UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

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

PINNACLE ENTERTAINMENT, INC.

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

Title of each class		Name of each exchange on which registered
Common Stock, $.10 par value per share		New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ

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 þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO þ

The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2008 was $601 million based on a closing price of $10.49 per share of common stock.

The number of outstanding shares of the registrant’s common stock as of the close of business on March 5, 2009 was 59,988,181.

Portions of the registrant’s definitive 2009 proxy statement, anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K.

 

 

PINNACLE ENTERTAINMENT, INC.

TABLE OF CONTENTS

PART I
Item 1. Business			1
Operating Properties			1
New Properties Under Construction and/or Development			3
Potential Future Development Sites			3
Asset Sales and Other			4
Competition			4
Government Regulation and Gaming Issues			4
Employees			5
Executive Officers of the Registrant			5
Directors of the Registrant			5
Available Information and CEO and CFO Certifications			5
Other			6
Item 1A. Risk Factors			6
Item 1B. Unresolved Staff Comments			17
Item 2. Properties			17
Item 3. Legal Proceedings			19
Item 4. Submission of Matters to a Vote of Security Holders			20
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			20
Stock Performance Graph			20
Item 6. Selected Financial Data			21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Executive Overview			22
Results of Operations			23
Liquidity and Capital Resources			31
Contractual Obligations and Other Commitments			35
Critical Accounting Estimates			36
Recently Issued and Adopted Accounting Standards			38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			39
Item 8. Financial Statements and Supplementary Data			40
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			74
Item 9A. Controls and Procedures			74
Item 9B. Other Information			75
PART III
Item 10. Directors, Executive Officers and Corporate Governance			76
Item 11. Executive Compensation			77
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			77
Item 13. Certain Relationships and Related Transactions, and Director Independence			77
Item 14. Principal Accountant Fees and Services			77
PART IV
Item 15. Exhibits and Financial Statement Schedules			77
Signatures
Exhibit 4.12
Exhibit 10.9
Exhibit 10.10
Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit 10.45
Exhibit 10.46
Exhibit 10.47
Exhibit 10.48
Exhibit 10.49
Exhibit 11
Exhibit 12
Exhibit 21
Exhibit 23
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 99.1

PART I

Item 1. Business

Pinnacle Entertainment, Inc. is a developer, owner and operator of casinos and related hospitality and entertainment facilities. Domestically, we operate seven casinos. We have three other casino development projects in various stages of construction and planning and two other potential casino development sites. In addition, we have one substantial and several small casinos in Argentina. References to “Pinnacle,” “the Company,” “we,” “our” or “us” refer to Pinnacle Entertainment, Inc. and its subsidiaries, except where the context otherwise indicates.

Our long-term strategy is to build or acquire new resorts that are expected to produce favorable returns above our cost of capital; to maintain and improve each of our existing casinos; and to develop the systems to tie all of our casinos together into a national gaming network. Hence, we are developing new, high-quality gaming properties in attractive gaming markets; we are maintaining and improving our existing properties with disciplined capital expenditures; we are developing a customer-loyalty program designed to motivate customers to continue to patronize our casinos; and we may make strategic acquisitions at reasonable valuations, when and if available. At present, implementation of this strategy is constrained by the tightening of the credit markets.

Highlights of 2008 and early 2009 include the following:

•

The opening in February 2008 of the 200-guestroom Four Seasons Hotel St. Louis, the 294 all-suites HoteLumière and other amenities at Lumière Place in downtown St. Louis, Missouri. The Lumière Place Casino opened in December 2007;

•

Record results at L’Auberge du Lac, our most profitable casino location, which benefitted from the completion of 252 new guestrooms and other new amenities in January 2008;

•

Completion of our 32-guestroom hotel adjoining our casino in Neuquén, Argentina;

•

Ongoing construction of our River City casino in south St. Louis County, which we expect to open in early 2010;

•

Approval by voters of a local referendum in February 2008, permitting construction of our proposed casino-hotel in Baton Rouge, Louisiana;

•

Approval by Missouri voters of a referendum, effective November 7, 2008, eliminating certain betting restrictions, limiting the number of gaming licenses available in the state and increasing the tax on casino revenue from 20 percent to 21 percent; and

•

Continuing development and implementation of the technology and infrastructure required to create a national customer-loyalty program.

Operating Properties

Our largest casino resort is L’Auberge du Lac in Lake Charles, Louisiana, which opened in May 2005 and offers the closest full-scale casino-hotel facilities to Houston (the sixth-largest metropolitan statistical area in the United States), as well as the Austin and San Antonio metropolitan areas. Our property is approximately 142 miles from Houston and approximately 300 miles and 335 miles from Austin and San Antonio, respectively.

L’Auberge du Lac offers 1,601 slot machines, 62 table games and 995 guestrooms and suites, inclusive of our recent expansion. The expansion project, in which we invested approximately $72 million, included 252 additional guestrooms (10 of which are new private garden villas), additional retail shops, an expanded pool area and other amenities. The facility also offers several restaurants, approximately 28,000 square feet of meeting space, a championship golf course designed by Tom Fazio, and a full-service spa. Unlike most other riverboat casinos, all of the public areas at L’Auberge du Lac (except the parking garage), and in particular the casino, are situated entirely on one level. The casino is surrounded on three sides by the hotel tower and other guest amenities. The hotel at L’Auberge du Lac is the largest in Louisiana outside of New Orleans.

L’Auberge du Lac competes with other full-service regional and national casinos, including those in New Orleans, Louisiana, Biloxi, Mississippi, and Las Vegas, Nevada. It also competes with another casino-hotel in Lake Charles; a land-based Native American casino, which is approximately 43 miles east of Lake Charles; a racetrack slot operation located approximately 25 miles to the west; and numerous truck stops with slot machines in many parishes of Louisiana, some of which call themselves “casinos”.

Our Boomtown New Orleans property is the only casino in the West Bank neighborhood, across the Mississippi River from downtown New Orleans. It features a dockside riverboat casino with 1,553 slot machines and 35 table games, two restaurants, a delicatessen, a 350-seat nightclub, 4,600 square feet of meeting space, an arcade and approximately 1,700 parking spaces. The property opened in 1994. Boomtown New Orleans competes with a large land-based casino in downtown New Orleans, one other riverboat casino, a racetrack with slot machines and numerous truck stop casinos.

Our southern Indiana property, Belterra Casino Resort, opened in October 2000 and is located along the Ohio River near Vevay, Indiana, approximately 50 minutes from downtown Cincinnati, Ohio, 70 minutes from Louisville, Kentucky and 90 minutes from Lexington, Kentucky. Belterra is also approximately two and a half hours from Indianapolis, Indiana. The total population within 300 miles of Belterra is approximately 48 million.

Belterra attracts customers by offering amenities that are generally superior to those at competing regional properties, several of which are closer to the population centers than Belterra. Belterra features a large casino with 1,604 slot machines and 54 table games and a 608-guestroom hotel, six restaurants, 33,000 square feet of meeting and conference space, a 1,553-seat entertainment showroom, retail shops, a swimming pool, a championship golf course designed by Tom Fazio and a full-service spa. The resort provides approximately 2,000 parking spaces, most of which are in a multi-level parking structure. In 2007, we added five retail shops and refurbished 11 of the 51 high-end suites at Belterra.

Belterra currently competes with four dockside riverboats; a casino resort that opened in November 2006 in French Lick, Indiana, approximately 100 miles west of Belterra; and two racetrack casinos that opened in mid-2008 in the Indianapolis metropolitan area, each with approximately 2,000 slot machines. One of the racetracks expects to open a permanent facility in early 2009, replacing a temporary facility. Another riverboat competitor plans to open a new, expanded casino in mid-2009. In addition, another competitor began heavily marketing its refurbished and rebranded facility during the year.

Our Boomtown Bossier City property in Bossier City, Louisiana, features a regional hotel adjoining a dockside riverboat casino. The property opened in October 1996 and is located on a site directly adjacent to, and easily visible from, Interstate 20. The Bossier City/Shreveport region is a three-hour drive from the Dallas/Fort Worth metropolitan area along Interstate 20. The property includes 1,048 slot machines and 30 table games, 188 guestrooms, including four master suites and 88 junior suites, four restaurants and approximately 1,860 parking spaces.

Boomtown Bossier City competes with four dockside riverboat casino-hotels, a racetrack slot operation and large Native American casinos in southern Oklahoma. Such Native American facilities are approximately one hour north of Dallas.

Lumière Place is located in downtown St. Louis, Missouri. The Lumière Place complex includes the Lumière Place Casino with 2,000 slot machines and 62 table games, the 200-guestroom luxury Four Seasons Hotel St. Louis, the 294 all-suites HoteLumière, seven restaurants, banquet facilities, retail shops and more than 22,000 square feet of convention/meeting space, including a 7,300-square-foot ballroom. We own all of the facilities and have entered into a long-term agreement with Four Seasons Hotels Limited to manage our Four Seasons Hotel St. Louis. Lumière Place is located across from the Edward Jones Dome and America’s Center convention center and just north of the famous Gateway Arch. A pedestrian tunnel to the America’s Center convention center, the Edward Jones Dome and the city’s central business district opened in May 2008.

The Admiral Riverboat Casino offers 696 slot machines and 13 table games and is currently moored near the Lumière Place complex.

In November 2008, Missouri voters approved a referendum which eliminated certain betting restrictions and also limits the number of gaming licenses available in the state to 13 (including the Lumière Place Casino, The Admiral Riverboat Casino and River City), and increases the tax on casino revenue by one percentage point. The Lumière Place Casino and The Admiral Riverboat Casino compete with four other casinos in the St. Louis metropolitan area, two of which are in Illinois.

Boomtown Reno is a land-based casino-hotel located approximately nine miles west of downtown Reno, Nevada, near the California border along Interstate 80. This interstate is the primary east-west interstate highway serving northern California. Boomtown Reno has been operating for more than 40 years.

The property offers 673 slot machines and 12 table games, 318 guestrooms, 172 of which we refurbished during 2008. In addition, the property has two restaurants, a 30,000-square-foot amusement center and approximately 1,300 parking spaces. In addition to the main casino-hotel, the property has a gas station, a mini-mart and a 197-space recreational vehicle park.

Boomtown Reno has approximately 890 acres of land, approximately 60 of which are utilized by the casino, hotel and other amenities and another 490 acres of which most is developable. The remaining 340 acres are remote and difficult to develop. In 2006, we sold approximately 28 acres of land to Cabela’s Inc. In 2007, we closed the property’s truck stop to accommodate the construction of a Cabela’s Inc. branded outdoor sporting goods store, which opened in November 2007.

Historically, Reno has been a drive-in gaming market that attracted visitors from northern California. Our facility also caters to travelers along Interstate 80 and local customers. Over the past 10 years, new and expanded Native American casino facilities have opened in California which facilities compete for business with Reno gaming properties. In addition, northern California has been adversely impacted by the recent economic downturn. Consequently, the overall performance of the casino-hotel business in Reno, as well as Boomtown Reno, has been adversely affected.

Casino Magic Argentina consists of a substantial casino-hotel facility in the city of Neuquén, Argentina and several smaller casinos elsewhere in the Patagonia region of Argentina. The principal Casino Magic Argentina property opened in July 2005 and replaced a leased facility that had operated for more than 20 years. Casino Magic Neuquén offers a casino with 1,014 slot machines and 54 table games, a 32-guestroom hotel, a restaurant, several bars and an entertainment venue on approximately 20 acres of land. We invested approximately $11.9 million in the hotel project, which was completed in June 2008 and funded through the property’s existing cash balances and operating cash flows.

We have certain exclusive rights to operate casinos in the principal cities of the Province of Neuquén. Under terms of our concession agreement with the Province of Neuquén, our exclusivity rights in the Province of Neuquén are to be extended from 2016 to 2021 with the completion of such luxury hotel. We are awaiting the formal government approval of such extension. In the neighboring Province of Río Negro, there is a casino approximately 10 miles from our principal Neuquén operations.

New Properties Under Construction and/or Development

We have a number of projects at various stages of development. In south St. Louis County, Missouri, we are continuing construction of our River City casino, which we expect to open in early 2010. In Lake Charles, Louisiana, we have begun site work for our Sugarcane Bay casino-hotel adjacent to L’Auberge du Lac. In East Baton Rouge Parish, Louisiana, we received voter approval in February 2008 permitting construction of a proposed casino-hotel complex.

We are building a casino called River City in south St. Louis County, Missouri, which we expect to open in early 2010, subject to approval of the Missouri Gaming Commission. River City is located just south of the confluence of the Mississippi River and the River des Peres in the community of Lemay, one of the most densely populated areas in the St. Louis region. The first phase of the River City project is planned to include a casino and several restaurants at an estimated cost of $380 million. River City is located on approximately 56 acres of land under a long-term lease from St. Louis County. We expect the property to have 2,300 slot machines and 60 table games. A second phase for the River City project is expected to include a hotel with a minimum of 100 guestrooms, as well as other amenities to be determined at a later time.

In June 2007, the Louisiana Gaming Control Board (the “LGCB”) approved the architectural plans for our proposed Sugarcane Bay casino resort to be built adjacent to our L’Auberge du Lac facility. Our plans for Sugarcane Bay include a floating, single-level dockside casino similar to that of L’Auberge du Lac, and is expected to include 1,500 slot machines and 50 table games, a 400-guestroom hotel and a large entertainment and multi-purpose convention center to be built on approximately 234 acres of land being leased from the Lake Charles Harbor and Terminal District. One of the conditions to our license requires a minimum project investment of $350 million. Including the multi-purpose entertainment venue, which will be shared with the adjoining L’Auberge du Lac property, the Company now estimates the project cost of Sugarcane Bay will be $407 million. During 2008, we began site work at Sugarcane Bay, and we intend to commence major construction if and when the capital markets can be accessed on more reasonable terms.

In October 2008, the LGCB approved our architectural plans for our planned $250 million Baton Rouge casino-hotel resort in Louisiana. The resort will be located on 575 acres of land that we own approximately eight miles southeast of downtown Baton Rouge, Louisiana, and is expected to have 1,500 slot machines and 50 table games. The project is subject to certain conditions and various other approvals. Baton Rouge is currently believed to rival New Orleans as the largest city in Louisiana and has experienced significant growth in recent years, both before and particularly after the effects of the 2005 Hurricane Katrina on the nearby New Orleans region. We are currently in the design phase of this project and intend to commence construction of this project if and when the capital markets can be accessed on more reasonable terms.

Potential Future Development Sites

In November 2006, we purchased entities that owned land and a former casino-hotel in Atlantic City, New Jersey. Since completing the acquisition in 2006, we have acquired an additional five acres. In the aggregate, the Atlantic City site comprises approximately 19 contiguous acres at the heart of Atlantic City, with extensive frontage along The Boardwalk, Pacific Avenue and Brighton Park.

We began site preparation work in 2007, including the demolition of the former casino-hotel and other structures on the site. In October 2008, we decided to continue and complete certain demolition activities, but to otherwise suspend substantially all other development indefinitely due to the current economic downturn, evolving competitive market and the tightening of the credit markets.

In August 2006, we purchased approximately one and one-half acres of gaming-zoned land in Central City, Colorado, which is approximately 40 miles from Denver, Colorado. We have an option to purchase an additional six acres of adjoining, non-gaming zoned land. We believe our Central City land is the most conveniently located gaming-zoned site for Denver customers. We do not intend to develop this property until market conditions improve.

Asset Sales and Other

Casino Magic Biloxi and Related Insurance Matters: In November 2006, we completed the cash sale of our Casino Magic Biloxi site and certain related assets to Harrah’s concurrent with our cash purchase of the entities that owned and operated Harrah’s Lake Charles. The physical property we sold was severely damaged by Hurricane Katrina in August 2005 and the facility had not reopened. We have filed an insurance claim and a lawsuit related to such claim for our losses associated with the casino-hotel previously operated at the site, which claim was retained by us in the sale. We have received $192 million from several of our insurers through December 31, 2008 and our lawsuit against the one remaining carrier seeks recovery of substantial additional amounts under our claim.

