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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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11/01/2017 | 08:15pm 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 competition (including online gaming), financing, revenues, or tax benefits; our expectations regarding the impact of Tropicana AC's recent tax appeal settlement; our beliefs regarding the sufficiency of our

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existing cash and credit sources, including our Term Loan Facility (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
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, the effects of our
recently completed tender offer and the partial pre-payment of our Term Loan
Facility, 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, including "Part II, Item 1A-Risk Factors," as well as those discussed
under "Part I, Item 1A-Risk Factors" in our Annual Report on Form 10-K for the
year ended December 31, 2016. 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 hotel, timeshare and casino resort 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, 2017, our properties collectively included approximately 392,000
square feet of gaming space with approximately 7,800 slot machines,
approximately 260 table games and approximately 5,700 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. As of September 30, 2017, 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 -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 & Casino ("Tropicana Aruba") located in Palm Beach, Aruba.


The Company, through its wholly-owned subsidiary, TEI Management Services LLC, also provided management services to the Taj Mahal Casino Hotel property ("Taj Mahal") in Atlantic City, which is a related party to the Company, that was closed in October 2016 and subsequently sold in March 2017. In addition, the Company, through our wholly-owned subsidiary, TropWorld Games LLC, operates an online social gaming site. The operating results of all other subsidiaries of the Company are reported under the heading of "Corporate and other" as they have been determined to not meet the aggregation criteria as separately reportable segments. 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"). The Company also acquired Columbia Properties Vicksburg ("CP Vicksburg"), JMBS Casino, LLC ("JMBS Casino") and CP Laughlin Realty, LLC ("CP Laughlin Realty"), all of which were part of the same plan of reorganization (the "Plan") as TEH (collectively, the "Predecessors"). 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.

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Except where the context suggests otherwise, the terms "we," "us," "our," and
"the Company" refer to Tropicana Entertainment Inc. and its subsidiaries.
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. Between January 2014 and October 2016, five Atlantic
       City casino hotels closed as a result of regional competitive market
       pressures and other factors. The Atlantic City gaming market experienced
       significant revenue declines in 2014 and 2015 due, in part, to these
       closures and market competition. In 2016, the Atlantic City gaming market
       experienced a slight 1.5% increase in casino revenue over 2015, including
       revenue from internet gaming which commenced in 2013. In addition, in
       November 2016 the State of New Jersey commenced a takeover of certain
       Atlantic City local government operations under a law enacted in May 2016,
       which gives the State the ability to direct certain financial and
       operational matters on behalf of the city in an effort to stabilize and
       strengthen its financial situation. The State's ability to stabilize
       Atlantic City's finances and restructure its debt is an important step
       toward improving the Atlantic City market. For the nine months ended
       September 30, 2017, the Atlantic City gaming market, including internet
       gaming, continued to show improvement, posting a 2.3% increase over the
       same period of 2016.


•      Tropicana AC Tax Appeal Settlement. On August 1, 2017, Tropicana AC, the
       City of Atlantic City and the New Jersey Department of Community Affairs
       entered into a Real Estate Tax Appeal Settlement Agreement (the
       "Settlement Agreement"), pursuant to which the parties agreed to settle
       Tropicana AC's 2015 and 2016 real estate tax appeals pending before the
       Tax Court of New Jersey (the "Pending Tax Appeals"). The Settlement
       Agreement, among other things, provided for refunds in the aggregate
       amount of approximately $36.8 million in respect of the Pending Tax
       Appeals and Tropicana AC's 2017 PILOT Payment. The portion of the
       settlement related to the reduction in 2017 PILOT expense has been
       recorded as a reduction of the current year expense, which is included in
       General and administrative expenses on the accompanying condensed
       consolidated statements of income for the three and nine months ended
       September 30, 2017. The balance of the settlement, net of $1.5 million of
       related professional fees expense, is included as Real estate tax
       settlement on the accompanying condensed consolidated statements of income
       for the three and nine months ended September 30, 2017. Tropicana AC
       received full payment of the refunds in early October 2017. In addition,
       the Settlement Agreement provides for a reduction in the assessed value of
       Tropicana AC for real estate tax purposes for calendar year 2015,
       including a corresponding reduction to Tropicana AC's PILOT CAP for each
       of calendar years 2018 through 2021, from approximately $19.8 million to
       approximately $8.4 million, and the expense associated with Tropicana AC's
       PILOT Payments for each of the calendar years 2018 through 2021. See Note
       13 - Commitments and Contingencies, NJ PILOT Law in our Notes to Condensed
       Consolidated Financial Statements (unaudited), contained herein, for a
       further discussion of PILOT Payments and the PILOT CAP.


