain pension plan obligations of any member of the controlled group. These pension obligations include ongoing contributions to fund the plan, as well as liability for any unfunded liabilities that may exist at the time the plan is terminated. In addition, the failure to pay these pension obligations when due may result in the creation of liens in favor of the pension plan or the Pension Benefit Guaranty Corporation ("PBGC") against the assets of each member of the controlled group.

As a result of the more than 80% ownership interest in TEI by Mr. Icahn's affiliates, the Company is subject to the pension liabilities of all entities in which Mr. Icahn has a direct or indirect ownership interest of at least 80%. Two such entities, ACF Industries LLC ("ACF") and Federal-Mogul, are the sponsors of several pension plans. All the minimum funding requirements of the Code and ERISA, as amended by the Pension Protection Act of 2006, for these plans have been met as of June 30, 2018 and December 31, 2017. If the ACF and Federal-Mogul plans were voluntarily terminated, they would be collectively underfunded by approximately $435 million and $424 million as of June 30, 2018 and December 31, 2017, respectively. These

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

results are based on the most recent information provided by Mr. Icahn's affiliates based on information from the plans' actuaries. These liabilities could increase or decrease, depending on a number of factors, including future changes in benefits, investment returns, and the assumptions used to calculate the liability. As members of the controlled group, TEI would be liable for any failure of ACF and Federal-Mogul to make ongoing pension contributions or to pay the unfunded liabilities upon a termination of their respective pension plans. In addition, other entities now or in the future within the controlled group that includes TEI may have pension plan obligations that are, or may become, underfunded, and the Company would be liable for any failure of such entities to make ongoing pension contributions or to pay the unfunded liabilities upon a termination of such plans. The current underfunded status of the ACF and Federal-Mogul pension plans requires such entities to notify the PBGC of certain "reportable events," such as if TEI were to cease to be a member of the controlled group, or if TEI makes certain extraordinary dividends or stock redemptions. The obligation to report could cause the Company to seek to delay or reconsider the occurrence of such reportable events.

Pursuant to the Tender Offer Agreement between Icahn Enterprises and the Company (see Note 12 - Related Party Transactions, Tender Offer Agreement), Icahn Enterprises agreed to indemnify the Company from any and all liability imposed upon the Tropicana Group resulting from any member of the Tropicana Group being considered a member of a controlled group (within the meaning of §4001(a)(14) of the ERISA of which Icahn Enterprises is a member (the "Controlled Group")), except with respect to liability in respect of any employee benefit plan, as defined in ERISA §3(3), maintained by any member of the Tropicana Group.

Based on the contingent nature of potential exposure related to these affiliate pension obligations and the indemnification from Icahn Enterprises, no liability has been recorded in the accompanying condensed consolidated financial statements.

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 14—STOCKHOLDERS' EQUITY

Common Stock

The Company is authorized to issue up to 100 million shares of its common stock, $0.01 par value per share ("Common Stock"), of which 23,834,512 shares were issued and outstanding as of both June 30, 2018 and December 31, 2017. Each holder of 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 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 the Common Stock. Subject to any preferences that may be granted to the holders of the Company's 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 the Company's liquidation, dissolution or winding up is entitled to share ratably in all the Company's assets remaining after payment of liabilities.

Stock Repurchase Program

On July 31, 2015, our Board of Directors authorized the repurchase of up to $50 million of our outstanding stock with no set expiration date. On February 22, 2017, our Board of Directors authorized the repurchase of an additional $50 million of our outstanding common stock, for the repurchase of an aggregate amount of up to $100 million of our outstanding common stock.

As of June 30, 2018, the Company had repurchased 2,477,988 shares of our stock at a total cost of $78.8 million under the Stock Repurchase Program, including 800,000 shares which were purchased in August 2017 under the Tender Offer (see Note 12 - Related Party Transactions, Icahn Enterprises Holdings L.P - Tender Offer). In all instances, the repurchased shares were subsequently retired.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Preferred Stock

The Company is authorized to issue up to 10 million shares of preferred stock, $0.01 par value per share, of which none were issued as of June 30, 2018 and December 31, 2017. 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.

Significant Ownership

At June 30, 2018, Mr. Icahn indirectly controlled approximately 83.9% of the voting power of the Company's Common Stock and, by virtue of such stock ownership, is able to control or 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 15—BASIC AND DILUTED NET INCOME PER SHARE

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. Diluted EPS excludes all potential dilutive shares if their effect is anti-dilutive.

NOTE 16—EMPLOYEE BENEFIT PLAN

In connection with the collective bargaining agreement and related settlement agreement (the “Settlement Agreement”) that was executed in May 2014 between Tropicana AC and UNITE HERE Local 54 (“Local 54”), the parties agreed that Tropicana AC would establish a Variable Annuity Pension Plan (“VAPP”), a defined benefit pension plan, for certain Tropicana AC Local 54 employees. The VAPP became effective on August 8, 2017 upon receipt of a favorable determination from the Internal Revenue Service (“IRS”) and formal adoption of the VAPP by Tropicana AC.

Pursuant to the provisions of the VAPP, qualifying individuals became participants in the VAPP on January 1, 2018. Therefore, there were no VAPP participants as of December 31, 2017 and hence no benefits had accrued under the VAPP as of December 31, 2017. Once an employee becomes a participant in the VAPP, in certain circumstances his or her benefit may take into account years of prior service with Tropicana AC on or after February 1, 2014. The VAPP is administered by a Retirement Committee composed of an equal number of members appointed by Tropicana AC and Local 54. The VAPP is intended to provide certain eligible Local 54 employees with retirement benefits in accordance with the VAPP. In accordance with the Settlement Agreement, Tropicana AC was required to initially fund the VAPP with contributions in the amount of $1.93 per hour for each straight time hour paid to regular employees covered by the collective bargaining agreement during the period commencing February 1, 2014 through and including August 8, 2017. Contributions to the VAPP through the end of the current collective bargaining agreement of February 29, 2020, will be calculated at $1.93 per straight time hour paid to employees covered by the agreement.

Based on the Settlement Agreement, Tropicana AC made a payment to initially fund the VAPP on January 1, 2018 in the amount of $10.7 million. Commencing in 2018, with the introduction of participants into the VAPP, pension expenses are calculated using actuarial assumptions, including an expected long-term rate of return on assets and discount rate, based on a long-term investment strategy that will be developed by the Retirement Committee. Tropicana AC will evaluate all of the actuarial assumptions, generally on an annual basis, and will adjust as necessary. Actual pension expense will depend on future investment performance, changes in future discount rates, the level of contributions and various other factors.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

The components of the net periodic benefit cost relating to the VAPP consist of the following (in thousands):



	Three months ended June 30, 2018			Six months ended June 30, 2018
Service costs	$	782		$	1,564
Interest costs	120			241
Expected return on plan assets	(143		)	(287		)
Amortization of net (gain) loss	(15		)	(30		)
Net periodic benefit cost	$	744		$	1,488

The change in the projected benefit obligation, change in plan assets and funded status is as follows (in thousands):



	Three months ended June 30, 2018			Six months ended June 30, 2018
Change in benefit obligations:
Projected benefit obligation beginning of period	$	10,441		$	9,654
Service and interest cost during period	902			1,805
Benefit payments during period	(11		)	(22		)
Expenses during period	(105		)	(210		)
Projected benefit obligation end of period	$	11,227		$	11,227

Change in plan assets:
Fair value of plan assets at beginning of period	$	10,782		$	10,754
Expected return on plan assets during period	143			287
Benefit payments during period	(11		)	(22		)
Expenses during period	(105		)	(210		)
Fair value of plan assets at end of period	$	10,809		$	10,809

Funded status at end of period	$	(418	)	$	(418	)

Actuarial assumptions used to determine the benefit obligations for the VAPP include a discount rate of 5.0% pre-retirement and a discount rate of 3.0% post-retirement, which, as defined in the Settlement Agreement, will result in no adjustments to the plan benefit. The expected return on plan assets used was 5.0%.

As of June 30, 2018, the Retirement Committee had not developed a formal investment policy for the VAPP. Therefore, the payment made to initially fund the VAPP of $10.7 million is currently held in a bank account which invests the funds in short term money market funds. The amount held in the account at June 30, 2018 of $10.8 million represents cash and cash equivalents, which approximate the fair value of the plan assets, and would be considered a Level 1 asset within the fair value hierarchy classification.

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

Future estimated expected benefit payments for 2018 through 2027 are as follows (in thousands):



	Expected Benefit Payments
2018	$	83
2019	107
2020	142
2021	203
2022	288
2023 through 2027	2,899
	$	3,722

Tropicana AC's net periodic pension cost for the year ended December 31, 2018 is expected to be approximately $3.0 million. The Company expects total contributions to the VAPP for the year ended December 31, 2018 to be approximately $3.4 million.

