Amendment No. 2 to Form 10-K

10-K/A 1 d10ka.htm AMENDMENT NO. 2 TO FORM 10-K Amendment No. 2 to Form 10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 2

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

Commission file number 001-13641

PINNACLE ENTERTAINMENT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation or Organization)

95-3667491

(IRS Employer Identification No.)

330 North Brand Boulevard, Suite 1100, Glendale, California 91203

(Address of Principal Executive Offices) (Zip Code)

(818) 662-5900

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

PINNACLE ENTERTAINMENT, INC.

Common Stock, $.10 par value

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether 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, and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. ¨

The aggregate market value of the voting stock held by non-affiliates (therefore excludes officers, directors and beneficial owners of 10% or more) of the registrant at April 24, 2002, was $243,714,502 based on a closing price of $11.05 per common share. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant’s common stock, as of the close of business on April 24, 2002: 25,757,563.

Documents incorporated by reference: None

PINNACLE ENTERTAINMENT, INC.

TABLE OF CONTENTS

Explanatory Note		2

Part II
Item 6.	Selected Financial Data	3
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6
	Forward-Looking Statements	6
	Risk Factors	7
	Critical Accounting Policies	11
	Results of Operations	12
	Liquidity and Capital Resources	17
	Factors Affecting Future Operating Results	20
Item 8.	Financial Statements	24

Part III

Item 10.	Directors and Executive Officers of the Registrant	24

Part IV

Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	27

Signatures		36

EXPLANATORY NOTE

On June 24, 2002, Pinnacle Entertainment, Inc. filed Amendment No. 1 to its Registration Statement on Form S-3/A with the Securities and Exchange Commission (the “SEC”), amending its Registration Statement on Form S-3 originally filed on June 13, 2002. The Company hereby amends and restates Items 6, 7, 8, 10 and 14 of its Annual Report on Form 10-K for the fiscal year ended December 31, 2001 that was originally filed with the SEC on April 1, 2002 (the “Original Filing”), and amended pursuant to Amendment No. 1 on Form 10-K/A filed on April 30, 2002, to respond to comments the Company received from the SEC in connection with the Form S-3/A and to make certain other changes, including to conform the presentation in this report with that contained in the Form S-3/A. In addition, as the Company reported in its Form 8-K filed June 19, 2002, the Company engaged Deloitte & Touche LLP as its new independent accountants on June 17, 2002. This report also contains, in Item 8, the audit report of Deloitte & Touche LLP with respect to the Company’s balance sheets as of December 31, 2001 and 2000 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. The audit report of Deloitte & Touche LLP expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s reportable segments having been restated to include in a footnote (see Note 24) segment information for the Company’s properties and operations on a disaggregated basis.

This report continues to speak as of the date of the Original Filing (except for Note 25 to the Consolidated Financial Statements with respect to subsequent events through the date of this amendment), and we have not updated the disclosures in this report to speak as of a later date. Updated information regarding recent developments is included in the Company’s other filings with the SEC and in press releases issued by the Company.

References to “Pinnacle Entertainment,” the “Company,” “we” or “our” in this report refer to Pinnacle Entertainment, Inc.

PART II

Item 6. Selected Financial Data

The following selected financial information for the years 1997 through 2001 was derived from the consolidated financial statements of the Company. In December 2001, the Company incurred asset impairment charges, primarily related to the write-down of the Crystal Park Casino and Boomtown Belle I (see Notes 4 and 5 to the Notes to Consolidated Financial statements). The Belterra Casino Resort was built by the Company and opened in October 2000. Boomtown Biloxi and Casino Magic Bay St. Louis were sold in August 2000, Turf Paradise was sold in June 2000, surplus land was sold in March 2000 and the Hollywood Park Race Track and Hollywood Park-Casino were disposed of in September 1999 (see Note 11 to the Notes to Consolidated Financial Statements). The Company leased the Hollywood Park-Casino back from Churchill Downs California Company (“Churchill Downs”), a wholly owned subsidiary of Churchill Downs Incorporated, and immediately subleased the facility to an unaffiliated third party. Casino Magic was acquired in October 1998 and Boomtown was acquired in June 1997, with both acquisitions accounted for under the purchase method of accounting for a business combination, and therefore Casino Magic’s and Boomtown’s financial results were not included in periods prior to their respective acquisitions (see Note 9 to the Notes to 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 financial statements and related notes thereto.

PINNACLE ENTERTAINMENT, INC.

SELECTED FINANCIAL DATA

	For the years ended December 31,
	2001			2000			1999			1998			1997
	(in thousands, except per share data)
Statement of Operations Data:
Revenues:
Gaming	$	442,089		$	461,901		$	536,661		$	277,593		$	125,030
Food and beverage		30,952			31,920			39,817			30,510			19,894
Hotel, truck stop and service station		35,167			34,512			29,381			17,575			9,570
Other (including racing)		20,433			34,792			80,133			85,825			81,005

		528,641			563,125			685,992			411,503			235,499

Expenses:
Gaming		259,573			258,346			288,643			146,085			62,104
Food and beverage		38,799			35,180			46,558			38,860			25,745
Hotel, truck stop and service station		28,872			26,963			22,219			14,492			8,325
General, administrative, racing and other		134,494			122,689			171,485			132,400			99,349
Depreciation and amortization		49,450			46,102			51,924			32,121			18,157
(Gain) loss on disposition of assets		(500	)		(118,816	)		(62,507	)		2,221			0
Asset impairment write-down		23,530			0			20,446			0			0
Pre-opening costs, Belterra Casino Resort		610			15,030			3,020			821			0
Terminated merger costs		(464	)		5,727			0			0			0

		534,364			391,221			541,788			367,000			213,680

Operating (loss) income		(5,723	)		171,904			144,204			44,503			21,819
Interest expense, net		44,832			40,016			57,544			22,518			7,302

(Loss) income before income taxes, minority interest and extraordinary item		(50,555	)		131,888			86,660			21,985			14,517
Minority interest		0			0			1,687			374			(3	)
Income tax (benefit) expense		(21,906	)		52,396			40,926			8,442			5,850

Net (loss) income before extraordinary item		(28,649	)		79,492			44,047			13,169			8,670
Extraordinary item, net of income tax benefit		0			2,653			0			0			0

Net (loss) income	$	(28,649	)	$	76,839		$	44,047		$	13,169		$	8,670

Dividends on convertible preferred stock	$	0		$	0		$	0		$	0		$	1,520

Net (loss) income (allocated) available to common stockholders	$	(28,649	)	$	76,839		$	44,047		$	13,169		$	7,150

Net (loss) income per common share:
Basic	$	(1.11	)	$	2.92		$	1.70		$	0.50		$	0.33
Diluted	$	(1.11	)	$	2.80		$	1.67		$	0.50		$	0.32
Other Data:
EBITDA(d)
Continuing properties(b)	$	40,740		$	71,092		$	93,303		$	38,807		$	8,454
Sold properties(c)		2,987			146,914			102,825			37,817			31,522

EBITDA(d), (e)	$	43,727		$	218,006		$	196,128		$	76,624		$	39,976

Cash flows (used in) provided by:
Operating activities	$	39,517		$	(28,824	)	$	75,323		$	37,224		$	14,365
Investing activities		(46,756	)		193,277			(51,063	)		(136,532	)		(16,226	)
Financing activities		(12,442	)		(114,947	)		54,868			119,386			9,609
Capital expenditures		52,264			202,775			59,680			54,605			32,505
Balance Sheet Data (at December 31,):
Cash, cash equivalents and short-term investments	$	156,639	(a)	$	172,868		$	246,790		$	47,413		$	24,156
Total assets		919,349			961,475			1,045,408			891,339			419,029
Current liabilities		83,654			93,375			145,008			128,592			57,317
Long term notes payable		493,493			497,162			618,698			527,619			132,102
Total liabilities		599,833			600,299			764,532			656,611			195,729
Stockholders’ equity		319,516			361,176			280,876			230,976			221,354

(a)

Includes $3,452 of cash in Argentina, which at December 31, 2001 could not be transferred out of Argentina.

(b)

Includes the five casinos we own and operate in the United States, the two casinos we operate in Argentina, the two card clubs we lease to a third party operator in Los Angeles and corporate expenses.

(c)

Includes the Hollywood Park Race Track and Casino sold in September 1999, Turf Paradise race track sold in June 2000 and Casino Magic Bay St. Louis and Boomtown Biloxi sold in August 2000. Also includes income from the Legends Casino, a Native American casino in Yakima, Washington, under various lease agreements with the tribe. These lease agreements were terminated in June 2001.

(d)

We define EBITDA as earnings before net interest expense, provision for income taxes, depreciation, amortization, minority interest and extraordinary items. Included in EBITDA are certain non-recurring and unusual items at various locations, – see Note (e) below. EBITDA is not a measure of financial performance under the promulgations of the accounting profession, known as “generally accepted accounting principles” or “GAAP.” Nevertheless, we believe some investors use EBITDA to determine a company’s ability to service or incur indebtedness and to estimate the company’s underlying cash flow from operations before capital costs and maintenance capital expenditures. EBITDA is not calculated in the same manner by all entities and accordingly, may not be an appropriate measure for comparing performance amongst different companies. EBITDA should not be considered in isolation from, or as a substitute for, net income (loss), cash flows from operations or cash flow data prepared in accordance with GAAP. EBITDA is calculated by adding the provision for income taxes, minority interests, net interest expense, depreciation and amortization, and extraordinary items to net income (loss). A reconciliation from net income (loss) to EBITDA is as follows:

	For the years ended December 31,
	2001			2000		1999		1998		1997
	(in thousands)
Net income (loss)	$	(28,649	)	$	76,839	$	44,047	$	13,169	$	8,670
Extraordinary item, net of income tax benefit		0			2,653		0		0		0

Net income (loss) before extraordinary item		(28,649	)		79,492		44,047		13,169		8,670
Income tax expense (benefit)		(21,906	)		52,396		40,926		8,442		5,850
Minority interest		0			0		1,687		374		(3	)

Income (loss) before extraordinary item, income taxes and minority interest		(50,555	)		131,888		86,660		21,985		14,517
Interest expense, net of capitalized interest and interest income		44,832			40,016		57,544		22,518		7,302

Operating income (loss)		(5,723	)		171,904		144,204		44,503		21,819
Depreciation and amortization		49,450			46,102		51,924		32,121		18,157

EBITDA	$	43,727		$	218,006	$	196,128	$	76,624	$	39,976

(e)

“Operating income (loss)” and “EBITDA” disclosed above include certain non-recurring and unusual items at various locations, such as: Pre-opening costs at Belterra Casino Resort; Asset disposition gain (loss) for sold operations; Asset impairment write-downs at Boomtown New Orleans, Casino Magic Biloxi and the Card Clubs; and Terminated merger and REIT costs at Corporate. Below is a listing of such items:

	For the years ended December 31,
	2001			2000			1999			1998		1997
	(in thousands)
Non-recurring and unusual items, by location
Pre-opening costs, Belterra Casino Resort	$	610		$	15,030		$	3,020		$	821	$	0
(Gain) loss on disposition of assets, sold operations		(500	)		(118,816	)		(62,507	)		2,221
Asset impairment write-down, sold operations								20,446
Asset impairment write-down, Card Clubs		20,358
Asset impairment write-down, New Orleans		1,801
Asset impairment write-down, Biloxi		1,371
Terminated merger costs, Corporate		(464	)		5,727
REIT costs, Corporate											419		2,483

Non-recurring and unusual items	$	23,176		$	(98,059	)	$	(39,041	)	$	3,461	$	2,483

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 the Company’s audited Consolidated Financial Statements and the notes thereto.

