10-K 1 a2016-12x3110k.htm 10-K Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
(Mark One)
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2016
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from                          to                          .
Commission file number 000-53831
 
TROPICANA ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
Delaware
 
27-0540158
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. Employer
Identification No.)
8345 W. Sunset Road, Suite 300, Las Vegas, Nevada 89113
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: 702-589-3900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer x
 
Non-accelerated filer o (Do not check if a smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o
The aggregate market value of the common stock held by non-affiliates (all persons other than executive officers or directors) of the registrant as of June 30, 2016, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $160.5 million based on the closing sales price of $19.50 per share of such stock on the OTCQB Market on June 30, 2016. As of February 23, 2017, there were 24,634,512 shares of the Registrant's common stock, $0.01 par value per share, outstanding.
Documents Incorporated by Reference
Portions of the registrant's Proxy Statement for its 2017 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference into Part III, Items 10, 11, 12, 13 and 14, of this Form 10-K.
 




TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act). These statements involve known and unknown risks, uncertainties and other factors, which may cause our or our industry's actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding our expectations, hopes or intentions regarding the future, including but not limited to statements regarding our operating or other strategic plans, including our management of the Taj Mahal (which was closed in October 2016), our competition (including online gaming), financing, revenues, or tax benefits; our beliefs regarding the sufficiency of our existing cash and credit sources, including our Credit Facilities (as defined herein) and cash flows from operating activities to meet our projected expenditures (including operating and maintenance capital expenditures) and costs associated with certain of our projects over the next twelve months; our required capital expenditures pursuant to agreements we are party to, such as the landside construction project at Tropicana Evansville, and our anticipated capital expenditures, including our use of our CRDA project funds, estimated asset and liability values; risk of counterparty nonperformance; our legal strategies and the potential effect of pending legal claims on our business and financial condition; and any financial or other information included herein based upon or otherwise incorporating judgments or estimates based upon future performance or events. In some situations, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions intended to identify forward-looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of this report, as well as the risks and uncertainties discussed elsewhere in this report. We qualify all of our forward-looking statements by these cautionary statements. We caution you that these risks are not exhaustive. We operate in a continually changing business environment and new risks emerge from time to time.



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PART I
ITEM 1.    BUSINESS.
Unless the context indicates otherwise, or unless specifically stated otherwise, references to the "Company," "TEI," "we," "our" and "us" refer to Tropicana Entertainment Inc. and its subsidiaries.
Introduction
We are an owner and operator of regional casino and entertainment properties located in the United States and one hotel, timeshare and casino resort property located on the island of Aruba. We also provide management services to the Taj Mahal Casino Hotel property in Atlantic City ("Taj Mahal"), which is a related party to the Company, that was closed in October 2016. Our United States properties include two casinos in Nevada and one casino in each of Indiana, Louisiana, Mississippi, Missouri and New Jersey. We primarily cater to local and regional guests to provide a fun and exciting gaming environment with high quality and high value lodging, dining, retail and entertainment amenities. Our properties offer a broad array of gaming options specifically tailored for our patrons in each market.
The following chart summarizes certain features of our properties as of December 31, 2016:
Name
 
Location
 
Casino
Square
Footage
 
Slot
Machines (a)
 
Table
Games (b)
 
Hotel
Rooms
East
 
 
 
 
 
 
 
 
 
 
Tropicana AC
 
Atlantic City, NJ
 
124,800

 
2,291

 
110

 
2,047

Central
 
 
 
 
 
 
 
 
 
 
Tropicana Evansville
 
Evansville, IN
 
38,400

 
1,040

 
30

 
339

Lumière Place
 
St. Louis, MO
 
75,000

 
1,598

 
50

 
494

West
 
 
 
 
 
 
 
 
 
 
Tropicana Laughlin
 
Laughlin, NV
 
53,700

 
969

 
18

 
1,487

MontBleu
 
South Lake Tahoe, NV
 
45,000

 
489

 
28

 
438

South
 
 
 
 
 
 
 
 
 
 
Belle of Baton Rouge
 
Baton Rouge, LA
 
28,500

 
777

 
14

 
288

Tropicana Greenville
 
Greenville, MS
 
22,800

 
610

 
12

 
40

Tropicana Aruba
 
Palm Beach, Aruba
 
4,000

 
130

 
5

 
362

 
 
 
 
392,200

 
7,904

 
267

 
5,495

______________________________________________________________________________
(a)
Includes slot machines, video poker machines and other electronic gaming devices.
(b)
Includes blackjack ("21"), craps, roulette and other table games; does not include poker tables.
Our Strengths
Focus on Regional Gaming Markets in Favorable Jurisdictions. Our properties primarily serve local and regional markets. We believe that regional gaming markets have been less volatile than destination gaming markets, which rely on air travel for their patronage. Our properties are primarily located in significant drive-in gaming markets, which allows our casino patrons to reach us in short travel times and make repeated trips to our gaming facilities. In order to meet the specific needs of local and regional customers, we tailor our gaming and entertainment experience to offer our customers a high quality product at a compelling price point.
Diversity in Geography and Product Offerings.    We operate both land-based and dockside gaming facilities in several of the largest commercial gaming markets in the United States. In addition, we currently operate a small casino at our resort property on the Caribbean island of Aruba. Because our facilities are geographically diversified, we are not subject to reliance on any single gaming market, which we believe mitigates the impact of potential market cycles. The majority of our gaming facilities offer multi-denominational, state-of-the-art slot machines as well as a full range of table games and betting minimums and limits, catering to a wide range of potential customers. We also offer internet gaming to our customers located within New Jersey. Our casino properties include hotel rooms, which both diversifies our revenue base and helps extend the average length of our patrons' stays at our facilities. We also offer timeshare intervals for sale at our Aruba property. Additionally, our

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customers enjoy a strong breadth of product offerings at our facilities, including restaurants, nightclubs, bars, retail stores and entertainment venues, which further diversifies our sources of revenue and offers our customers attractive non-gaming entertainment options.
The Company, through our wholly-owned subsidiary TEI Management Services LLC, also provides management services to the Taj Mahal, a related party, which closed its casino and hotel on October 10, 2016. In addition, the Company, through our wholly-owned subsidiary TropWorld Games LLC, operates an online social gaming website.
Emphasis on Slot Play.    We emphasize slot machine wagering, which we believe is typically both the highest margin and most predictable component of the gaming industry. Slot machines do not have the staffing requirements of table games nor do they have the variation in hold percentages that characterize the table game component of the casino business. We believe this affords us a more stable and predictable revenue base, as well as the potential for more consistent margins.
Committed Sponsorship.    Icahn Enterprises L.P. ("Icahn Enterprises"), the beneficial owner of approximately 72.5% of our common stock, has demonstrated a history of successfully acquiring assets and improving and enhancing such assets' operations. Its investment record is based on a long-term investment horizon that enhances business value. Our management continues to work closely with Icahn Enterprises to identify immediate and long-term strategic and operational improvements.
Our Strategies
Offer A Fun and Exciting Experience at Good Value.    We believe our facilities provide our guests with an attractive price-to-value relationship by offering an exciting gaming atmosphere in attractive surroundings. We seek to apply this positioning across our gaming and related amenities while maintaining attentive and friendly guest service. We also emphasize professional and courteous attitudes consistent with our high hospitality standards. By communicating our value proposition to customers through our marketing programs and their experiences at our properties, we believe we distinguish ourselves from our competition.
Leverage Brand Awareness and Customer Loyalty.    Tropicana is a longstanding and recognizable brand in the gaming industry. We continuously strive to identify marketing and promotion innovations that strengthen brand awareness and improve customer flow. Trop Advantage, our player loyalty card program, offers customers discounts and other benefits across our properties. We also utilize strategically targeted direct mail and social media marketing programs to enhance brand loyalty with current customers and attract new patrons to our properties.
Continue Execution of Operational Improvements and Cost Saving Opportunities.    We have implemented a number of capital investment programs and operational "best practices" aimed at growing revenue, improving margins at our properties, and reducing overhead expenses. Our analytical approach to operating our properties and in-depth research of gaming operations have allowed us to identify further cost saving opportunities across our portfolio of assets. Most of these savings do not impact customer service but rather involve a more efficient use of resources. These changes include development of a database and campaign manager system, centralizing purchasing to reduce costs, consolidating and streamlining back office operations, including utilizing third parties for certain services and reconfiguring gaming floor layouts and optimizing table game rules to increase hold and win.
Pursue Appropriate Expansion Opportunities.    Our primary focus has been the stabilization and growth of revenues in competitive gaming markets, implementation of operational improvements, the renovation of our existing properties and development of new strategic business initiatives. We also consider expansion opportunities in new gaming jurisdictions and underserved markets and acquisition opportunities and other strategic transactions that may arise periodically. For example, in 2014 we acquired Lumière Place Casino and Hotels in St. Louis, Missouri ("Lumière Place") and in 2015 we launched a social gaming website, TropWorld.com, utilizing a social gaming platform developed and operated by a third party.
Properties and Segments
The Company views each casino property as an operating segment which is aggregated by region in order to present our reportable segments: (i) East, (ii) Central, (iii) West and (iv) South. The operating results of all other subsidiaries of the Company, such as TEI Management Services LLC and TropWorld Games LLC, are reported under the heading of "Corporate and other," as they have been determined to not meet the aggregation criteria of separately reportable segments. The following describes each of our properties by region.

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East
Tropicana AC
Tropicana Casino and Resort, Atlantic City ("Tropicana AC") is situated on a 14-acre site with approximately 660 feet of ocean frontage in Atlantic City, New Jersey. The Atlantic City market generated gaming revenues of approximately $2.5 billion in 2016. Located within driving distance from the densely populated New York-to-Washington D.C. corridor, the Atlantic City market attracts customers within a 300-mile radius, which includes approximately 48 million adults. Tropicana AC is one of the larger properties in Atlantic City featuring 2,047 hotel rooms in four towers and approximately 124,800 square feet of gaming space. In addition to the hotel rooms and gaming facilities, the property features The Quarter, a Havana-themed, Las Vegas-style, approximately 200,000 square-foot indoor entertainment and retail center, hosting several restaurants, nightclubs, shops and an IMAX theatre. Other amenities include a 2,000-seat showroom, an up-scale Disco themed nightclub, a full service spa and salon, a health club and indoor pool, a beach and pool bar and approximately 99,000 square feet of meeting and convention space. In 2016, Tropicana AC completed an approximate $20 million improvement project, which included the renovation of hotel rooms in the Havana Tower, a new high-end slot area on the casino floor, a new hair salon, a convenience store and a promotional area for our Trop Advantage players' club. Tropicana AC is currently completing construction of three new Jose Garces-themed restaurants at a projected aggregate cost of $8 million expected to open in early 2017. In 2015, we completed an approximate $35 million renovation project, which included remodeling the North hotel tower guest rooms, renovation of the casino, restaurant renovations, a new health club operated by a third party operator, new retail outlets and exterior renovations including painting and new lighting. The 2015 renovations also included a multimedia light and sound show on the boardwalk. Since November 2013, Tropicana AC has been operating continuous, 24-hour Internet gaming on its online gaming site, www.TropicanaCasino.com. Tropicana Atlantic City Online showcases a variety of slot game options and classic casino table games. Players have the opportunity to participate in community jackpots and to be rewarded with both on-property and online incentives and have the chance to participate in a variety of promotions. All participants must be 21 or older and physically located in New Jersey to play.
Central
Tropicana Evansville
Tropicana Evansville ("Tropicana Evansville") is a large casino hotel and entertainment complex, and a popular attraction in Evansville, the third largest city in the state of Indiana. The property serves customers in the tri-state region of southern Indiana, southeastern Illinois and western Kentucky and is the only full service casino within an 85-mile radius, an area with approximately 1.2 million adults. Approximately 60% of Tropicana Evansville's revenues come from customers within a 50-mile radius. The property's casino operations are located dockside on the three-deck "City of Evansville" riverboat. Across the street from the casino and directly connected to it via pedestrian bridges, we own two distinctive hotels: the Tropicana Evansville Hotel, a 243-room hotel that underwent a significant room renovation in 2012 and offers guests a restaurant, conference rooms and banquet facilities; and Le Merigot Hotel, a luxurious 96-room boutique hotel with an upscale lounge. A 44,000-square-foot pavilion adjacent to the riverboat features a fine dining restaurant, two casual dining restaurants, an entertainment lounge, gift shop, coffee shop and players' club. The District at Tropicana Evansville, a $33 million entertainment complex that opened in late 2006, currently includes a restaurant, the Le Merigot Hotel and banquet/event space, along with an additional parking lot for our Le Merigot Hotel guests. Tropicana Evansville also includes a seven-story parking garage as well as surface parking.
In July 2016, the Company commenced development of a landside gaming facility at Tropicana Evansville that is expected to open in late 2017 or early 2018. The facility will encompass 75,000 square feet of enclosed space (including approximately 45,000 square feet of casino floor, additional food and beverage outlets and back of house space), at an estimated cost of $50 million.
Lumière Place Casino
Lumière Place is located on approximately 20 acres, located in historic downtown St. Louis, Missouri near business and entertainment districts and overlooks the Mississippi River. Its location provides significant foot traffic from nearby venues, including The Dome at America's Center, a multi-purpose stadium, and convention center, which are connected to Lumière Place via a pedestrian tunnel, the Gateway Arch and Busch Stadium. In addition to the casino, the Lumière Place complex includes the 294 all-suites HoteLumière, the 200-room luxury Four Seasons Hotel St. Louis, 3 full service restaurants, retail shops, indoor pool and fitness center, full service spa and 28,000 square feet of meeting and convention space. The suites in HoteLumière are currently undergoing a major renovation project which commenced in July 2016 and is expected to be completed in early 2017, at a cost of approximately $12 million.

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West
Tropicana Laughlin
Tropicana Laughlin Hotel and Casino ("Tropicana Laughlin") is located on an approximately 31-acre site on Casino Drive, Laughlin, Nevada's principal thoroughfare. In addition, we own approximately 57 acres of undeveloped real estate immediately adjacent to Tropicana Laughlin. The property attracts customers who drive in from southern California and Arizona. Tropicana Laughlin primarily targets customers in this market who are seeking great value, a breadth of amenities and friendly service in their gaming, lodging, dining and entertainment experiences. Non-gaming amenities include 1,487 hotel rooms, a heated outdoor swimming pool, seven restaurants, three full service bars, an entertainment lounge with live music, a premium lounge for high-end players, an 800-seat multi-purpose showroom and concert hall, meeting and convention space, retail stores, an arcade and a covered parking structure.
MontBleu
MontBleu Casino Resort & Spa ("MontBleu") is situated on approximately 21 acres in South Lake Tahoe, Nevada surrounded by the Sierra Nevada Mountains. The property attracts both drive-in and destination patrons, primarily from the northern California and northern Nevada markets. The area also attracts people seeking outdoor recreational activities. In addition to the casino, the property offers guests 438 hotel rooms, a choice of three restaurants and various non-gaming amenities, including retail shops, two nightclubs, a 1,300-seat showroom, approximately 14,000 square feet of meeting and convention space, a parking garage, a full service health spa and workout area, an indoor heated lagoon-style pool with whirlpool and a 110-seat wedding chapel. An approximate $25 million property renovation project was completed in December 2015, which included remodeling of the guest rooms and most of the public areas of the property including the casino, lobby, theater, convention center, sports bar and sports book and exterior of the building.
South
Tropicana Greenville
Trop Casino Greenville ("Tropicana Greenville"), located in Greenville, Mississippi is a dockside gaming facility with slot machines and table games, two restaurants, a bar and 734 onsite parking spaces. In October 2014 we completed an expansion project consisting of approximately 12,000 square feet of gaming space, additional parking spaces and a new restaurant. The property also leases and operates the Greenville Inn & Suites, a 40-room suite hotel located less than a mile from the casino, and offers free shuttle service to and from Tropicana Greenville. The Greenville Inn & Suites are currently being renovated, with twenty of the suites to be completed in early 2017 at a cost of approximately $1.4 million.
Tropicana Greenville along with another land-based casino, are currently the only gaming facilities in the Greenville market. The property draws customers primarily from the local market and to some extent from the Little Rock, Vicksburg and Tunica markets.
Belle of Baton Rouge
Belle of Baton Rouge Casino & Hotel ("Belle of Baton Rouge") is a dockside riverboat situated on approximately 23 acres on the Mississippi River in the downtown historic district of Baton Rouge, across from the River Center, a 70,000-square-foot convention center. The three-deck, dockside riverboat casino is one of three casino facilities in the Baton Rouge market. Baton Rouge is located 75 miles north of New Orleans and is the largest city in Louisiana. Over 90% of the Belle of Baton Rouge customer base resides within a 50-mile radius of the property. Non-gaming amenities include 288 hotel rooms, 25,000 square feet of meeting space, an outdoor pool, a fitness center, one restaurant, a deli, a buffet, an entertainment venue inside a 56,000-square-foot glass atrium that also encloses a lush tropical lobby and two parking garages with 803 parking spaces.
Tropicana Aruba
Tropicana Aruba Resort & Casino ("Tropicana Aruba") is a hotel, timeshare and casino resort in Palm Beach, Aruba, that consists of 362 timeshare and rental units, and also includes a 4,000-square-foot casino that was renovated in late 2014, two pools, a fitness center and a beach tennis facility located on approximately 14 acres near Eagle Beach. The Company recently completed a $5.3 million renovation project, consisting of 74 fully remodeled rooms that are intended for use as timeshare units, including a model room, a sales center and a new access road to the property improving our guest arrival process. The newly renovated rooms are also utilized as hotel rooms when not occupied as a timeshare interval. The Company began selling timeshare intervals at the property in late 2015.

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Our Equity Owners
As of December 31, 2016, Icahn Enterprises was the beneficial owner of approximately 72.5% of the Company's Common Stock. Icahn Enterprises is a diversified holding company that owns subsidiaries engaged in a variety of businesses including investment management, automotive, gaming, metals, real estate, home fashion, railcar, energy and food packaging. Icahn Enterprises is publicly listed on the NASDAQ Global Select Market (ticker: "IEP"). Carl C. Icahn, who is the chairman of our board of directors, is also the chairman of the board of directors of the general partner of Icahn Enterprises.
Our Corporate History and Information
We are a Delaware corporation that was formed on May 11, 2009 to acquire certain assets of Tropicana Entertainment Holdings, LLC ("TEH") and certain of its subsidiaries pursuant to their plan of reorganization (the "Plan") under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). We also acquired Columbia Properties Vicksburg, LLC ("CP Vicksburg") which we later sold in March 2011, JMBS Casino, LLC ("JMBS Casino") and CP Laughlin Realty, LLC ("CP Laughlin Realty", and together with TEH and certain of its subsidiaries, CP Vicksburg and JMBS Casino, the "Predecessors"), pursuant to the Plan. In addition, we acquired certain assets of Adamar of New Jersey, Inc. ("Adamar"), an unconsolidated subsidiary of TEH, including Tropicana AC.
On May 5, 2008, the Predecessors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (the "Chapter 11 Cases") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The reorganization of the Predecessors and the acquisition of Tropicana AC (together, the "Restructuring Transactions") were consummated and became effective on March 8, 2010 (the "Effective Date"), at which time we acquired Tropicana AC and several of the Predecessors' gaming properties and related assets. Prior to the Effective Date, we conducted no business, other than in connection with the Restructuring Transactions, and had no material assets or liabilities.
Pursuant to the Plan, on the Effective Date, a series of restructuring transactions were consummated through which we acquired the Predecessors in exchange for (i) the issuance of 12,098,053 shares of our common stock, $0.01 par value per share ("Common Stock") and warrants to purchase an additional 3,750,000 shares of Common Stock (the "Ordinary Warrants") and (ii) the issuance of new debt, which included the issuance to certain lenders of warrants to purchase an additional 1,312,500 shares of our Common Stock at $0.01 per share (the "Penny Warrants" and, together with the Ordinary Warrants, the "Warrants"). As a result of the reorganization we applied fresh-start reporting. Additionally, on the Effective Date, certain of our subsidiaries acquired Tropicana AC, and the lenders under the then existing credit facility each received their pro rata share of 12,901,947 shares of our Common Stock in exchange for their $200.0 million credit bid.
Our executive offices are located at 8345 W. Sunset Road, Suite 300, Las Vegas, Nevada 89113. Our telephone number is (702) 589-3900 and our website is www.tropicanacasinos.com.
Competition
We own land-based and riverboat casino facilities in six states and one casino resort located on the island of Aruba. We compete with numerous casinos and casino hotels of varying quality and size in the markets in which our properties are located and with other forms of legalized gaming, including internet gaming, state-sponsored lotteries, racetracks, off-track wagering, video lottery, video poker terminals and card parlors. We also compete with other non-gaming resorts and vacation areas, and with various other entertainment businesses. The casino entertainment business is characterized by competitors that vary considerably by their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent and geographic diversity.
In most markets, we compete directly with other casino facilities operating in the immediate and surrounding market areas, including casinos located on Native American reservations. In some markets, we face competition from nearby markets in addition to direct competition within our market areas.
We believe competition in existing markets has intensified over the last several years, due to new markets opening for development, new properties opening in existing markets, and challenging economic conditions in certain markets. Many casino operators have invested in expanding existing facilities, developing new facilities, and acquiring established facilities in existing markets. The expansion of casino entertainment at existing properties, the increase in the number of properties and the aggressive marketing strategies of many of our competitors has increased competition in many markets in which we compete, and we expect this intense competition to continue.
Our operating results can be adversely affected by costs associated with advertising, promotions and complimentary services to patrons, the amount and timing of which may be affected by the advertising and complimentary policies and actions

