Investments and Acquisition Activities

Acquisition of Ameristar Casinos, Inc.: On August 13, 2013, we completed the acquisition of Ameristar pursuant to an Agreement and Plan of Merger, dated December 20, 2012, as amended. Upon completion of the acquisition, Ameristar was merged with and into Pinnacle and ceased to exist as a separate entity. We expect this transaction will allow us to diversify operations into new geographical markets and will provide long term growth for our stockholders.

The purchase price totaled $1.8 billion (excluding assumed debt). We funded the cash required for the acquisition largely with debt financing. See discussion of new debt in Note 3, Long-Term Debt. The purchase price was comprised of the following (in thousands):



Consideration for Ameristar equity	$	962,428
Repayment of Ameristar debt	878,828
	$	1,841,256

We are required to allocate the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed

based on their fair values. The excess of the purchase price over those fair values is recorded as goodwill, of which $176.9 million is deductible for tax purposes.The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Ameristar. The determination of the fair values of the acquired assets and assumed liabilities requires significant judgment. During the quarter ended December 31, 2013, we continued to review the preliminary purchase price allocation and finalized related valuations. Based upon these reviews, we made adjustments to the preliminary purchase price allocation that resulted in a decrease in goodwill of approximately $2.3 million in the quarter ended December 31, 2013. We have not yet finalized our valuation analysis for acquisition date income tax balances.

The following table reflects the preliminary allocation of the purchase price to the tangible and identifiable intangible

assets acquired and liabilities assumed, with the excess recorded as goodwill (in thousands).



Current and other assets	$	152,165
Property and equipment	1,783,735
Goodwill	860,805
Intangible assets	524,200
Other non-current assets	39,496
Total assets	3,360,401

Current liabilities	179,493
Deferred tax liabilities	218,646
Other long-term liabilities	8,109
Debt	1,112,897
Total liabilities	1,519,145
Net assets acquired	$	1,841,256

Of the $860.8 million in goodwill, approximately $551.1 million has been assigned to the Midwest reporting segment, approximately $231.5 million has been assigned to the South reporting segment, and approximately $78.2 million has been assigned to the West reporting segment.

The following table summarizes the acquired property and equipment. These are preliminary and may change as the purchase price allocation is finalized.



	As Recorded at Fair Value
	(in thousands)
Land and land improvements	$	162,770
Buildings, vessels and improvements	1,308,151
Furniture, fixtures and equipment	158,999
Construction in progress (a)	153,815
Total property and equipment acquired	$	1,783,735

(a) Included in acquired construction in progress is Ameristar Casino Resort Spa Lake Charles. Ameristar Casino Resort Spa Lake Charles assets were sold in November 2013. See Note 8, Discontinued Operations, for further detail.

The following table summarizes the acquired intangible assets. These values are preliminary and may change as the purchase price allocation is finalized.



	As Recorded at Fair Value
	(in thousands)
Trade names	$	187,000
Gaming licenses	258,800
Player relationships	74,000
Favorable leasehold interests	4,400
	$	524,200

The following table includes the financial results for the acquired Ameristar entities included in our Consolidated Statement of Operations since the acquisition date:



	Period from August 13, 2013 to December 31, 2013
	(in thousands)
Net revenues	$	425,767
Net income	$	34,495

The following table includes unaudited pro forma consolidated financial information assuming our acquisition of Ameristar had occurred as of January 1, 2012. The pro forma financial information does not necessarily represent the results that may occur in the future. The pro forma amounts include the historical operating results of Pinnacle and Ameristar prior to the acquisition, with adjustments directly attributable to the acquisition. The pro forma results include increases to depreciation and amortization expense based on the fair values of the intangible assets and fixed assets acquired, amounting to $72.7 million and $120.8 million for the years ended December 31, 2013 and 2012, respectively. The pro forma results also included increases to interest expense, related to the debt issued and assumed in the acquisition, in the amount of $105.2 million and $147.9 million for the year ended December 31, 2013 and 2012, respectively. Lastly, the pro forma results also reflect adjustments for the impact of the extinguishment of Pinnacle's debt in connection with the transaction, acquisition costs and tax expense assuming Ameristar was part of the Company for the full pro forma periods presented.