Forward-Looking Statements

Except for the historical information contained herein, the matters addressed in this Annual Report on Form 10-K/A 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 and Exchange Act of 1934, as amended. Words such as, but not limited to, “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements, which may include, without limitation, statements regarding the Company’s expansion plans, cash needs, cash reserves, liquidity, operating and capital expenses, financing options, expense reductions and operating results, are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated by the Company’s management. Factors that may cause actual performance of the Company to differ materially from that contemplated by such forward-looking statements include, among others:

•

approval of the Calcasieu parish referendum for the Lake Charles project, compliance with the conditions negotiated with the Louisiana Gaming Control Board, completion of the project on time and on budget and the effect of expanded Indian gaming in Louisiana on the Company’s decision to proceed with the Lake Charles project (see Note 8 to the Notes to Consolidated Financial Statements);

•

the effectiveness of management at the Belterra Casino Resort in containing costs without negatively affecting revenues, customer service or efforts to expand the number of customers visiting the property;

•

changes in gaming legislation in each of the states in which the Company operates;

•

changes in gaming laws and regulations, including the expansion of casino gaming in states in which the Company operates (or in states bordering the states in which the Company operates), such as the expansion of Indian gaming in California and Louisiana and the introduction of casino gaming in Kentucky, Ohio or Arkansas;

•

the effectiveness of the planned capital improvements at Casino Magic Bossier City in drawing additional customers to the property despite significant competition in the local market (see Note 8 to the Notes to Consolidated Financial Statements);

•

the effect of current and future weather conditions and other natural events affecting the key markets in which the Company operates;

•

the effect of current and future political and economic instability in Argentina on the operations of Casino Magic Argentina and related currency matters (see Note 3 to the Notes to Consolidated Financial Statements);

•

the amount and effect of future impairment charges under SFAS No. 142 and SFAS No. 144 (see Note 1 to the Notes to Consolidated Financial Statements);

•

overall economic conditions, including the effects of the September 11, 2001 terrorist attacks (and any future terrorist attacks) on travel and leisure expenditures by the Company’s customers, as well as increased costs of insurance and higher self-insurance reserves;

•

the failure to sell any of the assets held for sale (see Note 5 to the Notes to Consolidated Financial Statements);

•

the failure to obtain adequate financing to meet strategic goals, including financing for the Lake Charles project;

•

the failure to obtain or retain gaming licenses or regulatory approvals;

•

risks associated with substantial indebtedness, leverage, debt service and liquidation;

•

loss or retirement of any key executives;

•

risks related to pending litigation;

•

increased competition by casino operators who have more resources and have built or are building competitive casino properties;

•

increases in existing taxes or the imposition of new taxes on gaming revenues or gaming devices;

•

other adverse changes in the gaming markets in which Pinnacle Entertainment, Inc. operates;

•

the other risks described or referred to in “—Risk Factors” and “—Factors Affecting Future Operating Results”.

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements. All forward-looking statements made in this Annual Report on Form 10-K/A are made pursuant to the Act. For more information on the potential factors which could affect the Company’s financial results, please see “—Risk Factors” and “—Factors Affecting Future Operating Results” below and review the Company’s filings with the Securities and Exchange Commission.

Risk Factors

In addition to the other information set forth in this Annual Report on Form 10-K/A for the fiscal year ended December 31, 2001, one should carefully consider the following factors.

All of the Company’s properties are dependent upon retaining existing and attracting new customers within their respective geographical markets.

The Company is continually developing new and different marketing programs to retain existing and attract new customers to its properties. Such programs include mailing coupons and other direct mail offers to customers, providing complimentary rooms, food and beverage based on the amount wagered in the casino to frequent players, sponsoring gaming tournaments that provide significant rewards to the winners, and other offers that both provide incentives to existing customers and attract new customers. The cost of such programs can be significant and can reduce the overall profitability of the specific location and the Company as a whole. In addition, certain programs may not generate incremental revenue if the customer merely takes advantage of the marketing program for the short-term and does not become a frequent customer.

In addition to competing with other gaming operators in the various markets the Company operates, the Company is competing for customers, and their available

discretionary spending resources, with other entertainment and leisure companies and attractions. Such companies and attractions may also offer rewards and incentives that would reduce the number of visits to and/or the amount spent by new and existing customers at the Company’s properties.

Finally, further terrorist attacks on the United States or its interests, such as that of September 11, 2001, could have a material adverse effect on the desire of existing and future customers to want to travel and frequent the Company’s facilities.

There can be no assurance that the Company will be able to continue to attract a sufficient number of customers necessary to make its operations profitable.

The Company faces intense competition in all the markets which it operates.

See “Item 1—Description of Business/Competition” for a description of competition faced by the Company.

Loss of land-based, riverboat or dockside facilities from service would adversely affect the Company’s operations.

The Company’s riverboat and dockside gaming facilities in Indiana, Louisiana and Mississippi, as well as any additional riverboat casino properties that might be developed or acquired, are subject to risks in addition to those associated with land-based casinos, including loss of service due to casualty, mechanical failure, extended or extraordinary maintenance, flood, hurricane, snow and ice storms or other severe weather conditions. For cruising riverboats there are additional risks associated with the movement of vessels on waterways, including risks of casualty due to river turbulence and severe weather conditions.

In addition, the Company’s Boomtown Reno, Nevada facility is subject to severe winter weather conditions that can cause the closure of Interstate 80 and reduce the amount of customers visiting the property. Finally, the Company’s Casino Magic Argentina operation is subject to continued political and economic instability.

In July 2000, the Miss Belterra was struck by a barge while en route to Vevay, Indiana. The incident caused the opening of the Belterra Casino Resort to be delayed from August 2000 to October 2000. There can be no assurance that the Company’s water-based facilities will not be struck by other vessels while on the waterways.

In September 1998, a hurricane struck the Gulf Coast region and Boomtown Biloxi, Boomtown New Orleans, Casino Magic Biloxi, and Casino Magic Bay St. Louis were forced to shut down operations for approximately one week, though none of the properties sustained significant damage. If any of the Company’s casinos, be it riverboat, dockside or land-based, cease operations for any period of time, it could adversely affect the Company’s results of operations.

Although the Company carries property and business interruption insurance for these types of items, there can be no assurances similar, or other, events will not occur in the future that could cause the loss of service of the Company’s facilities.

The substantial amount of debt of the Company could materially adversely affect the Company’s business.

As of December 31, 2001, the Company had $497,147,000 of debt, including $350,000,000 of unsecured 9.25% Notes due February 2007 and $125,000,000 of unsecured 9.5% Notes due August 2007 (see Note 14 to the Notes to Consolidated

Financial Statements). In 2001, cash flow to service the Company’s debt was $45,720,000 (see Note 2 to the Notes to Consolidated Financial Statements), including $44,250,000 related to the 9.25% and 9.5% Notes. While the Company currently believes that there are sufficient cash and cash-generating resources to meet its debt service obligations during the next year, there can be no assurance that in the future the Company will generate sufficient cash flow from operations or through asset sales to meet its long-term debt service obligations. No assurance can be given that the Company will be able to refinance any of its indebtedness on terms favorable to the Company, or at all. Such debt and the related debt service obligations could have important adverse consequences to the Company, including but not limited to: a) limiting the Company’s ability to obtain additional financing; b) requiring a substantial portion of the Company’s cash flow from operations to be used for payments on the debt and related interest; c) reducing the Company’s ability to use cash flow to fund working capital, capital expenditures and general corporate requirements; d) limiting the Company’s flexibility in planning for, or reacting to, changes in the business and the industry; and, e) restricting the Company’s activities compared to those of competitors with less debt or greater resources.

Limited operating history at the Belterra Casino Resort does not allow the Company to effectively measure various improvements the Company has implemented at the facility.

The Belterra Casino Resort opened in October 2000 and, through December 31, 2001, has generated a net loss in excess of $24,500,000, including an EBITDA loss in excess of $9,300,000 (see “Item 6—Selected Financial Data” for a definition of EBITDA). The Company attributes the poor performance to, among other things: a) a location that is not easily accessible from local interstate freeways, b) over-staffing in anticipation of higher revenue and a greater number of customers frequenting the property than did in fact visit the facility, c) additional marketing costs to promote the facility (which is customary for new gaming facilities), d) opening the property in October 2000, which is traditionally the slowest period of the year, and e) severe winter weather conditions in the fourth quarter of 2000 and first quarter of 2001.

In an attempt to improve the overall financial performance of the facility, during the fourth quarter of 2001, the Company undertook an aggressive cost containment program at the property, including reducing the property’s labor levels (including management positions) to be more consistent with its business levels, eliminating certain marketing programs and reducing operating costs by eliminating and/ or combining certain operations. In addition, changes were made in the casino, including the slot machine mix, to become more appealing to the customer. Results of these efforts appear to be positive, however, there can be no assurances such actions will materially improve the long-term profitability of the Belterra Casino Resort.

In addition, there is currently planned the construction of a 3.5 mile roadway from Interstate 71, a main thoroughfare in northern Kentucky, to the Ohio river, which ending point would be approximately 1 mile from the Belterra Casino Resort. It is anticipated the construction would begin in 2003 and be completed in 2004. The cost of the construction is to be borne by the state of Kentucky, which currently has the funds set aside for such construction. In the event the construction is completed, the Company believes this roadway will improve access to its facility; however, there can be no assurances the roadway will be constructed, and if constructed, that such roadway would materially increase the number of customers visiting the Belterra Casino Resort, and therefore improve the financial results of the property.

