UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2008

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

For the transition period from ____________ to ____________

PINNACLE ENTERTAINMENT, INC.

Delaware		95-3667491
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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 the filing requirements for the past 90 days. YES þ 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” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company 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 þ

As of the close of business on November 5, 2008, the number of outstanding shares of the registrant’s common stock was 59,981,181.

 

 

PINNACLE ENTERTAINMENT, INC.
TABLE OF CONTENTS

PART I
Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Income Statements for the Three and Nine Months ended September 30, 2008 and 2007			3
Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007			4
Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2008 and 2007			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Results of Operations			22
Liquidity and Capital Resources			27
Contractual Obligations and Other Commitments			29
Critical Accounting Policies			29
Forward-Looking Statements			30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			31
Item 4. Controls and Procedures			32
PART II
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 6. Exhibits			35
Signature Page			36
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 11
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I

Item 1. Financial Statements

PINNACLE ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Revenues:
Gaming		$	222,063			$	208,865			$	680,030			$	615,348
Food and beverage			17,012				12,442				47,254				34,918
Hotel and recreational vehicle park			11,709				6,025				27,067				18,289
Truck stop and service station			4,581				3,587				10,762				15,490
Other			7,489				6,723				20,644				18,565
			262,854				237,642				785,757				702,610
Expenses and other costs (benefits):
Gaming			132,182				119,466				410,035				353,080
Food and beverage			17,806				12,305				48,914				34,476
Hotel and recreational vehicle park			6,538				2,799				16,110				8,888
Truck stop and service station			4,634				3,392				10,643				14,676
Other			3,579				3,048				10,097				8,109
General and administrative			60,299				51,404				182,824				151,987
Depreciation and amortization			29,665				18,747				89,172				57,863
Pre-opening and development costs			14,571				12,161				45,914				37,474
Write-downs, reserves and recoveries, net			976				2,852				8,197				3,837
			270,250				226,174				821,906				670,390
Operating income (loss)			(7,396	)			11,468				(36,149	)			32,220
Interest income			843				4,301				2,466				13,262
Interest expense, net of capitalized interest			(11,025	)			(5,875	)			(34,715	)			(21,566	)
Impairment of investment in equity securities			—				—				(22,636	)			—
Loss on early extinguishment of debt			—				—				—				(6,124	)
Income (loss) from continuing operations before income taxes			(17,578	)			9,894				(91,034	)			17,792
Income tax benefit (expense)			9,295				(4,099	)			18,620				256
Income (loss) from continuing operations			(8,283	)			5,795				(72,414	)			18,048
Income (loss) from discontinued operations, net of income taxes			(3,561	)			(816	)			47,514				(258	)
Net income (loss)		$	(11,844	)		$	4,979			$	(24,900	)		$	17,790
Net income (loss) per common share—basic
Income (loss) from continuing operations		$	(0.14	)		$	0.10			$	(1.21	)		$	0.31
Income (loss) from discontinued operations, net of income taxes			(0.06	)			(0.02	)			0.79				(0.01	)
Net income (loss) per common share—basic		$	(0.20	)		$	0.08			$	(0.42	)		$	0.30
Net income (loss) per common share—diluted
Income (loss) from continuing operations		$	(0.14	)		$	0.10			$	(1.21	)		$	0.30
Income (loss) from discontinued operations, net of income taxes			(0.06	)			(0.02	)			0.79				(0.01	)
Net income (loss) per common share—diluted		$	(0.20	)		$	0.08			$	(0.42	)		$	0.29
Number of shares—basic			59,972				59,780				59,961				59,008
Number of shares—diluted			59,972				60,998				59,961				60,477

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

PINNACLE ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

		September 30,				December 31,
		2008				2007
		(in thousands, except share data)
ASSETS
Current Assets:
Cash and cash equivalents		$	124,604			$	191,124
Receivables, less allowance for doubtful accounts of $11,263 and $11,321			21,212				20,562
Inventories			6,778				6,688
Prepaid expenses and other assets			36,986				54,092
Deferred income taxes			9,409				9,213
Total current assets			198,989				281,679
Restricted cash			8,084				6,163
Land, buildings, riverboats and equipment:
Land and land improvements			573,993				470,568
Buildings, riverboats and improvements			1,056,519				1,002,402
Furniture, fixtures and equipment			491,218				437,120
Construction in progress			172,399				150,657
			2,294,129				2,060,747
Less: accumulated depreciation			(425,837	)			(346,405	)
			1,868,292				1,714,342
Goodwill			45,286				45,286
Intangible assets, net			74,165				74,487
Other assets, net			51,402				71,587
		$	2,246,218			$	2,193,544
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	44,058			$	86,736
Accrued interest			15,537				11,136
Accrued compensation			43,891				41,533
Accrued taxes			29,716				20,718
Other accrued liabilities			55,794				51,945
Current portion of long-term debt			80				87
Total current liabilities			189,076				212,155
Long-term debt, less current portion			916,400				841,214
Other long-term liabilities			64,689				70,272
Deferred income taxes			37,679				17,544
Commitments and contingencies (Note 8)
Stockholders’ Equity:
Preferred stock—$1.00 par value, 250,000 shares authorized, none issued or outstanding			—				—
Common stock—$0.10 par value, 59,979,181and 59,887,181 shares outstanding, net of treasury shares			6,199				6,190
Additional paid in capital			997,079				989,589
Retained earnings			67,621				92,520
Accumulated other comprehensive loss			(12,435	)			(15,850	)
Treasury stock, at cost, for both periods 2,008,986 of treasury shares			(20,090	)			(20,090	)
Total stockholders’ equity			1,038,374				1,052,359
		$	2,246,218			$	2,193,544

