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Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

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

 

For the quarterly period ended June 30, 2014

 

OR

 

o         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 000-54480

 


 

ALST CASINO HOLDCO, LLC

 (Exact name of registrant as specified in its charter)

 


 

Delaware

 

45-2487922

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

7300 Aliante Parkway, North Las Vegas, NV

 

89084

(Address of principal executive offices)

 

(Zip Code)

 

(702) 692-7777

(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 x  No o

 

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 o  No x

 

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x (Do not check if a smaller reporting company)

 

Smaller reporting company o

 

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

 

As of August 14, 2014, there were 432,213 units outstanding of the registrant’s common units.

 

 

 




Table of Contents

 

PART IFINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

ALST CASINO HOLDCO, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

12,665

 

$

9,850

 

Receivables, net

 

1,217

 

1,038

 

Inventories

 

612

 

638

 

Prepaid gaming taxes

 

1,677

 

1,314

 

Prepaid expenses and other current assets

 

1,283

 

1,024

 

Total current assets

 

17,454

 

13,864

 

Property and equipment, net

 

63,949

 

65,450

 

Intangible assets, net

 

2,138

 

2,224

 

Other assets, net

 

6,390

 

6,391

 

Total assets

 

$

89,931

 

$

87,929

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

1,588

 

$

2,044

 

Accounts payable

 

1,143

 

2,285

 

Accrued payroll and related

 

1,225

 

864

 

Accrued gaming and related

 

1,467

 

1,568

 

Accrued expenses and other current liabilities

 

604

 

529

 

Total current liabilities

 

6,027

 

7,290

 

Long-term debt, less current portion

 

50,426

 

48,172

 

Total liabilities

 

56,453

 

55,462

 

Members’ equity:

 

 

 

 

 

Members’ capital

 

37,254

 

37,254

 

Additional paid-in-capital

 

25

 

25

 

Accumulated deficit

 

(3,801

)

(4,812

)

Total members’ equity

 

33,478

 

32,467

 

Total liabilities and members’ equity

 

$

89,931

 

$

87,929

 

 

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

 

2



Table of Contents

 

ALST CASINO HOLDCO, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Casino

 

$

13,526

 

$

11,526

 

$

27,293

 

$

23,613

 

Food and beverage

 

3,675

 

3,349

 

7,236

 

6,480

 

Room

 

1,594

 

1,349

 

3,169

 

2,770

 

Other

 

895

 

789

 

1,715

 

1,544

 

Gross revenues

 

19,690

 

17,013

 

39,413

 

34,407

 

Promotional allowances

 

(1,616

)

(1,218

)

(3,185

)

(2,418

)

Net revenues

 

18,074

 

15,795

 

36,228

 

31,989

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

Casino

 

5,978

 

5,750

 

12,350

 

11,554

 

Food and beverage

 

2,970

 

2,829

 

5,792

 

5,560

 

Room

 

716

 

621

 

1,410

 

1,195

 

Other

 

364

 

436

 

713

 

714

 

Selling, general and administrative

 

5,381

 

5,092

 

10,305

 

10,394

 

Depreciation and amortization

 

1,267

 

1,082

 

2,408

 

2,164

 

(Gain) Loss on disposal of assets, net

 

(136

)

 

(136

)

 

Total operating costs and expenses

 

16,540

 

15,810

 

32,842

 

31,581

 

Operating income (loss)

 

1,534

 

(15

)

3,386

 

408

 

 

 

 

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(1,096

)

(1,698

)

(2,375

)

(2,763

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

438

 

$

(1,713

)

$

1,011

 

$

(2,355

)

 

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

 

3



Table of Contents

 

ALST CASINO HOLDCO, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

1,011

 

$

(2,355

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

2,408

 

2,164

 

(Gain) Loss on disposal of assets, net

 

(136

)

 

Amortization of debt discount and debt issuance costs

 

(469

)

169

 

Accrued interest - paid in kind

 

2,798

 

2,536

 

Changes in operating assets and liabilities:

 

 

 

 

 

Restricted cash

 

 

(1

)

Receivables, net

 

(179

)

(275

)

Inventories and prepaid expenses

 

(634

)

167

 

Accounts payable

 

(1,142

)

(1,475

)

Accrued payroll and other current liabilities

 

335

 

(821

)

Other, net

 

1

 

(6

)

Net cash provided by operating activities

 

3,993

 

103

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(830

)

(1,181

)

Proceeds from sale of property and equipment

 

145

 

 

Net cash (used in) investing activities

 

(685

)

(1,181

)

Cash flows from financing activities:

 

 

 

 

 

Principal payments on debt

 

(493

)

(480

)

Net increase (decrease) in cash and cash equivalents

 