NOTE 17—OTHER COMPREHENSIVE INCOME

The following table presents the changes in the components of accumulated other comprehensive income for the three and six months ended June 30, 2018 (in thousands):



	Three months ended June 30, 2018						Six months ended June 30, 2018
	Defined Benefit Pension Plan			Accumulated Other Comprehensive Income			Defined Benefit Pension Plan			Accumulated Other Comprehensive Income
Accumulated other comprehensive income, beginning of period	$	1,525		$	1,525		$	—		$	—
Actuarial gain, net of tax effect of $405	—			—			1,540			1,540
Amortization of net actuarial gain	(15		)	(15		)	(30		)	(30		)
Accumulated other comprehensive income, end of period	$	1,510		$	1,510		$	1,510		$	1,510

NOTE 18—INCOME TAXES

Effective Tax Rate

On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. Among other things, the Act permanently lowers the corporate tax rate to 21% from the previous maximum rate of 35%, effective for tax years including or commencing January 1, 2018. The Company's effective income tax rates for the three months ended June 30, 2018 and 2017 were 24.6% and 38.3%, respectively; and the income tax rates for the six months ended June 30, 2018 and 2017 were 24.8% and 38.3%, respectively. The difference between the federal statutory rates of 21.0% and 35%, respectively, and the Company's effective tax rates for the three and six months ended June 30, 2018 and 2017 was primarily due to disallowed foreign losses, state income taxes (net of federal benefit), valuation allowances 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.

Through September 15, 2017, the Company filed a consolidated federal income tax return and was the common parent for income tax purposes. Commencing with the period beginning September 16, 2017 through December 31, 2017, the Company is included in the consolidated federal tax return of AEPC (see Note 12 - Related Party Transactions, Tax Allocation Agreement). The provision for income taxes is calculated by using a "separate return" method. Under this method, the Company is assumed to file a separate return with the tax authority, thereby reporting its taxable income or loss and paying the applicable tax to or receiving the appropriate refund from AEPC. The current provision is the amount of tax payable or

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

refundable on the basis of a hypothetical, current-year separate return. Deferred taxes are provided on temporary differences and on any carryforwards that could be claimed on the hypothetical return and we assess the need for a valuation allowance on the basis of projected separate return assets. In connection with the transactions contemplated by the Merger Agreement, on April 15, 2018, the Company entered into a disaffiliation agreement with AEPC and Parent pursuant to which the parties thereto agreed to address certain tax and other matters relating to the separation of the Company from AEPC and its affiliates and to address the existing agreements between the Company and its subsidiaries, on the one hand, and AEPC and its affiliates, on the other, under the Tax Allocation Agreement. See Note 1 - Disaffiliation Agreement.

NOTE 19—SEGMENT INFORMATION

We view each property as an operating segment which we aggregate by region in order to present our reportable segments: (i) East, (ii) Central, (iii) West and (iv) South. We use operating income to compare operating results among our segments and allocate resources.

The following table highlights by segment our revenues and operating income, and reconciles operating income to income before income taxes for the three months ended June 30, 2018 and 2017 (in thousands, unaudited):



	Three months ended June 30,
	2018			2017
Revenues:
East	$	95,925		$	91,662
Central	85,852			76,045
West	27,660			28,203
South	21,949			25,266
Corporate and other	34			—
Net revenues	$	231,420		$	221,176
Operating income (loss):
East	$	15,479		$	11,185
Central	17,856			13,692
West	4,671			2,728
South	101			2,180
Corporate and other	(7,389		)	(5,275		)
Total operating income	$	30,718		$	24,510
Reconciliation of operating income to income before income taxes:
Operating income	$	30,718		$	24,510
Interest expense	(1,617		)	(3,016		)
Interest income	160			214
Term loan discount/cost write down	(362		)	—
Other non-operating income	76			—
Income before income taxes	$	28,975		$	21,708

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

The following table highlights by segment our revenues and operating income, and reconciles operating income to income before income taxes for the six months ended June 30, 2018 and 2017 (in thousands, unaudited):



	Six months ended June 30,
	2018			2017
Revenues:
East	$	180,460		$	177,660
Central	170,654			149,531
West	57,058			56,441
South	46,603			52,320
Corporate and other (1)	65			1,250
Net revenues	$	454,840		$	437,202
Operating income (loss):
East	$	23,883		$	21,223
Central	37,038			29,249
West	9,345			5,787
South	2,577			6,900
Corporate and other	(13,339		)	(9,054		)
Total operating income	$	59,504		$	54,105
Reconciliation of operating income to income before income taxes:
Operating income	$	59,504		$	54,105
Interest expense	(3,333		)	(5,981		)
Interest income	322			467
Termination fee from related party	—			15,000
Term loan discount/cost write down	(362		)	—
Other non-operating income	76			—
Income before income taxes	$	56,207		$	63,591

(1) For the six months ended June 30, 2017, amount represents management fee from related party.



Assets by segment:	June 30, 2018		December 31, 2017
East	$	414,437	$	411,630
Central	447,854		455,859
West	125,005		129,016
South	134,242		127,947
Corporate and other	53,018		75,650
Total assets	$	1,174,556	$	1,200,102

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TROPICANA ENTERTAINMENT INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)

The following tables provide additional disaggregation of revenue information for our reportable segments. See Note 2 - Summary of Significant Accounting Policies, for further information regarding our revenue recognition policies.



	Three months ended June 30, 2018
	East		Central		West		South		Corporate and Other		Total
Casino	$	57,499	$	62,963	$	13,181	$	14,949	$	—	$	148,592
Room	23,654		10,313		6,270		3,715		—		43,952
Food and beverage	10,246		10,711		7,343		2,676		—		30,976
Other	4,526		1,865		866		609		34		7,900
Net revenue	$	95,925	$	85,852	$	27,660	$	21,949	$	34	$	231,420

	Three months ended June 30, 2017
	East		Central		West		South		Corporate and Other		Total
Casino	$	56,595	$	53,255	$	13,576	$	17,469	$	—	$	140,895
Room	21,646		10,425		6,001		4,443		—		42,515
Food and beverage	9,189		10,368		7,381		2,763		—		29,701
Other	4,232		1,997		1,245		591		—		8,065
Net revenue	$	91,662	$	76,045	$	28,203	$	25,266	$	—	$	221,176



	Six months ended June 30, 2018
	East		Central		West		South		Corporate and Other		Total
Casino	$	112,236	$	127,015	$	28,812	$	31,444	$	—	$	299,507
Room	40,663		18,953		11,897		8,783		—		80,296
Food and beverage	19,129		20,812		14,559		5,244		—		59,744
Other	8,432		3,874		1,790		1,132		65		15,293
Net revenue	$	180,460	$	170,654	$	57,058	$	46,603	$	65	$	454,840

	Six months ended June 30, 2017
	East		Central		West		South		Corporate and Other		Total
Casino	$	114,041	$	107,789	$	28,169	$	36,370	$	—	$	286,369
Room	38,513		18,949		11,228		9,363		—		78,053
Food and beverage	17,211		18,934		14,689		5,364		—		56,198
Other	7,895		3,859		2,355		1,223		—		15,332
Management fee from related party	—		—		—		—		1,250		1,250
Net revenue	$	177,660	$	149,531	$	56,441	$	52,320	$	1,250	$	437,202