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

PINNACLE ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		For the nine months ended
		September 30,
		2008				2007
		(in thousands)
Cash flows from operating activities:
Net income (loss)		$	(24,900	)		$	17,790
Depreciation and amortization			89,596				58,388
Write-downs, reserves and recoveries, net			9,440				4,325
Gain on sale of assets			1,738				(488	)
Impairment of investment in equity securities			22,636				—
Provision for bad debts			2,158				3,609
Loss on extinguishment of debt			—				6,124
Amortization of debt issuance costs			3,479				3,208
Share-based compensation expense			6,997				6,406
Tax benefit from stock option exercises			(97	)			963
Excess tax benefit from stock equity plans			—				(861	)
Insurance advances in excess of net book value			2,018				5,000
Change in long-term accounts, net			(2,030	)			6,806
Change in deferred income taxes			25,253				(1,338	)
Changes in operating assets and liabilities:
Receivables			(2,808	)			5,775
Prepaid expenses and other			(4,129	)			(7,315	)
Accounts payable			(17,037	)			(9,756	)
Accrued compensation			2,358				741
Accrued interest			4,401				5,305
Other accrued liabilities			6,559				10,647
Net cash provided by operating activities			125,632				115,329
Cash flows from investing activities:
Capital expenditures			(267,676	)			(340,707	)
Additional funding for 2006 asset acquisitions			—				(10,066	)
Decrease (increase) in restricted cash			18				21,978
Kansas City application deposit			(25,000	)			—
Kansas City application refund			25,000				—
Proceeds from sale of property and equipment			312				6,929
Net cash used in investing activities			(267,346	)			(321,866	)
Cash flows from financing activities:
Borrowings under credit facility			215,000				—
Repayments under credit facility			(140,000	)			(335,000	)
Proceeds from 7.50% senior subordinated notes			—				379,321
Payment of 8.25% senior subordinated notes			—				(25,000	)
Payments on other secured and unsecured notes payable			(68	)			(2,115	)
Proceeds from common stock equity offerings			—				353,527
Proceeds from common stock options exercised			706				1,521
Excess tax benefits from stock equity plans			—				861
Debt issuance and other financing costs			(511	)			(9,406	)
Net cash provided by financing activities			75,127				363,709
Effect of exchange rate changes on cash and cash equivalents			67				248
Increase (decrease) in cash and cash equivalents			(66,520	)			157,420
Cash and cash equivalents at the beginning of the period			191,124				188,576
Cash and cash equivalents at the end of the period		$	124,604			$	345,996
Supplemental Cash Flow Information:
Cash paid for interest		$	50,132			$	42,158
Cash payments (refunds) related to income taxes, net			(5,078	)			(4,711	)
Increase (decrease) in construction related deposits and liabilities			(13,240	)			23,968

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

PINNACLE ENTERTAINMENT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions of the Securities and Exchange Commission (“SEC”) to the Quarterly Report on Form 10-Q and, therefore, do not include all information and notes necessary for complete financial statements in conformity with the instructions for generally accepted accounting principles (“GAAP”) in the United States. The results for the periods indicated are unaudited, but reflect all adjustments that management considers necessary for a fair presentation of operating results. The unaudited Condensed Consolidated Financial Statements include the accounts of Pinnacle Entertainment, Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. References in this Quarterly Report on Form 10-Q to “Pinnacle,” “the Company,” “we,” “our” or “us” refer to Pinnacle Entertainment, Inc. and its subsidiaries, except where the context otherwise indicates.

Certain reclassifications, which have no effect on previously reported net income, have been made to the 2007 financial statements to conform to the 2008 presentation.

The results of operations for interim periods are not necessarily indicative of a full year of operations. These unaudited Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2007.

Business Description Pinnacle is a developer, owner and operator of casinos and related hospitality and entertainment facilities. We currently operate six domestic casino destinations, located in southeastern Indiana (“Belterra Casino Resort”), Lake Charles, New Orleans and Bossier City, Louisiana (“L’Auberge du Lac,” “Boomtown New Orleans” and “Boomtown Bossier City,” respectively), Reno, Nevada (“Boomtown Reno”), and St. Louis, Missouri (“Lumière Place—St. Louis”). Internationally, we operate several small casinos in Argentina (“Casino Magic Argentina”) and one in The Bahamas (“The Casino at Emerald Bay”). We plan to close The Casino at Emerald Bay in early January 2009 and have included it as discontinued operations as of September 30, 2008. For a more detailed description, see Note 12 (Discontinued Operations and Discontinued Development Opportunity).

Within our construction and development pipeline, we have a number of projects at various stages of development. In south St. Louis County, Missouri, we are constructing a casino named River City. In Lake Charles, Louisiana, we are developing a second casino-hotel to be called Sugarcane Bay. We are also developing a casino-hotel in Baton Rouge, Louisiana. Each of these projects is subject to various regulatory approvals as well as financing. In Atlantic City, New Jersey, we own a casino site at the heart of the famed Boardwalk and have pursued development activities. In October 2008, management determined that it is in the best interests of the Company to suspend such development activities indefinitely due to credit market conditions and an evolving competitive environment.

Pre-Opening and Development Costs Pre-opening and development costs are expensed as incurred, consistent with the American Institute of Certified Public Accountants Statement of Position (“SOP”) 98-5 “Reporting on the Costs of Start-up Activities.”

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
		(in millions)
Pre-opening and development costs:
Atlantic City(a)		$	4.1			$	3.3			$	15.1			$	13.7
Kansas City (b)			1.6				—				4.4				—
River City			1.2				1.4				3.8				3.5
Lumière Place—St. Louis			0.2				4.1				6.2				9.9
Sugarcane Bay			0.7				0.5				2.2				1.5
Baton Rouge (c)			0.9				1.6				6.5				6.6
Missouri Proposition A Initiative			5.8				—				7.0				—
Other			0.1				1.3				0.7				2.3
Total pre-opening and development costs		$	14.6			$	12.2			$	45.9			$	37.5

Capitalization of Interest We capitalize interest expense on construction in progress based on our average cost of borrowed funds. Such capitalized interest becomes part of the cost of the related project and is depreciated over the estimated useful life of the various assets. Interest is no longer capitalized once the project is substantially complete or if a project has been delayed. Capitalized interest excluded from interest expense for the three and nine months ended September 30, 2008, was $8.6 million and $23.4 million, respectively, and for the three and nine months ended September 30, 2007, was $11.9 million and $29.1 million, respectively. Given our recent decision to indefinitely place our Atlantic City project on hold, we will no longer capitalize interest in connection with eligible project costs effective October 1, 2008.