2,815

 

(1,558

)

Cash and cash equivalents, beginning of period

 

9,850

 

11,276

 

Cash and cash equivalents, end of period

 

$

12,665

 

$

9,718

 

 

 

 

 

 

 

Supplemental cash flow disclosure:

 

 

 

 

 

Cash paid for interest

 

$

46

 

$

59

 

 

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

 

4



Table of Contents

 

ALST CASINO HOLDCO, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Note 1. Organization

 

ALST Casino Holdco, LLC (the “Company,” “we,” “us” or “our”), a Delaware limited liability company, was formed on May 11, 2011.  We were formed to acquire substantially all of the equity interests of Aliante Gaming, LLC (“Aliante Gaming”) pursuant to its joint plan of reorganization under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”). The reorganization was completed on November 1, 2011 (the “Effective Date”), resulting in Aliante Gaming, the owner and operator of the Aliante Casino + Hotel, previously known as Aliante Station Casino + Hotel located in North Las Vegas, Nevada (the “Casino”), becoming our wholly owned subsidiary. Prior to the effective date, we conducted no operations and had no material assets or liabilities.

 

Background

 

Prior to the Effective Date, Aliante Gaming was a wholly owned subsidiary of Aliante Holding, LLC (“Aliante Holding”), which was a 50/50 joint venture partnership between Aliante Station, LLC (“Aliante Station”), a wholly owned subsidiary of Station Casinos, Inc. (“Old Station”) and G.C. Aliante, LLC, an affiliate of the Greenspun Corporation.

 

Aliante Gaming experienced lower than expected operating results as a result of macroeconomic conditions, including a downturn in the Las Vegas area and low consumer confidence levels. As a result, Aliante Gaming failed to (i) remain in compliance with certain financial maintenance covenants set forth in its $430.0 million credit facility (the “Previous Facility”) and (ii) make scheduled principal or interest payments under the Previous Facility since April 2009.

 

On April 12, 2011 (the “Petition Date”), Aliante Gaming, together with Aliante Holding and Aliante Station, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Case”), in the United States Bankruptcy Court for the District of Nevada, Northern Division (the “Bankruptcy Court”) to preserve their assets and the value of their estates.

 

The Chapter 11 Case was jointly administered with certain subsidiaries of Old Station and Green Valley Ranch Gaming, LLC under the lead case In re Station Casinos, Inc., et. al. originally filed on July 28, 2009 (Jointly Administered Case No. 09-52477). Old Station emerged from Chapter 11 on June 17, 2011 as Station Casinos LLC (“New Station,” and collectively with Old Station, “Station”).

 

On May 20, 2011, Aliante Gaming, along with Aliante Holding, Aliante Station and certain other affiliates of Old Station, filed with the Bankruptcy Court an amended joint plan of reorganization (the “Plan”) resulting from negotiations with its lenders (the “Lenders”) under the Previous Facility and its International Swaps and Derivatives Association master agreement (the “Swap Agreement”). Under the Plan, Aliante Gaming and the Lenders agreed to enter into a series of restructuring transactions pursuant to which the Lenders received new equity of, and issued new debt to, Aliante Gaming, as reorganized, as of the Effective Date.

 

On the Effective Date, (i) 100% of the equity interests in Aliante Gaming previously held by Aliante Holding was canceled and ceased to be outstanding, (ii) each Lender received, on account, and in full satisfaction, of its claims against Aliante Gaming arising under the Previous Facility and the Swap Agreement, its pro rata share of (a) 100% of the equity interests in Aliante Gaming (the “New Aliante Equity”), which was contributed to the Company in exchange for 432,003 units of our issued and outstanding membership interests (“Common Units”) and (b) 100% of $45.0 million in aggregate principal amount of senior secured term loans of Aliante Gaming (the “Senior Secured Loans”) under a new senior secured credit facility (the “Senior Secured Credit Facility”), (iii) the Previous Facility and the Swap Agreement were canceled (clauses (i), (ii) and (iii) referred to herein as the “Restructuring Transactions”) and (iv) each creditor holding an unsecured claim was paid in full.

 

5



Table of Contents

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading.  In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results of the Company’s and Aliante Gaming’s financial position, results of operations and cash flows for the interim periods have been made.  The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year.  The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the Company and its wholly owned subsidiary, Aliante Gaming.  All material intercompany transactions are eliminated in consolidation.

 

Fair Value of Financial Instruments

 

The estimated fair value of the Company’s financial instruments has been determined by the Company using available market information and valuation methodologies. However, considerable judgment is required to develop the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

 

The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments.