Card Club Sales: In July 2006, we completed the sale of our leasehold interest and related receivables in the Hollywood Park Casino card club for net cash proceeds of approximately $24.2 million plus the cancellation of our lease obligation. In April 2006, we completed the sale of our Crystal Park Casino card club for net cash proceeds of approximately $16.5 million.

Merger Termination Proceeds: In March 2006, we entered into an agreement to acquire Aztar Corporation (“Aztar”) for $38.00 per share, subject to approval by Aztar’s shareholders. Pursuant to the agreement, Aztar’s board of directors was permitted to evaluate and recommend to its shareholders any unsolicited, superior proposals from qualified entities in accordance with its fiduciary duties. During April and May 2006, Aztar received several proposals that its board of directors deemed to be superior to our proposal. We matched or exceeded several of these proposals. Ultimately, we chose not to match a proposal to acquire Aztar for $54.00 per share. Aztar’s board of directors then terminated its merger agreement with us and made a merger termination fee payment of $78 million, of which we retained $44.7 million net of fees and expenses.

Competition

We face significant competition in each of the jurisdictions in which we operate. Such competition may intensify in some of these jurisdictions if new gaming operations open in these markets or existing competitors expand their operations. Our properties compete directly with other gaming properties in each state in which we operate, as well as in adjacent states. We also compete for customers with other casino operators in other markets, including casinos located on Native American reservations, and other forms of gaming, such as lotteries and internet gaming. Many of our competitors are larger and have substantially greater name recognition and marketing and financial resources. In some instances, particularly with Native American casinos, our competitors pay substantially lower taxes or no taxes at all. We believe that increased legalized gaming in other states, particularly in areas close to our existing gaming properties such as Texas, Ohio, Illinois, Indiana, Kentucky, Maryland, Oklahoma, California, Pennsylvania or New York, and the development or expansion of Native American gaming in or near the states in which we operate, could create additional competition for us and could adversely affect our operations or proposed development projects.

Government Regulation and Gaming Issues

The gaming industry is highly regulated, and we must maintain our licenses and pay gaming taxes to continue our operations. Each of our casinos is subject to extensive regulation under the laws, rules and regulations of the jurisdiction where it is located. These laws, rules and regulations generally concern the responsibility, financial stability and character of the owners, managers, and persons with financial interests in the gaming operations. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. For a more detailed description of the regulations to which we are subject, please see Exhibit 99.1 to this Annual Report on Form 10-K, “Government Regulation and Gaming Issues” which is incorporated herein by reference.

Our businesses are subject to various foreign, federal, state and local laws and regulations in addition to gaming regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, employees, currency transactions, taxation, zoning and building codes, and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our operating results.

Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment have not had a material effect upon our capital expenditures, earnings or the competitive positions of our properties. From time to time, certain of our development projects may require substantial costs for environmental remediation due to prior use of our development sites. Our River City project site, for example, was heavily used for industrial purposes and we have remediated the site as part of the project. Our Central City site was once used to dump tailings from gold-mining operations and is believed to have subterranean mining tunnels. In Reno, we have remediated the site where our former truck stop was located. Our project budgets typically include amounts expected to cover the remediation work required.

Employees

The following is a summary of our work force by segment at December 31, 2008, some of which are part-time employees:

		Approximate
		Number of
Property		Employees
L’Auberge du Lac			2,193
Lumière Place			1,255
Belterra Casino Resort			1,071
Boomtown New Orleans			804
Boomtown Bossier City			793
Casino Magic Argentina			729
Boomtown Reno			468
The Admiral Riverboat Casino			277
Corporate and other (a)			235
Total			7,825

Executive Officers of the Registrant

The persons serving as our executive officers as of March 9, 2009, and their positions with us are as follows:

NAME		POSITION WITH THE COMPANY
Daniel R. Lee		Chairman of the Board of Directors and Chief Executive Officer
Stephen H. Capp		Executive Vice President and Chief Financial Officer
John A. Godfrey		Executive Vice President, Secretary and General Counsel
Carlos Ruisanchez		Executive Vice President of Strategic Planning and Development
Alain Uboldi		Chief Operating Officer

Directors of the Registrant

The following table lists our directors, their principal occupations and principal employers as of March 9, 2009:

NAME		PRINCIPAL OCCUPATION & EMPLOYER
Daniel R. Lee		Chairman of the Board of Directors and Chief Executive Officer of Pinnacle
Stephen C. Comer		Retired Accounting Firm Managing Partner
John V. Giovenco		Retired Gaming Executive
Richard J. Goeglein		Owner, Evening Star Holdings, LLC (Hotel Development, Ownership & Management), Former Gaming Executive
Ellis Landau		Retired Gaming Executive
Bruce A. Leslie		Partner, Armstrong Teasdale LLP (law firm)
James L. Martineau		Private Investor
Michael Ornest		Private Investor
Lynn P. Reitnouer		Partner, Crowell, Weedon & Co. (Stock Brokerage Firm)

Available Information and CEO and CFO Certifications

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are available free of charge as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission (“SEC”) through our internet website, www.pnkinc.com. Our filings are also available through a database maintained by the SEC at www.sec.gov. We filed with the SEC as exhibits to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 the certifications of our Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. In addition, on June 4, 2008, we submitted to the New York Stock Exchange (the “NYSE”) the annual certification of the Company’s Chief Executive Officer required under Section 303A.12(a) of the NYSE Listed Company Manual.

Other

Pinnacle Entertainment, Inc., a Delaware corporation, is the successor to the Hollywood Park Turf Club, which was organized in 1938. It was incorporated in 1981 under the name Hollywood Park Realty Enterprises, Inc. In 1992, we changed our name to Hollywood Park, Inc. and in February 2000, we became Pinnacle Entertainment, Inc.

Financial information about segments and geographic areas is incorporated by reference from Note 14 to the audited Consolidated Financial Statements included in this Annual Report on Form 10-K.

Item 1A. Risk Factors

An investment in our securities is subject to risks inherent to our business. We have described below what we currently believe to be the material risks and uncertainties in our business.

Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with all of the other information included or incorporated by reference in this Annual Report on Form 10-K. We also face other risks and uncertainties beyond what is described below. This Annual Report on Form 10-K is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of securities, including our common stock, could decline significantly. You could lose all or part of your investment.

Our substantial funding needs in connection with our development projects, our current expansion projects and other capital-intensive projects, to the extent such projects are undertaken, will require us to raise substantial amounts of funding from outside sources. Currently, the availability of financing is extremely constrained by current disruptions in the credit markets.

We are currently engaged in and have planned expansions and development projects that require substantial amounts of capital. We are currently constructing River City, we have begun site work at Sugarcane Bay and we are in the design phase of our Baton Rouge project. These projects have an expected aggregate investment of approximately $1 billion, of which we have invested approximately $183 million through December 31, 2008. While we endeavor to stage development and construction of these projects over several years and we try not to commence major construction without having a reasonable expectation that we will have access to funds to complete it, our proposed projects could strain our financial resources and there is no certainty that such projects will be completed.

Under our most restrictive indenture, we are currently permitted to incur up to $350 million in senior indebtedness under a certain debt basket, of which approximately $172 million remains available to be borrowed under our Credit Facility as of March 6, 2009. We expect to supplement borrowings under our Credit Facility with existing cash and cash generated from operations through early 2010 to fund the completion of River City. While we believe we have sufficient funds to complete River City, there is no certainty that this will be the case if there is failure to comply with our debt covenants, or if actual results fall short of our forecasts, among other things.

In order to fund most of our projects, we will need to access the capital markets since the capital required for these projects exceeds our available financial resources. As a result of the continued turmoil in the capital markets, the availability of debt financing is extremely constrained, expensive and potentially unavailable. We cannot accurately predict when or if the capital markets will return to more normalized conditions. If the current debt market environment does not improve, we may not be able to raise additional funds in a timely manner, or on acceptable terms, or at all. Inability to access the capital markets, or the necessity to access the capital markets on less-than-favorable terms, may force us to delay, reduce or cancel planned development and expansion projects, sell assets or obtain additional financing on unfavorable terms. For instance, in October 2008, we decided to suspend substantially all development activities in Atlantic City, New Jersey indefinitely due to the current economic downturn, evolving competitive market and the tightening of the credit markets. Our current stock price, along with the stock prices of many public gaming companies, has declined sharply from recent historical levels. We may choose to cancel or delay projects rather than issue equity at these levels. This may impair our growth and materially and adversely affect our financial condition, results of operations and cash flow and the returns of investing in our securities.

Our ability to obtain bank financing or to access the capital markets for future debt or equity offerings may also be limited by our financial condition, results of operations or other factors, such as our credit rating or outlook at the time of any such financing or offering and the covenants in our existing debt agreements, as well as by general economic conditions and contingencies and uncertainties that are beyond our control. As we seek financing for our development projects, we will be subject to the risks of rising interest rates and other factors affecting the financial markets. Moreover, if we obtain additional funds by issuing equity securities or securities convertible into equity securities, dilution to stockholders may occur. In addition, preferred stock could be issued in the future without stockholder approval and the terms of the preferred stock could include dividend, liquidation, conversion, voting and other rights that are more favorable than the rights of the holders of our common stock.

If we continue with the construction of our current development projects, we may need to amend certain covenants in our Credit Facility or obtain waivers from our lenders.

The covenants in our Credit Facility require that we comply with a consolidated leverage ratio, a consolidated interest coverage ratio, and a consolidated senior debt ratio, in each case as defined in our Credit Facility. As of December 31, 2008, we believe we were in compliance with all of the financial covenants in our Credit Facility. Such covenants envisioned completion of River City at an earlier date than such completion is currently expected. As a result, the covenant ratios are scheduled to tighten, even as borrowings grow in order to fund completion. We are required to maintain a rolling four quarter consolidated leverage ratio no greater than 6.50x and 6.00x for the quarterly periods ending March 31, 2009 and June 30, 2009, respectively, and 5.50x for each of the quarterly periods ended September 30, 2009 and December 31, 2009. Our consolidated leverage ratio for the four quarters ended December 31, 2008 was 5.63x. With continued construction of our current development projects resulting in increased borrowing under our Credit Facility and depending upon generation of cash flow from operations, we may need to or choose to amend these covenants. Our lenders in the Credit Facility, some of whom have been reported in the press as having their own liquidity concerns, may use our potential need for an amendment as a means to seek increased pricing and/or reduced commitments under the Credit Facility. Such amendments may not be available, and if available, could significantly increase the costs of the Credit Facility and may adversely affect our financial results.

In the event that we are not able to amend our Credit Facility and we are not in compliance with the financial covenants in future periods, we would be restricted from borrowing funds under the Credit Facility and would need to seek a waiver of all covenant defaults under our Credit Facility. We may not be able to obtain a waiver on acceptable terms, on a timely basis or at all. In addition, any waiver may require us to pay a fee and higher interest rates to our lenders, which could increase our cost of credit and related expenses and adversely affect our financial results. If we fail to obtain a waiver of any violation, the lenders under the Credit Facility could require us to immediately repay all amounts outstanding under the Credit Facility, which would have a material adverse effect on our liquidity, business, financial condition and results of operations. In addition, if there is a payment acceleration under our Credit Facility, then we would be in default under our senior subordinated notes, which could result in an acceleration of such notes. We do not have adequate liquidity to repay all such indebtedness if there is a payment acceleration under such indebtedness. If the current debt market environment does not improve and we are not able to amend our Credit Facility or obtain a waiver from our lenders, we may have to delay, reduce or cancel our current development projects (such as River City, Sugarcane Bay and Baton Rouge) or sell assets. In addition, we may be forced to use available cash to pay down existing indebtedness. Nonetheless, even if we are forced to cancel our development projects and use available cash to pay down existing indebtedness, there can be no assurance that we will be able to comply with the covenants in our Credit Facility because it is not certain what our cash flow from operations will be in the future.

We may not be able to renew or extend our Credit Facility or enter into a new credit facility in today’s difficult markets. In addition, our ability to renew or extend our Credit Facility or to enter into a new credit facility may be impaired further if current market conditions continue or worsen. If we are able to renew or extend our Credit Facility, it may be on terms substantially less favorable than the current Credit Facility. We may face similar risks with respect to our outstanding bonds.

Recent disruptions in the global markets have lead to a scarcity of credit, tighter lending standards and higher interest rates on consumer and business loans. As of December 31, 2008, we had a $625 million Credit Facility that matures in December 2010. Our ability to renew or extend our existing Credit Facility or to enter into a new credit facility to replace the existing credit facility could be impaired if current market conditions continue or worsen. In the current environment, lenders may seek more restrictive lending provisions and higher interest rates that may reduce our borrowing capacity and increase our costs. We can make no assurances that we will be able to enter into a new credit facility or renew or extend our existing Credit Facility, or whether any such credit facility will be available under acceptable terms. Failure to obtain sufficient financing may constrain our ability to operate our business and to continue our development and expansion projects; to the extent such projects are undertaken. Any of these circumstances could have a material adverse effect on our business, financial condition and results of operation.

In addition, even though our existing Credit Facility matures in December 2010, if we have not made arrangements to extend the maturity of our Credit Facility or enter into a new credit facility by the end of December 2009, generally accepted accounting principles would require that amounts outstanding under the Credit Facility, which amounts may be substantial, be treated as a current liability at that time, which may lead to a “going concern” or like qualification or exception from our auditors with respect to our 2009 audited financial statements. We are discussing with certain of our lenders, among other things, an extension of the maturity of our Credit Facility, but we cannot assure you that we will be able to obtain any such extension, and if we are able to do so, the terms may be materially less favorable than the existing Credit Facility.

The bond market, and particularly the market for casino bonds, has deteriorated significantly over the past year. Quotes from reputable banks for our outstanding bond issues are significantly below par, meaning that such bonds, if purchased at such quotes, would offer yields to maturity that are significantly higher than the yields offered at issuance. Our bond issues mature in 2012, 2013 and 2015. If the bond market does not recover prior to the maturity of these bonds, the Company may be forced to refinance some or all of its debt at significantly worse terms than the Company has currently. Although it is several years before these unsecured bonds mature, the Company’s cash flow from operations is unlikely to be sufficient to retire all of such bonds at or prior to their maturity. Failure to obtain new debt on favorable or reasonable terms to replace existing debt could affect the Company’s liquidity and the value of its other securities, including its equity.

Our business may be sensitive to reductions in consumers’ discretionary spending as a result of recent downturns in the economy as well as other factors that are difficult to predict and beyond our control.

It is logical that the demand for entertainment and leisure activities would tend to be sensitive to consumers’ disposable incomes, and thus can be affected by changes in the economy and consumer tastes, both of which are difficult to predict and beyond our control. Unfavorable changes in general economic conditions including recession, economic slowdown, the current housing crisis and the credit crisis, the potential for bank failures, or higher fuel or other transportation costs, may reduce disposable income of our customers or result in fewer patrons visiting our casinos. As a result, we cannot ensure that demand for entertainment and leisure activities will remain constant. Continued adverse developments affecting economies throughout the world, including a general tightening of the availability of credit, increasing interest rates, increasing energy costs, acts of war or terrorism, natural disasters, declining consumer confidence or significant declines in the stock market could lead to a further reduction in discretionary spending on entertainment and leisure activities adversely affecting our business, financial and results of operations. A deterioration in operating results could affect our ability to comply with financial covenant ratios in our Credit Facility and to fund our construction projects.

The global financial crisis and recession may have an effect on our business and financial condition in ways that we currently cannot accurately predict.

