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TROPICANA ENTERTAINMENT : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

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11/01/2016 | 07:17pm CET

Cautionary Statement Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q 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. In some situations, you may be able to identify forward-looking statements by terms such as "may," "will," "might," "expect," "plan," "believe," "anticipate," "intend," "should," "could," "would," "estimate," "project," "continue," "pursue," or the negative thereof or comparable terminology, and may include (without limitation) information regarding our expectations, hopes or intentions regarding the future, including, but not limited to, statements regarding our operating or other strategic plans, our management of the Taj Mahal, our competition (including online gaming), financing, revenues, or tax benefits; our beliefs regarding the sufficiency of our existing cash and credit sources, including our New 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, our required capital expenditures


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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 and 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. Forward-looking
statements involve certain risks and uncertainties, and actual results may
differ materially from those discussed in each such statement. In light of these
risks, uncertainties and assumptions, the events described in the
forward-looking statements might not occur or might occur to a different manner
or extent or at a different time than we have described. All forward-looking
statements are qualified in their entirety by reference to the areas of risk and
uncertainty described elsewhere in this Quarterly Report on Form 10-Q as well as
those discussed under "Item 1A-Risk Factors" in our Annual Report on Form 10-K
for the year ended December 31, 2015. Forward-looking statements represent our
estimates and assumptions only as of the date of this report. We operate in a
continually changing business environment and new risks emerge from time to
time. Except as may be required by applicable law, we undertake no obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Overview
We are an owner and operator of regional casino and entertainment properties
located in the United States and one casino resort development located on the
island of Aruba. 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 September 30, 2016,
our properties collectively included approximately 392,000 square feet of gaming
space with approximately 7,900 slot machines, approximately 300 table games and
approximately 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 and other. As of September 30, 2016, our operations by region include
the following:
•      East-Tropicana Casino and Resort, Atlantic City ("Tropicana AC") located
       in Atlantic City, New Jersey;


•      Central- Tropicana Evansville ("Tropicana Evansville") located in
       Evansville, Indiana; and Lumière Place Casino, HoteLumière, the Four
       Seasons Hotel St. Louis (collectively, "Lumière Place") located in Saint
       Louis, Missouri;


•      West-Tropicana Laughlin Hotel and Casino ("Tropicana Laughlin") located in
       Laughlin, Nevada; and MontBleu Casino Resort & Spa ("MontBleu") located in
       South Lake Tahoe, Nevada; and


•      South and other-Belle of Baton Rouge Casino and Hotel ("Belle of Baton
       Rouge") located in Baton Rouge, Louisiana; Trop Casino Greenville
       ("Tropicana Greenville") located in Greenville, Mississippi; and Tropicana
       Aruba Resort and Casino ("Tropicana Aruba") located in Palm Beach, Aruba.


The Company, through its wholly-owned subsidiary, TEI Management Services LLC, also manages the Trump Taj Mahal Casino Hotel ("Taj Mahal") in Atlantic City (which discontinued its operation as a casino hotel on October 10, 2016), and, through an agreement with its 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" as they have been determined to not meet the aggregation criteria as separately reportable segments. We are a Delaware corporation 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 (which we sold in March 2011), JMBS Casino, LLC ("JMBS Casino") and CP Laughlin Realty, LLC (which we sold in July 2014), all of which (collectively, the "Predecessors") were part of the Plan. In addition, we acquired certain assets of Adamar of New Jersey, Inc. ("Adamar"), an unconsolidated subsidiary of TEH, pursuant to an amended and restated asset purchase agreement, including Tropicana AC. 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 Adamar and several of the Predecessors' gaming properties and related assets. Adamar was not a party to the Predecessors' bankruptcy. 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. Except where the context suggests otherwise, the terms "we," "us," "our," and "the Company" refer to Tropicana Entertainment Inc. and its subsidiaries.