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of our properties' competitors and our efforts to keep pace with them. If our operating revenues are insufficient to allow us to match the promotions of competitors, the number of our casino patrons may decline, which may have a material adverse effect on our financial performance. In addition, some of our competitors have significantly greater financial resources than we do, and as a result we may not be able to successfully compete with them in the future.
Our ability to compete successfully depends upon our ability to manage our costs and develop and implement strong and effective marketing campaigns both at our individual properties and across our business, as well as our investment in, and upgrade to, the facilities we own. To the extent we are unable to develop and implement these types of marketing initiatives and invest in and upgrade our facilities, we may not be successful in competing in our markets, which may have a material adverse effect on our financial position.
The competitive environment of each of our properties is described below by region.
East
Tropicana AC
The Atlantic City market primarily serves the New York-Philadelphia-Baltimore-Washington, D.C. corridor with nearly 48 million adults living within a 300-mile radius. Tropicana AC offers slot machines, table games and intrastate internet gaming and primarily competes with casino and gaming facilities located in Atlantic City and the north east region of the country. The following is a brief summary of competition in these markets.
Atlantic City.   Between January 2014 and October 2016, five Atlantic City casino hotels closed as a result of regional competitive market pressures and other factors. As a result of these closures, the Atlantic City gaming market experienced significant revenue declines during this period and, although Tropicana AC has increased market share as a result, in part, of the closings, the Atlantic City operating climate remains difficult. Currently, the seven remaining casino hotels located in Atlantic City, including Tropicana AC, compete with each other on the basis of customer service, quality and extent of amenities and promotional offers. For this reason, Tropicana AC and its competitors have historically incurred substantial capital expenditures and marketing expenses to compete effectively. The increased competition from neighboring jurisdictions, particularly Pennsylvania, New York, Delaware and Maryland (as discussed in more detail below), has further intensified the competition among the seven casino hotels currently operating in Atlantic City.
New Jersey law also permits a limited number of "boutique casinos" to be developed in Atlantic City. These boutique casinos would be subject to less stringent size and costs structures than those to which Tropicana AC and other existing casinos are currently subject, but would be subject to a higher gross gaming tax than non-boutique Atlantic City casinos. To date, no such “boutique casinos” have been developed, but if such are developed in the future, Tropicana AC could face additional competition.
In addition, various legislative initiatives have been introduced to authorize casino gaming at various locations in New Jersey. Most recently, a referendum in November 2016 to authorize up to two casinos in northern New Jersey was rejected by voters. Notwithstanding the rejection of this referendum by the voters, various legislative initiatives continue to be introduced in the New Jersey legislature to expand gaming at New Jersey racetracks. Should New Jersey authorize the expansion of gaming outside of Atlantic City in the future, Atlantic City casinos, including Tropicana AC, could lose customers and significant business.
Pennsylvania.    Atlantic City casinos, including Tropicana AC, primarily compete against the Pennsylvania gaming facilities located in the eastern part of the state that offer slot machines, table games and a variety of non-gaming amenities. These include four Philadelphia metropolitan area casinos and three casinos located north of the Philadelphia metropolitan area. In addition, in 2014 following a competitive bidding process, a second Philadelphia Category 2 casino license was awarded to Live! Hotel & Casino who have announced plans to construct a $400 million 200,000 square foot casino project in south Philadelphia to include 2,000 slot machines, 125 table games, a 240 room hotel and 2,500 parking spaces. The casino license award is still pending an appeal filed by unsuccessful bidders and other competing casinos. Should such casino be constructed it will further impact Atlantic City gaming revenues. In addition, during 2017, the Pennsylvania legislature is expected to consider legislative initiatives to authorize intrastate internet gaming and expanded casino gaming. Any expansion of gaming in Pennsylvania could further erode Atlantic City market share.
New York.    In New York, there are currently two large scale gaming facilities operating with video lottery terminals ("VLT") in the New York City metropolitan area, Empire City Casino at Yonker’s Raceway and Resort World at Aqueduct Racetrack. In addition, current New York law authorizes seven casinos as well as two additional New York metropolitan VLT

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facilities to be built in coming years. Under the law, New York has approved three commercial Class III casino licenses (which entitle the operators to offer slot machines and table games) and three casinos: Montreign Casino Resort in Monticello, Tioga Downs Casino in Nichols and Rivers Casino & Resort in Schenectady, are all under construction and expected to open beginning in early 2017 through 2018.
Competition from the VLT facilities at Aqueduct and Yonkers have impacted Atlantic City casinos, and competition from the additional approved commercial casinos and VLT facilities in and around the New York City metropolitan area could further adversely impact Atlantic City casinos, including Tropicana AC.
Maryland.    There are currently six casino gaming facilities open in Maryland, including the MGM Resorts International National Harbor Casino on the Potomac River in Prince George’s County, which opened in December 2016. We believe these facilities in Maryland, particularly the Baltimore area casinos, have adversely impacted Atlantic City casinos, including Tropicana AC.
Delaware.    Tropicana AC competes with Delaware primarily for gaming customers from the southern New Jersey, southern Pennsylvania and Delaware regions. Three racetrack casinos are currently operating in Delaware: Delaware Park, Dover Downs and Harrington Raceway and Casino offering slot machines, table games, intra-state internet gaming and limited parlay sports wagering on national football games.
Connecticut.    Connecticut features two mature resort style Native American casinos, Mohegan Sun and Foxwoods Resort and Casino. In addition, Connecticut has considered adding an additional commercial casino in the Hartford region to counter potential lost revenues expected with the opening of the MGM casino in Springfield, Massachusetts. These casinos draw customers from the New York metropolitan area and southern New England that had traditionally gambled in Atlantic City. Atlantic City casinos, including Tropicana AC, continue to market against and compete with these facilities for customers in these geographic areas.
Massachusetts. Massachusetts law allows for three resort casinos to be constructed in the central, southeastern and western parts of the state, and for one slot parlor with a maximum of 1,250 slot machines and no table games. In 2014 an MGM Resorts International proposed casino in Springfield, which is expected to open in 2018, and a Wynn Resorts proposed casino outside of Boston, which is expected to open in 2019, were approved and are currently under development, as well as a slot parlor in southeastern Massachusetts developed by Penn National Gaming, which opened in June 2015. A decision to award a third casino license outside of Boston is pending. These facilities will increase northeast gambling competition which had traditionally been monopolized by Atlantic City casinos.
Central
Tropicana Evansville
As the only full service casino within an 85-mile radius of Evansville, Indiana, we believe Tropicana Evansville enjoys a prime location. Its nearest direct competitor, French Lick Casino, is located 85 miles to the northeast. Other casino competitors include: Horseshoe Southern Indiana located 115 miles east; Harrah's Metropolis, Illinois, located 140 miles southwest; and four casinos in the St. Louis, Missouri area located approximately 165 miles northwest. Indiana racino competitors include Indiana Grand Racing Casino, located 205 miles northeast; and Hoosier Park located 225 miles northeast. Illinois also allows VLTs in taverns and convenience stores, which impact the overall market with just under 2,000 units within 100 miles of the property.
Legislation to bring casino gambling to neighboring Kentucky has been intermittently introduced dating back to 1988. Now that Kentucky is bordered by five states with legalized gaming it may put additional pressure on the Kentucky legislature to legalize gaming. State leaders have debated for years whether Kentucky, a state with a long tradition of betting on horse races, can offer casino-style gambling at racetracks and new legislative initiatives have been announced from time to time. Although legislation to allow slot machines and table games at the racetracks has thus far been unsuccessful, in 2010 the Kentucky Horse Racing Commission (the "KHRC") approved regulations permitting Instant Racing to be operated by Kentucky's racetracks. Instant Racing, a game also in use in Arkansas, allows players to bet on historical races that are chosen at random and shown on a video screen. Although the Kentucky Supreme Court ruled in 2014 that pari-mutual wagering on historic horse races is legal, ongoing challenges continue in the Kentucky courts for a determination as to whether wagering on historic horse races utilizing Instant Racing machines is in fact pari-mutual wagering. In 2012, Ellis Park, a thoroughbred racetrack in Henderson, Kentucky located approximately eight driving miles south of Tropicana Evansville, installed approximately 200 Instant Racing machines at its racetrack. The financial results of Tropicana Evansville could be adversely affected if Instant Racing at Ellis Park continues or is expanded, or if casino-style gaming is legalized in Kentucky.

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Lumière Place
Lumière Place competes with five other casinos in the St. Louis region. The state of Missouri offers favorable competitive dynamics for current operators as the number of gaming licenses in the state is limited to 13, all of which have been awarded and are currently operating.
West
Tropicana Laughlin
Tropicana Laughlin is located in southern Nevada on the Colorado River which forms the boundary between Nevada and Arizona. Tropicana Laughlin competes primarily with other Laughlin hotels and casinos located along the Colorado River based on a mix of casino games, personal service, payout ratios, price of hotel rooms, restaurant value and promotions. The Laughlin market is a value-oriented destination for travelers seeking an alternative to the fast-paced Las Vegas experience.
Tropicana Laughlin also competes with casinos in nearby locations, including the Mojave tribe's casino situated eight miles south of Laughlin, Native American casinos in Arizona and California, and numerous casinos in Las Vegas.
MontBleu
The South Lake Tahoe area consists of five casino properties including MontBleu. In 2015, one of our competitors, across the street from our MontBleu property, significantly renovated its property including additional gaming positions and rebranded the property under the "Hard Rock" brand. There are also three other casinos on the north shore of Lake Tahoe, which are approximately 25 miles from the South Lake Tahoe market, numerous casinos located in Reno, Nevada and several casinos located in Carson City and Carson Valley, Nevada. Gaming revenues in the South Lake Tahoe area are also adversely affected by the ongoing proliferation of Native American gaming in northern California.
South
Tropicana Greenville
Tropicana Greenville and Harlow's Casino are currently the only licensed gaming facilities in the Greenville, Mississippi market and primarily compete against each other. Several potential gaming sites still exist in or near Greenville, and from time to time potential competitors have proposed the development of additional casinos. To a lesser extent, the Greenville market also competes with the Vicksburg market which is 90 miles to the south and the Tunica, Mississippi market which is 115 miles to the northeast.
Belle of Baton Rouge
Belle of Baton Rouge is currently one of two licensed dockside riverboat gaming facilities operating in downtown Baton Rouge. In addition, although the L'Auberge Casino and Hotel, which is located on approximately eight miles southeast of downtown Baton Rouge on approximately 575 acres, has grown the market since opening in 2012, it has had a material adverse effect on the downtown Baton Rouge riverboat casinos, including the Belle of Baton Rouge.
Belle of Baton Rouge also faces competition from land-based and riverboat casinos throughout Louisiana and Mississippi, including Native American casinos. Belle of Baton Rouge also faces competition from casinos on the Mississippi Gulf Coast, which is approximately 120 miles east of Baton Rouge, as well as from New Orleans, which is approximately 75 miles from Baton Rouge and from Native American casinos located within 65 miles of Baton Rouge. In addition, slot machines in non-casino venues such as truck stops, restaurants, bars and off-track betting facilities located in Louisiana provide additional competition.
Tropicana Aruba
There are currently thirteen resort properties with operating casinos in Aruba including our hotel, timeshare and casino resort property. We compete directly with the La Cabana Timeshare Resort which is located immediately adjacent to our resort and includes an approximately 8,500 square-foot casino containing approximately 180 slot machines and eight table games. We do not expect that the Aruban casino market will experience any additional significant growth as casino licenses in Aruba are only granted to hotels with an average of 350 rooms and no additional projects of the requisite size have been announced. The operating casinos located in Aruba, including at Tropicana Aruba, can be categorized as amenities to resort operations.

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Governmental Regulation
General Governmental and Gaming Regulations
The following is a summary of the provisions of the laws and regulations applicable to our gaming operations and other laws and regulations applicable to us. The summary does not purport to be a full description thereof and is qualified in its entirety by reference to such laws and regulations.
The ownership and operation of our gaming facilities is subject to pervasive regulation under the laws and regulations of each of the six states in which we operate, Nevada, New Jersey, Mississippi, Missouri, Indiana and Louisiana, as well as of Aruba where we operate a small casino. Gaming laws generally are based upon declarations of public policy designed to protect gaming consumers and the viability and integrity of the gaming industry. Gaming laws also may be designed to protect and maximize state and local revenues derived through taxes and licensing fees imposed on the gaming industry participants as well as to enhance economic development and tourism. To accomplish these public policy goals, gaming laws establish procedures to ensure that participants in the gaming industry meet certain standards of character and financial fitness. In addition, gaming laws generally require gaming industry participants to:
establish and maintain responsible accounting practices and procedures;
maintain effective controls over their financial practices, including establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues;
maintain systems for reliable record keeping;
file periodic reports with gaming regulators;
ensure that contracts and financial transactions are commercially reasonable, reflect fair market value, and are arm's-length transactions entered into with suitable persons;
establish procedures designed to prevent cheating and fraudulent practices; and
establish programs to promote responsible gaming.
Typically, a jurisdiction's regulatory environment is established by statute and is administered by a regulatory agency with broad discretion to regulate, among other things, the affairs of owners, managers and persons with financial interests in gaming operations. Among other things, gaming authorities in the various jurisdictions in which we operate:
adopt rules and regulations under the implementing statutes;
interpret and enforce gaming laws, rules and regulations;
impose disciplinary sanctions for violations, including fines and penalties;
review the character and financial fitness of participants in gaming operations and make determinations regarding their suitability or qualification for participation and licensure;
grant licenses for participation in gaming operations and authorize renewals of those licenses on a periodic basis;
collect and review reports and information submitted by participants in gaming operations;
review and approve certain transactions, such as acquisitions or change-of-control transactions, of gaming industry participants, securities offerings and debt transactions engaged in by such participants; and
establish and collect fees and taxes.
Any change in the laws or regulations of a gaming jurisdiction could have a material adverse effect on our gaming operations.
Licensing
Gaming laws require us and certain of our subsidiaries, as well as our directors, officers (with respect to corporations), managers (with respect to limited liability companies), and certain other key employees and, in some cases, certain of our shareholders, (with respect to corporations), members (with respect to limited liability companies), and holders of debt securities, to obtain licenses, findings of suitability or other approvals from gaming authorities. Licenses or findings of suitability typically require a determination that the applicant is suitable or otherwise qualifies to hold the license or to merit the finding of suitability necessary to hold equity, debt securities or position with the gaming licensee or its affiliated entities. Where not mandated by statute, rule or regulation, gaming authorities generally have broad discretion in determining who must apply for a license or finding of suitability and whether an applicant qualifies for licensing or should be deemed suitable or otherwise qualified.
To determine whether to grant a license or finding of suitability to an entity to conduct gaming operations, gaming authorities generally consider the following factors (which vary among the jurisdictions in which we operate):

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the financial stability, integrity, and responsibility of the applicant, including whether the operation is adequately capitalized in the state and exhibits the ability to maintain adequate insurance levels;
the quality of the applicant's casino facilities, support facilities and equipment;
the amount of revenue to be derived by the applicable state from the operation of the applicant's casino;
the applicant's practices with respect to diversity in employment and procurement;
the effect on competition and general impact on the community; and
the good character, honesty and integrity of the applicant and its parent entities.
Many gaming jurisdictions limit the number of licenses granted to operate casinos within the state, and some states limit the number of licenses granted to a single gaming operator or the number of licenses in which an investor may hold an ownership interest. Licenses under gaming laws generally are not transferable. Licenses in most of the jurisdictions in which we conduct gaming operations are granted for limited durations and require renewal from time to time. The failure to obtain or renew any of our licenses could have a material adverse effect on our gaming operations.
In evaluating individual applicants, gaming authorities generally consider the individual's business probity and casino experience, the individual's reputation for good character, honesty, and integrity, the individual's criminal and financial history and the character and reputation of those with whom the individual associates.
Findings of Qualification and Suitability Determinations
As noted above, gaming authorities may investigate any individual who has a material relationship to or material involvement with our operations to determine whether such individual is suitable or should be licensed or found suitable as a business associate of a gaming licensee. In many of the jurisdictions in which we operate, our directors, officers (with respect to corporations), managers (with respect to limited liability companies), and certain other key employees must file applications with the gaming authorities and may be required to be licensed, qualify, or otherwise be found suitable. Qualification and suitability determinations generally require the submission of detailed personal and financial information followed by a thorough investigation. The applicant must pay all the costs of the investigation. Changes with respect to the individuals who occupy licensed positions must be reported to gaming authorities and—in addition to their authority to deny an application for licensure, qualification, or a finding of suitability—gaming authorities have jurisdiction to disapprove a change in a corporate position.
If one or more gaming authorities were to find that a director, officer (with respect to corporations), manager (with respect to limited liability companies), or other key employee of ours does not qualify, is unsuitable for licensing or is unsuitable to continue having a relationship with us, we may be required to sever all relationships with such person. In addition, gaming authorities may require that we terminate the employment of any person who refuses to file appropriate applications.
Moreover, in many jurisdictions, certain holders of our debt and equity securities may be required to undergo a suitability investigation similar to that described above. All of the jurisdictions in which we operate require any person who acquires beneficial ownership of more than a certain percentage of voting securities, and, in some jurisdictions, also non-voting securities, typically 5%, to report the acquisition to the gaming authorities, and the gaming authorities may require such holders to apply for qualification or a finding of suitability. Most jurisdictions provide that "institutional investors" may seek a waiver of these requirements. In such jurisdictions, an "institutional investor" generally is defined as a qualified investor (i.e., certain banks, insurance companies, investment companies or advisors) acquiring and holding voting securities (or non-voting securities in jurisdictions that do not make a distinction between voting and non-voting securities) in the ordinary course of business for passive investment purposes only, and not for the purpose of causing, directly or indirectly, the election of a majority of the gaming entity's board of directors, any change in such entity's corporate charter, bylaws, management, policies, or operations, or those of any of such entity's affiliates, or the taking of any other action that gaming authorities find to be inconsistent with holding the securities solely for passive investment purposes. Even if a waiver is granted, an institutional investor generally may not take any action inconsistent with its status when the waiver was granted without once again becoming subject to the foregoing reporting and application obligations.
The definition of an "institutional investor" varies from jurisdiction to jurisdiction. In addition, in order to obtain a qualification waiver, some jurisdictions, including Nevada, Louisiana, Mississippi, Missouri, Indiana and New Jersey, require an institutional investor to certify to, among other things, its intent and purpose in acquiring and holding an issuer's securities. In Indiana, an institutional investor that acquires, directly or indirectly, the beneficial ownership of 15% or more of a public gaming company's voting securities must apply for a finding of suitability within 45 days after acquiring the securities. The definition of "public company" varies from jurisdiction to jurisdiction, but in general, a public company is one that has a class of securities registered under the Securities Exchange Act of 1934 (the "Exchange Act"). In Mississippi, an institutional investor

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that acquires, directly or indirectly, beneficial ownership of more than 10% of a gaming company's voting securities must apply to the Mississippi Gaming Commission for a finding of suitability within thirty days of acquiring said interest. However, if the institutional investor holds such voting securities for investment purposes only, and, under certain circumstances, such an investor that has obtained a waiver can hold, directly or indirectly, up to 19% of the voting securities of a public gaming company for a limited period of time and maintain the waiver. In Missouri, licensing requirements will be imposed upon any holder of an aggregate ownership interest of 5% or more of a publicly-traded gaming company’s voting securities, unless such holder applies for and obtains an institutional investor exemption in accordance with the Missouri gaming regulations which require, among other things, certification by the institutional investor of its passive ownership status. The Executive Director of the Missouri Gaming Commission may grant a waiver to an institutional investor that holds up to 10% of the outstanding equity of a Missouri licensee. The Missouri Gaming Commission itself may grant a waiver to an institutional investor that holds up to 20% of the outstanding equity of the Missouri licensee.
In Nevada, beneficial owners of more than 10% of a public gaming company's voting securities must apply to the Nevada Gaming Commission for a finding of suitability within 30 days after the Chairman of the Nevada State Gaming Control Board mails a written notice requiring the filing of an application for such a finding. However, an institutional investor that beneficially owns more than 10% but not more than 11% of a public gaming company's voting securities as a result of a stock repurchase by the public gaming company may not be required to file such an application. Additionally, an institutional investor that acquires more than 10% but not more than 25% of a public gaming company's voting securities may apply to the Nevada Gaming Commission for a waiver of these application requirements if the investor holds the voting securities for investment purposes only. An institutional investor that has obtained a waiver may own more than 25% but not more than 29% of a public gaming company's voting securities and maintain the waiver where the additional ownership results from a stock repurchase by the public gaming company.
In New Jersey, gaming laws permit an institutional investor holding either under 25% of the equity securities of a casino licensee's holding or intermediary companies, or debt securities of a casino licensee's holding or intermediary companies, or another subsidiary company of a casino licensee's holding or intermediary companies which is related in any way to the financing of the casino licensee, where the securities represent a portion of the outstanding debt of the company not exceeding 25% or a percentage of any issue of the outstanding debt of the company not exceeding 50%, unless the full issue is in the amount of $150 million or less (in which case no qualification is required), shall be granted a waiver of the qualification requirement if the securities are those of a corporation, whether publicly traded or privately held, and its holdings of such securities were purchased for investment purposes only and the institutional investor provides a certification which, among other things, confirms that its holdings of such securities were purchased for investment purposes only. The Director of the New Jersey Division of Gaming Enforcement ("NJDGE") may grant a waiver of the qualification requirement to an institutional investor holding a higher percentage of such securities upon a showing of good cause and compliance with the certification submission requirement.
In Aruba, any direct or indirect holder of an Aruban casino license is required to provide certain information, including information regarding its ownership. Information required to be provided by the owners of a license holder includes the number of shares of the license holder held as well as a certificate of good standing.
Generally, in each of the jurisdictions in which our subsidiaries operate, any person who fails or refuses to apply for a finding of suitability or a license within the prescribed period after being advised by gaming authorities that it is required to do so may be denied a license or found unsuitable or unqualified, as applicable. Any holder of equity securities that is found unsuitable or unqualified or denied a license, and who holds, directly or indirectly, any beneficial ownership of a gaming entity's equity securities beyond such period of time as may be prescribed by the applicable gaming authorities may be guilty of a criminal offense. Furthermore, a gaming entity may be subject to disciplinary action if such gaming entity, after receiving notice that a person is unsuitable to be a holder of equity securities or to have any other relationship with such gaming entity or any of its subsidiaries: (i) pays that person any dividend or interest upon the securities; (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; (iii) pays remuneration in any form to that person for services rendered or otherwise; (iv) allows that person to continue an ownership or economic interest or receive any economic benefit or remain as a member, beneficial owner, officer or partner of a licensee; or (v) fails to pursue all lawful efforts to require such unsuitable person to relinquish the securities including, if necessary, the immediate purchase of such securities for the lesser of fair value at the time of repurchase or fair value at the time of acquisition by the unsuitable holder. In the event that disqualified holders fail to divest themselves of such securities, gaming authorities have the power to revoke or suspend the casino license or licenses related to the regulated entity that issued the securities.
Our certificate of incorporation includes provisions establishing our ability to redeem the securities of unsuitable holders if (i) the holder is determined by a gaming authority, or if we have been notified by the staff of a gaming authority that it will