Development of the Lake Charles project could exhaust all of the Company’s available capital and not provide for a sufficient return.

The Company has been selected to receive the fifteenth and final gaming license for a proposed project in Lake Charles, Louisiana. Issuance of the license is subject to a number of conditions, which conditions were finalized by the Company and the Gaming Control Board in November 2001 (the “Lake Charles Conditions”). The Lake Charles Conditions include, but are not limited to, the approval of the voters of Calcasieu Parish, where the Lake Charles project is located, currently scheduled for April 6, 2002. There are no assurances such referendum will not be delayed beyond April 2002, and if held, that it will pass.

In addition to the April 6, 2002 Calcasieu Parish vote noted above, other Lake Charles Conditions include, but are not limited to, building a facility consistent with the July 2000 presentation, meeting certain construction milestone dates and satisfying the financing requirements to complete the project (including segregating $22,500,000 in a refundable “escrow” account upon the voter approval of the project in Calcasieu Parish and demonstrating the Company has available financial resources in cash and credit facility access for the full project amount of $225,000,000 once construction commences). Construction is scheduled to commence in late 2002. The Company anticipates it will continue to meet each of the Lake Charles Conditions, however there can be no assurances the Company will do so, in which event the Company would not be licensed to operate a casino in Lake Charles, Louisiana.

The proposed project is the construction and operation of a $225,000,000 (excluding capitalized interest) dockside riverboat casino, hotel and golf course resort complex in Lake Charles, Louisiana. The Company is considering various financing options for the development of the proposed project (and therefore compliance with the financing requirement of the Lake Charles Conditions), including, but not limited to, utilizing the Company’s existing credit facility (see Note 14 to the Notes to Consolidated Financial Statements), a new credit facility or other senior debt, leasing arrangements and joint venture arrangements. In February 2002, the Governor of Louisiana signed a compact with the Jena Band of Choctaw Indians (the “Choctaw Indians”) to allow for the development and operation of a land-based casino in the city of Vinton, Louisiana (which city is in Calcasieu Parish and is 20 miles closer to Houston, Texas, the major marketing area for casinos in Lake Charles, than the Company’s proposed Lake Charles project). In March 2002, such compact was disapproved by the U.S. Department of the Interior. There can be no assurances the Choctaw Indians will not seek to amend the compact, negotiate a revised compact with the state of Louisiana and seek to resubmit with the Department of the Interior. In the event the Choctaw Indians are successful in obtaining the approval of the Department of the Interior for a new compact for their site in Vinton, Louisiana, the Company believes such facility would have a material adverse effect upon the Company’s decision to develop its proposed Lake Charles project. In the absence of an additional Indian gaming facility in Calcasieu Parish (as one currently exists to the east of the Company’s proposed Lake Charles project), the Company anticipates building a facility similar in design and scope to that of Belterra Casino Resort.

In the event the Company elects to proceed with the Lake Charles project, the capital required to complete the project is significant. Depending on the source of funding to develop the project (credit facility, leasing arrangements, joint venture partner, etc.), such capital requirement to the Company may exhaust all available capital of the Company. There can be no assurance that, in the event the project is commenced, there will be sufficient capital for other business activities of the Company. In addition, there are risks that, once completed, the revenue generated

from the new development is not sufficient to pay its expenses, and the Company is required to infuse cash to pay its bills. There can be no assurance such new facility will be able to cover its own cash flow requirements.

Adverse regulatory changes or changes in the gaming environment in any of the jurisdictions could have a material adverse effect on the Company’s operations.

See “Item 1—Description of Business/ Government Regulation and Gaming Issues” and “—/ Competition”.

For more information on the potential factors which could affect the Company’s financial results, please see “—Forward-Looking Statements” and “—Factors Affecting Future Operating Results” and review the Company’s filings with the Securities and Exchange Commission.

Critical Accounting Policies

Our significant accounting policies are discussed in the Notes to the Consolidated Financial Statements contained in this Form 10-K/A. The preparation of consolidated financial statements in conformity with “generally accepted accounting principles” requires us to apply significant judgment in defining the estimates and assumptions. Our accounting policies that require significant judgment in determining the appropriate assumptions include, among others, policies for:

•

insurance reserves, asset disposition reserves, allowances for doubtful accounts, and other reserves;

•

impairment of long-lived assets;

•

valuation of goodwill, intangible assets and long-lived assets;

•

depreciable lives of various assets; and

•

the calculation of income tax liabilities.

These judgments are subject to an inherent degree of uncertainty. Our judgments are based on our historical experience, terms of various past and present agreements and contracts, industry trends, and information available from other sources, as appropriate. We cannot assure you that actual results will not differ from the estimates.

Results of Operations

The following table highlights our results of operations in recent periods.

	For the years ended December 31,
	2001			2000			1999
	(in thousands)
Revenues
Boomtown New Orleans	$	103,702		$	97,893		$	104,054
Casino Magic Biloxi		86,495			89,042			89,377
Boomtown Bossier City		110,962			131,083			131,435
Belterra Casino Resort		107,571			15,634			—
Boomtown Reno		90,296			93,559			79,989
Casino Magic Argentina		20,159			22,092			21,996
Card Clubs		6,960			7,200			3,517

		526,145			456,503			430,368
Sold properties(a)		2,496			106,622			255,624

Total Revenues	$	528,641		$	563,125		$	685,992

Operating income (loss)
Boomtown New Orleans(b)	$	19,752		$	20,849		$	27,760
Casino Magic Biloxi(b)		7,798			10,512			14,960
Boomtown Bossier City		987			25,953			25,018
Belterra Casino Resort(b)		(18,673	)		(21,501	)		(3,020	)
Boomtown Reno		11,350			11,722			8,532
Casino Magic Argentina		5,622			7,405			7,247
Card Clubs(b)		(17,503	)		2,504			(2,375	)
Corporate(b)		(18,043	)		(26,864	)		(22,849	)

		(8,710	)		30,580			55,273
Sold properties(a), (b)		2,987			141,324			88,931

Operating income (loss)	$	(5,723	)	$	171,904			144,204

Non-recurring and unusual items, by location
Asset impairment write-down, New Orleans	$	1,801		$	0		$	0
Asset impairment write-down, Biloxi		1,371			0			0
Pre-opening costs, Belterra Casino Resort		610			15,030			3,020
Asset impairment write-down, Card Clubs		20,358			0			0
Terminated merger costs, Corporate		(464	)		5,727			0
Gain on disposition of assets, Sold properties		(500	)		(118,816	)		(62,507	)
Asset impairment write-down, Sold properties		0			0			20,446

Non-recurring and unusual items	$	23,176		$	(98,059	)	$	(39,041	)

	For the years ended December 31,
	2001		2000		1999
	(in thousands)
Revenue by Property as % of Total Revenue
Boomtown New Orleans	19.6	%	17.4	%	15.2	%
Casino Magic Biloxi	16.4	%	15.8	%	13.0	%
Boomtown Bossier City	21.0	%	23.3	%	19.2	%
Belterra Casino Resort	20.3	%	2.8	%	—
Boomtown Reno	17.1	%	16.6	%	11.7	%
Casino Magic Argentina	3.8	%	3.9	%	3.2	%
Card Clubs	1.3	%	1.3	%	0.5	%

	99.5	%	81.1	%	62.8	%
Sold Properties	0.5	%	18.9	%	37.2	%

	100.0	%	100.0	%	100.0	%

Operating margins(c)
Boomtown New Orleans	19.0	%	21.3	%	26.7	%
Casino Magic Biloxi	9.0	%	11.8	%	16.7	%
Boomtown Bossier City	0.9	%	19.8	%	19.0	%
Belterra Casino Resort	-17.4	%	-137.5	%	—
Boomtown Reno	12.6	%	12.5	%	10.7	%
Casino Magic Argentina	27.9	%	33.5	%	32.9	%
Card Clubs	-251.5	%	34.8	%	-67.5	%
Corporate	-3.4	%	-5.9	%	-5.3	%
Sold Properties	119.7	%	132.5	%	34.8	%

(a)

(b)

“Operating income (loss)” includes the non-recurring and unusual items.

(c)

Operating margin by property is calculated by dividing operating income (loss) by location by revenue by location.

Comparisons of the Years Ended December 31, 2001, 2000 and 1999

Operating Results

Total revenues for our properties increased by 15.3% in 2001 versus 2000, and by 6.1% in 2000 versus 1999, excluding the properties we have sold. Similarly, our operating income (again, excluding properties we have sold) declined by 128.5% in 2001 versus 2000, and by 44.7% in 2000 versus 1999. When excluding the non-recurring and unusual items, our operating income declined by 70.8% in 2001 versus 2000, and by 11.9% in 2000 versus 1999. Each property’s contribution to these results is as follows:

Revenues at Boomtown New Orleans increased by 5.9% in 2001 versus 2000, primarily due to the addition of 300 new slot machines and a new high limit table games area. Revenues also benefited from dockside legislation, effective April 1, 2001, which no longer requires (or, for that matter, allows) the boat to cruise. Therefore, customers no longer need to coordinate their schedules with the cruising times of the boat and can enter or leave the gaming area of the facility whenever they choose.

The dockside legislation also

increased the property’s gaming tax rate from 18.5% of gaming revenues to 21.5%, which accounted for a majority of the $4,030,000 increase in gaming taxes at the property over 2000. In addition, staffing levels increased due to the increase in activity levels (and therefore compensation costs increased by approximately $1,310,000) and the facility’s depreciation charge increased by approximately $169,000 primarily due to the expanded gaming area. As a result, when combined with the asset impairment write-down of $1,801,000 in 2001 (described below under “Other operating income (loss) items”), the property’s operating income declined by 5.3% in 2001 versus 2000. Without the non-recurring write-down charge, operating income increased by 3.4%.

Revenues and operating income at the property decreased in 2000 by 5.9% and 24.9%, respectively, from 1999. Revenues declined primarily due to competition from the opening in late 1999 of a large land-based casino approximately ten miles away, in downtown New Orleans. The decline in operating income was primarily due to increased marketing expenses that we incurred in response to the increased competition.