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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, and general public sentiment regarding travel. We
may experience significant fluctuations in our quarterly operating results due
to seasonality and other factors. Historically, 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 games volumes and slot
volumes, 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:
•      Atlantic City Market. Although competitive pressures in Atlantic City have
       stabilized somewhat with the closure of four casino properties in 2014 and
       the closure of the Taj Mahal on October 10, 2016, competition from the
       regional markets continues to adversely affect the Atlantic City market.
       In addition, a voter referendum in November 2016 to authorize up to two
       casinos in northern New Jersey, if approved, could have a material adverse
       impact on the Atlantic City market over the longer term. Further,
       continuing uncertainty about the City of Atlantic City's ability to fund
       ongoing operating costs and maintain existing operations may affect the
       Atlantic City casino market and Tropicana AC in the coming months. Based
       on market data, the Atlantic City market experienced period over period
       increases in gross casino win (including internet gaming revenue) of 0.2%
       and 1.6% for the three and nine months ended September 30, 2016,
       respectively, as compared to the same periods of 2015. However, excluding
       internet gaming revenue, the Atlantic City gaming market posted declines
       for the three and nine months ended September 30, 2016 as compared to the
       same periods of 2015.


•      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 three and nine months
       ended September 30, 2016, the Company's total table games hold of 19.2%
       and 18.8%, respectively, reflected increases of 3.6 and 2.3 percentage
       points compared to the prior year, which contributed to increased table
       game revenues. This hold percentage is not necessarily indicative of
       results that can be expected for future periods.


•      Debt and Interest Expense. In November 2013, we entered into the credit
       facilities (the "New 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 "New 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 New 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 New Term Loan Facility accrue interest at a
       floating rate which was 4.00% as of September 30, 2016. A portion of the
       net proceeds from the New Term Loan Facility was used to repay in full the
       amounts outstanding under the existing Term Loan Facility which totaled
       approximately $172.4 million in repaid principal, accrued and unpaid
       interest.


Our interest expense was $9.6 million and $9.1 million for the nine months ended
September 30, 2016 and 2015, respectively, which includes amortization of the
related debt discounts and debt issuance costs of $0.8 million for each of the
nine months ended September 30, 2016 and 2015, offset by approximately $0.1
million and $0.6 million of capitalized interest in the nine months ended
September 30, 2016 and 2015, respectively.
•      Predecessor related gain settlement. 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 condensed consolidated
       statements of income for the three and nine months ended September 30,
       2016.



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•      Cost Efficiencies. As a result of economic conditions, we continue to
       focus on areas where we may institute efficiency initiatives which may
       result in cost savings. In the past, these cost saving initiatives have
       included decreased payroll and benefits expense related to our
       company-sponsored health insurance plans.

Three months ended September 30, 2016 compared to three months ended September 30, 2015 The following table sets forth certain information concerning our results of operations (dollars in thousands):

                                   Three months ended September 30,
                                       2016                 2015
Net revenues:
East                            $       104,040       $        96,256
Central                                  71,371                72,594
West                                     30,650                27,817
South and other                          23,712                22,281
Corporate                                 1,250                     -
Total net revenues              $       231,023       $       218,948
Operating income (loss):
East                            $        20,228       $        21,193
Central                                  10,464                10,026
West                                      5,495                 3,708
South and other                             672                   394
Corporate                                (3,002 )              (4,224 )
Total operating income          $        33,857       $        31,097
Operating income margin(a):
East                                       19.4 %                22.0 %
Central                                    14.7 %                13.8 %
West                                       17.9 %                13.3 %
South and other                             2.8 %                 1.8 %
Total operating income margin              14.7 %                14.2 %


(a)Operating income margin is operating income as a percentage of net revenues. The following table presents detail of our net revenues (in thousands):

                                 Three months ended September 30,
                                     2016                 2015
Revenues:
Casino                        $       176,960       $       168,977
Room                                   39,701                37,238
Food and beverage                      28,902                28,860
Other                                   9,619                 7,646
Gross revenues                        255,182               242,721
Less promotional allowances           (24,159 )             (23,773 )
Net revenues                  $       231,023       $       218,948


