BUSINESS AND BASIS OF PRESENTATION	6 Months Ended
Jun. 30, 2014
BUSINESS AND BASIS OF PRESENTATION
BUSINESS AND BASIS OF PRESENTATION	NOTE 1—BUSINESS AND BASIS OF PRESENTATION *Introduction* MTR Gaming Group, Inc. (the "Company" or "we"), a Delaware corporation, is a hospitality and gaming company that owns and operates racetrack, gaming and hotel properties in West Virginia, Pennsylvania and Ohio. The Company, through its wholly-owned subsidiaries, owns and operates Mountaineer Casino, Racetrack & Resort in Chester, West Virginia ("Mountaineer"), Presque Isle Downs & Casino in Erie, Pennsylvania ("Presque Isle Downs"), and Scioto Downs in Columbus, Ohio. Scioto Downs, through its subsidiary RacelineBet, Inc., also operates Racelinebet.com, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of TwinSpires.com, an affiliate of Churchill Downs, Inc. In conjunction with the pending merger with Eldorado Resorts (as defined below), in September 2013, we formed several entities to facilitate the mergers: Eclair Holdings Company, a wholly owned subsidiary of the Company ("NewCo"), Ridgeline Acquisition Corp., a wholly owned subsidiary of NewCo ("Merger Sub A"), and Eclair Acquisition Company, LLC, a wholly owned subsidiary of NewCo ("Merger Sub B"). These entities had no assets or operations as of and for the six months ended June 30, 2014 or as of December 31, 2013. The accompanying unaudited consolidated financial statements of MTR Gaming Group, Inc. and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included herein. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. *Recently Issued Accounting Pronouncements* In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). The standard requires revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Qualitative and quantitative disclosures are also required regarding customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 supersedes and replaces nearly all existing revenue recognition guidance under U.S. GAAP. This accounting guidance is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early adoption is not permitted. We are currently evaluating the method of adoption and effect that this standard will have on our consolidated financial statements and related disclosures. There have been no significant changes in our significant accounting policies and estimates that were disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. *Pending Mergers with Eldorado HoldCo LLC* On September 9, 2013, the Company entered into a definitive agreement and plan of merger with Eldorado HoldCo LLC ("Eldorado"), the parent company of Eldorado Resorts LLC ("Eldorado Resorts"). Pursuant to the merger agreement, which was amended November 18, 2013, February 13, 2014 and May 13, 2014, the Company will combine with Eldorado in a part cash, part stock merger. Eldorado Resorts is an owner and operator of gaming properties in Nevada and Louisiana, whose properties include Eldorado Reno, Eldorado Shreveport and Silver Legacy Resort Casino (a 50/50 joint venture with MGM Resorts International) ("Silver Legacy"). Specifically, the Company, NewCo, Merger Sub A, Merger Sub B, Eldorado, and Thomas Reeg, Robert Jones, and Gary Carano, as the representative of the members of Eldorado, entered into an Agreement and Plan of Merger as of September 9, 2013 (as amended, the "Merger Agreement"), pursuant to which the Company will merge with Merger Sub A and Eldorado will merge with Merger Sub B, with the Company and Eldorado as the surviving entities in such mergers (the "Mergers"). As a result of the Mergers, NewCo will become the holding company for the Company and Eldorado and be renamed "Eldorado Resorts, Inc.," ("ERI") with its shares of common stock listed on The Nasdaq Stock Market. The Merger Agreement provides that, upon completion of the Mergers, the Company's stockholders will have the right to receive, at their election (but subject to customary procedures applicable to oversubscription for cash consideration), either (i) one share of ERI common stock, or (ii) $6.05 in cash in exchange for each share of the Company's common stock they own immediately prior to completion of the Mergers (the "MTR Exchange Ratio"); provided that no more than $35.0 million in cash will be exchanged for the Company's shares of common stock. The members of Eldorado will collectively receive, in the aggregate, an amount of merger consideration equaling to the product of (a) Eldorado's adjusted EBITDA for the twelve months ending on the most recent month end preceding the closing date by at least twenty days (the "Report Date") and (b) 6.81, with such amount being adjusted for Eldorado's excess cash, outstanding debt, and working capital based upon an agreed upon working capital target for Eldorado, an amount equal to certain