 

Note 3. Receivables

 

Receivables, net consist of the following (in thousands):

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(unaudited)

 

 

 

Casino

 

$

116

 

$

58

 

Hotel

 

129

 

196

 

Other

 

1,021

 

847

 

 

 

1,266

 

1,101

 

Allowance for doubtful accounts

 

(49

)

(63

)

Receivables, net

 

$

1,217

 

$

1,038

 

 

6



Table of Contents

 

Note 4. Long-term Debt

 

Long-term debt consists of the following (in thousands):

 

 

 

June 30,
2014

 

December 31,
2013

 

 

 

(unaudited)

 

 

 

Senior Secured Credit Facility, interest payable quarterly (paid in kind at 10%), principal due November 1, 2018, net of unamortized discount at June 30, 2014 and December 31, 2013 of $8.8 million and $8.3 million, respectively

 

$

49,712

 

$

47,420

 

Equipment financing, payable in 72 monthly installments including interest at a fixed rate of 2.5%

 

1,514

 

1,972

 

Special Improvement District assessment, payable in 32 semi-annual installments including interest at a fixed rate of 5.8%

 

788

 

824

 

 

 

 

 

 

 

Long-term debt

 

52,014

 

50,216

 

Less current portion of long-term debt

 

(1,588

)

(2,044

)

 

 

 

 

 

 

Long-term debt, net

 

$

50,426

 

$

48,172

 

 

Senior Secured Credit Facility

 

On November 1, 2011, the Company and Aliante Gaming entered into the Senior Secured Credit Facility, which provided for $45.0 million in principal amount of Senior Secured Loans, which were deemed made on the same date without any funding being provided. The Senior Secured Credit Facility represented an already outstanding obligation of Aliante Gaming as of November 1, 2011. Through November 1, 2014, the Senior Secured Loans bear interest at a rate to be elected by Aliante Gaming, such rate being either (i) 10% per annum, payable in kind, which interest will be added to the principal amount of the Senior Secured Loans quarterly in arrears and subsequently treated as principal of the Senior Secured Loans, or (ii) 6% per annum, which interest will be payable in cash quarterly in arrears. Following November 1, 2014, the Senior Secured Loans will bear interest at a rate of 6% per annum, which interest will be payable in cash quarterly in arrears. The outstanding principal amount of the Senior Secured Loans and all accrued and unpaid interest thereon will be payable on the maturity date, which shall be the earlier of November 1, 2018 or the acceleration of the Senior Secured Loans in accordance with the terms of the Senior Secured Credit Facility. The Senior Secured Loans may be prepaid in certain minimum amounts without the payment of any prepayment premium or fee. Effective June 30, 2014 Aliante Gaming elected the cash interest payment option with accrued interest being payable in kind through June 30, 2014, resulting in $58.5 million and $55.7 million in principal outstanding under the Senior Secured Credit Facility as of June 30, 2014 and December 31, 2013, respectively. There is currently no availability for borrowings under the Senior Secured Credit Facility.

 

The Senior Secured Credit Facility is guaranteed by the Company and by each domestic wholly owned subsidiary of Aliante Gaming and is secured by a first-priority (a) pledge of 100% of the Company’s equity interest in Aliante Gaming, (b) pledge of 100% of the equity interests in Aliante Gaming’s domestic subsidiaries (if any) and 65% of the equity interests of Aliante Gaming’s “first-tier” foreign subsidiaries (if any) and (c) security interest in substantially all of Aliante Gaming’s tangible and intangible assets, as well as those of each subsidiary guarantor (if any), in each case, other than any assets that may not be pledged pursuant to applicable gaming laws and subject to customary exceptions. The Senior Secured Credit Facility includes various covenants and mandatory prepayments which are customary for similar types of financings and does not contain any financial maintenance covenants.

 

In establishing the amortization of the debt discount on its Senior Secured Loans in November 2011, the Company expected that it would elect the cash interest payment option beginning in the first quarter of 2013. During the first quarter of 2013, this was subsequently revised to assume cash interest payments would begin during the second quarter of 2013. During the second quarter of 2013, the Company further evaluated the date it would commence the cash interest payment option, determining the Company would instead elect to defer the cash interest option until contractually required to do so beginning in November 2014. During the second quarter of 2014, this was subsequently revised to assume cash interest payments would begin with the interest period commencing on June 30, 2014. As a result of this change in the expected method of payment, the Company recorded an adjustment to its accrual during the second quarter of 2013 to increase interest expense by $518,326.  And, during the second quarter of 2014, using the retrospective approach the Company decreased by $179,273 the amount of interest expense that it would have otherwise recorded. Under the retrospective approach, a new effective interest rate is computed to reflect the modified estimated cash flows as if such modified cash flows were known at inception. The carrying amount is adjusted to reflect the amount that would have been presented had the adjusted effective rate have been applied since inception.