Net Revenues In the East region, net revenues were $104.0 million for the three months ended September 30, 2016, an increase of $7.8 million, or 8.1%, when compared to the three months ended September 30, 2015. Tropicana AC's net revenues comprise approximately 45% and 44% of the Company's total net revenues for the three months ended September 30, 2016 and 2015, respectively. Tropicana AC's gross casino win for the three months ended September 30, 2016 increased 9.3% over the three months ended September 30, 2015. Comparatively, there was a 1.6% decline in gaming revenues (excluding internet gaming revenue) in the total Atlantic City market, as reported, for the third quarter of 2016 in comparison to the same period of 2015. Gaming volumes at Tropicana AC reflected increases during the third quarter of 2016 compared to the comparable prior year period, including a 6.2% increase in table drop and a 5.0% increase in slot handle. In addition, the table hold for the three


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months ended September 30, 2016 was 17.8%, compared to 13.6% in the same period
of 2015; when combined with the increased volume, this resulted in a 39.0%
increase in table games revenue at Tropicana AC for the third quarter of 2016 as
compared to the same period of 2015. In addition, Tropicana AC's slot revenues
increased 3.2% during the third quarter of 2016 over the third quarter of 2015,
and internet gaming revenues in the third quarter of 2016 increased 17.8% over
the same period of 2015. Tropicana AC completed a capital improvement project
during the second quarter of 2016, which included renovation of hotel rooms in
its Havana Tower, a new high end slot area on the casino floor, a new hair salon
and a new promotional area for its TropAdvantage player's club. The hotel
occupancy and average daily room rate was 90% and $108, respectively, for the
three months ended September 30, 2016, compared to 91% and $103, respectively,
for the three months ended September 30, 2015.
In the Central region, net revenues were $71.4 million for the three months
ended September 30, 2016, a decrease of $1.2 million from the three months ended
September 30, 2015. Table games revenues at Lumière Place for the three months
ended September 30, 2016 increased 35.4% over the prior year period, primarily
due to a favorable table games hold of 22.1% in the third quarter of 2016
compared to 16.7% in the third quarter of 2015, combined with a 2.3% increase in
table volume during the period. However, slot volumes at Lumière Place declined
11.2% in the third quarter of 2016 from the prior year period, which, though
Lumière Place experienced a slightly higher slot hold, resulted in a 9.3%
decline in slot revenue during the third quarter of 2016 as compared with the
same period of the prior year. Gaming volumes at Lumière Place were impacted by
a room renovation project and casino floor reconfiguration which commenced
during the third quarter of 2016, which resulted in approximately half of the
Hotel Lumière rooms being taken temporarily out of service. Casino revenues at
Tropicana Evansville increased 2.9% during the three months ended September 30,
2016 as compared to the prior year period, resulting from a 4.0% increase in
slot revenues, partially offset by a 4.3% decrease in table games revenue during
the period. The increased slot revenues in Evansville primarily resulted from
higher slot volumes, as slot handle increased 3.4% over the prior year period.
The occupancy rate for the three months ended September 30, 2016 in the Central
Region was 85%, compared to 81% in the third quarter of 2015, while the average
daily room rate was $152 for the three months ended September 30, 2016, compared
to $139 for the three months ended September 30, 2015. The room renovation
project at Lumière Place impacted hotel revenues during the quarter, which
declined 7.1% from the third quarter of 2015.
In the West region, net revenues were $30.7 million for the three months ended
September 30, 2016, an increase of $2.8 million, or 10.2%, compared to the three
months ended September 30, 2015. Increases in gaming revenues at both Tropicana
Laughlin and MontBleu were driven by higher gaming volumes, with a 6.1% increase
in slot handle in the region during the third quarter of 2016 over the same
period of 2015 and a 6.4% increase in table games drop during the period. In
addition, the table games hold in the West region increased during the quarter,
to 20.3% from 16.2% from the prior year quarter. The improvement in volumes at
MontBleu is attributable in part to property renovations that were completed in
late 2015. In addition, the gaming markets for both properties in the West
region have reported revenue growth over 2015, which may be attributable to
generally lower gas prices prompting increased tourism travel in this region;
the most recently available data for the two months ended August 31, 2016 shows
a 23.0% increase in gaming win in the South Lake Tahoe market, as well as a 1.3%
increase in gaming win in the Laughlin market. In addition to improvements in
gaming revenue, hotel, food and beverage and other non-gaming revenues in the
West region increased 13.3% for the third quarter of 2016 compared to the same
period of 2015. The average daily room rate for the West region was $59 for the
three months ended September 30, 2016, compared to $58 for the comparable prior
year period. The occupancy rate in the West region was 67% for the three months
ended September 30, 2016, as compared to 58% occupancy for the three months
ended September 30, 2015.
In the South and other region, net revenues were $23.7 million for the three
months ended September 30, 2016, an increase of $1.4 million, or 6.4%, compared
to the three months ended September 30, 2015. Casino revenues for the South and
other region increased 1.2% in the three months ended September 30, 2016,
compared to the prior year period. At Tropicana Greenville, casino revenues
increased 2.2% for the three months ended September 30, 2016 compared to the
prior year period, driven primarily by a 6.2% increase in slot handle and a 3.2%
increase in table games drop. In Baton Rouge, revenues in July and August were
negatively impacted by civil unrest resulting from a police shooting and
subsequent retaliatory shooting of police officers, and further impacted by
flooding rains which impacted over 40,000 residents of the area. However, the
subsequent influx of federal aid workers and building contractors into the area
in response to the flooding positively impacted gaming and non-gaming revenues
in late August and September. Although table game drop at the Belle of Baton
Rouge declined 12.6% in the third quarter of 2016 compared to the same period of
2015, slot handle increased by 1.1% during the period. Tropicana Aruba's casino
volume increased during the three months ended September 30, 2016 compared to
the three months ended September 30, 2015 as a result of aggressive marketing
efforts during the quarter, reflected in a $2.4 million, or 80.0% increase in
slot handle and a 32.2% increase in table games drop during the period. During
the third quarter of 2016, Tropicana Aruba recorded $0.7 million of time share
sales, compared to less than $0.1 million of sales in the same period of 2015,
when time share sales commenced. The occupancy rate at our properties in the
South and other region was 87% for the three months ended September 30, 2016
compared to 71% for the same period of 2015. The average daily room rate for the
South and other region was $69 and $70 for the three months ended September 30,
2016 and 2015, respectively.

