Table Of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

 

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 FORM 10-K 

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(Mark One)

 

☒

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

 

for the fiscal year ended December 31, 2015

 

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 000-54480

 

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ALST CASINO HOLDCO, LLC

(Exact name of registrant as specified in its charter) 

 

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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)

 

Registrant’s telephone number, including area code: (702) 692-7777

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: Common Units

 

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☐  No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ☐  No ☒

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K.  ☒

 

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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 Act).  Yes ☐  No ☒

 

The aggregate market value of the voting common stock held by non-affiliates (all other persons other than executive officers or directors) of the registrant as of December 31, 2015 was $0.

 

As of March 28, 2016, there were 432,213 units outstanding of the registrant’s common units.

 

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Documents Incorporated by Reference

None.

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TABLE OF CONTENTS

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		1
	PART I
Item 1.	BUSINESS	2
Item 1A.	RISK FACTORS	8
Item 1B.	UNRESOLVED STAFF COMMENTS	15
Item 2.	PROPERTIES	15
Item 3.	LEGAL PROCEEDINGS	15
Item 4.	MINE SAFETY DISCLOSURES	15
	PART II
Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	16
Item 6.	SELECTED FINANCIAL DATA	17
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
Item 7A.	QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	27
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	27
Item 9A.	CONTROLS AND PROCEDURES	27
Item 9B.	OTHER INFORMATION	28
	PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	29
Item 11.	EXECUTIVE COMPENSATION	31
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	36
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	37
Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	37
	PART IV
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	38
	SIGNATURES

  

  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains forward-looking statements. Such statements contain words such as “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “may,” “will,” “might,” “should,” “could,” “would,” “seeks,” “pursues,” and “anticipates” 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 Annual Report on Form 10-K include, among other things, statements concerning:

 

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projections of future results of operations or financial condition;

 

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expectations regarding our business and results of operations;

 

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expenses and our ability to operate efficiently;

 

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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;

 

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

 

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our ability to refinance our outstanding indebtedness;

 

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

 

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expectations regarding the availability of capital resources; and

 

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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:

 

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

 

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

 

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

 

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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;

 

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

 

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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.

 

For additional contingencies and uncertainties, see “Item 1A. Risk Factors.”

 

  

PART I

 

ITEM  1.

BUSINESS

 

General

 

ALST Casino Holdco, LLC (the “Company,” “Successor,” “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” or “Predecessor”) pursuant to a 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.

 

Our principal executive offices are located at 7300 Aliante Parkway, North Las Vegas, NV 89084. The telephone number for our executive offices is (702) 692-7777. Our internet address is www.aliantegaming.com.

 

Background

 

As a result of macroeconomic conditions, including the economic downturn in the Las Vegas area and low consumer confidence levels generally commencing in 2007, Aliante Gaming’s results of operations were adversely affected causing Aliante Gaming to default under its $430.0 million credit facility (“Previous Facility”) and its International Swaps and Derivatives Association Master Agreement (the “Swap Agreement” and with the Previous Facility the “Previous Debt Instruments”). On April 12, 2011, Aliante Gaming, together with other affiliates filed voluntary petitions for relief under Chapter 11 of the Code, in the United States Bankruptcy Court for the District of Nevada, Northern Division (the “Bankruptcy Court”). On May 20, 2011, Aliante Gaming and certain affiliates filed with the Bankruptcy Court a plan of reorganization (the “Plan”) to restructure the equity and debt of Aliante Gaming. Pursuant to the Plan, on the Effective Date, (i) 100% of the equity interests in Aliante Gaming previously held by its parent corporation were cancelled and ceased to be outstanding, (ii) each lender (the “Lenders”) under the Previous Debt Instruments received, in full satisfaction of its claims against Aliante Gaming arising under the Previous Debt Instruments, its pro rata share of (a) 100% of the equity interests in Aliante Gaming (the “New Aliante Equity”)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 Debt Instruments 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. The Lenders contributed their pro rata share of the New Aliante Equity to us in connection with our formation on May 11, 2011.

 

Narrative Description of Business

 

Our business focuses on attracting and fostering repeat business from local gaming patrons at our Casino. Local patrons are typically sophisticated gaming customers who seek a convenient location, the latest gaming products and a pleasant atmosphere.

 

The Casino is located in the Aliante master-planned community (the “Aliante Community”) and is situated on approximately 40 acres within the 1,905-acre Aliante Community. The Casino is located adjacent to an 18-hole championship course (not owned by us) and has convenient access to major freeways connecting it to points throughout Las Vegas. The Casino opened in November 2008 and is a full-service casino and hotel offering high quality accommodations, gaming, dining, entertainment, attractive promotions, retail and other resort amenities. The Casino is considered to be one of the premier locals-oriented casinos in the North Las Vegas, Nevada market today.