•      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 nine months ended
       September 30, 2017 and 2016, the Company's total table games hold was
       17.7% and 18.8%, respectively. This hold percentage is not necessarily
       indicative of results that can be expected for future periods.



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•      Debt and Interest Expense. In November 2013, we entered into the credit
       facilities (the "Credit Facilities"), which consist of (i) a senior
       secured first lien term loan facility in an aggregate principal amount of
       $300 million issued at a discount of 0.5% (the "Term Loan Facility") and
       (ii) a senior secured first lien revolving credit facility in an aggregate
       principal amount of $15 million (the "Revolving Facility"). Commencing on
       December 31, 2013, the Term Loan Facility requires quarterly principal
       payments of $750,000 through September 2020 with the remaining outstanding
       amounts due on November 27, 2020, the maturity date. The obligations under
       the Term Loan Facility accrue interest at a floating rate which was 4.2%
       as of September 30, 2017. A portion of the net proceeds from the Term Loan
       Facility was used to repay in full the amounts outstanding under the
       then-existing term loan facility which totaled approximately $172.4
       million in repaid principal, accrued and unpaid interest. The Revolving
       Facility was terminated by the Company effective March 31, 2017, in
       accordance with the terms of the Credit Agreement. There were no amounts
       outstanding under the Revolving Facility at the time of the termination.

On September 29, 2017, the Company made an optional prepayment of principal under the Term Loan Facility in the amount of $125 million. The outstanding balance on the Term Loan Facility after the optional prepayment is $163 million. Under the terms of the Term Loan Facility, the optional prepayment is applied first to the next four quarterly mandatory principal payments, and second, to reduce on a pro-rata basis, the remaining scheduled principal payments. As a result of the optional prepayment on September 29, 2017, the Company wrote off a portion of the debt issuance costs and discount, totaling $1.1 million. Our interest expense was $9.2 million and $9.6 million for the nine months ended September 30, 2017 and 2016, 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, 2017 and 2016, offset by approximately $0.7 million and $0.1 million of capitalized interest in the nine months ended September 30, 2017 and 2016, respectively. • Insurance and other recoveries. In 2016, we filed a property damage and

       business interruption claim with our insurance carrier related to our
       HoteLumière room renovation project that commenced in July 2016. In
       December 2016 we received insurance proceeds of $1.0 million toward the
       property damage claim, which was recorded as a gain in 2016. In April 2017
       we received additional insurance proceeds of $1.3 million, representing
       the balance of the property damage claim. The business interruption claim
       is still pending.


•      Cost Efficiencies. 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 centralizing purchasing
       functions to reduce costs and maximize our potential buying power,
       consolidating and streamlining certain back office operations and
       decreasing benefits expense related to our company-sponsored plans.



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Three months ended September 30, 2017 compared to three months ended September 30, 2016 The following table sets forth certain information concerning our results of operations (dollars in thousands):

                                   Three months ended September 30,
                                       2017                 2016
Net revenues:
East                            $       116,000       $       104,040
Central                                  76,379                71,371
West                                     31,096                30,650
South                                    22,090                23,712
Corporate and other                          40                 1,250
Total net revenues              $       245,605       $       231,023
Operating income (loss):
East                            $        60,726       $        20,228
Central                                  12,530                10,464
West                                      5,620                 5,495
South                                       351                   672
Corporate and other                      (5,134 )              (3,002 )
Total operating income          $        74,093       $        33,857
Operating income margin(a):
East                                       52.4 %                19.4 %
Central                                    16.4 %                14.7 %
West                                       18.1 %                17.9 %
South                                       1.6 %                 2.8 %
Total operating income margin              30.2 %                14.7 %


(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,
                                           2017                 2016
Revenues:
Casino                              $       189,840       $       176,960
Room                                         41,753                39,701
Food and beverage                            30,623                28,902
Other                                         9,035                 8,369
Management fee from related party                 -                 1,250
Gross revenues                              271,251               255,182
Less promotional allowances                 (25,646 )             (24,159 )
Net revenues                        $       245,605       $       231,023