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Net revenues for Tropicana Entertainment Corporate division represents the
management fee earned as a result of our management of the Taj Mahal.
Operating Income
In the East region, Tropicana AC reported an operating income for the three
months ended September 30, 2016 of $20.2 million, a $1.0 million decrease
compared to $21.2 million of operating income in the three months ended
September 30, 2015. The decline in operating results in the East region was due
to higher operating expenses associated with the increase in business volumes,
including increases in payroll costs, gaming taxes and advertising and
promotional costs, as well as a $1.5 million increase in expense associated with
the reserve for the CRDA deposits over the prior year period, and a $2.9 million
increase in real estate tax expense over the prior year as a result of a $5.4
million decrease in the third quarter of 2015 resulting from a lower than
expected tax increase.
In the Central region, the operating income for the three months ended
September 30, 2016 was $10.5 million, a $0.4 million increase over the three
months ended September 30, 2015. Although revenues in the Central region
reflected a decline for the third quarter of 2016 as compared to the third
quarter of 2015, reductions in operating expenses, combined with a $1.6 million
decrease in depreciation expense, primarily at Lumière Place as assets have been
fully depreciated, more than offset the decline in revenue for the period.
In the West region, the operating income for the three months ended
September 30, 2016 was $5.5 million, a $1.8 million increase compared to the
three months ended September 30, 2015. The increase is mainly attributable to
the improvement in revenues as previously discussed, partially offset by
increased depreciation expense as a result of the completion of the capital
improvement project at MontBleu and other operating expense increases as a
result of the increased revenues and business volumes.
In the South and other region, operating income for the three months ended
September 30, 2016 was $0.7 million, an increase of $0.3 million over the
operating income for the three months ended September 30, 2015. Although net
revenue in the region increased $1.4 million over the third quarter of 2015,
increased costs associated with accounting for time share sales at Tropicana
Aruba, combined with a bad debt reserve of $0.7 million at that property for
furniture and equipment that was ordered but never delivered, contributed to
lowering the increase in operating results in this region.
The Corporate operating loss, which includes the results of all other
subsidiaries of the Company, was $3.0 million for the three months ended
September 30, 2016, reflecting improvement over the three months ended
September 30, 2015 primarily due to the recognition $1.3 million of revenue
during the third quarter of 2016 related to the TEI Management Services LLC
agreement to manage the Taj Mahal Casino Hotel.
Interest Expense
Interest expense for the three months ended September 30, 2016 and 2015 was $3.1
million and $3.2 million, respectively. The interest expense on our New Term
Loan Facility accrues at a floating rate, which was 4.0% per annum as of
September 30, 2016. Cash paid for interest, net of interest capitalized, was
$2.9 million for each of the three months ended September 30, 2016 and 2015.
Income Taxes
Income tax expense was $13.4 million and $11.4 million, respectively, for the
three months ended September 30, 2016 and 2015 and our effective income tax rate
was 39.4% and 40.8%, respectively. The difference between the federal statutory
rate of 35% and the effective tax rate for the three months ended September 30,
2016 and 2015 was primarily due to disallowed foreign losses, state income taxes
(net of federal benefit), and other permanent differences.
Predecessor Claim Settlement
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 for the three months ended
September 30, 2016.