At Casino Magic Biloxi, revenues and operating income declined in 2000 and then again in 2001, primarily due to increased competition in the market, most notably from a major new competitor that opened in March 1999. The year 2000 results also included approximately $800,000 of additional income from the settlement of a business interruption insurance claim resulting from Hurricane Georges in September 1998. Further, in 2001, operating income was reduced by a non-cash asset impairment charge of $1,371,000, as described below under “Other operating income (loss) items.” Operating income at the property excluding the impact of the insurance settlement declined by 25.8% in 2001 versus 2000. When further excluding the non-recurring impairment charge of $1,371,000, operating income declined by 5.6% in 2001 versus 2000. Hotel occupancy in 2001 declined to 83.1% from 86% in 2000.

The property’s overall revenues in 2000, despite the insurance settlement described above, declined by 0.4% versus 1999. Excluding the insurance settlement, revenues declined by 1.3%, primarily reflecting the increased competition cited above. Operating income, again excluding the insurance settlement, declined by 35.1% in 2000 versus 1999, due primarily to increased marketing expenses that we incurred in response to the increased competition. Hotel occupancy declined to 86% in 2000 from 89% in 1999.

At Boomtown Bossier City, revenues and operating income declined by 15.3% and 96.2%, respectively, in 2001 versus 2000. Revenue declines were primarily attributable to (i) increased competition from the opening of a new casino hotel in December 2000 and the opening of a new hotel tower at another competitor in January 2001; (ii) severe winter rainfall in late February and early March 2001, which flooded the first level of the property’s parking garage until mid-May 2001; and (iii) construction disruption to our casino operations from the installation of new slot machines. Management initially responded to the new competition with expensive marketing programs in the first half of 2001 of approximately $4,000,000. A new management team later determined that many of such programs were inefficient and they were modified or discontinued. We also recorded a charge of approximately $2,600,000 for certain reserves and write-downs related to inventory, accounts receivable and working capital valuation matters. Operating income in 2001 was also negatively impacted by a gaming tax increase at this property of one percentage point on April 1, 2001. Gaming taxes at this property will be increased further by one percentage point on each of April 1, 2002 and 2003. Hotel occupancy in 2001 declined to 84.2% from 89.6% in 2000.

Revenues at this property declined by 0.3% in 2000 versus 1999, due primarily to the opening in December 2000 of the new competitor mentioned above. Operating income, however, increased by 3.7% as management reduced payroll and other expenses. Hotel occupancy declined to 89.6% in 2000 from 94.0% in 1999.

The Belterra Casino Resort opened in late October 2000. Revenues at this property increased significantly in 2001 due to a full year of operation, versus approximately two months of operations in 2000. The property incurred operating losses in both periods, although the losses per day were much less in the full year 2001 than they were in the partial period in 2000. Prior to the opening of this property in late October 2000, we had anticipated greater guest counts and revenues than it has actually achieved, including achieving only 40% occupancy levels in 2000 compared to 89.6% in 2001. We staffed the facility at levels that proved to be greater than necessary. In late 2001, we hired a new General Manager for Belterra and have since taken steps to improve our marketing and reduce our staffing levels to reflect our levels of activity. The 2001, 2000

and 1999 operating losses include pre-opening expenses, as described below under “Other operating income (loss) items.”

At Boomtown Reno, revenues declined by $3,263,000, or 3.5%, in 2001 versus 2000 primarily due to the adverse impact of the events of September 11, 2001 on travel along Interstate 80. Fuel prices were also lower, affecting revenues from our two gas stations at the property. The property’s management aggressively controlled costs to mirror the reduced drive-by business. As a result, margins improved and operating income only fell by 3.2% from the prior year levels.

Boomtown Reno was extensively renovated and expanded in 1998 and early 1999, with the number of guest-rooms increasing from 122 to today’s 318, including 24 luxury suites. Hotel occupancy in 1999 was only 66%. Occupancy improved in 2000 to 87% and again in 2001 to 91%, despite the events of September 11, as we learned how to better market and fill our available guest-rooms and customers learned of the quality of the Boomtown product. The increase in occupancy, plus favorable weather conditions and increases in fuel prices, allowed us to achieve increases in revenues and operating income of 17.0% and 37.4%, respectively, in 2000 versus 1999.

Our Casino Magic Argentina operation’s revenues and operating income declined by 8.7% and 24.1%, respectively, in 2001 versus 2000, primarily due to the economic and political instability that began in Argentina in the third quarter of 2001. Revenues and operating income increased slightly in 2000 versus 1999; the economy in both such years was relatively stable.

Our revenues and operating income (when excluding the asset impairment write-down of $20,358,000 described below under “Other operating income (loss) items”) from “Card clubs” did not change significantly in 2001 from the prior year.

Revenues from “Card clubs” increased by $3,683,000 in 2000 versus 1999, and these operations realized operating profits of $2,504,000 in 2000 after having suffered operating losses of $2,375,000 in 1999. This improvement was primarily due to a full year of lease income from the Hollywood Park-Casino, compared to only three months in 1999.

Corporate Costs

Corporate costs declined by 32.8% in 2001 as compared to 2000 primarily due to the terminated merger costs in 2000 (as described below under “Other operating income (loss) items”) and an approximately $1,100,000 reduction in bonus compensation for our corporate officers, as well as other cost containment efforts. Excluding the terminated merger costs, such expenses also declined by 7.5% in 2000 versus 1999, primarily because we became focused on building Belterra and incurred fewer costs seeking new gaming licenses or new expansion opportunities.

Sold Properties

Included in the operating income for sold properties are the various gains and asset impairment costs associated with such locations. See “Other operating income (loss) items” below. The reductions in revenues and operating income (when excluding the non-recurring and unusual items noted) from the sold properties in both 2000 and 2001 reflects eliminating the operating income from the Mississippi Casinos sold in August 2000 and Turf Paradise race track sold in June 2000. The 2001 reductions in revenues and operating income from the sold properties also reflect the termination in June, 2001 of our various agreements with a Native American tribe under which we derived income from the Legends Casino in Washington State. Under our agreements with the tribe, we participated in the cash flow of the casino in return for having provided a loan to the tribe. The casino opened in 1998, and we recognized such income as it was received from 1998 through the first half of 2001. See “—Factors Affecting Future Operating Results—Assets Sold” below.

Other Operating Income (Loss) Items

Included in operating income (loss) for certain property locations and in corporate costs in 2001, 2000 and 1999 are certain non-recurring and unusual items, including:

•

Pre-opening expenses for the Belterra Casino Resort of $610,000 in 2001, $15,030,000 in 2000 and $3,020,000 in 1999. Pre-opening costs typically peak just before the opening of a new facility. Belterra opened in late October 2000. Pre-opening costs in 2001 were due to the construction of the championship golf course at Belterra, which opened in July 2001.

•

Gains on disposition of assets (included in sold operations) of $500,000 for the year ended December 31, 2001, which gain includes the early repayment of the promissory note related to the Native American casino in Washington State of $639,000, offset by the loss on disposition of other assets in the period. We also had gains on disposition of assets of $118,816,000 for the year ended December 31, 2000 in sold operations due primarily to the sale of the two Mississippi casinos in August 2000, Turf Paradise race track in June 2000 and a land sale in March 2000. Finally, we had gains on disposition of assets of $62,507,000 in the year ended December 31, 1999 in sold operations due primarily to the disposition of the Hollywood Park Race Track in September 1999.

•

We had an asset impairment loss of $23,530,000 in 2001 due primarily to the write downs of the Crystal Park Casino card club assets of $20,358,000, a riverboat (the original boat at Boomtown—New Orleans, which was replaced in February 1998) of $1,801,000 and assets at Casino Magic Biloxi of $1,371,000. The net book values of these assets are classified as “Assets held for sale” on our Consolidated Balance Sheet at December 31, 2001. We also had an asset impairment loss of $20,446,000 in 1999 related to the Hollywood Park-Casino card club.

•

Terminated merger costs (included in corporate costs) of $5,727,000 for the year ended December 31, 2000 relate to the terminated merger with Harveys Casino Resorts. Various other issues related to the terminated merger were settled in the second quarter of 2001, resulting in a reversal of accrued expenses of $464,000 in the year ended December 31, 2001. See “—Factors Affecting Future Operating Results—Terminated Merger Agreement” below.

Interest Income and Expense

Interest income decreased in 2001 versus 2000 by $7,583,000, or 60.2%, primarily due to lower investable funds and lower interest rates. Interest expense, net of capitalized interest decreased by $2,767,000, or 5.3%, due primarily to the redemption of the Casino Magic 13% Notes in August 2000. Capitalized interest was $482,000 in 2001 compared to $8,148,000 in 2000, a decrease of 94.1%, due primarily to the completion of the Belterra Casino Resort in October 2000.

Interest income increased in 2000 versus 1999 by $4,677,000, or 59.0%, primarily due to higher investable funds and higher interest rates during the year. Interest expense, net of capitalized interest, decreased by $12,851,000, or 19.6%, due primarily to amounts capitalized in 2000 in relation to construction of Belterra and lower interest expense from the redemption of the Casino Magic 13% Notes.

Income Taxes

We had a pre-tax loss of $50,555,000 for the year ended December 31, 2001. We also settled certain U.S. Federal income tax matters that were under examination by the I.R.S. relating to Casino Magic and its subsidiaries prior to 1997, resulting in an income tax benefit of approximately $3,700,000. Therefore, we recorded an income tax benefit of $21,906,000, compared to an income tax expenses of $52,396,000 and $40,926,000 for the years 2000 and 1999, respectively. The provision for taxes in the years 2000 and 1999 include taxes associated with the significant asset dispositions in those years.

Extraordinary Loss

The extraordinary loss of $2,653,000 recorded for the year ended December 31, 2000 related to the early redemption of the Casino Magic 13% Notes.

Liquidity and Capital Resources

At December 31, 2001, we had $153,187,000 of cash and cash equivalents, with all of our cash equivalents being marketable securities having remaining terms of less than 90 days. Our cash and cash equivalents at December 31, 2000 was $172,868,000. Of our cash at December 31, 2001, approximately $45,000,000 was in casino cages, slot machines, operating accounts or otherwise used in day-to-day operations. In addition, we had $3,452,000 of restricted cash related to Argentina (see below).

Restricted cash—Argentina at December 31, 2001 consists of the cash of Casino Magic Argentina maintained in Argentina, translated from the Argentine peso to the U.S. dollar. As discussed in Note 3 to the Consolidated Financial Statements, Argentina experienced political and economic disruption in the latter part of 2001, including the devaluation of its currency and the governmental restriction of transferring any cash out of the country. As such, all assets, including cash, have been translated to U.S. dollars from the Argentine peso, and, until such time as the restriction of transferring funds out of the country has been lifted, cash of Casino Magic Argentina maintained in Argentina will be classified as Restricted Cash—Argentina on the Consolidated Balance Sheet as it can only be utilized by Casino Magic Argentina and not by us or any of our other subsidiaries.