NOTE 20—SUBSEQUENT EVENTS

On July 31, 2018, the Company made an optional prepayment of principal on the Term Loan Facility in the amount of $25 million. The outstanding principal balance on the Term Loan Facility after giving effect to the optional prepayment is $63 million.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act). These statements involve known and unknown risks, uncertainties and other factors, which may cause our or our industry's actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some situations, you may be able to identify forward-looking statements by terms such as "may," "will," "might," "expect," "plan," "believe," "anticipate," "intend," "should," "could," "would," "estimate," "project," "continue," "pursue," or the negative thereof or comparable terminology, and may include (without limitation) information regarding our expectations, hopes or intentions regarding the future, including, but not limited to, statements regarding our operating or strategic plans, the Company’s planned real estate sale to GLP and planned merger with Parent and the anticipated timing thereof, expectations regarding, and adjustments to, the aggregate consideration relating to the transactions, the planned disposition of Tropicana’s Aruba assets, potential tax and change in control payments, our competition (including online gaming), financing, revenues, or tax benefits; our beliefs regarding the sufficiency of our existing cash and credit sources, including our Term Loan Facility (as defined herein) and cash flows from operating activities to meet our projected expenditures (including operating and maintenance capital expenditures) and costs associated with certain of our projects, our required capital expenditures pursuant to agreements we are party to, and our anticipated capital expenditures, estimated asset and liability values, risk of counterparty nonperformance and our legal strategies and the potential effect of pending legal claims on our business and financial condition, the effects of our completed tender offer and the partial pre-payments of our Term Loan Facility, and any financial or other information included herein based upon or otherwise incorporating judgments or estimates based upon future performance or events. Forward-looking statements involve certain risks and uncertainties, including but not limited to, the requirement to satisfy closing conditions to the Merger and the Real Estate Purchase as set forth in the Merger Agreement and the Real Estate Purchase Agreement, including, but not limited to, the receipt of certain regulatory and gaming approvals; the transfer or disposal of the Aruba operations; the outcome of any legal proceedings that may be instituted against the Company or others related to the transaction; and the ability to retain certain key employees of the Company, and actual results may differ materially from those discussed in each such statement. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different manner or extent or at a different time than we have described. All forward-looking statements are qualified in their entirety by reference to the areas of risk and uncertainty described elsewhere in this Quarterly Report on Form 10-Q, including "Part II, Item 1A—Risk Factors", as well as those discussed under "Part I, Item 1A—Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2017 and under "Part II, Item 1A—Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. Forward-looking statements represent our estimates and assumptions only as of the date of this report. We operate in a continually changing business environment and new risks emerge from time to time. Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are an owner and operator of regional casino and entertainment properties located in the United States and one hotel, timeshare and casino resort located on the island of Aruba. Our United States properties include two casinos in Nevada and one casino in each of Indiana, Louisiana, Mississippi, Missouri and New Jersey. We primarily cater to local and regional guests to provide a fun and exciting gaming environment with high quality and high value lodging, dining, retail and entertainment amenities. Our properties offer a broad array of gaming options specifically tailored for our patrons in each market. As of June 30, 2018, our properties collectively included approximately 402,000 square feet of gaming space with approximately 8,000 slot machines, approximately 270 table games and approximately 5,800 hotel rooms.

We view each property as an operating segment which we aggregate by region in order to present our reportable segments: (i) East, (ii) Central, (iii) West and (iv) South. As of June 30, 2018, our operations by region include the following:


•	East—Tropicana Casino and Resort, Atlantic City ("Tropicana AC") located in Atlantic City, New Jersey;


•	Central— Tropicana Evansville ("Tropicana Evansville") located in Evansville, Indiana; and Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis (collectively, "Lumière Place") located in Saint Louis, Missouri;


•	West—Tropicana Laughlin Hotel and Casino ("Tropicana Laughlin") located in Laughlin, Nevada; and MontBleu Casino Resort & Spa ("MontBleu") located in South Lake Tahoe, Nevada; and


•	South —Belle of Baton Rouge Casino and Hotel ("Belle of Baton Rouge") located in Baton Rouge, Louisiana; Trop Casino Greenville ("Tropicana Greenville") located in Greenville, Mississippi; and Tropicana Aruba Resort & Casino ("Tropicana Aruba") located near Eagle Beach, Aruba.

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The Company, through its wholly-owned subsidiary, TEI Management Services LLC, also provided management services to the Taj Mahal Casino Hotel property ("Taj Mahal") in Atlantic City through its sale in March 2017, and provides services to the closed Plaza Hotel in Atlantic City In addition, the Company, through our wholly-owned subsidiary, TropWorld Games LLC, operates an online social gaming site. The operating results of all other subsidiaries of the Company are reported under the heading of "Corporate and other" as they have been determined to not meet the aggregation criteria as separately reportable segments.

We are a Delaware corporation 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 (the "Plan") under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). In addition, we 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 Tropicana AC. The Company also acquired Columbia Properties Vicksburg ("CP Vicksburg"), JMBS Casino, LLC ("JMBS Casino") and CP Laughlin Realty, LLC ("CP Laughlin Realty"), all of which were part of the same plan of reorganization (the "Plan") as TEH (collectively, the "Predecessors"). 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 we acquired Adamar and several of the Predecessors' gaming properties and related assets. Adamar was not a party to the Predecessors' bankruptcy. Prior to the Effective Date, we 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.

Except where the context suggests otherwise, the terms "we," "us," "our," and "the Company" refer to Tropicana Entertainment Inc. and its subsidiaries.

Real Estate Purchase Agreement and Merger Agreement

Real Estate Purchase Agreement; Agreement and Plan of Merger

As further described in the Company's Current Report on Form 8-K filed with the Commission on April 16, 2018, on April 15, 2018, the Company entered into (i) a Real Estate Purchase Agreement (the “Real Estate Purchase Agreement”) with GLP Capital, L.P., a Pennsylvania limited partnership (“GLP”), and (ii) an Agreement and Plan of Merger (the “Merger Agreement”) with Eldorado Resorts, Inc., a Nevada corporation (“Parent”), Delta Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and GLP, pursuant to which, as more fully described below, the Company has agreed to sell its real estate assets to GLP and its gaming and hotel operations to Parent for an aggregate consideration of approximately $1.85 billion in cash, which amount is subject to adjustment, including for certain tax distributions payable by the Company under the Disaffiliation Agreement (as defined below).

Subject to the terms of the Real Estate Purchase Agreement, the Company has agreed to sell the real property assets held by its subsidiaries, other than the Company’s operations and subsidiaries located in Aruba (the “Aruba Operations”), to GLP (the “Real Estate Purchase”) for a purchase price of $1.21 billion. Immediately following the Real Estate Purchase, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation in the merger (the “Merger”). Following the consummation of the Merger, the Company will be a wholly-owned subsidiary of Parent.

Without taking into consideration any net proceeds associated with the distribution, transfer or disposition of the Aruba Operations, the Company has estimated that the adjusted aggregate merger consideration will be approximately $1.77 billion.

The Company has engaged an investment bank and begun a sale process with respect to the transfer or disposal of the Aruba operations. The transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement are expected to close in the second half of 2018. We cannot assure you that these transactions will be consummated in a timely manner, if at all.

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Disaffiliation Agreement

In connection with the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement, the Company, on behalf of itself and its subsidiaries, entered into a disaffiliation agreement with AEPC and Parent (the “Disaffiliation Agreement”), pursuant to which the parties thereto agreed to address certain tax and other matters relating to the separation of the Company from AEPC and its affiliates and to address the existing agreements between the Company and its subsidiaries, on the one hand, and AEPC and its affiliates, on the other, under the Tax Allocation Agreement that was entered into on September 16, 2017 (the “Tax Allocation Agreement”).

The Company is part of the AEPC affiliated group (as such term is defined in the Internal Revenue Code of 1986, as amended) and from and after September 16, 2017, AEPC and its subsidiaries filed consolidated federal tax returns with the Company and its subsidiaries. The Tax Allocation Agreement currently governs the relationship of the parties thereto with respect to tax preparation, tax payments and certain other matters. Pursuant to the terms of the Disaffiliation Agreement, as of the effective time of the transactions contemplated by the Merger Agreement, the Tax Allocation Agreement will terminate and the terms and conditions of the Disaffiliation Agreement will govern the relationship of the parties from and after the Effective Time with respect to the matters set forth therein.

Voting Agreement

In connection with the execution of the Real Estate Purchase Agreement and Merger Agreement, Parent, GLP, and AEPC and certain of its affiliates entered into a voting and support agreement (the “Voting Agreement”). Subject to the terms and conditions set forth in the Voting Agreement, AEPC and its affiliates agreed, among other things, to vote the shares of Common Stock over which they have voting power in favor of the adoption of the Real Estate Purchase Agreement, the Merger Agreement, the Real Estate Purchase, the Merger and the other transactions contemplated in connection therewith.

Results of Operations

Our financial results are highly dependent upon the number of customers that we attract to our facilities and the amounts those customers spend per visit. Additionally, our operating results may be affected by, among other things, overall economic conditions affecting the discretionary spending of our customers, competitive factors, gaming tax increases and other regulatory changes, the opening or acquisition of new gaming operations, our ability to reinvest in our properties, potential future exposure for liabilities of the Predecessors that we assumed, and general public sentiment regarding travel. We may experience significant fluctuations in our quarterly operating results due to seasonality and other factors. Historically, our operating results are the strongest in the third quarter and the weakest in the fourth quarter. In addition, weather and long-weekend holidays affect our operating results.