The continued credit crisis, recession and related turmoil in the global financial system have had and may continue to have an effect on our business and financial condition. In October 2008, Lehman Commercial Paper, Inc. (“LCPI”), which is one of the lenders under our Credit Facility, filed for bankruptcy. LCPI had committed $48 million towards our $625 million Credit Facility. We paid appropriate fees for such commitment. LCPI funded its portion of the Credit Facility through September 30, 2008, or approximately $9.6 million of the then outstanding balance of $125 million. Since the beginning of October 2008, when the Company has increased its borrowing under the Credit Facility, LCPI has failed to fund its proportionate share. Management believes that it is unlikely that LCPI will provide its proportionate share if the Company were to draw additional sums under its Credit Facility. Hence, the $625 million Credit Facility is effectively a $586 million Credit Facility. As of December 31, 2008, the Company’s actual borrowings were $152 million with LCPI having defaulted on $2.2 million of its obligations. The Company continues to evaluate what remedies it may have, if any, regarding LCPI’s default. As noted elsewhere, the Company’s most restrictive indenture limits our ability to incur senior indebtedness under our Credit Facility to $350 million. As a result, we do not believe that LCPI’s inability to fund future borrowing requests will impact our liquidity.

The credit crisis has affected other lenders under our Credit Facility, although none have filed for bankruptcy and all, except for LCPI, have to date continued to fund their obligations. If a large percentage of our lenders file for bankruptcy or otherwise default on their obligations to us, we may not have the liquidity to fund our current projects, to the extent such projects are undertaken. There is no certainty that our lenders will continue to remain solvent or fund their respective obligations under our Credit Facility.

The significant distress recently experienced by financial institutions has had and may continue to have far reaching adverse consequences across many industries, including the gaming industry. The ongoing credit and liquidity crisis has greatly restricted the availability of capital and has caused the cost of capital (if available) to be much higher than it has traditionally been. Accessing the capital markets in this environment could increase the costs of our projects, which could have an impact on our flexibility to react to changing economic and business conditions and our ability or willingness to fund our development projects. All of these effects could have a material adverse effect on our business, financial condition and results of operations.

Our present indebtedness and projected future borrowings could have adverse consequences to us; future cash flows may not be sufficient to meet our obligations and we might have difficulty obtaining additional financing; we may experience adverse effects of interest-rate and exchange-rate fluctuations.

In June 2007, we issued $385 million aggregate principal amount of 7.50% senior subordinated notes due 2015, using a portion of the proceeds to retire our $275 million term loan within our Credit Facility and a portion to purchase $25 million in principal amount of our outstanding 8.25% senior subordinated notes due 2012. As of December 31, 2008, we had indebtedness of approximately $943 million, including $152 million drawn on the revolving credit facility, $275 million in aggregate principal amount of our 8.25% senior subordinated notes due 2012, $135 million in aggregate principal amount of our 8.75% senior subordinated notes due 2013, and $385 million in aggregate principal amount of our 7.50% senior subordinated notes due 2015. Our Credit Facility is comprised of a $625 million revolving credit facility, of which we are limited to $350 million under the terms of the indenture governing our 8.75% senior subordinated notes due 2013. As of March 6, 2009, we have drawn $166 million. Another $12.6 million was utilized under various letters of credit. Our substantial development plans for capital-intensive projects will require us to borrow significant amounts under our Credit Facility and, depending on which projects are pursued to completion, may cause us to incur substantial additional indebtedness.

While we believe that we have sufficient cash and cash-generating resources to meet our debt service obligations during the next 12 months, it is uncertain in the future whether we will generate sufficient cash flow from operations or through asset sales to meet our long-term debt service obligations. Our present indebtedness and projected future borrowings could have important adverse consequences to us, such as:

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limiting our ability to obtain additional financing without restructuring the covenants in our existing indebtedness to permit the incurrence of such financing;

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requiring a substantial portion of our cash flow to be used for payments on the debt and related interest, thereby reducing our ability to use cash flow to fund working capital, capital expenditures and general corporate requirements;

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limiting our ability to respond to changing business, industry and economic conditions and to withstand competitive pressures, which may affect our financial condition;

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incurring higher interest expense in the event of increases in interest rates on our borrowings that have variable interest rates or in the event of refinancing existing debt at higher interest rates;

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limiting our ability to make investments, dispose of assets, pay cash dividends or repurchase stock;

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heightening our vulnerability to downturns in our business or our industry or the general economy and restricting us from making improvements or acquisitions or exploring business opportunities;

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restricting our activities compared to those of competitors with less debt or greater resources; and

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subjecting us to financial and other restrictive covenants in our indebtedness, which a failure to comply with could result in an event of default.

If we fail to generate sufficient cash flow from future operations to meet our debt service obligations, we may need to refinance all or a portion of our debt on or before maturity. In such circumstances, it is uncertain that we will be able to refinance any of our debt. Our future operating performance and our ability to service or refinance our debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Our borrowings under our revolving credit facility are at variable rates of interest, and to the extent not protected with interest rate hedges, could expose us to market risk from adverse changes in interest rates. We currently have no such interest rate hedges. If interest rates increase, our debt service obligations on the variable-rate indebtedness could increase significantly even though the amount borrowed would remain the same. This may only be partially offset by earning higher rates of interest on our surplus cash balances. Additionally, our operation of Casino Magic Argentina exposes us to foreign exchange rate risk from adverse changes in the exchange rate of the dollar to the Argentine peso.

The terms of our credit facility and the indentures governing our subordinated indebtedness impose operating and financial restrictions on us.

Our Credit Facility and the indentures governing our 7.50%, 8.25% and 8.75% senior subordinated notes impose various customary covenants on us and our subsidiaries, including, among others, reporting covenants, incurrence covenants, covenants restricting our ability to make certain investments or other restricted payments, covenants to maintain insurance and comply with laws, covenants to maintain properties and other covenants customary in senior credit financings and indentures. In addition, our Credit Facility requires that we comply with various financial covenants and capital spending limits, such as receiving an opinion regarding our financial statements without a qualification or exception from our auditors. Our ability to comply with these provisions may be affected by general economic conditions, industry conditions and other events beyond our control, including delays in the completion of new projects under construction. As a result, we cannot assure you that we will be able to comply with these covenants. Our failure to comply with the covenants contained in the instruments governing our indebtedness could result in an event of default, which could materially and adversely affect our operating results and our financial condition.

Insufficient or lower-than-expected results generated from our new developments and acquired properties may negatively affect the market for our securities.

We cannot assure you that, if and once completed, the revenues generated from our new developments and acquired properties will be sufficient to pay related expenses; or, even if revenues are sufficient to pay expenses, the new developments and acquired properties will yield an adequate or expected return on our significant investments. Our projects, if completed, may take significantly longer than we expect to generate returns, if any. Moreover, lower-than-expected results from the opening of a new facility may negatively affect us and the market for our securities and may make it more difficult to raise capital, even as the shortfall increases the need to raise capital. In addition, there is no guarantee that the design of any of our projects, to the extent undertaken, will meet with customers’ approval. It might simply be unappealing, and this could affect our results of operations, our liquidity and the returns on the investment in our securities.

Many factors could prevent us from completing our construction and development projects as planned, including the escalation of construction costs beyond increments anticipated in our construction budgets.

Construction of major buildings has certain inherent risks, including the risks of fire, structural collapse, human error and electrical, mechanical and plumbing malfunction. Several of the buildings being built by us entail additional risks related to heights and cranes. Our development and expansion projects also entail significant risks, including:

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shortages of materials;

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shortages of skilled labor or work stoppages;

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unforeseen construction scheduling, engineering, excavation, environmental or geological problems;

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natural disasters, hurricanes, weather interference, floods, fires, earthquakes or other casualty losses or delays;

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unanticipated cost increases or delays in completing the projects;

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delays in obtaining or inability to obtain or maintain necessary licenses or permits;

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changes to plans or specifications;

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disputes with contractors;

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construction at our existing properties, which could disrupt our operations;

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remediation of environmental contamination at some of our proposed construction sites, which may prove more difficult or expensive than anticipated in our construction budgets;

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failure to obtain necessary gaming regulatory approvals and licenses, or failure to obtain such approvals and licenses on a timely basis; and

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requirements or government-established “goals” concerning union labor or requiring that a portion of the project expenditures be through companies controlled by specific ethnic or gender groups, goals that may not be obtainable, or may only be obtainable at additional project cost.

Increases in the cost of raw materials for construction, driven by worldwide demand, higher labor and construction costs and other factors, may cause price increases beyond those anticipated in the budgets for our development projects. Escalating construction costs may cause us to modify the design and scope of projects from those initially contemplated or cause the budgets for those projects to be increased. We generally carry insurance to cover certain liabilities related to construction, but not all risks are covered and it is uncertain whether such insurance will provide sufficient payment in a timely fashion even for those risks that are insured.

It is uncertain whether any project will be completed on time or within established budgets. Significant delays or cost overruns related to our construction projects could significantly reduce any return on our investment in these projects and adversely affect our earnings and financial resources. There are also certain tax incentives for construction in hurricane-damaged areas that require completion of new facilities by certain dates. There is no certainty that such dates will be met. Construction of our development projects exposes us to risks of cost overruns due to typical construction uncertainties associated with any project or changes in the designs, plans or concepts of such projects. For these and other reasons, construction costs may exceed the estimated cost of completion notwithstanding the existence of any guaranteed maximum price construction contracts.

In November 2007, we entered into a construction contract for our Sugarcane Bay project. Pursuant to the terms of the contract, the general contractor was required to submit a proposal to us for the guaranteed maximum price. In accordance with the contract, in the event that we and the general contractor are unable to agree upon the guaranteed maximum price, then we can either change the scope and scale of the work or terminate the contract. We are currently in discussions with the contractor regarding such proposed guaranteed maximum price. We may seek to terminate such contract and seek a new general contractor through competitive bidding. In August 2008, we entered into a guaranteed maximum price agreement for the first phase of our River City project, including the casino facility. We have not yet entered into a guaranteed maximum price agreement for our Baton Rouge project.

If we determine to proceed with our Atlantic City project, it will have many risks, and we may not realize the financial and strategic goals that are contemplated from its development.

In November 2006, we completed the purchase of the entities that own the Atlantic City site. Our plans to construct a major facility along Atlantic City’s Boardwalk are on indefinite hold in light of the current economic downturn, evolving competitive market and the tightening of the credit markets. To the extent we proceed with developing the site, the risks we may face in the development of our Atlantic City site include:

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We will face significant competition in the Atlantic City market. There are numerous casinos already in Atlantic City and casinos are now operating in Pennsylvania, Delaware and New York. Legalization or expansion of gaming in other nearby jurisdictions could provide additional competition for casinos in Atlantic City, including the recent approval by Maryland voters of 15,000 slot machines at each of five locations in Maryland. In addition, the city of Atlantic City has issued a request for proposals for development of one or more casinos on Bader Field, a municipally owned, defunct airport that is located alongside the major feeder routes into Atlantic City. Development of casinos on Bader Field may materially reduce visitation to Atlantic City’s Boardwalk area;

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It will be subject to significant risks and contingencies, including those relating to construction and financing. We may not complete the development on time, within budget, or at all, which could exacerbate the risks associated with such development;

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Completion of the Atlantic City project would likely involve the incurrence of substantial amounts of additional indebtedness, which will increase the risks associated with our current level of indebtedness. Until the development is complete, a process that is estimated to take several years, we will not have any revenue relative to this investment. Accordingly, during construction, we will incur substantial amounts of indebtedness for the development without additional revenue to contribute to the servicing of such indebtedness until the new facility opens;

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If we complete the development, the results of operations at our new Atlantic City casino may not meet our expectations or those of investors in our securities; and

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We must obtain approvals (including a license) from the New Jersey Casino Control Commission and other governmental authorities in order to operate the casino and it is uncertain whether such approvals will be obtained.

The gaming industry is very competitive and increased competition, including by Native American gaming facilities, could adversely affect our profitability.

We face significant competition in all of the markets in which we operate. This competition will intensify if new gaming operations enter our markets or existing competitors expand their operations.

Further, several of our properties are located in jurisdictions that restrict gaming to certain areas and/or are adjacent to states that currently prohibit or restrict gaming operations. Economic difficulties faced by state governments could lead to intensified political pressures for the legalization of gaming in jurisdictions where it is currently prohibited. The legalization of gaming in such jurisdictions could be an expansion opportunity for us or a significant threat to us, depending on where the legalization occurs and our ability to capitalize on it. In particular, our ability to attract customers to our existing casinos would be significantly affected by the legalization or expansion of gaming in Texas, Ohio, Illinois, Kentucky, Oklahoma, and California and the development or expansion of Native American casinos in our markets. The value of our site or potential casinos in Atlantic City has been affected and would be affected by the legislation or expansion of casino gaming in Delaware, Maryland, Pennsylvania, West Virginia, New York, northern New Jersey or Connecticut.

In the past, legislation to legalize or expand gaming has been introduced in some of these jurisdictions and federal law favors the expansion of Native American gaming. In 2006, legislation to add more than 30,000 slot machines at seven racetracks in Ohio was rejected by the voters of Ohio. In 2007, voters in West Virginia approved table games at racetracks in the Ohio, Hancock and Kanawha counties, but rejected a similar proposal in Jefferson County. In 2007, Indiana approved casinos with 2,000 slot machines at each of two racetracks in the Indianapolis area, both of which are now open. In 2008, New York approved a significant reduction in its gaming tax rate as a specific inducement for a large casino hotel in the Catskills region. In 2008, Maryland voters approved a state constitutional amendment allowing 15,000 slot machines total in five locations. We expect similar proposals to legalize or expand gaming will be made in the future in various states and it is uncertain whether such proposals will be successful.

Even in gaming markets where the state governments do not choose to increase the maximum number of gaming licenses available, we face the risk that existing casino licensees will expand their operations and the risk that Native American gaming will continue to grow. Furthermore, Native American gaming facilities frequently operate under regulatory requirements and tax environments that are less stringent than those imposed on state-licensed casinos, which could provide them with a competitive advantage.

Many of our competitors are larger and have substantially greater name recognition and marketing resources than we do. Moreover, consolidation of companies in the gaming industry could increase the concentration of large gaming companies in the markets in which we operate. This may result in our competitors having even greater resources and name recognition than such competitors currently enjoy.

We face competition from racetracks that offer slot machines. We also compete with other forms of legalized gaming and entertainment such as bingo, pull-tab games, card parlors, sports books, pari-mutuel or telephonic betting on horse and dog racing, state-sponsored lotteries, video lottery terminals, video poker terminals and, in the future, may compete with gaming at other venues. Furthermore, competition from internet lotteries and other internet wagering gaming services, which allow their customers to wager on a wide variety of sporting events and play Las Vegas-style casino games from home, could divert customers from our properties and thus adversely affect our business. Such internet wagering services are often illegal under federal law but operate from overseas locations, and are nevertheless sometimes accessible to domestic gamblers. There are also proposals that would specifically legalize internet gaming under federal law.

Our stock price has been and may remain volatile, and the value of our common stock may decline as a result of this volatility.

The market price of our common stock has been, and may be in the future, subject to wide fluctuations in response to factors such as:

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general conditions in the economy, including the recent economic slowdown, the current housing crisis and the credit crisis, the potential for bank failures, or higher fuel or other transportation costs;

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the tightening of the credit markets and our ability to enter into new credit facilities;

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the receptiveness of the capital markets to any future financings;

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variations in quarterly operating results;

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lower-than-expected results from the openings of our new facilities;

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announcements, by us or our competitors, of acquisitions, strategic partnerships, joint ventures or capital commitments;

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speculation about takeover or acquisition activity;

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the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

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changes in recommendations or financial estimates by securities analysts and changes in accounting principles by the accounting industry;

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loss or threat of loss of material gaming licenses or failure to obtain new approvals and licenses required for our projects;

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the granting of new gaming licenses to our competitors, whether in our markets or in adjacent gaming markets;

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conditions and trends in the gaming industry, including new state regulation or taxes enacted by state legislatures; and

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the other risk factors described in or referred to in this “Risk Factors” section as well as the “Private Securities Litigation Reform Act” section of this Annual Report on Form 10-K.