transaction expenses of the Company which is capped at $7.0 million, the value of Eldorado's interest in Silver Legacy, and the amount of restricted cash on Eldorado's balance sheet (if any) relating to the credit support required in connection with Silver Legacy's credit facility. The value of Eldorado's interest in Silver Legacy is equal to the product of (x) Eldorado's proportionate ownership interest in Silver Legacy which, through a subsidiary, is expected to be 50% at the closing of the Mergers, and (y) the product of (A) Silver Legacy's adjusted EBITDA for the twelve months ending on the Report Date and (B) 6.81, with such amount being adjusted for Silver Legacy's excess cash, outstanding debt, and working capital based upon an agreed upon working capital target for Silver Legacy, each such adjustment in proportion to Eldorado's ownership interest, the amount of the subordinated notes made by Eldorado to Silver Legacy, and Eldorado's portion of the difference between the capital accounts of the members of Silver Legacy. As a result, the members of Eldorado will receive, in the aggregate, the number of shares of ERI common stock equal to quotient obtained by dividing the merger consideration as calculated in the two preceding sentences by an implied price per share of $6.05 for ERI common stock (the "Eldorado Merger Shares"). The number of Eldorado Merger Shares issued to Eldorado members is subject to a post-closing adjustment based on a final post-closing calculation of the components of the Eldorado valuation. The MTR Exchange Ratio and the number of Eldorado Merger Shares are subject to customary anti-dilution adjustments in the event of stock splits, stock dividends and similar transactions involving the Company's common stock. The Mergers are expected to qualify as tax-free transfers of property to ERI for federal income tax purposes. The Registration Statement on Form S-4 (File No. 333-192086) (the "Registration Statement") filed in connection with the Mergers was declared effective by the U.S. Securities and Exchange Commission ("SEC") on June 16, 2014. Additionally, the Mergers have been approved by the Company's stockholders, gaming regulators in West Virginia, Louisiana, Ohio and Nevada, and remain subject to certain conditions and approvals, including final regulatory approvals from the gaming regulators in Pennsylvania, registration and listing of ERI shares and customary closing conditions. The obligation of Eldorado and the Company to complete the Mergers is also conditioned on the combined adjusted EBITDA (as defined in the Merger Agreement) of the Company and Eldorado exceeding $115.0 million during the twelve months ending on the month end immediately preceding the closing of the Mergers. The Merger Agreement provides certain termination rights for both the Company and Eldorado, including a right of either the Company or Eldorado to terminate if the combined adjusted EBITDA of the Company and Eldorado does not exceed $115.0 million during the valuation period. At the request of Eldorado, the Company commenced a consent solicitation with respect to obtaining certain amendments and waivers of the indenture underlying the Company's 11.5% Senior Secured Second Lien Notes due August 1, 2019 (the "Notes") on terms and conditions agreed upon between Eldorado and the Company. On January 8, 2014, this consent solicitation expired, and the necessary principal amount of the Notes validly delivered duly executed consents for the proposed amendments. Accordingly, the consents received exceeded the number needed to approve the proposed amendments to the indenture, which permit the formation of a new holding company without requiring the Company to effect a change of control offer under the Notes and indenture. The Company did not pay a consent fee to any registered holder of the Notes in connection with this consent solicitation. In March 2014, the Company amended its Credit Facility (as defined below) to modify the terms of the agreement and received a waiver of the Change in Control default provisions and any breach as a result of the payment of up to $35.0 million to stockholders to repurchase shares of the Company's stock, in anticipation of the Mergers. The amendment modified the covenant requirements for the maximum leverage ratios and minimum interest coverage ratios for the periods beginning September 30, 2014 and thereafter. There was no fee incurred to obtain the amendment. The Company incurred costs of approximately $0.4 million and $0.9 million, related to our strategic initiatives, during the three and six months ended June 30, 2014, respectively. Strategic transaction related costs are expensed as incurred and are included within strategic transaction costs in the accompanying consolidated statements of operations.