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recommend that the gaming authority determine the holder to be, unsuitable, unqualified, or disqualified to own or control such securities or unsuitable to be connected with a person engaged in gaming activities in that jurisdiction, or (ii) the holder is deemed likely to preclude or materially delay, impede, impair or jeopardize our application for or ability to obtain, right to the use of or ability to reinstate or retain any gaming license, or to result in the imposition of materially burdensome terms of or conditions on any gaming license.
Some of the gaming jurisdictions in which we operate also require that suppliers of certain goods and services to gaming industry participants be licensed or otherwise approved, and require that we purchase and lease gaming equipment, supplies, and services only from such licensed or approved suppliers.
Violations of Gaming Laws
The gaming authorities in each of the jurisdictions in which our subsidiaries operate may also, among other things, limit, condition, suspend, or revoke a gaming license or approval to own the equity or joint venture interests of any of our operations in such licensing authority's jurisdiction for any cause deemed reasonable by such licensing authority. In addition, if our subsidiaries violate applicable gaming laws, their gaming licenses could be limited, conditioned, suspended, or revoked by gaming authorities, and we and any other persons and entities involved could be subject to substantial fines. Further, gaming authorities may appoint a supervisor or conservator to operate our gaming properties or, in some jurisdictions, take title to our gaming assets. Under certain circumstances, earnings generated during such appointment could be forfeited to the applicable state or states. Furthermore, violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions and, as a result, violations by us of applicable gaming laws in one jurisdiction could have a material adverse effect on all of our gaming operations. Finally, some gaming jurisdictions prohibit certain types of political activity by a gaming licensee, its directors, officers (with respect to corporations), managers (with respect to limited liability companies), and certain other key people. In Indiana, for example, a licensee or a person with an interest in a licensee is prohibited from making certain political contributions. A violation of such a prohibition may subject the offender to criminal charges and disciplinary action.
Reporting and Record-Keeping Requirements of Gaming Authorities
We are periodically required to submit detailed financial and operating reports and furnish any other information that gaming authorities may require. Under federal law, we are required to record and submit detailed reports of currency transactions at our casinos involving greater than $10,000, as well as any suspicious activity that may occur at such facilities. Additionally, we are required to maintain a current stock ledger that may be examined by gaming authorities at any time. In addition, gaming authorities may require that our Common Stock certificates and Warrant certificates bear a legend indicating that the securities are subject to specified gaming laws.
Review and Approval by Gaming Authorities of Certain Transactions
Substantially all material loans, leases, sales of securities, and similar financing transactions by us must be reported to, and in some cases, requires the prior approval of gaming authorities. We may not make a public offering of securities without the prior approval of certain gaming authorities. Changes in control through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or otherwise, are subject to prior approval of gaming authorities. Entities seeking to acquire control of us or one of our subsidiaries must satisfy gaming authorities with respect to a variety of standards prior to assuming control. Gaming authorities may also require controlling stockholders, directors, officers (with respect to corporations), managers (with respect to limited liability companies), and certain other key employees having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed, qualified, or found suitable as part of the approval process relating to the transaction.
Because of regulatory restrictions, our ability to grant a security interest in any of our gaming assets is limited and subject to receipt of approval by gaming authorities. Some jurisdictions, including Nevada, Louisiana, Indiana, Mississippi, Missouri and Aruba, prohibit the transfer of a gaming license or the granting of a security interest in the same.
License for Sale of Alcoholic Beverages
The service and sale of alcoholic beverages at our various casinos are subject to licensing, control and regulation by various governmental authorities, some of which have the authority to approve all persons owning or controlling stock, and all directors and officers in a manner similar to the gaming suitability determinations discussed above. Although these authorities, with the exception of Indiana, Louisiana and Mississippi, typically defer to the suitability determinations of the relevant gaming authority in their jurisdiction, they retain the jurisdiction to conduct any investigation and take any regulatory action deemed appropriate under the circumstances. Any holder found to be unsuitable by such an authority must dispose of held securities,

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and such securities would be subject to repurchase by us, as provided in our certificate of incorporation. In New Jersey, the authority to grant any license for, or to permit or prohibit the presence of, alcoholic beverages in, on, or about any premises licensed as part of a casino hotel is exclusively vested in the NJDGE.
Other Regulations
We are subject to various federal, state and local laws and regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters (see "—Environmental Matters"), currency transactions, employees, taxation, zoning and building codes, marketing and advertising, vessels and permanently moored craft. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our business.
Trademarks
We use a variety of trade names, service marks and trademarks and have all the rights and licenses necessary to conduct our continuing operations. We have registered several service marks and trademarks with the United States Patent and Trademark Office or otherwise acquired the licenses to use those which are material to the conduct of our business. We own the following federally registered trademarks or service marks that are material to our business: MontBleu, Aztar, Trop, Tropicana, Belle of Baton Rouge, Trop Advantage, the Quarter at Tropicana and Lumière.
Tropicana Trademark
We along with certain entities that own Tropicana Las Vegas (“Tropicana LV”) are parties to a trademark Settlement Agreement (the “Settlement Agreement”) governing the respective rights of the parties to the “Tropicana” trademark. Pursuant to the Settlement Agreement, which became effective on September 28, 2011, the Tropicana LV entities, subject to certain advertising exceptions and other terms and conditions set forth in the Settlement Agreement, have perpetual exclusive rights to use the names, trademarks, and/or service marks TROPICANA LAS VEGAS (or TROP LAS VEGAS) and TROPICANA LV (or TROP LV) (the “TLV Marks”, as defined in the Settlement Agreement) in conjunction with its services (“Services”, as defined in the Settlement Agreement) in the City of Las Vegas, Nevada and within a 50-mile radius of the front entrance of the Tropicana Las Vegas Hotel and Casino located at 3801 Las Vegas Boulevard South, Las Vegas, Nevada (the “TLV Territory”) along with certain rights to use the TLV Marks on the Internet without geographic limitation and to register the TLV Marks as domain names. TEI and its affiliates, subject to certain advertising exceptions and other terms and conditions set forth in the Settlement Agreement, have perpetual exclusive worldwide rights (excluding the TLV Territory) to use the TROPICANA and TROP Marks coupled with either a pre-existing identifier of its Services (such as "TROPICANA ENTERTAINMENT" or "TROP ADVANTAGE") or an accurate geographic identifier of the location of a Tropicana Entertainment property (other than LAS VEGAS or the name of any city within the TLV Territory) (the “TE Marks”) along with certain rights to use the TE Marks on the Internet without geographic limitation and to register the TE Marks as domain names.
Seasonality
Our cash flows from operating activities are seasonal in nature. Operating results are traditionally the strongest in the third quarter and traditionally the weakest during the fourth quarter. Any excess cash flows achieved from operations during the peak seasons are used to subsidize non-peak seasons. Performance in non-peak seasons is usually dependent on favorable weather and a long-weekend holiday calendar. In the event that we are not able to generate excess cash flows during the peak seasons, we may not be able to fully subsidize non-peak seasons.
Environmental Matters
We have to address, and are liable for, hazardous materials or contamination on our properties. Some of our properties currently have or had in the past underground fuel storage tanks and construction materials containing asbestos. We may become liable for contamination on our properties that was caused by former owners or operators. Our ongoing operations are subject to stringent regulations relating to protection of the environment and handling of waste, particularly with respect to the management of wastewater from the facilities. See "Item 1A—Risk Factors—Noncompliance with environmental, health and safety regulations applicable to our hotels and casinos could adversely affect our results of operations."

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Employees
As of December 31, 2016, we had approximately 7,000 employees and had collective bargaining agreements with several unions covering approximately 2,600 of those employees, substantially all of whom are employed at Tropicana AC, Lumière Place, Belle of Baton Rouge and Tropicana Evansville.
Financial Information
See "Item 6.—Selected Financial Data" and "Item 7.—Management's Discussion and Analysis of Financial Condition and Results of Operations" for information about our revenues and operating results and "Item 15.—Exhibits and Financial Statement Schedules" for our financial statements and accompanying footnotes.
Available Information
We are required to file annual, quarterly and other current reports and information with the Securities and Exchange Commission (the "SEC"). You may read and copy any materials filed by the Company with the SEC at its Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings are also available to the public from commercial document retrieval services and at the world wide web site maintained by the SEC at http://www.sec.gov.
Copies of our annual, quarterly and current reports and amendments to those reports are available on our web site at www.tropicanacasinos.com or free of charge by contacting our Investors Relations Department at Tropicana Entertainment Inc., 8345 West Sunset Road, Suite 300, Las Vegas, Nevada 89113.
ITEM 1A.    RISK FACTORS.
The following risk factors should be considered carefully in addition to the other information contained in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. See "Cautionary Statement Regarding Forward-Looking Statements," above. Our actual results could differ materially from those contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, those discussed below as well as those discussed elsewhere in this Annual Report on Form 10-K. Additional risks and uncertainties that management is not aware of or that are currently deemed immaterial may also adversely affect our business operations. If any of the following risks materialize, our business, financial condition or operating results could be materially adversely affected.
Risks Related to Our Business and Our Industry
We are pursuing, and may in the future pursue, expansion and acquisition opportunities and other strategic transactions that involve inherent risks, any of which may cause us to not realize anticipated benefits of such expansion and acquisition opportunities.
Our business strategy includes the consideration of expansion opportunities in new gaming jurisdictions and underserved markets and acquisition opportunities and other strategic transactions that may arise periodically. For example, in April 2014 we acquired Lumiére Place for $261.3 million in cash, which included an adjustment for working capital as of the acquisition date, as discussed in Note 3 of the “Notes to Consolidated Financial Statements.” We may not be able to successfully identify suitable acquisition or other strategic opportunities or complete any particular acquisition, combination, joint venture or other strategic transaction on acceptable terms. Our identification of suitable acquisition candidates and other strategic opportunities involves risks inherent in assessing the values, strengths, weaknesses, risks and profitability of these opportunities including their effects on our business, diversion of our management’s attention and risks associated with unanticipated problems or unforeseen liabilities. If we are successful in pursuing acquisitions or other strategic opportunities, we may be required to expend significant funds, incur additional debt, or issue additional securities, which may materially and adversely affect our results of operations and be dilutive to our stockholders. If we spend significant funds or incur additional debt, our ability to obtain financing for working capital or other purposes could decline and we may be more vulnerable to economic downturns and competitive pressures. In addition, we cannot guarantee that we will be able to finance additional acquisitions or other strategic opportunities, or that we will realize any anticipated benefits from acquisitions or other strategic opportunities. Should we successfully acquire another business, the process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our existing business. The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining

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different corporate cultures. In addition, we may not be effective in retaining key employees or customers of the combined businesses. We may face integration issues pertaining to the internal controls and operations functions of the acquired companies and we may not realize cost efficiencies or synergies that we anticipated when selecting our acquisition candidates. Our failure to identify suitable acquisition or other strategic opportunities may restrict our ability to grow our business.
Intense competition exists and is growing in the gaming industry, including competition involving the implementation of internet gaming, and we may not be able to compete effectively which could negatively affect our results of operations.
The gaming industry is highly competitive for both customers and employees, including those at the management level. We face increasing intense competition with numerous casinos and hotel casinos of varying quality and size in market areas where our properties are located. We also compete with other non-gaming resorts and vacation destinations, and with various other casino and other entertainment businesses and could compete with any new forms of gaming that exist or may be legalized in the future, including on-line gaming. The casino entertainment business is characterized by competitors that vary considerably in their size, quality of facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities, level of amenities, management talent and geographic diversity. In most markets, we compete directly with other casino facilities operating in the immediate and surrounding market areas. In some markets, we face competition from nearby markets in addition to direct competition within our market areas as well as the threat from new, emerging markets. With internet gaming, our land based casinos will also potentially be competing in virtual markets that may not be constrained by geographical limitations.
Competition in the gaming industry in existing markets continues to intensify. For example, although no new casinos have opened in eastern Pennsylvania since 2012, the second Philadelphia Category 2 license was awarded in 2014 and the Pennsylvania legislature is considering further gaming expansion proposals; six casinos currently operate in Maryland including the MGM Resorts International National Harbor Casino which opened in December 2016; two large VLT casinos are currently operating in the New York metropolitan area, and three additional commercial gaming facilities are under construction and expected to open soon, including two new VLT facilities planned for the eastern parts of New York in the coming years. Two casinos are currently under development in Massachusetts. In addition, the New Jersey legislature continues to consider gaming expansion outside of Atlantic City notwithstanding voter disapproval of a referendum in November 2016 to authorize two casinos in the northern part of the state.
This expansion of existing casino entertainment properties, the increase in the number of gaming opportunities, the potential emergence of legal internet gaming outside of New Jersey, including active consideration of internet gaming by the Pennsylvania legislature, and the aggressive marketing strategies of many of our competitors has also increased competition in many markets in which we compete, and we expect this intense competition to continue.
Our ability to make capital investments in our properties going forward may be constrained due to market conditions, and we may not be able to compete effectively with casinos that have been modernized or recently expanded. If our competitors operate more successfully than we do, if they are more successful than us in attracting and retaining employees, if their properties are enhanced or expanded, if additional hotels and casinos are established in and around the locations in which we conduct business, or if internet gaming is permitted and conducted in any of our markets, we may lose market share or the ability to attract or retain employees or customers. In particular, the expansion of casino gaming in or near any geographic area from which we attract or expect to attract a significant number of our customers could materially adversely affect our business, financial condition and results of operations.
We expect that competition from internet gaming will continue to grow and intensify.
We expect that we will face increased competition from internet gaming as the potential for legalized internet gaming continues to grow. Several states are currently considering legislation that would legalize internet gaming at the state level. As a result of the Justice Department's December 2011 opinion concerning the applicability of the Wire Act to internet gaming, certain states including Nevada, Delaware and New Jersey have enacted legislation to authorize various forms of intrastate internet gaming. Notably, in February 2013 Nevada amended its internet gaming law to permit Nevada licensed internet providers to commence internet poker and to allow the state to enter into agreements with other states to create multi-state online poker wagering, and in November 2013 New Jersey authorized intrastate internet gaming through Atlantic City casinos. The New Jersey law provides that licensed Atlantic City casinos including Tropicana AC may offer internet gambling games subject to regulations to be adopted by the NJDGE. The law provides for a 15% tax on internet gaming gross revenues and permits New Jersey to enter into agreements with other states to engage in multi-state internet wagering pools. The law has a 10 year sunset provision. A number of New Jersey casinos including Tropicana Atlantic City participate in intrastate internet gaming. Our ability to compete in a marketplace containing multiple virtual casino platforms will depend on our ability to

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effectively market our internet gaming products to our customers in the face of stiff competition as well as the availability of internet gaming in jurisdictions in which we operate casinos. Furthermore, competition from internet lotteries and other internet wagering gaming services, which allow their customers to wager on a wide variety of sporting events and play Las Vegas-style casino games from home, could divert customers from our properties and thus adversely affect our business. Such internet wagering services are likely to expand in future years and become more accessible to domestic gamblers as a result of initiatives in some states to consider legislation to legalize intrastate internet wagering. There have also been proposals that would specifically legalize internet gaming under federal law.
The casino, hotel and resort industry is capital intensive and we may not be able to proceed with renovation projects because of market conditions, which could put us at a competitive disadvantage.
Our properties have an ongoing need for renovations and other capital improvements to remain competitive, including replacement, from time to time, of furniture, fixtures and equipment. We also need to make capital expenditures to comply with applicable laws and regulations.
Renovations and other capital improvements of our properties require significant capital expenditures and usually generate little or no cash flow until the project is completed. We may not be able to proceed with planned capital improvement projects because of market conditions. Our failure to renovate our gaming properties may put us at a competitive disadvantage, which could materially adversely affect our business, financial condition and results of operations.
Renovations and other capital improvements may disrupt our operations.
Renovation projects may cause us to temporarily close all or a portion of our facilities to customers and disrupt service and room availability, causing reduced demand, occupancy and rates. For example, in 2014 and 2015 MontBleu and Tropicana AC underwent major renovation projects that impacted operating results, as did Lumière Place in 2016. Any future capital improvements projects may increase our expenses and reduce our cash flows and our revenues and, accordingly, may have a material adverse effect on our business, financial condition and results of operations.
Similarly, in July 2016 the Company commenced construction of a new landside gaming facility in Evansville, Indiana, which will encompass 75,000 square feet of enclosed space (including approximately 45,000 square feet of casino floor, additional food and beverage outlets and back of house space) and is expected to open in late 2017 or early 2018. The Company estimates that the development costs for the facility will be at least $50 million. There can be no assurances that we will finish construction of this facility in a timely manner or within our anticipated budget. We may encounter delays or other disruptions during construction of this facility, which may have a material adverse effect on our business, financial condition and results of operations.
Work stoppages, labor problems and unexpected shutdowns may limit our operational flexibility and negatively impact our future profits.
We are party to numerous collective bargaining agreements with different unions. In 2016 we completed collective bargaining negotiations on extended agreements with several unions including UNITE HERE Local 54 in Atlantic City and Local 74 in St. Louis and the United Auto Workers in Evansville. However, we cannot assure that we will be able to negotiate new collective bargaining agreements with unions in the future, or renegotiate collective bargaining agreements with other unions currently in effect. The addition of new or changes to the existing collective bargaining agreements could cause significant increases in labor costs, which could have a material adverse effect on our businesses, financial condition and results of operations.
In addition, the unions with which we have collective bargaining agreements or other unions could seek to organize employees at our non-union properties or groups of employees at our properties that are not currently represented by unions. Union organization efforts could cause disruptions in our businesses and result in significant costs, both of which could have a material adverse effect on our businesses, financial condition and results of operations.
Finally, if we are unable to negotiate these agreements on mutually acceptable terms, the affected employees may engage in a strike or other job actions instead of continuing to operate without contracts or under expired contracts, which could have a materially adverse effect on our results of operations and financial condition or be disruptive to our business. Any unexpected shutdown of one of the casino properties from a work stoppage or strike action could have a material adverse effect on our businesses and results of operations. Moreover, strikes, work stoppages or other job actions could also result in adverse media attention or otherwise discourage customers, including convention and meeting groups, from visiting our casinos. We cannot

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assure that we can be adequately prepared for labor developments that may lead to a temporary or permanent shutdown of any of our casino properties.
Our business is particularly sensitive to reductions in discretionary consumer spending as a result of downturns in the local, regional or national economy.
Consumer demand for gaming, entertainment and amenities at casino and hotel properties, such as ours, is particularly sensitive to downturns in the local, regional or national economy and the corresponding impact on discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions, the housing and credit crises, the impact of high energy and food costs, the increased cost of travel, the potential for bank failures, perceived or actual declines in disposable consumer income and wealth, the effect of the current economic environment and changes in consumer confidence in the economy, or fears of war and future acts of terrorism could reduce customer demand for amenities that we offer.
The housing crisis and recession in the United States that began in 2008 resulted in a significant decline in tourism and consumer spending. Economic conditions like the 2008 downturn (and slowdowns or recessions less severe) could cause fewer consumers to spend money or cause consumers to spend less money at our properties and could materially adversely affect our business, financial condition and results of operations. While general economic conditions have improved, we cannot assure that they will continue to improve or will not worsen in the future.
The state of the global financial markets may impact our ability to obtain sufficient financing and credit on a going forward basis which could negatively impact our ability to expand our business.
In addition to earnings and cash flows from operations, we may rely on borrowed money to finance our business, which may be constrained if we are unable to borrow additional capital or refinance existing borrowings on reasonable terms. Developments in the global financial markets that have led to unpredictable government interventions in the United States and European banking systems, including the 2008 capital crisis in the banking system, a series of rating agency downgrades of subprime United States mortgage-related assets and significant provisions for loan losses recorded by major financial institutions and downgrades of sovereign debt in the United States and certain EU member nations have resulted in volatility in the credit markets, a low level of liquidity in many global financial markets and other adverse conditions for issuers in fixed income, credit and equity markets. In the recent past, these markets experienced disruption that had a dramatic impact on the availability and cost of capital and credit. The market interest rate for debt of companies similar to ours has been volatile. The United States and other governments have enacted legislation and taken other actions to help alleviate these conditions, although we cannot assure that such steps will have the effect of easing the conditions in global credit and capital markets. Therefore, we cannot assure that such steps will facilitate our further access to credit or capital markets at desirable times or at rates that we would consider acceptable, and the lack of such funding could have a material adverse effect on our business, results of operations and financial condition and our ability to service our indebtedness. We are unable to predict the likely duration or severity of any disruption in the capital and credit markets, or its impact on the larger economy. A disruption in the global credit and financial markets may materially and adversely affect our ability to obtain sufficient financing to execute our business strategy.
Changes in our management team could affect our business strategy and adversely impact our performance and results of operations.
In the past, we have experienced management changes in several key areas including marketing, finance and human resources. In 2015 and 2016 we also experienced senior management changes at several of our operating properties. We intend to continue to focus on strengthening our management team. However, we cannot assure that we will be successful. In addition, turnover in our management team could have a negative impact on our performance and results of operations.
We may be subject to litigation resulting from our gaming, resort and dining operations which, if adversely determined, could result in substantial losses.
We will be, from time to time, during the ordinary course of operating our businesses, subject to various litigation claims and legal disputes, including contract, lease, employment and regulatory claims as well as claims made by visitors to our properties. Certain litigation claims may not be covered entirely or at all by our insurance policies or our insurance carriers may seek to deny coverage. In addition, litigation claims can be expensive to defend and may divert our attention from the operations of our businesses. Further, litigation involving visitors to our properties, even if without merit, can attract adverse media attention. As a result, litigation can have a material adverse effect on our businesses. We cannot predict the outcome of any action, and it is possible that adverse judgments or settlements could significantly reduce our earnings or result in losses.