Casino revenues are one of our main performance indicators and account for a significant portion of our net revenues. Casino revenues represent the difference between wins and losses from gaming activities such as slot machines and table games. Key volume indicators include table games volumes and slot volumes, which refer to amounts wagered by our customers. Win or hold percentage represents the percentage of the amounts wagered by the customer that is won by the casino, which is not fully controllable by us, and recorded as casino revenue. Most of our revenues are cash-based, through customers wagering with cash or chips or paying for non-gaming services with cash or credit cards, and therefore are not subject to any significant or complex estimation. As a result, fluctuations in net revenues have a direct impact on cash flows from operating activities. Other performance indicators include hotel occupancy, which is a volume indicator for hotels, and the average daily rate, which is a price indicator for the amount customers paid for hotel rooms.

In addition to the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement and the other items described above, including the transfer or disposal of the Aruba operations, the following significant factors and trends should be considered in analyzing our operating performance:

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Sports Betting. In May 2018, the Supreme Court of the United States ruled that the Professional and Amateur Sports Protection Act ("PASPA") was unconstitutional. PASPA, which had been passed in 1992, provided a nationwide ban on state-sponsored sports betting, except for in states such as Nevada which allowed it under prior laws. Following the Supreme Court ruling, New Jersey approved legislation in June 2018, allowing sports betting in the state at

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Atlantic City casinos and racetracks throughout the state. Sports betting commenced at two casinos and one racetrack in New Jersey in June 2018.

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Atlantic City Market. Between January 2014 and October 2016, five Atlantic City casino hotels closed as a result of regional competitive market pressures and other factors. The Atlantic City gaming market experienced significant revenue declines in 2014 and 2015 due, in part, to these closures and market competition. In addition, in November 2016, the State of New Jersey commenced a takeover of certain Atlantic City local government operations under a law enacted in May 2016, which gave the State the ability to direct certain financial and operational matters on behalf of the city in an effort to stabilize and strengthen its financial situation. The State's ability to stabilize Atlantic City's finances and restructure its debt will be an important step toward improving the Atlantic City market.

Two of the closed Atlantic City casino properties re-opened under new ownership and management in late June 2018, which will increase competition and may impact the market shares of the existing casinos, including Tropicana AC. For the six months ended June 30, 2018, the Atlantic City gaming market, excluding internet gaming, declined by 4.4% from the same period of 2017, due primarily to severe winter weather in the region in the first quarter of 2018, which hindered travel. Internet gaming revenues, as reported for the Atlantic City market for the first six months of 2018, increased 14.9% over the same period of 2017.

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Acquisition of The Chelsea Hotel. In the third quarter of 2017, Tropicana AC acquired the property formerly known as The Chelsea Hotel in Atlantic City ("The Chelsea") from IEP Morris LLC, an affiliate of Icahn Enterprises. The Chelsea, which is located adjacent to the Tropicana AC facility, contains approximately 300 guest rooms, two restaurant locations, meeting room space, an outdoor pool and a valet parking garage. The additional hotel rooms provide Tropicana AC with the ability to accommodate a higher volume of overnight guests during peak business times such as weekends and the summer season. Tropicana AC renovated The Chelsea guest rooms and constructed a skywalk bridge that connects The Chelsea with the casino; construction was completed in May 2018.

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Tropicana AC Tax Appeal Settlement. On August 1, 2017, Tropicana AC, the City of Atlantic City and the New Jersey Department of Community Affairs entered into a Real Estate Tax Appeal Settlement Agreement (the "Settlement Agreement"), pursuant to which the parties agreed to settle Tropicana AC's 2015 and 2016 real estate tax appeals pending before the Tax Court of New Jersey (the "Pending Tax Appeals"). The Settlement Agreement, among other things, provided for refunds in the aggregate amount of approximately $36.8 million in respect of the Pending Tax Appeals and Tropicana AC's 2017 PILOT Payment. Tropicana AC received full payment of the refunds in early October 2017. In addition, the Settlement Agreement provides for a reduction in the assessed value of Tropicana AC for real estate tax purposes for calendar year 2015, including a corresponding reduction to Tropicana AC's PILOT CAP for each of calendar years 2018 through 2021, from approximately $19.8 million to approximately $8.4 million, and the expense associated with Tropicana AC's PILOT Payments for each of the calendar years 2018 through 2021. See Note 13 - Commitments and Contingencies, NJ PILOT Law in our Notes to Condensed Consolidated Financial Statements (unaudited), contained herein, for a further discussion of PILOT Payments and the PILOT CAP.

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Evansville Landbased Gaming. In 2015, the Indiana legislature amended the state’s casino legislation to allow operating riverboat casinos to move into landside casinos on their existing sites. Tropicana Evansville was the first to take advantage of the new law, announcing plans in November 2015 to develop a landside facility. After obtaining all necessary regulatory approvals, construction of the new facility commenced in July 2016 and was completed in October 2017, when it was opened to the public. The landside facility, which is located across the street from the original riverboat casino, is anchored on each end by Tropicana’s two hotels, and encompasses 79,000 square feet of enclosed space, including 45,000 square feet of casino floor, two new food and beverage outlets, an entertainment lounge and back of house space, and was built at a cost of approximately $50 million. The size of the casino in the new landside facility represents an increase of 7,000 square feet over the previous riverboat casino, which allowed the property to increase the number of slot machines by approximately 100 and the number of table games by three.


•	Baton Rouge smoking ban. In 2017, East Baton Rouge Parish passed an ordinance which bans smoking in bars and casinos located within the parish; the ban became effective on June 1, 2018. Belle of Baton Rouge and two competitor gaming properties are located in the area impacted by the smoking ban.

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Income taxes. On December 22, 2017, H.R.1, known as the Tax Cuts and Jobs Act (the “Act”), was signed into law. Among other things, the Act permanently lowers the corporate tax rate to 21% from the previous maximum rate of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate tax rate to 21%, the Company re-valued its deferred tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period of enactment.


•	Revenue Recognition. The Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) on January 1, 2018, using the full retrospective method. The most significant impact resulting from the adoption of this standard is a change in the accounting for and reporting of rewards earned and redeemed by our customers under

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our loyalty programs. The adoption of this standard resulted in a reclassification of revenue between gaming and non-gaming, and a change in the measurement of the loyalty program liabilities which results in an increase in the deferral of gaming revenues. See Note 2 - Summary of Significant Accounting Policies, Adoption of New Accounting Standards to the accompanying consolidated financial statements for additional information regarding the impact of the adoption of this standard.

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Table games hold percentages. Casino revenues can vary because of table games hold percentages and differences in the odds for different table games. A variety of factors may impact table games hold, including variances in the amount of high end play. For the six months ended June 30, 2018 and 2017, the Company's total table games hold was 18.2% and 17.7%, respectively. This hold percentage is not necessarily indicative of results that can be expected for future periods.

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Debt and Interest Expense. In November 2013, we entered into the credit facilities (the "Credit Facilities"), which consist of (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million issued at a discount of 0.5% (the "Term Loan Facility") and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the "Revolving Facility"). Commencing on December 31, 2013, the Term Loan Facility requires quarterly principal payments of $750,000 through September 2020 with the remaining outstanding amounts due on November 27, 2020, the maturity date. The obligations under the Term Loan Facility accrue interest at a floating rate which was 5.1% as of June 30, 2018. A portion of the net proceeds from the Term Loan Facility was used to repay in full the amounts outstanding under the then-existing term loan facility which totaled approximately $172.4 million in repaid principal, accrued and unpaid interest. The Revolving Facility was terminated by the Company effective March 31, 2017, in accordance with the terms of the Credit Agreement. There were no amounts outstanding under the Revolving Facility at the time of the termination.

In September and December 2017, the Company made optional prepayments of principal on the Term Loan Facility in the amounts of $125 million and $25 million, respectively. In addition, the Company made optional prepayments of principal on the Term Loan Facility in the amount of $50 million in May 2018 and $25 million in July 2018. The outstanding balance on the Term Loan Facility as of July 31, 2018, after giving effect to the optional prepayments, is $63 million. In accordance with the terms of the Term Loan Facility, each optional prepayment was applied first to the next four quarterly mandatory principal payments, and second, to reduce on a pro-rata basis, the remaining scheduled principal payments. As a result of the optional prepayments, the Company wrote off a portion of the associated debt issuance costs and discount, totaling $1.4 million in 2017 and $0.4 million during the six months ended June 30, 2018.

Our interest expense was $3.3 million and $6.0 million for the six months ended June 30, 2018 and 2017, respectively, which includes amortization of the related debt discounts and debt issuance costs of $0.3 million and $0.5 million for the six months ended June 30, 2018 and 2017, respectively, offset by less than $0.1 million and approximately $0.4 million of capitalized interest in the six months ended June 30, 2018 and 2017, respectively.