Net Revenues In the East region, net revenues were $116.0 million for the three months ended September 30, 2017, an increase of $12.0 million, or 11.5%, when compared to the three months ended September 30, 2016. Tropicana AC's net revenues comprised approximately 47% and 45% of the Company's total net revenues for the three months ended September 30, 2017 and 2016, respectively. Tropicana AC's gross casino win (including internet gaming revenue) for the three months ended September 30, 2017 increased 13.3% over the three months ended September 30, 2016, as compared to the 0.1% increase in gaming revenues (including internet gaming revenue) in the total Atlantic City market, as reported, for the third quarter of 2017 in comparison to the same period of 2016. The increase in gaming revenues at Tropicana AC was primarily the result of higher gaming volumes, including a 10.3% increase in table drop and a 13.2% increase in slot handle during the third quarter of 2017 as compared to the third quarter of 2016. The increase in gaming volumes was due, in part, to marketing efforts directed towards customers who formerly visited the Taj Mahal casino as a result of the initial lease and subsequent purchase of the Taj Mahal customer database. Increases in customer volume at the Tropicana AC are also attributable to renovation projects in 2017, which included the opening of two new restaurants as well as the renovation and relocation of the coffee shop and buffet, in addition to major projects completed at the property in 2016 and 2015, which included hotel room renovations, a new high-

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end slot area on the casino floor, a new TropAdvantage club promotional area and other improvements. Although the table games volumes increased during the quarter over the prior year period, the table hold for the three months ended September 30, 2017 was 15.8%, compared to 17.8% in the same period of 2016; as a result, table games revenue reflected a 2.0% decrease in the third quarter of 2017 compared to the third quarter of 2016. The acquisition of The Chelsea hotel in early July increased the number of available hotel rooms by approximately 200, and the total number of occupied rooms during the third quarter of 2017 increased 8.7% over the same period of 2016, which also contributed to the increase in gaming volumes. The hotel occupancy and average daily room rate was 93% and $105, respectively, for the three months ended September 30, 2017, compared to 90% and $108, respectively, for the three months ended September 30, 2016. The decrease in the average daily rate in the third quarter of 2017 from the prior year was primarily due to a change in the mix of occupied rooms, with an increase in promotional rooms occupied, which are typically recorded at a lower rate than transient business, as a result of marketing to the former Taj Mahal customers. In addition to increased hotel revenues, other non-gaming revenues, including food and beverage, entertainment and retail revenues increased over the prior year period resulting primarily from increased customer volumes throughout the facility. In the Central region, net revenues were $76.4 million for the three months ended September 30, 2017, an increase of $5.0 million over the three months ended September 30, 2016, driven primarily by higher slot revenues. Slot volumes in the Central region increased 11.4% in the third quarter of 2017 as compared to the same period of 2016, while slot revenues increased 11.9%, or $6.3 million, in the region during the comparable periods. The increase in slot volumes and revenue in the Central region was primarily evident at Lumière Place, where targeted marketing efforts, particularly with free slot play offerings, have had a positive impact on customer volumes at the property. In addition, gaming volumes at Lumière Place in the third quarter of 2016 were impacted by a room renovation and casino reconfiguration project, which resulted in approximately half of the Hotel Lumière rooms being taken temporarily out of service. Although table games volume in the Central region increased slightly in the third quarter of 2017 over the same period of 2016, the table games hold in 2017 was 21.3% compared to 22.2% in 2016, resulting in a slight decline in table games revenue for the period. The hotel occupancy rate for the three months ended September 30, 2017 was 82%, with an average room rate of $144, compared to occupancy of 85% and an average rate of $152 in the same period of 2016. The Hotel Lumière rooms that were out of service for renovation in the third quarter of 2016 are not included in the calculation of occupancy rate; if they were included, occupancy would have been 70% in the Central region during that period. Hotel revenues in the Central region during the three months ended September 30, 2017 increased 9.6% over the same period of 2016, due in part to the completion of the Lumière Place renovation project in early 2017, combined with the increased gaming volume at the properties. In the West region, net revenues were $31.1 million for the three months ended September 30, 2017, an increase of $0.4 million, or 1.5%, compared to the three months ended September 30, 2016. Gaming volumes in the West region during the third quarter of 2017 decreased from the prior year, including a 1.7% decline in slot volumes and a 1.4% decline in table volumes. In addition, the table games hold percentage in the third quarter of 2017 was 19.2%, compared to 20.3% in the third quarter of 2016, resulting in a 6.9% decrease in table games revenue for the period. However, reductions in free slot play redeemed, combined with increased hotel revenues in the region during the period partially offset the declines in gaming revenue. The average daily room rate for the West region was $62 for the three months ended September 30, 2017, compared to $59 for the comparable prior year period. The occupancy rate in the West region was 67% for each of the three months ended September 30, 2017 and 2016. In the South region, net revenues were $22.1 million for the three months ended September 30, 2017, a decrease of $1.6 million, or 6.8%, compared to the three months ended September 30, 2016. Slot volumes for the South region decreased 8.4% in the three months ended September 30, 2017, compared to the prior year period, resulting in an 8.2% decrease in slot revenue in the region. In addition, table games volume during the third quarter of 2017 decreased 3.8%, which resulted in a 4.0% decrease in table games revenue. The decline in gaming volumes was primarily evident at the Belle of Baton Rouge, where the 2016 results were positively impacted by an influx of federal aid workers and building contractors into the region in response to the flooding in the area in August 2016. Non-gaming revenues in the region also reflected decreases due to the declines in gaming volumes and visitors to the properties during the third quarter of 2017. Timeshare sales at the Tropicana Aruba were $1.1 million in the third quarter of 2017, compared to $0.7 million in the third quarter of 2016. The occupancy rate at our properties in the South region was 68% for the three months ended September 30, 2017 compared to 87% for the same period of 2016. The average daily room rate for the South region was $78 and $69 for the three months ended September 30, 2017 and 2016, respectively. Net revenues for Tropicana Entertainment Corporate and other division in the third quarter of 2016 represents the management fee earned as a result of our management of the Taj Mahal, which was sold in March 2017. Revenue in the third quarter of 2017 includes revenue earned from our online social gaming site. Tropicana shares in the excess of revenue over expenses with the operator of the site, which became operational in 2015. No revenue was earned by Tropicana from the operation of the site prior to the third quarter of 2017.