 

7



Table of Contents

 

Fair Value of Debt

 

It was not practicable to determine the fair market value of our senior secured 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 our equipment financing and spread assessment debt approximates to fair value.

 

Equipment Financing

 

During 2008, Aliante Gaming entered into an equipment financing arrangement which terminates in November 2014 and is accounted for as a capital lease. The agreement calls for monthly payments of approximately $80,000 with a residual payment of $1.1 million to be paid in November 2014.

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Background

 

The following discussion and analysis of our results of operations and financial condition for the three and six months ending June 30, 2014 and June 30, 2013 should be read in conjunction with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.

 

ALST Casino Holdco, LLC (the “Company,” “we,” “us” or “our”), a Delaware limited liability company, was formed on May 11, 2011. We were formed to acquire substantially all of the equity interests of Aliante Gaming, LLC (“Aliante Gaming”) pursuant to its joint plan of reorganization under Chapter 11 of the United States Bankruptcy Code. The reorganization was completed on November 1, 2011 (the “Effective Date”), resulting in Aliante Gaming, the owner and operator of Aliante Casino + Hotel, previously known as Aliante Station Casino + Hotel located in North Las Vegas, Nevada (the “Casino”), becoming our wholly owned subsidiary. The Casino is a full-service casino and hotel offering high quality accommodations, gaming, dining, entertainment, retail and other resort amenities. Prior to November 1, 2011, we conducted no operations and had no material assets or liabilities.

 

On November 1, 2011, the Company and Aliante Gaming entered into a senior secured credit facility (the “Senior Secured Credit Facility”) with the holders (the “Lenders”) of our membership interests (the “Common Units”), also referred to as “Members”. The Lenders own 100% of our Common Units. The Senior Secured Credit Facility is further described under “- Liquidity and Capital Resources”.

 

Overview

 

Our operating results are greatly dependent on the level of gaming revenue generated at the Casino. Gaming revenue is generally defined as gaming wins less gaming losses. A substantial portion of our operating income is generated from our gaming operations, primarily from slot play. We use our non-gaming revenue departments to drive customer traffic to the Casino. The majority of our revenue is cash-based, and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Additionally, our business is capital intensive, and we rely heavily on the ability of the Casino to generate operating cash flow to repay debt financing and fund maintenance capital expenditures.

 

8



Table of Contents

 

Promotional allowances consist primarily of free slot play and complimentary food and beverages furnished to customers. Upon redemption, the retail value of such services is included in the respective revenue classifications and is then deducted as promotional allowances. We calculate income from operations as net revenues less total operating costs and expenses. Income from operations represents only those amounts that relate to operations and excludes interest income, interest expense and other non-operating income and expenses.

 

We consider various performance measures in assessing financial condition and results of operations including fluctuations in revenues, expenses and margins as compared to prior periods and internal plans. Additionally, we measure changes in selling, general and administrative expenses as a percent of net revenues, which indicate management’s ability to control costs. We also evaluate our profitability based upon Adjusted EBITDA (see “Results of Operations” for additional information), which represents earnings before interest, taxes, depreciation and amortization, management fees, restructuring and other charges and other non-recurring items, as applicable. The measures listed above are not a comprehensive list of all factors considered by us in assessing our financial condition and operating performance, and we may consider other individual measures as required by trends and discrete events arising in a specific period, but these are the key indicators.

 

We are organized as a limited liability company and are not subject to federal income taxes. Accordingly, a provision for income taxes is not included in our condensed financial statements.

 

Results of Operations

 

The following table highlights the results of operations and reconciles Adjusted EBITDA to net income (loss) for the three and six months ended June 30, 2014 as compared to the prior year period (in thousands, except percentages):

 

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

 

 

June 30,
2014

 

June 30,
2013

 

Percent
Change

 

June 30,
2014

 

June 30,
2013

 

Percent
Change

 

Net revenues

 

$

18,074

 

$

15,795

 

14.4

%

$

36,228

 

$

31,989

 

13.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(a)

 

$

2,665

 

$

1,067

 

149.8

%

$

5,658

 

$

2,572

 

120.0

%

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

1,267

 

1,082

 

17.1

%

2,408

 

2,164

 

11.3

%

(Gain) Loss on disposal of assets, net

 

(136

)

 

n/m

 

(136

)

 

n/m

 

Operating income (loss)

 

1,534

 

(15

)

 

 

3,386

 

408

 

 

 

Interest expense, net

 

(1,096

)

(1,698

)

(35.5

)%

(2,375

)

(2,763

)

(14.0

)%

Net income (loss)

 

$

438

 