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Insurance and other recoveries. In 2016, we filed a property damage and business interruption claim with our insurance carrier related to our HoteLumière room renovation project that commenced in July. In December 2016 we received insurance proceeds of $1.0 million toward the property damage claim, which was recorded as a gain in 2016. In April 2017 we received additional insurance proceeds of $1.3 million, representing the balance of the property damage claim. The business interruption claim was paid in December 2017.

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Three months ended June 30, 2018 compared to three months ended June 30, 2017

The following table sets forth certain information concerning our results of operations (dollars in thousands):



	Three months ended June 30,
	2018			2017
Revenues:
East	$	95,925		$	91,662
Central	85,852			76,045
West	27,660			28,203
South	21,949			25,266
Corporate and other	34			—
Net revenues	$	231,420		$	221,176
Operating income (loss):
East	$	15,479		$	11,185
Central	17,856			13,692
West	4,671			2,728
South	101			2,180
Corporate and other	(7,389		)	(5,275		)
Total operating income	$	30,718		$	24,510
Operating income margin(a):
East	16.1		%	12.2		%
Central	20.8		%	18.0		%
West	16.9		%	9.7		%
South	0.5		%	8.6		%
Total operating income margin	13.3		%	11.1		%

(a)Operating income margin is operating income as a percentage of net revenues.

The following table presents detail of our revenues (in thousands):



	Three months ended June 30,
	2018		2017
Revenues:
Casino	$	148,592	$	140,895
Room	43,952		42,515
Food and beverage	30,976		29,701
Other	7,900		8,065
Net revenues	$	231,420	$	221,176

Revenues

In the East region, net revenues were $95.9 million for the three months ended June 30, 2018, an increase of $4.3 million, or 4.7%, when compared to the three months ended June 30, 2017. Tropicana AC's net revenues comprised approximately 41% of the Company's total net revenues for each of the three months ended June 30, 2018 and 2017. Tropicana AC's gross gaming revenue (including internet gaming revenue) for the three months ended June 30, 2018 increased 2.4% over revenue for the three months ended June 30, 2017, as compared to the 0.5% increase in gross gaming revenues (including internet gaming revenue) in the total Atlantic City market, as reported, for the second quarter of 2018 in comparison to the same period of 2017. The increase in total gaming revenues at Tropicana AC resulted from efforts to leverage capital improvements as well as marketing efforts to drive new and inactive customers to visit the property. Improvements completed during the quarter included the completion of the bridge connecting The Chelsea hotel, which was acquired in July 2017, to Tropicana AC, as well as renovation of The Chelsea hotel rooms and opening of two new food and beverage outlets in the Chelsea. The improvement in gaming volumes during the second quarter of 2018 over the prior year period resulted from a 3.1% increase in slot machine volumes, and slot revenues increased 3.3% for the period. Although table games volumes decreased 1.4% during the quarter over the prior year period, the table hold for the three months ended June 30, 2018 was 15.8%, compared to 14.7% in the same period of 2017, which resulted in a 5.6% improvement in table games revenue for the current quarter over the prior year's quarter. Higher non-gaming revenues, including hotel, food, beverage and entertainment, resulting from the increased customer volumes at the property, also contributed to the increase in net revenues during the second quarter of 2018 compared

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to the same period of 2017. The hotel occupancy and average daily room rate was 80% and $136, respectively, for the three months ended June 30, 2018, compared to 90% and $127, respectively, for the three months ended June 30, 2017. The hotel occupancy percentage decreased due to having additional rooms available as a result of the acquisition of The Chelsea hotel. However, the total number of rooms occupied increased 1.7% in the second quarter of 2018 over the second quarter of 2017, contributing to higher hotel revenues for the period.

In the Central region, the opening of the new land-based casino at Tropicana Evansville in October 2017 and continued marketing efforts to increase customer volumes at Lumière Place combined to contribute to an $9.8 million increase in net revenues, to $85.9 million for the three months ended June 30, 2018, compared to $76.0 million for the three months ended June 30, 2017. Higher levels of gaming volumes at Lumière Place were driven by increased free play offers for table games and slots, as well as expanded operating hours at the buffet and more food offers to gaming customers. Slot volumes in the Central region increased 15.5% and slot revenues increased 16.2%, or $9.4 million in the second quarter of 2018 as compared to the same period of 2017. Table games volume in the Central region increased 18.9% in the second quarter of 2018 over the same period of 2017, and although the table games hold of 20.1% in the second quarter of 2018 was lower than the 21.2% hold in the same period of 2017, table games revenue increased 12.6% for the second quarter of 2018 compared to the same period of 2017. Hotel occupancy in the region decreased slightly during the second quarter of 2018, to 81% from 82% in the same period of 2017, while the average room rate increased to $155 from $152 during the comparable periods.

In the West region, net revenues were $27.7 million for the three months ended June 30, 2018, a decrease of $0.5 million, or 1.9%, compared to the three months ended June 30, 2017. Total gaming revenues in the region during the second quarter of 2018 declined approximately 2.2% from the prior year period, driven primarily by a 5.1% reduction in slot handle and a 2.3% decrease in table games drop. However, the table games hold percentage in the second quarter of 2018 was 19.6%, compared to 17.2% in the second quarter of 2017, resulting in an increase in table games revenue of 11.7% for the second quarter of 2018 compared to the same period of 2017. The decline in slot volumes was due in part to construction activities at Tropicana Laughlin, which has disrupted the bingo operation at the property and impacted cross-over slot machine play. However, although gross slot revenue in the region during the quarter declined by approximately 3.5% from the prior year quarter, the reduction was partially offset by a reduced amount of free slot play redeemed by customers. Non-gaming revenues at Tropicana Laughlin reflected a reduction from the prior year due to the outsourcing of retail operations to a third party; as a result, retail revenue and related expenses are eliminated, with rental income recorded based on contractual terms. Hotel revenues increased 4.3% in the region, due to a higher occupancy and average daily room rate of 61% and $56, respectively, in the second quarter of 2018 compared to 60% and $55, respectively, in the second quarter of 2017.

In the South region, net revenues were $21.9 million for the three months ended June 30, 2018, a decrease of $3.3 million, or 13.1%, compared to the three months ended June 30, 2017. Slot volumes for the South region decreased 10.7% in the three months ended June 30, 2018, compared to the prior year period, resulting in a 10.5% decline in slot revenue in the region. The decline in slot volumes and revenue in the second quarter of 2018 as compared to the same period of the prior year was primarily evident at the Belle of Baton Rouge, where a full smoking ban in casinos went into effect on June 1, 2018, combined with a very slow economy in the area. However, table games volume in the region during the second quarter of 2018 increased 18.5%, which resulted in an increase in table games revenue of $0.3 million, or 19.3%, when compared to the second quarter of 2017. Timeshare sales at the Tropicana Aruba were $0.9 million and $1.0 million in the second quarter of 2018 and 2017, respectively. The occupancy rate at our properties in the South region was 66% for the three months ended June 30, 2018 compared to 69% for the same period of 2017, with a 14.9% decline in the occupancy rate at the Belle of Baton Rouge partially offset by an improved occupancy rate at Tropicana Aruba. The average daily room rate for the South region was $83 and $95 for the three months ended June 30, 2018 and 2017, respectively. In the second quarter of 2017, hotel occupancy and the average daily rate at the Belle of Baton Rouge were positively impacted by the property's sponsorship of a major city-wide, multiple month event, which increased transient and convention room business.

Revenues for Tropicana Entertainment Corporate and other division in the second quarter of 2018 of approximately $34,000 consists of revenue earned from our online social gaming site. Tropicana shares in the excess of revenue over expenses with the operator of the site, which became operational in 2015. No revenue was earned by Tropicana from the operation of the site in the second quarter of 2017.

Operating Income

In the East region, Tropicana AC reported operating income for the three months ended June 30, 2018 of $15.5 million, a $4.3 million increase over the operating income in the three months ended June 30, 2017. The improvement in operating results in the East region was primarily driven by the increase in net revenues, as discussed previously. In addition, although certain operating expenses such as gaming taxes and promotional costs, as well as depreciation expense increased during the second quarter of 2018 over the second quarter of 2017, real estate tax expense declined approximately $3.0 million during the comparable periods as a result of the real estate tax appeal settlement in the third quarter of 2017.

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In the Central region, the operating income for the three months ended June 30, 2018 was $17.9 million, a $4.2 million increase over the three months ended June 30, 2017. The improvements in revenue were partially offset by higher volume-driven operating expenses, primarily gaming taxes, labor and promotional costs, at both properties, combined with an increase in depreciation expense in the region of $0.3 million during the second quarter of 2018 as compared to the second quarter of 2017.