Our working capital (current assets less current liabilities) was $135,170,000 at December 31, 2001 versus $131,482,000 at December 31, 2000.

During 2001, we invested $52,264,000 into new property, plant and equipment. This primarily included completion of the golf course at Belterra (which opened in July 2001), the renovation project at Boomtown New Orleans, the purchase of player tracking systems at various properties, and the purchase of approximately 14 acres of land that we previously leased at our Crystal Park card club. We also used approximately $9,820,000 of our funds to repurchase 1,103,000 shares of our common stock at an average price of approximately $8.90 per share. Our cash flow from operations was $39,517,000. We also received cash of $8,636,000 in the year in connection with the termination of the Native American agreements. Primarily because we invested more in new property, plant and equipment and in repurchasing our stock than we generated from operating cash flow and the termination of the Native American agreements, our cash and equivalents declined by $19,681,000 during the year.

During 2000, we invested $202,775,000 into new property, plant and equipment, primarily at the Belterra Casino Resort (which opened in October 2000). We also used approximately $112,875,000 to redeem the Casino Magic 13% Notes and $28,824,000 of cash in operating activities. However, principally as a result of cash receipts of $266,925,000 during the year from the sale of property, plant and equipment (see Note 11 to the Notes to Consolidated Financial Statements) and cash proceeds of $123,428,000 from the maturity of short term investments, our cash and cash equivalents increased by $49,506,000 during the year.

As discussed in Note 14 to the Notes to Consolidated Financial Statements, we have a bank credit facility with a syndicate of banks in the amount of $110,000,000, with scheduled commitment reductions of $6,667,000 on March 31, 2003 and $16,667,000 on each of June 30 and September 30, 2003 and which expires December 31, 2003 (the “Credit Facility”). As of December 31, 2001, we had no outstanding borrowings under the Credit Facility, and have not utilized the Credit Facility since February 1999. We do not anticipate making any borrowing under this facility in 2002 and maintain the facility to satisfy the requirements of the Louisiana Gaming Control Board that we have financing available to complete the Lake Charles project (see Note 8 to the Notes to Consolidated Financial Statements).

Interest rates on future borrowings under our bank credit facility are determined by adding a margin, which is based on our debt to cash flow ratio (as defined in the facility), to either the LIBOR rate or Prime Rate (at our option). We also pay a quarterly commitment fee on the unused balance of the facility. The facility allows for interest rate swap agreements or other interest rate protection agreements. Presently, we have no such agreements outstanding.

In November 2001, we and the bank syndicate executed Amendment No. 6 to the Credit Facility, which, among other things, (i) amended various financial covenant ratios to be more consistent with current operations, (ii) allowed for certain capital expenditures, including $25,000,000 related to Casino Magic Bossier City, (iii) suspended any additional stock repurchase activity until April 1, 2002 and, (iv) required us to utilize our cash (other than working capital and casino cash) prior to drawing on the facility. In July 2001, we and the bank syndicate executed Amendment No. 5 to the Credit Facility, which, among other things, (i) amended various financial covenant ratios to be more consistent with operations (therefore reflective of the operations sold in 1999 and 2000, as well as the opening of the Belterra Casino Resort in October 2000), and (ii) allowed

for the necessary capital spending for the Lake Charles opportunity. An additional amendment to the Credit Facility will be necessary to obtain approval from the bank syndicate for capital projects not specifically provided for in either Amendment No. 5 or Amendment No. 6 to the Credit Facility.

As noted above, we were selected by the Gaming Control Board to receive a license for the construction and operation of a dockside riverboat casino in Lake Charles, Louisiana, and must stay in compliance with the Lake Charles Conditions, including satisfying certain financing requirements throughout the project. Currently, we anticipate that we will not meet the ratio of our cash flow to net debt covenant specified in the Credit Facility in June 2002 and therefore will need to seek another amendment to the Credit Facility. In the event we are not successful in negotiating an amendment to the Credit Facility, we anticipate we will terminate the Credit Facility and secure a new bank credit agreement; however, there are no assurances we will be able to secure such new facility under terms and conditions favorable to us. In the event we are not successful in securing a new bank credit facility, we will need to secure an alternative source of financing for our Lake Charles project. There is no assurance the Louisiana Gaming Control Board will approve such alternative method of financing. Should the Louisiana Gaming Control Board not approve an alternative method of financing, we would likely not complete the project. All costs incurred through December 31, 2001 to obtain the license have been expensed and we have no capitalized costs on our balance sheet at December 31, 2001.

Our debt consists principally of two issues of senior subordinated indebtedness: $350 million of 9.25% Senior Subordinated Notes due February 2007, and $125 million of 9.50% Senior Subordinated Notes due August 2007. The 9.50% notes become callable at a premium over their face amount on August 1, 2002; the 9.25% notes become callable at a premium over their face amount on February 15, 2003. Such premiums decline periodically as the bonds near their respective maturities. Neither series of notes has any required sinking fund or other principal payments prior to their maturities in 2007. Both series of notes permit us to have up to $350 million of senior indebtedness, none of which is currently outstanding.

We believe available cash, cash to be generated by potential asset sales, cash flow from operations and availability under the Credit Facility is sufficient to build the Lake Charles facility (subject to statements above regarding the need to amend the Credit Facility and, if we are unable to effect such amendment, then subject to our ability to secure a new bank credit agreement), should we move forward with the project. As part of the Credit Facility, we are contractually obligated to utilize cash other than working capital and casino cash before drawing on the Credit Facility.

In addition to the Credit Facility, we are considering various financing options for the development of the proposed Lake Charles project, including, but not limited to, a new credit facility or other senior debt, leasing arrangements and joint venture arrangements.

Regardless of future changes to the Credit Facility, we currently believe that our available cash and cash equivalents at December 31, 2001 of over $153,000,000 and cash flow from operations in 2002 will be sufficient to finance working capital needs, make necessary debt service payments and finance the capital spending requirements for at least the next twelve months and fund the $22,500,000 “escrow” requirement for the Lake Charles project (see Note 8 to the Notes to Consolidated Financial Statements). In addition, we also currently believe that cash requirements of our existing operations beyond the next twelve months will consist of debt service requirements and capital spending (including continued capital spending for the Lake Charles project, if commenced), which we expect to be met by then-existing cash, cash flows from operations and borrowing capacity under the existing Credit Facility (subject to statements above regarding the need to amend the Credit Facility and, if we are unable to effect such amendment, then subject to our ability to secure a new bank credit agreement).

In addition to the above anticipated uses of resources, we may use a portion of existing resources to (i) reduce our outstanding debt obligations prior to their scheduled maturities, (ii) make capital improvements at other existing properties, and/or (iii) develop or acquire other casino properties or companies. To the extent cash is used for these purposes, our cash reserves will be diminished and we may require additional capital to finance any such activities, including the debt service and capital improvements. Additional capital may be generated through internally generated cash flow, future borrowings (including amounts available under the Credit Facility), asset sales and/or lease transactions. There can be no assurance, however, that such capital will be available on terms acceptable to us.

Other Supplemental Data

Management believes EBITDA, which we define as earnings before net interest expense, provision for income taxes, depreciation, amortization, minority interest and extraordinary items, to be a relevant and useful measure to compare operating results between our properties and between accounting periods. EBITDA is not a measure of financial performance under the promulgations of the accounting profession, known as “generally accepted accounting principles” or “GAAP.” Nevertheless, we believe some investors use EBITDA to help determine a company’s ability to service or incur indebtedness and to estimate a company’s underlying cash flow from operations before capital costs, taxes and maintenance capital expenditures. EBITDA is one of several comparative tools used by management to assist in the evaluation of operating performance and to measure cash flow generated by ongoing operations. Below is a reconciliation of operating income (loss), as presented in the “—Results of Operations” table above, to EBITDA. Operating income (loss) and EBITDA include the $23,176,000, ($98,059,000) and ($39,041,000) of non-recurring and unusual items listed in the “—Results of Operations” table above for the years ended December 31, 2001, 2000 and 1999, respectively.

	Operating Income (Loss)			Depreciation And Amortization		EBITDA
	(in thousands)
For the twelve months ended December 31, 2001
Boomtown New Orleans	$	19,752		$	6,012	$	25,764
Casino Magic Biloxi		7,798			6,799		14,597
Boomtown Bossier City		987			8,410		9,397
Belterra Casino Resort		(18,673	)		12,898		(5,775	)
Boomtown Reno		11,350			7,834		19,184
Casino Magic Argentina		5,622			1,447		7,069
Card Clubs		(17,503	)		3,767		(13,736	)
Corporate		(18,043	)		2,283		(15,760	)

		(8,710	)		49,450		40,740
Sold properties		2,987			0		2,987

	($	5,723	)	$	49,450	$	43,727

	Operating Income (Loss)			Depreciation And Amortization		EBITDA
	(in thousands)
For the twelve months ended December 31, 2000
Boomtown New Orleans	$	20,849		$	5,843	$	26,692
Casino Magic Biloxi		10,512			6,963		17,475
Boomtown Bossier City		25,953			8,428		34,381
Belterra Casino Resort		(21,501	)		2,294		(19,207	)
Boomtown Reno		11,722			7,683		19,405
Casino Magic Argentina		7,405			1,573		8,978
Card Clubs		2,504			3,937		6,441
Corporate		(26,864	)		3,791		(23,073	)

		30,580			40,512		71,092
Sold properties		141,324			5,590		146,914

	$	171,904		$	46,102	$	218,006

	Operating Income (Loss)			Depreciation And Amortization		EBITDA
	(in thousands)
For the twelve months ended December 31, 1999
Boomtown New Orleans	$	27,760		$	5,674	$	33,434
Casino Magic Biloxi		14,960			7,072		22,032
Boomtown Bossier City		25,018			8,074		33,092
Belterra Casino Resort		(3,020	)		0		(3,020	)
Boomtown Reno		8,532			6,700		15,232
Casino Magic Argentina		7,247			1,590		8,837
Card Clubs		(2,375	)		4,383		2,008
Corporate		(22,849	)		4,537		(18,312	)