In addition, in recent years, the stock market has experienced significant price and volume fluctuations, which are often unrelated to the performance or condition of particular companies. Such broad market fluctuations could adversely affect the market price of our common stock. Following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against a company. If we become subject to this kind of litigation in the future, it could result in substantial litigation costs, damage awards against us, and the diversion of our management’s attention and resources.

Damage and closures caused by hurricanes in the Gulf Region make our results less predictable.

The damage caused by the hurricanes in the Gulf Coast, including damage to roads, utilities and residential and commercial buildings, has affected the local gaming markets. Some of our competitors have chosen to exit the hurricane-damaged areas following hurricanes and some have chosen to reenter such markets on a grander scale and rebuild their facilities with significant capital investments. In 2008, hurricanes caused closures, impairment of operations and some damage on two key weekends. As a result, operating results at casinos in the region have been less predictable. In addition, the Company’s ability to secure adequate insurance coverage may present additional risks.

Issues with respect to our insurance policies could affect our recovery of further insurance proceeds associated with the 2005 hurricane damage and related business interruption.

We are currently in litigation with one remaining insurance carrier, RSUI Indemnity Company (which has two insurance policies), regarding our right to recover further insurance proceeds from the damage to Casino Magic Biloxi, which was closed as a result of Hurricane Katrina and subsequently sold. In April 2006, we filed a claim for property damage and business interruption incurred at the Casino Magic Biloxi site as a result of 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. We have received $192 million to date on the claim. We continue to litigate with the one remaining defendant insurance carrier, RSUI Indemnity Company, regarding our right to recover further insurance proceeds with respect to our claim. It is uncertain whether our damage claim will be sustained or whether we will be fully compensated for all losses sustained due to the closure of the Biloxi facility or whether we will be paid on a timely basis. We have preserved all of our rights to pursue our full claim, plus interest, bad-faith and punitive damages against the remaining insurance carrier that has withheld payment.

Natural disasters have made it more challenging for us to obtain similar levels of Weather Catastrophe Occurrence/Named Windstorm, Flood and Earthquake insurance coverage for our properties compared to the levels before the 2005 hurricane.

Because of significant loss experience caused by hurricanes and other natural disasters over the last several years, a number of insurance companies have stopped writing insurance in Class 1 hurricane areas, including Louisiana and Mississippi. Others have significantly limited the amount of coverage they will write in these markets and have dramatically increased the premiums charged for this coverage. As a result, our policy limits for Weather Catastrophe Occurrences/Named Windstorms as well as other losses are significantly less than the policy limits we had during the 2005 hurricane season. During that period, our aggregate Weather Catastrophe Occurrence coverage was $400 million per occurrence. Our coverage for a Named Windstorm today is $200 million per occurrence, with a deductible of 5% of stated values. Above this $200 million limit, we have an additional $200 million of coverage per occurrence, but excluding Named Windstorms. If any of our properties suffer a Named Windstorm, any damages in excess of the coverage limits will likely be borne by us. In addition, as a result of the worldwide economic conditions, there has been uncertainty as to the viability of certain insurance companies. While the Company believes that its remaining insurance companies will remain solvent, there is no certainty that this will be the case.

We operate in a highly taxed industry and may be subject to higher taxes in the future.

In gaming jurisdictions in which we operate, state and local governments raise considerable revenues from taxes based on casino revenues and operations. We also pay property taxes, admission taxes, sales and use taxes, payroll taxes, franchise taxes and income taxes.

Our profitability depends on generating enough revenues to pay gaming taxes and other largely variable expenses, such as payroll and marketing, as well as largely fixed expenses, such as our property taxes and interest expense. From time to time, state and local governments have increased gaming taxes and such increases can significantly impact the profitability of gaming operations.

We cannot assure you that governments in jurisdictions in which we operate, or the federal government, will not enact legislation that increases gaming tax rates.

We may not meet the conditions for the maintenance of the licenses that we plan to utilize for our Sugarcane Bay and Baton Rouge projects.

In 2006, we completed the acquisition from Harrah’s of two entities that own certain Lake Charles, Louisiana gaming assets, including two licensed riverboat casinos, each with an associated gaming license. One of these licenses is planned to be used in connection with our planned Sugarcane Bay facility and the other license is anticipated to be used in connection with our planned Baton Rouge facility. The Louisiana Gaming Control Board (the “LGCB”) has established numerous conditions for use of each of these licenses, which, if not satisfied, could result in forfeiture of such licenses. While we intend to fulfill all conditions set by the LGCB, it is uncertain whether we will be able to do so or that the LGCB would agree to make any amendments that might be necessary. Forfeiture of one or both licenses could adversely affect our expansion plans for the Louisiana gaming market. The LGCB recently granted two extensions related to our Sugarcane Bay and Baton Rouge projects, but there can be no assurance that additional extensions, if required, will be granted.

We could lose the right to open our River City project if we fail to meet the conditions imposed by the Missouri Gaming Commission.

One of our subsidiaries was selected by the Missouri Gaming Commission (the “MGC”) to proceed for licensing for the operation of the River City casino. The issuance of the operating license is in the discretion of the MGC. Although our subsidiary was selected by the MGC to proceed for licensing, it is uncertain whether the license will ultimately be granted. We have invested a significant amount of capital in this project, which may be lost or difficult to recoup in the event that the license is not ultimately granted to us by the MGC.

In connection with respect to the River City casino, we have entered into a lease and development agreement with the St. Louis County Port Authority (the “SLCPA”). The SLCPA may terminate the lease and development agreement under certain instances. For example, if we fail to complete the River City project in accordance with its terms, we will owe monetary penalties and liquidated damages and could lose the right to open such project, irrespective of the substantial investment made to date.

Our industry is highly regulated, which makes us dependent on obtaining and maintaining gaming licenses and subjects us to potentially significant fines and penalties.

The ownership, management and operation of gaming facilities are subject to extensive state and local regulation. The statutes, rules and regulations of the states and local jurisdictions in which we and our subsidiaries conduct gaming operations require us to hold various licenses, registrations, permits and approvals and to obtain findings of suitability. The various regulatory authorities, including the Indiana Gaming Commission, the Louisiana Gaming Control Board, the Missouri Gaming Commission, the Nevada State Gaming Control Board, the Nevada Gaming Commission, the New Jersey Casino Control Commission, and the Government of the Province of Neuquén, Argentina may, among other things, limit, condition, suspend, revoke or fail to renew a license to conduct gaming operations or prevent us from owning the securities of any of our gaming subsidiaries for any cause deemed reasonable by such licensing authorities. Substantial fines or forfeitures of assets for violations of gaming laws or regulations may be levied against us, our subsidiaries and the persons involved.

To date, we have obtained all governmental licenses, findings of suitability, registrations, permits and approvals necessary for the operation of our gaming facilities. However, it is uncertain whether we will be able to obtain any new licenses, registrations, permits, approvals and findings of suitability that may be required in the future or that existing ones will be renewed or will not be suspended or revoked. Any expansion of our gaming operations in our existing jurisdictions or into new jurisdictions may require various additional licenses, findings of suitability, registrations, permits and approvals of the gaming authorities. The approval process can be time consuming and costly and has no assurance of success.

Potential changes in the regulatory environment could harm our business.

From time to time, legislators and special-interest groups have proposed legislation that would restrict or prevent gaming operations. Changes in regulations affecting the casino business can affect our existing or proposed operations. For example, various jurisdictions such as Illinois, Delaware and Neuquén, Argentina have restricted smoking on the casino floor. Such restrictions resulted in decreases in gaming revenues. Other restrictions or prohibitions on our current or future gaming operations could curtail our operations and could result in decreases in income.

The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.

A majority of our revenues are attributable to slot machines at our casinos. It is important for competitive reasons that we offer the most popular and up-to-date slot machine games with the latest technology to our customers.

In recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring participating lease arrangements. Generally, a participating lease is substantially more expensive over the long-term than the cost to purchase a new machine.

For competitive reasons, we may be forced to purchase new slot machines, slot machine systems, or enter into participating lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased investment and participating lease costs, it could adversely affect our profitability.

Adverse weather conditions, highway construction, gasoline shortages and other factors affecting our facilities and the areas in which we operate could make it more difficult for potential customers to travel to our properties and deter customers from visiting our properties.

Our continued success depends upon our ability to draw customers from each of the geographic markets in which we operate. Adverse weather conditions or highway construction can deter our customers from traveling to our facilities or make it difficult for them to frequent our properties. In addition, gasoline shortages or fuel price increases in regions that constitute a significant source of customers for our properties could make it more difficult for potential customers to travel to our properties and deter customers from visiting our properties. We believe that the vast majority of our customers drive to our properties.

Our dockside gaming facilities in Indiana, Louisiana and Missouri, as well as any additional riverboat or dockside casino properties that might be developed or acquired, are also subject to risks, in addition to those associated with land-based casinos, which could disrupt our operations. Although none of our vessels leave their moorings in normal operations, there are risks associated with the movement or mooring of vessels on waterways, including risks of casualty due to river turbulence, flooding, collisions with other vessels and severe weather conditions. We have been notified that The Admiral Riverboat Casino shall not be used to carry passengers beyond July 19, 2010 without replacement, dry-docking, or specific approval. As a result, we cannot assure you we will be able to re-certify The Admiral Riverboat Casino. We own a jet airplane, two seaplanes and numerous limousines and other vehicles that are used to transport customers to our casinos and for other corporate purposes. There are liabilities and other risks included in such transportation operations.

Our results of operations and financial condition could be materially adversely affected by the occurrence of natural disasters, such as hurricanes, or other catastrophic events, including war and terrorism.

Natural disasters such as major hurricanes, floods, fires and earthquakes could adversely affect our business and operating results. Hurricanes are common to the areas in which our Louisiana properties are located and the severity of such natural disasters is unpredictable. Atlantic City is on a barrier island and could also be susceptible to hurricanes and storm surges. River City is located in an area along the Mississippi that has historically experienced flooding. Although its foundation is built up to be above historical flooding levels, there is no certainty that this will be sufficient in future floods. In 2005, Hurricanes Katrina and Rita caused significant damage in the Gulf Coast region. Our Biloxi facility was destroyed by Hurricane Katrina. Our Boomtown New Orleans casino was forced to close for 34 days as a result of Hurricane Katrina. Hurricane Rita caused significant damage in the Lake Charles, Louisiana area and forced our L’Auberge du Lac resort to close for 16 days in addition to causing physical damage. In the third quarter of 2008, Hurricanes Gustav and Ike, which struck during two key weekends, affected our Louisiana operations and our Texas customer base. Hurricane Ike also caused flooding in St. Louis, necessitating the temporary closure of The Admiral Riverboat Casino, and caused a power outage over the course of two days at our Belterra Casino Resort. We cannot accurately predict the long-term effect that the recent hurricanes or any future natural disasters will have on our ability to maintain our customer base or to sustain our business activities.

Catastrophic events such as terrorist and war activities in the United States and elsewhere have had a negative effect on travel and leisure expenditures, including lodging, gaming (in some jurisdictions) and tourism. We cannot accurately predict the extent to which such events may affect us, directly or indirectly, in the future. We also cannot assure you that we will be able to obtain or choose to purchase any insurance coverage with respect to occurrences of terrorist acts and any losses that could result from these acts. If there is a prolonged disruption at our properties due to natural disasters, terrorist attacks or other catastrophic events, or if several of our properties simultaneously experience such events, our results of operations and financial condition could be materially adversely affected.

The loss of management and other key personnel could significantly harm our business.

Our continued success and our ability to maintain our competitive position is largely dependent upon, among other things, the efforts and skills of our senior executives and management team, including Daniel R. Lee, our Chairman of the Board and Chief Executive Officer. Although we have entered into an employment agreement with Mr. Lee and certain of our other senior executives and managers, we cannot guarantee that these individuals will remain with us. If we lose the services of any members of our management team or other key personnel, our business may be significantly impaired. We cannot assure you that we will be able to retain our existing senior executive and management personnel or attract additional qualified senior executive and management personnel.

In addition, our officers, directors and key employees also are required to file applications with the gaming authorities in each of the jurisdictions in which we operate and are required to be licensed or found suitable by these gaming authorities. If the gaming authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. Furthermore, the gaming authorities may require us to terminate the employment of any person who refuses to file appropriate applications. Either result could significantly impair our gaming operations.

We are subject to litigation which, if adversely determined, could cause us to incur substantial losses.

From time to time during the normal course of operating our businesses, we are subject to various litigation claims and legal disputes. Some of the litigation claims may not be covered under our insurance policies, or our insurance carriers may seek to deny coverage. As a result, we might also be required to incur significant legal fees, which may have a material adverse effect on our financial position. In addition, because we cannot predict the outcome of any action, it is possible that, as a result of current and/or future litigation, we will be subject to adverse judgments or settlements that could significantly reduce our earnings or result in losses.

We face environmental and archaeological regulation of our real estate.

Our business is subject to a variety of federal, state and local governmental statutes and regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Failure to comply with such laws could result in the imposition of severe penalties or restrictions on our operations by government agencies or courts of law or the incurrence of significant costs of remediation of hazardous materials. A material fine or penalty, severe operational or development restriction, or imposition of material remediation costs could adversely affect our business. In addition, the locations of our current or future developments may coincide with sites containing archaeologically significant artifacts, such as Native American remains and artifacts. Federal, state and local governmental regulations relating to the protection of such sites may require us to modify, delay or cancel construction projects at significant cost to us.

We face risks associated with growth and acquisitions.

We regularly evaluate opportunities for growth through development of gaming operations in existing or new markets, through acquiring other gaming entertainment facilities or through redeveloping our existing facilities. For example, we acquired the Atlantic City site and entities that hold two riverboats and gaming operations to be used in our Sugarcane Bay and Baton Rouge projects. The expansion of our operations, whether through acquisitions, development or internal growth, could divert management’s attention and could also cause us to incur substantial costs, including legal, professional and consulting fees. It is uncertain that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems. Additionally, it is uncertain that we will receive gaming or other necessary licenses or governmental approvals for our new projects or that gaming will be approved in jurisdictions where it is not currently approved. Further, we may not have adequate financing for such opportunities on acceptable terms.

Private Securities Litigation Reform Act

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements. Except for the historical information contained herein, the matters addressed in this Annual Report on Form 10-K, as well as in other reports filed with or furnished to the SEC or statements made by us, may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may provide oral or written forward-looking statements in our other periodic reports on Form 10-Q, Form 8-K, press releases and other materials released to the public. All forward-looking statements made in this Annual Report on Form 10-K and any documents we incorporate by reference are made pursuant to the Act. Words such as, but not limited to, “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “could,” “may,” “will,” “should,” “is fairly confident” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements, which may include, without limitation, adequacy of resources to fund development and expansion projects, liquidity, financing options, including the state of the capital markets and our ability to access the capital markets, the state of the credit markets and our ability to amend the terms of our credit facility, the state of the economy, anticipated completion and opening schedules of various projects, expansion plans, construction schedules, cash needs, cash reserves, operating and capital expenses, expense reductions, expected receipts of insurance proceeds including the amount of any such recovery and sufficiency of such coverage, anticipated marketing costs at various projects, the future outlook of Pinnacle and the gaming industry, the ability to meet the Consolidated Coverage Ratio required by the indentures of our senior subordinated indebtedness, our continuing exclusivity rights to operate casinos in Neuquén, Argentina after 2016, operating results and pending regulatory and legal matters, are all subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated by us. This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Factors that may cause our actual performance to differ materially from that contemplated by such forward-looking statements include, among others, the various risk factors discussed above, in addition to general domestic and international economic and political conditions as well as market conditions in our industry. For more information on the potential factors that could affect our operating results and financial condition in addition to the risk factors described above, review our other filings (other than any portion of such filings that are furnished under applicable SEC Rules rather than filed) with the SEC.

