b

 

 

---

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2014

 

or

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to         

 

Commission File Number: 000-53894

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		27-0455607
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

3801 Las Vegas Boulevard South

Las Vegas, Nevada 89109

(Address of principal executive offices and zip code)

 

(702) 739-3530

(Registrant’s telephone number, including area code)

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐		Accelerated filer  ☐
Non-accelerated filer  ☒		Smaller reporting company  ☐
(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of April 30, 2014, there were 4,666,151 shares outstanding of the registrant’s Class A Common Stock, $0.01 par value and no shares outstanding of the registrant’s Class B Common Stock, $0.01 par value. The issued and outstanding equity securities of the registrant are not publicly traded.

 

---

---

 

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

FORM 10-Q

INDEX

 

 

PART I FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2014 (Unaudited) and December 31, 2013
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2014 and 2013 (Unaudited)
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (Unaudited)
	Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations Properties	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
	Signatures	24

 

 

 

 

 PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

 

		March 31, 2014 (Unaudited)				December 31, 2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	9,910			$	9,363
Restricted cash			7,839				7,839
Receivables, net			4,243				3,941
Inventories			627				797
Prepaid expenses and other current assets			2,358				2,393
Total current assets			24,977				24,333
Long-term restricted cash			253				879
Property and equipment, net			327,299				331,122
Other assets, net			4,058				4,231
TOTAL ASSETS		$	356,587			$	360,565
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt		$	816			$	784
Accounts payable			9,122				9,833
Construction payable			53				439
Accrued payroll and related			4,822				5,140
Accrued gaming and related			1,465				1,597
Other accrued expenses and current liabilities			4,439				3,597
Total current liabilities			20,717				21,390
Long-term debt, less current portion			59,668				59,850
Accrued management fees			7,788				7,162
Other long-term liabilities			656				687
TOTAL LIABILITIES			88,829				89,089
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS’ EQUITY:
Class A convertible participating preferred stock, $0.01 par value, 750,000 shares authorized, issued and outstanding			8				8
Class A series 2 convertible participating preferred stock, $0.01 par value, 545,702 shares authorized, 545,585 shares issued and outstanding			5				5
Class A series 3 convertible participating preferred stock, $0.01 par value, 350,000 shares authorized, issued and outstanding			3				3
Class A series 4 convertible participating preferred stock, $0.01 par value, 416,500 shares authorized, issued and outstanding			4				4
Class A common stock, $0.01 par value, 16,500,000 shares authorized, 4,666,151 shares issued and outstanding			47				47
Class B common stock, $0.01 par value, 16,500,000 shares authorized, no shares issued or outstanding			—				—
Additional paid-in capital			436,203				436,201
Accumulated deficit			(168,512	)			(164,792	)
Total stockholders’ equity			267,758				271,476
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	356,587			$	360,565

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

AND COMPREHENSIVE (LOSS) INCOME

(amounts in thousands, except per share data)

(Unaudited)

 

 

 

		Three Months Ended March 31,
		2014				2013
REVENUES:
Casino		$	10,007			$	7,571
Room			12,141				8,840
Food and beverage			6,297				5,415
Other			1,197				1,483
Gross revenues			29,642				23,309
Less: promotional allowances			(2,493	)			(2,428	)
Net revenues			27,149				20,881
OPERATING EXPENSES:
Casino			6,539				7,168
Room			4,934				4,297
Food and beverage			5,212				4,666
Other			1,324				1,275
Selling, general and administrative			4,690				4,841
Maintenance and utilities			2,858				2,797
Depreciation and amortization			4,501				4,492
Loss on assets disposals			1				322
Total operating expenses			30,059				29,858
OPERATING LOSS			(2,910	)			(8,977	)
OTHER (EXPENSES) INCOME:
Interest income			1				1
Interest expense			(811	)			(644	)
Total other (expense) income			(810	)			(643	)
NET LOSS			(3,720	)			(9,620	)
Other comprehensive income (loss)			—				—
COMPREHENSIVE LOSS		$	(3,720	)		$	(9,620	)
NET LOSS PER COMMON SHARE:
Basic and diluted		$	(0.80	)		$	(2.06	)
Weighted average common shares outstanding:
Basic and diluted			4,666				4,662

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

 

		Three Months Ended March 31,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(3,720	)		$	(9,620	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			4,501				4,492
Share-based compensation			2				3
Amortization of debt issuance costs			176				153
Loss on disposition of assets			1				322
Changes in operating assets and liabilities:
Receivables, net			(302	)			(1,037	)
Inventories, prepaid expenses and other assets			205				270
Long-term restricted cash			626				477
Other assets			(7	)			12
Accounts payable, accrued expenses and other current liabilities			276				2,435
Net cash provided by (used in) operating activities			1,758				(2,493	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(635	)			(6,910	)
Change in construction payable			(386	)			975
Proceeds from sale of property and equipment			18				—
Net cash used in investing activities			(1,003	)			(5,935	)
CASH FLOWS FROM FINANCING ACTIVITES:
Borrowings under loan agreement			—				17,500
Payments under loan agreement			—				(10,000	)
Principal payments on capital leases			(208	)			(110	)
Debt issuance costs			—				(86	)
Net cash (used in) provided by financing activities			(208	)			7,304
Net increase or decrease in cash and cash equivalents			547				(1,124	)
Cash and cash equivalents, beginning of period			9,363				8,355
Cash and cash equivalents, end of period		$	9,910			$	7,231
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		$	635			$	492
Property and equipment financed by debt			58				—
Preferred stock issued for payment of debt issuance costs			—				1,300

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

 TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. Organization and Nature of Business

 

Tropicana Las Vegas Hotel and Casino, Inc., (“Tropicana Las Vegas”) is a Delaware corporation formed in June 2009 that acts largely as a holding company and, through its wholly owned subsidiaries owns the Tropicana Las Vegas casino resort. Tropicana Las Vegas offers casino gaming, hotel accommodations, dining, entertainment, retail shopping and other resort amenities. Tropicana Las Vegas is conveniently located on 35 acres at the corner of Tropicana Avenue and Las Vegas Boulevard on the Las Vegas Strip. Our property currently offers 1,467 remodeled hotel rooms and suites, a 50,000 square foot casino floor, three restaurants, two casual dining venues, two entertainment venues, beach club and special event venue, and more than 60,000 square feet of flexible convention and meeting space. We also offer a state of the art spa and fitness facility, race and sports book, and retail space, all leased to various third parties.

 

As a casino-based company, our operating results are highly dependent on a number of factors including the state of the United States economy, the amount of discretionary consumer and corporate spending in Las Vegas, and the level of competition in the Las Vegas casino/hotel market. We have been operating at a loss since we commenced operations on July 1, 2009 and generated negative cash flows prior to 2014. Our primary sources of liquidity have been comprised of a revolving line of credit and four rights offerings totaling $200 million.

 

We believe that our existing cash balance, cash flows from operations and revolving line of credit will be more than adequate to meet our financial, operating and debt obligations over the next twelve months. However, we will continue to closely monitor and manage our cash position given the current economic environment. If our sources of capital are inadequate to fund our long-term liquidity requirements including our need to service our existing debt obligations as they come due, we will attempt to procure additional debt or equity financing to fund our operations, capital expenditures and debt service requirements. We can provide no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available in amounts sufficient to enable us to pay our indebtedness or to fund our other liquidity needs including capital improvements.