		55,273			38,030		93,303
Sold properties		88,931			13,894		102,825

	$	144,204		$	51,924	$	196,128

EBITDA is not calculated in the same manner by all companies and accordingly, may not be an appropriate measure for comparing performance amongst different companies. EBITDA should not be considered in isolation from, or as a substitute for, net income (loss), cash flows from operations or cash flow data prepared in accordance with GAAP. A reconciliation from net income (loss) to EBITDA is as follows:

	For the years ended December 31,
	2001			2000			1999
	(in thousands)
Net income (loss)	$	(28,649	)	$	76,839		$	44,047
Extraordinary item, net of income tax benefit		—			2,653			—

Income (loss) before extraordinary item		(28,649	)		79,492			44,047
Income tax expense (benefit)		(21,906	)		52,396			40,926
Minority interest		—			—			1,687

Income (loss) before extraordinary item, income taxes and minority interest		(50,555	)		131,888			86,660
Interest expense, net of capitalized interest		49,853			52,620			65,471
Interest income		(5,021	)		(12,604	)		(7,927	)

Operating income (loss)		(5,723	)		171,904			144,204
Depreciation and amortization		49,450			46,102			51,924

EBITDA	$	43,727		$	218,006		$	196,128

Factors Affecting Future Operating Results

Goodwill and Intangible Asset Amortization

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS No. 141”) and No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”) which are effective July 1, 2001 and January 1, 2002, respectively, for the Company (see Note 1—“Goodwill” to the Notes to Consolidated Financial Statements). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. With the adoption of SFAS No. 142 on January 1, 2002 (earlier adoption is not permitted), goodwill and intangible assets with indefinite lives will no longer be amortized. Amortization expense for the years ended December 31, 2001, 2000 and 1999, was $2,848,000, $2,964,000 and $2,855,000, respectively. Rather, these assets will be subject to at least an annual assessment for impairment by applying a fair-value-based test. The Company is in the process of completing its evaluation of the financial statement impact of adoption of SFAS No. 142 and anticipates there will be an impairment charge recorded in the first quarter of 2002 (see Note 25 to the Consolidated Financial Statements). In accordance with SFAS No. 142, any such transition related impairment charge would be classified as a cumulative effect of a change in accounting principle. In addition, under the new rules, any future acquired intangible asset will be separately recognized if the benefit of the intangible is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of the acquirer’s intent to do so. Intangible assets with finite lives will be amortized over their useful lives and intangible assets with indefinite lives will no longer be amortized and will be subject to at least an annual assessment for impairment by applying a fair-value-based test.

Argentina

During the second half of 2001, the political and economic condition of Argentina deteriorated, including an increase in the risk of being unable to repatriate funds out of the country, the fall of international reserves, continuous fiscal imbalance, and a decrease in the financial system deposits. In December 2001, these events culminated in the resignation of the then President of the country, the imposition of restrictions on cash withdrawals, the delaying of payment of wages to government employees, and the closing of the banking system from late December to early January 2002. In an effort to stabilize the country, the new government of Argentina decided to devalue the Argentine Peso in early January 2002 (which had been pegged to the U.S. dollar for over ten years), as well as stop all transfers of U.S. dollars out of the country. As a result of the actions taken, pursuant to Statement of Financial Accounting Standards No. 52 Foreign Currency Translation (“SFAS No. 52”), the Company recorded a translation loss in a separate component of stockholders’ equity in the amount of $4,430,000 as of December 31, 2001 (see Note 3 to the Notes to Consolidated Financial Statements). At December 31, 2001, total assets of the Company in Argentina were $11,376,000 or less than 2% of the Company’s consolidated assets. The Company anticipates the cumulative translation loss will fluctuate in the future based on changes in the currency exchange rate between the U.S. dollar and the Argentine peso. In addition, the Company reclassified the cash ($3,452,000) maintained in Argentina as restricted cash at December 31, 2001, until such time as the Argentine government amends its position regarding transferring funds out of the country, as such cash can only be utilized by Casino Magic Argentina and not by Pinnacle Entertainment or any of its other subsidiaries. In February 2002, the government authorized the Central Bank of Argentina to review and approve transfers of cash (after converting pesos to U.S. dollars). There is no assurance the Central Bank will continue to authorize such transfers for Casino Magic Argentina.

The impact of these events to Casino Magic Argentina include a significant reduction in revenue resulting from a decline in customer counts and lower discretionary spending by customers. The Company anticipates the economic instability will continue in 2002 and will therefore continue to adversely impact Casino Magic Argentina operating results in 2002.

Belterra Casino Resort

In October 2000, the Company opened the Belterra Casino Resort located on 315 acres adjacent to the Ohio River in Switzerland County, Indiana, which is approximately 45 miles southwest of downtown Cincinnati, Ohio. The Belterra Casino Resort features a 15-story, 308-room hotel, a cruising riverboat casino (the “Miss Belterra”) with 1,344 slot machines and 45 table games, an 18-hole Tom Fazio-designed championship golf course, which opened in July 2001, six restaurants, a 1,500-seat entertainment venue, a spa, retail areas and other amenities.

Prior to August 2001, the Company owned a 97% interest in the Belterra Casino Resort, with the remaining 3% held by a non-voting local partner. In November 2000, the Company entered into an agreement with the local partner whereby the local partner had the right to require the Company to purchase, for a purchase price determined in accordance with the agreement, its entire ownership interest in the Belterra Casino Resort at any time on or after January 1, 2001. A $100,000 deposit toward such ultimate purchase price was made by the Company to the partner at that time. In July 2001, the local partner exercised the right to require the Company to purchase the remaining 3% ownership interest held by the partner for approximately $1,600,000 as calculated in accordance with the agreement. In August 2001, the remaining payment of approximately $1,500,000 was made to the partner and the Belterra Casino Resort is now wholly owned by the Company.

Legislation Regarding Dockside Gaming in Louisiana

In March 2001, the state legislature passed a law enabling riverboat casinos to remain dockside at all times and increased the gaming taxes paid to the state of Louisiana from 18.5% to 21.5% of net gaming proceeds effective April 1, 2001 for the nine riverboats in the southern region of the state, including the Company’s Boomtown New Orleans property. The gaming tax increase to 21.5% of net gaming proceeds will be phased in over an approximately two-year period for the riverboats operating in parishes bordering the Red

River, including the Company’s Casino Magic Bossier City property. The phase in included a 1% increase on April 1, 2001, with another 1% on each of April 1, 2002 and 2003.

The Company believes this change in the law will benefit its Boomtown New Orleans operations in the long-term, as increased revenues are expected from casino patrons who will no longer be required to arrange their plans to coincide with a cruising schedule. The Company also believes the new legislation would benefit the proposed Lake Charles project (see below), as it would enable the Company to build a riverboat casino that would remain dockside at all times and thus compete more effectively with existing operators. Finally, during the nine months ended December 31, 2001, the Company believes the increased gaming taxes had a negative impact at Casino Magic Bossier City, as gaming was already being conducted on a dockside riverboat casino prior to the new legislation.

Lake Charles

In November 1999, the Company filed an application for the fifteenth and final gaming license to be issued by the Louisiana Gaming Control Board (the “Gaming Control Board”). In July 2000, the Company was one of three groups that presented their proposed projects to the Gaming Control Board. On October 16, 2001, the Company was selected by the Gaming Control Board to receive the license. In connection with the 1999 application, Pinnacle Entertainment entered into an option agreement with the Lake Charles Harbor and Terminal District (the “District”) to lease 225 acres of unimproved land from the District upon which such resort complex would be constructed. The initial lease option was for a six-month period ending January 2000, with three six-month renewal options (all of which have been exercised), at a cost of $62,500 per six-month renewal option. In June 2001 and again in January 2002, the District agreed to extend the option period for additional six-month terms at a cost of $62,500 per six-month term. In the event the local referendum noted above is not held prior to the expiration of the current option extension, the Company anticipates requesting an additional lease option extension from the District. These lease option payments are expensed over the option periods. If the lease option were exercised, the annual rental payment would be $815,000, with a maximum annual increase of 5%, commencing upon opening of the facility. The term of the lease would be for a total of up to 70 years, with an initial term of 10 years and six consecutive renewal options of 10 years each. The lease would require the Company to develop certain on- and off-site improvements at the location. All costs incurred by the Company related to obtaining this license have been expensed as incurred.

Assets Held for Sale

Assets held for sale of $18,285,000 at December 31, 2001 consist primarily of 97 acres of surplus land in Inglewood, California and the Crystal Park Casino card club casino in Compton, California (see “California Card Clubs” below and Note 5 to the Notes to Consolidated Financial Statements). Assets held for sale at December 31, 2000 consist of the 97 acres of surplus land. The Company is marketing the properties to prospective buyers.

California Card Clubs

By California state law, a corporation may operate a gambling enterprise in California only if every officer, director and shareholder holds a state gambling license. Only 5% or greater shareholders of a publicly traded racing association, however, must hold a state gambling license. As a practical matter, therefore, public corporations that are not qualified racing associations may not operate gambling enterprises in California. As a result, the Hollywood Park-Casino and Crystal Park Casino, are leased to, and operated by, an unrelated third party. In May 2001, the California Senate passed a bill, the effect of which would have been to permit the Company to operate the Hollywood Park-Casino in Inglewood, California, which was subsequently passed by the California State Assembly. The bill was vetoed by the Governor of California in October 2001. Therefore, the Company anticipates leasing the Hollywood Park-Casino and the Crystal Park Casino to the current operator for the foreseeable future.

In November 2001, the operator of the Crystal Park Casino requested, and the Company granted, a reduction in rent to $20,000 per month from $100,000 per month, due to increased card club competition and the overall slowdown in the U.S. economy. In addition, in the fourth quarter 2001, the Company began

aggressively seeking buyers for the facility; and accordingly, reclassified the assets as held for sale (see Note 5 to the Notes to Consolidated Financial Statements).