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State gaming laws and regulations may require holders of our debt or equity securities to undergo a suitability investigation, and may result in redemption of their securities.
Many jurisdictions require any person who acquires beneficial ownership of debt or equity securities of a casino gaming company to apply for qualification or a finding of suitability. Generally, any person who fails or refuses to apply for a finding of suitability or a license within the prescribed period after being advised by gaming authorities that it is required to do so may be denied a license or found unsuitable or unqualified, as applicable. Any holder of securities that is found unsuitable or unqualified or denied a license, and who holds, directly or indirectly, any beneficial ownership of a gaming entity's securities beyond such period of time as may be prescribed by the applicable gaming authorities may be guilty of a criminal offense. Furthermore, a gaming entity may be subject to disciplinary action if such gaming entity, after receiving notice that a person is unsuitable to be a holder of securities or to have any other relationship with such gaming entity or any of its subsidiaries:
pays that person any dividend or interest upon the securities;
allows that person to exercise, directly or indirectly, any voting ownership right conferred through securities held by that person;
pays remuneration in any form to that person for services rendered or otherwise;
allows that person to continue in an ownership or economic interest or receive any economic benefit; or
fails to pursue all lawful efforts to require such unsuitable person to relinquish the securities including, if necessary, the immediate (or within such other time period as prescribed by the applicable gaming authorities) purchase of such securities for the lesser of fair value or market price at the time of repurchase or fair value or market price at the time of acquisition by the unsuitable holder.
In the event that disqualified holders fail to divest themselves of such securities, gaming authorities have the power to revoke or suspend the casino license or licenses related to the regulated entity that issued the securities. In addition, our certificate of incorporation provides that we may redeem our securities from an Unsuitable Person (as such term is defined in our certificate of incorporation).
Regulation by gaming authorities could adversely affect our businesses, financial condition and results of operations.
We are subject to extensive regulation with respect to the ownership and operation of our gaming facilities. Federal, state and local gaming authorities require that we and our subsidiaries hold various licenses, qualifications, findings of suitability, registrations, permits and approvals. The gaming regulatory authorities have broad powers with respect to the licensing of casino operations and alcoholic beverage service and may deny, revoke, suspend, condition, or limit our gaming or other licenses, impose substantial fines, temporarily suspend casino operations, and take other actions, any one of which could adversely affect our businesses, financial condition and results of operations.
We own, operate, or have an interest in gaming facilities located in Nevada, Indiana, Mississippi, Missouri, Louisiana, New Jersey and Aruba. We have obtained all material governmental licenses, qualifications, registrations, permits, and approvals necessary for the operation of our gaming facilities as operations at such facilities are presently conducted. However, we cannot assure that we can obtain any new licenses, or renew any existing, licenses, qualifications, findings of suitability, registrations, permits, or approvals that may be required in the future or that existing ones will not be suspended or revoked. If we relocate or expand any of our current gaming facilities or enter new jurisdictions, we must obtain all additional licenses, qualifications, findings of suitability, registrations, permits and approvals of the applicable gaming authorities in such jurisdictions. If state regulatory authorities were to find an officer, director, owner, or other person affiliated with our operations unsuitable, we would be required to sever our relationship with that person. Gaming authorities, as well as other state regulatory authorities, may conduct similar investigations in the future in connection with new equity and debt holders. We cannot predict the outcome of these investigations or their potential impact on our businesses.
Additionally, certain manufacturers, distributors and suppliers of gaming devices, junkets, goods or services to our gaming facilities, may be required to obtain a license, permit or registration or undergo a suitability investigation by the gaming authorities. We cannot assure that such licenses, permits or registrations will be obtained by such vendors. The failure of any such vendors to obtain any required licenses, permits or registrations on a timely basis could materially adversely affect our business, financial condition and results of operations.
Our operations are subject to numerous laws and regulations resulting from our presence in several states and diverse operating activities.
In addition to gaming regulations, we are also subject to various federal, state and local laws and regulations affecting businesses in general. We operate hotels, restaurants, entertainment facilities, parking garages, swimming pools, riverboats and

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other facilities connected with our core gaming business. Many of these activities are subject to federal, state and local laws and regulations. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Any cessation of operations as a result of a government shutdown or similar events resulting from laws and regulations affecting businesses could materially adversely affect our business, financial condition and results of operations.
Potential changes in legislation and regulation could negatively impact our gaming operations.
From time to time, legislators and special interest groups propose legislation that would expand, restrict, or prevent gaming operations in the jurisdictions in which we operate and in neighboring jurisdictions. Further, from time to time, individual jurisdictions have considered or enacted legislation and referenda, such as bans on smoking in casinos and other entertainment and dining facilities, which could adversely affect our operations going forward. Any restriction on or prohibition relating to our future gaming operations, or enactment of other adverse legislation or regulatory changes, could materially adversely affect our business, financial condition and results of operations.
We may be subject to increases in taxation and fees resulting from our gaming operations.
The casino gaming industry represents a significant source of tax revenues to the various jurisdictions in which casinos operate. Gaming companies are currently subject to significant federal, state and local taxes and fees in addition to the federal and state income taxes that typically apply to corporations, and such taxes and fees could increase at any time. From time to time, various state and federal legislators and officials have proposed changes in tax laws or in the administration of such laws, including increases in tax rates, which would affect the gaming industry. Economic conditions could intensify the efforts of federal, state and local governments to raise revenues through increases in gaming taxes and fees. In addition, growing federal, state or local budget shortfalls resulting from an economic downturn could prompt tax or fee increases. Any material increase in assessed taxes, or the adoption of additional taxes or fees in any of our markets could materially adversely affect our business, financial condition and results of operations.
The risks associated with international operations could affect our ability to pursue expansion opportunities.
We currently operate a small casino at our property on the Caribbean island of Aruba. International operations are subject to inherent risks including variation in local economies, currency fluctuation, greater difficulty in accounts receivable collection, trade barriers, burden of complying with a variety of international laws, and political and economic instability. Each of these risks could impair our ability to execute our business strategy and adversely affect our business.
Any violation of the Foreign Corrupt Practices Act or applicable Anti-Money Laundering laws or regulations such as the Bank Secrecy Act could have a negative impact on us.
We are subject to risks associated with doing business outside of the United States, which exposes us to complex foreign and U.S. regulations inherent in doing business cross-border and in each of the countries in which we transacts business. We are subject to regulations imposed by the Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws that generally prohibit U.S. companies and their intermediaries from offering, promising, authorizing or making improper payments to foreign government officials for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties and the SEC and U.S. Department of Justice have increased their enforcement activities with respect to the FCPA. Internal control policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices may not be effective in prohibiting our directors, employees, contractors or agents from violating or circumventing our policies and the law. If our directors, employees or agents fail to comply with applicable laws or Company policies governing our international operations, the Company may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. Any determination that we have violated the FCPA could have a material adverse effect on our financial condition. Compliance with international and U.S. laws and regulations that apply to our international operations increases our cost of doing business in foreign jurisdictions. We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations such as the Bank Secrecy Act (the “BSA”). The Internal Revenue Service and Financial Crimes Enforcement Network monitor casino compliance with casino filing of Currency Transaction Reports (“CTR”) and Suspicious Activity Report (“SAR”) and anti-money laundering (“AML”) programs and have recently stepped-up enforcement activities involving non-compliant casinos. Internal control policies and procedures and employee training, AML compliance programs and internal audits involving CTR and SAR filings have been implemented to enhance compliance and detect problems. Any violation of anti-money laundering laws or regulations by any of our resorts could have a negative effect on our results of operations.

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We could encounter problems during development, construction, renovation and refurbishment of our properties that could increase the construction costs or delay their completion. In addition, we may not be able to complete projects if we do not obtain all necessary permits, licenses, grants and approvals.
Construction projects like the development, construction, renovation and refurbishment of Tropicana AC, MontBleu, Evansville, Lumiere and Tropicana Aruba are subject to significant development and construction risks, any of which could cause unanticipated cost increases and delays. These include, among others, the following:
adverse weather conditions that damage the project or cause delays;
changes to the plans or specifications;
shortages and increased costs of energy, materials and skilled labor;
engineering problems;
labor disputes and work stoppages;
environmental issues;
fire, flooding and other natural disasters; and
geological, construction, excavation, regulatory and equipment problems.

In addition, certain permits, licenses, grants and approvals necessary for development, construction and operation may not be obtained. The scope of the approvals required for projects vary. Unexpected changes or concessions required by regulatory authorities could involve significant additional costs and could result in a delay in the schedule. We may not receive the necessary licenses, grants and approvals or obtain them within our anticipated time frame. For example, the Evansville land-based gaming construction project which commenced in 2016, and the Tropicana AC capital renovation projects that were completed in 2016 and 2015 required approvals from various state agencies as well as approval of our plans by various federal, state and local regulatory agencies in order for us to proceed with construction. In addition, even if we complete any development, construction, renovation and refurbishment projects, we cannot assure you that we will achieve all of, or any of, the anticipated benefits of such projects.
Our business, financial condition and results of operations could be materially adversely affected by the occurrence of accidents, natural disasters, such as hurricanes, or other catastrophic events, including war and terrorism.
Natural disasters, such as hurricanes, floods, fires and earthquakes could adversely affect our businesses and operating results. Hurricanes are common to the areas in which our Louisiana and Mississippi properties are located and the severity of such natural disasters is unpredictable. Catastrophic flooding in southern Louisiana in August 2016, caused by prolonged rainfall over several days which in total exceeded nearly two feet of rain, resulted in significant residential damage impacting tens of thousands of people, and disrupted the operation of our Baton Rouge property. In October 2012 Superstorm Sandy resulted in the mandatory closure of our Tropicana Atlantic City property for approximately five days. Although the property did not incur any significant property damage, the severity of the property damage to a large portion of the Atlantic City feeder markets, including New Jersey, New York and Pennsylvania resulted in long term business interruption that continued into 2013 and materially affected operating results. We cannot predict the impact that any future natural disasters will have on our ability to maintain our customer base or to sustain our business activities.
Moreover, our riverboats face additional risks from the movement of vessels on waterways, such as collisions with other vessels or damage from debris in the water. Reduced patronage and the loss of a dockside or riverboat casino from service for any period of time could materially adversely affect our business, financial condition and results of operations.
Catastrophic events such as terrorist and war activities in the United States and elsewhere have had a negative effect on travel and leisure expenditures, including lodging, gaming (in some jurisdictions), and tourism. In addition, any man-made or natural disasters in or around our properties could have a materially adverse effect on our businesses, financial condition and results of operations. We cannot predict the extent to which such events may affect us, directly or indirectly, in the future. We also cannot ensure that we will be able to obtain any insurance coverage with respect to occurrences of terrorist acts and any losses that could result from these acts.
In the future, the prolonged disruption at any of our properties due to natural disasters, terrorist attacks, or other catastrophic events could materially adversely affect our business, financial condition and results of operations.
Leisure and business travel, especially travel by air, are particularly susceptible to global geopolitical events, such as terrorist attacks or acts of war or hostility. These events can create economic and political uncertainties that could adversely impact our business levels. Furthermore, although we may have some insurance coverage for certain types of terrorist acts, insurance coverage against loss or business interruption resulting from war and some forms of terrorism may be unavailable.

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Our properties, including our riverboats and dockside facilities, are subject to risks relating to mechanical failure, weather and regulatory compliance.
All of our facilities are subject to the risk that operations could be halted for a temporary or extended period of time, as result of casualty, forces of nature, mechanical failure, or extended or extraordinary maintenance, among other causes. In addition, our gaming operations, particularly those conducted on riverboats or at dockside facilities, could be damaged or halted due to extreme weather conditions. Catastrophic flooding in southern Louisiana in August 2016, caused by prolonged rainfall over several days which in total exceeded nearly two feet of rain, resulted in significant residential damage impacting tens of thousands of people, and disrupted the operation of our Baton Rouge property. In October 2012 Superstorm Sandy resulted in the mandatory closure of our Tropicana Atlantic City property for approximately five days. Although the property did not incur any significant property damage, the severity of the property damage to a large portion of the Atlantic City feeder markets including New Jersey, New York and Pennsylvania resulted in long term business interruption that continued into 2013 and materially affected operating results. Each of our riverboats must comply with U.S. Coast Guard requirements as to boat design, on-board facilities, equipment, personnel and safety. Each riverboat must hold a Certificate of Inspection for stabilization and flotation, and may also be subject to local zoning codes. The U.S. Coast Guard requirements establish standards, set limits on the operation of the vessels and require individual licensing of all personnel involved with the operation of the vessels. Loss of a vessel's Certificate of Inspection or American Bureau of Shipping approval would preclude its use as a casino.
Except for our riverboats that have opted for alternate inspection by the American Bureau of Shipping allowed in those gaming jurisdictions where we operate that provide for such alternative inspections, U.S. Coast Guard regulations require a hull inspection for all riverboats at five-year intervals. Under certain circumstances, alternative hull inspections may be approved. The U.S. Coast Guard may require that such hull inspections be conducted at a dry-docking facility, and if so required, the cost of travel to and from such docking facility, as well as the time required for inspections of the affected riverboats, could be significant. To date, the U.S. Coast Guard has allowed in-place inspections of our riverboats. The U.S. Coast Guard may not allow these types of inspections in the future. The loss of a riverboat casino from service for any period of time could materially adversely affect our business, financial condition and results of operations.
U.S. Coast Guard regulations also require certain of our properties to prepare and follow certain security programs. In the first quarter of 2003, Tropicana Evansville implemented the American Gaming Association's Alternative Security Program at its riverboat casino. In November 2012, the Indiana Gaming Commission approved Tropicana Evansville to convert from a self-propelled riverboat to a permanently moored craft designation, contingent on successful completion of an emergency drill package to be approved by American Bureau of Shipping (ABS) and the addition of an additional passenger egress before the next annual inspection of the vessel (October 2013). In December 2012, the United States Coast Guard relinquished regulatory oversight of the Tropicana Evansville vessel after successful completion of the ABS drills, negating the requirement for the Alternative Security Program. Belle of Baton Rouge applies a customized alternative security program. The American Gaming Association's Alternative Security Program is specifically designed to address maritime security requirements at riverboat casinos and their respective dockside facilities. Changes to these regulations could adversely affect our business, financial condition and results of operations.
We are subject to cybersecurity risks and other cyber incidents resulting in disruption.
Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow. We depend on information technology systems. In addition, we collect, process and retain sensitive and confidential customer information in the normal course of business. Despite the security measures we have in place and any additional measures we may implement in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism or other events. Any disruption of our systems or security breach or event resulting in the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us directly or our third-party service providers, could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise affect our results of operations.
Noncompliance with environmental, health and safety regulations applicable to our hotels and casinos could adversely affect our results of operations.
As the owner, operator, and developer of real property, we must address, and may be liable for, hazardous materials or contamination of these sites and any other off-site locations at which any hazardous materials that our activities generate are disposed. Our ongoing operations are subject to stringent regulations relating to the protection of the environment and handling of waste, particularly with respect to the management of wastewater from our facilities. Any failure to comply with existing laws or regulations, the adoption of new laws or regulations with additional or more rigorous compliance standards, or the more

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vigorous enforcement of environmental laws or regulations could limit our future opportunities and, accordingly, could materially adversely affect our business, financial condition and results of operations by increasing our expenses and limiting our future opportunities.
The concentration and evolution of the slot machine manufacturing industry could impose additional costs on our operations.
A majority of our gaming revenue is attributable to slot machines operated at our gaming facilities. It is important, for competitive reasons, that we offer popular and technologically advanced slot machine games to our customers. A substantial majority of the slot machines sold in the United States in recent years were manufactured by a limited number of companies. A deterioration in the commercial arrangements with any of these slot machine manufacturers or significant industry demand, could result in our being unable to acquire the slot machines desired by our customers or could result in manufacturers significantly increasing the cost of these machines. Going forward, the inability to obtain new and up to date slot machine games could impair our competitive position and result in decreased gaming revenues at our casinos. In addition, increases in the costs associated with acquiring slot machine games could adversely affect our profitability and, accordingly, have a material adverse effect on our business, financial condition and results of operations.
In recent years, the prices of new slot machines have dramatically increased. Furthermore, in recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring gaming operators to execute participation lease arrangements for them to be able to offer such machines to patrons. Participation slot machine leasing arrangements typically require the payment of a fixed daily rental fee. Such agreements may (depending on regulatory restrictions in the applicable jurisdiction) also include a percentage payment to the manufacturer based on the usage of the machine or the gaming company's receipts from the machine, sometimes referred to as "coin-in" or "net win" percentage payments. Generally, a slot machine participation lease is more expensive over the long term than the cost of purchasing a new slot machine. We have slot machine participation leases at most of our properties.
For competitive reasons, we may be forced to purchase new, more contemporary slot machines, or enter into participation lease arrangements that are more expensive than the costs currently associated with the continued operation of existing slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased investment and participation lease costs, it could materially adversely affect our business, financial condition and results of operations.
We may not have or be able to obtain sufficient insurance coverage to replace or cover the full value of losses we may suffer.
Our casino properties may be subject to extreme weather conditions, including, but not limited to, hurricanes and floods. In the future, such extreme weather conditions may interrupt our operations, damage our properties, and reduce the number of customers who visit our facilities. Although we maintain both property and business interruption insurance coverage for certain extreme weather conditions, such coverage is subject to deductibles and limits on maximum benefits, including limitation on the coverage period for business interruption. We cannot assure you that we will be able to fully insure such losses or fully collect, if at all, on claims resulting from such extreme weather conditions. In addition, extreme weather events such as hurricanes and floods have resulted in increases in insurance premiums, increased deductibles and less favorable coverage terms. Furthermore, such extreme weather conditions may interrupt or impede access to our affected properties and may cause visits to our affected properties to decrease for an indefinite period.
While we maintain insurance against many risks to the extent and in amounts that we believe are reasonable, these policies will not cover all risks. Furthermore, portions of our businesses are difficult or impracticable to insure. Therefore, after carefully weighing the costs, risks, and benefits of retaining versus insuring various risks, as well as the availability of certain types of insurance coverage, we occasionally may opt to retain certain risks not covered by our insurance policies. Retained risks are associated with deductible limits or self-insured retentions, partial self-insurance programs and insurance policy coverage ceilings.
We carry certain insurance policies that, in the event of certain substantial losses, may not be sufficient to pay the full current market value or current replacement cost of damaged property. As a result, if a significant event were to occur that is not fully covered by our insurance policies, we may lose all, or a portion of, the capital we have invested in a property, as well as the anticipated future revenue from such property. We cannot assure that we will not face uninsured losses pertaining to the risks we have retained. Consequently, uninsured losses may negatively affect our financial condition, liquidity and results of operations.

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We may not be able to obtain sufficient insurance coverage and cannot predict whether we may encounter difficulty in collecting on any insurance claims we may submit, including claims for business interruption.
Energy price increases may adversely affect our business, financial condition and results of operations due to the significant amounts of energy used in our operations.
Our casino properties use significant amounts of electricity, oil, natural gas and other forms of energy. Substantial increases in energy and fuel prices may negatively affect our businesses, financial condition and results of operations in the future. The extent of the impact is subject to the magnitude and duration of the energy and fuel price increases, but the impact could be material. In addition, energy and gasoline price increases in cities that constitute a significant source of customers for our properties could result in a decline in disposable income of potential customers and a corresponding decrease in visitation and spending at our properties, which would negatively impact our revenues. Further, increases in fuel prices, and resulting increases in transportation costs, could materially adversely affect our business, financial condition and results of operations.
Our investment activities are subject to risks that may adversely affect our results of operations, liquidity and financial condition.
From time to time we may invest in marketable securities, or derivatives thereof, including higher risk equity securities and high yield debt instruments. These securities are subject to general credit, liquidity, market risks and interest rate fluctuations that can affect various sectors of the financial markets, including the credit and stock markets. The market risks associated with any investments we may make may have a material adverse effect on our results of operations, liquidity and financial condition.
Our investments at any given time also may become highly concentrated within a particular company, industry, asset category, trading style or financial or economic market. In that event, our investment portfolio will be more susceptible to fluctuations in value resulting from adverse economic conditions affecting the performance of that particular company, industry, asset category, trading style or economic market than a less concentrated portfolio would be. As a result, our investment portfolio could become concentrated and its aggregate return may be volatile and may be affected substantially by the performance of only one or a few holdings.
For reasons not necessarily attributable to any of the risks set forth in this Form 10-K (for example, supply/demand imbalances or other market forces), the prices of the securities in which we invest may decline substantially.
We may face potential successor liability for liabilities of the Predecessors not provided for in the Plan.
As the successor to the Predecessors, we may be subject to certain liabilities of the Predecessors not provided for in the Plan. Such liabilities may arise in a number of circumstances, including, but not limited to, those where:
a creditor of the Predecessors did not receive proper notice of the pendency of the bankruptcy case relating to the Plan or the deadline for filing claims therein;
the injury giving rise to, or the source of, a creditor's claim did not manifest itself in time for the creditor to file the creditor's claim;
a creditor did not timely file the creditor's claim in such bankruptcy case due to excusable neglect;
we are liable for the Predecessors' federal and/or state tax liabilities under a theory of successor liability; or
the order of confirmation for the Plan was procured by fraud.
Although we have no reason to believe that we will become subject to liabilities of the Predecessors that are not provided for in the Plan, should we become subject to such liabilities, they could materially adversely affect our business, financial condition and results of operations.
Atlantic City property tax valuations and market declines have created stress on the City of Atlantic City’s ability to manage its finances and have created uncertainty about Atlantic City’s fiscal solvency.
In recent years real property tax valuations and assessments of Atlantic City casinos have been significantly reduced as a result of various N.J. Tax Court proceedings involving casino properties. In addition, since January 2014 five Atlantic City casinos have closed and three were sold at reduced values further eroding the municipal tax base. As a result, Atlantic City has suffered an erosion of its municipal tax base, has outstanding debt in excess of $500 million and serious ongoing municipal operating budget deficits. In May 2016, New Jersey enacted the Casino Property Tax Stabilization Act (the "NJ PILOT Law") that commenced in January 2017, which exempts Atlantic City gaming properties from ad valorem property taxation and requires these gaming properties to make to make annual payment in lieu of tax payments ("PILOT Payments") to the City of

26


Atlantic City, and other payments to the State of New Jersey to assist in the stabilization of Atlantic City finances. In addition, in November 2016 the State of New Jersey commenced a takeover of certain Atlantic City local government operations, which gives the State the ability to direct certain financial and operational matters on behalf of the city, in an effort to stabilize and strengthen its financial situation. If Atlantic City is unable to maintain fiscal stability it could have an adverse impact on the Atlantic City casino industry including our Tropicana AC property.
Risks Related to Our Indebtedness
Circumstances may arise whereby the Company may become overleveraged, which could have significant negative consequences.
As of December 31, 2016, we had total indebtedness of approximately $290.3 million, which represents the outstanding balance under our Term Loan Facility. Circumstances may arise that could cause us to become overleveraged, which could have significant negative consequences, including:
we may be vulnerable to a downturn in the markets in which we operate or a downturn in the economy in general;
we may be required to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, which would limit our ability to use cash flows to fund working capital, capital expenditures, and other general corporate requirements;
we may be limited in our flexibility to plan for, or react to, changes in our businesses and the industry in which we operate or entry of new competitors into our markets;
we may be placed at a competitive disadvantage compared to our competitors that have less debt;
we may be limited in borrowing additional funds; and
we may have difficulties in satisfying our obligations under our current indebtedness, including the Term Loan Facility.
Our indebtedness is subject to floating interest rates, which may expose us to higher interest payments.
Our indebtedness is subject to floating interest rates, which makes us more vulnerable in the event of adverse economic conditions, increases in prevailing interest rates, or a downturn in our business. As of December 31, 2016, approximately $290.3 million of our indebtedness, which represents the face value of the outstanding balance under our Term Loan Facility, was subject to floating interest rates. We currently have no hedging arrangements in place to mitigate the impact of higher interest rates.
Our indebtedness could adversely affect our business, financial condition and results of operations and prevent us from fulfilling our obligations under the terms of our indebtedness.
Our indebtedness could adversely affect our business, financial condition and results of operations and prevent us from fulfilling our obligations under the terms of our indebtedness. The terms of the Term Loan Facility require us to comply with a senior secured net leverage ratio. The Term Loan Facility contains mandatory prepayment provisions from proceeds received by us and our subsidiaries as a result of asset sales, the incurrence of indebtedness and issuance of equity, casualty events and excess cash flow (subject in each case to certain exceptions). In addition, other covenants in the Term Loan Facility may restrict our flexibility. Such covenants include limitations on indebtedness, liens, investments, acquisitions, asset sales, dividends and other restricted payments, and affiliate and extraordinary transactions. Failure to comply with these covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on our business, results of operations and financial conditions. Additionally, there may be factors beyond our control that could affect our ability to meet debt service requirements. Our ability to meet debt service requirements will depend on our future performance and our ability to sustain sales conditions in the markets in which we operate, the economy generally, and other factors that are beyond our control. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure that our businesses will generate sufficient cash flow from operations or that future borrowings will be available in amounts sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We cannot assure that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. If we are unable to make scheduled debt payments or comply with the other provisions of our debt instruments, our lenders will be permitted under certain circumstances to accelerate the maturity of the indebtedness owing to them and exercise other remedies provided for in those instruments and under applicable law.