 

References herein to “we,” “us,” “our,” “management” or “Company” refer to Tropicana Las Vegas Hotel and Casino, Inc. and/or its consolidated subsidiaries, unless the context specifically requires otherwise.

 

2. Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation of the results for the interim periods were included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.

 

The condensed consolidated balance sheet as of December 31, 2013 was derived from our audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

 

These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

 

 

 

 TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Reclassifications

 

Certain reclassifications were made to the condensed consolidated financial statements for the three months ended March 31, 2013 in order to conform to the March 31, 2014 presentation. Prior to January 1, 2014, we classified $0.1 million of promotional discounts (i.e., coupons), as complimentary expenses included in promotional allowances and netted against gross revenues. Effective January 1, 2014, we now record discounts as contra revenue against food and beverage revenue. These reclassifications had no effect on the previously reported net revenues.

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used by the Company include estimated useful lives for depreciable and amortizable assets, certain accrued liabilities and the estimated allowances for receivables, customer loyalty program liability, and self-insurance reserves. Actual results may differ from those estimates.

 

Fair Value Measurement

 

The fair values of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate carrying values due to the short maturity of these items. It was not practicable to determine the fair market value of the revolving credit facility due to the lack of comparable credit facilities and the involvement of our majority shareholder in negotiating the terms and conditions directly with the lender. It is unlikely the Company could obtain similar financing on the same terms with another lender without the involvement and resources of our majority shareholder given our financial condition and history of operating losses. The fair value of other long-term obligations approximates carrying value.

 

Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value framework requires the categorization of assets and liabilities into three levels based upon assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas, Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: quoted market prices in active markets for identical assets or liabilities; Level 2: observable market-based inputs or unobservable inputs that are corroborated by market data and Level 3: unobservable inputs that are not corroborated by market data. As of March 31, 2014, the Company had no assets or liabilities measured at fair value on a recurring basis.

 

3. Recent Accounting Pronouncements

 

No new accounting pronouncements issued or becoming effective during 2014 or 2013 have had or are expected to have a material impact on the Company’s financial position or results of operations. A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our financial statements.

 

 

 

 TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

4. Property and Equipment

 

Property and equipment consists of the following for the periods indicated ($ in thousands):

 

		March 31, 2014 (Unaudited)				December 31, 2013
Land and improvements		$	203,980			$	203,980
Building and improvements			126,557				123,157
Furniture, fixtures and equipment			60,276				59,358
Capital leases			2,771				2,713
Construction in progress			1,862				5,599
			395,446				394,807
Less: accumulated depreciation and amortization			(68,147	)			(63,685	)
Property and equipment, net		$	327,299			$	331,122

 

 

5. Debt

 

Long-term debt consists of the following for the periods indicated ($ in thousands):

 

		March 31, 2014 (Unaudited)				December 31, 2013
Revolver A, $50 million limit		$	49,765			$	49,765
Revolver B, $5 million limit			5,000				5,000
Revolver C, $10 million limit			4,500				4,500
Other long-term debt			1,219				1,369
			60,484				60,634
Less current portion			(816	)			(784	)
Total long-term debt, net		$	59,668			$	59,850

 

Loan Agreement

 

Effective December 21, 2012, we amended and restated our $65.0 million loan agreement (the “Amended and Restated Loan”). The Amended and Restated Loan is comprised of a $50.0 million revolving credit facility (the “Revolver A”), a $5.0 million revolving credit facility (the “Revolver B”), and a $10.0 million revolving credit facility (the “Revolver C”). The Revolver A bears interest at 4% per annum, Revolver B bears interest at 5% per annum and Revolver C bears interest at 6% per annum. The fee for any unfunded portion of the Revolver A, Revolver B or Revolver C is 0.50%. Each revolving credit facility has a stated maturity date of April 2, 2018.

 

The Amended and Restated Loan contains customary affirmative, negative and financial covenants. The covenants, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; create liens on property or assets; make certain investments; engage in mergers or consolidations; sell assets; pay dividends or make distributions; engage in certain transactions with affiliates; enter into sale-leaseback transactions; and pay management fees. In addition, the Amended and Restated Loan requires us to: maintain a $2.0 million cash balance; meet certain EBITDA minimums on a quarterly basis for the periods from March 31, 2015 through March 31, 2018 with a standard cure provision if the EBITDA minimums are not met; and limits the annual aggregate capital expenditures to $18.0 million in 2013 and 2014. As of March 31, 2014, we are in compliance with all of our covenants.

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Substantially all of the assets of Tropicana Las Vegas are pledged as collateral under the Amended and Restated Loan and priority of liens and security interest were granted to our lenders. The lenders have agreed to release their security interest in a one acre (approximately) parcel for future development. Pursuant to the terms of the Amended and Restated Loan, we are required to maintain an interest reserve account for payments of quarterly interest. As of March 31, 2014 and December 31 2013, the interest reserve account had a balance of $3.1 million and $3.7 million, respectively. The following table provides interest incurred on the Amended and Restated Loan for the periods indicated ($ in thousands).

 

		Three Months Ended March 31,
		2014				2013
Interest incurred		$	627			$	478

 

 

Debt issuance costs incurred in connection with the issuance of long-term debt are deferred and amortized to interest expense over the expected terms of the related debt agreements and are included in other assets, net on our condensed consolidated balance sheets. The following table provides amortization incurred in association with the Loan Agreement for the periods indicated ($ in thousands).

 

		Three Months Ended March 31,
		2014				2013
Amortization of debt issuance cost		$	176			$	153

 

Other Long-Term Debt

 

We enter into capital leases for marquee signs, cash kiosk stations and slot machines. These agreements are capitalized at the present value of the future minimum lease payments at inception and are included in property and equipment. The assets are depreciated on straight line method over their estimated useful lives. Under the terms, certain lease agreements are non-interest bearing. As a result, no imputed interest was recorded as it was not material to the financial statements. The following table provides principal payments made under the capital leases for the periods indicated ($ in thousands).

 

		Three Months Ended March 31,
		2014				2013
Principal payments under capital leases		$	208			$	110

 

 

6. Related Party Transactions

 

Trilliant Gaming Nevada, Inc.

 

Trilliant Gaming Nevada Inc. (“Trilliant Gaming”) is the general partner of the Onex Armenco Gaming Entities. The Onex Armenco Gaming Entities, in the aggregate, own, and Trilliant Gaming has voting and investment control over approximately 82.65% of our outstanding voting securities. Each of Mr. Alex Yemenidjian, our Chairman of the Board, Chief Executive Officer and President, Mr. Timothy Duncanson, one of our directors, and Mr. Gerald Schwartz, the chairman and controlling stockholder of Onex Corporation, owns one-third of the outstanding voting securities of Trilliant Gaming, and together Messrs. Yemenidjian, Duncanson and Schwartz own 100% of the outstanding voting securities of Trilliant Gaming. A stockholder agreement between Messrs. Yemenidjian, Duncanson and Schwartz sets forth the rights of each of them with respect to control of Trilliant Gaming and, in turn, our securities owned by the Onex Armenco Gaming Entities. The Onex Armenco Gaming Entities were formed by entities affiliated with Onex Corporation.