Overall U.S. Economic Conditions

During the year ended December 31, 2001, the U.S. economy experienced a significant economic slowdown. These economic conditions were further impacted by the tragic events of September 11, 2001. The impact of these adverse conditions to the Company’s operations includes fewer guests visiting the properties and spending less while visiting. The Company developed cost control programs at its various locations, including labor and marketing spending reductions, and began implementing those programs in late 2001 at the various locations.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 “Business Combinations” (“SFAS No. 141”) and No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”) which are effective July 1, 2001 and January 1, 2002, respectively, for the Company. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. With the adoption of SFAS No. 142 on January 1, 2002 (earlier adoption is not permitted), goodwill is no longer amortized over its estimated useful life, which, for the years ended December 31, 2001, 2000 and 1999, was $2,846,000, $3,030,000 and $2,859,000, respectively. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value-based test. During the three months ended March 31, 2002, the Company completed its evaluation of the financial statement impact of the adoption of SFAS No. 142 and recorded a transition adjustment impairment charge of $56,704,000, including a goodwill impairment charge of $49,169,000 related to the Casino Magic locations and gaming license impairment charge of $7,535,000 (net of an income tax benefit of $4,239,000). In accordance with SFAS No. 142, such transition adjustment charge is classified as a cumulative effect of a change in accounting principle, net of the income tax benefit. In addition, under the new rules, any future acquired intangible asset will be separately recognized if the benefit of the intangible is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of the acquirer’s intent to do so. Intangible assets with finite lives will be amortized over their useful lives (see Note 25), and intangible assets with indefinite lives will no longer be amortized and will be subject to at least an annual assessment for impairment by applying a fair-value-based test.

In June 2001, Statement of Financial Accounting Standards No. 143 Accounting for Asset Retirement Obligations (“SFAS No. 143) was issued. SFAS No. 143 addresses the diversity in practice for the recognizing asset retirement obligations (“ARO”). SFAS No. 143 requires that obligations associated with the retirement of a tangible long-lived asset be recorded as a liability when those obligations are incurred, with the amount of the liability initially measured at fair value. Upon initially recognizing a liability for ARO’s, an entity must capitalize the cost by recognizing an increase in the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. SFAS No. 143 will be effective for financial statements for fiscal years beginning after June 15, 2002, although early adoption is encouraged. The Company believes the adoption of SFAS No. 143 will not have a material impact on its financial position or results of operations.

In August 2001, Statement of Financial Accounting Standards No. 144 Accounting for the Impairment or Disposal of Long-lived Assets (“SFAS No. 144”) was issued. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supercedes SFAS No. 121 and the accounting and reporting provisions of APB Opinion No. 30 Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions for the disposal of a segment of a business. Because SFAS No. 121 did not address the accounting for a segment of a business accounted for as a discontinued operation under Accounting Principles Board Opinion No. 30, two accounting models existed for long-lived assets to be disposed. The FASB decided to establish a single accounting model, based on the framework established in SFAS No. 121, for long-lived assets to be disposed of by sale. The FASB also decided to resolve significant implementation issues related to SFAS No. 121. The provisions of the statement are effective for financial statements issued for fiscal years beginning after December 31, 2001, and interim periods within those fiscal years, with early application encouraged. The provisions of SFAS No. 144 generally are to be applied prospectively. The Company believes that the adoption of SFAS No. 144 will not have a material impact on its financial position or results of operations.

Item

8. Financial Statements

Financial Statements and accompanying notes are attached hereto.

PART III

Item

10. Directors and Executive Officers of the Registrant

The following table sets forth certain information with respect to the Directors and Executive Officers of the Company:

Name	Age	Position
Daniel R. Lee (a)	45	Chairman of the Board of Directors and Chief Executive Officer
James L. Martineau (b)	61	Director
Gary G. Miller (c)	51	Director
Michael Ornest (c)	44	Director
Timothy J. Parrott (a), (c)	54	Director
Lynn P. Reitnouer (a), (b)	69	Director
Marlin Torguson	57	Director
Wade W. Hundley	36	Executive Vice President and Chief Operating Officer
G. Michael Finnigan	53	President and Chief Executive Officer of Realty Investment Group, Inc., a wholly-owned subsidiary of the Company
Bruce C. Hinckley	55	Senior Vice President, Chief Financial Officer and Treasurer
Loren S. Ostrow	50	Senior Vice President, Secretary and General Counsel

(a)

Member of Executive Committee

(b)

Member of Compensation Committee

(c)

Member of Audit Committee

Mr. Lee has been Chairman of the Board of Directors and Chief Executive Officer of the Company since April 11, 2002; owner of LVMR, LLC (developer of casino hotels) from 2001 to 2002; Chief Financial Officer and Senior Vice President of HomeGrocer.com, Inc. (internet grocery service) from 1999 until the sale of the company in 2000; and Chief Financial Officer, Treasurer and Senior Vice President of Finance and Development of Mirage Resorts, Incorporated (major operator and developer of casino resorts) from 1992 to 1999.

Mr. Martineau has been a Director of the Company since May 1999; President (and Founder), Viracon, Inc. (auto glass corporation) from 1970 to 1996; Executive Vice President, Apogee Enterprises, Inc. (glass design and development corporation that acquired Viracon, Inc. in 1973) from 1996 to 1998; Director, Apogee Enterprises, Inc. since 1973; Director, Northstar Photonics (telecommunications business) since December 1998; Chairman, Genesis Portfolio Partners, LLC, (start-up company development) since August 1998; Director, Borgen Systems since 1994; and Trustee, Owatonna Foundation since 1973.

Mr. Miller has been a Director of the Company since May 1999; Chairman and Chief Executive Officer, Fore Star Golf (golf management) since 1993; President, Cumberland Capital Corporation (personal investments) since 1990; Executive Vice President—Finance and Administration, Treasurer, Director, AFG Industries, Inc. (glass manufacturing) from 1977 to 1993; Director, Nordic Tugs since January 1999; and Director, United Stationers, Inc. from 1992 to October 1998.

Mr. Ornest has been a Director of the Company since October 1998; private investor since 1983; Director of the Ornest Family Partnership since 1983; Director of the Ornest Family Foundation since 1993; Director of the Toronto Argonauts Football Club from 1988 to 1990; President of the St. Louis Arena and Vice President of the St. Louis Blues Hockey Club from 1983 to 1986; and Managing Director of the Vancouver Canadians Baseball Club, Pacific Coast League from 1979 to 1980.

Mr. Parrott has been a Director of the Company since June 1997; Consultant to the Company from November 1998 to present; Chief Executive Officer and Director, On Stage Entertainment (entertainment production company) since October 2000, President, October 2000 to January 2002; Chairman of the Board and Chief Executive Officer, Boomtown, Inc. (Boomtown) (gaming operations) from September 1992 to October 1998; President and Treasurer, Boomtown from June 1987 to September 1992; Director, Boomtown from 1987 to October 1998; Chairman of the Board and Chief Executive Officer, Boomtown Hotel & Casino, Inc. since May 1988; Chief Executive Officer, Parrott Investment Company (a family-held investment company with agricultural interests in California) since April 1995; and Director, The Chronicle Publishing Company since April 1995.

Mr. Reitnouer has been a Director of the Company since 1991; Director, Hollywood Park Operating Company from September 1991 to January 1992; Partner, Crowell Weedon & Co. (stock brokerage) since 1969; Director and Chairman of the Board, COHR, Inc. from 1986 to 1999; Director and Chairman, Forest Lawn Memorial Parks Association since 1975; and Trustee, University of California Santa Barbara Foundation (and former Chairman) since 1992.

Mr. Torguson has been a Director of the Company since October 1998 and a consultant to the Company from October 2001 to present; Chairman of the Board, Casino Magic Corp. (Casino Magic) (gaming operations) since 1994; President and Chief Executive Officer, Casino Magic from April 1992 through November 1994; Chief Financial Officer and Treasurer, Casino Magic from April 1992 to February 1993; 50% owner and a Vice President, G.M.T. Management Co. (casino management and operations) from December 1983 to December 1994; and private investor. See the discussion below under the heading “Actions by Greek Authorities” regarding the conviction in absentia of Mr. Torguson under Greek law and the Company’s belief that Mr. Torguson was improperly named in the proceeding.

Mr. Hundley has served as the Company’s Executive Vice President and Chief Operating Officer since September 2001; Executive Vice President and Office of the CEO, Harveys Casino Resorts (gaming operations) from December 2000 through July 2001; Principal, Colony Capital (private equity investment), June 1993 through November 2000.

Mr. Finnigan has served as the President and Chief Executive Officer of Realty Investment Group, Inc., a wholly-owned subsidiary of the Company which conducts all of the Company’s real estate business and related development activities, since December 1998; Chief Financial Officer and Executive Vice President of the Company and Hollywood Park Operating Company from March 1989 to March 31, 1999; President, Sports and Entertainment, from January 1996 to December 1998; President, Gaming and Entertainment, from February 1994 to January 1996; Treasurer of the Company and Hollywood Park Operating Company from March 1992 to March 31, 1999; Chairman of the Board, Southern California Special Olympics since 1996; Chairman of the Board, Centinela Hospital since 1996; and Director, Shoemaker Foundation from 1993 to 2001.

Mr. Hinckley joined the Company in February 1999 and has served as its Chief Financial Officer, Senior Vice President and Treasurer since April 1, 1999; Executive Vice President, Chief Financial Officer and Secretary, Iwerks Entertainment, Inc. (movie simulation theaters) from September 1996 to February 1999; financial consultant from September 1995 to September 1996; and Vice President, Controller and Chief Accounting Officer, Caesars World, Inc. (casino and hotel company) from November 1985 to September 1995. Mr. Hinckley is a certified public accountant.

Mr. Ostrow joined the Company in January 1999 and has served as its Senior Vice President, Secretary and General Counsel since January 1, 1999; General Counsel, Horseshoe Gaming (gaming operations) from January 1996 through December 1998; Senior Vice President, KII—Pasadena, Inc. (real estate and casino consulting) from December 1988 to December 1998; and Senior Vice President, KOAR International, Inc. (real estate and casino consulting) from 1991 to 1997.

Mr. R.D. Hubbard, a former director and Chairman of the Board of the Company, resigned from his position as Chairman effective April 10, 2002 and resigned as a director effective April 26, 2002. Mr. Robert T. Manfuso, a former director of the Company, resigned effective April 29, 2002. Mr. Paul R. Alanis, a former director, Chief Executive Officer and President of the Company, resigned effective April 10, 2002.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of reports furnished to the Company during or with respect to the year ended December 31, 2001 pursuant to Rule 16a-3(e) of the Exchange Act, all required reports on Form 3, Form 4 and Form 5 were timely filed by the Company’s directors, officers and 10% stockholders, except that Mr. Miller failed to file on a timely basis one Form 4 with respect to one acquisition of 3,000 shares of Pinnacle Common Stock.

Actions by Greek Authorities

In 1995, a subsidiary of Casino Magic Corp., which we refer to as “CME,” performed management services for Porto Carras Casino, S.A., which we refer to as “PCC,” a joint venture in which CME had a minority interest. Effective December 31, 1995, CME, with the approval of PCC, assigned its interests and obligations under the PCC management agreement to a Greek subsidiary, Casino Magic Hellas S.A., which we refer to as “Hellas.” Hellas issued invoices to PCC for management fees which accrued during 1995, but had not been billed by CME.