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Operating Income
In the East region, Tropicana AC reported operating income for the three months
ended September 30, 2017 of $60.7 million, a $40.5 million increase over the
operating income in the three months ended September 30, 2016. Operating income
in the third quarter of 2017 includes the benefit of the Tropicana AC real
estate tax settlement, net of professional fees, totaling $35.3 million.
Excluding the impact of that settlement, the increase in operating income over
the third quarter of 2016 resulted from the higher gaming and non-gaming
revenues, partially offset by increases in volume-related costs such as gaming
taxes, payroll and promotional costs. The operating income margin for the three
months ended September 30, 2017, excluding the real estate tax settlement,
improved to 21.9%, as compared to 19.4% for the three months ended September 30,
2016.
In the Central region, the operating income for the three months ended
September 30, 2017 was $12.5 million, a $2.1 million increase over the three
months ended September 30, 2016. The increase in revenues in the Central region
in the third quarter, as previously discussed, were partially offset by higher
operating expenses, primarily gaming taxes, at Lumière Place, combined with an
increase in depreciation expense in the region of $0.8 million.
In the West region, the operating income for the three months ended
September 30, 2017 was $5.6 million, a slight increase compared to the three
months ended September 30, 2016. The increase is mainly attributable to the
improvement in revenues, as previously discussed, combined with a decrease in
operating costs, but partially offset by a $0.6 million increase in depreciation
expense in the region during the quarter.
In the South region, operating income for the three months ended September 30,
2017 was $0.4 million, a decrease of $0.3 million from the operating income for
the three months ended September 30, 2016. This decrease was attributable to the
lower revenues during the quarter, as previously discussed, partially offset by
lower operating expenses during the third quarter of 2017 as compared to the
same period of 2016.
The Corporate and other operating loss, which includes the results of all other
subsidiaries of the Company, was $5.1 million for the three months ended
September 30, 2017, reflecting a larger loss than during the three months ended
September 30, 2016 primarily due to the recognition of $1.3 million of revenue
during the third quarter of 2016 related to the TEI Management Services LLC
agreement to manage the Taj Mahal, together with increased depreciation expense
and approximately $0.5 million of costs associated with the joint tender offer
which was completed in August 2017.
Interest Expense
Interest expense for the three months ended September 30, 2017 and 2016 was $3.2
million and $3.1 million, respectively. The interest expense on our Term Loan
Facility accrues at a floating rate, which was 4.2% per annum as of
September 30, 2017. Cash paid for interest, net of interest capitalized, was
$2.9 million for each of the three months ended September 30, 2017 and 2016.
Interest expense also includes $0.2 million and $0.3 million of amortization of
debt issuance costs and discounts for the three months ended September 30, 2017
and September 30, 2016, respectively.
Income Taxes
Income tax expense was $25.3 million and $13.4 million, for the three months
ended September 30, 2017 and 2016, respectively, and our effective income tax
rate was 36.2% and 39.4% for the same periods, respectively. The difference
between the federal statutory rate of 35% and the effective tax rate for the
three months ended September 30, 2017 and 2016 was primarily due to disallowed
foreign losses, state income taxes (net of federal benefit), and other permanent
differences.