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

As a result of Trilliant Gaming’s voting and investment control over our securities held by the Onex Armenco Gaming Entities, Trilliant Gaming may, among other things, exercise a controlling influence over our affairs, the election of directors and the approval of significant corporate transactions, including a merger or the sale of all or substantially all of our assets. Trilliant Gaming may have the ability to prevent any transaction that requires approval of our stockholders regardless of whether or not other stockholders believe that any such transaction is in our best interests and the interests of such other stockholders. Trilliant Gaming’s ability to exercise a controlling influence over our affairs is, to a certain extent, set forth in the Stockholders’ Agreement. Trilliant Gaming also controls the voting of greater than two-thirds of the outstanding shares of our Preferred Stock, giving it the power to amend or waive certain provisions thereof, including the power to waive the anti-dilution protections.

 

Currently, we are a party to a management agreement with Trilliant Management LP, a limited partnership that is controlled by its general partner, Trilliant Gaming (“Trilliant Management”), for the management and operation of the Tropicana Las Vegas, Inc. (See Management Agreement below).

 

Armenco Lease

 

On June 22, 2009, we entered into the Armenco Lease (“Armenco”) in which we leased the real and non-gaming personal property of our hotel and casino, including the restaurants, lounges, retail shops and other related support facilities, and the operation thereof to Armenco until such time as we were able to obtain all governmental registrations, findings of suitability, licenses, qualifications, permits and approvals pursuant to the gaming laws and regulations of the State of Nevada and Clark County liquor and gaming codes necessary for us to own and operate our gaming facility directly. Effective December 1, 2010, we received all approvals necessary for us to own and operate our gaming property directly. We incurred approximately $1.7 million in management fees related to the Armenco Lease which was terminated on November 30, 2010. These fees have not been paid and will not accrue interest due to certain restrictions under the Amended and Restated Loan Agreement.

 

Management Agreement

 

Effective December 1, 2010, we received the necessary approvals and licenses for us to own and operate our gaming facility directly and as a result, the Armenco Lease was terminated and the operation of our hotel and casino was thereafter managed by Trilliant Management, pursuant to the terms of the management agreement entered into in May 2010 (the “Management Agreement”).

 

The Management Agreement provides for Trilliant to assist us in the management and operation of Tropicana Las Vegas beginning December 1, 2010 and terminating on November 30, 2020. For each fiscal year or portion thereof during the term of the Management Agreement, we will pay Trilliant a fee equal to the sum of 2% of all revenue from the operation of Tropicana Las Vegas (the “Revenue Fee”) and 5% of EBITDA after reduction of the Revenue Fee (each as defined). The following table provides Trilliant management fees recorded for the periods indicated and is included in selling, general and administrative expenses on the accompanying condensed consolidated statements of operations and comprehensive (loss) income ($ in thousands).

 

		Three Months Ended March 31,
		2014				2013
Management fee expense		$	627			$	418

 

 

 

 

 TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

 

 

 

For both Armenco and Trilliant, the Amended and Restated Loan restricts our payments of management fees until the earlier of a) the date on which the outstanding principal has been repaid in full or b) the date on which EBITDA for the prior 12 month period is equal to or greater than $20.0 million, and upon the condition that no default or event of default is continuing under the Amended and Restated Loan. However, the Amended and Restated Loan does permit the Company to pay a portion of the management fees for reimbursement of tax liabilities actually incurred and paid. As of March 31, 2014 and December 31, 2013, we have $7.8 million and $7.2 million, respectively, recorded as accrued management fees due Armenco and Trilliant. We have not accrued interest on these management fees since these fees are subject to certain restrictions under the Amended and Restated Loan.

 

7. Commitments and Contingencies

 

Letters of Credit

 

We maintain two irrevocable standby letters of credit. The first irrevocable standby letter of credit is with the State of Nevada, Division of Insurance which acts as a security deposit providing coverage for workers compensation claims/liabilities since the Company is self-insured. This is reviewed annually by the State of Nevada and can be adjusted based on the Company’s prior workers compensation claims experience. The outstanding balance is currently $200,000 and automatically renews on an annual basis. The second irrevocable standby letter of credit is with Starbucks Coffee Company for $35,000. This is to ensure performance of the Company’s obligations to Starbucks for the term of the ten year licensing agreement which commenced on December 14, 2010.

 

Self-Insurance Reserves

 

We are self-insured up to certain stop-loss amounts for employee health coverage for non-union employees as well as workers compensation and general liability cost. Insurance claims and reserves include accruals of estimated settlements for known claims as provided by a third party. In estimating these accruals, we consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however, changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities. We continually monitor changes in claim type and incident and evaluate the insurance accrual making necessary adjustments based on the evaluation of these qualitative data points. As of March 31, 2014 and December 31, 2013, the estimated liabilities for unpaid and incurred but not reported claims totaled $1.1 million and $1.0 million, respectively.

 

Customer Loyalty Program

 

We provide a customer loyalty program (the “Program”) at our casino, which allows customers to redeem points earned from their gaming activity for slot play, food, beverage, rooms or merchandise. Under the Program, customers are able to accumulate points which may be redeemed in the future, subject to certain limitations and the terms of the Program. We accrue a liability for the estimated cost of the outstanding points that we believe will ultimately be redeemed which is calculated based on the total number of points earned, converted to a redemption value based on the average number of points needed to convert to rewards. The offset to this liability is recorded in contra casino revenue.

 

We also have a promotion for new members, Even the Odds Program (“Even the Odds”), which allows first-time customers to be reimbursed for their losses up to $200. Under the current promotion rules, a customer’s actual rated slot loss up to $200 is reimbursed in free slot play with 50% reimbursement on the first day of sign up and the remaining 50% is reimbursed thirty days after their loss up to one year from initial play. We record a liability for the estimated cost of the reimbursements under Even the Odds based on our estimate of redemption. As of March 31, 2014 and December 31, 2013, the estimated accrual for the costs of the Program and Even the Odds redemption totaled $0.4 million and $0.3 million, respectively.

 

 

 

 

 TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

General Litigation

 

We are occasionally party to routine lawsuits arising from the normal operations of a hotel and casino. As with all ligation, no assurance can be provided as to the outcome of such matters. Other than the items discussed below under “Bankruptcy Litigation”, there are no other pending legal proceedings to which we are party to and that are material in relation to our condensed consolidated financial statements.

 

Bankruptcy Litigation

 

The Company was formed in June 2009 for the purpose of owning and operating Tropicana Las Vegas Holdings, LLC and its subsidiaries (the “Predecessor”), including the operations of Tropicana Las Vegas Hotel and Casino, LLC (“Tropicana Las Vegas”) in connection with the reorganization of Tropicana Entertainment Holdings, LLC (“TEH”) and certain of its subsidiaries, under Chapter 11 of Title 11 of the United States Code or Bankruptcy Code.

 

On May 5, 2008 (the “Petition Date”), TEH together with certain of its subsidiaries, including the Predecessor, filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) for relief, seeking to reorganize their businesses under the provisions of the Bankruptcy Code (the “Chapter 11 Cases”). As TEH and certain of its subsidiaries progressed towards an exit from the Chapter 11 Cases, it was determined that given their capital structures and the claims arising there under, as well as the nature of the business operations, two separate plans were warranted. Accordingly, TEH proposed two separate plans of reorganization, one for the Predecessor (“the Bankruptcy Plan”) and one for TEH’s other gaming properties. The Bankruptcy Plan was confirmed by the Bankruptcy Court on May 5, 2009 and became effective on July 1, 2009 (the “Effective Date”).

