J.P. Morgan SMid Cap Conference November PDF Free Download

J.P. Morgan SMid Cap Conference November 2011

Safe Harbor/Non-GAAP Financial Disclosures All statements included in this presentation, other than historical information or statements of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including statements regarding the Company s future operating performance, future growth, anticipated milestones, completion and opening schedules of various projects, constructionschedules and budgets of the various projects, amenities and features of the various projects, continued improvement of operations at our properties, the Ho Tram Strip, potential growth for ACDL and potential growth of the gaming markets in Vietnam and throughout Asia, the completion of the first and second integrated resort of the Ho Tram Strip, the expected returns of the Company s various development projects and investments, and the ability of the Company to borrow as it constructs its various projects under its Credit Facility, are based on management s current expectations and are subject to risks, uncertainties and changes in circumstances that could significantly affect future results. Accordingly, Pinnacle cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include, but are not limited to: (a) the Company s business is particularly sensitive to reductions in consumers discretionary spending as a result of downturns in the economyorother changes it cannot accurately predict; (b) the gaming industry is very competitive and increased competition could adversely affect our profitability; (c) many factors could prevent the Company from completing its construction and development projects as planned, including the escalation of construction costsbeyond increments anticipated in construction budgets; (d) the Company s substantial development plans for capital-intensive projects will requirethe Company to borrow significant amounts under the Company s credit facility and, depending on which projects are pursued to completion, may causethe Company to incur substantial additional indebtedness; (e) the Company is subject to risks associated with geographic market concentration in Louisiana; (f) insufficient or lowerthan-expected results generated from the Company s new developments and acquired properties may not yield adequate or expected returns on the Company s substantial investments; (g) the Company s industry is highly regulated, which makes the Company dependent on obtaining and maintaining gaming licenses and subjects the Company to potentially significant fines and penalties; (h) the Company may not meet the conditions for the maintenance of the license that the Company plans to utilize for the Company s L Auberge Casino& Hotel Baton Rouge; (i) the Company operates in a highly taxed industry and may be subject to higher taxes in the future; (j) the Company may not realize gains on the Company s proposed investment in a joint venture that is planning to develop gaming resorts in Vietnam; the Company s involvement in Vietnam could expose us to risks associated with violations of the Foreign Corrupt Practices Act or applicable anti-money laundering regulations, which could have a negative impact on the Company; (k) Pinnacle may experience delays in completing the Boomtown Reno transactions or fail to complete the transactions for the sale of Boomtown Casino and Hotel Reno and the excess land adjacenttoboomtown Reno due to circumstances beyond its control, including failure of the buyers to have adequate financing and failure to obtain approval of the Nevada Gaming Commission; (l) the global financial crisis and recession has affected the Company s business and financial condition, and may continue to affect the Company in ways that the Company currently cannot accurately predict; (m) adverse weather conditions, road construction, gasoline shortages and other factors affecting the Company s facilities and the areas in which the Company operates could make it more difficult for potential customers to travel to the Company s properties and deter customers from visiting the Company s properties; and (n) other risks, including those as may be detailed from time to time in the Company s filings with the Securities and Exchange Commission ( SEC ). For more information on the potential factors that could affect the Company s financial results and business, review the Company s filings with the SEC, including, but not limited to, its Annual Report on Form 10-K, its Quarterly Reports on Form10-Q and its Current Reports on Form 8-K. 2 *** Statements in this presentation may include adjusted financial measures governed by Regulation G. For a reconciliation ofthese measures, please see the end of this presentation or visit the Investor Relations section of our corporate website at www.pnkinc.com.

