Basis of Presentation and Summary of Significant Accounting Policies

Basis of Accounting and Presentation

The interim financial statements presented herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Commission applicable to interim financial information. Certain information and disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods have been made (consisting of normal recurring adjustments). Results of operations for the current interim periods are not necessarily indicative of results to be expected for the full fiscal year. All significant intercompany accounts and transactions have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Commission on May 29, 2013, from which the balance sheet information as of February 28, 2013 was derived.

Investments in Eldorado and Mesquite (Notes 4 and 5) are accounted for using the equity method of accounting. Accordingly, the Company measures all of its assets and liabilities on the historical cost basis of accounting except as required by GAAP. Such assets are evaluated at least annually (and more frequently when circumstances warrant) to determine if events or changes in circumstances indicate that the carrying value may not be recoverable. Examples of such events or changes in circumstances that might indicate impairment might include an adverse change in the legal, regulatory or business climate relative to gaming nationally or in the jurisdictions in which the Company’s investees operate, or a significant long-term decline in historical or forecasted earnings or cash flows of an investee or the fair value of its property or business, possibly as a result of competitive or other economic or political factors.

When estimated future undiscounted cash flows appear to be insufficient to recover the Company's investment in its investees, the Company considers whether the carrying value of its investments are less than their respective estimated fair value, which is estimated using a discounted cash flow approach based on Level 3 inputs as defined by GAAP. The Company’s valuation model incorporates an estimated weighted-average cost of capital (effectively, a discount rate) and terminal value multiples that are used by market participants. The estimated weighted-average cost of capital is based on the risk free interest rate at the time, adjusted for specific risk factors. The Company also considers the metrics of specific business transactions that may be comparable to varying degrees. The weight assigned to these approaches to value in the Company’s impairment evaluation may vary from period to period depending upon evolving events. Forecasted prospective financial information used in the model is based on management’s expected course of action. Sensitivity analysis is performed related to key assumptions used, including possible variations in the weighted-average cost of capital and terminal value multiples, among others.

In evaluating whether a loss in value is other than temporary, the Company considers: (1) the length of time and the extent to which the fair value has been less than cost; (2) the financial condition and near-term prospects of the investee, including any specific events which may influence the operations; (3) the Company’s intent and ability to retain its investments in the investee for a period of time sufficient to allow for any anticipated recovery in fair value; (4) the condition and trend of the economic cycle; (5) the investee’s historical and forecasted financial performance; (6) trends in the general market; and (7) the investee’s capital strength and liquidity.

Restatement

The Company's consolidated financial statements for the three and nine months ended November 30, 2013 have been restated to reflect adjustments related to its investment in Eldorado resulting from a change in Eldorado's recognition of its share of the net earnings (losses) of the Silver Legacy Joint Venture. Eldorado recognized an other than temporary impairment loss and wrote down its investment in the Silver Legacy Joint Venture to zero at December 31, 2011, and concurrently ceased the equity method of accounting and suspended recording its share of Silver Legacy Joint Venture’s losses. In connection with Silver Legacy Joint Venture’s exit from bankruptcy in November 2012, Eldorado made additional investments in the joint venture; however, the equity method of accounting was not reinitiated upon the exit from bankruptcy or at December 31, 2012 as required by the applicable accounting guidance. As such, the previously issued consolidated financial statements of Eldorado, which were relied on by the Company in preparing its quarterly report on Form 10-Q for the three and nine months ended November 30, 2013, did not properly reflect Eldorado's share of the net earnings (losses) from the joint venture after making the additional investments. The additional investments resulted in Eldorado recording losses in excess of its recorded investment in the Silver Legacy Joint Venture during the three and nine months ended September 30, 2013.

The effects of the misstatements on the Company's consolidated financial statements were to understate net income for the three and nine months ended November 30, 2013 by $0.3 million and $0.4 million respectively, and our investment in Eldorado as of that date, by approximately $1.2 million.

The following table sets forth the effects of the restatement on line items within Eldorado's previously reported consolidated financial statements as of and for the year ended December 31, 2012 (in thousands).



	September 30, 2013
	As Previously Presented		As Corrected
Balance Sheets
Current assets	$	47,159	$	47,159
Restricted cash	5,000		5,000
Investment in and advances to unconsolidated affiliate	12,888		5,388
Property and equipment, net	182,807		182,807
Other assets, net	27,516		27,516
Total assets	$	275,370	$	267,870

Current liabilities	$	31,370	$	31,370
Other liabilities	169,458		169,775
Equity	74,542		66,725
Total liabilities and partners' equity	$	275,370	$	267,870



	Three Months Ended September 30, 2013				Nine Months Ended September 30, 2013
	As Previously Presented		As Corrected		As Previously Presented		As Corrected
Statements of Operations
Net operating revenues	$	63,631	$	63,631	$	191,638	$	191,638
Operating income	$	5,214	$	7,092	$	21,002	$	23,617
Net income (loss) all attributable to Eldorado	$	1,306	$	3,184	$	9,204	$	11,819

Use of estimates

Timely preparation of financial statements in accordance with the rules and regulations of the Commission requires management to make estimates that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. Management estimates that the Company will eventually sell its investments in unconsolidated investees following an expected economic recovery at a price sufficient to realize the carrying value of the Company’s assets which estimates are subject to material variation.