27


Risks Related to Our Common Stock
Mr. Carl C. Icahn exerts significant influence over us and his interests may conflict with the interest of our other stockholders.
Mr. Carl C. Icahn, the chairman of our board of directors, controlled approximately 72.5% of the outstanding shares of our common stock as of December 31, 2016. Mr. Icahn is able to control or exert substantial influence over us, including the election of our directors and controlling most matters requiring board and stockholder approval, including business strategies, mergers, business combinations, acquisitions or dispositions of significant assets, issuances of common stock, incurrence of debt or other financings. The existence of a controlling stockholder may have the effect of making it difficult for, or may discourage or delay, a third party from seeking to acquire, a majority of our outstanding common stock, which may decrease the value of shares held by other stockholders. Entities affiliated with Mr. Icahn hold financial interests that may be competitive to us. For example, entities affiliated with Mr. Icahn are owners of and lenders to Trump Entertainment Resorts, Inc.
As disclosed by a Schedule 13D/A filed on August 17, 2015, Mr. Icahn and the Reporting Persons listed therein do not intend to sell their respective shares pursuant to our Stock Repurchase Program and, accordingly, the percentage of our shares beneficially owned by the Reporting Persons has increased and may continue to increase during the Stock Repurchase Program, thus further increasing Mr. Icahn's control and influence over us.
As a public company, we may have reduced access to resources of, and benefits provided by, entities affiliated with Mr. Carl Icahn.
We believe that our relationship with entities affiliated with Mr. Icahn has, in many cases, provided us with a competitive advantage in identifying and attracting partners for critical supply and buying arrangements. In January 2013 we acquired an equity interest in Insight Portfolio Group, LLC, (“Insight Portfolio”) a company that provides consulting services and expertise in sourcing goods and services and insurance products to its members who consist of Icahn portfolio companies. As a member of Insight Portfolio we are afforded the opportunity to purchase goods, services and property from vendors with whom Insight Portfolio has negotiated rates and terms. Insight Portfolio does not guarantee that we will purchase any goods, services or property from any such vendors, and we are under no obligation to do so. We have purchased a variety of goods and services as members of the buying group at prices and on terms that we believe are more favorable than those that would be achieved on a stand-alone basis.
If we were unable to participate in these supply and buying group arrangements, our costs could increase, which could materially adversely affect our business, financial condition and results of operations.
Our common stock is traded on the OTCQB Market, is illiquid and subject to price volatility unrelated to our operations.
Our shares of common stock are currently traded on the OTCQB Market. Many institutional investors have investment policies which prohibit them from trading in stocks on the OTCQB Market. As a result, stocks traded on the OTCQB Market generally have a more limited trading volume and exhibit a wide spread between the bid/ask quotations than stock traded on national exchanges.
In addition, the stock market is subject to extreme price and volume fluctuations. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, our quarterly operating results, operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. Certain of these factors can have a significant effect on the market price for our stock for reasons that are unrelated to our operating performance.
Issuance of common stock to our management and directors will dilute our stockholders.
On the Effective Date, 7% of our common stock, on a fully diluted basis, was reserved for issuance as grants of stock, restricted stock, options, or similar equity awards in connection with a management and director equity incentive program, which has not yet been adopted. Any future issuance of common stock will dilute the percentage ownership of existing holders of our common stock. For example, the issuance of the full 7%, or 1,881,720 shares of common stock, would dilute a stockholder with 1% of the pre-issuance outstanding shares by 0.07%, resulting in a post-issuance ownership of 0.93% by that stockholder.

28


We have not paid dividends in the past, and do not plan to pay dividends in the future.
We do not plan to pay any dividends or make any distributions on our common stock in the foreseeable future. We also have certain restrictions under the Term Loan Facility from paying dividends in the future. Therefore you should not expect to receive any dividend income from our shares of common stock.
Our Stock Repurchase Program could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of our common stock
On July 31, 2015, our Board of Directors authorized the repurchase of up to $50 million of our outstanding common stock. The Stock Repurchase Program will end upon the earlier of the date on which the plan is terminated by the Board or when all authorized repurchases are completed. The timing and amount of stock repurchases, if any, will be determined based upon our evaluation of market conditions and other factors. The Stock Repurchase Program may be suspended, modified or discontinued at any time and we have no obligation to repurchase any amount of our common stock under the Stock Repurchase Program. Repurchases pursuant to our Stock Repurchase Program could affect our stock price and increase the volatility of our common stock. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. We cannot assure you that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchase shares of common stock. Although our Stock Repurchase Program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program's effectiveness. As of December 31, 2016, the Company has repurchased 1,677,988 shares of our common stock at a total cost of $42.8 million under this Stock Repurchase Program.
ITEM 1B.    UNRESOLVED STAFF COMMENTS.
Not applicable.
ITEM 2.    PROPERTIES.
See "Item 1.—Business—Properties and Segments" for a brief description of the location and general character of each of our properties.
East
Tropicana AC is situated along the Boardwalk in Atlantic City, New Jersey, on approximately 14 acres, which we own.
Central
Tropicana Evansville is a riverboat casino, hotel and entertainment complex situated on approximately 20 acres along the Ohio River in Evansville, Indiana. We own the riverboat along with 10 acres and the remaining 10 acres are leased from the City of Evansville. In January 2016, the Company and the City of Evansville entered into a sixth amendment to the lease agreement (the "Sixth Amendment"), which was approved by the Indiana Gaming Commission in February 2016, along with the Company's application to move its casino operations from its current dockside gaming vessel to a future-developed landside gaming facility. Under the Sixth Amendment, in exchange for the Company's commitment to expend at least $50 million to develop a landside gaming facility (the "Tropicana Development Project"), along with a pre-payment of lease rent in the amount of $25 million (the "Rental Pre-Payments"), the City of Evansville granted the Company a $20 million redevelopment credit (the "Redevelopment Credit"). In December 2015 the Company paid the first $12.5 million Rental Pre-Payment, and the second $12.5 million Rental Pre-Payment is due upon the opening of the Tropicana Development Project. Both the Rental Pre-Payments and the Redevelopment Credit will be applied against future rent in equal monthly amounts over a period of one hundred and twenty (120) months commencing upon the opening of the Tropicana Development to the public. Under the terms of the lease, as amended by the Sixth Amendment, the Company may extend the lease term through November 30, 2055 by exercising renewal options. The current term commenced December 1, 2015 and expires November 30, 2027 under the terms of the Sixth Amendment. Thereafter, the Company may extend the lease for a three (3) year term through November 30, 2030, followed by five (5) five-year renewal options through November 30, 2055. Under the terms of the Sixth Amendment, in the event the Company decides not to exercise its renewal option(s) and continues to conduct gaming operations in the City of Evansville, the lease may not be terminated and will continue through November 30, 2055, unless the Company and the City of Evansville enter into a replacement agreement that includes payments to the City of Evansville in the amount equal to rent payments under the lease. Under the terms of the lease, as amended by the Sixth Amendment, the Company is required to pay a

29


percentage of the adjusted gross receipts ("AGR") for the year in rent with a minimum annual rent of no less than $2 million. The percentage rent is equal to 2% of the AGR up to $25 million, plus 4% of the AGR in excess of $25 million up to $50 million, plus 6% of the AGR in excess of $50 million up to $75 million, plus 8% of the AGR in excess of $75 million up to $100 million, plus 10% of the AGR in excess of $100 million.
Pursuant to the terms of the Sixth Amendment, the Company has commenced construction of the new landside gaming facility, which will encompass 75,000 square feet of enclosed space (including approximately 45,000 square feet of casino floor, additional food and beverage outlets and back of house space). In addition, pursuant to the Sixth Amendment, the Company intends to remove its riverboat casino from its current location, so that the Evansville LST 325 Maritime vessel, a historic warship, can be docked in its place. In addition, the Company anticipates making available to the City of Evansville and other parties, space within the existing pavilion building for a ticket counter, museum and/or gift shop to support the Evansville LST 325 Maritime vessel.
Lumière Place is located on approximately 20 acres, which we own, located in historic downtown St. Louis, Missouri.
West
Tropicana Laughlin is located in Laughlin, Nevada. Tropicana Laughlin is situated on approximately 31 acres, which we own. In addition, in 2014 we acquired approximately 57 acres of land immediately surrounding Tropicana Laughlin.
MontBleu is situated on approximately 21 acres in South Lake Tahoe, Nevada. We have a lease agreement with respect to the land and building which MontBleu operates through December 31, 2028, and subject to a further 25 year renewal at our option. Under the terms of the lease, rent is $333,333 per month, plus 10% of gross revenues in excess of $50 million through December 31, 2011. Beginning in 2012, rent is calculated as the greater of (i) $333,333 per month as increased by the same percentage that the Consumer Price Index has increased from 2009 thereafter, or (ii) 10% of gross revenues.
South
Tropicana Greenville is situated on approximately six acres of property along the Mississippi River levee in Greenville, Mississippi. In 2014, we expanded the gaming space and added a new restaurant and parking spaces at Tropicana Greenville and discontinued the dockside riverboat operation at that property. Tropicana Greenville owns the facility in which it conducts its operations and leases the land on which the casino and parking facilities are situated. We are required to pay an amount equal to 2% of Tropicana Greenville's monthly gross gaming revenues in rent, with a minimum monthly payment of $75,000. In addition, in any given year in which Tropicana Greenville's annual gross gaming revenues exceed $36.6 million, we are required to pay 8% of the excess amount as rent pursuant to the terms of the lease. The current lease has been extended through June 2019 with options to extend its term through 2044.

Tropicana Greenville also leases, from the Board of Mississippi Levee Commissioners, and operates the Greenville Inn and Suites, a 40-room all-suite hotel, located less than a mile from the casino. The current lease term for the property, which is through February 2021, is for monthly lease payments of $7,300.
In October 2013, Tropicana Greenville entered into an additional lease agreement with the City of Greenville, Mississippi, for a parcel of land adjacent to Tropicana Greenville upon which the Company constructed a parking lot in conjunction with its expansion of the Tropicana Greenville casino. The initial term of the lease expires in August 2020, and the Company has several options to extend the lease for a total term of up to twenty-five years. Initial annual rent is $0.4 million with rent adjustments in option periods based upon the Consumer Price Index.
Belle of Baton Rouge is a dockside riverboat situated on approximately 23 acres on the Mississippi River in Baton Rouge, Louisiana. We lease certain land and buildings under separate leases, with annual payments of $0.2 million. In addition, we lease a parking lot with annual base rent of $0.4 million, plus 0.94% of annual Adjusted Gross Revenue in excess of $45.0 million but not to exceed $80.0 million through August 2017.
Tropicana Aruba, is a hotel, timeshare and casino resort property located in Palm Beach, Aruba on approximately 14 acres of land which are leased through July 30, 2051. Under the terms of the land lease, the required annual payments are approximately $110,000.
Corporate
We also lease office space for our corporate headquarters in Las Vegas, Nevada. In addition to the property described above, we own or lease certain facilities that are not material to our operations.

30


ITEM 3.    LEGAL PROCEEDINGS.
Wimar and CSC Administrative Expense Claims
On March 31, 2009, Wimar Tahoe Corporation ("Wimar") and Columbia Sussex Corporation ("CSC") filed separate proceedings with the Bankruptcy Court related to administrative expense and priority claims against the Predecessors. On August 4, 2010, Wimar and CSC separately filed motions for summary judgment seeking payment on account of these claims from the Company totaling approximately $5.4 million, which was recorded as a liability upon emergence from bankruptcy and is included in accounts payable in our accompanying consolidated balance sheets as of December 31, 2016 and December 31, 2015. In its objection to Wimar and CSC's motions for summary judgment, the Company disputed the administrative expense and/or priority status of certain amounts claimed and also contended that any payment to CSC or Wimar should await the resolution of the adversary proceeding instituted by Lightsway Litigation Services, LLC, as Trustee of the Tropicana Litigation Trust established by the bankruptcy reorganization plan against CSC and Wimar (the "Litigation Trust Proceeding"), and be set off against any judgment against Wimar and CSC in the Litigation Trust Proceeding against them.
In October 2015, the Bankruptcy Court issued an opinion and entered an order (1) denying Wimar's and CSC's Motions for Summary Judgment seeking allowance and payment of administrative expense claims, (2) granting, in part, CSC's Motion for Summary Judgment to allow priority status under Bankruptcy Code Section 507(a)(5) for certain contributions made to employee benefit plans and denying, in part, CSC's request for prepayment of the priority claims. The Company has a motion pending with the Bankruptcy Court seeking clarification of certain aspects of the Bankruptcy Court's opinion and order. Any further litigation on the Wimar and CSC administrative expense claim has been consensually continued until after the Litigation Trust Proceeding is resolved. The Company continues to dispute any payment obligation to Wimar or CSC.
In addition, we are party to certain lawsuits in the normal course of business. While the outcome of any such open legal proceedings cannot at this time be predicted with certainty, we do not expect these matters will materially affect our financial condition or results of operations.
ITEM 4.    MINE SAFETY DISCLOSURES.
Not applicable.

31



PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Effective November 15, 2010, our common stock was quoted on the OTCQB Market under the symbol "TPCA".
The following table sets forth the high and low sales prices per share of our common stock on the OTCQB Market for the period indicated. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily reflect actual transactions.
 
 
High
 
Low
2016
 
 
 
 
First Quarter
 
$
18.40

 
$
15.00

Second Quarter
 
$
20.65

 
$
17.85

Third Quarter
 
$
23.75

 
$
17.00

Fourth Quarter
 
$
32.00

 
$
23.10

2015
 
 
 
 
First Quarter
 
$
17.25

 
$
15.00

Second Quarter
 
$
17.25

 
$
15.52

Third Quarter
 
$
17.00

 
$
14.80

Fourth Quarter
 
$
17.50

 
$
15.08

Holders
As of February 23, 2017, there were 14 holders of record of our common stock.
Dividends
We have not paid, and do not anticipate paying in the foreseeable future, any dividends or making any distributions on our common stock. We also have certain restrictions under the Term Loan Facility from paying dividends in the future.
Recent Sales of Unregistered Securities
We did not sell any unregistered securities during the period covered in this report that were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
This table provides information with respect to purchases by the Company of shares of its Common Stock on the open market as part of the Stock Repurchase Program during the three months ended December 31, 2016:
Period
 
Number of Shares Repurchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (in thousands)
October 1, 2016 through October 31, 2016
 
 
 
 
$
44,383

November 1, 2016 through November 30, 2016
 
915,327
 
$26.50
 
915,327
 
$
20,127

December 1, 2016 through December 31, 2016
 
431,937
 
$30.00
 
431,937
 
$
7,169


(1) On July 31, 2015, our Board of Directors authorized the repurchase of up to $50 million of our outstanding common stock with no set expiration date. On February 22, 2017, our Board of Directors authorized the repurchase of an additional $50 million of our outstanding common stock, for the repurchase of an aggregate amount of up to $100 million of our outstanding common stock. The Stock Repurchase Program will end upon the earlier of the date on which the plan is terminated by the Board of Directors or when all authorized repurchases are completed.


32


Stock Performance Graph
The graph below compares the cumulative total return on our common stock to the cumulative total return of the Dow Jones US Casino Index and the Russell 2000 Index for the period from December 31, 2012 through December 31, 2016. The performance graph assumes that $100 was invested on December 31, 2011 in each of the Company's common stock, the Dow Jones US Casino Index and the Russell 2000 Index, and that all dividends were reinvested. The stock price performance shown in this graph is neither necessarily indicative of, nor intended to suggest, future stock price performance.
a2015-12x3110_chartx48103a01.jpg
 
 
 
12/31/2012
 
12/31/2013
 
12/31/2014
 
12/31/2015
 
12/31/2016
Tropicana Entertainment Inc.
$
81.26

 
$
106.12

 
$
102.18

 
$
104.61

 
$
184.05

Dow Jones US Casino Index
$
108.91

 
$
183.68

 
$
145.47

 
$
107.76

 
$
133.84

Russell 2000 Index
$
114.63

 
$
157.05

 
$
162.60

 
$
153.31

 
$
183.17

The performance graph should not be deemed filed or incorporated by reference into any other of our filings under the Securities Act of 1933 or the Exchange Act of 1934, unless we specifically incorporate the performance graph by reference therein.

33


ITEM 6.    SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the data of the Company as of and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012. The selected financial data of the Company presented below has been derived from the audited consolidated statements of income of the Company for the years ended December 31, 2016, 2015 and 2014 for income statement data and the audited consolidated balance sheets as of December 31, 2016 and 2015 for balance sheet data, which are included elsewhere in this Annual Report on Form 10-K. The selected financial data of the Company, specifically the income statement data for the years ended December 31, 2013 and 2012 and the balance sheet data as of December 31, 2014, 2013 and 2012, has been derived from the audited financial statements of the Company which are not included in this Annual Report on Form 10-K. The selected financial data set forth below is qualified in its entirety by, and should be read in conjunction with, "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited financial statements, the notes thereto and other financial and statistical information included elsewhere in this Annual Report on Form 10-K. The historical results set forth below do not indicate results expected for any future periods. Our future results of operations will be subject to significant business, economic, regulatory and competitive uncertainties and contingencies, some of which are beyond our control.
Selected Financial Data—Tropicana Entertainment Inc.
 
 
Year ended December 31,
(in thousands, except per share data)
 
2016
 
2015
 
2014
 
2013
 
2012
Income Statement Data:
 
 
 
 
 
 

 
 
 
 
Net revenues
 
$
847,152

 
$
811,477

 
$
746,661

 
557,667

 
$
593,358

Operating income (a)
 
76,046

 
76,224

 
71,123

 
42,763

 
53,005

Income from continuing operations (b)
 
43,544

 
37,400

 
252,896

 
21,847

 
20,910

Basic and Diluted Earnings Per Share:
 
 
 
 
 
 

 
 

 
 

Income from continuing operations per share
 
$
1.68

 
$
1.42

 
$
9.61

 
$
0.83

 
$
0.79

Balance Sheet Data (as of period end):
 
 
 
 
 
 

 
 

 
 
Total assets
 
$
1,325,035

 
$
1,312,873

 
$
1,285,759

 
$
1,039,317

 
$
897,990

Total debt (c)
 
290,250

 
293,250

 
296,250

 
299,250

 
173,777

Total shareholders' equity
 
903,505

 
902,792

 
865,392

 
614,125

 
596,022

_______________________________________________________________________________
(a)
During 2014, the Company sold River Palms. Accordingly, the results of operations for River Palms are presented as discontinued operations for the years ended December 31, 2014, 2013 and 2012. This reclassification had no impact on previously reported net income.
(b)
During 2016, we recognized a gain of $1.0 million on insurance recoveries related to Lumière Place and a $3.1 million gain related to a settlement agreement for certain Predecessor professional fees paid.
In 2014, we acquired Lumière Place in April, recognized a gain of $5.6 million related to insurance recoveries and a gain of $31.7 million related to a property tax settlement at Tropicana AC, partially offset by a goodwill impairment of $9.1 million. Also during 2014, we recognized one-time gains of $52.7 million related to the settlement of certain predecessor related claims and reduced the valuation allowance related to the remaining net deferred tax assets by $188.2 million. The reduction reflects our expectation that it is more likely than not that we will generate future taxable income to utilize this amount of net deferred tax assets. The benefit from this reduction was recorded as a tax benefit for 2014.
During 2013, we recognized an impairment loss of $0.4 million related to damage to our Bayou Caddy's Jubilee Casino ("Jubilee") barge which we had closed in April 2012. During 2012, we recognized an impairment loss of $1.8 million related to our intangible assets and a gain of $4.3 million on insurance recoveries.
During the years ended December 31, 2013 and 2012, we recognized $4.9 million and $12.8 million, respectively in losses on debt retirement.
(c)
Total debt represents the face value of outstanding debt, including current and long-term portions, without giving effect for discounts or debt issuance costs.

34


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
We are an owner and operator of regional casino and entertainment properties located in the United States and one hotel, timeshare and casino resort property located on the island of Aruba. We also provide management services to the Taj Mahal in Atlantic City, which is a related party to the Company, that was closed in October 2016. Our United States properties include two casinos in Nevada and one casino in each of Indiana, Louisiana, Mississippi, Missouri and New Jersey. We primarily cater to local and regional guests to provide a fun and exciting gaming environment with high quality and high value lodging, dining, retail and entertainment amenities. Our properties offer a broad array of gaming options specifically tailored for our patrons in each market. As of December 31, 2016, our properties collectively included approximately 392,000 square feet of gaming space with approximately 7,900 slot machines, 270 table games and 5,500 hotel rooms.
We view each property as an operating segment which we aggregate by region in order to present our reportable segments: (i) East, (ii) Central, (iii) West and (iv) South. Our operations by region include the following:
East—Tropicana AC located in Atlantic City, New Jersey;
Central—Tropicana Evansville located in Evansville, Indiana; and Lumière Place located in St. Louis, Missouri;
West—Tropicana Laughlin located in Laughlin, Nevada; and MontBleu located in South Lake Tahoe, Nevada; and
South—Belle of Baton Rouge located in Baton Rouge, Louisiana; Tropicana Greenville located in Greenville, Mississippi; and Tropicana Aruba located in Palm Beach, Aruba.

In addition, the Company, through our wholly-owned subsidiary, TropWorld Games LLC, operates an online social gaming site. The operating results of all other subsidiaries of the Company are reported under the heading of "Corporate and other" as they have been determined to not meet the aggregation criteria as separately reportable segments.

In addition, in July 2014 the Company sold and concurrently leased back River Palms located in Laughlin, Nevada and by September 2014 had terminated the lease and discontinued its operations at the property. River Palms is presented as discontinued operations in the accompanying financial statements for 2014 and is not included in management's discussion and analysis of financial condition and results of operations.