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
		(in millions)
Capitalized interest by project:
Atlantic City		$	7.2			$	5.4			$	19.5			$	14.1
River City			1.1				0.6				2.8				1.7
Lumière Place—St. Louis			—				5.5				0.2				12.3
Sugarcane Bay			0.2				—				0.3				—
Others			0.1				0.4				0.6				1.0
Total capitalized interest		$	8.6			$	11.9			$	23.4			$	29.1

Fair Value Measurements Effective January 1, 2008, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” and SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment to FASB Statement No. 115.” SFAS No. 157 outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures.

SFAS No. 159 permits an entity to measure certain financial assets and financial liabilities at fair value with changes in fair value recognized in earnings each period. During the three and nine months ended September 30, 2008, we elected not to use the fair value option permitted under SFAS No. 159 for any of our financial assets and financial liabilities that are not already recorded at fair value.

Equity securities we hold and the cash surrender value of life insurance plans are the only significant assets affected by the adoption of SFAS No. 157, all measured entirely using “Level 1” inputs under SFAS No. 157, which are observable inputs for identical assets such as quoted prices in an active market. As of September 30, 2008, these assets have fair values of $17.7 million and $1.9 million, respectively.

Available-for-Sale Securities: We classify all equity securities that we hold as current available-for-sale securities. Available-for-sale securities are recorded at fair value measured entirely using “Level 1” inputs under SFAS No. 157, which are observable inputs for identical assets such as quoted market values for the securities, and temporary unrealized holding gains and losses are recorded, net of tax, as a separate component of “Accumulated other comprehensive income” on the unaudited Condensed Consolidated Balance Sheets. Unrealized losses are charged against net earnings when a decline in fair value is determined to be “other-than-temporary.” In accordance with the Financial Accounting Standards Board’s (the “FASB”) Staff Position FAS 115-1 and 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” we review several factors to determine whether a loss is “other-than-temporary.” These factors include but are not limited to: (i) the length of time a security is in an unrealized loss position; (ii) the extent to which fair value is less than cost; (iii) the financial condition and near-term prospects of the issuer; and (iv) our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. Realized gains and losses are accounted for on the specific identification method.

As of June 30, 2008, we determined that the fair value of the equity securities that we hold in Ameristar Casinos, Inc. were “other-than-temporarily” impaired and recorded a related impairment loss of $22.6 million based on the June 30, 2008 fair market value of such securities, which represented the cumulative unrealized loss as of June 30, 2008. This impairment adjustment established a new basis of $17.2 million in our investment. As of September 30, 2008, such investment had appreciated to $17.7 million and is included in “Prepaid expenses and other assets” on the unaudited Condensed Consolidated Balance Sheet. The increase in value reflects an unrealized holding gain of $461,000, net of taxes, which gain is included in “Accumulated other comprehensive income” at September 30, 2008.

Goodwill and Indefinite-Lived Intangible Assets We have significant amounts of goodwill and indefinite-life intangible assets on our unaudited Condensed Consolidated Balance Sheet as of September 30, 2008 and December 31, 2007. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, our policy is to evaluate goodwill for impairment on an annual basis in the fourth quarter of each year or more frequently if events or circumstances occur that would indicate a reduction in the fair value of the Company or its reporting units. The Company’s market capitalization is significantly below its book value. This may result in a non-cash impairment charge in the fourth quarter. As of September 30, 2008, the balances of the Company’s goodwill and indefinite-lived intangible assets were $45.3 million and $74.2 million, respectively.

Discontinued operations On July 30, 2008, we decided to sell or abandon operations of The Casino at Emerald Bay. As reflected on the unaudited Condensed Consolidated Income Statements, the current and prior-year periods have been revised to reflect the reclassification of The Casino at Emerald Bay from continuing operations to discontinued operations. The same reclassification in revenues, Adjusted EBITDA, and other benefits (costs) is reflected in the segment information and results of operations. All prior-period amounts have been reclassified to conform to the current presentation. For a more detailed discussion, see Note 12 (Discontinued Operations and Discontinued Development Opportunity).

Recently Issued Accounting Pronouncements

SFAS No. 161 In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an Amendment of FASB Statement No. 133,” which enhances required disclosures regarding derivatives and hedging activities. SFAS No. 161 will become effective for us on January 1, 2009 (our first fiscal year beginning after November 15, 2008). We currently do not utilize derivatives and hedging activities; thus, SFAS No. 161 is not expected to have an effect on our consolidated financial statements.

SFAS No. 160 In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements.” The statement is an amendment of Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” The objective of this statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 will become effective for us on January 1, 2009 (our first fiscal year beginning after December 15, 2008). We currently do not have subsidiaries in which we have a non-controlling interest; thus, SFAS No. 160 is not expected to have an effect on our consolidated financial statements upon adoption.

Note 2—Land, Buildings, Riverboats and Equipment

Construction in progress at September 30, 2008 of $172 million relates primarily to our River City and Atlantic City projects, while construction in progress at December 31, 2007 of $151 million related primarily to our Lumière Place, River City and Atlantic City projects. Depreciation expense for the three and nine months ended September 30, 2008 was $29.7 million and $89.2 million, respectively, and $18.7 million and $57.9 million for the three and nine months ended September 30, 2007, respectively.