 

Pursuant to the Bankruptcy Plan, among other things, we assumed certain obligations and liabilities of the Predecessor. The following represents the current status of such obligations as well as remaining litigation matters. We assumed to pay $0.4 million in satisfaction of the Predecessor’s unsecured claims. To date, we have paid, or have been deemed by order of the Bankruptcy Court to have satisfied $0.3 million of those unsecured claims and have a remaining $0.1 million recorded as a liability in accounts payable. With regard to allowed priority and cure claims and non-professional fee administrative expenses, we have paid approximately $2.9 million which does not include certain disputed administrative/priority claims (“Disputed Claims”) in the aggregate asserted amount of approximately $1.5 million discussed below. We do not anticipate any material additions to such claims or expenses and given our position we have not recognized any additional liability.

 

The professionals employed at the expense of the bankruptcy estates of the Predecessor and other debtors have filed applications for allowance of approximately $13.5 million in professional fees and expenses against the Predecessor. We dispute and have objected to many of those applications in advance of hearings before the Bankruptcy Court, the first of which occurred on May 11, 2011, and addressed issues of allocation of fees and expenses between the Predecessor and TEH. Following the May 11, 2011 hearing, the Bankruptcy Court requested post-hearing submissions from the parties, which were filed on June 30, 2011. A second hearing on all other issues subject to the objections will occur approximately eight (8) weeks after the resolution of the allocation issues, which have been under submission with, and pending a ruling from the Bankruptcy Court. We believe that our potential liability in respect of such claimed professional fees and expenses is approximately $3.4 million. Management cannot predict the outcome of these Bankruptcy claims and proceedings, therefore, no assurance can be provided as to the ultimate amount that will be paid. We currently have approximately $5.0 million in restricted funds reserved in connection with the reorganization of the Predecessor for the sole purpose of satisfying liabilities related to professional services incurred as part of the Chapter 11 Cases.

 

With regard to the Disputed Claims discussed above, Wimar Tahoe Corporation (“Wimar”) and Columbia Sussex Corporation (“CSC”) are companies related by common ownership to the Predecessor that provided management services to and incurred expenses through September 2008, which were charged to the Predecessor. Both companies seek allowance and payment by the Predecessor of administrative expense and/or priority claims in the Chapter 11 Cases in the aggregate amount of $0.8 million. Oral arguments on dispositive cross motions for summary judgment were conducted on September 27, 2011, and we are awaiting the Bankruptcy Court ruling. We currently have recorded a liability in the amount of $0.8 million in accounts payable for these claims.

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Finally, TEH has asserted two claims against the Predecessor in the Chapter 11 Cases. The first claim is in regard to the Disputed Claims discussed above, and has been asserted as an administrative/priority claim in the amount of approximately $0.5 million. That claim covers management fees and an unliquidated contingent claim relating to alleged workers’ compensation liabilities. We dispute the workers’ compensation liabilities claim in its entirety and a portion of the claimed management fees. Given our position, we have not recorded any liability associated with this Disputed Claim. With regard to the second claim, TEH has asserted that the Predecessor should be responsible for payment of the entire amount of fees and expenses ultimately allocated to the Predecessor, an amount that TEH asserts should be 50% of the entire amount requested. The Company, on the other hand, has taken the position that, pursuant to the Bankruptcy Plan, it is responsible only for the Predecessor’s appropriate allocation of professional fees and expenses that were unpaid at the time of confirmation of the Bankruptcy Plan, which would be an amount less than the amount of fees and expenses that the Company’s objections concede should be allocated to the Predecessor. Given our position, we have not recorded any liability associated with this claim. Management cannot predict the outcome and no assurance can be given that the claims asserted will ultimately be disallowed or will not have a material adverse impact on the Company.

 

Contingencies

 

In the ordinary course of business, we enter into numerous agreements that contain standard guarantees and indemnities whereby we indemnify another party for breaches of representations and warranties. Many of these parties are also indemnified against any third party claim resulting from the transaction that is contemplated in the underlying agreement such as a lease agreement. While some of these guarantees extend only for the duration of the underlying agreement, many survive the expiration of the term of the agreement. There are no explicit limitations on the maximum potential amount of future payments that we could be required to make under some of these guarantees. We are unable to develop an estimate of the maximum potential amount of future payments to be made under these guarantees as the triggering events are not predictable. We maintain insurance coverage that mitigates some potential payments to be made.

 

Environmental Matters

 

Portions of Tropicana Las Vegas are known to contain asbestos as well as other environmental conditions, which may include the presence of mold. The environmental conditions may require remediation in isolated areas. The extent of such potential conditions cannot be determined definitively, and may result in additional expense in the event that additional or currently unknown conditions are detected.

 

8. Stockholders’ Equity and Net Loss Per Share

 

Changes in Stockholders’ Equity

 

Changes in stockholders’ equity for the three months ended March 31, 2014 were as follows ($ in thousands):

 

Balance, December 31, 2013		$	271,476
Share-based compensation			2
Net loss			(3,720	)
Accumulated other comprehensive income (loss)			—
Balance, March 31, 2014		$	267,758

 

 

 

 

 TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Net Loss per Share

 

Basic net loss per share includes no dilution and is calculated by dividing net loss attributable to the Company by the weighted average number of shares of common stock outstanding during each period. Diluted net loss per share reflects the potential dilution of securities that could share in the earnings or losses of the entity. Due to the net loss in all periods presented, the calculation of diluted per share amounts would create an anti-dilutive result and therefore is not presented. As a result, basic EPS is equal to diluted EPS for the three months ended March 31, 2014 and 2013. The following table shows the number of shares which were excluded from the computation of diluted loss per share for the periods indicated, as they were anti-dilutive (shares in thousands).

 

		Three Months Ended March 31,
		2014				2013
Convertible preferred shares			17,030				15,066

 

 

Preferred Stock

 

In January 2013, we issued an additional 13,000 shares of Series 4 Preferred to the lead arranger and administrative agent of the Amended and Restated Loan as consideration for amending and restating the loan agreement.

 

Dividends on the Preferred Stock are calculated at a rate of 12.5% per annum and are payable semi-annually in arrears, commencing in February 2010 for the Series 1 Preferred, August 2010 for the Series 2 Preferred, August 2011 for the Series 3 Preferred and February 2012 for the Series 4 Preferred. Dividends payable for each dividend period are computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends on the Preferred Stock are cumulative. If for any reason our board of directors does not declare a dividend on the Preferred Stock for a particular dividend period, or if our board of directors declares less than a full dividend, we will remain obligated to pay the unpaid portion of the dividend for that period and the unpaid dividend will compound on each subsequent dividend date (meaning that dividends for future dividend periods will be calculated on any unpaid dividend amounts for prior dividend periods).

 

There have been no cash dividends declared on our preferred stock since we issued each preferred stock series. We do not intend to pay cash dividends on our preferred stock for the foreseeable future. Our Amended and Restated Loan prohibits us from declaring dividends as long as there is outstanding debt. As of March 31, 2014, we had approximately $112.4 million in unrecorded dividend liability.

 

9. Share-Based Compensation

 

Under three separate Non-Employee Director Restricted Stock Plans (2010, 2011 and 2013), we have granted restricted common stock to each of our non-employee directors. Each non-employee director was granted 4,000 restricted common stock shares with the first 1,000 shares being immediately vested. The remaining 3,000 shares will vest equally over three years on the anniversary grant date. The following table provides a summary of the status and changes of the unvested restricted common stock under each of the plan for the three months ending March 31, 2014.