Further, on April 1, 2014 we acquired Lumière Place Casino, HoteLumière, the Four Seasons Hotel St. Louis and related land parcels in St. Louis, Missouri (collectively, "Lumière Place").
We are a Delaware corporation formed on May 11, 2009 to acquire certain assets of TEH and certain of its subsidiaries pursuant to the Plan. We also acquired CP Vicksburg (which we sold in March 2011), JMBS Casino and CP Laughlin Realty, all of which were part of the Plan. In addition, we acquired certain assets of Adamar, an unconsolidated subsidiary of TEH, including Tropicana AC.
The Restructuring Transactions were consummated and became effective on the Effective Date, March 8, 2010, at which time we acquired Tropicana AC and several of the Predecessors' gaming properties and related assets. Prior to the Effective Date, we conducted no business, other than in connection with the reorganization of the Predecessors and the acquisition of Tropicana AC, and had no material assets or liabilities.
Presentation
References in this Annual Report on Form 10-K to "Successor" refer to the Company on or after March 8, 2010, after giving effect to (i) the issuance of 12,098,053 shares of common stock and Ordinary Warrants in accordance with the Plan, (ii) the entry into our Exit Facility in accordance with the Plan, which included the issuance of Penny Warrants, (iii) the application of fresh-start reporting and (iv) the issuance of 12,901,947 shares of our common stock related to the acquisition of Tropicana AC. References to "Predecessors" refer to the Predecessors prior to March 8, 2010.
Results of Operations
Our financial results are highly dependent upon the number of customers that we attract to our facilities and the amounts those customers spend per visit. Additionally, our operating results may be affected by, among other things, overall economic conditions affecting the discretionary spending of our customers, competitive factors, gaming tax increases and other regulatory changes, the opening or acquisition of new gaming operations, our ability to reinvest in our properties, potential future exposure for liabilities of the Predecessors that we assumed, our limited operating history, and general public sentiment regarding travel. We may experience significant fluctuations in our quarterly operating results due to seasonality and other factors. Historically,

35


our operating results are the strongest in the third quarter and the weakest in the fourth quarter. In addition, weather and long-weekend holidays affect our operating results.
Casino revenues are one of our main performance indicators and account for a significant portion of our net revenues. Casino revenues represent the difference between wins and losses from gaming activities such as slot machines and table games. Key volume indicators include table game volumes (drop) and slot volumes (handle), which refer to amounts wagered by our customers. Win or hold percentage represents the percentage of the amounts wagered by the customer that is won by the casino, which is not fully controllable by us, and recorded as casino revenue. Most of our revenues are cash-based, through customers wagering with cash or chips or paying for non-gaming services with cash or credit cards, and therefore are not subject to any significant or complex estimation. As a result, fluctuations in net revenues have a direct impact on cash flows from operating activities. Other performance indicators include hotel occupancy, which is a volume indicator for hotels, and the average daily rate, which is a price indicator for the amount customers paid for hotel rooms.
The following significant factors and trends should be considered in analyzing our operating performance:
Lumiére Place. In April 2014, we purchased Lumiére Place Casino, HoteLumiére, the Four Seasons Hotel St. Louis and related excess land parcels in St. Louis, Missouri (collectively, "Lumiére Place") for a cash purchase price of $261.3 million, which includes an adjustment for working capital as of the acquisition date.
Table games hold percentages. Casino revenues can vary because of table games hold percentages and differences in the odds for different table games. A variety of factors may impact table games hold, including variances in the amount of high end play. For the year ended December 31, 2016, the Company's total table games hold was 18.5%, compared to 16.8% for the year ended December 31, 2015 and 17.6% for the year ended December 31, 2014.
Atlantic City Market. Between January 2014 and October 2016, five Atlantic City casino hotels closed as a result of regional competitive market pressures and other factors. The Atlantic City gaming market experienced significant revenue declines in 2014 and 2015 due, in part, to these closures. For the years ended December 31, 2015 and 2014, Atlantic City experienced year over year declines in gaming revenues (including internet gaming) of 6.5% and 4.5%, respectively. In 2016, the Atlantic City gaming market experienced year over year growth in casino revenue (including revenue from internet gaming, which commenced in 2013) of 1.5%. Although Tropicana AC has increased market share as a result, in part, of the closings, the Atlantic City operating climate remains difficult. The seven remaining casino hotels located in Atlantic City, including Tropicana AC, compete with each other on the basis of customer service, quality and extent of amenities and promotional offers. In addition, in November 2016 the State of New Jersey commenced a takeover of certain Atlantic City local government operations under a law enacted in May 2016, which gives the State the ability to direct certain financial and operational matters on behalf of the city in an effort to stabilize and strengthen its financial situation. The State's ability to stabilize Atlantic City's finances and restructure its debt is an important step toward improving the Atlantic City market.
Debt and Interest Expense.  In November 2013, we entered into the credit facilities (the "Credit Facilities"), which consist of (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million issued at a discount of 0.5% (the "Term Loan Facility") and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the "Revolving Facility"). Commencing on December 31, 2013, the Term Loan Facility requires quarterly principal payments of $750,000 through September 2020 with the remaining outstanding amounts due on November 27, 2020, the maturity date. The obligations under the Term Loan Facility accrue interest at a floating rate which was 4.00% annually as of December 31, 2016. A portion of the net proceeds from the Term Loan Facility was used to repay in full the amounts outstanding under the then-existing term loan facility which totaled approximately $172.4 million in principal, accrued and unpaid interest.
Our interest expense was $12.7 million, $12.3 million and $12.9 million for the years ended December 31, 2016, 2015 and 2014, respectively, which includes amortization of the related debt discount and debt issuance costs of $1.0 million, in each of the years ended December 31, 2016, 2015 and 2014.
Insurance and other recoveries. In 2016, we filed a property damage and business interruption claim with our insurance carrier related to our HoteLumière room renovation project that commenced in July. In December 2016 we received insurance proceeds of $1.0 million toward the claim, which has been recorded as a gain in 2016. We expect to receive additional insurance recoveries related to the claim once the project is completed.
In 2014, we settled the filed claims related to damages sustained on the Jubilee barge in 2013 for $5.9 million and received the balance of $5.2 million in insurance proceeds related to this claim, resulting in a gain of $4.4 million.

36


We filed a claim in 2013 with our insurance carriers relating to business interruption at Tropicana AC as a result of Superstorm Sandy and received a cash settlement of $1.3 million during 2014.
Impairment Losses.  In 2014, we determined there was an indication of impairment related to goodwill tested at the Tropicana AC reporting unit and recognized a $9.1 million goodwill impairment due to Tropicana AC's goodwill carrying value exceeding its fair value. 
Predecessor related gain settlements. In July 2016, the Bankruptcy Court approved a settlement agreement related to the Predecessors, which resulted in the Company receiving a payment of $3.1 million related to certain professional fees previously paid by the Company. This amount was recognized as a one-time gain on the Company's consolidated statement of income in 2016.
In 2014, we recorded one-time gains totaling $52.7 million related to the settlement of certain claims related to the Predecessors in other income on our consolidated statement of income for 2014. We also received in 2014 a $31.7 million cash payment to satisfy a property tax settlement in Atlantic City, which is recorded as a gain in property tax settlement in our consolidated statement of income for 2014.
Deferred taxes. In 2014, we reduced the valuation allowance related to the deferred tax assets by $188.2 million. The reduction reflects our expectation that it is more likely than not that we will generate future taxable income to utilize this amount of net deferred tax assets. The benefit from this reduction was recorded as a tax benefit for 2014.
River Palms. On July 1, 2014, we sold substantially all of the assets constituting River Palms to Nevada Restaurant Services, Inc. and its affiliate, Laughlin Hotel, LLC, for approximately $6.8 million in cash and the assumption of certain liabilities. Concurrently with the sale, we leased back River Palms. We terminated the lease and discontinued operations at River Palms in September 2014. Due to the sale of River Palms and the termination of its operations in September 2014, the results of operations for River Palms are presented as discontinued operations. In addition, River Palms is not included in management's discussion and analysis of financial condition and results of operations.
Cost Efficiencies. We continue to focus on efficiency initiatives, which in the past have included centralizing purchasing functions to reduce costs and maximize our potential buying power, consolidating and streamlining certain back office operations and decreasing benefits expense relating to our company-sponsored plans.

Year ended December 31, 2016 compared to year ended December 31, 2015
The following table presents detail of our net revenues (in thousands):
 
 
Year ended December 31,
 
 
2016
 
2015
Revenues:
 
 
 
 
Casino
 
$
666,047

 
$
640,793

Room
 
129,124

 
121,666

Food and beverage
 
107,455

 
107,174

Other
 
30,988

 
29,350

Management fee from related party
 
3,583

 

Gross revenues
 
937,197

 
898,983

Less promotional allowances
 
(90,045
)
 
(87,506
)
Net revenues
 
$
847,152

 
$
811,477


37



The following table sets forth certain information concerning our results of operations (dollars in thousands):
 
 
Year ended December 31,
 
 
2016
 
2015
Net revenues:
 
 
 
 
East
 
$
344,124

 
$
322,309

Central
 
290,024

 
288,882

West
 
110,154

 
104,610

South
 
99,267

 
95,676

Corporate and other
 
3,583

 

Total net revenues
 
$
847,152

 
$
811,477

Operating income:
 
 
 
 
East
 
$
21,308

 
$
30,932

Central
 
48,136

 
42,529

West
 
13,373

 
11,405

South
 
8,602

 
7,801

Corporate and other
 
(15,373
)
 
(16,443
)
Total operating income
 
$
76,046

 
$
76,224

Operating income margin(a):
 
 
 
 
East
 
6.2
%
 
9.6
%
Central
 
16.6
%
 
14.7
%
West
 
12.1
%
 
10.9
%
South
 
8.7
%
 
8.2
%
Total operating income margin
 
9.0
%
 
9.4
%
_______________________________________________________________________________
(a)
Operating income margin is operating income as a percentage of net revenues.
Net Revenues
Five Atlantic City casino hotels have closed between January 2014 and October 2016 as a result of regional competitive market pressures and other factors, including the Taj Mahal in October 2016. In 2016, the Atlantic City gaming market experienced year over year growth in casino revenue (including revenue from internet gaming) of 1.5%. At Tropicana AC, total gross gaming revenues increased 9.0% in 2016 over 2015, including a 12.7% increase in internet gaming revenues. The increased net revenues for Tropicana AC were primarily driven by increased customer volumes, resulting in a 7.4% increase in slot volumes and a 5.2% increase in table game volumes, combined with a 1.6 point increase in the table hold, from 14.8% in 2015 to 16.4% in 2016. The improvement in customer volumes was driven by several factors, such as the renovation projects completed in 2016 and mid-2015, which included hotel room renovations, a new high-end slot area on the casino floor, a new Trop Advantage club promotional area and other improvements. In addition, when the Taj Mahal closed in October 2016, Tropicana AC entered into an agreement to license the Taj Mahal customer database, and is able to market directly to customers who formerly visited the Taj Mahal. Hotel revenues at Tropicana AC also increased due to higher occupancy rates and average room rates in 2016. The average daily room rate increased to $90 from $89 for the years ended December 31, 2016 and 2015, respectively. The occupancy rate for the year ended December 31, 2016 was 81%, up from 79% for the prior year period.
In the Central region, net revenues were $290.0 million in 2016, reflecting a slight increase over 2015 net revenues of $288.9 million. Although slot volumes in the region declined 1.1% in 2016 from 2015 levels, table volumes increased 3.3% year over year, and combined with a 2.0 point increase in the table hold, from 19.4% in 2015 to 21.4% in 2016, resulted in a 13.8% increase in table revenues year over year. Gaming revenues at Tropicana Evansville increased 3.7% in 2016 over 2015, resulting from an increase in slot volumes of 3.5% and in table game volumes of 7.5% over 2015, combined with a 1.4 point increase in the table hold, from 21.3% in 2015 to 22.7% in 2016. The increases at Tropicana Evansville offset a 1.9% decline in gaming revenue at Lumière Place for the year ended December 31, 2016, where a hotel renovation project which commenced in July 2016 significantly impacted business levels within the casino in the second half of the year, offsetting improvements gained in the first half of the year as a result of strategic marketing efforts aimed at increasing customer volumes. The average daily room rate for the year ended December 31, 2016 in the Central region was $140, compared to $134 for the year ended December 31, 2015. For the year ended December 31, 2016, the occupancy rate, as calculated excluding the rooms that were out of service due to the renovations at HoteLumière, was 80%, compared to 78% occupancy for the year ended December 31, 2015; however, when calculated based on the total rooms at HoteLumière, our occupancy rate in the Central region was 73% for 2016.

38


In the West region, net revenues were $110.2 million for the year ended December 31, 2016, an increase of $5.5 million, or 5.3%, compared to the year ended December 31, 2015. The increase was primarily driven by increases in casino revenues within the region, which in turn were driven by a 1.4% increase in slot volumes and a 4.0% increase in table games volume in 2016 over 2015. In addition, the table hold in the West region of 21.0% in 2016 was 2.6 points higher than the 18.4% hold in 2015. Casino revenues for the Laughlin and the South Lake Tahoe markets, as reported for the year 2016, increased 1.2% and 5.2%, respectively, over the year 2015, with improvements in part attributable to lower gas prices during the year prompting increased tourism travel in this region. In addition, property renovations completed at MontBleu in late 2015 contributed to the improved casino results in 2016. Hotel and food and beverage revenues in the West region also increased 14.3% and 4.7%, respectively, in 2016 over 2015, with increases attributable to the increased customer volumes through the properties. The average daily room rate for the West region was $55 for the year ended December 31, 2016 compared to $51 for the year ended December 31, 2015. The occupancy rate for the each of the years ended December 31, 2016 and 2015 at our properties in the West region was 56%.
In the South region, net revenues were $99.3 million for the year ended December 31, 2016, an increase of $3.6 million, or 3.8%, compared to the year ended December 31, 2015. Although gross gaming revenues (before the deductions for free play redeemed by gaming customers) in the region increased 2.0% in 2016 over 2015, resulting from a 2.1% increase in slot volumes, slot free play redeemed increased 9.4% in 2016 over 2015; as a result, total net casino revenues were only slightly higher in 2016 over 2015. In the first half of 2016, casino volumes at Belle of Baton Rouge were negatively impacted by declines in the local economy which were driven by low oil and gas prices resulting in layoffs in that industry which is a major employer in southern Louisiana. Casino volumes were further impacted by civil unrest in Baton Rouge and damaging rain and flooding in the area in the early third quarter of 2016; however, the recovery efforts for the flooding, which resulted in an influx of federal aid workers and building contractors into the area starting in late August 2016, positively impacted gaming and non-gaming revenues for the remainder of the year. Timeshare sales at the Tropicana Aruba property, which commenced in late 2015, were $3.3 million in 2016, compared to $0.4 million in 2015. The occupancy rate at our properties in the South region was 78% and 70% for the years ended December 31, 2016 and 2015, respectively. The average daily room rate for the South region was $78 and $79 for the years ended December 31, 2016 and 2015, respectively.
Net revenues for Corporate and other for the year ended December 31, 2016 of $3.6 million represents the management fee earned as a result of our management of the Taj Mahal, which is a related party of the Company.
Operating Income
In the East region, the operating income for the year ended December 31, 2016 was $21.3 million, a $9.6 million decrease compared to the year ended December 31, 2015. Although net revenues in the East region increased $21.8 million in 2016 over 2015, expenses such as depreciation and CRDA reserves also increased, offsetting the improvement in revenues. Depreciation expense at Tropicana AC increased $5.9 million in 2016 over 2015, primarily due to the renovation projects completed in those years. Also in 2016, total expense associated with increases in CRDA reserves was $8.7 million, reflecting a $10.7 million increase as compared to a net reduction in expense in 2015 related to changes in CRDA reserves of $2.0 million. In addition, variable operating expenses such as gaming taxes, payroll costs and promotional and advertising costs also increased for the year ended December 31, 2016 as compared to the year ended December 31, 2015.
In the Central region, the operating income for the year ended December 31, 2016 was $48.1 million, a $5.6 million increase compared to the year ended December 31, 2015. The improvement in operating income in the Central region in 2016 was due to the increase in net revenues, as previously discussed, combined with lower depreciation expense in the region, principally at Lumière Place, where most of the furniture, fixtures and equipment that were acquired with the Lumière acquisition in 2014 was assigned a two year remaining life, and were fully depreciated in early 2016. In addition, operating income for 2016 at Lumière Place includes a $1.0 million gain on insurance proceeds for an insurance payment received.
In the West region, the operating income for the year ended December 31, 2016 was $13.4 million, a $2.0 million increase compared to the year ended December 31, 2015. Although net revenue in the West region improved by $5.5 million, as previously discussed, this increase was partially offset by higher expenses, primarily a $2.8 million increase in depreciation expense resulting from the renovation project that was completed at MontBleu in late 2015 and other capital projects at Tropicana Laughlin that were completed in 2016.
In the South region operating income for the year ended December 31, 2016 was $8.6 million, a $0.8 million increase compared to the year ended December 31, 2015. Although net revenues in this region increased $3.6 million in 2016 over 2015, increased expenses at Tropicana Aruba partially offset the improvement in revenues. The increase in expenses included costs associated with accounting for timeshare sales at Tropicana Aruba, as well as an increase in bad debt reserves at the property of $0.7 million for a deposit for furniture that was ordered but never received and $0.2 million for a receivable from a third party facilitator of online reservations who sent out notifications in October 2016 that they were ceasing operations and liquidating their assets.

39


The Corporate and other operating loss of $15.4 million for the year ended December 31, 2016, was $1.1 million lower than the operating loss for the year ended December 31, 2015, primarily due to management fee revenue earned as a result of our management of the Taj Mahal, as previously discussed, offset partially by higher expenses, principally higher incentive costs resulting from the improved consolidated operating results for 2016, together with an accrual for the long term incentive program that was adopted in 2016.
Interest Expense
Interest expense for the years ended December 31, 2016 and 2015 was $12.7 million and $12.3 million, respectively. The interest expense for the year ended December 31, 2016 increased compared to the year ended December 31, 2015 primarily due to higher capitalization of interest in 2015 related to ongoing construction projects. The Term Loan Facility, which was funded in November 2013, accrues interest at a floating rate, which was 4.0% per annum at each of December 31, 2016 and 2015. Cash paid for interest, net of amounts capitalized, was $11.7 million and $11.5 million for the years ended December 31, 2016 and 2015, respectively. The increase in cash paid for interest was attributable to the higher capitalization of interest in 2015, as discussed. Interest expense also includes $1.0 million of amortization of debt issuance costs and discounts for the each of the years ended December 31, 2016 and 2015.
Predecessor Claim Settlements
In July 2016, the Bankruptcy Court approved a settlement agreement related to the Predecessors, which resulted in the Company receiving a payment of $3.1 million related to certain professional fees previously paid by the Company. This amount was recognized as a one-time gain in 2016.
Income Taxes
Income tax expense was $23.7 million for the year ended December 31, 2016 and our effective income tax rate was 35.2%. The difference between the federal statutory rate of 35% and the effective tax rate for the year ended December 31, 2016 was primarily due to the disallowed foreign losses, state income taxes (net of federal benefit), valuation allowances and other permanent differences. For the year ended December 31, 2015, income tax expense was $27.1 million and our effective tax rate was 42.0%. The difference between the federal statutory rate of 35% and the effective tax rate for the year ended December 31, 2015 was primarily due to the disallowed foreign losses, state income taxes (net of federal benefit), and other permanent differences.
Year ended December 31, 2015 compared to year ended December 31, 2014
The following table presents detail of our net revenues (in thousands):
 
 
Year ended December 31,
 
 
2015
 
2014
Revenues:
 
 
 
 

Casino
 
$
640,793

 
$
592,467

Rooms
 
121,666

 
113,890

Food and beverage
 
107,174

 
103,319

Other
 
29,350

 
26,594

Gross revenues
 
898,983

 
836,270

Less promotional allowances
 
(87,506
)
 
(89,609
)
Net revenues
 
$
811,477

 
$
746,661


40


The following table sets forth certain information concerning our results of operations by region (dollars in thousands):
 
 
Year ended December 31,
 
 
2015
 
2014
Net revenues:
 
 
 
 

East
 
$
322,309

 
$
303,079

Central
 
288,882

 
247,784

West
 
104,610

 
103,147

South
 
95,676

 
92,651

Corporate and other
 

 

Total net revenues
 
$
811,477

 
$
746,661

Operating income:
 
 
 
 

East
 
$
30,932

 
$
44,121

Central
 
42,529

 
30,119

West
 
11,405

 
13,564

South
 
7,801

 
10,337

Corporate and other
 
(16,443
)
 
(27,018
)
Total operating income
 
$
76,224

 
$
71,123

Operating income margin(a):
 
 
 
 

East
 
9.6
%
 
14.6
%
Central
 
14.7
%
 
12.2
%
West
 
10.9
%
 
13.2
%
South
 
8.2
%
 
11.2
%
Total operating income margin
 
9.4
%
 
9.5
%
__________________________________________________________________________
(a)    Operating income margin is operating income as a percentage of net revenues.
Net Revenues
During 2014, four casino properties in the Atlantic City market ceased operating. Based on reported data, the Atlantic City casino market experienced a decline in casino revenue (including revenue from internet gaming, which commenced in 2013) of 6.5% in the year ended December 31, 2015 from 2014, due in part to these closures and the continued competitive pressures from the competing gaming markets. At Tropicana AC, total net revenues were $322.3 million for the year ended December 31, 2015, an increase of $19.2 million, or 6.3%, compared to the year ended December 31, 2014. The increased net revenues for Tropicana AC were primarily driven by a $15.2 million increase in casino revenues, resulting from increased customer volumes due, in part, to the competitor closings, but also attributable to other factors, including a $5.3 million increase in revenue from internet gaming. In addition to the increase in internet gaming revenues, Tropicana AC casino revenues were positively impacted by a 3.6% increase in slot volumes, a 7.7% increase in table games volumes and a 9.4% reduction in the amount of promotional slot play redeemed, partially offset by a 1.1 percentage point decrease in the table hold percentage for the year ended December 31, 2015 as compared to 2014. Hotel revenues at Tropicana AC also increased due to higher occupancy rates and average room rates in the year ended December 31, 2015. The average daily room rate increased to $89 from $87 for the years ended December 31, 2015 and 2014, respectively. The occupancy rate for the year ended December 31, 2015 was 79%, up from 77% for the prior year period. A capital renovation project completed at Tropicana AC in 2015, which included hotel room and casino floor renovations, boardwalk facade renovations and the opening of a new fitness center contributed to the increased customer volumes and revenues.
In the Central region, net revenues were $288.9 million for the year ended December 31, 2015, an increase of $41.1 million, or 16.6%, compared to the year ended December 31, 2014. The results for 2015 include a full year of operations (compared to only nine months in 2014) from Lumière Place, which the Company acquired in April 2014, which contributed to the majority of the increase. In addition, net revenues at Tropicana Evansville improved in 2015 over the prior year due to changes to our reinvestment strategy with targeted reductions to our complimentary and free play programs in an effort to maximize casino profitability, and to increase cash revenue in the hotel through the use of online travel agencies. Casino revenues at Tropicana Evansville increased slightly compared to the prior year period primarily due to a 3.4% increase in table games volumes combined with an 8.4% reduction in promotional slot play redeemed, despite a 1.8 percentage point decrease in the table games hold percentage for the year ended December 31, 2015 compared to the prior year. The occupancy rate for the year ended December 31, 2015 in the Central region was 78%, an increase over the 77% in the year ended December 31, 2014. The average daily room rate in the Central region was $134 for the each of the years ended December 31, 2015 and 2014.