 

The Casino features a full-service Scottsdale-modern, desert-inspired casino and resort with approximately 82,000 square feet of gaming space, 202 hotel rooms including suites, 1,838 slot machines, 38 gaming tables, and a 200-seat bingo room. The ultra-modern 170-seat race and sports book rivals any in Las Vegas and also includes a sports bar and viewing patio. Non-gaming amenities include a 16-screen movie theater complex, a 650-seat showroom, an entertainment lounge, a spa and a resort style pool with cabanas.

 

The Casino can accommodate both large groups and intimate gatherings in its 14,000-square feet of event and banquet space divided among four ballrooms and six meeting and conference rooms. The Casino’s six full-service restaurants include MRKT Sea & Land, Bistro 57, The Salted Lime, TGI Friday’s, Medley Buffet and the Farm, a 24 hour cafe. The Casino also offers a Starbucks coffee outlet and a variety of fast-food outlets to enhance the dining selection of our customers.

 

 

Operating Strategy

 

The Casino caters primarily to North Las Vegas residents. Our operating strategy emphasizes attracting and retaining customers from the local and repeat visitor markets. We attract customers through:

 

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innovative, frequent and high-profile promotional programs directed towards the local market;

 

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focused marketing efforts and a convenient location;

 

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aggressive marketing to the repeat visitor market; and

 

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the development of strong relationships with specifically targeted travel wholesalers in addition to convention business.

 

Although perceived value will initially attract a customer to the Casino, actual value generates customer satisfaction and loyalty. We believe that actual value becomes apparent during the customer’s visit through an enjoyable, affordable and high-quality entertainment experience.

 

Provide a High-Value Experience

 

Because we target the repeat customer, we are committed to providing a high-value entertainment experience for our customers in the restaurants, hotel, casino and other entertainment amenities, which include movie theaters and a resort-like pool facility. In addition, we believe the value offered by our restaurants is a major factor in attracting local gaming customers, as dining is a primary motivation for casino visits by many locals. Through our restaurants, each of which has a distinct style of cuisine, the Casino offers generous portions of high-quality food at reasonable prices. In addition, our operating strategy focuses on slot and video poker machine play. Our target market consists of frequent gaming patrons who seek a friendly atmosphere and convenience. Because locals and repeat visitors demand variety and quality in their slot and video poker machine play, the Casino strives to offer the latest in slot and video poker technology.

 

As part of our commitment to providing a quality entertainment experience for our patrons, we are dedicated to ensuring a high level of customer satisfaction and loyalty by providing attentive customer service in a friendly, casual atmosphere. We recognize that consistent quality and a comfortable atmosphere stem from the collective care and friendliness of each of our employees. Toward this end, we take a hands-on approach through active and direct involvement with employees at all levels.

 

Marketing and Promotion

 

We employ an innovative marketing strategy that utilizes frequent high-profile promotional programs in order to attract customers and establish a high level of name recognition. In addition to aggressive marketing through radio and newspaper advertising, we consistently assess existing marketing promotions and create new promotions to attract customers.

 

Our player loyalty program, the Aliante Players Club, allows participants to redeem points earned from their gaming activity at the Casino for complimentary slot play, food, beverages, hotel rooms, spa treatments, movie passes, entertainment tickets or merchandise from the gift shop. Under the player loyalty program, participants may accumulate points over time that can be redeemed at their discretion under the terms of the Aliante Players Club.

 

Intellectual Property

 

We use a variety of trade names, service marks and trademarks (collectively, “Marks”) in our operations and believe that we have all licenses for the third-party Marks necessary to conduct our continuing operations. We have registered several composite Marks (as described in the following paragraph) with the United States Patent and Trademark Office or otherwise acquired the licenses to use those which are material to our business.

 

We use the “ALIANTE” mark pursuant to a license agreement, dated January 6, 2006, with North Valley Enterprises, LLC (“North Valley”) (an affiliate of GC Aliante). Under the agreement, North Valley grants us a non-exclusive, non-transferable, non-sublicensable, royalty-free license to use certain Marks owned by North Valley in connection with the Casino. The license agreement is perpetual, provided that North Valley may terminate the license if we fail to meet the quality standards applicable to the use of the Marks and fail to cure any such failure within thirty days. The license provides that North Valley will own all right, title and interest in any derivative Marks consisting of “ALIANTE” (or another Mark licensed by North Valley under the agreement). If we are required to cease and desist using the “ALIANTE” mark or any derivative Marks for any reason, we may be unable to obtain a license to use such Marks on favorable terms, or at all.

 

 

Seasonality

 

Our cash flows from operating activities are seasonal in nature. Our operating results are traditionally the strongest in the first quarter and the fourth quarter, and traditionally the weakest during the third quarter.