All forward-looking statements included in this Annual Report on Form 10-K are made only as of the date of this Form 10-K. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

The following table provides a brief description of our properties as of December 31, 2008:

						Approximate Number of
						Slot				Table
Locations		Type of Casino		Principal Markets		Machines				Games				Guestrooms
Operating Properties (a):
L’Auberge du Lac, LA (b)		Dockside		Houston, Beaumont, San Antonio, Austin, Southwest Louisiana and local patrons			1,601				62				995
Boomtown New Orleans, LA		Dockside		Local patrons			1,553				35				—
Belterra Casino Resort, IN		Dockside		Cincinnati, Louisville and local patrons			1,604				54				608
Boomtown Bossier City, LA		Dockside		Dallas/Ft. Worth and local patrons			1,048				30				188
Lumière Place Casino and Hotels (c)		Dockside		Kansas City, Chicago and local patrons			2,000				62				494
The Admiral Riverboat Casino		Dockside		Local patrons and regional tourists			696				13				—
Boomtown Reno, NV		Land-based		Northern California, I-80 travelers and local patrons			673				12				318
Casino Magic Argentina (d)		Land-based		Local patrons and regional tourists			1,014				54				32
Operating Properties Total							10,189				322				2,635
New Properties Under Construction and/or Development:
River City, St. Louis, MO (e)		Dockside		Local patrons and regional tourists			2,300				60				—
Sugarcane Bay, Lake Charles, LA (f)		Dockside		Houston, Beaumont, San Antonio, Austin, Southwest Louisiana and local patrons			1,500				50				400
Baton Rouge, LA (g)		Dockside		Local patrons and regional tourists			1,500				50				100
Potential Future Development Sites:
Atlantic City, NJ (h)		Land-based		New York City, Philadelphia, New Jersey, Baltimore, Washington, D.C. and Boston		Not Yet Determined
Central City, CO (i)		Land-based		Denver		Not Yet Determined

The following describes the real estate and leases associated with our properties:

L’Auberge du Lac: We lease 227 acres from the Lake Charles Harbor and Terminal District upon which our L’Auberge du Lac casino-hotel resort is located. The lease has an initial term of 10 years, which commenced in May 2005, with six renewal options of 10 years each. The annual base rent for the lease is approximately $939,500 per year, which amount adjusts annually for changes in the Consumer Price Index. We own the facilities and associated improvements at the property, including the casino facility.

Sugarcane Bay: Adjoining L’Auberge du Lac, we lease approximately 234 acres of land from the Lake Charles Harbor and Terminal District upon which we anticipate building our Sugarcane Bay casino-hotel resort. The Sugarcane Bay casino-hotel will occupy only a portion of this land. The balance would allow the eventual development of an additional 18-hole golf course at the L’Auberge du Lac/Sugarcane Bay complex and the possible sale of residential home sites along that golf course to subsidize the cost of construction of the golf course. The lease has an initial term of 10 years, commencing on the opening of Sugarcane Bay with six renewal options of 10 years each, similar to the L’Auberge du Lac lease. The annual rent on the 234-acre lease is $1.2 million for the first five years commencing with the opening of Sugarcane Bay and thereafter the amount adjusts annually for changes in the Consumer Price Index, not to exceed 5% in any given year. Prior to the opening of Sugarcane Bay, we are obligated to pay one-half of the annual rent on the date that certain conditions have been meet, such as obtaining all the required permits, licenses or approvals. Within the leased land, we purchased 50 acres for $5.0 million, which purchase did not change the base rent amount, and is intended to be used for eventual home sites around the planned golf course, the location of which we will designate prior to the opening of Sugarcane Bay. In addition, we purchased approximately 56 acres of land adjacent to the Sugarcane Bay and L’Auberge du Lac properties, potentially for additional home sites, which land has a carrying value of $5.2 million.

Boomtown New Orleans: We own approximately 54 acres in Harvey, Louisiana that are utilized by Boomtown New Orleans. We also own the facilities and associated improvements at the property, including the dockside riverboat casino.

Belterra Casino Resort: We lease approximately 148 acres of the 315 acres that our Belterra Casino Resort occupies in southern Indiana. The current lease term is through September 2010 and has eight remaining consecutive five-year automatic renewal periods. The lease currently provides for minimum annual rental payments of approximately $1.2 million, plus 1.5% of gross gaming win (as defined in the lease agreement) in excess of $100 million. The lease obligation included in rent expense was $2.2 million for 2008 and $2.3 million for each of the years ended December 31, 2007 and 2006. We also have the option to purchase the property on or after October 2020 for $30 million, subject to adjustments as defined in the lease agreement. In addition, we own the facilities and associated improvements at the property, including the dockside riverboat casino. We also own a 54-guestroom Best Western-branded hotel on 6 acres approximately 10 miles from Belterra.

Boomtown Bossier City: We own 23 acres on the banks of the Red River in Bossier City, Louisiana. We also own the facilities and associated improvements at the property, including the dockside riverboat casino. We lease approximately one acre of water bottoms from the State of Louisiana. The current lease term expires in September 2011. We have options to extend the lease for seven additional five-year periods.

Boomtown Reno: We own approximately 890 acres in Reno, Nevada, approximately 60 acres of which are utilized by the casino, hotel and other amenities and another 490 acres most of which is developable. The remaining 340 acres is remote and difficult to develop. We own all of the improvements and facilities at the property, including the casino, hotel, recreational vehicle park and service station, along with substantial related water and development rights.

Lumière Place: We own approximately 16 acres of contiguous land in St. Louis for the Lumière Place complex. We own all of the improvements and facilities at the property, including the casino, hotels and various amenities.

The Admiral Riverboat. We own approximately two acres of contiguous land in St. Louis for The Admiral Riverboat Casino. We own all of the improvements and facilities at the property, including the casino.

River City: We lease 56 acres in south St. Louis County located approximately 10 miles south of downtown St. Louis, where we are building our River City casino. We are building an approximately one-mile-long, four-lane public road to connect River City to the nearby interstate highway.

Casino Magic Argentina: We operate one substantial and several small casinos in southern Argentina under an exclusive concession agreement with the Province of Neuquén. This includes the principal facility in the City of Neuquén and a smaller facility in San Martín de los Andes. In Neuquén, we own the 20 acre site, the casino, and a 32-guestroom hotel and other amenities. In San Martín de los Andes, we lease the building in which we operate the casino. Such lease expires in January 2010, and is expected to be renewed in accordance with past renewals.

Great Exuma, Bahamas: As of December 31, 2008, we sub-subleased a 5,000-square-foot facility where we operated our casino adjacent to Four Seasons Resort Great Exuma at Emerald Bay in The Bahamas. We closed the casino on January 2, 2009 and vacated the premises on February 28, 2009.

Baton Rouge: We own approximately 575 acres of land approximately 10 miles south of downtown Baton Rouge, Louisiana, where we intend to build a casino-hotel.

Atlantic City, New Jersey: We own approximately 19 contiguous acres of land at the heart of Atlantic City along the Boardwalk. We have demolished the former casino as well as certain other structures on the site. We are continuing certain demolition activities but as of October 2008, we have otherwise suspended substantially all development activities indefinitely.

Central City, Colorado: We own approximately one and one-half acres of gaming-zoned land in Central City, Colorado. In addition, we have an option to purchase an additional six acres of adjoining non-casino-zoned land.

Lake Charles, Louisiana: In connection with the purchase of the two entities from Harrah’s in 2006, we acquired two dockside riverboat casinos, neither of which are in service. In addition, we acquired approximately nine acres of land containing a non-operating hotel and parking structure. We also acquired two water bottom leases with the State of Louisiana at the former casino site, which expire in 2010. We plan to use the two licenses for our Sugarcane Bay and Baton Rouge projects.

Virtually all of our real property interests collateralize our obligations under our Credit Facility, except for the real estate owned in Atlantic City and Argentina. For a description of the segments that use the properties described above, please see the table above.

Item 3. Legal Proceedings

Insurance Litigation: On August 1, 2006, we filed a lawsuit in the United States District Court for the District of Nevada against three of our excess insurance carriers, Allianz Global Risks US Insurance Company, Arch Specialty Insurance Company and RSUI Indemnity Company. The suit relates to the loss incurred by us as a result of Hurricane Katrina at our Casino Magic property in Biloxi, Mississippi.

The lawsuit seeks damages equal to the outstanding amount of our claim (totaling $346.5 million, less the approximately $192 million received to date). It also seeks declarations that our River City Project constitutes a permissible replacement property under the applicable policies and that we are entitled to receive the full amount of our Casino Magic Biloxi business interruption loss arising out of Hurricane Katrina, even though we sold certain Casino Magic Biloxi assets. Our insurance policies permit a “replacement” facility to be built anywhere in the United States. Finally, the suit seeks unspecified punitive damages for the improper actions of the defendants in connection with our claim.

On February 22, 2008, we settled with Arch Specialty Insurance Company, which provided $50 million of coverage, 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 us $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 and pari passu with the coverage provided by 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.

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 was obligated to pay Jebaco a 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. On January 6, 2009, the Louisiana district civil court extended the time for the defendants to respond to the state-court lawsuit until after the Fifth Circuit rules on Jebaco’s appeal. The Louisiana district civil court provided that Jebaco could request a deadline for a response from defendants if the Fifth Circuit had not ruled by February 12, 2009. On March 2, 2009, the Fifth Circuit heard oral arguments on the appeal. In light of this development, the defendants intend to seek an additional extension of time to respond to the state-court 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.

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

None.

PART II

Item 5.		Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is quoted on the New York Stock Exchange under the symbol “PNK”. The table below sets forth the high and low sales prices of our common stock as reported on the New York Stock Exchange:

		Price Range
		High				Low
2008
Fourth Quarter		$	7.91			$	2.58
Third Quarter			13.36				6.57
Second Quarter			17.86				10.32
First Quarter			23.74				12.12
2007
Fourth Quarter		$	29.75			$	22.78
Third Quarter			31.00				24.36
Second Quarter			31.34				27.07
First Quarter			36.17				27.85

As of March 5, 2009, there were 2,408 stockholders of record of our common stock.

Dividends: We did not pay any dividends in 2008 or 2007. Our indentures governing our 7.50% senior subordinated notes due 2015, 8.25% senior subordinated notes due 2012 and 8.75% senior subordinated notes due 2013 and existing Credit Facility limit the amount of dividends that we are permitted to pay. The Board of Directors does not anticipate paying any cash dividends on our common stock in the foreseeable future, as our financial resources are being reinvested into the expansion of our business.

Share Repurchase: During the fourth quarter ended December 31, 2008, we did not make any purchases of the Company’s equity securities.

Sales of Unregistered Equity Securities: During the fiscal year ended December 31, 2008, we did not issue or sell any unregistered equity securities.

Stock Performance Graph

The stock performance graph and related information presented below is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.

Set forth below is a graph comparing the cumulative total stockholder return for Pinnacle’s common stock with the cumulative total returns for the New York Stock Exchange Composite Index (the “NYSE Composite Index”) and the Dow Jones US Gambling Index. The total cumulative return calculations are for the period commencing December 31, 2003 and ending December 31, 2008, and include the reinvestment of dividends. The stock price performance shown in this graph is neither necessarily indicative of, nor intended to suggest, future stock price performance.

		12/31/03				12/31/04				12/31/05				12/31/06				12/31/07				12/31/08
Pinnacle Entertainment, Inc.		$	100.00			$	212.23			$	265.13			$	355.58			$	252.79			$	82.40
NYSE Composite Index		$	100.00			$	114.97			$	125.73			$	151.46			$	164.89			$	100.16
Dow Jones US Gambling Index		$	100.00			$	133.09			$	135.01			$	196.72			$	225.84			$	60.74

Item 6. Selected Financial Data

The following selected financial information for the years 2004 through 2008 was derived from our audited Consolidated Financial Statements. The information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the audited Consolidated Financial Statements and related notes thereto.

		For the year ended December 31,
		2008(a)				2007(b)				2006(c)				2005(d)				2004(e)
		(in millions, except per share data)
Results of Operations :
Revenues		$	1,044.7			$	921.8			$	911.5			$	668.5			$	466.5
Operating (loss) income			(345.3	)			16.8				98.3				32.3				69.2
Income (loss) from continuing operations, net of income taxes			(370.2	)			—				63.3				(0.1	)			2.2
Income (loss) from discontinued operations, net of income taxes			47.6				(1.4	)			13.6				6.2				6.9
Income (loss) from continuing operations per common share:
Basic		$	(6.17	)		$	0.00			$	1.33			$	0.00			$	0.06
Diluted		$	(6.17	)		$	0.00			$	1.28			$	0.00			$	0.06
Other Data:
Capital expenditures		$	306.0			$	545.6			$	186.5			$	193.9			$	209.6
Ratio of Earnings to Fixed Charges (f)			—				—				2.57				—				1.02
Cash flows provided by (used in):
Operating activities		$	129.3			$	153.4			$	206.5			$	61.7			$	30.4
Investing activities			(306.0	)			(566.2	)			(459.3	)			(138.6	)			(109.1	)
Financing activities			101.9				414.6				294.1				23.2				181.4
Balance Sheet Data—December 31:
Cash, restricted cash and equivalents		$	125.0			$	197.3			$	216.7			$	156.5			$	287.8
Total assets			1,919.2				2,193.5				1,737.8				1,244.9				1,208.8
Long-term debt			943.2				841.3				774.3				657.7				640.5
Stockholders’ equity			739.3				1,052.4				694.6				427.8				415.2

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

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

EXECUTIVE OVERVIEW

Pinnacle Entertainment, Inc. is a developer, owner and operator of casinos and related hospitality and entertainment facilities. We currently operate six significant domestic casinos, including L’Auberge du Lac in Lake Charles, Louisiana; Boomtown New Orleans in New Orleans, Louisiana; Belterra Casino Resort in Vevay, Indiana; Boomtown Bossier City in Bossier City, Louisiana; Lumière Place in St. Louis, Missouri; and Boomtown Reno in Reno, Nevada. We also operate the small Admiral Riverboat Casino in St. Louis, Missouri. Internationally, we operate one substantial and several small casinos in Argentina. We previously operated a small casino in the Bahamas, which we closed on January 2, 2009.

We have a number of projects at various stages of development. In south St. Louis County, Missouri, we are building our River City casino, which we expect to open in early 2010. In Lake Charles, Louisiana, we have begun site preparation of our planned Sugarcane Bay casino-hotel adjacent to L’Auberge du Lac. In East Baton Rouge Parish, Louisiana, we received voter approval in February 2008 permitting construction of a proposed casino-hotel complex. We also own well-located casino sites in Atlantic City, New Jersey and Central City, Colorado.

We operate casino properties, which include gaming, hotel, dining, retail and other amenities. Our operating results are highly dependent on the volume of customers at our properties, which in turn affects the price we can charge for our hotel rooms and other amenities. While we do provide casino credit in several gaming jurisdictions, most of our revenue is cash-based with customers wagering with cash or paying for non-gaming services with cash or credit cards. Our properties generate significant operating cash flow. Our industry is capital intensive and we rely on the ability of our resorts to generate operating cash flow to repay debt financing and fund maintenance capital expenditures.

Our long-term strategy is to build or acquire new resorts that are expected to produce favorable returns above our cost of capital; to maintain and improve each of our existing casinos; and to develop the systems to tie all of our casinos together into a national gaming network. Hence, we are developing new, high-quality gaming properties in attractive gaming markets; we are maintaining and improving our existing properties with disciplined capital expenditures; we are developing a customer-loyalty program designed to motivate customers to continue to patronize our casinos; and we may make strategic acquisitions at reasonable valuations, when and if available. We continue to make progress toward achieving our long-term strategy.

RESULTS OF OPERATIONS

The following table highlights our results of operations for the three years ended December 31, 2008, 2007 and 2006. As discussed in Note 14 to our audited Consolidated Financial Statements, we report segment operating results based on revenues and Adjusted EBITDA. Such segment reporting is on a basis consistent with how we measure our business and allocate resources internally. See Note 14 to our audited Consolidated Financial Statements for more information regarding our segment information and a reconciliation of this financial information to income from continuing operations in accordance with GAAP.