41


In the West region, net revenues were $104.6 million for the year ended December 31, 2015, an increase of $1.5 million, or 1.4%, compared to the year ended December 31, 2014. The increase was primarily driven by increases in casino revenues at Tropicana Laughlin, partially offset by lower casino revenues at MontBleu. Casino revenues at Tropicana Laughlin increased due to a 3.6% increase in slot volumes and a 4.1% increase in table game volumes, partially offset by a 6.4% increase in promotional slot play redeemed. Net revenues at Tropicana Laughlin increased $4.9 million for the year ended December 31, 2015 compared to the prior year primarily due to the increase in casino revenues, partially offset by marketing incentives given to our casino patrons which are recorded as a reduction in revenues. At MontBleu, net revenues decreased $3.4 million due to decreased customer visitation as a result of disruption from a hotel room and public area renovation project that was completed in 2015, in addition to increased competition from a nearby competing property that was purchased in early 2014, later renovated and reopened as a "Hard Rock" branded casino hotel in 2015. The average daily room rate for the West region was $51 for each of the years ended December 31, 2015 and 2014. The occupancy rate for the each of the years ended December 31, 2015 and 2014 at our properties in the West region was 56%.
In the South region, net revenues were $95.7 million for the year ended December 31, 2015, an increase of $3.0 million, or 3.3%, compared to the year ended December 31, 2014. Casino revenues for the South region increased $2.4 million, driven by a 12.4% increase in casino revenue at Tropicana Greenville, which completed its land-side gaming expansion in the fourth quarter of 2014. Slot volumes at Tropicana Greenville increased 11.0%, combined with a 19.3% increase in table games drop, partially offset by a 1.3 percentage point decline in the table games hold for the year ended December 31, 2015 as compared to the prior year. Net revenues at the Belle of Baton Rouge decreased $0.5 million for the year ended December 31, 2015, primarily due to a 4.2% decrease in slot volumes and a 1.7% decrease in table games volumes, combined with a 2.3 percentage point decline in the table games hold, offset by a reduction in promotional slot play in 2015 as compared to 2014. Casino revenues at Tropicana Aruba also increased in 2015 over 2014, primarily as a result of a renovation project in the prior year, which resulted in the closure of the casino from October 2014 through February 2015. Timeshare sales at the Tropicana Aruba property commenced in late 2015, resulting in approximately $0.4 million of timeshare sales for the year. However, hotel revenues in 2015 at Tropicana Aruba were lower than in 2014, primarily due to decreased visitation from the Venezuelan market, which has impacted the number of room nights generated from that market. The occupancy rate at our properties in the South region was 70% and 71% for the years ended December 31, 2015 and 2014, respectively. The average daily room rate for the South region was $79 and $80 for the years ended December 31, 2015 and 2014, respectively.
Operating Income
In the East region, the operating income for the year ended December 31, 2015 was $30.9 million, a $13.2 million decrease compared to the year ended December 31, 2014. In 2014, we received a $31.7 million cash payment to satisfy a property tax settlement in Atlantic City, which was recorded as a gain in Property tax settlement during 2014. Absent this gain, operating income for the year ended December 31, 2015 would have increased $18.5 million over the year ended December 31, 2014.
In the Central region, the operating income for the year ended December 31, 2015 was $42.5 million, a $12.4 million increase compared to the year ended December 31, 2014. The increase in operating income in the Central region in 2015 was due to the acquisition of Lumière Place in April 2014, combined with the increase in net revenues at Tropicana Evansville discussed above, combined with a decrease in operating expenses at Tropicana Evansville during the year ended December 31, 2015.
In the West region, the operating income for the year ended December 31, 2015 was $11.4 million, a $2.2 million decrease compared to the year ended December 31, 2014. Although operating income at Tropicana Laughlin improved by $2.1 million, driven by the increase in net revenues as previously discussed, this increase was offset by the reduction in net revenue at MontBleu caused by the renovation disruption and increased competition, as discussed previously. The decrease in net revenue at MontBleu was offset partially by lower operating expenses during the year ended December 31, 2015 as compared to the prior year.
In the South region, operating income for the year ended December 31, 2015 was $7.8 million, a $2.5 million decrease compared to the year ended December 31, 2014. This decrease is primarily due to a gain on insurance recoveries of $4.4 million, net of expenses and write-downs, in the year ended December 31, 2014. Absent the gain on insurance recoveries, operating income in the South region for the year ended December 31, 2015 would have increased $1.9 million over 2014, due to the increased net revenues at Tropicana Greenville, as previously discussed, combined with an increase in operating income at the Belle of Baton Rouge resulting from lower operating expenses which offset the decrease in net revenue at the property; these improvements were offset by a decline in operating income at Tropicana Aruba due to the decrease in revenues, combined with an increase in operating expenses at the property.
Corporate expenses were $16.4 million for the year ended December 31, 2015, a $10.6 million decrease from the year ended December 31, 2014. The difference between years was driven primarily by a $9.1 million goodwill impairment

42


recognized during the year ended December 31, 2014. The impairment related to Tropicana AC's goodwill carrying value exceeding its fair value.
Interest Expense
Interest expense for the years ended December 31, 2015 and 2014 was $12.3 million and $12.9 million, respectively. The interest expense for the year ended December 31, 2015 decreased compared to the year ended December 31, 2014 primarily due the decrease in the outstanding principal on the Term Loan Facility combined with higher capitalization of interest in 2015 related to ongoing construction projects. The Term Loan Facility, which was funded in November 2013, accrues interest at a floating rate, which was 4.0% per annum at each of December 31, 2015 and 2014. Cash paid for interest was $11.5 million and $11.8 million for the years ended December 31, 2015 and 2014, respectively. The decrease in cash paid for interest was attributable to the decrease in outstanding principal on the Term Loan Facility. Interest expense also includes $1.0 million of amortization of debt issuance costs and discounts for the each of the years ended December 31, 2015 and 2014.
Predecessor Claim Settlements
During 2014, we recognized one-time gains totaling $52.7 million related to the settlement of certain predecessor claims.
Income Taxes
Income tax expense was $27.1 million for the year ended December 31, 2015 and our effective income tax rate was 42.0%. The difference between the federal statutory rate of 35% and the effective tax rate for the year ended December 31, 2015 was primarily due to the disallowed foreign losses, state income taxes (net of federal benefit) and other permanent differences. For the year ended December 31, 2014, the income tax benefit was $140.0 million and our effective tax rate was a benefit of 124.0%. The difference between the federal statutory rate of 35% and the effective tax rate for the year ended December 31, 2014 was primarily due to the release of the valuation allowance related to our net deferred tax assets, utilization of the Company's deferred tax assets offset by disallowed foreign losses, state income taxes (net of federal benefit), and other permanent differences.
We recognized a deferred tax benefit in 2014, as compared to income tax expense in 2015 primarily due to the reversal of $188.2 million of the valuation allowance on deferred tax assets. The reduction in the valuation allowance is a result of analyzing all positive and negative evidence associated with our deferred tax assets, primarily as a result of the change in estimated future earnings, and concluding that it is more likely than not that we will generate future taxable income to utilize this portion of net deferred tax assets. The benefit from this reduction in the valuation allowance was recorded as an income tax benefit for 2014.
Discontinued Operations
On July 1, 2014, we entered into and closed an asset purchase agreement to sell substantially all of the assets associated with the operation of River Palms for $6.8 million in cash and the assumption of certain liabilities. Concurrently with the execution and closing of the asset purchase agreement, we leased back River Palms. We terminated the lease and discontinued operations at River Palms in September 2014. The sale resulted in a loss of $0.2 million which is included in the loss from discontinued operations for the year ended December 31, 2014. The results of operations of River Palms are presented as discontinued operations in the accompanying consolidated statements of income for the year ended December 31, 2014.
Liquidity and Capital Resources
Our cash flows are and will continue to be affected by a variety of factors, many of which are outside of our control, including regulatory restrictions, competition, financial markets and other general business conditions. We believe that we will have sufficient liquidity through anticipated borrowing availability, available cash, trade credit and cash flow from our properties to fund our cash requirements and capital expenditures for our expected operating activities for at least twelve months. However, we cannot provide assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements and other obligations as our results for future periods are subject to numerous uncertainties that may result in liquidity problems, which could affect our ability to meet our obligations while attempting to meet competitive pressures or adverse economic conditions. In addition, we continually evaluate our financing needs and we may refinance all or a portion of our indebtedness on or before maturity.
Part of our overall strategy includes consideration of expansion opportunities in new gaming jurisdictions, underserved markets and acquisition and other strategic opportunities that may arise periodically. We may require additional funds in order to execute on such strategic growth, and may incur additional debt or sell additional equity to finance any such transactions. We cannot assure you that we will be able to incur such debt or sell any such additional equity on acceptable terms or at all.

43


Our material cash requirements for 2017 are expected to include (i) principal and interest payments related to our Term Loan Facility of $3.0 million and $11.8 million, respectively, (ii) capital maintenance expenditures expected to be approximately $31 million, (iii) growth capital expenditures expected to be approximately $22 million, (iv) expenditures related to the Company's $50 million commitment to develop a landside gaming facility at Tropicana Evansville, estimated to be approximately $45 million in 2017, and (v) minimum lease payments under our operating leases of $8.7 million. Except for the commitment to spend $50 million of capital renovation at Tropicana Evansville required by the Sixth Amendment, the majority of our planned capital expenditures are discretionary and we may decide to spend more or less than the amounts described above.
The following table summarizes our historical cash flows (in thousands):
 
 
Year ended December 31,
 
 
2016
 
2015
Cash Flow Information:
 
 
 
 

Net cash provided by operating activities
 
$
133,732

 
$
103,605

Net cash used in investing activities
 
(72,198
)
 
(80,840
)
Net cash used in financing activities
 
(38,809
)
 
(1,305
)
Net increase in cash and cash equivalents
 
$
22,725

 
$
21,460

During the year ended December 31, 2016, our operating activities provided $133.7 million in cash compared to $103.6 million in 2015. The improvement in cash flow from operations over 2015 resulted from higher net income, combined with the elimination of higher non-cash expenses such as depreciation and changes in investment reserves. Cash paid for interest, net of amounts capitalized, was $11.7 million for the year ended December 31, 2016 compared to $11.5 million for the year ended December 31, 2015; this variance primarily resulted from higher capitalization of interest in 2015.
Net cash used in investing activities in the year ended December 31, 2016 consisted primarily of $71.7 million used for capital expenditures and $5.9 million of restricted cash, partially offset by $3.0 million of proceeds from Approved CRDA Project Funds, $1.0 million of insurance proceeds and proceeds from the cancellation of Ruby Seven preferred stock. Net cash used in investing activities in the year ended December 31, 2015 consisted primarily of $94.1 million used for capital expenditures partially offset by $15.2 million of proceeds from Approved CRDA Project Funds. Capital expenditures primarily relate to expenditures necessary to keep our existing properties at their current levels and are typically replacement items due to the normal wear and tear of our properties and equipment as a result of use and age.
Net cash used in financing activities in the year ended December 31, 2016 consisted primarily of $3.0 million repayments on the Term Loan Facility and $42.8 million used for the buy back of TEI common stock under the Stock Repurchase Program, as further described below, together with a $0.5 million increase in restricted cash to collateralize letters of credit, offset by proceeds of $7.6 million previously classified as restricted cash for certain bankruptcy related professional fee liabilities. Net cash used in financing activities in the years ended December 31, 2015 consisted primarily of $3.0 million repayments on the Term Loan Facility, offset by proceeds of amounts previously classified as restricted cash.
Credit Facilities
In November 2013, we entered into (i) a senior secured first lien term loan facility in an aggregate principal amount of $300 million, issued at a discount of 0.5% (the “Term Loan Facility”) and (ii) a senior secured first lien revolving credit facility in an aggregate principal amount of $15 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Credit Facilities”). Commencing on December 31, 2013, the Term Loan Facility requires quarterly principal payments of $750,000, with any remaining balance payable on the final maturity date of the Term Loan Facility, which is November 27, 2020. Amounts under the Revolving Facility are available to be borrowed and re-borrowed until its termination on November 27, 2018.

A portion of the net proceeds from the Credit Facilities were used to repay in full the principal amounts outstanding under the then existing credit facilities along with accrued and unpaid interest. The then-existing credit facilities were terminated effective as of November 27, 2013. A portion of the proceeds from the Credit Facilities was also used to finance our previously announced acquisition of Lumière Place, which was completed in April 2014.

The Term Loan Facility accrues interest, at our option, at a per annum rate equal to either (i) the LIBO Rate (as defined in the Credit Agreement) (subject to a 1.00% floor) plus an applicable margin equal to 3.00%, or (ii) the alternate base rate (as defined in the Credit Agreement) (subject to a 2.00% floor) plus an applicable margin equal to 2.00%; such that in either case, the applicable interest rate shall not be less than 4.0%. The Revolving Facility accrues interest, at our option, at a per annum rate equal to either (i) the LIBO Rate plus an applicable margin ranging from 2.00% (if the total net leverage ratio is less than

44


2.50:1.00) to 2.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00); or (ii) the alternate base rate plus an applicable margin ranging from 1.00% (if the total net leverage ratio is less than 2.50:1.00) to 1.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00). The interest rate increases by 2.00% following certain defaults. As of December 31, 2016, the interest rate on the Term Loan Facility was 4.0% and no amounts were outstanding under the Revolving Facility.

At our election and subject to certain conditions, including a maximum senior secured net leverage ratio of 3.25:1.00, the amount available under the Credit Facilities may be increased, which increased amount may be comprised of additional term loans and revolving loans.

The Term Loan Facility may be prepaid at our option at any time without penalty (other than customary LIBO Rate breakage fees). We are required to make mandatory payments of the Credit Facilities with (i) net cash proceeds of certain asset sales (subject to reinvestment rights), (ii) net cash proceeds from certain issuances of debt and equity (with certain exceptions), (iii) up to 50% of annual excess cash flow (as low as 0% if our total leverage ratio is below 2.75:1.00), and (iv) certain casualty proceeds and condemnation awards (subject to reinvestment rights).

Our interest expense for the years ended December 31, 2016 and 2015 was $12.7 million and $12.3 million, respectively, which includes $1.0 million of amortization of the related debt discount and debt issuance costs for each of the years ended December 31, 2016 and 2015. The increase in interest expense in 2016 compared to 2015 is primarily attributable to higher capitalization of interest in 2015 related to ongoing construction projects.
Stock Repurchase Program
On July 31, 2015 our Board of Directors authorized the repurchase of up to $50 million of our outstanding stock with no set expiration date. On February 22, 2017, our Board of Directors authorized the repurchase of an additional $50 million of our outstanding common stock, for the repurchase of an aggregate amount of up to $100 million of our outstanding common stock. The Stock Repurchase Program will end upon the earlier of the date on which the plan is terminated by the Board of Directors or when all authorized repurchases are completed. The timing and amount of stock repurchases will be determined based upon our evaluation of market conditions and other factors. The Stock Repurchase Program may be suspended, modified or discontinued at any time and we have no obligation to repurchase any amount of our common stock under the Stock Repurchase Program.
As of December 31, 2016, we have repurchased 1,677,988 shares of our stock under the Stock Repurchase Program. The repurchased shares were subsequently retired. As of the date of this report, there have not been any subsequent repurchases of stock under the Stock Repurchase Program.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Item 303 (a)(4)(ii) of SEC Regulation S-K.
Contractual Obligations
The following table summarizes our material future contractual obligations as of December 31, 2016 (in thousands):
 
 
Payments Due By Period
 
 
Less Than
1 Year
 
1 To 3 Years
 
3 to 5 Years
 
More Than
5 Years
 
Total
Debt (a)
 
$
3,000

 
$
6,000

 
$
281,250

 
$

 
$
290,250

Estimated interest payment on debt (b)
 
11,725

 
23,084

 
10,306

 

 
45,115

Operating leases
 
8,738

 
24,825

 
10,062

 
35,853

 
79,478

Purchase obligations (c)
 
64,962

 
2,577

 
160

 

 
67,699

Total
 
$
88,425

 
$
56,486

 
$
301,778

 
$
35,853

 
$
482,542

_______________________________________________________________________________
(a)
The Term Loan Facility provides for a stated maturity date of November 2020.
(b)
Estimated interest payment on debt is based on principal amounts outstanding and the interest rate at December 31, 2016 and required principal payments through the maturity of the debt.
(c)
Includes commitments for capital expenditures related required under the Sixth Amendment, related to the development of a landside gaming facility at Tropicana Evansville, as well as various contracts, including advertising, maintenance contracts and service agreements.

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Critical Accounting Policies
Management's discussion and analysis of our results of operations and liquidity and capital resources is based on our financial statements. We prepare our financial statements in conformity with accounting principles generally accepted in the United States. Certain of our accounting policies require that we apply significant judgment in determining the estimates and assumptions for calculating estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based in part on our historical experience, terms of existing contracts, observance of trends in the gaming industry and information obtained from independent valuation experts or other outside sources. We cannot assure you that our actual results will conform to our estimates. We regularly evaluate these estimates and assumptions, particularly in areas we consider to be critical accounting estimates, where changes in estimates and assumptions could have a material impact on our results of operations, financial position and, generally to a lesser extent, cash flows.
We believe the following items are the critical accounting policies and more significant estimates and assumptions used in the preparation of our financial statements. These accounting policies conform to the accounting policies contained in our financial statements contained elsewhere in this Annual Report on Form 10-K.
Business Combinations
The Company accounts for business combinations in accordance with guidance related to business combinations using the purchase method of accounting for business combinations, which requires that the assets acquired and liabilities assumed be recorded on the date of acquisition at their respective fair value and the identification and recognition of intangible assets separately from goodwill. Additionally, the guidance requires, among other things, the buyer to: (1) expense acquisition-related costs; (2) recognize assets or liabilities assumed arising from contractual contingencies on the acquisition date using acquisition-date fair values; (3) recognize goodwill as the excess of the consideration transferred plus the fair value of any noncontrolling interest over the acquisition-date fair value of net assets acquired; (4) recognize on the acquisition date any contingent consideration using acquisition-date fair values (i.e., fair value earn-outs in the initial accounting for the acquisition); and (5) eliminate the recognition of liabilities for restructuring costs expected to be incurred as a result of the business combination. In addition, if the buyer determines that some or all of its previously booked deferred tax valuation allowance is no longer needed as a result of the business combination, the guidance requires that the reduction or elimination of the valuation allowance be accounted as a reduction of income tax expense.
Receivables
Receivables consist primarily of casino, hotel and other receivables, net of an allowance for doubtful accounts. Receivables are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems the account to be uncollectible. An estimated allowance for doubtful accounts is maintained to reduce our receivables to their expected realization, which approximates fair value. The allowance is estimated based on specific reviews of customer accounts as well as historical collection experience and current economic and business conditions. Recoveries of accounts previously written off are recorded when received.
Property and Equipment
Property and equipment under fresh-start reporting and business combination guidance is stated at fair value as of the Effective Date and acquisition date, respectively. Property and equipment acquired subsequent to the Effective Date and the acquisition date are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets or, for capital leases and leasehold improvements, over the shorter of the asset's useful life or the term of the lease. Gains or losses on disposals of assets are recognized as incurred. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are expensed as incurred.
We must make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense or a capital asset is a matter of judgment. In contrast to normal repair and maintenance costs that are expensed when incurred, items we classify as maintenance capital are expenditures necessary to keep our existing properties at their current levels and are typically replacement items due to the normal wear and tear of our properties and equipment as a result of use and age. Our depreciation expense is highly dependent on the assumptions we make about our assets' estimated useful lives. We determine the estimated useful lives based on our experience with similar assets, engineering studies and our estimate of the usage of the asset. Whenever events or circumstances occur that change the estimated useful life of an asset, we account for the change prospectively.
Long-Lived Assets
We evaluate our property and equipment and other long-lived assets for impairment in accordance with accounting guidance related to impairment or disposal of long-lived assets. For assets to be held for sale, we recognize the asset to be sold

46


at the lower of carrying value or fair value less costs to sell. Fair value for assets held for sale is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model. For long-lived assets to be held and used, we review for impairment whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows are less than the carrying value, then impairment is measured based on estimated fair value compared to carrying value, with fair value typically based on a discounted cash flow model.
Goodwill and Intangible Assets
Goodwill represents the excess of purchase price over fair value of assets acquired and liabilities assumed in business combinations or under fresh-start reporting. In accordance with accounting guidance related to goodwill and other intangible assets, we test for impairment of goodwill and indefinite-lived intangible assets at the reporting unit level in the fourth quarter of each year and in certain situations between those annual dates if events occur or circumstances change indicating potential impairment. We have the option to begin with a qualitative assessment, commonly referred to as Step 0, to determine whether it is more likely than not that the reporting units fair value is less than its carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as the general economic environment, industry and market conditions, changes in key assumptions used since the most recently performed valuation and overall financial performance of the reporting units. If we determine the reporting units are not at risk of failing the qualitative assessment, no further impairment testing is required.
Our annual impairment testing for goodwill is performed at the reporting unit level and each of our casino properties is considered to be a reporting unit. The annual quantitative goodwill impairment testing, if applicable, utilizes a two-step process. In the first step, we compare the fair value of each reporting unit with its carrying amount, including goodwill. The fair value of each reporting unit is estimated using the expected present value of future cash flows along with indications provided by the current valuation multiples of comparable publicly traded companies. If the fair value of the reporting unit exceeds its carrying amount, then goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, then the goodwill of the reporting unit is considered impaired and the Company proceeds to the second step of the goodwill impairment test to quantify the amount of goodwill impairment, if any. In the second step, we determine the implied fair value of the reporting unit's goodwill by allocating the fair value of the reporting unit determined in step one to the assets and liabilities of the reporting unit, as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
Our indefinite-lived intangible assets, which include our "Tropicana" trade name and certain gaming licenses, are not subject to amortization but are tested for impairment annually. A qualitative assessment of indefinite-lived assets may be performed to determine whether it is necessary to perform the quantitative impairment test. The annual quantitative impairment test for indefinite-lived intangible assets, if applicable, consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The fair value of the trade name is estimated using the relief from royalty method, a form of both the income approach and the market approach, which is a function of prospective revenue, the royalty rate that would hypothetically be charged by a licensor of an asset to an unrelated licensee, and a discount rate. The fair value of our indefinite-lived gaming licenses are estimated using the Greenfield method of the discounted cash flow approach which is the function of the cost to build a new casino operation, the build out period, projected cash flows attributed to the casino once operational, and a discount rate.
Our definite-lived intangible assets include customer lists and favorable lease arrangements. Intangible assets with a definite life are amortized over their useful life, which is the period over which the asset is expected to contribute directly or indirectly to future cash flows. Management periodically assesses the amortization period of intangible assets with definite lives based upon estimated future cash flows from related operations.
We believe our prospective cash flow assumptions are reasonable. However, future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. If ongoing estimates of future cash flows are not met, impairment charges may be recorded in future accounting periods. Estimates of cash flows are based on the current regulatory, political and economic climates, recent operating information and budgets of the various properties where we conduct operations. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to our properties.
CRDA Investment
The New Jersey Casino Reinvestment Development Authority ("CRDA") deposits made by Tropicana AC are carried at fair value. The CRDA deposits are recorded at fair value and used to purchase CRDA bonds that carry below market interest

47


rates unless an alternative investment is approved. An allowance is established, unless there is an agreement with the CRDA for a return of the deposit at full face value, by a charge to the statement of operations as part of general and administrative expense. If the CRDA deposits are used to purchase CRDA bonds, the allowance is transferred to the bonds as a discount, which is amortized to interest income using the interest method. If the CRDA deposits are used to make other investments, the allowance is transferred to those investments. The CRDA bonds are classified as held-to-maturity securities and are carried at amortized cost less any adjustments for other than temporary impairments.
As a result of the NJ PILOT Law, which was enacted in May 2016, the portion of investment alternative tax payments made by casino operators which are deposited with the CRDA and which have not been pledged for the payment of bonds issued by the CRDA will be allocated to the State of New Jersey for purposes of paying debt service on bonds previously issued by Atlantic City. That portion of the deposits which will be allocated to the State of New Jersey are no longer recorded as an investment with a corresponding allowance, but are charged directly to general and administrative expenses.
Self-Insurance Reserves
We are self-insured up to certain stop loss amounts for employee health coverage, workers' compensation and general liability claims. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported as estimated by management with the assistance of a third party claims administrator. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. The Company continually monitors changes in claim type and incident and evaluates the insurance accrual, making necessary adjustments based on the evaluation of these qualitative data points.
Customer Loyalty Program
We provide certain customer loyalty programs (the "Programs") at our casinos, which allow customers to redeem points earned from their gaming activity for cash, food, beverage, rooms or merchandise. Under the Programs, customers are able to accumulate points that may be redeemed in the future, subject to certain limitations and the terms of the Programs. We record a liability for the estimated cost of the outstanding points under the Programs that we believe will ultimately be redeemed. The estimated cost of the outstanding points under the Programs is calculated based on estimates and assumptions regarding marginal costs of the goods and services, redemption rates and the mix of goods and services for which the points are expected to be redeemed. For points that may be redeemed for cash, we accrue this cost (after consideration of estimated redemption rates) as they are earned from gaming play, which is included in promotional allowances. For points that may only be redeemed for goods or services but cannot be redeemed for cash, we estimate the cost and accrue for this expense as the points are earned from gaming play, which is recorded as casino operating costs and expenses.
Revenue Recognition and Promotional Allowances
Casino revenue represents the difference between wins and losses from gaming activities, and is reported net of cash and free play incentives redeemed by customers. Room, food and beverage and other operating revenues are recognized at the time the goods or services are provided. The Company collects taxes from customers at the point of sale on transactions subject to sales and other taxes. Revenues are recorded net of any taxes collected. The majority of the Company's casino revenue is counted in the form of cash and chips and, therefore, is not subject to any significant or complex estimation. The retail value of rooms, food and beverage and other services provided to customers on a complimentary basis is included in gross revenues and then deducted as promotional allowances. Promotional allowances also includes accruals for incentives earned in our Programs for points that may be redeemed for free play or cash, as described above.
Timeshare Sales
The Company accounts for sales of timeshare intervals at the Tropicana Aruba in accordance with Accounting Standards Codification ("ASC") 978, Real Estate - Time Sharing Activity. Sales of timeshare intervals, the majority of which are sold under a credit arrangement, are recorded net of an estimated allowance for bad debt. Costs associated with the timeshare units, including building and renovation costs, furniture, fixtures and equipment, and other costs directly attributable to the timeshare units are recorded as timeshare inventory. In addition, revenue generated from the daily rental of the designated timeshare units is recorded as a reduction of the timeshare inventory, as opposed to hotel revenue. A cost of sales is calculated using the total timeshare inventory as a percentage of the potential total timeshare interval sales, and a portion of the inventory is recorded as cost of sales expense as each timeshare interval is sold.