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Nine months ended September 30, 2016 compared to nine months ended September 30, 2015 The following table sets forth certain information concerning our results of operations (dollars in thousands):

                                    Nine months ended September 30,
                                       2016                 2015
Net revenues:
East                            $       260,712       $       247,046
Central                                 221,359               216,406
West                                     84,976                79,461
South and other                          74,335                72,408
Corporate                                 2,333                     -
Total net revenues              $       643,715       $       615,321
Operating income (loss):
East                            $        19,630       $        29,114
Central                                  37,933                31,776
West                                     12,016                 9,171
South and other                           6,297                 6,489
Corporate                               (11,364 )             (12,391 )
Total operating income          $        64,512       $        64,159
Operating income margin(a):
East                                        7.5 %                11.8 %
Central                                    17.1 %                14.7 %
West                                       14.1 %                11.5 %
South and other                             8.5 %                 9.0 %
Total operating income margin              10.0 %                10.4 %


(a)Operating income margin is operating income as a percentage of net revenues.

The following table presents detail of our net revenues (in thousands):

                                  Nine months ended September 30,
                                     2016                 2015
Revenues:
Casino                        $       504,026       $       485,419
Room                                  100,292                93,675
Food and beverage                      82,358                80,783
Other                                  25,286                21,719
Gross revenues                        711,962               681,596
Less promotional allowances           (68,247 )             (66,275 )
Net revenues                  $       643,715       $       615,321


Net Revenues In the East region, net revenues were $260.7 million for the nine months ended September 30, 2016, an increase of $13.7 million, or 5.5%, when compared to the nine months ended September 30, 2015. Based on published market data, the Atlantic City market experienced a year-over-year decline in gross casino win (excluding internet gaming win) of 0.2% in the nine months ended September 30, 2016. At Tropicana AC, total gross casino win increased 5.9% during the nine months ended September 30, 2016 over the same period of 2015. The increase at Tropicana AC was driven by a 4.1% increase in slot handle, combined with a 6.0% increase in table game drop and a 1.8 percentage point increase in table game hold, to 16.7% in the first nine months of 2016 compared to 14.9% in the same period of 2015. As a result of the combined increase in table games drop and hold, table games revenue increased 19.0% for the year to date period ended September 30, 2016 compared to the same period of 2015. Internet gaming revenue also increased 18.4% in the first nine months of 2016 compared to the first nine months of 2015. Tropicana AC completed a renovation project during the second quarter of 2016, which included renovation of hotel rooms in its Havana Tower, a new high end slot area on the casino floor, a new hair salon and a new promotional area. The average daily room rate was $93 and $92 for the nine months ended September 30, 2016 and 2015, respectively. The occupancy rate increased to 82% for the nine months ended September 30, 2016 compared to 81% for the nine months ended September 30, 2015. Other non-gaming revenues, including food and beverage, entertainment and retail, all posted increases in