		For the year ended December 31,
		2008				2007				2006
		(in millions)
Revenues:
L’Auberge du Lac		$	342.6			$	321.2			$	312.3
Boomtown New Orleans			158.4				162.0				201.5
Belterra Casino Resort			168.6				177.9				172.7
Boomtown Bossier City			88.9				89.7				96.3
Lumière Place			174.2				8.0				11.6
The Admiral Riverboat Casino			25.8				58.1				2.2
Boomtown Reno			46.0				67.2				87.1
Casino Magic Argentina			40.0				37.3				27.7
Other			0.2				0.4				0.1
Total revenues		$	1,044.7			$	921.8			$	911.5
Operating income (loss)		$	(345.3	)		$	16.8			$	98.3
Income (loss) from continuing operations		$	(370.2	)		$	0.1			$	63.3
Adjusted EBITDA (a):
L’Auberge du Lac		$	84.3			$	75.2			$	72.4
Boomtown New Orleans			54.2				54.2				81.0
Belterra Casino Resort			29.7				39.3				37.3
Boomtown Bossier City			17.1				17.9				23.0
Lumière Place			10.1				(1.0	)			1.7
The Admiral Riverboat Casino			(5.0	)			7.1				0.4
Boomtown Reno			(4.4	)			3.5				6.8
Casino Magic Argentina			11.8				14.3				10.6

Comparison of the year ended December 31, 2008 to December 31, 2007 and December 31, 2006

Significant events that affected our 2008 results as compared to 2007 are described below:

•

The impact of slowing economic conditions and its effect on consumer discretionary spending may have negatively affected our gross revenues at some of our properties during the latter part of 2008.

•

The opening of Lumière Place Casino on December 19, 2007 and the opening of Four Seasons Hotel St. Louis and HoteLumière in February 2008.

•

The completion of the 252-guestroom and amenity expansion project at L’Auberge du Lac in January 2008.

•

Hurricane Gustav in late August 2008 caused the temporary closure of L’Auberge du Lac and Boomtown New Orleans during the historically profitable Labor Day weekend.

•

Hurricane Ike in mid-September 2008 caused the temporary closure of L’Auberge du Lac during a key weekend, affected our Indiana and Missouri operations, and caused extensive damage in southeastern Texas.

•

The worldwide capital crunch and the decline in values ascribed to casino companies and casinos have caused us to reevaluate the carrying costs of certain development land, capitalized development costs, goodwill, indefinite-lived intangible assets and certain other assets. This resulted in non-cash impairment charges to such assets and equity shares totaling $347 million in 2008.

Significant events that affected our 2007 results as compared to 2006 are described below:

•

Moderation of 2007 revenues at Boomtown New Orleans after operating with less competition in 2006 as a result of Hurricane Katrina.

•

The June 2007 closure of Boomtown Reno’s truck stop.

•

The January 2007 public equity offering resulting in net proceeds to us of approximately $353 million.

•

The June 2007 issuance of $385 million in aggregate principal of 7.50% senior subordinated notes, resulting in net proceeds to us of approximately $379 million.

•

The December 2006 acquisition of The Admiral Riverboat Casino.

•

The November 2006 acquisition of our Atlantic City site.

•

The November 2006 sale of the Casino Magic site and concurrent purchase of the assets from Harrah’s.

•

The ongoing effects of Hurricane Katrina and the rebuilding efforts in the affected areas throughout 2006.

•

In 2006, we received net proceeds of approximately $44.7 million related to our termination merger agreement with Aztar Corporation.

Segment comparison of the year ended December 31, 2008 to December 31, 2007 and December 31, 2006

Each segment’s contribution to the operating results was as follows:

L’Auberge du Lac

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	300.7			$	288.5			$	279.7				4.2	%			3.1	%
Total revenues			342.6				321.2				312.3				6.7	%			2.8	%
Operating income			49.1				48.2				46.7				1.9	%			3.2	%
Adjusted EBITDA			84.3				75.2				72.4				12.1	%			3.9	%

L’Auberge du Lac, our largest property, achieved record results in 2008 with increased revenues and Adjusted EBITDA reflecting the benefits of the completion of the $72 million guestroom and amenity expansion in January 2008. The guestroom expansion increased available hotel rooms to 995 from 743, an increase of 34%, resulting in increased lodging, gaming and food and beverage revenues. Hotel occupancy for 2008 was 85% compared to 92% in 2007. Improvement over prior-year results was achieved despite closures caused by Hurricane Gustav over the Labor Day weekend and Hurricane Ike over a historically profitable mid-September Asian holiday weekend. The casino was closed for nine days during the third quarter, which we estimate affected net revenues by approximately $9 million. In addition, the property incurred approximately $1.5 million of physical damage, which is below the deductible limits of our insurance policy and has been expensed in 2008.

Revenues increased from 2006 to 2007 primarily due to maturation of this property, which opened in May 2005. The increase in revenues contributed to an increase in Adjusted EBITDA. In late December 2007, L’Auberge du Lac opened 208 guestrooms of its new 252-guestoom expansion. Hotel occupancy, inclusive of the additional guestrooms that opened in late December 2007, was 92% for 2007, versus 92% in 2006.

Boomtown New Orleans

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	151.7			$	154.8			$	192.5				(2.0	)%			(19.6	)%
Total revenues			158.4				162.0				201.5				(2.2	)%			(19.6	)%
Operating income			45.1				45.7				72.6				(1.3	)%			(37.1	)%
Adjusted EBITDA			54.2				54.2				81.0				—				(33.1	)%

Boomtown New Orleans achieved Adjusted EBITDA in 2008 that equaled 2007 results despite the temporary closure and other hurricane disruptions in the third quarter of 2008. Management estimates that Hurricanes Gustav and Ike affected Boomtown New Orleans’ net revenues by approximately $2.7 million during the year.

In 2006, Boomtown New Orleans benefited from limited competition in both the New Orleans and Gulf Coast regions for a majority of the year due to the closure of competing properties due to Hurricane Katrina. Business levels moderated at the end of the year, once significant competition had reopened.

Belterra Casino Resort

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	144.0			$	153.6			$	150.1				(6.3	)%			2.3	%
Total revenues			168.6				177.9				172.7				(5.2	)%			3.0	%
Operating income			15.3				23.1				22.6				(33.8	)%			2.2	%
Adjusted EBITDA			29.7				39.3				37.3				(24.4	)%			5.4	%

Results in 2008 at Belterra reflect the mid-year opening of two racetrack casinos in the Indianapolis metropolitan area, each of which operate approximately 2,000 slot machines. One of the racetracks expects to open a permanent facility, replacing a temporary facility in early 2009. Another competitor plans to open a new, expanded casino in mid-2009. In addition, another competitor began heavily marketing its refurbished and rebranded facility during 2008. Finally, overall economic conditions in the region may have adversely affected the consumer’s spending habits. Belterra has responded through revamping its marketing efforts.

In 2007, gaming revenues increased as casino admissions increased 4.3% from 2006 and hotel revenues increased as hotel occupancy increased 5.2% from 2006. In August 2007, five new retail shops opened and, in December 2007, the refurbishment of 11 of the 51 high-end suites was completed resulting in higher retail and lodging revenues for the year ended December 31, 2007 as compared to the year ended December 31, 2006.

Boomtown Bossier City

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	83.4			$	84.6			$	91.1				(1.4	)%			(7.1	)%
Total revenues			88.9				89.7				96.3				(0.9	)%			(6.9	)%
Operating income			2.1				9.9				14.7				(78.8	)%			(32.7	)%
Adjusted EBITDA			17.1				17.9				23.0				(4.5	)%			(22.2	)%

The Bossier City/Shreveport gaming market is competitive, with four dockside riverboat casino-hotels and a racetrack operation. In addition, the Bossier City/Shreveport gaming market, which is approximately 188 miles east of Dallas/Fort Worth, competes with Native American gaming in southern Oklahoma located approximately 60 miles north of Dallas/Fort Worth. In October 2008, a large Native American casino on the Oklahoma/Texas border began the phased opening of its casino expansion. Despite this competition and regional disruption due to Hurricanes Gustav and Ike, we were able to achieve relatively consistent results as compared to 2007. As part of our annual assessment of indefinite-life intangible assets, the fair value of this property’s gaming licenses was below its carrying value due to decreased valuations of casinos and casino companies. The gaming license was the result of our 1998 acquisition of Casino Magic Corp. We recorded a non-cash impairment charge of $5.7 million, which affected operating income. In addition, we recorded a $2.1 million impairment of project costs related to the arrival facility conversion, which affected operating income. In 2006, we acquired a barge that we intend to convert to an arrival facility for guests of our riverboat casino. The arrival facility will adjoin our casino and offer escalators, making it easier for customers to travel among the three levels of our riverboat casino. This project is currently on hold given the current state of the capital markets.

Our operating results for 2007 decreased from 2006 due to the normalization of revenues after the temporary increase in 2006 in the local population due to the 2005 hurricanes in southern Louisiana, as well as reduced regional competition.

Lumière Place

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006(a)				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	140.6			$	4.7			$	—				2,891.5	%		NM
Total revenues			174.2				8.0				11.6				2,077.5	%			(31.0	)%
Operating loss			(38.5	)			(29.4	)			(0.2	)			31.0	%		NM
Adjusted EBITDA			10.1				(1.0	)			1.7			NM					(158.8	)%

Lumière Place includes the Lumière Place Casino, which opened mid-December 2007, HoteLumière and Four Seasons Hotel St. Louis, which opened in early 2008 and other amenities, comprising the Lumière Place complex. Consistent with the ramp-up of operations at almost all new casino-hotels, Lumière Place has incurred higher marketing costs and payroll during 2008 than is anticipated in future periods. The Lumière Place Casino itself has been consistently profitable on a property-level Adjusted EBITDA basis since January 2008, with profits increasing sequentially in most months since opening.

On November 4, 2008, Missouri voters approved Proposition A, a ballot referendum designed to protect economic benefits and thousands of jobs created by Missouri casinos, as well as to increase funding for Missouri schools. Proposition A allows for the removal of certain betting restrictions related to per customer loss limits, places a limit on the number of gaming licenses available in the state and increases the tax on casino revenues to 21 percent from 20 percent. The approval will allow Lumière Place to expand its marketing from local customers towards becoming a regional entertainment destination. Proposition A became effective on November 7, 2008.

For the year ended December 31, 2007, revenues consist of the first 12 days of operations at Lumière Place Casino. The results for December 31, 2006 include HoteLumière, which was acquired in September 2005, and was closed for most of 2007 for renovation.

The Admiral Riverboat Casino

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	23.6			$	53.6			$	2.0				(56.0	)%			2,580.0	%
Total revenues			25.8				58.1				2.2				(55.6	)%			2,540.9	%
Operating income (loss)			(38.1	)			0.1				0.2			NM					(50.0	)%
Adjusted EBITDA			(5.0	)			7.1				0.4				(170.4	)%			1,675.0	%

Growing losses at The Admiral Riverboat Casino have been caused by periodic closures due to flooding and augmented competition. We are evaluating the feasibility, subject to the MGC and other approvals, of relocating The Admiral Riverboat Casino to another location, in part due to the limitation of licenses in the state due to the recently passed Proposition A. We have an option to purchase 30 acres of land near the Chain of Rocks Bridge for this potential move, which option expires March 31, 2009. In addition, we recorded non-cash impairment charges of $18.6 million and $6.6 million related to the impairment of goodwill, and the riverboats and equipment, respectively, associated with The Admiral Riverboat Casino.

For the year ended December 31, 2007, revenues consist of a full year of operation of The Admiral Riverboat Casino, which was purchased in December 2006. The results for December 31, 2006 include one month of operation for The Admiral Riverboat Casino.

Boomtown Reno

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	23.8			$	35.3			$	41.0				(32.6	)%			(13.9	)%
Total revenues			46.0				67.2				87.1				(31.5	)%			(22.8	)%
Operating income (loss)			(23.6	)			(3.9	)			0.1				(505.1	)%			(4,000.0	)%
Adjusted EBITDA			(4.4	)			3.5				6.8				(225.7	)%			(48.5	)%

Revenues and Adjusted EBITDA declined in 2008 as a result of the highly competitive operating environment attributed to Native American gaming in northern California, as well as the overall poor economic conditions in both the region and northern California. This resulted in decreased traffic on the major interstate alongside Boomtown Reno that connects northern California with northern Nevada. Average traffic counts declined 9% in 2008 from 2007 according to the Nevada Department of Transportation. Operating income in 2008 includes non-cash impairment charges of $9.9 million in connection with the impairment of goodwill associated with our 1997 acquisition of Boomtown, Inc. and $6.4 million in connection with the impairment of buildings and equipment.

Revenues and Adjusted EBITDA declined in 2007 primarily due to the June 2007 closure of the Boomtown truck stop. We closed the truck stop to facilitate construction of the neighboring Cabela Inc.’s branded sporting goods store, which opened in November 2007. The parking for Cabela’s utilizes the former truck stop location. The Cabela’s store has resulted in few incremental casino customers. We have entitlements for a new satellite casino and travel plaza that could be built at a different location on our 490 acres of available land.

Casino Magic Argentina

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Gaming revenues		$	35.9			$	34.5			$	25.1				4.1	%			37.5	%
Total revenues			40.0				37.3				27.7				7.2	%			34.7	%
Operating income			6.8				11.6				8.2				(41.4	)%			41.5	%
Adjusted EBITDA			11.8				14.3				10.6				(17.5	)%			34.9	%

Casino Magic Argentina includes a sizable casino-hotel facility in Neuquén and several smaller casinos in other parts of the Province of Neuquén. Revenues for 2008 increased despite a smoking ban imposed within the city of Neuquén, Argentina effective November 2007. Our principal competitor in this market is in a neighboring province, where a similar smoking ban was imposed effective November 2008. Adjusted EBITDA reflects inflation of certain costs, principally payroll costs.

In June 2008, all 32 guestrooms of the hotel that adjoins the principal casino in Neuquén, Argentina were opened. Under terms of our concession agreement with the Province of Neuquén, our exclusivity rights in the Province of Neuquén are to be extended from 2016 to 2021 with the completion of such luxury hotel. We are awaiting the formal government approval of such extension.

Other factors affecting income from continuing operations

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
Other benefits (costs):
Corporate expenses		$	(38.2	)		$	(39.8	)		$	(29.2	)			(4.0	)%			36.6	%
Depreciation and amortization expense			(117.8	)			(80.3	)			(68.7	)			46.7	%			16.9	%
Pre-opening and development costs			(55.4	)			(60.8	)			(29.3	)			(8.9	)%			107.7	%
Litigation settlement			—				—				(2.2	)			—				—
Non-cash share-based compensation			(9.2	)			(8.4	)			(5.5	)			9.5	%			52.7	%
Merger termination proceeds, net of expenses			—				—				44.7				—				—
Impairment of goodwill			(28.5	)			—				—				—				—
Impairment of indefinite-lived intangible assets			(41.4	)			—				—				—				—
Impairment of land and development costs			(228.0	)			—				—				—				—
Impairment of buildings, riverboats and equipment			(20.3	)			(4.9	)			—				314.3	%			—
Write-downs, reserves and recoveries, net			(4.3	)			0.5				—				(960.0	)%			—
Impairment of investment in equity securities			(29.1	)			—				—				—				—
Loss on early extinguishment of debt			—				(6.1	)			—				—				—
Other non-operating income			2.7				15.5				16.0				(82.6	)%			(3.1	)%
Interest expense, net of capitalized interest			(53.0	)			(25.7	)			(53.7	)			106.2	%			(52.1	)%
Minority Interest			—				—				0.1				—				—
Income tax benefit (expense)			54.5				(0.5	)			(42.1	)		NM					(98.8	)%

Corporate expenses represent unallocated payroll, professional fees, rent, travel expenses and other general and administrative expenses not directly related to our casino and hotel operations. Such expenses were approximately flat in 2008 versus 2007, despite our expanding operations. The increase in corporate expenses from 2007 to 2006 is due to the hiring of additional corporate staff in support of our expanding operations.