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Nine months ended September 30, 2017 compared to nine months ended September 30, 2016 The following table sets forth certain information concerning our results of operations (dollars in thousands):

                                    Nine months ended September 30,
                                       2017                 2016
Net revenues:
East                            $       298,580       $       260,712
Central                                 225,745               221,359
West                                     85,612                84,976
South                                    74,061                74,335
Corporate and other                       1,290                 2,333
Total net revenues              $       685,288       $       643,715
Operating income (loss):
East                            $        81,785       $        19,630
Central                                  41,841                37,933
West                                     11,357                12,016
South                                     7,205                 6,297
Corporate and other                     (14,188 )             (11,364 )
Total operating income          $       128,000       $        64,512
Operating income margin(a):
East                                       27.4 %                 7.5 %
Central                                    18.5 %                17.1 %
West                                       13.3 %                14.1 %
South                                       9.7 %                 8.5 %
Total operating income margin              18.7 %                10.0 %


(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,
                                           2017                 2016
Revenues:
Casino                              $       543,228       $       504,026
Room                                        105,995               100,292
Food and beverage                            83,450                82,358
Other                                        23,416                22,953
Management fee from related party             1,250                 2,333
Gross revenues                              757,339               711,962
Less promotional allowances                 (72,051 )             (68,247 )
Net revenues                        $       685,288       $       643,715

Net Revenues In the East region, net revenues were $298.6 million for the nine months ended September 30, 2017, an increase of $37.9 million, or 14.5%, when compared to the nine months ended September 30, 2016. Based on published market data, the Atlantic City market experienced year-over-year growth in gross casino win (including internet gaming win) of 2.3% in the nine months ended September 30, 2017. At Tropicana AC, total gross casino win increased 18.8% during the nine months ended September 30, 2017 over the same period of 2016. The increase at Tropicana AC was driven by an 18.2% increase in slot volume. In addition, although the year to date table hold declined to 15.9% in the first nine months of 2017 compared to 16.7% in the same period of 2016, table games drop increased 15.0% during the period, resulting in an increase in table games revenue of 9.4% for the year to date period ended September 30, 2017 compared to the same period of 2016. This positive trend was due, in part, to marketing efforts directed towards attracting customers who formerly visited the Taj Mahal casino. Increases in customer volume at the Tropicana AC are also attributable to renovation projects completed in the first half of 2017, which included the opening of two new restaurants as well as the renovation and relocation of the coffee shop and buffet, in addition to major renovation projects completed at the property in 2016 and 2015, which included hotel room renovations, a new high-end slot area on the casino floor, a new TropAdvantage club promotional area and other improvements, as well as the