In the West region, the operating income for the three months ended June 30, 2018 was $4.7 million, an increase of $1.9 million compared to the three months ended June 30, 2017. Although net revenues in the region declined slightly during the second quarter of 2018 as compared to the same period of 2017, as previously discussed, decreased operating expenses, primarily gaming taxes and expenses associated with the prior retail operations, offset the decline in net revenues.

In the South region, operating income for the three months ended June 30, 2018 was $0.1 million, a decrease of $2.1 million from the operating income for the three months ended June 30, 2017. This decrease was attributable to the lower net revenues during the quarter, as previously discussed, partially offset by lower operating expenses, primarily gaming taxes, during the second quarter of 2018 as compared to the same period of 2017.

The Corporate and other operating loss, which includes the results of all other subsidiaries of the Company, was $7.4 million for the three months ended June 30, 2018, reflecting a larger loss than during the three months ended June 30, 2017 primarily due to expenses associated with the Real Estate Purchase Agreement and Merger Agreement entered into in April 2018.

Interest Expense

Interest expense for the three months ended June 30, 2018 and 2017 was $1.6 million and $3.0 million, respectively. The reduction in interest expense was primarily due to the lower outstanding principal balance resulting from the optional prepayments, totaling $200 million, made in the second half of 2017 and in May 2018. The interest expense on our Term Loan Facility accrues at a floating rate, which was 5.1% per annum as of June 30, 2018. Cash paid for interest, net of interest capitalized, was $1.5 million and $3.7 million for the three months ended June 30, 2018 and 2017, respectively. Interest expense also includes $0.2 million and $0.3 million of amortization of debt issuance costs and discounts for the three months ended June 30, 2018 and June 30, 2017, respectively.

Income Taxes

Income tax expense was $7.1 million and $8.3 million, for the three months ended June 30, 2018 and 2017, respectively, and our effective income tax rate was 24.6% and 38.3% for the same periods, respectively. On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. Among other things, the Act permanently lowers the corporate tax rate to 21% from the previous maximum rate of 35%, effective for tax years including or commencing January 1, 2018. The difference between the federal statutory rate of 21.0% and 35%, respectively, and the effective tax rates for the three months ended June 30, 2018 and 2017 was primarily due to disallowed foreign losses, state income taxes (net of federal benefit), valuation allowances and other permanent differences.

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Six months ended June 30, 2018 compared to six months ended June 30, 2017

The following table sets forth certain information concerning our results of operations (dollars in thousands):



	Six months ended June 30,
	2018			2017
Revenues:
East	$	180,460		$	177,660
Central	170,654			149,531
West	57,058			56,441
South	46,603			52,320
Corporate and other	65			1,250
Net revenues	$	454,840		$	437,202
Operating income (loss):
East	$	23,883		$	21,223
Central	37,038			29,249
West	9,345			5,787
South	2,577			6,900
Corporate and other	(13,339		)	(9,054		)
Total operating income	$	59,504		$	54,105
Operating income margin(a):
East	13.2		%	11.9		%
Central	21.7		%	19.6		%
West	16.4		%	10.3		%
South	5.5		%	13.2		%
Total operating income margin	13.1		%	12.4		%

(a)Operating income margin is operating income as a percentage of net revenues.

The following table presents detail of our revenues (in thousands):



	Six months ended June 30,
	2018		2017
Revenues:
Casino	$	299,507	$	286,369
Room	80,296		78,053
Food and beverage	59,744		56,198
Other	15,293		15,332
Management fee from related party	—		1,250
Net revenues	$	454,840	$	437,202

Revenues

In the East region, net revenues were $180.5 million for the six months ended June 30, 2018, an increase of $2.8 million, or 1.6%, when compared to the six months ended June 30, 2017. Based on published market data, the Atlantic City market experienced year-over-year decline in gross casino win (including internet gaming win) of 2.6% for the six months ended June 30, 2018. At Tropicana AC, total gross casino win decreased 1.9% during the six months ended June 30, 2018 as compared to the same period of 2017. The decline in gaming revenues in the Atlantic City market and at the Tropicana AC was primarily due to severe winter weather during the first quarter of 2018, which has been partially offset by improvements during the second quarter of 2018. Slot and table games volumes at Tropicana AC declined 1.9% and 6.9%, respectively, for the year to date period ended June 30, 2018 compared to same period of the prior year. The decrease in gaming revenue at Tropicana AC was offset by improvements in non-gaming revenues, such as hotel, food and beverage, and entertainment revenue. Contributing to the improvements in non-gaming revenues were renovation projects completed in the first half of 2018 and 2017, including the opening of two new restaurants, the renovation and relocation of the coffee shop and buffet, as well as the acquisition of The Chelsea hotel in the third quarter of 2017, and the completion of the bridge connecting The Chelsea hotel to Tropicana AC in the second quarter of 2018. The average daily room rate was $127 and $123 for the six months ended June 30, 2018 and 2017, respectively. The occupancy rate was 77% for the six months ended June 30, 2018 compared to 83% for the six months ended June 30, 2017. The hotel occupancy percentage decreased due to having additional rooms available as a result

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of the acquisition of The Chelsea hotel in July 2017. However, the total number of rooms occupied increased 1.3% during the six months ended June 30, 2018 over the same period of 2017, contributing to higher hotel revenues for the period.

In the Central region, net revenues were $170.7 million for the six months ended June 30, 2018, a 14.1%, or $21.1 million, increase over net revenues of $149.5 million for the six months ended June 30, 2017. The opening of the land-based casino operation at Tropicana Evansville in October 2017 and the completion of a hotel renovation project in the first quarter of 2017 at Lumière Place, together with continued marketing efforts to increase customer volumes at the property, contributed to the improvement in net revenues in the Central region. Slot volumes for the six months ending June 30, 2018 increased 16.6% over the same period of 2017, while table game volumes increased 19.0% in the comparable periods in the Central region. The increase in slot volumes resulted in an 18.5% increase in slot revenues for the six months ended June 30, 2018 over the same period of 2017. Table games revenue increased 14.5% in the year to date period ending June 30, 2018 over the prior year period; the table games hold for the six months ended June 30, 2018 was 19.7% compared to 20.5% for the same period of 2017. The occupancy rate in the Central region for the six months ended June 30, 2018 and 2017 was 78% and 80%, respectively, while the average daily room rate in the region was $146 and $145, respectively. Other non-gaming revenues, such as food and beverage revenues, also reflected increases for the six months ended June 30, 2018 over the prior year period due to the increase customer volumes at both properties in the Central region.

In the West region, net revenues were $57.1 million for the six months ended June 30, 2018, an increase of $0.6 million, compared to the six months ended June 30, 2017. Although gaming volumes in the West region for the six months ended June 30, 2018 reflected a 2.2% decline from the same period of 2017, the table games hold percentage in 2018 was 20.5%, an increase from the 2017 table games hold of 18.3%. As a result total table games revenue in the West region for the six months ended June 30, 2018 increased 11.6% over the same period of the prior year, offsetting the 1.0% decline in slot revenues during the period. Hotel revenues in the West region for the six months ended June 30, 2018 also increased 5.7%, driven by higher occupancy of 61% compared to 59% in the prior year period, and a slight increase in the average room rate, to $54 from $52 in the prior year period. Non-gaming revenues at Tropicana Laughlin reflected a reduction from the prior year due to the outsourcing of retail operations to a third party; as a result, retail revenue and related expenses are eliminated, with rental income recorded based on contractual terms.

In the South region, net revenues were $46.6 million for the six months ended June 30, 2018, a $5.7 million decrease from the six months ended June 30, 2017. Table volumes in the region increased by 13.5% in the first six months of 2018, driven in part by increased marketing efforts and free play offers. The table games hold for the six months ended June 30, 2018 was 18.9%, in line with the 19.0% in the same period of 2017. As a result, table games revenue increased 13.0%, or $0.5 million, in the six months ended June 30, 2018 over the same period of 2017. However, slot volumes in the region declined 11.0% in the first six months of 2018 from the same period of 2017, primarily evident at the Belle of Baton Rouge, which has been impacted by economic pressures in the region, as well as the full smoking ban in casinos which went into effect on June 1, 2018, and an unfavorable comparison to 2017 when the property sponsored a major city wide, multiple month event, which impacted visitation. Non-gaming revenues at Tropicana Aruba increased, driven in part by timeshare sales of $2.0 million for the first six months of 2018 compared to $1.8 million in the comparable 2017 period, as well as higher hotel and food revenues as a result of increased transient business at the property. The hotel occupancy rate at our properties in the South region was 65% and 71% for the six months ended June 30, 2018 and 2017, respectively, while the average daily room rate for the South was $98 for each of the six months ended June 30, 2018 and 2017.

