4. Investment in Eldorado

On December 14, 2007, the Company effectively acquired its Eldorado Interest by transferring the Eldorado-Shreveport Investments in part to Eldorado Resorts, LLC ("Resorts") and the balance to Donald L. Carano ("Carano"), free and clear of any liens. The Eldorado-Shreveport Investments included first mortgage bonds due 2012 (the "Mortgage Bonds") and 11,000 preferred shares of a partner of the co-issuer of the Mortgage Bonds. The Mortgage Bonds were co-issued by Eldorado Casino Shreveport Joint Venture (the "Louisiana Partnership") and Shreveport Capital Corporation, a wholly-owned subsidiary of the Louisiana Partnership (the "New Shreveport Notes"). The original principal amount of the Mortgage Bonds was $38,045,363. The 11,000 preferred shares were issued by Shreveport Gaming Holdings, Inc. ("SGH"), then a partner of the Louisiana Partnership, that is not affiliated with Resorts or the Company. Previously in May 2007, NGOF had contributed the Eldorado-Shreveport Investments to the Company at the estimated fair value of such investments as of that date. Effective April 1, 2009, Resorts became a wholly-owned subsidiary of Eldorado when all of the members of Resorts, including AcquisitionCo, exchanged their interests in Resorts for identical interests in Eldorado. Approximately 85% of the Company's Eldorado Interest was acquired directly from Resorts and the balance from Carano, 14.47% and 2.5659%, respectively.

The Company's interest in Eldorado was recorded at estimated fair value based on the quoted market price of the Eldorado-Shreveport Investments ($38,314,863) on the acquisition date. Such value exceeded 17.0359% of the carrying (or book) value of Resorts' equity by approximately $14.8 million. The Company attributed $16.1 million of its $38.3 million acquisition price to intangible assets, $15.4 million to indefinite-lived intangibles assets and $760,000 to definite-lived intangibles assets. Subsequently, the Company has adjusted its equity in the net income (loss) of Eldorado by amortization of the excess purchase price attributed to the definite-lived intangibles, approximately $108,000 annually using an estimated economic life of seven years.

The Company acquired its interest in Eldorado pursuant to the terms and conditions of a purchase agreement, dated July 20, 2007. The parties to the agreement were Resorts, AcquisitionCo, and Carano, now the presiding member of Eldorado's board of managers and the chief executive officer of Eldorado who then held the same positions with Resorts. Carano or members of his family continue to own directly or indirectly approximately 51% of Eldorado.

Eldorado's five member board of managers is composed of individuals designated by the parties to the purchase agreement, including one member to be designated by AcquisitionCo, currently Timothy T. Janszen. Members of the board of managers are required to be licensed or found suitable by the relevant Nevada and Louisiana gaming authorities.

As a limited liability company, Eldorado is generally not subject to federal income taxes and its members are required to include their respective shares of Eldorado's taxable income in their respective income tax returns. Eldorado's operating agreement provides that the board of managers will distribute each year to each member an amount equal to such member's allocable share of taxable income multiplied by the highest marginal combined federal, state, and local income tax rate applicable to the members for that year.

Changes in the Company's investment in Eldorado during the years ended December 31, 2011 and 2010 are as follows:


	December 31,
	2011			2010
Balance, beginning of year	$	28,197,330		$	29,328,577
Equity in net loss of Eldorado		(4,233,314	)		(1,131,247	)
Distributions received from Eldorado		(235,641	)		—
Eldorado's adoption of ASU 2010-16		133,561			—

Balance, end of year	$	23,861,936		$	28,197,330

We evaluated our investment in Eldorado for possible impairment as of December 31, 2011 and December 31, 2010 and determined that no impairment existed. Impairment charges prior to 2010 have totaled approximately $3.6 million.

The following tables present condensed financial information of Eldorado as of December 31, 2011 and 2010, and for the years then ended (in thousands). Certain reclassifications, which had no effect on the previously reported net income (loss) of Eldorado, have been made to Eldorado's 2010 consolidated statements of operations to conform to its 2011 presentation. Pursuant to guidance in the "Audit and Accounting Guide – Gaming" recently issued by the American Institute of Certified Public Accountants (the "AICPA"), Resorts reclassified amounts paid under its slot participation agreements from casino revenues to casino expenses and reclassified amounts paid under its cash coupons from casino expenses to casino revenues. The total amount reclassified for the year ended December 31, 2010 was $7,764,000. Additionally, Eldorado's management identified errors in the classification of certain casino expenses and selling, general and administrative expenses which were recorded within food, beverage and entertainment, hotel and other operating expenses. Management determined that Eldorado Shreveport had not allocated the estimated cost of complimentary services to be charged to the casino department from the food, beverage and entertainment, hotel and other operations departments on a consistent basis with other properties operated by Resorts.


	2011		2010
Balance Sheets
Current assets	$	39,533	$	57,747
Investment in unconsolidated affiliates		5,213		42,994
Property and equipment, net		198,728		209,996
Other assets, net		28,795		22,906

Total assets	$	272,269	$	333,643

Current liabilities	$	27,153	$	27,685
Long-term liabilities		179,093		210,053
Equity		66,023		95,905

Total liabilities and partners' equity	$	272,269	$	333,643


	2011			2010
Statements of Operations
Net revenues	$	256,072		$	254,858
Operating expenses		(232,265	)		(235,816	)
Loss on sale/disposition of long-lived assets		(120	)		(266	)
Equity in losses of unconsolidated affiliates		(3,695	)		(3,899	)
Impairment of investment in joint venture		(33,066	)		—

Operating (loss) income		(13,074	)		14,877
Other expense		(15,946	)		(21,064	)

Net loss		(29,020	)		(6,187	)
Net loss attributable to non-controlling interest		4,807			183

Net loss attributable to Eldorado	$	(24,213	)	$	(6,004	)

The following tables present condensed financial information of one of Eldorado's unconsolidated investees, the Silver Legacy Joint Venture, as of December 31, 2011 and 2010, and for the years then ended (in thousands). Certain reclassifications, which had no effect on the previously reported net income (loss) of Silver Legacy, have been made to Silver Legacy's 2010 consolidated statements of operations to conform to its 2011 presentation. Pursuant to guidance in the "Audit and Accounting Guide—Gaming" recently issued by the American Institute of Certified Public Accountants (the "AICPA"), Silver Legacy reclassified amounts paid under its slot participation agreements from casino revenues to casino expenses. The total amount reclassified for the year ended December 31, 2010 was $0.9 million.


	December 31,
	2011		2010
Balance Sheets
Current assets	$	42,504	$	38,817
Property and equipment, net		217,038		229,119
Other assets, net		6,979		7,315

Total assets	$	266,521	$	275,251

Current liabilities	$	160,598	$	18,510
Long-term liabilities		10,081		150,911
Partners' equity		95,842		105,830

Total liabilities and partners' equity	$	266,521	$	275,251


	2011			2010
Statements of Operations
Net revenues	$	122,855		$	121,531
Operating expenses		(117,072	)		(116,141	)

Operating income		5,783			5,390
Other expense		(15,045	)		(14,984	)

Net loss	$	(9,262	)	$	(9,594	)