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acquisition of The Chelsea hotel in the third quarter of 2017. The average daily
room rate was $91 and $93 for the nine months ended September 30, 2017 and 2016,
respectively. The occupancy rate increased to 87% for the nine months ended
September 30, 2017 compared to 82% for the nine months ended September 30, 2016.
The decrease in the average daily rate from the prior year was primarily due to
a change in the mix of occupied rooms, with an increase in promotional rooms
occupied, which are typically recorded at a lower rate than transient business,
as a result of marketing to the former Taj Mahal customers.
In the Central region, net revenues were $225.7 million for the nine months
ended September 30, 2017, a 2.0% increase over net revenues of $221.4 million
for the nine months ended September 30, 2016. Slot volumes for the nine months
ending September 30, 2017 increased 7.4% over the same period of 2016, including
a 14.3% increase at Lumière Place, while table game volumes increased 1.7% in
the comparable periods in the Central region. The increase in slot volumes
resulted in a 7.8% increase in slot revenues for the nine months ended September
30, 2017 over the same period of 2016. However, a decrease in the table hold, to
20.7% in 2017 from 21.8% in 2016, resulted in a 3.2% decline in table revenue
for the period. The occupancy rate in the Central region for the nine months
ended September 30, 2017 and 2016 was 81% and 80%, respectively, while the
average daily room rate in the region was $138 and $140 in the nine months ended
September 30, 2017 and 2016, respectively.
In the West region, net revenues were $85.6 million for the nine months ended
September 30, 2017, an increase of $0.6 million, compared to the nine months
ended September 30, 2016. Business volumes at MontBleu were negatively impacted
by severe winter weather in the Lake Tahoe area in the early part of 2017. As a
result, slot volumes in the West region in the first nine months of 2017 reflect
a 1.2% decrease from the same period of 2016, while table volumes in the region
reflect a 0.7% decrease in the period. In addition, the table hold percentage in
the first nine months of 2017 was 18.6%, a decrease from the hold of 21.3% in
the comparable prior year period. Total gaming revenues in the West region for
the first nine months of 2017 were 1.2%, or $0.8 million, lower than the
comparable period of 2016. However, increased hotel occupancy in the region
during the nine months ended September 30, 2017 was reflected in the 4.3%
increase in hotel revenues over the prior year. Additionally, promotional
allowances at MontBleu decreased $1.0 million in the first nine months of 2017
compared to the same period of 2016, primarily due to a decrease in promotional
rooms for casino customers, while cash room revenues at the property increased.
The average daily room rate for the West region was $56 and $55 for the nine
months ended September 30, 2017 and 2016, respectively. The occupancy rate for
the nine months ended September 30, 2017 and 2016 at our properties in the West
region was 62% and 60%, respectively.
In the South region, net revenues were $74.1 million for the nine months ended
September 30, 2017, a $0.3 million decrease from the nine months ended
September 30, 2016. Slot volumes in the region decreased 1.4% in the first nine
months of 2017 from the same period of 2016, while table volumes declined 3.5%
during the period. The decreases in volumes were primarily evident at Tropicana
Greenville, caused primarily by increased competitive pressures in the market,
offset partially by increased volumes at Tropicana Aruba. At Tropicana Aruba,
volumes at the property were impacted by the completion of a room renovation in
late 2016, which has contributed to higher transient business at the property
and a resulting increase in casino volumes. Non-gaming revenues at Tropicana
Aruba increased, driven in part by timeshare sales of $2.5 million for the first
nine months of 2017 compared to $2.3 million in the comparable 2016 period, as
well as higher hotel and food revenues as a result of the increased transient
business. The hotel occupancy rate at our properties in the South region was 70%
and 78% for the nine months ended September 30, 2017 and 2016, respectively,
while the average daily room rate for the South was $90 and $76 for the nine
months ended September 30, 2017 and 2016, respectively. The increase in the
average room rate was primarily due to a shift in the mix of occupied rooms in
2017 at the Belle of Baton Rouge, from primarily promotional rooms, which are
recorded at a lower average rate, to more transient and convention business.
Net revenues for Tropicana Entertainment Corporate and other division of $1.3
million and $2.3 million for the nine months ended September 30, 2017 and 2016,
respectively, primarily represents the management fee earned as a result of our
management of the Taj Mahal, which was sold in March 2017.
Operating Income
In the East region, operating income for the nine months ended September 30,
2017 was $81.8 million, which includes the benefit of the Tropicana AC real
estate tax settlement, net of professional fees, totaling $35.3 million, which
was recorded in the third quarter, as compared to operating income of $19.6
million for the first nine months of 2016. The increase in operating income
excluding the tax settlement was due primarily to the higher revenues, as
previously discussed. In addition, although volume-driven operating costs such
as payroll, gaming taxes and promotional expenses increased with the higher
casino volumes, and depreciation expense in the first nine months of 2017
increased $3.2 million over the same period of the prior year, these increases
were partially offset by a $5.5 million reduction in expense associated with the
reserve for CRDA deposits as a result of the donation of funds to the CRDA in
the second quarter of 2016.
In the Central region, the operating income for the nine months ended
September 30, 2017 was $41.8 million, a $3.9 million improvement over the nine
months ended September 30, 2016, primarily driven by the increase in revenues,
as

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previously discussed. Operating income for the nine months ended September 30,
2017 include the $1.3 million gain on insurance proceeds in the first quarter of
the year.
In the West region, the operating income for the nine months ended September 30,
2017 was $11.4 million, a $0.7 million decrease compared to the nine months
ended September 30, 2016, primarily due to a $1.7 million increase in
depreciation expense in the region in the first nine months of 2017 compared to
the same period of 2016, which offset the improvement in net revenues during the
period.
In the South region, operating income for the nine months ended September 30,
2017 was $7.2 million, a $0.9 million increase compared to the nine months ended
September 30, 2016. Although net revenues in the region reflected a decrease
during the period, as previously discussed, operating expenses also reflected
reductions, primarily in payroll costs and gaming taxes. In addition, in 2016
Tropicana Aruba recorded a bad debt reserve of $0.7 million for furniture that
was ordered but never delivered.
The Corporate and other operating loss, which includes the results of all other
subsidiaries of the Company, was $14.2 million for the nine months ended
September 30, 2017, compared to an operating loss of $11.4 million for the nine
months ended September 30, 2016. The higher loss was due to lower management fee
income related to the TEI Management Services LLC agreement to manage the Taj
Mahal, together with increased depreciation expense and the increased costs
associated with the Company's long term incentive plan.
Interest Expense
Interest expense for the nine months ended September 30, 2017 and 2016 was $9.2
million and $9.6 million, respectively. The interest expense for the nine months
ended September 30, 2017 decreased compared to the prior year period primarily
due to interest capitalized in 2017 related to ongoing construction projects.
Interest on our Term Loan Facility accrues at a floating rate, which was 4.2%
per annum as of September 30, 2017, compared to 4.0% as of September 30, 2016.
Cash paid for interest, net of interest capitalized, was $9.3 million and $8.9
million for the nine months ended September 30, 2017 and 2016, respectively,
reflecting an increase primarily due to the increased interest rate in 2017.
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, 2017 and 2016, respectively.
Income Taxes
Income tax expense was $49.6 million and $23.2 million for the nine months ended
September 30, 2017 and 2016, respectively, and the Company's effective income
tax rates were 37.2% and 39.7%, respectively. The difference between the federal
statutory rate of 35% and the effective tax rates for the nine months ended
September 30, 2017 and September 30, 2016 was primarily due to disallowed
foreign losses, state income taxes (net of federal benefit), and other permanent
differences.
Termination Fee from Related Party
Concurrently with the sale of the Taj Mahal to a third party and the surrender
of TTMA's New Jersey casino license on March 31, 2017, TTMA exercised its right
to terminate the Management Agreement without Cause (as defined in the
Management Agreement), at which time TEI Management Services LLC was paid a
termination fee of $15 million pursuant to the provisions of the Management
Agreement.
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").
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