$

(1,713

)

 

 

$

1,011

 

$

(2,355

)

 

 

 


n/m = not meaningful

(a)                  EBITDA, earnings before interest, taxes, depreciation and amortization, is a widely used measure of operating performance in the gaming industry. We have traditionally adjusted EBITDA when evaluating the Casino’s operating performance because we believe that the inclusion or exclusion of certain non-cash recurring, non-recurring items is necessary to present the most accurate measure of the Casino’s operating results and as a means to assess results period over period. We refer to the financial measure that adjusts for these items as Adjusted EBITDA. We believe, when considered with measures calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), Adjusted EBITDA is a useful financial performance measurement for assessing the Casino’s operating performance and is used by management in making financial and operational decisions. In this regard, Adjusted EBITDA is a key metric used by us in our budgeting process, when calculating returns on investment of existing and proposed projects and in the evaluation of incentive compensation related to property management. Adjusted EBITDA consists of net income (loss) plus interest, taxes, depreciation and amortization and other non-recurring items, as applicable. We believe that while items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluation of the Casino’s operating performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions, the ability of management to control such items or events and may not be comparable between the periods being presented. Also, we believe excluded items may not relate specifically to the Casino’s operating trends or be indicative of future results. For example, lease terminations will be significantly different in periods when we terminate a lease agreement and it is not expected to be comparable period over period, nor is the amount expected to follow any particular trend from period-to-period. Therefore, we use Adjusted EBITDA as the primary measure of the Casino’s operating performance. We believe that our Members use Adjusted EBITDA as an appropriate financial measure in determining the value of their investment. To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. The impact of interest, taxes, depreciation and amortization, and other non-recurring items, as applicable, each of which can significantly affect our results of operations and liquidity, should be considered in evaluating our operating performance, and cannot be determined from Adjusted EBITDA. Adjusted EBITDA is used in addition to, and in conjunction with, GAAP measures and should not be considered as an alternative to net income (loss), or any other GAAP operating performance measure. To compensate for the inherent limitations of the disclosure of Adjusted EBITDA, we provide relevant disclosure of our depreciation and amortization, interest and other items in our reconciliations to GAAP financial measures and condensed financial statements, all of which should be considered when evaluating our performance. In addition, it should be noted that not all gaming companies that report Adjusted EBITDA or adjustments to such measures, may calculate Adjusted EBITDA, or such adjustments, in the same manner as us, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.

 

9



Table of Contents

 

The following table highlights the various sources of revenues and expenses for the three and six months ended June 30, 2014 as compared to the prior year period (in thousands, except percentages):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2014

 

June 30,
2013

 

Percent
Change

 

June 30,
2014

 

June 30,
2013

 

Percent
Change

 

Casino revenues

 

$

13,526

 

$

11,526

 

17.4

%

$

27,293

 

$

23,613

 

15.6

%

Casino expenses

 

5,978

 

5,750

 

4.0

%

12,350

 

11,554

 

6.9

%

Margin

 

55.8

%

50.1

%

 

 

54.8

%

51.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Food and beverage revenue

 

3,675

 

3,349

 

9.7

%

7,236

 

6,480

 

11.7

%

Food and beverage expenses

 

2,970

 

2,829

 

5.0

%

5,792

 

5,560

 

4.2

%

Margin

 

19.2

%

15.5

%

 

 

20.0

%

14.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Room revenue

 

1,594

 

1,349

 

18.2

%

3,169

 

2,770

 

14.4

%

Room expenses

 

716

 

621

 

15.3

%

1,410

 

1,195

 

18.0

%

Margin

 

55.1

%

54.0

%

 

 

55.5

%

56.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other revenue

 

895

 

789

 

13.4

%

1,715

 

1,544

 

11.1

%

Other expenses

 

364

 

436

 

(16.5

)%

713

 

714

 

(0.1

)%

Margin

 

59.3

%

44.7

%

 

 

58.4

%

53.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

5,381

 

5,092

 

5.7

%

10,305

 

10,394

 

(0.9

)%

Percent of net revenues

 

29.8

%

32.2

%

 

 

28.4

%

32.5

%

 

 

 

Casino. Casino revenues increased 17.4% to $13.5 million for the three months ended June 30, 2014 as compared to $11.5 million for the three months ended June 30, 2013. The $2.0 million increase in casino revenues is due primarily to an increase in slot revenue. Casino expenses increased 4.0% to $6.0 million for the three months ended June 30, 2014 as compared to $5.8 million for the three months ended June 30, 2013, primarily due to the increase in casino promotional spending that drove the increase in slot revenue. The net impact of these factors resulted in a 5.7 percentage point improvement in the casino operating margin for the three months ended June 30, 2014 as compared to the three months ended June 30, 2013.