		Year Ended December 31,
		2013			2012
	(in thousands, except per share data)
Net revenues		$	2,209,143		$	2,198,057
Net income (loss) from continuing operations		$	(59,792	)	$	34,529
Basic income (loss) per share		$	(1.02	)	$	0.56
Diluted income (loss) per share		$	(1.02	)	$	0.56

As a result of the Ameristar transaction, we became obligated under certain agreements that Ameristar was a party.

ACDL Equity Method Investments: We have a minority ownership interest in Asian Coast Development (Canada), Ltd. ("ACDL"), which is accounted for under the equity method. Under the equity method, the carrying value is adjusted for our share of ACDL's earnings and losses, as well as capital contributions to and distributions from ACDL. During 2013, we recorded an other-than-temporary impairment of approximately $92.2 million, fully impairing the remaining asset carrying value of our investment in ACDL. As of March 31, 2013, we discontinued applying the equity method for our investment in ACDL and will not provide for additional losses until our share of future net income, if any, equals the share of net losses not recognized during the period the equity method was suspended. During 2013, we made a $1.8 million loan to ACDL. We determined it was appropriate to fully reserve for the loan receivable during 2013. During the fourth quarter of 2012, we concluded that the carrying value of our investment in ACDL experienced a decline in value. As a result, we recorded an impairment of approximately $25 million as of December 31, 2012.

Other Equity Method Investment: During 2012, we committed to invest $2.0 million in Farmworks, a land re-vitalization project in downtown St. Louis. As of December 31, 2013, we have invested $2.0 million, which is included in "Equity method investments" on our Consolidated Balance Sheets. This investment is accounted for under the equity method.

Retama Park Racetrack: In April 2012, we acquired certain bonds and promissory notes issued by the Retama Development Corporation ("RDC") and a 50.0% interest in additional rights to operate and receive revenue from expanded gaming in the future (the "Gaming Enhancement Rights" and together with the bonds and notes, the "Acquired Property") for cash consideration of $7.8 million. On January 29, 2013, we acquired 75.5% of the equity of Pinnacle Retama Partners, LLC ("PRP") through a contribution of a majority of the Acquired Property, cash funding of $16.7 million, and commitments to future capital funding up to $2.0 million annually over the next five years. Cash consideration in the transaction was used primarily to refinance existing RDC indebtedness and to provide RDC working capital.

The acquisition of 75.5% of the equity of PRP was accounted for as a business combination. The purchase price for the equity of PRP was allocated based upon estimated fair values of the assets, with the excess of the purchase price over the estimated fair value of the assets acquired recorded as goodwill. The purchase price allocation includes goodwill of $3.3 million and other intangibles of $5.0 million. The allocation of fair value was finalized during 2013.

As of December 31, 2013, we held $9.5 million in promissory notes issued by RDC that are included in "Other Assets, Net" in our Consolidated Balance Sheet. The promissory notes have long-term contractual maturities and are collateralized by Retama Park Racetrack assets. The contractual terms of these promissory notes include interest payments due at maturity. Uncertainty exists as to RDC's ability to make these interest payments; therefore, we have not recorded accrued interest on these promissory notes.

As of December 31, 2013, we held, at amortized cost, $11.4 million in local government corporation bonds that were issued by RDC, a local government corporation of the City of Selma, Texas. These bonds have long-term contractual maturities and are included in "Other Assets, Net" in our Consolidated Balance Sheet. It is not likely that we will sell or will be required to sell these investments prior to the recovery of the amortized cost.

Heartland Poker Tour: On July 2, 2012, we closed on an agreement to purchase substantially all of the assets of Federated Sports & Gaming, Inc. and Federated Heartland, Inc., owners of the Heartland Poker Tour and other related assets and intellectual property, for total consideration of $4.6 million. The purchase was accounted for as a business combination. The purchase price for the assets of Federated Sports & Gaming Inc. and Federated Heartland, Inc. was allocated based upon estimated fair values of the assets, with the excess of the purchase price over the estimated fair values of the assets acquired recorded as goodwill. The allocation of fair value was finalized during the fourth quarter of 2012 and we recorded goodwill totaling $2.6 million related to our acquisition of the Heartland Poker Tour.