Note 3—Long-Term Debt

Long-term debt at September 30, 2008 and December 31, 2007 consisted of the following:

		September 30,				December 31,
		2008				2007
		(in millions)
Senior Secured Credit Facility		$	125.0			$	50.0
Unsecured 8.25% Notes due 2012			276.8				277.2
Unsecured 8.75% Notes due 2013			133.7				133.5
Unsecured 7.50% Notes due 2015			380.0				379.6
Other secured and unsecured notes payable			1.0				1.0
		$	916.5			$	841.3
Less current maturities			(0.1	)			(0.1	)
		$	916.4			$	841.2

Senior Secured Credit Facility: As of September 30, 2008, we had a $625 million revolving credit facility (the “Credit Facility”) that matures in December 2010. As of September 30, 2008, we had outstanding borrowings of $125 million under the Credit Facility and, in addition, had outstanding letters of credit of $22.3 million under the Credit Facility as of September 30, 2008. Utilization of the Credit Facility is currently limited to $350 million by the indenture governing our 8.75% senior subordinated notes due 2013, which notes became callable in October 2008. As of September 30, 2008, for borrowings under the Credit Facility, the interest rate is computed as either LIBOR plus a margin of 2.0% or prime plus a margin of 0.5% based on our “Consolidated Leverage Ratio” as defined in the Credit Facility. The letters of credit bore facility fees of 2.0% per annum during the three months ended September 30, 2008. On September 15, 2008, Lehman Brothers Holding Inc. (“Lehman”) filed for bankruptcy, and on October 5, 2008, Lehman Commercial Paper, Inc. (“LCPI”), a wholly-owned subsidiary of Lehman and one of our lenders under our Credit Facility, also filed for bankruptcy. We anticipate that a portion of the Credit Facility will not be available from LCPI. For a more detailed description regarding the bankruptcy of LCPI and its effect on our Credit Facility, see Note 13 (Subsequent Event).

Interest expense: Interest expense was as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
		(in millions)
Interest expense before capitalization of interest		$	19.6			$	17.8			$	58.1			$	50.7
Less capitalized interest			(8.6	)			(11.9	)			(23.4	)			(29.1	)
Interest expense, net of capitalized interest		$	11.0			$	5.9			$	34.7			$	21.6

The increase in interest expense before capitalized interest for the three and nine months ended September 30, 2008 from the same 2007 period was principally the result of additional borrowings under the Credit Facility. The decrease in capitalized interest was principally due to the completion of Lumière Place in phases in late 2007 and early 2008.

Note 4—Income Taxes

Our effective income tax rate applicable to continuing operations for the three and nine months ended September 30, 2008 was (52.9%) and (20.5%), respectively. The significant reconciling items between our effective tax rate and the U.S. federal statutory rate of 35% include state income taxes, nondeductible gaming taxes for Indiana state income tax purposes, nondeductible political initiatives, and changes in judgments between periods related to the need for valuation allowances. Our effective income tax rate for continuing operations for the three and nine months ended September 30, 2007 was 41.4% and (1.4%), respectively. The significant reconciling items between our effective tax rate and the statutory rate of 35% for those periods include the items cited above, as well as changes in FIN 48 reserve amounts.

During the third quarter of 2008, our Unrecognized Tax Benefits decreased by approximately $8.7 million. Unrecognized Tax Benefits increased approximately $2.7 million primarily from issues related to the timing of temporary deductions for federal and state purposes. Unrecognized Tax Benefits decreased by approximately $11.4 million primarily from the final determination of tax attributes upon the filing of 2007 income tax returns and the corresponding netting of FIN 48 Liabilities. Management believes that our unrecognized tax benefits may decrease between $1.0 million and $4.0 million during the next twelve months. We do not expect this decrease to impact our liquidity or income from operations.

Note 5—Stockholders’ Equity

Earnings per Share: For the three and nine months ended September 30, 2008, there were 5.1 million and 4.5 million common stock options outstanding, respectively, which were excluded from the determination of diluted earnings per share as their inclusion would have been anti-dilutive due to our net loss position. There were 909,000 and 342,000 common stock options outstanding for the three and nine months ended September 30, 2007, respectively, which were not in-the-money and therefore excluded from the determination of earnings per share.

Comprehensive Income: Our comprehensive income (loss) is as follows:

		For the three months ended								For the nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
		(in millions)
Net income (loss)		$	(11.8	)		$	5.0			$	(24.9	)		$	17.8
Other comprehensive income (loss)
Foreign currency translation gain (loss)			(1.0	)			(0.5	)			0.1				(0.7	)
Post-retirement plan benefit obligation, net of amortization and income taxes			—				—				(0.5	)			(0.1	)
Unrealized gain on securities, net of provisions for income taxes			0.5				—				0.5				—
Comprehensive income (loss)		$	(12.3	)		$	4.5			$	(24.8	)		$	17.0

Note 6—Employee Benefit and Other Plans

Share-based Compensation: As of September 30, 2008, we had approximately 7.4 million share-based awards issued, 26,000 of which are restricted stock awards and the rest of which are common stock options, and approximately 658,000 share-based awards available for grant.

Pursuant to SFAS No. 123R, “Share-Based Payment,” we recorded pre-tax compensation expense of approximately $2.0 million and $6.9 million for the three and nine months ended September 30, 2008, respectively, and $1.9 million and $6.4 million for the three and nine months ended September 30, 2007, respectively. Theoretical compensation costs not yet amortized related to stock options granted totaled approximately $25.8 million and $21.3 million at September 30, 2008 and 2007, respectively, and the weighted average period over which the costs are expected to be recognized is approximately three years.

The aggregate amount of cash we received from the exercise of stock options was $131,000 and $706,000 for the three and nine months ended September 30, 2008, respectively, and $519,000 and $1.5 million for the three and nine months ended September 30, 2007, respectively. The associated shares were newly issued common stock. Excess tax benefit resulting from the exercise of stock options was $861,000 for the nine months ended September 30, 2007, and there was no such tax benefit for nine months ended September 30, 2008. The excess tax benefit is reported as additional cash flows from financing activities.