 

		Number of Unvested Restricted Shares				Weighted Average Grant Date Fair Value
Unvested, 12-31-13			4,000			$	3.47
Granted			—				—
Vested			—				—
Forfeited			—				—
Unvested, 3-31-14			4,000			$	3.47

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

We account for share-based awards exchanged for services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. The following table provides the share-based compensation expense recorded for the periods indicated and is included in selling, general and administrative expenses on the accompanying condensed consolidated statements of operations and comprehensive (loss) income.

 

		Three Months Ended March 31,
		2014				2013
Share-based compensation expense		$	1,972				3,667

 

 

10. Employee Benefit Plans

 

Collective bargaining agreements

 

A significant portion of our labor force is covered by collective bargaining agreements. Although unions have been active in Las Vegas, we believe that we have a good working relationship with our union employees. In March 2014, we reached a collective bargaining agreement with the Culinary Union and Bartenders Union Local 165 that covers approximately 810 employees. This collective bargaining agreement covers approximately 84% of our union workers. As March 31, 2014, 973 of our 1,526 employees, or 64%, were covered by collective bargaining agreements.

 

Multi-employer pension plans

 

We contribute to multi-employer defined benefit pension plans (collectively, “the Plans”) for certain of our union employees under the terms of the applicable bargaining agreements. Risks of participating in a multi-employer plan differs from single-employer plans for the following reasons: (1) assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of other participating employers; (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and (3) if a participating employer stops participating, it may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The following table includes information on each of our multi-employer defined pension plans and the employer contributions made for the periods indicated.

 

											Contributions for Three Months Ended March 31,
Pension Plan Legal Name		Plan No.				Employer Identification No.			Expiration Date		2014				2013
Southern Nevada Culinary Workers and Bartenders Pension Plan Trust			001				88-6016617		5/31/18		$	275,108			$	222,978
Nevada Resort Association—I.A.T.S.E. Local 720 Pension Trust			001				51-0144767		12/31/18			6,625				7,003
Western Conference of Teamsters Pension Trust			001				91-0681009		(M-T-M)			106,033				91,850
Central Pension Fund of the International Union of Operating Engineers and Participating Employers			001				36-6052390		(M-T-M)			71,871				63,750
Southwest Carpenters Joint Trust Fund			001				95-6042875		7/31/14			14,266				16,941
National Electrical Benefit Fund			001				88-6023284		2/28/17			4,895				4,368
International Painters and Allied Trades Industry Pension Fund			001				52-6073909		(M-T-M)			6,630				7,813
Total Contributions											$	485,428			$	414,703

 

 

 

 

TROPICANA LAS VEGAS HOTEL AND CASINO, INC. 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Retirement Plan

 

We maintain a 401(k) defined contribution plan that covers substantially all employees who are not covered by various collective bargaining agreements identified above. The plan allows employees, at their discretion, to make contributions of their before-tax earnings to an annual maximum amount allowed by law. We currently make no employer matching contributions to this plan.

 

11. Subsequent Events

 

Termination of a Property Lease

 

Effective July 29, 2013, the BBCLV, LLC and The One Group (collectively, the “Tenant”) relinquished the operation of the nightclub and beach club to us. We are operating the upscale venues for private events and have renamed the venues Havana Room and Beach Club. Effective May 1, 2014, we have reached a settlement agreement with the Tenant whereby: i) we will retain their $0.2 million security deposit which will be utilized to offset previous billings to the Tenant; ii) the Tenant will provide an escrow account for potential Live Entertainment Taxes incurred during their period of occupancy, iii) the Tenant will make a payment for certain missing equipment; and, iv) the Tenant will transfer certain personal property and leasehold improvements to us in lieu of us enforcing the 10 year lease guaranty. The Company is currently reviewing the accounting treatment of the settlement and the value of the personal property and leasehold improvement to be recorded in the subsequent financial statements.

 

 

 

 

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion in conjunction with management’s discussion and analysis contained in our 2013 Annual Report on Form 10-K, as well as the condensed consolidated financial statements and the notes hereto included in this Quarterly Report on Form 10-Q. This discussion contains certain “forward-looking statements,” including information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. Our actual results may differ materially from those discussed in these forward-looking statements because of the risks and uncertainties inherent in future events.

 

 

Overview and Recent Events

 

Our primary business is the ownership and operation of Tropicana Las Vegas which offers casino gaming, hotel accommodations, dining, entertainment, retail shopping and other resort amenities. Tropicana Las Vegas is conveniently located on 35 acres at the corner of Tropicana Avenue and Las Vegas Boulevard on the Las Vegas Strip. Our property currently offers 1,467 remodeled hotel rooms and suites, a 50,000 square foot casino floor, three restaurants, two casual dining venues, two entertainment venues, beach club and special event venue, and more than 60,000 square feet of flexible convention and meeting space. We also offer a state of the art spa and fitness facility, race and sports book, and retail space, all leased to various third parties.

 

Our financial results are dependent upon the number of patrons that we attract to our property and the amounts those guests spend per visit. Additionally, our operating results may be affected by, among other things, overall economic conditions impacting the disposable income of our guests, achieving and maintaining cost efficiencies, competition on the Las Vegas Strip, gaming tax increases and other regulatory changes, the commencement of new gaming operations, charges associated with debt refinancing, construction at our facilities and general public sentiment regarding travel. We may experience significant fluctuations in our quarterly operating results due to seasonality, variations in gaming hold percentages and other factors. Consequently, our operating results for any quarter or year are not necessarily comparable and may not be indicative of future periods’ results.

 

Current Economic Conditions. Over the past 20 years, Las Vegas has become one of the fastest growing and largest entertainment markets in the United States. During 2013, the economic environment in the gaming and hotel markets in Las Vegas continued to improve from prior years with increased levels of gaming revenue and hotel room demand. While these gaming and hotel statistics have increased from prior year levels, uncertainty still exists in the Las Vegas market. During 2013, the average daily room rate increased 2.4%, visitation remained relatively flat at 39.7 million visitors, and Las Vegas Strip gaming revenues increased 4.8% (without baccarat 1.5%), all as compared to the year ended December 31, 2012. During 2012, the average daily room rate increased 2.8%, visitation increased 2.1% to 39.7 million visitors, and Las Vegas Strip gaming revenues increased 2.3% (without baccarat 0.7%), all as compared to the year ended December 31, 2011. Volume and gaming statistics noted above are released by the Las Vegas Convention and Visitors Authority and the Nevada Gaming Control Board.

 

Competition. We face significant competition in the Las Vegas market, as well as from adjacent states. Such competition may intensify if new gaming operations open in our market or existing competitors expand their operations. Over the past year, a number of competitors announced investments in new hotel/casino offerings, restaurants and clubs in Las Vegas. When these developments open, they may target the same customers as we do. We also compete for customers with other casino operators in other markets, including casinos located on Native American reservations, and other forms of gaming, such as lotteries and internet gaming. Many of our competitors are larger and have substantially greater name recognition and marketing and financial resources. We believe that increased legalized gaming in other areas, the development or expansion of Native American gaming, the expansion or additional developments in Las Vegas, and the legalization of internet gaming, could create additional competition for us and could adversely affect our operations.