Revenues for Tropicana Entertainment Corporate and other division in the six months ended June 30, 2018 of approximately $65,000 consists of revenue earned from our online social gaming site. Tropicana shares in the excess of revenue over expenses with the operator of the site, which became operational in 2015. No revenue was earned by Tropicana from the operation of the site in the first six months of 2017. Revenue for the six months ended June 30, 2017 represents the management fee earned as a result of our management of the Taj Mahal, which was sold in March 2017.

Operating Income

In the East region, operating income for the six months ended June 30, 2018 was $23.9 million, as compared to operating income of $21.2 million for the first six months of 2017. The increase in operating income was due primarily to the higher net revenues, as previously discussed. In addition, although depreciation and amortization expense increased approximately $2.9 million during the six months ended June 30, 2018 over the same period of 2017, real estate tax expense decreased approximately $6.0 million during the comparable periods as a result of the real estate tax appeal settlement in the third quarter of 2017.

In the Central region, the operating income for the six months ended June 30, 2018 was $37.0 million, a $7.8 million improvement over the six months ended June 30, 2017, primarily driven by the increase in net revenues, as previously discussed, partially offset by higher operating expenses such as gaming taxes, payroll costs and promotional expenses.

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Operating income for the six months ended June 30, 2017 also includes the $1.3 million gain on insurance proceeds in the first quarter of the year.

In the West region, the operating income for the six months ended June 30, 2018 was $9.3 million, a $3.6 million increase compared to the six months ended June 30, 2017, primarily due to improvement in net revenues in the region during the period, combined with lower expenses such as cost of sales and other expenses associated with the prior retail operations, which was outsourced at the end of 2017.

In the South region, operating income for the six months ended June 30, 2018 was $2.6 million, a $4.3 million decrease compared to the six months ended June 30, 2017. Although net revenues in the region reflected a decrease during the period, as previously discussed, operating expenses also reflected reductions which partially offset the decline in net revenues, primarily evident in lower gaming taxes and other operating costs.

The Corporate and other operating loss, which includes the results of all other subsidiaries of the Company, was $13.3 million for the six months ended June 30, 2018, compared to an operating loss of $9.1 million for the six months ended June 30, 2017. The higher loss was due to management fee income in 2017 related to the TEI Management Services LLC agreement to manage the Taj Mahal, which was recognized in the first quarter of 2017, together with expenses in 2018 associated with the Real Estate Purchase Agreement and Merger Agreement entered into in April 2018.

Interest Expense

Interest expense for the six months ended June 30, 2018 and 2017 was $3.3 million and $6.0 million, respectively. The interest expense for the six months ended June 30, 2018 decreased compared to the prior year period primarily due to the lower outstanding principal balance resulting from the optional prepayments, totaling $200 million, made in the second half of 2017 and in May 2018. Interest on our Term Loan Facility accrues at a floating rate, which was 5.1% per annum as of June 30, 2018, compared to 4.3% as of June 30, 2017. Cash paid for interest, net of interest capitalized, was $3.1 million and $6.5 million for the six months ended June 30, 2018 and 2017, respectively, reflecting an increase primarily due to the reduction in the outstanding principal balance as a result of the optional prepayments. Interest expense also includes approximately $0.3 million and $0.5 million of amortization of debt issuance costs and discounts for the six months ended June 30, 2018 and 2017, respectively.

Income Taxes

Income tax expense was $13.9 million and $24.4 million for the six months ended June 30, 2018 and 2017, respectively, and the Company's effective income tax rates were 24.8% and 38.3%, respectively. On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. Among other things, the Act permanently lowered the corporate tax rate to 21% from the previous maximum rate of 35%, effective for tax years including or commencing January 1, 2018. The difference between the federal statutory rate of 21% and 35%, respectively, and the effective tax rates for the six months ended June 30, 2018 and June 30, 2017 was primarily due to disallowed foreign losses, state income taxes (net of federal benefit), valuation allowances and other permanent differences.

Termination Fee from Related Party

Concurrently with the sale of the Taj Mahal to a third party and the surrender of TTMA's New Jersey casino license on March 31, 2017, TTMA exercised its right to terminate the Management Agreement without Cause (as defined in the Management Agreement), at which time TEI Management Services LLC was paid a termination fee of $15 million pursuant to the provisions of the Management Agreement.

Liquidity and Capital Resources

Our cash flows are and will continue to be affected by a variety of factors, many of which are outside of our control, including regulatory restrictions, competition, financial markets and other general business conditions. We believe that we will have sufficient liquidity through available cash, credit facilities and cash flow from our properties to fund our cash requirements and capital expenditures for our normal operating activities for at least twelve months. However, we cannot provide assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements and other obligations as our results for future periods are subject to numerous uncertainties that may result in liquidity problems that could affect our ability to meet our obligations while attempting to meet competitive pressures or adverse economic conditions.

Our material cash requirements for our existing properties for 2018 include (i) mandatory interest payments related to our Term Loan Facility of approximately $5.4 million, (ii) maintenance capital expenditures expected to be approximately $43 million, (iii) growth capital expenditures expected to be approximately $25 million, (iv) minimum lease payments under our

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operating leases of approximately $6.8 million. The majority of our planned capital expenditures are discretionary and we may decide to spend more or less than the amounts described above.

The following table summarizes our cash flows (in thousands):



	Six months ended June 30,
	2018			2017
Cash Flow Information:
Net cash provided by operating activities	$	90,522		$	81,474
Net cash used in investing activities	(45,103		)	(54,577		)
Net cash used in financing activities	(50,000		)	(1,500		)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(4,581	)	$	25,397

During the six months ended June 30, 2018, our operating activities provided $90.5 million in cash. Cash paid for interest, net of interest capitalized, was $3.1 million and $6.5 million for the six months ended June 30, 2018 and 2017, respectively. Cash paid for interest was lower in 2018 from 2017 primarily due to the lower outstanding principal balance on the Term Loan Facility. Net cash provided by operating activities for the six months ended June 30, 2018 improved from the prior year period primarily due to increased revenues and operating income; combined with improved cash from operations after the elimination of non-cash expenses such as depreciation, amortization and changes in investment reserves.

During the six months ended June 30, 2018, our investing activities used $45.1 million in cash. Net cash used in investing activities during the six months ended June 30, 2018 primarily consisted of $46.4 million for capital expenditures. Net cash used in investing activities during the six months ended June 30, 2017 consisted primarily of $55.4 million for capital expenditures and $8.1 million for the acquisition of the Taj Mahal's customer database and other intellectual property, partially offset by insurance proceeds of $1.3 million and Approved CRDA Project Funds received of $6.4 million. Capital expenditures are expenditures necessary to keep our existing properties at their current levels, typically replacement items due to the normal wear and tear of our properties and equipment as a result of use and age, or expenditures for the growth of our business.

During the six months ended June 30, 2018, our financing activities used $50 million related to an optional prepayment on the Term Loan Facility. Net cash used by financing activities for the six months ended June 30, 2017 consisted of the principal payments on the Term Loan Facility of $1.5 million.

Credit Facilities

On November 27, 2013, we entered into (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million, issued at a discount of 0.5% (the “Term Loan Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”). Commencing on December 31, 2013, the Term Loan Facility is amortized in equal quarterly installments of $750,000, with any remaining balance payable on the final maturity date of the Term Loan Facility, which is November 27, 2020.

Approximately $172.4 million of the net proceeds from the Credit Facilities were used to repay in full the principal amounts outstanding under our then-existing credit facilities, which were terminated effective as of November 27, 2013. A portion of the proceeds from the Credit Facilities was also used to finance our acquisition of Lumière Place in April 2014.

The Term Loan Facility accrues interest, at our option, at a per annum rate equal to either (i) the LIBO Rate (as defined in the Credit Agreement) (subject to a 1.00% floor) plus an applicable margin equal to 3.00%, or (ii) the alternate base rate (as defined in the Credit Agreement) (subject to a 2.00% floor) plus an applicable margin equal to 2.00%; such that in either case, the applicable interest rate shall not be less than 4.0%. The interest rate increases by 2.00% following certain defaults. As of June 30, 2018, the interest rate on the Term Loan Facility was 5.1%.

At our election and subject to certain conditions, including a maximum senior secured net leverage ratio of 3.25:1.00, the amount available under the Credit Facilities may be increased, which increased amount may be comprised of additional term loans and revolving loans.