Depreciation and amortization expense increased in 2008 primarily due to the opening of Lumière Place and the expansion at L’Auberge du Lac. The increase in depreciation expense in 2007 is primarily due to a full year of depreciation for The Admiral Riverboat Casino, which we acquired in December 2006.

Pre-opening and development costs for the fiscal years ended December 31, 2008, 2007 and 2006 consist of the following:

		For the year ended December 31,
		2008				2007				2006
		(in millions)
Pre-opening and development costs:
Atlantic City (a)		$	17.3			$	18.7			$	7.2
Missouri Proposition A Initiative (b)			7.9				—				—
Lumière Place (c)			7.8				22.9				5.6
Baton Rouge (d)			7.5				9.5				1.4
River City (e)			6.1				4.8				8.2
Kansas City			4.6				2.2				—
Sugarcane Bay			3.2				1.8				2.6
Other			1.0				0.9				4.3
Total pre-opening and development costs		$	55.4			$	60.8			$	29.3

Litigation settlement In the fourth quarter of 2006, we recorded a $2.2 million litigation settlement reserve involving our former chairman. The suit was settled in the first quarter of 2007 for an amount approximating the litigation reserve.

Non-cash share-based compensation was $9.2 million, $8.4 million, and $5.5 million for the year ended December 31, 2008, 2007 and 2006, respectively. Such compensation expense relates to the theoretical value of options on the date of issuance and is not related to actual stock price performance. The number of options granted under our equity incentive compensation plan was 2,070,500 options in 2008, versus 552,500 and 734,000 options in 2007 and 2006, respectively.

Merger termination proceeds The 2006 results reflect net proceeds of approximately $44.7 million related to our terminated merger agreement with Aztar Corporation. The gross breakup fee from the merger agreement was $78.0 million. The difference reflects legal, financing fees and other costs related to the terminated merger agreement.

Impairment of goodwill In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, the Company reviews goodwill for impairment annually during the fourth quarter or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Goodwill was recently tested as of the fourth quarter of 2008 by estimating the fair value of each reporting unit in accordance with SFAS No. 142. Reference to fair value in this document refers to the definition of fair value in accordance with SFAS No. 157 “Fair Value Measurements”, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment and therefore those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market existed for the item being valued.

The estimated fair value of each reporting unit was then compared with the carrying value to determine if any impairment exists. In connection with the preparation of the audited Financial Statements for 2008, we concluded that as of the fourth quarter of 2008 the carrying amounts of goodwill associated with Boomtown Reno and The Admiral Riverboat Casino were impaired by $9.9 million and $18.6 million, respectively. These impairment charges are reflected in income from continuing operations for the year ended December 31, 2008.

Impairment of indefinite-lived intangible assets include gaming licenses and are reviewed for impairment annually during the fourth quarter, or more frequently if events or circumstances indicate that the carrying value may not be recoverable. As a result of our annual impairment testing, we determined the fair value of our gaming licenses, computed according to SFAS No. 142, related to Sugarcane Bay, Baton Rouge and Boomtown Bossier City were less than the carrying value, and as a result, for the year ended December 31, 2008, we recorded an impairment charges of $20.3 million, $15.4 million, and $5.7 million, respectively.

Impairment of land and development costs During the fourth quarter of 2008, the continuing economic downturn and constrained capital markets contributed to a severe decline in value of gaming stocks and gaming assets. As a result, management determined that a triggering event in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” occurred in the fourth quarter of 2008. Given the continuing deterioration in commercial real estate values, uncertainties surrounding the Company’s access to sufficient resources to adequately finance the majority of its development pipeline we tested all development project land holdings and related capitalized costs for recoverability in connection with the preparation of the audited Consolidated Financial Statements for 2008. As a result of these tests, we determined that certain land holdings and related capitalized costs were impaired and recorded the following impairment charges:

		For the year ended December 31,
		2008				2007				2006
		(in millions)
Boomtown Reno		$	0.5			$	—			$	—
Boomtown Bossier City			2.2				—				—
The Admiral Riverboat Casino			3.6				—				—
Corporate and other projects (a)			221.7				—				—
Impairment of land and development costs		$	228.0			$	—			$	—

Impairment of buildings, riverboats and equipment consist of the following:

		For the year ended December 31,
		2008				2007				2006
		(in millions)
Boomtown Reno (a)		$	7.7			$	—			$	—
The Admiral Riverboat Casino (a)			6.6				—				—
Boomtown Bossier City (b)			0.2				—				—
L’Auberge du Lac (b)			0.3				—				—
Belterra Casino Resort (c)			—				1.0				—
Casino Magic Argentina			1.0				—				—
Corporate and other projects (d)			4.5				3.9
Impairment of buildings, riverboats and equipment		$	20.3			$	4.9			$	—

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

		For the year ended December 31,
		2008				2007				2006
		(in millions)
(Gain)/Loss on sale of assets (a)		$	3.0			$	(0.5	)		$	—
Customer loyalty program related expenses (b)			1.4				—				—
Insurance proceeds			(0.2	)			—				—
Other			0.1				—				—
Write-downs, reserves and recoveries, net		$	4.3			$	(0.5	)		$	—

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 in loss from discontinued operations as of December 31, 2008.

Impairment of Investment in Equity Securities We own 1.2 million shares of common stock in Ameristar Casinos, Inc., a competitor. We had purchased such shares with the intent of proposing a combination of the two companies. However, with the changes in the financial markets, we determined that such combination was no longer in the best interests of our stockholders. In accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, at June 30, 2008 we determined that the fair value of these shares was “other-than-temporarily” impaired and recorded an initial impairment charge of $22.6 million based on the June 30, 2008 fair market value of such securities. Given further deterioration in the fair market value of these securities during the fourth quarter of 2008, we recorded an additional $6.4 million impairment charge based on the December 31, 2008 fair market value. As of December 31, 2008, we have a basis of $10.8 million, or $8.64 per share, in our investment, which investment is included in “Other assets, net” on the audited Consolidated Balance Sheets.

Loss on early extinguishment of debt During the 2007 second quarter, we issued fixed-rate eight-year 7.50% senior subordinated notes due 2015 at an effective yield of 7.75% to maturity. A majority of the proceeds were used to retire $275 million of floating rate secured term debt and to purchase $25.0 million in principal amount of our 8.25% senior subordinated notes due 2012. These transactions resulted in a write-off of $6.1 million of debt issuance costs in 2007. There were no debt issuance costs written off in 2008 or 2006.

Other non-operating income consists primarily of the following:

		For the year ended December 31,
		2008				2007				2006
						(in millions)
Other non-operating income:
Interest income (a)		$	2.0			$	15.2			$	13.4
Dividend income			0.7				0.3				0.8
Gain on sale of common stock (b)			—				—				1.8
Total other non-operating income		$	2.7			$	15.5			$	16.0

Interest expense, net of capitalized interest was as follows:

		For the year ended December 31,
		2008				2007				2006
						(in millions)
Interest expense before capitalization of interest		$	78.1			$	68.6			$	59.5
Less capitalized interest			(25.1	)			(42.9	)			(5.8	)
Interest expense, net of capitalized interest		$	53.0			$	25.7			$	53.7

The increase in interest expense before capitalized interest for the year ended December 31, 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 both Lumière Place and the expansion at L’Auberge du Lac in late 2007 and early 2008 and the discontinuance of capitalization of interest in relation to our Atlantic City project. Given our recent decision to indefinitely place our Atlantic City project on hold, we stopped capitalizing interest in connection with eligible project costs effective October 1, 2008.

Income tax Our 2008 effective income tax rate for continuing operations was (12.8)%, or a benefit of approximately $54.5 million, as compared to 91.4%, or an expense of $0.4 million in 2007. Our 2008 effective rate differs from the statutory rate primarily due to the effects of the recording of a valuation allowance reserve against substantially all of our domestic deferred tax assets, as well as non-deductible expenses associated with certain lobbying activities, the impairment of goodwill related to our Boomtown Reno property and the gaming tax add-back for Indiana income tax purposes. During 2008, we established additional non-cash deferred tax asset valuation allowances totaling $98.3 million following an assessment of the recoverability of our deferred tax assets. Our deferred tax asset valuation allowance for the year included $11.6 million related to the book impairment of our Ameristar common stock holdings of which $2.7 million was recorded in the fourth quarter, $42.0 million associated with the impairment of certain real estate holdings and approximately $44.7 million attributable to other deferred tax assets under accounting principle SFAS No. 109 “Accounting for Income Taxes”, which requires a valuation allowance for deferred tax assets in a tax jurisdiction when a company has cumulative financial accounting losses over several years. We have incurred three-year cumulative accounting losses as of December 31, 2008.

Discontinued operations consist of our former Casino Magic Biloxi operations and our operations at The Casino at Emerald Bay in The Bahamas. During 2008, we recorded a gain of $54.9 million, net of income taxes, related to insurance proceeds received related to our former Casino Magic Biloxi operations. In July 2008, we decided to sell or otherwise discontinue operations of The Casino at Emerald Bay. This small casino is distant from our other operations and its success was heavily reliant on the neighboring unaffiliated Four Seasons hotel. The owner of such hotel is currently in receivership. Consequently, since the beginning of the third quarter of 2008, we have reflected the business as a discontinued operation and as of December 31, 2008 have recorded $4.3 million in asset impairment charges for the gaming operation’s related assets. On January 2, 2009, we closed the casino as a suitable buyer has not yet been located. We completed the sale of our Crystal Park Casino card club in April 2006, our leasehold interest and related receivables in the Hollywood Park Casino card club in July 2006 and our Casino Magic Biloxi site and certain related assets in November 2006.

Discontinued Development Opportunity In September 2007, we submitted a proposal for a new gaming entertainment complex to be located in Kansas City, Kansas. In September 2008, we withdrew such application in light of deteriorating capital markets. In connection with our application, we deposited $25 million with the Kansas Lottery Commission in June 2008, which was later returned to us in September 2008.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2008, we had $116 million of cash and cash equivalents and approximately $186 million of availability under our Credit Facility. We generally produce significant positive cash flows from operations, though this is not always reflected in our reported net income due to large non-cash charges such as depreciation and other non-cash costs. We estimate that approximately $70.0 million was needed to fund our casino cages, slot machines and day-to-day operating and corporate accounts as of December 31, 2008.

We have reduced excess cash throughout operations, and have used cash for, among other things, the construction of River City, completion of Lumière Place and the acquisition of additional real estate for our Atlantic City project. Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, our compliance with covenants contained in the Credit Facility and indentures, and our ability to access the credit and capital markets.

														Percentage
		For the year ended December 31,												Increase/(Decrease)
		2008				2007				2006				2008 vs. 2007				2007 vs. 2006
						(in millions)
Net cash provided by operating activities		$	129.3			$	153.4			$	206.5				(15.7	)%			(25.7	)%
Net cash used in investing activities		$	(306.0	)		$	(566.2	)		$	(459.3	)			46.0	%			23.3	%
Net cash providing by financing activities		$	101.9			$	414.6			$	294.1				(75.4	)%			41.0	%

Operating Cash Flow

Our decrease in cash provided by operating activities in 2008 from 2007 is primarily due to a slight deterioration in operating results and cash payments for previously accrued accounts payable, offset by the collection of insurance proceeds in the year.

Our decrease in cash provided by operating activities in 2007 from 2006 is the result of large cash payments totaling $44.7 million received in 2006 related to our terminated merger agreement with Aztar Corporation.

Investing Cash Flow

Cash used in investing activities has decreased in 2008 from 2007 due to the substantial completion of our Lumière Place and expanded L’Auberge du Lac projects in December 2007. During 2008, we finalized these two projects, purchased land in Atlantic City for our future Atlantic City project, and continued construction of River City. The results for 2006 include the various acquisitions completed in November and December of that year. The following is a summary of our capital expenditures for the years ended December 31, 2008, 2007 and 2006:

		For the year ended December 31,
		2008				2007				2006
						(in millions)
Capital expenditures by property or development included:
Lumière Place		$	83.5			$	322.8			$	104.3
Sugarcane Bay			11.2				3.1				—
Atlantic City (a)			99.4				37.2				—
River City			51.7				18.3				18.1
Baton Rouge			1.0				21.4				—
L’Auberge du Lac			23.4				69.8				14.4
Boomtown New Orleans			7.6				4.7				12.0
Belterra Casino Resort			5.7				13.9				6.7
Boomtown Bossier City			3.1				2.3				4.6
Boomtown Reno			7.0				2.5				3.1
Casino Magic Argentina			4.5				10.5				6.9
Other			7.9				39.1				16.4
Total capital expenditures		$	306.0			$	545.6			$	186.5

The principal construction in progress as of December 31, 2008 is the River City casino in south St. Louis County. The total estimated budget of Phase One of River City is $380 million, which includes $22.7 million in capitalized interest. This is an increase from the previous budget of $375 million, reflecting an increase in the anticipated amount of capitalized interest. Such increase reflects a higher average interest rate used in the capitalized interest calculation and a longer period of time for construction than was originally anticipated. Such project costs do not include start-up cage cash or the non-cash accrual for rent during the construction period. We have incurred costs of $126 million as of December 31, 2008. Provided continued compliance with the financial covenants and other borrowing conditions, management anticipates that the $172 million in currently available liquidity under the Credit Facility as of March 6, 2009, as well as our surplus cash and anticipated cash flows from operations, will provide the funding required for completion. There is no certainty that this will be the case.

Generally, development of our projects, including River City, Sugarcane Bay and Baton Rouge, are contingent upon regulatory or other approvals that may or may not be achieved. We have purchased land in Atlantic City, New Jersey and Central City, Colorado for development of casino-hotels. We frequently evaluate other potential projects as well. Some of our development projects, including River City, Sugarcane Bay and Baton Rouge, are being developed pursuant to agreements and conditions with relevant government entities that require minimum investment levels and completion time schedules. Failure to meet such schedules may result in monetary damages in the case of River City and/or the revocation of the gaming licenses with respect to all three projects.