Diversified Portfolio Leading owner and operator of gaming resorts, with six casinos and one pari-mutuel racing facility SOUTHERN INDIANA CHICAGO INDIANAPOLIS HEADQUARTERS BOSSIER CITY ST. LOUIS CINCINNATI LEXINGTON LOUISVILLE DALLAS/FORT WORTH BATON ROUGE AUSTIN SAN ANTONIO HOUSTON Pinnacle Properties Pinnacle Development Sites 3 Large Regional Cities LAKE CHARLES NEW ORLEANS

High-Quality Properties Belterra Boomtown Bossier City Boomtown New Orleans Boomtown Reno 1 Florence, IN Opened in October 2000 38,000 sq.ft. of gaming 1,600 slots; 55 tables 608 hotel rooms L Auberge du Lac Bossier City, LA Opened in October 1996 30,000 sq.ft. of gaming 1,062 slots; 32 tables 187 hotel rooms Lumière Place Harvey, LA (New Orleans) Opened in 1994 30,000 sq.ft. of gaming 1,491 slots; 39 tables 1,700 parking spaces River City Reno, NV Opened in 1964 40,000 sq.ft. of gaming 615 slots; 13 tables 318 hotel rooms Entered into definitive sale agreements 11/10/11 Baton Rouge Lake Charles, LA Opened in May 2005 30,000 sq.ft. of gaming 1,615 slots; 63 tables 995 hotel rooms St. Louis, MO (downtown) Opened in Dec. 2007 75,000 sq.ft. of gaming 2,043 slots; 68 tables 494 total hotel rooms Lemay, MO (southern St. Louis County) Opened in March 2010 90,000 sq.ft. of gaming 2,104 slots; 55 tables 3,000 parking spaces Baton Rouge, LA Planned opening in Summer 2012 30,000 sq.ft. of gaming 1,500 slots; 51 tables 206 hotel rooms 2,400 parking spaces 4 1. Boomtown Reno was classified as a discontinued operation in 3Q11. The Company entered into definitive agreements on November10, 2011 to sell Boomtown Reno and a majority of its adjoining land acreage for $22.2M, subject to certain conditions and regulatory approvals.

Operating Strategy Focus on operational excellence 5

Operating Strategy Focus on operational excellence Revamped marketing structure Recently re-launched and Enhanced mychoice program 6

Operating Strategy Focus on operational excellence Revamped marketing structure Enhanced mychoice program Elevating the guest experience 7

Operating Strategy Focus on operational excellence Revamped marketing structure Enhanced mychoice program Elevating the guest experience Diversified return-focused growth pipeline 8

Diversified Return-Focused Growth Pipeline Staged pipeline of development projects will expand Pinnacle s regional operations and mark entry into southeast Asia L Auberge Casino & Hotel Baton Rouge (anticipated to open in Summer 2012) River Downs Racetrack (approved to operate VLTs) River City Expansion (property enhancements anticipated to come online in phases through 2H13) Ho Tram Strip (Vietnam s first integrated resort facility with anticipated Phase I opening by the end of first quarter 2013) 9

Growth Pipeline Summary Slots/ VLTs Table Games Hotel Rooms Projected Completion Current Portfolio 10,530 325 2,602 - L Auberge Casino & Hotel Baton Rouge 1,500 51 206 Summer 2012 River Downs Racetrack 1 2,500 - - TBD River City (expansion) - - 200 2H13 Total New Properties 2 4,000 51 406 - Growth +38.0% +15.7% +15.6% - 1 2,500 VLTs represents current legislative proposal for Ohio racetracks 2 Excludes investment in the Ho Tram Strip located in Vietnam 10

12 L Auberge Casino & Hotel Baton Rouge

13 Baton Rouge Recent Construction Progress

Operating Strategy Focus on operational excellence Revamped marketing structure Enhanced mychoice program Elevating the guest experience Diversified return-focused growth pipeline L Auberge Casino & Hotel Baton Rouge River Downs Racetrack VLT Facility 14

River Downs -Cincinnati, OH Market Horseshoe Cincinnati Hollywood Lawrenceburg River Downs Rising Star Casino & Resort Belterra 15