 

 

 

 

Seasonality. The Las Vegas hotel, resort and casino industry is seasonal in nature. A variety of factors contribute to the seasonality of the Las Vegas market, including the timing of major Las Vegas conventions, major holidays such as New Year’s and Chinese New Year and major sporting events, particularly the Super Bowl. These factors can drive additional business to the Las Vegas market. Visitor volumes typically are lower during off-peak times, such as mid-week or during traditional slower leisure periods between Thanksgiving and New Year’s.

 

Property Updates – Remodeled Theater. In October 2013, we announced that MAMMA MIA! will be opening in our recently transformed, state-of-the-art Tropicana Theater. Performances will begin May 8^th with the shows running nightly from Saturday through Thursday each week.

 

Property Updates – Collective Bargaining Agreement. In March 2014, we reached a collective bargaining agreement with the Culinary Union and Bartenders Union Local 165 that covers about 810 Tropicana’s employees. This collective bargaining agreement covers approximately 84% of our union workers.

 

 

Key Financial Metrics

 

Casino Revenue. Casino revenue is derived primarily from customers wagering on slot machines, table games and other gaming activities. Table games generally include blackjack or twenty one, craps, mini-baccarat, roulette and other specialty games. Other gaming activities include poker. Casino revenue is defined as the net win from gaming activities, computed as the difference between gaming wins and losses, not the total amounts wagered. “Table game drop” and “slot handle” are casino industry specific terms that are used to identify the amount wagered by customers at tables and slot machines, respectively. “Table game hold” and “slot hold” represent the percentage of the total amount wagered by customers that the casino has won. Hold is derived by dividing the amount won by the casino by the amount wagered by customers. Casino revenue is recognized at the end of each gaming day. Casino revenue varies from time to time due to table game hold, slot hold and the amount of gaming activity.

 

Room Revenue. Room revenue is derived from hotel rooms and suites rented to guests. “Average daily rate” is an industry specific term used to define the average amount of revenue per room per rented room day. “Occupancy percentage” defines the total percentage of rooms occupied and is computed by dividing the number of rooms occupied by the total number of rooms available. “Revenue per available room” (“RevPAR”) is an industry specific term used to define the average amount of revenue per room per available room day and is computed by dividing total room revenue by total rooms available. Room revenue is recognized at the time the rooms are provided to guests. Hotel room revenue varies depending upon the occupancy level of the hotel and the rates that can be charged.

 

Food and Beverage Revenue. Food and beverage revenue is derived from food and beverage sales in the food outlets of the hotel and casino, including restaurants, room service and banquets. Food and beverage revenue is recognized at the time the relevant food or beverage service is provided to guests.

 

Operating Costs and Expenses. Operating costs and expenses include the direct costs associated with, among other things, operating the casino, hotel, food and beverage outlets and other casino and hotel operations (including retail amenities, concessions, entertainment offerings and certain other ancillary services conducted at the casino). These direct costs primarily relate to payroll, supplies, costs of goods sold and gaming taxes and licenses. Gaming taxes and license fees are based upon such factors as a percentage of the gross revenues or net gaming proceeds received and the number of gaming devices and table games operated. Gaming license fees and taxes may also vary with changes in applicable legislation. Operating costs and expenses also include the costs of marketing, advertising and promotions, general and administrative costs and the costs of maintenance and utilities in addition to depreciation and amortization expense.

 

 

 

 

Results of Operation

 

Three months ended March 31, 2014 (“Current Quarter”) compared to the three months ended March 31, 2013 (“Prior Year Quarter”)

 

The following table highlights our results of operations ($ in thousands):

 

		Three Months Ended March 31,								Percent
		2014				2013				Change
Net revenues		$	27,149			$	20,881				30	%
Operating expenses			30,059				29,858				1	%
Operating loss			(2,910	)			(8,977	)			(68	)%
Interest (expense) income, net			(810	)			(643	)			26	%
Net loss		$	(3,720	)			(9,620	)			(61	)%

 

 

Net Revenues. Net revenues increased by $6.3 million or 30% for the Current Quarter as compared to the Prior Year Quarter primarily due to higher revenue across all business segments. All business segments benefitted from the higher hotel occupancy rate of 86.9% versus 74.5% in the Prior Year Quarter.

 

Operating Loss. The operating loss decreased by $6.1 million or 61% for the Current Quarter as compared to the Prior Year Quarter primarily as a result of higher net revenues noted above, partially offset by a modest increase operating expenses.

 

The following table highlights our various sources of revenues and expenses as compared to the prior period ($ in thousands):

 

		Three Months Ended March 31,								Percent
		2014				2013				Change
Casino revenues		$	10,007			$	7,571				32	%
Casino expenses			6,539				7,168				(9	)%
Margin			35	%			5	%
Room revenue		$	12,141			$	8,840				37	%
Room expense			4,934				4,297				15	%
Margin			59	%			51	%
Food and beverage revenues		$	6,297			$	5,415				16	%
Food and beverage expenses			5,212				4,666				12	%
Margin			17	%			14	%
Other revenues		$	1,197			$	1,483				(19	)%
Other expenses			1,324				1,275				4	%

 

 

Casino. Casino revenue increased $2.4 million or 32% for the Current Quarter as compared to the Prior Year Quarter. Table game revenue accounted for $1.8 million of the increase in casino revenue as a result of a higher hold percentage. Slot revenue accounted for $0.6 million of the increase in casino revenue as a result of a higher hold percentage. Both table game and slot revenue benefitted from higher hotel occupancy and the successful results of the new locals customer loyalty program. Casino expenses decreased by $0.6 million for the Current Quarter as compared to the Prior Year Quarter due primarily to reductions in the cost of complimentaries and payroll expenses. As a result of the increased casino revenues, the casino operating margin increased 30 percentage points in the Current Quarter as compared to the Prior Year Quarter.

 

 

 

 

Room. Room revenue increased $3.3 million or 37%, for the Current Quarter as compared to the Prior Year Quarter, which was attributable to an increase in average daily room rate to $97 from $85 as well as an increase in the occupancy rate to 86.9% from 74.5% for the same previously reported period. This year’s increase in occupancy rate is due to increase in transient and convention room nights. Room expenses increased $0.6 million for the Current Quarter as compared to the Prior Year Quarter due to labor and operating supplies increasing as a result of additional occupied rooms. With the increase in room revenues, the hotel operating margin increased 8 percentage points in the Current Quarter as compared to the Prior Year Quarter.

 

Food and Beverage. Food and beverage revenue increased $0.9 million or 16% for the Current Quarter as compared to the Prior Year Quarter. The increase was primarily due to the improved occupancy rate and improved banquet business. Food and beverage expenses increased $0.5 million for the Current Quarter as compared to the Prior Year Quarter due to labor, cost of goods sold and operating supplies increasing as result of the additional food and beverage business. With the increase in food and beverage revenues as well as improved cost controls, the food and beverage operating margin increased 3 percentage points in the Current Quarter as compared to the Prior Year Quarter.

 

Other. Other revenue primarily includes income from convention services, entertainment and leased outlets. Other revenue decreased by $0.3 million or 19% for the Current Quarter as compared to the Prior Year Quarter, reflecting a decrease in entertainment revenue and lease income. During the Current Quarter, our theater was dark in preparation for the May 8^th opening of MAMMA MIA.