The following table summarizes information related to our common stock options under our stock option plans:

		Number of				Weighted Average
		Stock Options				Exercise Price
Options outstanding at January 1, 2008			5,728,865			$	15.10
Granted			2,070,500			$	14.34
Exercised			(74,000	)		$	9.21
Cancelled, Forfeited			(307,225	)		$	19.59
Options outstanding at September 30, 2008			7,418,140			$	14.76
Vested or expected to vest at a point in the future as of September 30, 2008			7,124,300			$	15.55
Options exercisable at September 30, 2008			3,961,240			$	12.00
Weighted-average value per granted option calculated using the Black-Scholes option-pricing model for options granted during the nine months ended September 30, 2008:		$	6.69

Note 7—Hurricane Insurance Matters — Casino Magic Biloxi

In April 2006, we filed a $347 million insurance claim for our losses related to our former Casino Magic Biloxi property caused by Hurricane Katrina. In August 2006, we filed suit in the United States District Court for the District of Nevada against three of our insurance carriers, Allianz Global Risks US Insurance Company, Arch Specialty Insurance Company and RSUI Indemnity Company, related to such losses. On February 22, 2008, we settled with Arch Specialty Insurance Company, in exchange for its agreement to pay us approximately $36.8 million, which we received in March 2008. On May 9, 2008, we settled with Allianz Global Risks US Insurance Company, in exchange for its agreement to pay us approximately $48 million, which we received in June 2008. Allianz Global Risks US Insurance Company had previously paid Pinnacle $5 million, which brought Allianz Global Risks US Insurance Company’s total payment on the claim to $53 million. RSUI Indemnity Company provides $50 million of coverage at the same layer as Arch Specialty Insurance Company and an additional $150 million of coverage between $250 million and $400 million of total coverage. To date, RSUI Indemnity Company has paid us approximately $2.0 million as a prepayment on the undisputed amount of the claim. We continue to pursue our claims against RSUI Indemnity Company for its respective share of our total hurricane-related damage and consequential loss in Biloxi. On October 20, 2008, we filed a motion for partial summary judgment on certain outstanding legal issues relating to the calculation of our business interruption loss for the claim. A hearing date has not yet been set on that motion. As of September 30, 2008, we have received payments totaling approximately $192 million from our insurers relative to these claims, including the settlement payments.

As of September 30, 2008, the insurers have not designated the $192 million of advances toward our insurance claim as being specific to any particular part of the claim. Therefore, the advances have offset the book value of the destroyed assets and certain insured expenses. To the extent that the advances exceed such expenses and book value, the difference (currently $18.4 million) is recorded as a deferred gain on our unaudited Condensed Consolidated Balance Sheets.

Our ultimate insurance claim and recovery amounts are based on replacement costs rather than book value and are unrelated to, computed differently from, and are substantially larger than the asset write-offs. Management believes that the replacement cost of the assets that were destroyed is substantially in excess of their book value. We are also insured for lost profits as a result of the damage, but will not book such profits until the claim is resolved. The settlements of parts of the insurance claim resulted in gains of $54.4 million, net of tax, which is reflected in discontinued operating results in the first nine months of 2008. The deferred gain reflected on the unaudited Condensed Consolidated Balance Sheets primarily reflects the ongoing dispute with remaining insurance carrier.

Note 8—Commitments and Contingencies

Guaranteed Maximum Price Agreement for Lumière Place: In the second quarter of 2007, we signed a Guaranteed Maximum Price Agreement (the “GMP Agreement”) with a general contractor for our Lumière Place project. Pursuant to the GMP Agreement, the contractor agreed to complete the construction of the casino-hotel for a maximum price of approximately $345 million. The GMP Agreement established an outside date of March 20, 2008 for the contractor to be substantially completed with the work, which date has been met. The GMP Agreement contains various other milestone dates and obligations. The guaranteed maximum price set by the GMP Agreement was a portion of the total budget of $507 million for the Lumière Place project. The budget includes items separate from those covered in the GMP Agreement, such as pre-opening and development costs; furniture, fixtures and other equipment; gaming equipment; consulting fees and information technology. As of September 30, 2008, we had paid approximately $335 million of the approximate $345 million maximum price and we expect to pay a portion of the remaining $10 million.

Redevelopment Agreement: In connection with our Lumière Place project, we have a redevelopment agreement which, among other things, commits us to oversee the investment of $50.0 million in residential housing, retail or mixed-use developments in the City of St. Louis within five years of the opening of the casino and hotel. Such investment can be made with partners and partner contributions and project debt financing, all of which count toward the $50.0 million. We are also obligated to pay an annual fee of $1.0 million to the City of St. Louis beginning after our River City project opens. The redevelopment agreement also contains certain contingent payments in the event of certain defaults. If we and our development partners collectively fail to invest $50.0 million in residential housing, retail, or mixed-use developments within five years of the opening of the casino and hotel, we would be obligated to pay an additional annual service fee of $1.0 million in Year Six, $2.0 million in Years Seven and Eight, and $2.0 million annually thereafter, adjusted by the change in the consumer price index.

Guaranteed Maximum Price Agreement for River City: On August 8, 2008, we entered into a Guaranteed Maximum Price Agreement (the “Agreement”) with a general contractor for the construction of the first phase of our River City project. Among other things, the Agreement establishes that the contractor will complete the construction of the casino for a maximum price of approximately $149 million and that the project will be substantially complete by January 31, 2010. The guaranteed maximum price set by the Agreement is a portion of the total budget of $375 million for Phase One of the River City project. The budget includes items separate from those covered in the Agreement, such as Phase One construction work prior to entering into the GMP Agreement and the items mentioned in the paragraph below, pre-opening and development costs; furniture, fixtures and other equipment; gaming equipment; consulting fees and information technology.

Lease and Development Agreement: In connection with our River City project, we have a lease and development agreement with the St. Louis County Port Authority which, among other things, commits us to lease 56 acres for 99 years (not including certain termination provisions) for annual rent of the greater of $4.0 million or 2.5% of adjusted gross receipts (as defined in the lease and development agreement) commencing on the earlier of August 11, 2009 or the date the project opens. In addition, the lease and development agreement provides that the project is to be developed in two phases. In the first phase, we are required to invest a minimum of $375 million to: (a) construct a gaming and multi-use facility; (b) perform environmental remediation on the site of the project, which remediation has been completed; (c) contribute $5.1 million for the construction of community and recreational facilities, which amount has been paid; (d) develop and construct a hatch shell on the park property; and (e) construct a roadway into the project. In the second phase, we are required to invest at least an additional $75.0 million to construct a hotel with a minimum of 100 guestrooms and other amenities to be mutually agreed upon by us and St. Louis County. The lease and development agreement provides that we must commence the aforementioned construction of the gaming facilities and the roadwork by December 31, 2007 (which condition has been satisfied) and must proceed with reasonable diligence to complete the gaming facilities by May 1, 2009, subject to delays beyond our control, including governmental approvals. We currently anticipate that the property will be completed in early 2010 due to several factors which were beyond our control, including delays in receiving governmental approvals and delays caused by unfavorable weather conditions. In the event the second phase is not opened within three years from the date of the casino opening, we are required to pay liquidated damages over five years beginning on the January 2 immediately following the expiration of three years. In each of the five subsequent years that the second phase is not opened, the amount of liquidated damages begins at $2.0 million for the first year and increases by $1.0 million each subsequent year: hence, $3.0 million in Year Two, $4.0 million in Year Three, $5.0 million in Year Four and $6.0 million in Year Five. As a result, the maximum amount of liquidated damages that we would have to pay if the second phase is not completed is $20.0 million.