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the nine months ended September 30, 2016 over the same period of the prior year
due to increased customer volumes throughout the property, due in part to
another major renovation project that was completed in mid-2015, which included
hotel room and casino floor renovations, boardwalk facade renovations and the
opening of a new fitness center.
In the Central region, net revenues were $221.4 million for the nine months
ended September 30, 2016, an increase of $5.0 million, as compared to the nine
months ended September 30, 2015. Net revenues in 2016 were boosted early in the
year with mild winter weather and low gas prices contributing to strong customer
visitation levels. At Tropicana Evansville, casino revenues increased 7.4% for
the first nine months of 2016 over the same period of 2015, due in part to
increases in marketing reinvestment strategies aimed at increasing customer
volumes. Slot handle at Tropicana Evansville for the first nine months of 2016
increased 4.9% over the same period of the prior year, while table games drop
also increased during the period, by 8.6% over the comparable prior year period.
In addition, the table games hold at Tropicana Evansville increased to 23.6% in
the first nine months of 2016, compared to 21.1% in the same period of 2015,
contributing to the 21.3% increase in table games revenue during the period. At
Lumière Place, aggressive marketing efforts in the first nine months of 2016
aimed at increasing customer volumes contributed to a 4.5% increase in table
games drop over the first nine months of 2015; when combined with more favorable
table games hold percentages, this resulted in a 21.6% increase in table game
revenues. However, a decrease in slot revenues at Lumière Place during the same
period partially offset the higher table games revenue, and factoring in higher
promotional and free play costs, total net casino revenues for the nine months
ended September 30, 2016 increased a slight 0.3% over the same period of 2015.
The occupancy rate in the Central region for the nine months ended September 30,
2016 was 80%, compared to 79% in the nine months ended September 30, 2015. The
average daily room rate in the region was $140 and $135 for the nine months
ended September 30, 2016 and 2015, respectively.
In the West region, net revenues were $85.0 million for the nine months ended
September 30, 2016, an increase of $5.5 million, compared to the nine months
ended September 30, 2015. The increase was driven by improved results at
MontBleu, where a hotel guest room and public area renovation project was
completed in late 2015. At MontBleu, total casino revenues for the first nine
months of 2016 increased 11.0% over the same period of 2015, driven by a 5.2%
increase in table volume combined with a 4.8 percentage point increase in table
hold, which resulted in a 36.5% increase in table games revenue. In addition,
slot revenue at MontBleu increased 5.4% over the first nine months of 2015, and
hotel revenue increased $2.4 million as a result of the completion of the room
renovation project; total net revenue at MontBleu increased 14.3% in the first
nine months of 2016 compared to the same period of 2015. At Tropicana Laughlin,
table games revenue for the first nine months of 2016 increased 23.0% over the
prior year period as a result of an 8.2% increase in table games drop combined
with a 2.6 percentage point increase in table games hold. Slot revenues at
Tropicana Laughlin declined a slight 0.2% in the first nine months of 2016
compared to the same period of 2015 due to a 1.5% decrease in slot volumes.
However, the improvement in table games revenue, combined with increases in
hotel and food and beverage revenues, offset the decline in slot revenues, and
as a result, total net revenues at Tropicana Laughlin increased 2.8% for the
nine months ended September 30, 2016 compared to the same period of the prior
year. The average daily room rate for the West region was $55 for the nine
months ended September 30, 2016 compared to $50 for the nine months ended
September 30, 2015. The occupancy rate for the nine months ended September 30,
2016 and 2015 at our properties in the West region was 60% and 59%,
respectively.
In the South and other region, net revenues were $74.3 million for the nine
months ended September 30, 2016, a $1.9 million increase over the nine months
ended September 30, 2015. Increases in casino volumes at Tropicana Greenville
and Tropicana Aruba were offset by declines in casino volumes at the Belle of
Baton Rouge, where the local economy has been impacted by lower oil and gas
prices, and further impacted by civil unrest and flooding in the first part of
the third quarter of 2016. An increase in the table games hold percentage in the
South and other region, to 18.4% in the first nine months of 2016, compared to
17.1% in the same period of 2015, partially offset the decline in table games
volume, resulting in a 5.4% decline in table games revenue for the year to date
period ended September 30, 2016 in the region. Non-gaming revenues at Tropicana
Aruba also increased, driven primarily by $2.3 million in time share sales in
the first nine months of 2016. The hotel occupancy rate at our properties in the
South and other region was 78% and 71% for the nine months ended September 30,
2016 and 2015, respectively, while the average daily room rate for the South and
other region was $76 and $78 for the nine months ended September 30, 2016 and
2015, respectively.
Net revenues for Tropicana Entertainment Corporate division of $2.3 million
represents the management fee earned as a result of our management of the Taj
Mahal.
Operating Income
In the East region, although net revenues increased 5.5% for the first nine
months of 2016 over the same period of 2015, increased expenses resulted in an
operating income for the nine months ended September 30, 2016 of $19.6 million,
compared to operating income of $29.1 million for the first nine months of 2015.
The increase in expenses for the nine months ended September 30, 2016 from the
prior year period was primarily the result of an $9.7 million increase in
expenses associated with the reserves for CRDA deposits over the prior year
period, as well as higher payroll costs, gaming taxes and advertising and