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Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that included the enactment date. Future tax benefits are recognized to the extent that realization of those benefits is considered more likely than not, and a valuation allowance is established for deferred tax assets which do not meet this threshold.
ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary market risk exposure is in the area of interest rate risk. We incur interest expense on borrowings outstanding under the Credit Facilities. Our debt under the Credit Facilities consists primarily of the Term Loan Facility and the Revolving Facility. The obligations under the Term Loan Facility bear interest, at the Company's election, at an annual rate equal to either: (i) the sum of (a) the LIBO Rate (as defined in the Term Loan Facility) (subject to a 1.00% floor); plus (b) a margin of 3.00%; or (ii) the sum of: (a) the alternate base rate (as defined in the Term Loan Facility) (subject to a 2.00% floor); plus (b) a margin of 2.00%; such that, in either case, the applicable interest rate shall not be less than 4.00%. The Revolving Facility, which has no amounts outstanding at December 31, 2016, accrues interest at a per annum rate equal to either, at the Company’s option (with limited restrictions), the LIBO Rate plus an applicable margin ranging from 2.00% (if the total net leverage ratio is less than 2.50:1.00) to 2.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00); or the alternate base rate plus an applicable margin ranging from 1.00% (if the total net leverage ratio is less than 2.50:1.00) to 1.50% (if the total net leverage ratio is greater than or equal to 3.00:1.00). An additional 2% default rate also applies in certain instances described in the Term Loan Facility. As of December 31, 2016, the interest rate was 4.0%. We currently have no hedging arrangements in place to mitigate the impact of higher interest rates.
Based on our borrowings at December 31, 2016, assuming a 1% increase over the 4.0% floor specified in our Term Loan Facility, our annual interest cost would increase $2.9 million.
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is contained in the financial statements listed in Item 15(a) of this Annual Report on Form 10-K.
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.    CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our President and Chief Executive Officer (principal executive officer) and Executive Vice President, Chief Financial Officer and Treasurer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are effective as of December 31, 2016. This conclusion is based on an evaluation conducted under the supervision and with the participation of our management, including the principal executive officer and principal financial officer. Disclosure controls and procedures include, without limitation, controls and procedures which ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management and is recorded, processed, summarized and reported in the time periods specific in the Securities and Exchange Commission's rules and forms.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for an assessment of the effectiveness of internal control over financial reporting; as such items are defined in Rule 13a-15(f) under the Exchange Act.
Our internal control over financial reporting is designed to provide reasonable assurance that our financial reporting and preparation of financial statements is reliable and in accordance with generally accepted accounting principles. Our policies and

49


procedures are designed to provide reasonable assurance that transactions are recorded and records maintained in reasonable detail as necessary to accurately and fairly reflect transactions and that all transactions are properly authorized by management in order to prevent or timely detect unauthorized transactions or misappropriation of assets that could have a material effect on our financial statements.
Management is required to base its assessment on the effectiveness of our internal control over financial reporting on a suitable, recognized control framework. Management has utilized the criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to evaluate the effectiveness of internal control over financial reporting, which is a suitable framework as recognized by the Public Company Accounting Oversight Board (“PCAOB”).
Our management has performed an assessment according to the 2013 Internal Control-Integrated Framework established by COSO. Based on the assessment, management has concluded that our system of internal control over financial reporting, as of December 31, 2016, is effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Grant Thornton LLP, our independent registered public accounting firm, has audited and issued their report on Tropicana Entertainment Inc.'s internal control over financial reporting, which appears below.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 31, 2016, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting.

50


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Tropicana Entertainment Inc.

We have audited the internal control over financial reporting of Tropicana Entertainment Inc. and subsidiaries (collectively, the “Company”) as of December 31, 2016, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended December 31, 2016, and our report dated February 24, 2017 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Reno, Nevada
February 24, 2017

51



ITEM 9B.    OTHER INFORMATION
On July 31, 2015, our Board of Directors authorized a Stock Repurchase Program pursuant to which the Company may, from time to time, repurchase up to $50 million of the Company's common stock. On February 22, 2017, our Board of Directors authorized the repurchase of an additional $50 million of our outstanding common stock, for the repurchase of an aggregate amount of up to $100 million of our outstanding common stock. As part of the Stock Repurchase Program, and subject to the terms of the Company's credit facility, shares may be repurchased in open market transactions, including through block purchases, through privately negotiated transactions, pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the "Exchange Act"), through tender offers or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Exchange Act, on terms to be determined from time to time.
The Stock Repurchase Program will end upon the earlier of the date on which the plan is terminated by the Board or when all authorized repurchases are completed. The Stock Repurchase Program does not obligate the Company to purchase any particular amount of common stock at any particular price or at all. The Stock Repurchase Program may be suspended, modified, or terminated by the Company's Board of Directors at any time for any reason.
As of December 31, 2016, the Company had repurchased 1,677,988 shares of our common stock at a total cost of $42.8 million under the Stock Repurchase Program.

52



PART III
ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this item will be contained in the Company's definitive Proxy Statement for its 2017 Annual Stockholder Meeting, to be filed with the SEC within 120 days after December 31, 2016, and is incorporated herein by reference.
ITEM 11.    EXECUTIVE COMPENSATION.
The information required by this item will be contained in the Company's definitive Proxy Statement for its 2017 Annual Stockholder Meeting, to be filed with the SEC within 120 days after December 31, 2016, and is incorporated herein by reference.
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required by this item will be contained in the Company's definitive Proxy Statement for its 2017 Annual Stockholder Meeting, to be filed with the SEC within 120 days after December 31, 2016, and is incorporated herein by reference.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information required by this item will be contained in the Company's definitive Proxy Statement for its 2017 Annual Stockholder Meeting, to be filed with the SEC within 120 days after December 31, 2016, and is incorporated herein by reference.
ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this item will be contained in the Company's definitive Proxy Statement for its 2017 Annual Stockholder Meeting, to be filed with the SEC within 120 days after December 31, 2016, and is incorporated herein by reference.

53



PART IV
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)(1). Financial Statements.
(a)(2). Financial Statement Schedules.
We have omitted financial statement schedules because they are not required or are not applicable, or the required information is shown in the financial statements or notes to the financial statements.
(a)(3). Exhibits.
Exhibit Number
 
Exhibit Description
2.1
 
First Amended Joint Plan of Reorganization of Tropicana Entertainment, LLC and Certain of its Debtor Affiliates Under Chapter 11 of the Bankruptcy Code. (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)
2.2
 
Amended and Restated Purchase Agreement, dated as of November 20, 2009, among Adamar of New Jersey, Inc., Manchester Mall, Inc., the Honorable Gary S. Stein, Tropicana Entertainment, LLC, Ramada New Jersey Holdings Corporation, Atlantic-Deauville, Inc., Adamar Garage Corporation, Ramada New Jersey, Inc., Credit Suisse, Tropicana Entertainment Inc., Tropicana Atlantic City Corp., and Tropicana AC Sub Corp (Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K; the Registrant will furnish supplementally a copy of the omitted schedules to the SEC upon request.). (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)
3.1
 
Amended and Restated Certificate of Incorporation of Tropicana Entertainment Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
3.2
 
Amended and Restated Bylaws of Tropicana Entertainment Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated February 24, 2014)
4.1
 
Specimen Certificate for shares of Common Stock, par value $0.01 per share, of the Registrant. (Incorporated by reference to the Company's Post-Effective Amendment No. 1 to Form 10 dated January 25, 2010)
4.2
 
Form of Stock Purchase Warrant issued to general unsecured creditors of the Predecessors. (Incorporated by reference to the Company's Amendment No. 1 to Form 10 dated December 21, 2009)
4.3
 
Form of Stock Purchase Warrant issued to lenders under the Exit Facility. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.1
 
Contract of Lease, dated as of August 29, 1982, between Cohn Realty Co. and Jazz Enterprises, Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.1(A)
 
Amendment of Lease, dated as of August 4, 1993, between Cohn Realty Co. and Jazz Enterprises, Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.2
 
Second Amended and Restated Lease Agreement, entered into and made on October 27, 2010, between Greenville Marine Corporation and Lighthouse Point, LLC. (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010)
10.2(A)
 
First Amendment to Second Amended and Restated Lease Agreement, entered November 19, 2013, between Greenville Marine Corporation and Lighthouse Point, LLC. (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014)

54


10.3
 
Restated and Amended Lease Agreement, entered into April 18, 1997, between The Board of Levee Commissioners and JMBS Casino LLC., successor in interest to Alpha Greenville Hotel, Inc. (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014)
10.4
 
Assignment of Restated and Amended Lease Agreement, entered into November 23, 2013, between JMBS Casino LLC. and Lighthouse Point, LLC. (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014)
10.5
 
Lease Agreement, entered into October 1, 2013, between the City of Greenville and Lighthouse Point, LLC. (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014)
10.6
 
Evansville Riverboat Landing Lease, dated as of May 2, 1995, by and among the City of Evansville, Indiana and Aztar Indiana Gaming Company, LLC. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(A)
 
Amendment to Evansville Riverboat Landing Lease, effective as of December 1, 2001, by and among the City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC and Aztar Corporation. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(B)
 
Second Amendment to Evansville Riverboat Landing Lease, dated as of August 27, 2003, by and among the City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC and Aztar Corporation. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(C)
 
Memorandum of Understanding, dated as of December 21, 2004, by and among City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC and Aztar Corporation. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(D)
 
Memorandum of Understanding, dated as of March 15, 2005, by and among City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC and Aztar Corporation. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(E)
 
Memorandum of Understanding, dated as of May 12, 2005, by and among City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC and Aztar Corporation. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(F)
 
Memorandum of Understanding, dated as of June 7, 2005, by and among City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC and Aztar Corporation. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(G)
 
Third Amendment to Evansville Riverboat Landing Lease, dated as of July 19, 2005, by and among the City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC and Aztar Corporation. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.6(H)
 
Fourth Amendment to Lease Agreement dated March 2, 2010 by and among the City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC, and New Tropicana OpCo, Inc. (Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010)
10.6(I)
 
Fifth Amendment to Lease Agreement dated September 1, 2011 by and among the City of Evansville, Indiana, Aztar Indiana Gaming Company, LLC, and New Tropicana OpCo, Inc. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2011)

10.6(J)
 
Sixth Amendment to Lease Agreement dated January 5, 2016, among the City of Evansville, Indiana, acting by and through the Redevelopment Commission of the City of Evansville, Indiana, organized and operating under IC 36-7-14, Aztar Indiana Gaming Company, LLC, as tenant and New Tropicana Opco, Inc., as guarantor. (Incorporated by reference to the Company's Current Report on Form 8-K dated January 6, 2016)
10.7
 
Amended and Restated Net Lease Agreement by and between Park Cattle Co. and Desert Palace, Inc. dated January 1, 2000. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.7(A)
 
Amendment and Reservation of Rights Regarding MontBleu dated April 2, 2008 by and between Park Cattle Co. and Columbia Properties Tahoe, LLC. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)
10.7(B)
 
MontBleu Lease Amendment No. 2 by and between Park Cattle Co. and Columbia Properties Tahoe, LLC, dated June 12, 2009. (Incorporated by reference to the Company's Current Report on Form 8-K dated March 11, 2010)

55


10.7(C)
 
MontBleu Lease Amendment No. 3 by and between the Edgewood Companies and Columbia Properties Tahoe, LLC, made effective May 10, 2010. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010)
10.7(D)
 
MontBleu Lease Amendment No. 4 by and between the Edgewood Companies, a Nevada corporation formerly known as Park Cattle Co., and Columbia Properties Tahoe, LLC, made effective October 1, 2014. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014)
10.8
 
Equity Interest Purchase Agreement, dated as of August 16, 2013, by and among Tropicana St. Louis LLC, Casino One Corporation, PNK (ES), LLC, PNK (ST. LOUIS RE), LLC, PNK (STLH), LLC, Casino Magic, LLC and Pinnacle Entertainment, Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 21, 2013)
10.9
 
Limited Guarantee, dated as of August 16, 2013, by Tropicana Entertainment Inc. in favor of Pinnacle Entertainment, Inc. and Casino Magic, LLC. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 21, 2013)
10.10
 
Credit Agreement by and among Tropicana Entertainment Inc., the lenders party thereto from time to time, Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, and Credit Suisse Securities (USA) LLC and UBS Securities LLC, as joint bookrunners and joint lead arrangers (Incorporated by reference to the Company's Current Report on Form 8-K dated November 27, 2013)
10.11
 
Management Services Agreement dated as of March 1, 2016 by and between TEI Management Services LLC, IEH Investments I, LLC and Trump Taj Mahal Associates, LLC. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2016)
10.12
 
Tropicana Entertainment Inc. Severance Pay Plan, effective as of January 1, 2016. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for period ended March 31, 2016)
10.13
 
Tropicana Entertainment Inc. Performance Incentive Plan. (Incorporated by reference to the Company's Current Report on Form 8-K dated May 13, 2016) #
10.13(A)
 
Tropicana Entertainment Inc. Performance Incentive Plan Performance Award Agreement. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2016) #
10.13(B)
 
Tropicana Entertainment Inc. Management Incentive Plan Performance under the Tropicana Entertainment Inc. Performance Incentive Plan. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2016) #
21.1
 
List of Subsidiaries*
31.1
 
Certification by Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
 
Certification by Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32
 
Certification by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS
 
XBRL Instance Document (filed electronically herewith)
101.SCH
 
XBRL Taxonomy Extension Schema Document (filed electronically herewith)
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document (filed electronically herewith)
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith)
101.PRE
 
XBRL Taxonomy Presentation Linkbase Document (filed electronically herewith)
101.DEF
 
XBRL Taxonomy Definition Linkbase Document (filed electronically herewith)
*
Filed herewith
**
Furnished herewith
#
Indicates management contract or compensatory plan or arrangement.

56


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
TROPICANA ENTERTAINMENT INC.
 
 
 
 
 
 
Date:
February 24, 2017
 
By:
 
/s/ THERESA GLEBOCKI
 
 
 
Name:
 
Theresa Glebocki
 
 
 
Title:
 
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
________________________________________________________________________________________________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
 
Title
 
Date
 
 
 
 
 
/s/ ANTHONY P. RODIO
 
President, Chief Executive Officer and Director
(Principal Executive Officer)
 
February 24, 2017
Anthony P. Rodio
 
 
 
 
 
 
/s/ THERESA GLEBOCKI
 
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
 
February 24, 2017
Theresa Glebocki
 
 
 
 
 
 
/s/ KEITH COZZA
 
Director
 
February 24, 2017
Keith Cozza
 
 
 
 
 
 
/s/ DANIEL A. CASSELLA
 
Director
 
February 24, 2017
Daniel A. Cassella
 
 
 
 
 
 
/s/ HUNTER C. GARY
 
Director
 
February 24, 2017
Hunter C. Gary
 
 
 
 
 
 
/s/ WILLIAM A. LEIDESDORF
 
Director
 
February 24, 2017
William A. Leidesdorf
 
 
 
 
 
 
/s/ DANIEL H. SCOTT
 
Director
 
February 24, 2017
Daniel H. Scott
 

57




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Tropicana Entertainment Inc.

We have audited the accompanying consolidated balance sheets of Tropicana Entertainment Inc. (and subsidiaries) (collectively, the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tropicana Entertainment Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 24, 2017 expressed an unqualified opinion.


/s/ GRANT THORNTON LLP

Reno, Nevada
February 24, 2017

F-1


TROPICANA ENTERTAINMENT INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share data)

 
December 31,
 
2016
 
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
239,615

 
$
216,890

Restricted cash
14,842

 
14,455

Receivables, net
31,997

 
22,068

Inventories
7,485

 
6,726

Prepaid expenses and other assets
12,041

 
11,893

Total current assets
305,980

 
272,032

Property and equipment, net
764,282

 
760,820

Goodwill
15,857

 
15,857

Intangible assets, net
73,891

 
74,295

Investments
17,161

 
26,323

Deferred tax assets, net
122,956

 
144,742

Long-term prepaid rent and other assets
24,908

 
18,804

Total assets
$
1,325,035

 
$
1,312,873

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
3,000

 
$
3,000

Accounts payable
38,975

 
33,568

Accrued expenses and other current liabilities
86,155

 
77,836

Total current liabilities
128,130

 
114,404

Long-term debt, net
283,825

 
285,946

Other long-term liabilities
6,331

 
6,207

Deferred tax liabilities
3,244

 
3,524

Total liabilities
421,530

 
410,081

Commitments and contingencies

 

Shareholders' equity:
 
 
 
Tropicana Entertainment Inc. preferred stock at $0.01 par value; 10,000,000 shares authorized, no shares issued

 

Tropicana Entertainment Inc. common stock at $0.01 par value; 100,000,000 shares authorized, 24,634,512 and 26,312,500 shares issued and outstanding at December 31, 2016 and 2015, respectively
246

 
263

Additional paid-in capital
557,545

 
600,359

Retained earnings
345,714

 
302,170

Total shareholders' equity
903,505

 
902,792

Total liabilities and shareholders' equity
$
1,325,035

 
$
1,312,873


The accompanying notes are an integral part of these consolidated financial statements.

F-2


TROPICANA ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)

 
 
Year ended December 31,
 
 
2016
 
2015
 
2014
Revenues:
 
 
 
 

 
 

Casino
 
$
666,047

 
$
640,793

 
$
592,467

Room
 
129,124

 
121,666

 
113,890

Food and beverage
 
107,455

 
107,174

 
103,319

Other
 
30,988

 
29,350

 
26,594

Management fee from related party
 
3,583

 

 

Gross revenues
 
937,197

 
898,983

 
836,270

Less promotional allowances
 
(90,045
)
 
(87,506
)
 
(89,609
)
Net revenues
 
847,152

 
811,477

 
746,661

Operating costs and expenses:
 
 

 
 

 
 

Casino
 
287,715

 
278,532

 
271,857

Room
 
45,041

 
43,625

 
41,159

Food and beverage
 
51,975

 
54,594

 
50,283

Other
 
19,136

 
18,941

 
16,845

Marketing, advertising and promotions
 
68,701

 
61,357

 
57,819

General and administrative
 
160,852

 
142,942

 
143,744

Maintenance and utilities
 
70,395

 
71,320

 
70,512

Depreciation and amortization
 
67,502

 
63,036

 
50,457

Impairment charges, other write-downs and recoveries
 
(211
)
 
906

 
(4,484
)
Goodwill impairment
 

 

 
9,071

Property tax settlement
 

 

 
(31,725
)
Total operating costs and expenses
 
771,106

 
735,253

 
675,538

Operating income
 
76,046

 
76,224

 
71,123

Other income (expense):
 
 

 
 

 
 

Interest expense
 
(12,678
)
 
(12,348
)
 
(12,873
)
Interest income
 
726

 
616

 
1,957

Predecessor claim settlements
 
3,100

 

 
52,680

Total other income (expense)
 
(8,852
)
 
(11,732
)
 
41,764

Income from continuing operations before income taxes
 
67,194

 
64,492

 
112,887

Income tax benefit (expense)
 
(23,650
)
 
(27,092
)
 
140,009

Income from continuing operations
 
43,544

 
37,400

 
252,896

Loss from discontinued operations, net
 

 

 
(1,629
)
Net income
 
$
43,544

 
$
37,400

 
$
251,267

 
 
 
 
 
 
 
Basic and diluted income per common share:
 
 

 
 

 
 

Income from continuing operations
 
$
1.68

 
$
1.42

 
$
9.61

Loss from discontinued operations, net
 

 

 
(0.06
)
Net income per common share
 
$
1.68

 
$
1.42

 
$
9.55

 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 

 
 

 
 

Basic and diluted
 
25,944

 
26,313

 
26,313



The accompanying notes are an integral part of these consolidated financial statements.

F-3


TROPICANA ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(amounts in thousands)

 
 
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Total Shareholders' Equity
Balances, December 31, 2013
 
$
263

 
$
600,359

 
$
13,503

 
$
614,125

 
Net income
 

 

 
251,267

 
251,267

Balances, December 31, 2014
 
263

 
600,359

 
264,770

 
865,392

 
Net income
 

 

 
37,400

 
37,400

Balances, December 31, 2015
 
263

 
600,359

 
302,170

 
902,792

 
Repurchase of TEI common stock
 
(17
)
 
(42,814
)
 

 
(42,831
)
 
Net income
 

 

 
43,544

 
43,544

Balances, December 31, 2016
 
$
246

 
$
557,545

 
$
345,714

 
$
903,505


The accompanying notes are an integral part of these consolidated financial statements.


F-4


TROPICANA ENTERTAINMENT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
 
Year ended December 31,
 
 
2016
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
 
 
Net income
 
$
43,544

 
$
37,400

 
$
251,267

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
Loss on sale of discontinued operations
 

 

 
233

Gain on insurance recoveries
 
(1,016
)
 

 
(5,610
)
Change in investment reserves
 
6,571

 
(2,017
)
 
1,606

Restricted cash funded
 
(1,512
)
 
(105
)
 
(305
)
Depreciation and amortization (including discontinued operations)
 
67,502

 
63,036

 
50,457

Amortization of debt discount and debt issuance costs
 
1,005

 
1,011

 
1,025

Impairment charges, loss on disposition of assets and other write-downs
 
805

 
906

 
1,082

Goodwill impairment
 

 

 
9,071

Insurance proceeds from business interruption
 

 

 
1,250

Deferred income tax
 
21,506

 
17,883

 
(178,760
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
Receivables, net
 
(9,929
)
 
645

 
1,655

Inventories, prepaids and other assets
 
(907
)
 
2,533

 
(1,613
)
Accrued interest
 
(13
)
 
(137
)
 
1,182

Accounts payable, accrued expenses and other liabilities
 
10,230

 
(5,579
)
 
4,846

Long term prepaid rent and other noncurrent assets and liabilities, net
 
(4,054
)
 
(11,971
)
 
5,049

Net cash provided by operating activities
 
133,732

 
103,605

 
142,435

Cash flows from investing activities:
 
 
 
 
 
 
Additions of property and equipment
 
(71,674
)
 
(94,059
)
 
(80,554
)
Approved CRDA Project Funds received
 
3,035