In September 1996, local Greek tax authorities in Thessaloniki assessed a penalty of approximately $3.5 million against Hellas, and an equal amount against PCC, arising out of the presentation and payment of the invoices. The Thessaloniki tax authorities asserted that the Hellas invoices were fictitious, representing an effort to reduce the taxable income of PCC.

PCC and Hellas each appealed their respective assessments. The assessment of the fine against PCC was overturned by the Administrative Court of Thessaloniki on December 11, 2000. The court determined that the actions taken by Hellas and PCC were not fictitious but constituted a legitimate business transaction and accordingly overturned the assessment of the fine.

Hellas’s appeal was dismissed for technical procedural failures and has not been reinstated; presumably, however, the rationale of the court in the PCC fine matter would apply equally to Hellas, assuming the court’s decision is upheld on appeal (see below).

During the first quarter of 2001, the Greek taxing authorities appealed the December 11, 2000 decision by the Administrative Court of Thessaloniki overturning the assessment of the fine against PCC. No hearing date on such appeal has been set.

Under Greek law, shareholders are not liable for the liabilities of a Greek company in which they hold shares, even if the entity is later liquidated or dissolved, and assessments such as the PCC and Hellas fines generally are treated as liabilities of the company. Additionally, all of PCC’s stock was sold to an unrelated company in December of 1996, and the buyer assumed all of PCC’s liabilities. Therefore, management does not expect that this matter will have a materially adverse effect on our financial condition or results of operations.

In June 2000, Greek authorities issued a warrant to appear at a September 29, 2000 criminal proceeding to Marlin Torguson (a member of our board of directors and Chairman of the Board of CME in 1995) and Robert Callaway (our former Associate General Counsel and, prior to its acquisition by us, CME’s General Counsel). They were charged under Greek law, and convicted in absentia, as being culpable criminally for corporate misconduct based solely on their status as alleged executive board members of PCC. We are advised that they are not, and have never been, managing (active) executive directors of PCC. Accordingly, we believe that they were improperly named in the proceedings. The defendants have a right of appeal for a de novo trial under Greek law.

On March 30, 2001, appeals on behalf of Mr. Torguson and Mr. Callaway were filed. A hearing before the three-member Court of Misdemeanors of Thessaloniki has been set for October 24, 2002.

We have been advised that the resolution of the related civil penalties may sometimes resolve criminal issues in Greece. We are actively working to resolve the civil and criminal actions related to this matter.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)

Documents filed as a part of this report.

The consolidated financial statements are set forth in the index to Consolidated Financial Statements attached hereto.

Financial Statement Schedule II—Valuation and Qualifying Accounts is set forth on page 84 of this report.

Exhibits

Exhibit Number		Description of Exhibit
2.1		Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP Acquisition, Inc. and Boomtown, Inc., dated April 23, 1996, is hereby incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed May 3, 1996.
2.2		Agreement and Plan of Merger, dated as of February 19, 1998, among Casino Magic Corp., Hollywood Park, Inc. and HP Acquisition II, Inc., is hereby incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed February 26, 1998.
2.3		Agreement and Plan of Merger, dated as of April 17, 2000, among Pinnacle Entertainment, Inc., PH Casino Resorts, Inc., and Pinnacle Acquisition Corporation, is hereby incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed May 1, 2000.
2.4		Letter Agreement dated August 22, 2000, among Pinnacle Entertainment, Inc., PH Casino Resorts, Inc., and Pinnacle Acquisition Corporation, is hereby incorporated by reference to Annex A1 to the Company’s Definitive Proxy Statement filed August 23, 2000.

Exhibit Number		Description of Exhibit
2.5		Second Amendment to Agreement and Plan of Merger, dated as of September 15, 2000, among Pinnacle Entertainment, Inc., PH Casino Resorts, Inc., and Pinnacle Acquisition Corporation, is hereby incorporated by reference to Annex A to the Company’s Proxy Statement Supplement filed September 19, 2000.
2.6		Letter Agreement dated January 22, 2001, among Pinnacle Entertainment, Inc., PH Casino Resorts, Inc., and Pinnacle Acquisition Corporation, terminating the PHCR Merger Agreement, is hereby incorporated by reference from Exhibit (d)(8) to Amendment No. 7 to the Schedule 13E-3 filed January 25, 2001 by Pinnacle Entertainment, Inc., R.D. Hubbard, G. Michael Finnigan, Paul R. Alanis, J. Michael Allen, Loren S. Ostrow, Bruce C. Hinckley, PH Casino Resorts, Inc., Harveys Casino Resorts and Colony HCR Voteco, LLC.
3.1		Certificate of Incorporation of Hollywood Park, Inc., is hereby incorporated by reference to Exhibit 3.1 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.2		Restated By-laws of Hollywood Park, Inc. are hereby incorporated by reference to Exhibit 3.2 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.3		Certificate of Ownership and Merger, dated February 23, 2000, merging Pinnacle Entertainment, Inc. into Hollywood Park, Inc., is hereby incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K filed March 29, 2000.
3.4		Articles of Incorporation of HP/Compton, Inc., are hereby incorporated by reference to Exhibit 3.9 to the Company’s Amendment No. 1 to Form S-4 Registration dated October 30, 1997.
3.5		By-laws of HP/Compton, Inc., are hereby incorporated by reference to Exhibit 3.10 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.6		Articles of Organization of Crystal Park Hotel and Casino Development Company, LLC, are hereby incorporated by reference to Exhibit 3.11 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.7		Operating Agreement of Crystal Park Hotel and Casino Development Company, LLC, are hereby incorporated by reference to Exhibit 3.12 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.8		Restated Articles of Incorporation of Turf Paradise, Inc., are hereby incorporated by reference to Exhibit 3.13 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.9		By-laws of Turf Paradise, are hereby incorporated by reference to Exhibit 3.14 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.10		Certificate of Incorporation of HP Yakama, Inc., is hereby incorporated by reference to Exhibit 3.15 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.11		By-laws of HP Yakama, Inc., are hereby incorporated by reference to Exhibit 3.16 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.12		Amended and Restated Certificate of Incorporation of Boomtown, Inc., is hereby incorporated by reference to Exhibit 3.17 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.13		By-laws of Boomtown, Inc., are hereby incorporated by reference to Exhibit 3.18 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.14		Certificate of Amended and Restated Articles of Incorporation of Boomtown Hotel & Casino, Inc., are hereby incorporated by reference to Exhibit 3.19 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.15		Revised and Restated By-laws of Boomtown Hotel & Casino, Inc., are hereby incorporated by reference to Exhibit 3.20 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.

Exhibit Number		Description of Exhibit
3.16		Articles of Incorporation of Bayview Yacht Club, Inc., are hereby incorporated by reference to Exhibit 3.21 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.17		By-laws of Bayview Yacht Club, Inc., are hereby incorporated by reference to Exhibit 3.22 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.18		Certificate of Mississippi Limited Partnership of Mississippi—I Gaming, L.P., are hereby incorporated by reference to Exhibit 3.23 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.19		Amended and Restated Agreement of Limited Partnership of Mississippi—I Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31 to the Company’s Quarterly Report on Form 10-Q for quarter ended June 30, 1997.
3.20		Articles of Incorporation of Louisiana Gaming Enterprises, Inc., are hereby incorporated by reference to Exhibit 3.25 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated October 30, 1997.
3.21		Second Amended and Restated Partnership Agreement of Louisiana—I Gaming, a Louisiana Partnership in Commendam, is hereby incorporated by reference to Exhibit 3.26 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.22		Certificate of Incorporation of HP Yakama Consulting, Inc., is hereby incorporated by reference to Exhibit 3.27 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.23		By-laws of HP Yakama Consulting, Inc., are hereby incorporated by reference to Exhibit 3.28 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.24		Articles of Incorporation of Casino Magic Corp., are hereby incorporated by reference to Exhibit 3.29 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.25		Amended By-laws of Casino Magic Corp., are hereby incorporated by reference to Exhibit 3.30 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.26		Articles of Incorporation of Casino Magic American Corp., are hereby incorporated by reference to Exhibit 3.31 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.27		By-laws of Casino Magic American Corp., are hereby incorporated by reference to Exhibit 3.32 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.28		Articles of Incorporation of Biloxi Casino Corp., are hereby incorporated by reference to Exhibit 3.33 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.29		By-laws of Biloxi Casino Corp., are hereby incorporated by reference to Exhibit 3.34 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.30		Articles of Incorporation of Casino Magic Finance Corp., are hereby incorporated by reference to Exhibit 3.35 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.31		By-laws of Casino Magic Finance Corp., are hereby incorporated by reference to Exhibit 3.36 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.32		Articles of Incorporation of Casino One Corporation, are hereby incorporated by reference to Exhibit 3.37 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.33		By-laws of Casino One Corporation, are hereby incorporated by reference to Exhibit 3.38 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.34		Articles of Incorporation of Bay St. Louis Casino Corp., are hereby incorporated by reference to Exhibit 3.39 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.

Exhibit Number		Description of Exhibit
3.35		By-laws of Bay St. Louis Casino Corp., are hereby incorporated by reference to Exhibit 3.40 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.36		Articles of Incorporation of Mardi Gras Casino Corp., are hereby incorporated by reference to Exhibit 3.41 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.37		By-laws of Mardi Gras Casino Corp., are hereby incorporated by reference to Exhibit 3.42 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.38		Articles of Incorporation of Boomtown Hoosier, Inc., are hereby incorporated by reference to Exhibit 3.43 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.39		By-laws of Boomtown Hoosier, Inc., are hereby incorporate by reference to Exhibit 3.44 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.40		Articles of Organization of Indiana Ventures, LLC (subsequently renamed Belterra Resort Indiana, LLC), are hereby incorporated by reference to Exhibit 3.45 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.41		Operating Agreement of Indiana Ventures, LLC (subsequently renamed Belterra Resort Indiana, LLC), is hereby incorporated by reference to Exhibit 3.46 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.42		Articles of Incorporation of HP Casino, Inc., are hereby incorporated by reference to Exhibit 3.51 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.43		By-laws of HP Casino, Inc., are hereby incorporated by reference to Exhibit 3.52 to the Company’s Amendment No. 1 to Form S-4 Registration Statement dated March 26, 1999.
3.44		Articles of Incorporation of Casino Magic of Louisiana, Corporation are hereby incorporated by reference to Exhibit 3.44 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.

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