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promotional expenses associated with the increased casino volumes, and a $4.8
million increase in depreciation expense resulting from the capital improvements
projects that were completed in mid-2015 and early 2016.
In the Central region, the operating income for the nine months ended
September 30, 2016 was $37.9 million, a $6.2 million improvement over the nine
months ended September 30, 2015, driven primarily by the increase in net
revenues at both Tropicana Evansville and Lumière Place, as previously
discussed. In addition, depreciation expense in the Central region for the first
nine months of 2016 declined $3.3 million from the same period of 2015,
partially offset by increases in gaming taxes and marketing and promotional
expenses during the period, associated with the increased casino volumes.
In the West region, the operating income for the nine months ended September 30,
2016 was $12.0 million, a $2.8 million increase compared to the nine months
ended September 30, 2015. The improvement in operating income in the West region
was driven by the increase in net revenues, as discussed previously, partially
offset by $1.6 million increase in depreciation expense resulting from the
completion of the capital improvements at MontBleu in 2015.
In the South and other region, operating income for the nine months ended
September 30, 2016 was $6.3 million, a $0.2 million decrease compared to the
nine months ended September 30, 2015. Although net revenues in this region
increased by 2.7% over the prior year period, increased costs associated with
accounting for time share sales at Tropicana Aruba, combined with a bad debt
reserve of $0.7 million at that property for furniture and equipment that was
ordered but never delivered, contributed to the decrease in operating results in
this region.
The Corporate operating loss, which includes the results of all other
subsidiaries of the Company, was $11.4 million for the nine months ended
September 30, 2016, compared to an operating loss of $12.4 million for the nine
months ended September 30, 2015, primarily due to the recognition of $2.3
million of income resulting from the TEI Management Services LLC agreement to
manage the Trump Taj Mahal Casino Hotel.
Interest Expense
Interest expense for the nine months ended September 30, 2016 and 2015 was $9.6
million and $9.1 million, respectively. The interest expense for the nine months
ended September 30, 2016 increased compared to the prior year period primarily
due to a higher amount of interest capitalized in 2015 related to ongoing
construction projects. Interest on our New Term Loan Facility accrues at a
floating rate, which was 4.0% per annum as of September 30, 2016. Cash paid for
interest, net of interest capitalized, was $8.9 million and $8.5 million for the
nine months ended September 30, 2016 and 2015, respectively, reflecting a
variance related to the higher capitalization of interest in 2015. Interest
expense also includes approximately $0.8 million of amortization of debt
issuance costs and discounts for each of the nine months ended September 30,
2016 and 2015, respectively.
Income Taxes
Income tax expense was $23.2 million and $22.7 million for the nine months ended
September 30, 2016 and 2015, respectively, and the Company's effective income
tax rates were 39.7% and 40.9%, respectively. The difference between the federal
statutory rate of 35% and the effective tax rates for the nine months ended
September 30, 2016 and September 30, 2015 was primarily due to disallowed
foreign losses, state income taxes (net of federal benefit), and other permanent
differences.
Predecessor Claim Settlement
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 for the nine months ended
September 30, 2016.
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 available cash, credit facilities
and cash flow from our properties to fund our cash requirements and capital
expenditures for our normal 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 that 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. Liquidity may be
impacted if additional stock repurchases are made under the stock repurchase
program noted below (the "Stock Repurchase Program").