 

Selling, General and Administrative. Selling, general and administrative expenses decreased $0.2 million or 3% for the Current Quarter as compared to the Prior Year Quarter. The decrease in selling, general and administrative expenses is primarily the result of lower general liability claims and legal expenses.

 

Maintenance and Utilities. Maintenance and utilities expense increased $0.1 million or 2% for the Current Quarter as compared to the Prior Year Quarter primarily due to higher utilities and repair and maintenance costs.

 

Depreciation and Amortization. Depreciation and amortization expense was flat for the Current Quarter as compared to the Prior Year Quarter.

 

Loss on Assets Disposals. For the Prior Year Quarter, we wrote off $0.3 million due to the retiring of certain assets associated with remodeling the theater, bungalows and sky villas.

 

Interest Expense, Net. Net interest expense increased $0.2 million or 26% for the Current Quarter, as compared to the Prior Year Quarter due to increase in borrowings to cover capital expenditures and 2013 operating loss. There was $60.5 million in outstanding debt as of March 31, 2014 as compared to $48.0 million outstanding as of March 31, 2013.

 

Liquidity and Capital Resources

 

Amended and Restated Loan Agreement

 

Effective December 21, 2012, we agreed to amend and restate our $65.0 million loan agreement. The Amended and Restated Loan is comprised of a $50.0 million Revolver A facility, a $5.0 million Revolver B facility, and a $10.0 million Revolver C facility. The Revolver A bears interest at 4% per annum, Revolver B bears interest at 5% per annum and Revolver C bears interest at 6% per annum. The fee for any unfunded portion of the Revolver A, Revolver B or Revolver C is 0.50%. Each revolving credit facility has a stated maturity date of April 2, 2018.

 

The Amended and Restated Loan contains customary affirmative, negative and financial covenants. The covenants, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; create liens on property or assets; make certain investments; engage in mergers or consolidations; sell assets; pay dividends or make distributions; engage in certain transactions with affiliates; enter into sale-leaseback transactions; and pay management fees. In addition, the Amended and Restated Loan requires us to: maintain a $2.0 million cash balance; meet certain EBITDA minimums on a quarterly basis for the periods from March 31, 2015 through March 31, 2018 with a standard cure provision if the EBITDA minimums are not met; and limits the annual aggregate capital expenditures to $18.0 million in 2013 and 2014. As of March 31, 2014, we are in compliance with all of our covenants.

 

 

 

 

Substantially all of the assets of Tropicana Las Vegas are pledged as collateral under the Amended and Restated Loan and priority of liens and security interest were granted to our lenders. The lenders have agreed to release its security interest in approximately one acre parcel for future development. Pursuant to the terms of the Amended and Restated Loan, we are required to establish an interest reserve account for payments of quarterly interest. As of March 31, 2014, the interest reserve account had a balance of $3.1 million.

 

Liquidity Outlook

 

We have been operating at a loss since we commenced operations on July 1, 2009 and generated negative cash flows prior to 2014. Our ability to generate cash from operations in the future depends, in significant part, upon the state of the hotel and gaming industry in Las Vegas, which in turn depends upon a number of factors including the state of the United States economy, the amount of discretionary consumer and corporate spending in Las Vegas and the level of competition in the Las Vegas market.

 

Our primary sources of liquidity are comprised of cash flows from operations, a revolving line of credit totaling $65 million and four rights offerings which raised $200 million. We believe that our existing cash balance, cash flows from operations, and existing revolver line will be more than adequate to meet our financial and operating obligations over the next twelve months. However, we will continue to closely monitor and manage our cash position given the current economic environment. If our sources of capital are inadequate to fund our long-term liquidity requirements, including our need to service our existing debt obligations as they come due, we will attempt to procure additional debt or equity financing, to fund our operations, capital expenditures and debt service requirements.

 

We can provide no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available in amounts sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. Moreover, we may need to refinance all or a portion of our indebtedness on or before maturity. We cannot make assurances that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

 

Cash Flows from Operating Activities

 

During the Current Quarter, cash flows provided by operating activities were $1.8 million as compared to $2.5 million being used for the Prior Year Quarter, reflecting significantly higher revenues and cost controls.

 

Cash Flows Used in Investing Activities

 

Cash used for capital expenditures were approximately $1.0 million for the Current Quarter. During the Prior Year Quarter, cash used for capital expenditures was approximately $5.9 million due to new bungalows and theater renovations.

 

Cash Flows Provided by Financing Activities

 

During the Current Quarter, we paid $0.2 million in principal payments under capital leases. For the Prior Year Quarter, we borrowed $17.5 million to complete capital expenditures and to pay down our Revolver C loan of $10 million. Revolver C carries a higher interest rate than Revolver A, which allowed us to lower our financing cost in the Prior Year Quarter. In addition, we paid $0.1 million in principal payments under capital leases for the Prior Year Quarter. As of March 31, 2014, we had borrowing base of $5.5 million remaining under the Amended and Restated Loan.

 

Off-Balance Sheet Arrangements

 

We have no special purpose entities, financing partnerships, guarantees or off-balance sheet arrangements other than $0.2 million of outstanding letter of credits discussed in Note 7 “Commitments and Contingencies” to the condensed consolidated financial statements.

 

 

 

 

Contractual Obligations

 

With the exception of payments made in relationship to our capital leases, there were no material changes during the three months ended March 31, 2014 to our contractual obligations as disclosed in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2013.

 

Critical Accounting Policies

 

A description of our critical accounting policies can be found in the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2013. For a further discussion of our accounting policies, see Note 2 to the condensed consolidated financial statements in this Form 10-Q. There were no material changes to our critical accounting policies during the three months ended March 31, 2014.

 

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

 

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our use of debt exposes us to interest rate risk. As of March 31, 2014, all of our long-term debt and capital leases had fixed interest rates which eliminated our exposure to fluctuation of interest rates. However, as our fixed rate debt matures, and if additional debt is acquired to fund the debt payment, future earnings and cash flows may be affected by changes in interest rates. The following table set forth our long-term debt obligations and the related interest rates as of March 31, 2014 ($ in thousands):

 

Type

Expected Maturity

Interest Rate

Principal Outstanding

Obligations under capital leases

Dec 2014

–

Jul 2015

0.0%

to

6.9%

$

1,219

Revolver A, $50.0 million limit

April 2018

Fixed at 4.0%

49,765

Revolver B, $5.0 million limit

April 2018

Fixed at 5.0%

5,000

Revolver C, $10.0 million limit

April 2018

Fixed at 6.0%

4,500

Total debt

$

60,484

 

 

Item 4.      Controls and Procedures.

 

Disclosure Controls and Procedures

 

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of the end of the period covered by this report. This conclusion is based on an evaluation as required by Rule 13a-15(e) under the Exchange Act conducted under the supervision and participation of the principal executive officer and principal financial officer along with the Company’s management. Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported in a timely manner and in accordance with Securities and Exchange Commission (“SEC”) rules and regulations.

 

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

 

Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the quarter to which this report relates that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1.      Legal Proceedings

 

Reference is made to the legal proceedings reported under Note 7 “Commitments and Contingencies” of the condensed consolidated financial statements included in this Form 10-Q.

 

Item 1A.    Risk Factors

 

Our business has many risks. Factors that could materially adversely affect our business, financial condition, operating results or liquidity are described under “Risk Factors” in Item I of our Annual Report on Form 10-K for the year ended December 31, 2013. This information should be considered carefully, together with other information in this report and other reports and materials we file with the Securities and Exchange Commission.