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Introduction

MTR Gaming Group, Inc. (the "Company" or "we"), a Delaware corporation, is a hospitality and gaming company that owns and operates racetrack, gaming and hotel properties in West Virginia, Pennsylvania and Ohio.

The Company, through its wholly-owned subsidiaries, owns and operates Mountaineer Casino, Racetrack & Resort in Chester, West Virginia ("Mountaineer"), Presque Isle Downs & Casino in Erie, Pennsylvania ("Presque Isle Downs"), and Scioto Downs in Columbus, Ohio. Scioto Downs, through its subsidiary RacelineBet, Inc., also operates Racelinebet.com, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of TwinSpires.com, an affiliate of Churchill Downs, Inc.

In conjunction with the pending merger with Eldorado Resorts (as defined below), in September 2013, we formed several entities to facilitate the mergers: Eclair Holdings Company, a wholly owned subsidiary of the Company ("NewCo"), Ridgeline Acquisition Corp., a wholly owned subsidiary of NewCo ("Merger Sub A"), and Eclair Acquisition Company, LLC, a wholly owned subsidiary of NewCo ("Merger Sub B"). These entities had no assets or operations as of and for the six months ended June 30, 2014 or as of December 31, 2013.

The accompanying unaudited consolidated financial statements of MTR Gaming Group, Inc. and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included herein. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full year or for any future period. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). The standard requires revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Qualitative and quantitative disclosures are also required regarding customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 supersedes and replaces nearly all existing revenue recognition guidance under U.S. GAAP. This accounting guidance is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early adoption is not permitted. We are currently evaluating the method of adoption and effect that this standard will have on our consolidated financial statements and related disclosures.

There have been no significant changes in our significant accounting policies and estimates that were disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

Pending Mergers with Eldorado HoldCo LLC

On September 9, 2013, the Company entered into a definitive agreement and plan of merger with Eldorado HoldCo LLC ("Eldorado"), the parent company of Eldorado Resorts LLC ("Eldorado Resorts"). Pursuant to the merger agreement, which was amended November 18, 2013, February 13, 2014 and May 13, 2014, the Company will combine with Eldorado in a part cash, part stock merger. Eldorado Resorts is an owner and operator of gaming properties in Nevada and Louisiana, whose properties include Eldorado Reno, Eldorado Shreveport and Silver Legacy Resort Casino (a 50/50 joint venture with MGM Resorts International) ("Silver Legacy").

Specifically, the Company, NewCo, Merger Sub A, Merger Sub B, Eldorado, and Thomas Reeg, Robert Jones, and Gary Carano, as the representative of the members of Eldorado, entered into an Agreement and Plan of Merger as of September 9, 2013 (as amended, the "Merger Agreement"), pursuant to which the Company will merge with Merger Sub A and Eldorado will merge with Merger Sub B, with the Company and Eldorado as the surviving entities in such mergers (the "Mergers"). As a result of the Mergers, NewCo will become the holding company for the Company and Eldorado and be renamed "Eldorado Resorts, Inc.," ("ERI") with its shares of common stock listed on The Nasdaq Stock Market.