 

Casino revenues increased to $27.3 million for the six months ended June 30, 2014 as compared to $23.6 million for the six months ended June 30, 2013 primarily due to a 12.3% increase in table games drop and an 18.0% increase in slot handle. Both increases are primarily a result of an increase in gaming patron visitation. Casino expenses increased 6.9% to $12.4 million for the six months ended June 30, 2014 as compared to $11.6 million for the six months ended June 30, 2013, primarily due to an increase in casino promotional spending. The casino operating margin increased to 54.8% for the six months ended June 30, 2014 as compared to 51.1% for the six months ended June 30, 2013 primarily due to the increase in casino revenues.

 

Food and Beverage. Food and beverage revenues increased 9.7% to $3.7 million for the three months ended June 30, 2014 as compared to $3.3 million for the same period in the prior year and revenues increased 11.7% to $7.2 million for the six months ended June 30, 2014 as compared to $6.5 million for the prior year period, primarily as a result of the addition of the Farm 24/7 restaurant. Food and beverage expenses increased 5.0% to $3.0 million for the three months ended June 30, 2014 as compared to the same period in the prior year, and expenses increased $0.2 million or 4.2% for the six months ended June 30, 2014 as compared to the same period prior year, primarily as a result of increased food costs. The food and beverage operating margin increased to 20.0% for the six months ended June 30, 2014 as compared to 14.2% for the six months ended June 30, 2013 as a result of an increase in the number of patrons served, which was offset in part by an increase in food costs as a percentage of food revenue.

 

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Table of Contents

 

Room. The following table shows key information for hotel operations:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,
2014

 

June 30,
2013

 

Percent
Change

 

June 30,
2014

 

June 30,
2013

 

Percent
Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Occupancy

 

89

%

86

%

 

 

89

%

86

%

 

 

Average daily rate

 

$

91

 

$

85

 

7.4

%

$

91

 

$

88

 

3.8

%

Revenue per available room

 

$

81

 

$

73

 

6.6

%

$

81

 

$

76

 

6.6

%

 

Room revenue includes income from hotel room sales, convention bookings and the spa. Room revenues increased by 18.2% to $1.6 million for the three months ended June 30, 2014 as compared to $1.3 million for the prior year period. The increase in room revenues is attributable to more room nights sold and an increase in average daily rate.  Room revenues increased by 14.4% to $3.2 million for the six month ended June 30, 2014 as compared to the prior year period. The increase is primarily due to higher occupancy during non-peak periods and an increase in average daily rate. Room expenses increased by 15.3% and 18.0%, respectively, for the three and six months ended June 30, 2014 as compared to the prior year periods mainly due to increased laundry costs.

 

Other Revenues and Expenses. Other revenues primarily include income from leased outlets, the gift shop, the call center and entertainment. Other revenues increased by $0.1 million, or 13.4%, during the three months ended June 30, 2014 as compared to the same period in the prior year and increased by 11.1% during the six month ended June 30, 2014 as compared to the same period in the prior year, primarily due to increased sales in the gift shop resulting from an increase in patron visits. Other expenses decreased by 16.5% during the three months ended June 30, 2014 as compared to the same period in the prior year due to a decrease in fees paid to entertainment artists, but were relatively flat for the six months ended June 30, 2014 as compared to the prior year period.

 

Selling, General and Administrative (“SG&A”). SG&A expenses increased 5.7% to $5.4 million for the three months ended June 30, 2014, compared to $5.1 million for the three months ended June 30, 2013.  The increase in SG&A expenses is primarily due the result of a onetime reversal of a sales tax accrual on complimentary meals to patrons and employees during the second quarter of 2013.  SG&A expenses decreased by 1% to $10.3 million for the six months ended June 30, 2014, compared to $10.4 million for the six months ended June 30, 2013.

 

Depreciation and Amortization. Depreciation and amortization increased by $0.2 million for the three months ending June 30, 2014 and by $0.2 million for the six months ended June 30, 2014, as compared to the prior year period, primarily due to incremental depreciation associated with 2014 and 2013 fixed asset additions.

 

Operating Income (Loss). As a result of the factors discussed above, operating income was $1.5 million for the three months ended June 30, 2014, compared to a loss of $.02 million for the three months ended June 30, 2013 and operating income of $3.4 million for the six months ended June 30, 2014 as compared to the $0.4 million for the six months ended June 30, 2013.