 

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

 

There were no unregistered sales of equity securities.

 

Item 3.     Defaults Upon Senior Securities

 

None.

 

Item 4.     Mine Safety Disclosures

 

Not applicable.

 

Item 5.     Other Information

 

None.

 

 

 

 

Item 6. Exhibits

 

Exhibit Number		Exhibit Description
2.1		First Amended Joint Plan of Reorganization of Tropicana Las Vegas Holdings, LLC and Certain of its Debtor Affiliates pursuant to Title 11 of the United States Code, 11 U.S.C. Section 101 et seq. (Incorporated herein by reference to the Company’s Form 10-12G dated February 16, 2010)
3.1		Certificate of Incorporation of Tropicana Las Vegas Hotel and Casino, Inc. (Incorporated herein by reference to the Company’s Form 10-12G dated February 16, 2010)
3.2		Bylaws of Tropicana Las Vegas Hotel and Casino, Inc. (Incorporated herein by reference to the Company’s Form 10-12G dated February 16, 2010)
3.3		Certificate of Designations of Class A Convertible Participating Preferred Stock of Tropicana Las Vegas Hotel and Casino, Inc. dated as of August 12, 2009. (Incorporated herein by reference to the Company’s Form 10-12G dated February 16, 2010)
3.4		Amendment to Certificate of Incorporation of Tropicana Las Vegas Hotel and Casino, Inc. dated as of August 12, 2009. (Incorporated herein by reference to the Company’s Form 10-12G/A dated April 13, 2010)
3.5		Amendment to Certificate of Incorporation of Tropicana Las Vegas Hotel and Casino, Inc. dated as of March 17, 2010. (Incorporated herein by reference to the Company’s Form 10-12G/A dated April 13, 2010)
3.6		Certificate of Designations of Class A Series 2 Convertible Participating Preferred Stock of Tropicana Las Vegas Hotel and Casino, Inc. dated as of March 17, 2010. (Incorporated herein by reference to the Company’s Form 10-12G/A dated April 13, 2010)
3.7		Amendment to Certificate of Incorporation of Tropicana Las Vegas Hotel and Casino, Inc. dated as of April 28, 2011 (Included as exhibit 3.7 to the Registrant’s Form 8-K filed on May 3, 2011 and incorporated herein by reference)
3.8		Certificate of Designations of Class A Series 3 Convertible Participating Preferred Stock of Tropicana Las Vegas Hotel and Casino, Inc. dated as of April 28, 2011 (Included as exhibit 3.8 to Form 8-K filed on May 3, 2011 and incorporated herein by reference)
3.9		Amendment to Certificate of Incorporation of Tropicana Las Vegas Hotel and Casino, Inc., dated November 1, 2012. (Incorporated herein by reference to the Company’s Form 8-K filed on November 8, 2012)
3.10		Certificate of Designations of Class A Series 4 Convertible Participating Preferred Stock of Tropicana Las Vegas Hotel and Casino, Inc. dated November 1, 2012. (Incorporated herein by reference to the Company’s Form 8-K filed on November 8, 2012)
3.11		Amendment to Certificate of Incorporation of Tropicana Las Vegas Hotel and Casino, Inc., dated January 31, 2013. (Incorporated herein by reference to the Company’s Form 8-K filed on January 30, 2013)
3.12		Amended Certificate of Designations of Class A Series 4 Convertible Participating Preferred Stock of Tropicana Las Vegas Hotel and Casino, Inc. dated November 1, 2012. (Incorporated herein by reference to the Company’s Form 8-K filed on January 30, 2013)
4.1		Form of Tropicana Las Vegas, Inc. Common Share Certificate(Incorporated herein by reference to the Company’s Form 10-12G dated February 16, 2010)
4.2		Warrant Agreement, dated July 1, 2009, for Warrant Issued to Tropicana Entertainment, LLC (Incorporated herein by reference to the Company’s Form 10-12G/A dated April 13, 2010)
10.1		Stockholders’ Agreement, dated July 1, 2009, by and among Tropicana Las Vegas Hotel and Casino, Inc., and the stockholders listed on a schedule thereto and any stockholder or option holder who becomes a party thereto by joinder. (Incorporated herein by reference to the Company’s Form 10-12G dated February 16, 2010)
10.2		Employment Agreement dated July 1, 2009 by and between Tropicana Las Vegas, Inc. and Alex Yemenidjian. (Incorporated herein by reference to the Company’s Form 10-12G dated February 16, 2010)

 

 

 

 

Exhibit Number		Exhibit Description
10.3		Employment Agreement dated October 1, 2010 by and between Tropicana Las Vegas, Inc. and Joanne M. Beckett. (Incorporated herein by reference to the Company’s Form 8-K dated December 8, 2010 when originally filed as Exhibit 10.4)
10.4		Management Agreement, dated May 17, 2010, by and between Tropicana Las Vegas, Inc. and Trilliant Management, L.P. (Incorporated herein by reference to the Company’s Form 8-K dated May 21, 2010 when originally filed as Exhibit 10.8)
10.5		2010 Non-Employee Director Restricted Stock Plan (effective September 16, 2010), Form of Restricted Stock Grant Notice and Form of Restricted Stock Agreement. (Incorporated herein by reference to the Company’s Form 8-K dated September 17, 2010 when originally filed as Exhibit 10.9)
10.6		2011 Non-Employee Director Restricted Stock Plan (effective September 15, 2011), Form of Restricted Stock Grant Notice and Form of Restricted Stock Agreement (Incorporated herein by reference to the Company’s Form 8-K dated September 16, 2011 when originally filed as Exhibit 10.12).
10.7		Consulting Service Agreement, dated March 21, 2012 between Tropicana Las Vegas, Inc. and Mr. Michael A. Ribero (Incorporated herein by reference to the Company’s Form 8-K dated March 21, 2012 when originally filed as Exhibit 10.18).
10.8		Amendment and Restated Loan Agreement, dated December 21, 2012, between Tropicana Las Vegas, Inc., as the Borrower, and Wells Fargo Principal Investments, LLC as a Lender and Wells Fargo National Association, as the Administrative Agent for the Lender (Incorporated herein by reference to the Company’s Form 8-K dated on December 26, 2012 when originally filed as Exhibit 10.20).
10.9		Employment Agreement dated July 8, 2013 by and between Tropicana Las Vegas, Inc. and Jason A. Goudie. (Incorporated herein by reference to the Company’s Form 8-K dated July 8, 2013 when originally filed as Exhibit 10.21).
10.10		2013 Non-Employee Director Restricted Stock Plan (effective July 1, 2013), Form of Restricted Stock Grant Notice and Form of Restricted Stock Agreement (Incorporated herein by reference to the Company’s Form 8-K dated August 12, 2013 when originally filed as Exhibit 10.22).
31.1*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema Document**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB		XBRL Taxonomy Extension Label Linkbase Document**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

 

---

*	Filed herewith.
**	Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	TROPICANA LAS VEGAS HOTEL AND CASINO, INC.
Date: May 5, 2014	By:	/s/ Alex Yemenidjian
		Alex Yemenidjian
		Chief Executive Officer and President
		(Principal Executive Officer)
Date: May 5, 2014	By:	/s/ Jason Goudie
		Jason Goudie
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

 

 

24