17 River City Expansion

Ho Tram Strip (Vietnam) Overview Asian Coast Development ( ACDL ) is an international development company specializing in integrated resort destinations Developing multi-phase Ho Tram Strip in southern Vietnam Pinnacle investment in ACDL $95.0 million invested into preferred stock and common equity tranches, transaction closed August 9, 2011 26.0% ownership Representation on Board proportional to ownership Management contract Second gaming resort development through 2058, with a potential 20-year extension 19

20 MGM Grand Ho Tram Phases 1 & 2

21 MGM Grand Ho Tram Construction Progress

Improving Operating Results 22

Successfully Improving Operating Results Net Revenue Adj. EBITDA Adj. EBITDA Margin $ in millions Nine months ending % Nine months ending % Nine months ending bps Segment 9/30/11 9/30/10 chg. 9/30/11 9/30/10 chg. 9/30/11 9/30/10 chg. L'Auberge Lake Charles 283.1 257.1 10% 79.5 70.0 14% 28.1% 27.2% 86 St. Louis 1 288.5 249.5 16% 63.3 46.8 35% 21.9% 18.8% 318 Boomtown New Orleans 102.5 103.2-1% 34.2 31.7 8% 33.4% 30.7% 270 Belterra Casino Resort 117.3 115.8 1% 21.9 23.7-7% 18.7% 20.4% (174) Boomtown Bossier City 65.4 67.2-3% 14.6 16.3-10% 22.4% 24.2% (184) River Downs 2 8.5 - N/M (1.7) - N/M N/M N/M N/M Other/corporate 0.1 0.0 N/M (22.0) (25.4) -13% N/M N/M N/M Total 865.4 792.8 9.2% 189.9 3,4 163.0 3 16.5% 21.9% 20.6% 139 1. St. Louis segment consists of Lumière Place (which includes the Lumière Place Casino, the Pinnacle-owned Four Seasons Hotel St. Louis and HoteLumière) and River City. River City Casino opened on March 4, 2010. 2. River Downs was acquired on January 28, 2011. 3. Consolidated Adjusted EBITDA includes severance cost of $2.5mm and $1.9mm in the nine months ending September 30, 2011 and 2010, respectively, as well as $1.1 million one-time charge related to corporate office consolidation in the nine months ending September 30, 2010. 4. Consolidated Adjusted EBITDA for the nine months ending September 30, 2011 includes a one-time, non-cash charge of $10.2mm related to an accounting adjustment for mychoice re-launch related reward and incentive expenses. Nine months ending 9/30/11 Improved Results Revenue growth of +9.2% to $865.4mm Consolidated Adjusted EBITDA growth of +16.5% to $189.9mm Income from continuing operations improved from $(37.4)mm to $12.5mm +139 bps improvement in Adj. EBITDA margins and Income on Continuing Operations margin improves from (4.7)% to 1.4% 23 For a description of Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA margin, please see the slides beginning on page 26.

Flexibility to Pursue Return-Focused Projects Strong balance sheet, appropriate capital structure and solid leverage profile Nearest maturity is over 3+ years away in 2015 Significant free cash flow and ample liquidity to fund growth with $15mm of excess cash and $378mm of revolver capacity at 9/30 $ in millions Maturity Date 9/30/11 $410mm Senior Secured Credit Facility 2016 $32.0 7.50% Senior Subordinated Notes 2015 $372.0 8.625% Senior Notes 2017 $445.0 8.75% Senior Subordinated Notes 2020 $350.0 Other Notes Payable Variable $0.7 TOTAL DEBT $1,199.7 Cash and Cash Equivalents $83.3 Net Debt $1,116.4 TOTALLEVERAGE (1) 4.98x 24 (1) Based on Adjusted trailing twelve months EBITDA ending September 30, 2011.