 

Interest Expense. Interest expense, net for the three and six months ended June 30, 2014 was $1.1 million and $2.4 million, respectively. Interest expense is primarily related to our Senior Secured Credit Facility which had $58.5 million in Senior Secured Loans outstanding as of June 30, 2014. The Senior Secured Loans bear interest at a rate to be elected by Aliante Gaming, such rate being either (i) 10% per annum, which interest will be added to the principal amount of the Senior Secured Loans quarterly in arrears and subsequently treated as principal of the Senior Secured Loans, or (ii) 6% per annum, which interest will be payable in cash quarterly in arrears. As of June 30, 2014, Aliante Gaming has elected the cash interest payment option.

 

11



Table of Contents

 

Net Income (Loss). As a result of the factors discussed above, net income for the three and six months ended June 30, 2014 was $0.4 million and $1.0 million and a net loss of $1.7 million and $2.4 million for the three and six months ended June 30, 2013, respectfully.

 

Liquidity and Capital Resources

 

Our cash flows will be affected by a variety of factors, many of which are outside of our control, including recovery of the local gaming market, recovery of the housing market and community surrounding the Casino, competition and other general business conditions. We believe that our available cash and cash flows from our operations will provide sufficient liquidity to fund our cash requirements and capital expenditures for 2014. We will endeavor to fund capital expenditures for maintenance of the Casino through future improvements in operating results. However, we cannot assure that we will generate sufficient income and liquidity to meet all of our liquidity requirements and other obligations. Our results for future periods are subject to numerous uncertainties which may result in liquidity problems, and in turn affect our ability to meet our obligations while attempting to meet competitive pressures or adverse economic conditions.

 

Senior Secured Credit Facility

 

On November 1, 2011, the Company and Aliante Gaming entered into the Senior Secured Credit Facility, which provided for $45.0 million in principal amount of Senior Secured Loans, which were deemed made on the same date without any funding being provided. The Senior Secured Credit Facility represented an already outstanding obligation of Aliante Gaming as of November 1, 2011. Through November 1, 2014, the Senior Secured Loans bear interest at a rate to be elected by Aliante Gaming, such rate being either (i) 10% per annum, which interest will be added to the principal amount of the Senior Secured Loans quarterly in arrears and subsequently treated as principal of the Senior Secured Loans, or (ii) 6% per annum, which interest will be payable in cash quarterly in arrears. Following November 1, 2014, the Senior Secured Loans will bear interest at the rate of 6% per annum, which interest will be payable in cash quarterly in arrears. The outstanding principal amount of the Senior Secured Loans and all accrued and unpaid interest thereon will be payable on the maturity date, which shall be the earlier of November 1, 2018 or the acceleration of the Senior Secured Loans in accordance with the terms of the Senior Secured Credit Facility. The Senior Secured Loans may be prepaid in certain minimum amounts without the payment of any prepayment premium or fee. For all interest periods prior to June 30, 2014, Aliante Gaming has paid interest in kind at 10% per annum, resulting in $58.5 million in principal outstanding under the Senior Secured Credit Facility as of June 30, 2014.  For the interest period commencing June 30, 2014, Aliante Gaming elected the cash interest option. There is currently no availability for borrowings under the Senior Secured Credit Facility.

 

The Senior Secured Credit Facility is guaranteed by the Company and by each domestic wholly owned subsidiary of Aliante Gaming and is secured by a first-priority (a) pledge of 100% of the Company’s equity interest in Aliante Gaming, (b) pledge of 100% of the equity interests in Aliante Gaming’s domestic subsidiaries (if any) and 65% of the equity interests of Aliante Gaming’s “first-tier” foreign subsidiaries (if any) and (c) security interest in substantially all of Aliante Gaming’s tangible and intangible assets, as well as those of each subsidiary guarantor (if any), in each case, other than any assets that may not be pledged pursuant to applicable gaming laws and subject to customary exceptions. The Senior Secured Credit Facility includes various covenants and mandatory prepayments which are customary for similar types of financings and does not contain any financial maintenance covenants.

 

Six Months Ended June 30, 2014

 

Our primary cash requirements for the remainder of 2014 are expected to include approximately $1.5 million for capital expenditures and $3.4 million for principal and interest payments on indebtedness. We do not expect to make distributions to the Members in 2014. At June 30, 2014, we have no availability for borrowings under the Senior Secured Credit Facility and we had $12.7 million in cash and cash equivalents, approximately one third of which is used on the casino floor with the other two thirds are reserved for other general purposes.