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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 2017 include (i) mandatory principal and interest payments related to our Term Loan Facility of $2.3 million and $10.4 million, respectively, (ii) maintenance capital expenditures expected to be approximately $53 million, (iii) growth capital expenditures expected to be approximately $37 million, (iv) expenditures related to the Company's $50 million commitment to develop a landside gaming facility at Tropicana Evansville, estimated to be approximately $45 million in 2017, and (iv) minimum lease payments under our operating leases of approximately $8.7 million. Except for the commitment to spend $50 million of capital renovation at Tropicana Evansville, required by the Sixth Amendment, the majority of our planned capital expenditures are discretionary and we may decide to spend more or less than the amounts described above. The following table summarizes our cash flows (in thousands):

                                                             Nine months ended September 30,
                                                                2017                  2016
Cash Flow Information:
Net cash provided by operating activities                $        135,731       $      106,856
Net cash used in investing activities                             (89,420 )            (50,374 )
Net cash used in financing activities                            (163,259 )               (306 )

Net (decrease) increase in cash and cash equivalents $ (116,948 ) $ 56,176


During the nine months ended September 30, 2017, our operating activities
provided $135.7 million in cash. Cash paid for interest, net of interest
capitalized, was $9.3 million and $8.9 million for the nine months ended
September 30, 2017 and 2016, respectively. Cash paid for interest was higher in
2017 over 2016 primarily due to higher interest rate in the current year. Net
cash provided by operating activities for the nine months ended September 30,
2017 improved over the prior year period primarily due to the improvement in
operating income during the period, combined with the receipt of the $15 million
termination fee as a result of the sale of the Taj Mahal to a third party and
concurrent termination of the Management Agreement.
During the nine months ended September 30, 2017, our investing activities used
$89.4 million in cash. Net cash used in investing activities during the nine
months ended September 30, 2017 primarily consisted of $91.5 million for capital
expenditures and $8.1 million for the acquisition of the Taj Mahal's customer
database and other intellectual property, partially offset by insurance proceeds
of $1.3 million and Approved CRDA Project Funds received of $7.8 million. Net
cash used in investing activities during the nine months ended September 30,
2016 consisted primarily of $49.1 million for capital expenditures, partially
offset by $3.0 million of Approved CRDA Project Fund reimbursements received and
proceeds from the cancellation of the Ruby Seven preferred stock. Capital
expenditures are expenditures necessary to keep our existing properties at their
current levels, typically replacement items due to the normal wear and tear of
our properties and equipment as a result of use and age, or expenditures for the
growth of our business, such as the construction of the landbased gaming
facility at Tropicana Evansville.
During the nine months ended September 30, 2017, our financing activities used
$163.3 million in cash, consisting of principal payments on the Term Loan
Facility, including the optional principal prepayment of $125 million on
September 29, 2017, together with $36.0 million for the repurchase of stock in
connection with the tender offer that was completed in August 2017. Net cash
used by financing activities for the nine months ended September 30, 2016
primarily consisted of principal payments on the Term Loan Facility of $2.3
million, combined with the buy back of the Company's common stock under the
Stock Repurchase Program of $5.6 million, offset by proceeds of $7.6 million
previously classified as restricted cash for certain bankruptcy-related
professional fee liabilities.
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 "Term Loan Facility") and (ii) a senior secured first lien
revolving credit facility in an aggregate principal amount of $15 million (the
"Revolving Facility" and, together with the Term Loan Facility, the "Credit
Facilities"). Commencing on December 31, 2013, the Term Loan Facility is
amortized in equal quarterly installments of $750,000, with any remaining
balance payable on the final maturity date of the Term Loan Facility, which is
November 27, 2020.