Employment and Severance Agreements: We have entered into employment agreements with certain employees, including our executive officers. The employment agreements require severance payments in the case of certain triggering events, including a change in control. As of September 30, 2008, the maximum aggregate amount that would be paid to this group of 35 employees if a triggering event occurs in every case following a change in control, where applicable, is approximately $33.3 million.

In connection with Wade Hundley’s resignation as President of the Company, we entered into a separation agreement with him, dated as of June 5, 2008. Mr. Hundley is entitled to cash severance payments equal to $1.4 million, payable in various installments over an 18-month period, except for $562,500 of such amount which shall be payable on January 9, 2009. Mr. Hundley received accrued salary through the date of resignation and will be entitled to a pro rata bonus of approximately $215,000 for 2008. Mr. Hundley will also be entitled to receive health benefits coverage and disability insurance coverage for a maximum period of eighteen (18) months. Mr. Hundley will also be entitled to receive $205,000, representing the remaining portions of his 2006 and 2007 deferred bonuses, and approximately $373,000 representing amounts he had previously elected to defer plus earnings thereon. Vesting of Mr. Hundley’s stock options and restricted stock which would have vested over the next 18 months following the date of the separation agreement was accelerated to June 5, 2008. The compensation expense charge associated with the terms of the separation agreement relating to his stock options and restricted stock awards was $727,000, computed in accordance with SFAS 123R. As provided in the separation agreement, Mr. Hundley is entitled to exercise certain stock options, which survive the separation. For those stock options granted prior to the date of his employment agreement, Mr. Hundley has until March 5, 2009 to exercise those stock options. For those stock options granted on or after the date of his employment agreement, Mr. Hundley has until June 5, 2009 to exercise those stock options.

Deferred Bonus Plan: In 2004, we established a deferred bonus plan in which a portion of an employee’s bonus is deferred and paid in three equal annual installments contingent on the individual remaining employed by us. Payments are accelerated under certain circumstances, including death, disability and a change in control. We are expensing the deferred portion over the period of time leading up to the vesting date. As of September 30, 2008, the deferred bonus commitment, which, for example, would have to be paid commensurate with a change in control, was approximately $3.3 million, of which $1.6 million is included in the $33.3 million change in control amount mentioned above.

Self-Insurance: We self-insure various levels of general liability, property, workers’ compensation and medical coverage. Insurance reserves include accruals for estimated settlements for known claims, as well as accruals for estimates of claims not yet made, which are included in “Accrued compensation” and “Other accrued liabilities” on the unaudited Condensed Consolidated Balance Sheets.

Collective Bargaining Agreement: As of September 30, 2008, we continue to negotiate a collective bargaining agreement with approximately 149 of our employees at The Admiral Riverboat Casino. The prior agreement expired on September 30, 2007.

Legal

Insurance Litigation: In April 2006, we filed a $347 million insurance claim for our losses related to our former Casino Magic Biloxi property caused by Hurricane Katrina. In August 2006, we filed suit in the United States District Court for the District of Nevada against three of our insurance carriers, Allianz Global Risks US Insurance Company, Arch Specialty Insurance Company and RSUI Indemnity Company, related to such losses. On February 22, 2008, we settled with Arch Specialty Insurance Company, in exchange for its agreement to pay us approximately $36.8 million, which we received in March 2008. On May 9, 2008, we settled with Allianz Global Risks US Insurance Company, in exchange for its agreement to pay us approximately $48 million, which we received in June 2008. Allianz Global Risks US Insurance Company had previously paid Pinnacle $5 million, which brought Allianz Global Risks US Insurance Company’s total payment on the claim to $53 million. RSUI Indemnity Company provides $50 million of coverage at the same layer as Arch Specialty Insurance Company and an additional $150 million of coverage between $250 million and $400 million of total coverage. To date, RSUI Indemnity Company has paid us approximately $2.0 million as a prepayment on the undisputed amount of the claim. We continue to pursue our claims against RSUI Indemnity Company for its respective share of our total hurricane-related damage and consequential loss in Biloxi. On October 20, 2008, we filed a motion for partial summary judgment on certain outstanding legal issues relating to the calculation of our business interruption loss for the claim. A hearing date has not yet been set on that motion. As of September 30, 2008, we have received payments totaling approximately $192 million from our insurers relative to these claims, including the settlement payments.