The Merger Agreement provides that, upon completion of the Mergers, the Company's stockholders will have the right to receive, at their election (but subject to customary procedures applicable to oversubscription for cash consideration), either (i) one share of ERI common stock, or (ii) $6.05 in cash in exchange for each share of the Company's common stock they own immediately prior to completion of the Mergers (the "MTR Exchange Ratio"); provided that no more than $35.0 million in cash will be exchanged for the Company's shares of common stock. The members of Eldorado will collectively receive, in the aggregate, an amount of merger consideration equaling to the product of (a) Eldorado's adjusted EBITDA for the twelve months ending on the most recent month end preceding the closing date by at least twenty days (the "Report Date") and (b) 6.81, with such amount being adjusted for Eldorado's excess cash, outstanding debt, and working capital based upon an agreed upon working capital target for Eldorado, an amount equal to certain transaction expenses of the Company which is capped at $7.0 million, the value of Eldorado's interest in Silver Legacy, and the amount of restricted cash on Eldorado's balance sheet (if any) relating to the credit support required in connection with Silver Legacy's credit facility. The value of Eldorado's interest in Silver Legacy is equal to the product of (x) Eldorado's proportionate ownership interest in Silver Legacy which, through a subsidiary, is expected to be 50% at the closing of the Mergers, and (y) the product of (A) Silver Legacy's adjusted EBITDA for the twelve months ending on the Report Date and (B) 6.81, with such amount being adjusted for Silver Legacy's excess cash, outstanding debt, and working capital based upon an agreed upon working capital target for Silver Legacy, each such adjustment in proportion to Eldorado's ownership interest, the amount of the subordinated notes made by Eldorado to Silver Legacy, and Eldorado's portion of the difference between the capital accounts of the members of Silver Legacy. As a result, the members of Eldorado will receive, in the aggregate, the number of shares of ERI common stock equal to quotient obtained by dividing the merger consideration as calculated in the two preceding sentences by an implied price per share of $6.05 for ERI common stock (the "Eldorado Merger Shares"). The number of Eldorado Merger Shares issued to Eldorado members is subject to a post-closing adjustment based on a final post-closing calculation of the components of the Eldorado valuation. The MTR Exchange Ratio and the number of Eldorado Merger Shares are subject to customary anti-dilution adjustments in the event of stock splits, stock dividends and similar transactions involving the Company's common stock. The Mergers are expected to qualify as tax-free transfers of property to ERI for federal income tax purposes.

The Registration Statement on Form S-4 (File No. 333-192086) (the "Registration Statement") filed in connection with the Mergers was declared effective by the U.S. Securities and Exchange Commission ("SEC") on June 16, 2014. Additionally, the Mergers have been approved by the Company's stockholders, gaming regulators in West Virginia, Louisiana, Ohio and Nevada, and remain subject to certain conditions and approvals, including final regulatory approvals from the gaming regulators in Pennsylvania, registration and listing of ERI shares and customary closing conditions. The obligation of Eldorado and the Company to complete the Mergers is also conditioned on the combined adjusted EBITDA (as defined in the Merger Agreement) of the Company and Eldorado exceeding $115.0 million during the twelve months ending on the month end immediately preceding the closing of the Mergers. The Merger Agreement provides certain termination rights for both the Company and Eldorado, including a right of either the Company or Eldorado to terminate if the combined adjusted EBITDA of the Company and Eldorado does not exceed $115.0 million during the valuation period.

At the request of Eldorado, the Company commenced a consent solicitation with respect to obtaining certain amendments and waivers of the indenture underlying the Company's 11.5% Senior Secured Second Lien Notes due August 1, 2019 (the "Notes") on terms and conditions agreed upon between Eldorado and the Company. On January 8, 2014, this consent solicitation expired, and the necessary principal amount of the Notes validly delivered duly executed consents for the proposed amendments. Accordingly, the consents received exceeded the number needed to approve the proposed amendments to the indenture, which permit the formation of a new holding company without requiring the Company to effect a change of control offer under the Notes and indenture. The Company did not pay a consent fee to any registered holder of the Notes in connection with this consent solicitation.

In March 2014, the Company amended its Credit Facility (as defined below) to modify the terms of the agreement and received a waiver of the Change in Control default provisions and any breach as a result of the payment of up to $35.0 million to stockholders to repurchase shares of the Company's stock, in anticipation of the Mergers. The amendment modified the covenant requirements for the maximum leverage ratios and minimum interest coverage ratios for the periods beginning September 30, 2014 and thereafter. There was no fee incurred to obtain the amendment.

The Company incurred costs of approximately $0.4 million and $0.9 million, related to our strategic initiatives, during the three and six months ended June 30, 2014, respectively. Strategic transaction related costs are expensed as incurred and are included within strategic transaction costs in the accompanying consolidated statements of operations.