Summary Successfully executing on revenue and operating margin growth strategies Focusing on operational excellence, re-launched guest loyalty program and prudent facility enhancements Driving profitable revenue growth Growing portfolio with four development projects that will deliver Diversification and favorable returns on invested capital Strong balance sheet with no near-term maturities 25

Definitions of Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin and Adjusted EBITDA for Operating Segments Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA margin Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA margin are non-gaap measurements. The Company defines Consolidated Adjusted EBITDA as earnings before interest income and expense, income taxes, depreciation, amortization, pre-opening and development expenses, non-cash share-based compensation, asset impairment costs, write-downs, reserves, recoveries, corporate-level litigation settlement costs, gain (loss) on sale of certain assets, loss on early extinguishment of debt, gain (loss) on sale of equity security investments, minority interest and discontinued operations. The Company defines Consolidated Adjusted EBITDA margin as Consolidated Adjusted EBITDA divided by revenues on a consolidated basis. Not all of theaforementioned benefits and costs occur in each reporting period, but have been included in the definition based on historical activity. The Company uses Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA margin as relevant and useful measures to compareoperating results between accounting periods. The presentation of Consolidated Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of its business. Consolidated Adjusted EBITDA is specifically relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial, non-operational depreciation charges and financing costs of such projects. Management eliminates the results from discontinued operations as they are discontinued. Management also reviews preopening and development expenses separately, as such expenses are also included in total project costs when assessing budgetsand project returns, and because such costs relate to anticipated future revenues and income. Management believes some investors consider Consolidated Adjusted EBITDA to be a useful measure in determining a company s ability to service or incur indebtedness and for estimating a company s underlying cash flows from operations before capital costs, taxes and capital expenditures. Consolidated Adjusted EBITDA also approximates the measures used in thedebt covenants within the Company s debt agreements. Consolidated Adjusted EBITDA does not include depreciation or interest expense and therefore doesnot reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using other comparativemeasures to assist in the evaluation of operating performance. EBITDA measures, such as Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA margin, and Adjusted net income (loss)are not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure of comparing performance among different companies. See the attached supplemental information table on slide for a reconciliation of Consolidated Adjusted EBITDA to Income (loss) from continuing operations and a reconciliation of Consolidated Adjusted EBITDA margin to Income (loss) from continuing operations margin. Adjusted EBITDA and Adjusted EBITDA Margin for Operating Segments The Company defines Adjusted EBITDA for each operating segment as earnings before interest income and expense, income taxes, depreciation, amortization, pre-opening and development expenses, non-cash share-based compensation, asset impairment costs, write-downs, reserves, recoveries, gain (loss) on sale of certain assets, gain (loss) on early extinguishment of debt, gain (loss) on sale of discontinued operations, and discontinuedoperations. The Company defines Adjusted EBITDA margin for each operating segment as Adjusted EBITDA divided by revenues. The Company uses Adjusted EBITDA and Adjusted EBITDA margin to compare operating results among its properties and between accounting periods. 26

Reconciliation of Consolidated Adjusted EBITDA to Income (Loss) from Continuing Operations Reconciliation from Consolidated Adjusted EBITDA to Loss from Continuing Operations Nine months ended ($ in Millions) 9/30/2011 9/30/2010 Consolidated Adjusted EBITDA $189.9 $163.0 Depreciation and Amortization ($77.9) ($81.9) Pre-opening and Development Costs ($7.2) ($12.2) Non-cash Share-based Compensation ($5.4) ($4.7) Impairment of Goodwill - - Impairment of Indefinite-lived Intangible Assets - ($11.5) Impairment of Land and Development Costs - ($23.2) Impairment of Buildings, Riverboats and Equipment - - Write-downs, Reserves and Recoveries, Net ($7.9) $4.0 Other Non-operating Income $0.3 $0.2 Interest Expense, Net of Capitalized Interest ($76.0) ($76.3) Income/(loss) from equity method investment ($0.5) - Loss on Early Extinguishment of Debt ($0.2) ($1.9) Income Tax Benefit (Expense) ($2.6) $7.0 Income (Loss) from Continuing Operations $12.5 ($37.4) Net Revenues $865.4 $792.8 Consolidated Adjusted EBITDA Margin 21.9% 20.6% Income/(Loss) from Continuing Operations Margin 1.4% -4.7% 27