Jebaco Litigation: On August 9, 2006, Jebaco, Inc. (“Jebaco”) filed suit in the U.S. District Court for the Eastern District of Louisiana against Harrah’s Operating Co., Inc., Harrah’s Lake Charles, LLC, Harrah’s Star Partnership, Players LC, LLC, Players Riverboat Management, LLC, Players Riverboat II, LLC, and Pinnacle Entertainment, Inc. The lawsuit arises out of an agreement between Jebaco and Harrah’s (as successor in interest to the various Players defendants) whereby Harrah’s is obligated to pay Jebaco an annual fee based on the number of patrons entering Harrah’s two Lake Charles, Louisiana riverboat casinos. In November 2006, we acquired the Harrah’s Lake Charles subsidiaries, including the two riverboats. The lawsuit filed by Jebaco asserts that Harrah’s, in ceasing gaming operations in Lake Charles and ceasing payments to Jebaco, breached its contractual obligations to Jebaco and asserts damages of approximately $34.0 million. Jebaco also asserts that our agreement with Harrah’s violates state and federal antitrust laws. The lawsuit seeks antitrust damages jointly and severally against both us and Harrah’s and seeks a trebling of the $34.0 million in damages Jebaco alleges it has suffered. The defendants answered the complaint, denying all claims and asserting that the lawsuit is barred, among other reasons, because of the approval of our transaction with Harrah’s by the Louisiana Gaming Control Board and the lack of antitrust injury to Jebaco. In January 2007, all of the defendants moved to dismiss all of the claims of the complaint, which motions were heard on July 18, 2007. The motions to dismiss were granted with prejudice as to the federal antitrust claims and the state-law claims were dismissed without prejudice. Judgment of dismissal was entered on March 5, 2008. Jebaco has appealed the dismissal of the federal antitrust claims to the U.S. Court of Appeals for the Fifth Circuit. Further, on March 13, 2008, Jebaco filed a new lawsuit against the same parties in the Louisiana district civil court for Orleans Parish. This lawsuit seeks unspecified damages arising out of the same circumstances as the federal lawsuit based on claims for breach of the duty of good faith, negligent breach of contract, breach of contract, unfair trade practices, unjust enrichment, and subrogation to Harrah’s insurance proceeds. We have been given an indefinite extension to answer the March 13 complaint. While we cannot predict the outcome of this litigation, management intends to vigorously defend this litigation.

Other: We are a party to a number of other pending legal proceedings. Management does not expect that the outcome of such proceedings, either individually or in the aggregate, will have a material effect on our financial position, cash flows or results of operations.

Note 9—Write-downs, reserves and recoveries, net

Write-downs, reserves and recoveries, net consist of the following:

		For the three months ended								For the nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
		(in millions)
Impairment of assets (a)		$	—			$	2.8			$	5.1			$	3.8
Loss on disposal of assets			0.9				—				1.7				—
Customer related expenses (b)			—				—				1.4				—
Write-downs, reserves and recoveries, net		$	0.9			$	2.8			$	8.2			$	3.8

We also incurred asset impairment charges of $4.3 million related to the discontinued operation at The Casino at Emerald Bay in The Bahamas, which has been recorded as a loss from discontinued operations as of September 30, 2008.

Note 10—Consolidating Condensed Financial Information

Our subsidiaries (excluding our Argentine and Bahamian subsidiaries; a subsidiary that owns an aircraft; a subsidiary with approximately $63.3 million in cash, cash equivalents and marketable securities as of September 30, 2008; and certain non-material subsidiaries) have fully and unconditionally and jointly and severally guaranteed the payment of all obligations under the 7.50% Notes, 8.25% Notes and 8.75% Notes. Separate financial statements and other disclosures regarding the subsidiary guarantors are not included herein because management has determined that such information is not material to investors. In lieu thereof, we include the following:

										Wholly Owned				Consolidating				Pinnacle
		Pinnacle				Wholly Owned				Non-				and				Entertainment,
		Entertainment,				Guarantor				Guarantor				Eliminating				Inc.
		Inc.				Subsidiaries (a)				Subsidiaries (b)				Entries				Consolidated
		(in millions)
For the three months ended September 30, 2008
Income Statement
Revenues:
Gaming		$	—			$	207.2			$	14.9			$	—			$	222.1
Food and beverage			—				15.8				1.2				—				17.0
Other			—				23.3				0.4				—				23.7
			—				246.3				16.5				—				262.8
Expenses:
Gaming			—				124.1				8.1				—				132.2
Food and beverage			—				16.1				1.7				—				17.8
Administrative and other			16.7				67.0				5.8				—				89.5
Write-downs, reserves and recoveries, net			—				0.7				0.3				—				1.0
Depreciation and amortization			1.0				25.5				3.2				—				29.7
			17.7				233.4				19.1				—				270.2
Operating income (loss)			(17.7	)			12.9				(2.6	)			—				(7.4	)
Equity earnings of subsidiaries			5.2				1.2				—				(6.4	)			—
Interest (expense) income, net			(19.3	)			8.5				0.6				—				(10.2	)
Income (loss) from continuing operations before inter-company activity and income taxes			(31.8	)			22.6				(2.0	)			(6.4	)			(17.6	)
Management fee and inter-company interest income (expense)			9.4				(9.4	)			—				—				—
Income tax benefit (expense)			10.6				—				(1.3	)			—				9.3
Income (loss) from continuing operations			(11.8	)			13.2				(3.3	)			(6.4	)			(8.3	)
Income from discontinued operations, net of taxes			—				2.5				(6.0	)			—				(3.5	)
Net income (loss)		$	(11.8	)		$	15.7			$	(9.3	)		$	(6.4	)		$	(11.8	)
For the three months ended September 30, 2007
Income Statement
Revenues:
Gaming		$	—			$	185.3			$	23.6			$	—			$	208.9
Food and beverage			—				10.9				1.5				—				12.4
Other			0.1				15.7				0.5				—				16.3
			0.1				211.9				25.6				—				237.6
Expenses:
Gaming			—				107.5				12.0				—				119.5
Food and beverage			—				10.5				1.8				—				12.3
Administrative and other			13.7				53.2				6.0				—				72.9
Write-downs, reserves and recoveries, net			—				3.3				(0.5	)			—				2.8
Depreciation and amortization			0.3				15.7				2.7				—				18.7
			14.0				190.2				22.0				—				226.2
Operating income			(13.9	)			21.7				3.6				—				11.4
Equity earnings of subsidiaries			34.8				1.2				—				(36.0	)			—
Interest (expense) income, net			(14.9	)			12.1				1.2				—				(1.6	)
Income from continuing operations before inter-company activity and income taxes			6.0				35.0				4.8				(36.0	)			9.8
Management fee and inter-company interest income (expense)			1.0				(0.9	)			(0.1	)			—				—
Income (loss) tax benefit (expense)			(1.5	)			—				(2.5	)			—				(4.0	)
Income (loss) from continuing operations			5.5				34.1				2.2				(36.0	)			5.8
Income (loss) from discontinued operations, net of taxes			(0.5	)			(0.2	)			(0.1	)			—				(0.8	)
Net income (loss)		$	5.0			$	33.9			$	2.1			$	(36.0	)		$	5.0