In 2009 and for the next several years, our anticipated capital needs include the following:

•

In connection with our River City project, we have entered into a lease and development agreement with the St. Louis County Port Authority. Pursuant to the terms of the lease and development agreement, the project is to be developed in two phases. We are required to invest $375 million in the first phase and $75 million in the second phase, which must be completed three years from the opening of phase one. The maximum that we would have to pay is $20 million if the second phase is never completed. The gaming facilities of phase one are scheduled to be completed and expect to be open to the public by early 2010;

•

In June 2007, the Louisiana Gaming Control Board (the “LGCB”) approved our architectural plans for the proposed $350 million Sugarcane Bay project to be built adjacent to our L’Auberge du Lac facility in Lake Charles, Louisiana. We are required to complete specific milestones within certain timeframes and complete construction within 18 months of commencing excavating and grading work for the foundations, subject to certain approvals by the LGCB. We have cumulatively invested approximately $25.6 million in capital expenditures and pre-opening costs as of December 31, 2008 on such project. On February 17, 2009, the LGCB granted our petition to modify the Statement of Conditions to Riverboat Gaming License for Sugarcane Bay (the “Sugarcane Bay Conditions”) relating to the completion of construction of the Sugarcane Bay project by extending the deadline for completion of construction by ninety (90) days. Construction must now be completed by July 30, 2010, absent further extension or modification by the LGCB. During the hearing at which the petition was approved, we also indicated to the LGCB that depending on the condition of the capital markets, we may need to seek additional extensions of time to complete construction. There is no certainty that the LGCB will grant any additional extension of time to complete construction, or that it will otherwise modify the Sugarcane Bay Conditions upon request made. In the event that the LGCB determines that we are in violation of the Sugarcane Bay Conditions, it could take disciplinary action, including, but not limited to, revocation of the license for Sugarcane Bay. Construction of Sugarcane Bay will require additional financing by us which is not currently available on reasonable terms in the constrained capital markets;

•

In February 2008, voters in the East Baton Rouge Parish approved the site for our proposed casino-hotel entertainment complex in Baton Rouge, Louisiana. We had previously received approval from the LGCB for this project. Construction will still require zoning and other local approvals. Construction is expected to cost approximately $250 million and includes a casino, a 100-guestroom hotel and several entertainment and dining options. Similar to Sugarcane Bay, we are required to complete specific milestones within certain timeframes and complete construction of the first phase within 18 months of commencing excavating and grading work for the foundations, subject to certain approvals by the LGCB. We have cumulatively invested approximately $31.0 million in capital expenditures and pre-opening costs as of December 31, 2008 on such project, of which $24.5 million was for the purchase of the approximately 575 acre site. On February 17, 2009, the LGCB granted our petition to modify the Statement of Conditions to Riverboat Gaming License for the Baton Rouge project (the “Baton Rouge Conditions”) relating to entering into and submitting to the LGCB all necessary contracts for construction of the project by extending the deadline for such execution and submission by ninety (90) days. Such contracts must now be entered into by May 19, 2009 absent further extension or modification by the LGCB. During the hearing at which the petition was approved, we also indicated to the LGCB that depending on the condition of the capital markets, we may need to seek additional extensions of time to enter into such contracts. There is no certainty that the LGCB will grant any additional extension of time to enter into contracts, or that it will otherwise modify the Baton Rouge Conditions upon request made. In the event that the LGCB determines that we are in violation of the Baton Rouge Conditions, it could take disciplinary action, including, but not limited to, revocation of the license for the Baton Rouge project;

•

We intend to oversee the development at a future date of at least $50 million of real estate projects in downtown St. Louis, Missouri, which we are required to complete by December 2012. The total cost of such projects must be at least $50 million; however, our investment in such projects can be substantially less, as such projects may be developed in partnership with others. If we and our development partners collectively fail to invest $50 million in real estate projects by December 2012, we would be obligated to pay a fee of $1.0 million in January 2013, $2.0 million in January 2014 and $2.0 million annually thereafter, adjusted by the change in the consumer price index; and

•

We intend to continue to maintain our current properties in good condition and estimate that this will require maintenance capital spending of approximately $30 million per year.

Management’s intention is to use existing cash resources, cash flows from operations and funds available under the Credit Facility to fund operations, maintain existing properties, make necessary debt service payments and fund the development of some of our capital projects. As discussed in more detail in the Risk Factors above, the continued credit crisis, recession and related turmoil in the global financial system has had and may continue to have an effect on our liquidity. The significant distress recently experienced by financial institutions has had and may continue to have far-reaching adverse consequences across many industries, including the gaming industry. The ongoing credit and liquidity crisis has greatly restricted the availability of capital and has caused the cost of capital (if available) to be much higher than it has traditionally been. Under our most restrictive indenture, we are currently permitted to incur up to $350 million in senior indebtedness under a certain debt basket, of which approximately $172 million could be additionally borrowed under our Credit Facility, subject to covenant compliance, utilizing such debt basket as of March 6, 2009.

Given that indenture borrowing limit, we expect to supplement borrowings under our Credit Facility with existing cash and cash generated from operations through early 2010 to fund the completion of River City. However, the financial covenants within our Credit Facility are scheduled to tighten during 2009 and beyond, and as a result, we could experience difficulty in meeting such covenants as we increase our revolver borrowings to complete River City. Failure to meet such covenants, or failure to have such covenants amended, could prevent further borrowings under the Credit Facility. While we currently believe we will have sufficient funds to complete River City, there is no certainty that this will be the case. In particular, if our operating results are adversely affected because of a reduction in consumer spending, or for any other reason, this may affect our ability to complete River City unless we sell assets, enter into leasing facilities, or take other measures to find additional resources. There is no certainty that we will be able to do so on terms that are favorable to the Company or at all, particularly in the absence of considerable improvements in the capital markets or covenant relief under our Credit Facility.

Our substantial funding needs in connection with our development projects, if pursued, would require us to raise substantial amounts of capital from outside sources. As a result of the continued turmoil in the capital markets, the availability of financing is extremely constrained, expensive and potentially unavailable. We cannot accurately predict when or if the capital markets will return to more normalized conditions. If the current capital market environment does not improve, we may not be able to raise additional funds in a timely manner, or on acceptable terms, or at all. Inability to access the capital markets, or the necessity to access the capital markets on less than favorable terms, may force us to delay, reduce or cancel planned development and expansion projects, sell assets or obtain additional financing on potentially unfavorable terms. Management intends to proceed with construction of its various projects only when it believes that financing can be arranged on terms favorable to the Company.

In addition to the effect that the global financial crisis has already had on us, we may face significant challenges if conditions in the financial markets do not improve or continue to worsen. For example, an extension of the credit crisis to other industries could adversely affect overall demand, particularly leisure travel and discretionary expenditures, which could have a negative effect on our revenues. Furthermore, the effects of the recent disruption to the overall economy could adversely affect consumer confidence and the willingness of consumers to spend money on leisure activities. Because of the current economic environment, certain of our customers may curtail the frequency of their visits to our casinos and may reduce the amounts they wager and spend during those visits below what they would normally wager and spend in better economic times. All of these effects could have a material adverse effect on our liquidity.

Financing Cash Flow

Financing cash flow is the net result of borrowings and repayments under our Credit Facility and the result of other capital-raising efforts. During 2006, we borrowed $135 million and repaid $20 million under the Credit Facility and consummated a public offering resulting in net proceeds of $179 million. During 2007, we borrowed $50 million under our Credit Facility. We also consummated a public offering resulting in net proceeds of approximately $353 million and issued senior subordinated notes resulting in proceeds of $379 million. These proceeds were used to repay debt of $362 million, including a $275 million term loan facility, $25 million to purchase some of our 8.25% senior subordinated notes due 2012, and a $60 million repayment of the Credit Facility. During 2008, we borrowed $242 million and repaid $140 million under the Credit Facility.

Second Amended and Restated Credit Facility

In December 2005, we entered into a $750 million amended and restated credit facility (the “Credit Facility”). In November 2006, we amended the Credit Facility to, among other things, increase the overall size of the facility to $1 billion, including a $625 million revolving credit facility, a $275 million funded term loan facility and a $100 million delayed-draw term loan facility.

In June 2007, we repaid the $275 million term loan facility and elected to allow the $100 million delayed-draw term loan to expire undrawn on July 2, 2007. Consequently, our Credit Facility currently consists of a $625 million revolving credit facility that matures in December 2010. Utilization of our 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 December 31, 2008, our indebtedness of $943 million consists of $152 million drawn on our Credit Facility, $385 million aggregate principal amount of 7.50% senior subordinated notes due 2015, $275 million aggregate principal amount of 8.25% senior subordinated notes due 2012, $135 million aggregate principal amount of 8.75% senior subordinated notes due 2013 and certain other debt.

At December 31, 2008, we had issued approximately $12.6 million of irrevocable letters of credit, which includes $3.0 million associated with our River City project and $9.6 million for various self-insurance programs.

In January and February 2009, we borrowed a total of approximately $13.8 million under our Credit Facility. As noted below, Lehman Commercial Paper, Inc. (“LCPI”), a lender under the Credit Facility, filed for bankruptcy in early October 2008 and since that time has failed to fund its proportionate share of its commitment under the Credit Facility, including approximately $1.2 million of funding requests in January and February 2009. In each case, the borrowings were initially base rate borrowings, which accrue interest at a Base Rate plus a margin, which margin is 0.5%. However, over the course of the two months of January and February 2009, a majority of such borrowings were converted into LIBOR loans, such that as of March 6, 2009, all but approximately $611,000 of the borrowings under the Credit Facility are LIBOR loans. LIBOR loans accrue interest at a LIBOR rate plus a margin, which margin is currently 2.0%. As of March 6, 2009, we have drawn $166 million and $12.6 million was utilized under various letters of credit.

On October 5, 2008, LCPI, which is one of the lenders under our Credit Facility, filed for bankruptcy. LCPI had committed $48 million towards our $625 million Credit Facility. LCPI funded its portion of the Credit Facility through September 30, 2008, or approximately $9.6 million of the then outstanding balance of $125 million. In the fourth quarter of 2008 and the first quarter of 2009, when the Company attempted to increase its borrowing under the Credit Facility, LCPI failed to fund its proportionate share. We believe that it is unlikely that LCPI would provide its proportionate share if the Company drew additional sums under its Credit Facility. Hence, the $625 million Credit Facility is effectively a $586 million Credit Facility. As noted below, the indenture governing our 8.75% senior subordinated notes due 2013 restricts the amount that we can borrow under our Credit Facility to $350 million and therefore any de facto reduction in the total size of our Credit Facility resulting from LCPI’s inability to fund does not currently affect our liquidity.

We are obligated to make mandatory prepayments of indebtedness under the Credit Facility from the net proceeds of certain debt offerings and certain asset sales and dispositions. No such payments have been made or are required at this time. In addition, we are required to prepay borrowings under the Credit Facility with a percentage of our “Excess Cash Flow” as defined in the Credit Facility. No such payments have been made, nor does management believe such payments will be required in the foreseeable future, as such definition of Excess Cash Flow incorporates capital spending activities in a given year and our capital expenditure plans are substantial. We have the option to prepay all or any portion of the indebtedness under the Credit Facility at any time without premium or penalty.

For borrowings under the Credit Facility, the interest rate is computed as a margin over LIBOR plus 2.0% or prime plus 0.5% based on our “Consolidated Leverage Ratio” as defined in the Credit Facility. As of December 31, 2008, LIBOR was 0.43% and prime was 3.75%. The Credit Facility also bears commitment fees, which are based on our Consolidated Leverage Ratio. Under the Credit Facility, at least 40% of our total funded debt obligations must be subject to fixed interest rates or hedge agreements or other interest rate protection agreements. As of December 31, 2008, approximately 83.8% of our debt was at fixed versus floating interest rates.

The Credit Facility has, among other things, restrictive financial covenants and capital spending limits and other affirmative and negative covenants. The Credit Facility provides for permitted capital expenditures for our River City project, maintaining our existing casinos and hotels and for various new projects, all up to certain limits. In certain circumstances, our Credit Facility permits those limits to be increased through asset sales or equity transactions.

As of December 31, 2008, we believe we were in compliance with all of the financial covenants in our Credit Facility. Such covenants envisioned completion of River City at an earlier date than such completion is currently expected. As a result, the covenant ratios are scheduled to tighten, even as borrowings grow in order to fund completion. A deterioration in operating results could affect our ability to comply with financial covenant ratios in our Credit Facility and to fund River City and our other construction projects. Given the uncertain outlook in the economy, we may choose to modify such covenants, even if we are unsure that such modification is necessary. Such amendments may not be available, and if available, could be at significantly increased costs and may adversely affect our financial results. If the current capital market environment does not improve and we are unable to amend our Credit Facility or obtain a waiver from our lenders, we may have to delay, reduce or cancel some of our current development projects.

The obligations under the Credit Facility are secured by most of our assets and those of our domestic restricted subsidiaries, including a pledge of the equity interests in our domestic restricted subsidiaries. Our obligations under the Credit Facility are also guaranteed by our domestic restricted subsidiaries. Our subsidiaries that own the Atlantic City site and related parcels of land, our Argentine operations, our airplane, approximately $59.1 million in cash, cash equivalents and marketable securities as of December 31, 2008, and certain other assets are unrestricted subsidiaries under the Credit Facility. We believe we were in compliance with all such covenants as of December 31, 2008.

Senior Subordinated Indebtedness

In 2003, we issued $135 million in aggregate principal amount of 8.75% of senior subordinated notes due 2013 (the “8.75% Notes”), which notes were issued at 98.369% of par, thereby yielding 9.00% to first call and maturity. In 2004, we issued $300 million in aggregate principal amount of 8.25% senior subordinated notes due 2012 (the “8.25% Notes”), $200 million of which were issued at a price of 99.282% of par, thereby yielding 8.375% to first call and maturity, and $100 million of which were issued later at a price of 105.00% of par, thereby yielding 7.10% to the first call date (7.35% to maturity). Net proceeds of these offerings were used to refinance our then-existing higher coupon senior subordinated notes with maturity dates in 2007.

In June 2007, we issued $385 million in aggregate principal amount of 7.50% senior subordinated notes due 2015 (the “7.50% Notes”). The 7.50% Notes were issued at 98.525% of par to yield 7.75% to maturity, with interest payable on June 15 and December 15, beginning December 2007. Net of the original issue discount, initial purchasers’ fees and various costs and expenses, proceeds from the offering were approximately $379 million. We retired our then-outstanding $275 million term loan, discussed above, and we used a portion of the proceeds to purchase $25.0 million in aggregate principal amount of our 8.25% Notes.

Under the indentures governing the 7.50% Notes, 8.25% Notes and 8.75% Notes, we are permitted to incur up to $1.5 billion, $475 million and $350 million in senior indebtedness, respectively, among other debt incurrence baskets. Under our indentures, we may also incur additional indebtedness if, after giving effect to the indebtedness proposed to be incurred, our Consolidated Coverage Ratio (essentially, a ratio of adjusted EBITDA to interest) for a trailing four-quarter period on a pro forma basis (as defined in the indentures) would be at least 2:1. As of December 31, 2008, our Consolidated Coverage Ratio was below 2:1.

The 7.50% Notes, 8.25% Notes and 8.75% Notes are unsecured obligations, guaranteed by all of our domestic material restricted subsidiaries, as defined in the indentures. The indentures governing these notes contain certain covenants limiting our ability and the ability of our restricted subsidiaries to incur additional indebtedness, issue preferred stock, pay dividends or make certain distributions, repurchase equity interests or subordinated indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets, issue or sell equity interests in our subsidiaries, or enter into certain mergers and consolidations.

The 7.50% Notes become callable at a premium over their face amount on June 15, 2011, and the 8.25% Notes and 8.75% Notes became callable at a premium over their face amount in March 2008 and October 2008, respectively. Such premiums decline periodically as the bonds near their respective maturities. The 7.50% Notes are redeemable prior to such time at a price that reflects a yield to first call equivalent to the applicable Treasury bond yield plus 0.5 percentage points.

While we are proceeding with our development projects in Missouri and Louisiana, construction and completion of our various projects may require amending the terms of some of our debt and Credit Facility and accessing the capital markets, which would be difficult or expensive under current market conditions. If the capital markets do not improve, we may be forced to adopt one or more alternatives, such as incurring debt on less-than-favorable terms, delaying or reducing planned development and expansion projects, selling assets, restructuring or modifying debt, or obtaining additional equity financing. Our current stock price, along with the stock prices of many public gaming companies, has declined sharply from historical levels. We may choose to cancel or delay projects rather than issue equity at these levels. This may impair our growth and materially and adversely affect our financial condition, results of operations and cash flow and the returns of investing in our securities. The inability to access the capital markets when needed, or the incurrence of debt on less than favorable terms, may impair our growth and materially and adversely affect our returns from new projects and expansions and our financial condition, results of operations and cash flow and the per share trading price of our common stock. For further discussion of the impact of the current disruption in the credit markets on our development plans, see Part I, Item 1A—Risk Factors.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The following table summarizes our contractual obligations and other commitments as of December 31, 2008:

						Less than												More than
Contractual Obligations		Total				1 year				1-3 years				3-5 years				5 years				Other
		(in millions)
Long-Term Debt Obligations (a)		$	1,274.4			$	63.7			$	278.8			$	503.0			$	428.9			$	—
Operating Lease Obligations (b)			588.1				8.6				21.6				22.2				535.7				—
Purchase Obligations: (c)
Construction contractual obligations (d)			147.5				6.0				141.5				—				—				—
Other (e)			55.2				39.4				13.5				2.3				—				—
Other Long-Term Liabilities Reflected on the Registrant’s Balance sheet under GAAP (f)			24.7				10.7				—				—				—				14.0
Total		$	2,089.9			$	128.4			$	455.4			$	527.5			$	964.6			$	14.0