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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 we may incur additional debt or issue additional equity to finance any such transactions. We cannot assure that we will be able to incur such debt or issue any such additional equity on acceptable terms or at all. Our material cash requirements for our existing properties for 2016 are expected to include (i) principal and interest payments related to our New Term Loan Facility of $3.0 million and $11.9 million, respectively, (ii) maintenance capital expenditures expected to be approximately $62 million, (iii) growth capital expenditures expected to be approximately $28 million, (iv) expenditures related to the Company's $50 million commitment to develop a landside gaming facility at Tropicana Evansville, estimated to be approximately $25 million in 2016, and (iv) minimum lease payments under our operating leases of approximately $9.9 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 cash flows (in thousands):

                                                             Nine months ended September 30,
                                                                2016                  2015
Cash Flow Information:
Net cash provided by operating activities                $        106,968       $       97,110
Net cash used in investing activities                             (50,374 )            (69,167 )
Net cash used by financing activities                                (306 )               (554 )

Net increase (decrease) in cash and cash equivalents $ 56,288 $ 27,389



During the nine months ended September 30, 2016, our operating activities
provided $107.0 million in cash. Cash paid for interest, net of interest
capitalized, was $8.9 million and $8.5 million for the nine months ended
September 30, 2016 and 2015, respectively. This variance primarily relates to
the capitalization of interest in 2015. Net cash provided by operating
activities for the nine months ended September 30, 2016 improved over the prior
year period primarily due to improved cash from operations after the elimination
of non-cash expenses such as depreciation, amortization and changes in
investment reserves.
During the nine months ended September 30, 2016, our investing activities used
$50.4 million in cash. Net cash used in investing activities primarily consisted
of $49.1 million for capital expenditures and $5.1 million of restricted cash,
partially offset by $3.0 million of Approved CRDA Project Fund reimbursements
received and proceeds from the cancellation of the Ruby Seven preferred stock.
Net cash used in investing activities during the nine months ended September 30,
2015 consisted primarily of $77.4 million for capital expenditures, partially
offset by $9.9 million of Approved CRDA Project Fund reimbursements received.
Capital expenditures 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.
During the nine months ended September 30, 2016, our financing activities used
$0.3 million in cash. Net cash used by financing activities for the nine months
ended September 30, 2016 primarily consisted of the buy back of the Company's
common stock under the Stock Repurchase Program, as further described below, and
principal payments on the New Term Loan Facility, offset by the proceeds of $7.6
million previously classified as restricted cash for certain bankruptcy-related
professional fee liabilities. Net cash used by financing activities for the nine
months ended September 30, 2015 primarily consisted of principal payments on the
New Term Loan Facility offset by proceeds previously classified as restricted
cash.
New Credit Facilities
On November 27, 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 "New 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 New Term Loan Facility, the "New
Credit Facilities"). Commencing on December 31, 2013, the New Term Loan Facility
is amortized in equal quarterly installments of $750,000, with any remaining
balance payable on the final maturity date of the New 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.

Approximately $172.4 million of the net proceeds from the New Credit Facilities were used to repay in full the principal amounts outstanding under our then existing Credit Facilities. The Credit Facilities were terminated effective as of


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November 27, 2013. A portion of the proceeds from the New Credit Facilities was used to finance our acquisition of Lumière Place in April 2014.

The New 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 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 September 30, 2016, the interest rate on the New 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 New Credit Facilities may be increased, which increased amount may be comprised of additional term loans and revolving loans.

The New 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 New 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 nine months ended September 30, 2016 and 2015 was $9.6 million and $9.1 million, respectively, which includes $0.8 million of amortization of the related debt discounts and debt issuance costs for each of the nine months ended September 30, 2016 and 2015.

Stock Repurchase Program

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. 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, 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.


During March 2016, we repurchased 221,578 shares of our stock under the Stock
Repurchase Program. During the third quarter of 2016, an additional 109,146
shares of our stock were repurchased 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.
Critical Accounting Policies
There have been no material changes to our critical accounting policies during
the nine months ended September 30, 2016 compared to those reported in our
Annual Report on Form 10-K for the year ended December 31, 2015.

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Anthony P. Rodio President, Chief Executive Officer & Director
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