										Wholly Owned				Consolidating				Pinnacle
		Pinnacle				Wholly Owned				Non-				and				Entertainment,
		Entertainment,				Guarantor				Guarantor				Eliminating				Inc.
		Inc.				Subsidiaries (a)				Subsidiaries (b)				Entries				Consolidated
For the nine months ended September 30, 2008
Income Statement
Revenues:
Gaming		$	—			$	633.9			$	46.1			$	—			$	680.0
Food and beverage			—				43.4				3.8				—				47.2
Other			0.2				57.5				0.9				—				58.6
			0.2				734.8				50.8				—				785.8
Expenses:
Gaming			—				384.2				25.8				—				410.0
Food and beverage			—				44.0				4.9				—				48.9
Administrative and other			47.6				203.7				14.3				—				265.6
Write-downs, reserves and recoveries, net			—				7.8				0.4				—				8.2
Depreciation and amortization			2.6				77.3				9.3				—				89.2
			50.2				717.0				54.7				—				821.9
Operating income (loss)			(50.0	)			17.8				(3.9	)			—				(36.1	)
Equity earnings of subsidiaries			43.0				3.7				—				(46.7	)			—
Interest (expense) income, net			(56.9	)			23.0				1.6				—				(32.3	)
Impairment of investment in equity securities			(8.4	)			—				(14.2	)			—				(22.6	)
Income from continuing operations before inter-company activity and income taxes			(72.3	)			44.5				(16.5	)			(46.7	)			(91.0	)
Management fee and inter-company interest income (expense)			25.6				(25.4	)			(0.2	)			—				—
Income tax benefit (expense)			21.8				—				(3.2	)			—				18.6
Income from continuing operations			(24.9	)			19.1				(19.9	)			(46.7	)			(72.4	)
Income from discontinued operations, net of taxes			—				54.5				(7.0	)			—				47.5
Net income (loss)		$	(24.9	)		$	73.6			$	(26.9	)		$	(46.7	)		$	(24.9	)
For the nine months ended September 30, 2007
Income Statement
Revenues:
Gaming		$	—			$	547.0			$	68.4			$	—			$	615.4
Food and beverage			—				30.7				4.2				—				34.9
Other			0.3				50.4				1.6				—				52.3
			0.3				628.1				74.2				—				702.6
Expenses:
Gaming			—				318.1				35.0				—				353.1
Food and beverage			—				29.4				5.1				—				34.5
Administrative and other			39.1				164.8				17.2				—				221.1
Write-downs, reserves and recoveries, net			—				4.3				(0.5	)			—				3.8
Depreciation and amortization			0.9				49.5				7.5				—				57.9
			40.0				566.1				64.3				—				670.4
Operating income			(39.7	)			62.0				9.9				—				32.2
Equity earnings of subsidiaries			87.0				4.0				—				(91.0	)			—
Loss on early extinguishment of debt			(6.1	)			—				—				—				(6.1	)
Interest (expense) income, net			(39.9	)			30.0				1.6				—				(8.3	)
Income from continuing operations before inter-company activity and income taxes			1.3				96.0				11.5				(91.0	)			17.8
Management fee and inter-company interest income (expense)			11.7				(11.4	)			(0.3	)			—				—
Income tax benefit (expense)			4.9				—				(4.7	)			—				0.2
Income (loss) from continuing operations			17.9				84.6				6.5				(91.0	)			18.0
Income (loss) from discontinued operations, net of taxes			(0.1	)			0.8				(0.9	)			—				(0.2	)
Net income (loss)		$	17.8			$	85.4			$	5.6			$	(91.0	)		$	17.8

										Wholly Owned				Consolidating				Pinnacle
		Pinnacle				Wholly Owned				Non-				and				Entertainment,
		Entertainment,				Guarantor				Guarantor				Eliminating				Inc.
		Inc.				Subsidiaries (a)				Subsidiaries (b)				Entries				Consolidated
		(in millions)
As of September 30, 2008
Balance Sheet
Current assets		$	27.5			$	91.7			$	79.8			$	—			$	199.0
Property and equipment, net			34.4				1,774.1				59.8				—				1,868.3
Other non-current assets			49.2				111.6				18.1				—				178.9
Investment in subsidiaries			1,949.7				25.1				—				(1,974.8	)			—
Inter-company			1.2				2.5				(3.7	)			—				—
		$	2,062.0			$	2,005.0			$	154.0			$	(1,974.8	)		$	2,246.2
Current liabilities		$	41.7			$	137.7			$	9.7			$	—			$	189.1
Notes payable, long term			915.5				0.9				—				—				916.4
Other non-current liabilities			66.3				35.2				0.8				—				102.3
Equity			1,038.5				1,831.2				143.5				(1,974.8	)			1,038.4
		$	2,062.0			$	2,005.0			$	154.0			$	(1,974.8	)		$	2,246.2
As of December 31, 2007
Balance Sheet
Current assets		$	44.3			$	141.3			$	96.0			$	—			$	281.6
Property and equipment, net			28.7				1,617.8				69.8				—				1,716.3
Other non-current assets			54.7				123.7				17.2				—				195.6
Investment in subsidiaries			1,859.8				21.3				—				(1,881.1	)			—
Inter-company			1.3				3.5				(4.8	)			—				—
		$	1,988.8			$	1,907.6			$	178.2			$	(1,881.1	)		$	2,193.5
Current liabilities		$	35.7			$	165.1			$	11.3			$	—			$	212.1
Notes payable, long term			840.3				0.9				—				—				841.2
Other non-current liabilities			60.4				27.3				0.1				—				87.8
Equity			1,052.4				1,714.3				166.8				(1,881.1	)			1,052.4
		$	1,988.8			$	1,907.6			$	178.2			$	(1,881.1	)		$	2,193.5