The Term Loan Facility may be prepaid at our option at any time without penalty (other than customary LIBO Rate breakage fees). In September and December 2017, the Company made optional prepayments of principal on the Term Loan Facility in the amounts of $125 million and $25 million, respectively. In addition, the Company made optional prepayments of principal on the Term Loan Facility in the amount of $50 million in May 2018 and $25 million in July 2018. Under the terms

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of the Term Loan Facility, the optional prepayments are applied first to the next four quarterly mandatory principal payments, and second, to reduce on a pro-rata basis, the remaining scheduled principal payments. As a result of the optional prepayments, the Company wrote off a portion of the debt issuance costs and discount totaling $1.4 million in 2017 and $0.4 million during the six months ended June 30, 2018.

We are required to make mandatory payments of the Credit Facilities with (i) net cash proceeds of certain asset sales (subject to reinvestment rights), (ii) net cash proceeds from certain issuances of debt and equity (with certain exceptions), (iii) up to 50% of annual excess cash flow (as low as 0% if our total leverage ratio is below 2.75:1.00), and (iv) certain casualty proceeds and condemnation awards (subject to reinvestment rights).

Our interest expense for the six months ended June 30, 2018 and 2017 was $3.3 million and $6.0 million, respectively, which includes $0.3 million and $0.5 million of amortization of the related debt discounts and debt issuance costs for the six months ended June 30, 2018 and 2017, respectively.

In connection with the transactions contemplated by the Merger Agreement, it is currently anticipated that the Term Loan Facility will be repaid on or before the Closing Date (as defined in the Merger Agreement).

Stock Repurchase Program

On July 31, 2015 our Board of Directors authorized the repurchase of up to $50 million of our outstanding common stock with no set expiration date. On February 22, 2017, our Board of Directors authorized the repurchase of an additional $50 million of our outstanding stock, for the repurchase of an aggregate amount of up to $100 million of our outstanding common stock.

In connection with the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement (see Note 1 - Merger Agreement) on April 15, 2018, the Board of Directors terminated the Stock Repurchase Program. There were no repurchases of our stock in 2018, prior to the termination of the Stock Repurchase Program. There were no repurchases of our stock under the Stock Repurchase Program during the six months ended June 30, 2017.

Tender Offer

On June 23, 2017, the Company and Icahn Enterprises Holdings L.P., a Delaware limited partnership ("Icahn Enterprises") commenced a tender offer to purchase severally, and not jointly, up to 5,580,000 shares of common stock in the aggregate, at a price not greater than $45.00 nor less than $38.00 per share, by means of a "modified" Dutch auction, on the terms and subject to the conditions set forth in the Offer to Purchase dated June 23, 2017 and the related Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constituted the "Offer"). The Offer was completed on August 9, 2017. The Offer was made severally, and not jointly, by the Company and Icahn Enterprises and upon the terms and subject to the conditions of the Offer, first, the Company severally, and not jointly, purchased 800,000 of the shares properly tendered, and second, Icahn Enterprises severally, and not jointly, purchased the remaining shares properly tendered, totaling 2,121,712 shares. The shares purchased by the Company in this Offer were purchased under the Company's Stock Repurchase Program. All shares purchased by the Company and Icahn Enterprises were purchased at the maximum offer price per share of $45. As a result of the completion of the Offer, as of June 30, 2018, Mr. Icahn indirectly controlled approximately 83.9% of the voting power of the Company’s Common Stock.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies

There have been no material changes to our critical accounting policies during the six months ended June 30, 2018 compared to those reported in our Annual Report on Form 10-K for the year ended December 31, 2017.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our Term Loan Facility that bears interest based on floating rates. Based on our outstanding borrowings as of June 30, 2018, assuming a 1 (one) percentage point increase in the interest rate, which was approximately 5.1% annually as of June 30, 2018, our annual interest cost would increase by approximately $0.9 million.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our Chief Executive Officer (principal executive officer) and Executive Vice President, Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are effective as of June 30, 2018. This conclusion is based on an evaluation conducted under the supervision and with the participation of our management, including the principal executive officer and principal financial officer. Disclosure controls and procedures include, without limitation, controls and procedures which ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

Changes in Internal Control Over Financial Reporting

During the quarter ended June 30, 2018, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our previously reported legal proceedings, refer to "Item 3-Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material developments with respect to the legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2017, except as discussed in Note 13 - Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

"Item 1A.—Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2017 includes a discussion of our risk factors. Except for the risk factor noted below, there have been no other material changes to our risk factors during the six months ended June 30, 2018 as compared to those risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2017. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

The consummation of the transactions contemplated by the Merger Agreement and the Real Estate Purchase Agreement is contingent upon the satisfaction of a number of conditions, including certain regulatory and gaming approvals and the disposal of the Aruba operations, that may not be satisfied or completed on a timely basis, if at all. Failure to complete the transactions contemplated by the Merger Agreement and the Real Estate Purchase Agreement could negatively impact our stock price, business, financial condition, results of operations or prospects.

The closing of the transactions contemplated by the Real Estate Purchase Agreement and the Merger Agreement are subject to conditions to closing which are not wholly within the Company’s control, including, among other things, the receipt of certain regulatory and gaming approvals, and the disposal of the Aruba Operations. We cannot assure you that each of the conditions will be satisfied or waived in a timely manner, if at all, and the Merger may be delayed or not consummated. If the conditions are not satisfied or waived in a timely manner and the Merger is delayed or not consummated, we may lose some or all of the intended or perceived benefits of the Merger, which could cause our stock price to decline and harm our business.

We are also subject to additional risks in connection with the Merger, including, without limitation: (1) the occurrence of an event or circumstance that could give rise to the payment of a termination fee by us of $92.5 million, (2) the outcome of any legal proceedings that may be instituted against us, our directors or others relating to the transactions contemplated by the Merger Agreement, (3) the failure of the Merger to close for any reason, including due to the failure to obtain the necessary regulatory and gaming approvals, (4) the restrictions imposed on our business, properties and operations pursuant to the affirmative and negative covenants set forth in the Merger Agreement and the potential impact of such covenants on our business, (5) the risk that the Merger will divert management’s attention resulting in a potential disruption of our current business plan, and (6) potential difficulties in employee retention arising from the Merger.

If any of these risks materialize, our stock price may decline and our business, financial conditions, results of operations or prospects could be materially harmed.

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ITEM 6. EXHIBITS

(a) Exhibits



Exhibit Number		Exhibit Description
2.1		First Amended Joint Plan of Reorganization of Tropicana Entertainment, LLC and Certain of its Debtor Affiliates Under Chapter 11 of the Bankruptcy Code. (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)

2.2		Amended and Restated Purchase Agreement, dated as of November 20, 2009, among Adamar of New Jersey, Inc., Manchester Mall, Inc., the Honorable Gary S. Stein, Tropicana Entertainment, LLC, Ramada New Jersey Holdings Corporation, Atlantic-Deauville, Inc., Adamar Garage Corporation, Ramada New Jersey, Inc., Credit Suisse, Tropicana Entertainment Inc., Tropicana Atlantic City Corp., and Tropicana AC Sub Corp. (Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K; the Registrant will furnish supplementally a copy of the omitted schedules to the Commission upon request.) (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)

2.3		Agreement and Plan of Merger, dated as of April 15, 2018, by and among Eldorado Resorts, Inc., Delta Merger Sub, Inc., GLP Capital, L.P. and Tropicana Entertainment Inc. (Incorporated by reference to exhibit 2.1 of the Company's Current Report on Form 8-K dated April 16, 2018)

3.1		Amended and Restated Certificate of Incorporation of Tropicana Entertainment Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)

3.2		Second Amended and Restated Bylaws of Tropicana Entertainment Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated January 7, 2011)

4.1		Specimen Certificate for shares of Common Stock, par value $0.01 per share, of the Registrant. (Incorporated by reference to the Company's Post-Effective Amendment No. 1 to Form 10 dated January 25, 2010)

4.2		Form of Stock Purchase Warrant issued to general unsecured creditors of the Predecessors. (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)

4.3		Form of Stock Purchase Warrant issued to lenders under the Exit Facility. (Incorporated by reference to exhibit 4.1 of the Company's Current Report on Form 8-K dated March 11, 2010)

31.1*		Certification by Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification by Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32**		Certification by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.IN*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition

*	Filed herewith

**	This exhibit is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

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, thereunto duly authorized.



		TROPICANA ENTERTAINMENT INC.

Date:	August 1, 2018	By:	/s/ THERESA GLEBOCKI
		Name:	Theresa Glebocki
		Title:	Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

Tropicana Entertainment Inc. - FORM 10-Q - August 1, 2018

Attached files

Tropicana Entertainment Inc. Reports