The Revolving Facility was terminated by the Company effective March 31, 2017, in accordance with the terms of the Credit Agreement. There were no amounts outstanding under the Revolving Facility at the time of the termination.


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Approximately $172.4 million of the net proceeds from the Credit Facilities were used to repay in full the principal amounts outstanding under our then-existing credit facilities, which were terminated effective as of November 27, 2013. A portion of the proceeds from the Credit Facilities was also used to finance our acquisition of Lumière Place in April 2014.

The Term Loan Facility accrues interest, at our option, at a per annum rate equal to either (i) the LIBO Rate (as defined in the Credit Agreement) (subject to a 1.00% floor) plus an applicable margin equal to 3.00%, or (ii) the alternate base rate (as defined in the Credit Agreement) (subject to a 2.00% floor) plus an applicable margin equal to 2.00%; such that in either case, the applicable interest rate shall not be less than 4.0%. The interest rate increases by 2.00% following certain defaults. As of September 30, 2017, the interest rate on the Term Loan Facility was 4.2%.

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

The Term Loan Facility may be prepaid at our option at any time without penalty (other than customary LIBO Rate breakage fees). On September 29, 2017, the Company made an optional prepayment of $125 million on the Term Loan Facility. Under the terms of the Term Loan Facility, the optional prepayment is applied first to the next four quarterly mandatory principal payments, and second, to reduce on a pro-rata basis, the remaining scheduled principal payments. As a result of the optional prepayment on September 29, 2017, the Company wrote off a portion of the debt issuance costs and discount, totaling $1.1 million.

We are required to make mandatory payments of the Credit Facilities with (i) net cash proceeds of certain asset sales (subject to reinvestment rights), (ii) net cash proceeds from certain issuances of debt and equity (with certain exceptions), (iii) up to 50% of annual excess cash flow (as low as 0% if our total leverage ratio is below 2.75:1.00), and (iv) certain casualty proceeds and condemnation awards (subject to reinvestment rights).

Our interest expense for the nine months ended September 30, 2017 and 2016 was $9.2 million and $9.6 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, 2017 and 2016.

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. On February 22, 2017, our Board of Directors authorized the repurchase of an additional $50 million of our outstanding stock, for the repurchase of an aggregate amount of up to $100 million of our outstanding common stock. The Stock Repurchase Program will end upon the earlier of the date on which the plan is terminated by the Board of Directors or when all authorized repurchases are completed. The timing and amount of stock repurchases, 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.

Other than the shares repurchased under the tender offer, as further described below, there were no repurchases of our stock under the Stock Repurchase Program during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, we repurchased 330,724 shares of our stock under the Stock Repurchase Program. The repurchased shares were subsequently retired. Tender Offer On June 23, 2017, the Company and Icahn Enterprises Holdings L.P., a Delaware limited partnership ("Icahn Enterprises") commenced a tender offer to purchase severally, and not jointly, up to 5,580,000 shares of common stock in the aggregate, at a price not greater than $45.00 nor less than $38.00 per share, by means of a "modified" Dutch auction, on the terms and subject to the conditions set forth in the Offer to Purchase dated June 23, 2017 and the related Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constituted the "Offer"). The Offer was completed on August 9, 2017. The Offer was made severally, and not jointly, by the Company and Icahn Enterprises and upon the terms and subject to the conditions of the Offer, first, the Company severally, and not jointly, purchased 800,000 of the shares properly tendered, and second, Icahn Enterprises severally, and not jointly, purchased the remaining shares properly tendered, totaling 2,121,712 shares. The shares purchased by the Company in this Offer were purchased under the Company's Stock Repurchase Program. All shares purchased by the Company and Icahn Enterprises were purchased at the maximum offer

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price per share of $45. As a result of the completion of the Offer, as of
September 30, 2017, Mr. Icahn indirectly controlled approximately 83.85% of the
voting power of the Company's Common Stock.
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, 2017 compared to those reported in our
Annual Report on Form 10-K for the year ended December 31, 2016.

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NameTitle
Anthony P. Rodio President, Chief Executive Officer & Director
Carl Celian Icahn Chairman
Theresa A. Glebocki Chief Financial Officer, Treasurer & Executive VP
Daniel A. Cassella Independent Director
Daniel H. Scott Independent Director
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