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.

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 2, 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. Management has not yet finalized its 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 $860.0 million of 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.



	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 are the assets of the Ameristar Casino Resort Spa Lake Charles development. These assets were sold in November 2013. See Note 7, Discontinued Operations, for further detail.

The following table summarizes the acquired intangible assets.



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

The following table includes the financial results for the acquired Ameristar entities included in our Condensed Consolidated Statement of Operations during the first quarter of 2014:



	Three Months Ended March 31, 2014
	(in thousands)
Net revenues	$	279,910
Net income	$	54,894

The following table includes unaudited pro forma consolidated financial information assuming our acquisition of Ameristar had occurred as of January 1, 2013. 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 $30.2 million for the three months ended March 31, 2013. The pro forma results also included increases to interest expense, related to the debt issued and assumed in the acquisition, in the amount of $36.1 million for the three months ended March 31, 2013. Lastly, the pro forma results also reflect adjustments for the impact of acquisition costs and tax expense assuming Ameristar was part of the Company for the full pro forma periods presented.



	Three Months Ended March 31, 2013
	(in thousands, except per share data)
Net revenues	$	561,697
Net loss from continuing operations attributable to Pinnacle Entertainment, Inc.	$	(61,192	)
Basic loss per share	$	(1.37	)
Diluted loss per share	$	(1.37	)

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

ACDL Investment: We have a minority ownership interest in Asian Coast Development (Canada), Ltd. ("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. We have discontinued accounting for our investment in ACDL under the equity method 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.

Equity Method Investment: As of March 31, 2014, we have invested $2.0 million in Farmworks, a land re-utilization project in downtown St. Louis, included in "Equity method investment" in our unaudited Condensed Consolidated Balance Sheet. This investment is accounted for under the equity method.

Retama Park Racetrack: On January 29, 2013, we acquired 75.5% of the equity of Pinnacle Retama Partners, LLC ("PRP"). The acquisition 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.

As of March 31, 2014, PRP held $10.2 million in promissory notes issued by Retama Development Corporation ("RDC"), a local government corporation of the City of Selma, Texas, included in "Other Assets, net" in our unaudited Condensed Consolidated Balance Sheets. 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. We have not recorded accrued interest on these promissory notes because uncertainty exists as to RDC's ability to make interest payments.

As of March 31, 2014, we held, at amortized cost, $11.4 million in local government corporation bonds, with long-term contractual maturities, issued by RDC, a local government corporation of the City of Selma, Texas, included in "Other Assets, net" in our unaudited Condensed Consolidated Balance Sheet. It is not likely that we will be required to sell these investments prior to the recovery of the amortized cost.