 

12



Table of Contents

 

Six months ended June 30, 2014 and 2013

 

The following table summarizes our historical cash flows (in thousands):

 

 

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2014

 

2013

 

Net cash provided by operating activities

 

$

3,993

 

$

103

 

Net cash used in investing activities

 

(685

)

(1,181

)

Net cash used in financing activities

 

(493

)

(480

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

$

2,815

 

$

(1,558

)

 

For the six months ended June 30, 2014, net cash provided by operating activities was $4.0 million as compared to $0.1 million of cash provided by operating activities for the six months ended June 30, 2013. The increase in cash flows from operating activities is primarily the result of changes in net working capital and net income. For the six months ended June 30, 2014 and June 30, 2013, cash used in investing activities consisted of capital expenditures. Cash used in financing activities represents principal payments on debt for the six months ended June 30, 2014 and June 30, 2013. There were no distributions to the Members during the three months ended June 30, 2014 and June 30, 2013.

 

Off Balance Sheet Arrangements

 

As of June 30, 2014, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Contractual Obligations

 

As of June 30, 2014, there were no material changes to the contractual obligations previously reported under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2014.

 

Critical Accounting Policies

 

A description of our critical accounting policies can be found 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, filed with the SEC on March 27, 2014.

 

13



Table of Contents

 

Cautionary Statement Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements. Such statements contain words such as “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “may,” “will,” “might,” “should,” “could,” “would,” “seek,” “pursue,” and “anticipate” or the negative or other variation of these or similar words, or may include discussions of strategy or risks and uncertainties. Forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements concerning:

 

·                  projections of future results of operations or financial condition;

·                  expectations regarding our business and results of operations;

·                  expenses and our ability to operate efficiently;

·                  expectations regarding trends that will affect our market and the gaming industry generally and the impact of those trends on our business and results of operations;

·                  our ability to comply with the covenants in the agreements governing our outstanding indebtedness;

·                  our ability to meet our projected debt service obligations, operating expenses and maintenance capital expenditures;

·                  expectations regarding the availability of capital resources; and

·                  the impact of regulation on our business and our ability to maintain necessary approvals for our property.

 

Any forward-looking statement is based upon a number of estimates and assumptions that, while considered reasonable by us, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, and are subject to change. Actual results of operations may vary materially from any forward-looking statement made herein. Forward-looking statements should not be regarded as a representation by us or any other person that the forward-looking statements will be achieved. Undue reliance should not be placed on any forward-looking statements. Some of the contingencies and uncertainties to which any forward-looking statement contained herein is subject include, but are not limited to, the following:

 

·                  the economic downturn, and in particular the economic downturn in Las Vegas, Nevada, and its effect on consumer spending and our business;

·                  the effects of intense competition that exists in the gaming industry;

·                  the risk that new gaming licenses or gaming activities, such as internet gaming, are approved and result in additional competition;

·                  the risk that we are dependent on one property for all of our cash flow;

·                  the impact of extensive regulation from gaming and other government authorities on our ability to operate our business and the risk that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines or take other actions that adversely affect us;

·                  risks associated with changes to applicable gaming and tax laws could have a material adverse effect on our financial condition; and

·                  the impact of general business conditions, including competitive practices, changes in customer demand and the cyclical nature of the gaming and hospitality business generally, and general economic conditions on our business and results of operations.

 

You should consider the areas of risk and uncertainty described elsewhere in this Quarterly Report on Form 10-Q, as well as those discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014. 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.

 

14



Table of Contents

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As of June 30, 2014, there were no material changes to the information previously reported under “Item 7A. Quantitative and Qualitative Disclosures About market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of its Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). The design of any system of control is based in part upon certain assumptions about the likelihood of future events, and we cannot assure that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Internal Control Over Financial Reporting

 

During the quarter ended June 30, 2014, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The Company is currently a party to litigation arising in the ordinary course of business. As with all litigation, no assurance can be provided as to the outcome, and litigation inherently involves significant costs.

 

ITEM 1A. RISK FACTORS.

 

A description of our risk factors can be found in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014. There have been no material changes in the risk factors described in such Annual Report on Form 10-K.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

15



Table of Contents

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

Exhibit
Number

 

Description

 

 

 

 

  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.

 

 

 

 

 

101.CAL*

 

XBRL Taxonomy Extension Calculation Linkbase.

 

 

 

 

 

101.DEF*

 

XBRL Taxonomy Extension Definition Linkbase.

 

 

 

 

 

101.LAB*

 

XBRL Taxonomy Extension Label Linkbase.

 

 

 

 

 

101.PRE*

 

XBRL Taxonomy Extension Presentation Linkbase.

 


*         Pursuant to Rule 406T of Regulation S-T, these interactive data files 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 the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

16



Table of Contents

 

SIGNATURE

 

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.

 

 

 

 

ALST CASINO HOLDCO, LLC, Registrant

 

 

Dated: August 14, 2014

By:

/s/ SOOHYUNG KIM

 

 

Name:

Soohyung Kim

 

 

Title:

Manager, Chief Executive Officer and Secretary

 

17