 

Competition

 

We face competition from all the 166 non-restricted gaming locations in Clark County, Nevada and more specifically from the 11 non-restricted gaming locations, as well as the restricted gaming locations (locations with 15 or fewer slot machines) in the North Las Vegas area. We compete with other gaming locations by focusing on repeat customers and attracting these customers through innovative marketing programs. Our value-oriented, high-quality approach is designed to generate repeat business. The Casino is strategically located and designed to permit convenient access and ample parking, which are critical factors in attracting local visitors and repeat patrons.

 

We also compete for local gaming customers with other locals-oriented casino-hotels in Las Vegas and Henderson, Nevada. We believe that these properties compete on the basis of the desirability of location and gaming product, personalized service, casino promotions, comfort and value of restaurants and hotel rooms and the variety and value of entertainment offerings. The construction of new casinos or the expansion of existing casinos near the Casino could have a negative impact on our casino operations.

 

To a lesser extent, we compete with gaming operations in other parts of the state of Nevada, such as Mesquite, Laughlin, Reno and Lake Tahoe, and other gaming markets throughout the United States and in other parts of the world; with state sponsored lotteries; on-and-off-track wagering on horse and other races; card rooms; online gaming and other forms of legalized gambling. The gaming industry also includes land-based casinos, dockside casinos, riverboat casinos, racetracks with slots and casinos located on Native American land. There is intense competition among companies in the gaming industry, some of which have significantly greater resources than we do. Several states are currently considering legalizing casino gaming in designated areas. Legalized casino gaming in such states and on Native American land could result in increased competition and could adversely affect our operations, particularly to the extent that such gaming is conducted in areas close to our operations.

 

Regulation and Licensing

 

The ownership and operation of casino gaming facilities in Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the “Nevada Act”), and various local regulations. We are subject to the licensing and regulatory control of the Nevada Gaming Commission (the “Gaming Commission”), the Nevada State Gaming Control Board (the “Gaming Board”), the Clark County Liquor and Gaming Licensing Board (the “Clark County Board”), the City of North Las Vegas and other local regulatory authorities (collectively, the “Gaming Authorities”). The laws, regulations and supervisory procedures of the Gaming Authorities are based upon declarations of public policy which are concerned with, among other things:

 

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the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity;

 

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the establishment and maintenance of responsible accounting practices and procedures;

 

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the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Gaming Authorities;

 

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the prevention of cheating and fraudulent practices; and

 

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providing a source of state and local revenues through taxation and licensing fees.

 

Changes in these laws, regulations and procedures could have an adverse effect on our gaming operations.

 

Entities, including our subsidiary Aliante Gaming, that own and operate casinos in Nevada are required to be licensed by the Gaming Authorities. A gaming license for such activities requires the periodic payment of fees and taxes and is not transferable. We have received all necessary licenses from the Gaming Authorities for Aliante Gaming to conduct non-restricted gaming operations at the Casino. No person may become a holder of more than a 5% interest in or receive any percentage of gaming revenue from Aliante Gaming, without first obtaining licenses and approvals from the Gaming Authorities. No person may become a holder of a 5% or less interest in Aliante Gaming without registering with the Gaming Authorities.

 

 

The Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, us in order to determine whether such individual is suitable or should be licensed as a business associate of an entity that has applied for a gaming license or for registration. Certain officers, managers and key employees of the Company must file applications with the Gaming Authorities and are required to be licensed or found suitable by the Gaming Authorities. The Gaming Authorities may deny, limit or condition a grant of any license, registration, finding of suitability or other approval for any cause that they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. Changes in licensed positions must be reported to the Gaming Authorities and, in addition to their authority to deny an application for a license or finding of suitability, the Gaming Authorities have jurisdiction to disapprove any change in corporate position.

 

If the Gaming Authorities were to find an officer, manager or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. In addition, the Gaming Commission may require us to terminate the employment of any person who refuses to file the appropriate applications. Determinations of suitability or decisions pertaining to licensing are not subject to judicial review in Nevada.

 

The Company is required to submit detailed financial and operating reports to the Gaming Authorities. Substantially all material loans, leases, sales of securities and similar financing transactions by the Company must be reported to the Gaming Authorities and may require their approval.

 

In the event the Company was determined to have violated the Nevada Act, the Gaming Commission could limit, condition, suspend or revoke any license, registration, finding of suitability or other approval subject to compliance with certain statutory and regulatory procedures. In addition, the Company and the individuals involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Gaming Commission. Further, the Gaming Commission could seek court appointment of a supervisor to operate the Casino and, under certain circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the Casino) could be forfeited to the State of Nevada. The limitation or suspension of any gaming license or registration, or the appointment of a supervisor, would materially adversely affect our operations.

 

Any beneficial holder of the Company’s membership units, regardless of the number of units owned, may be required to file an application, be investigated and have his or her suitability as a beneficial holder of the Company’s equity securities determined if the Gaming Commission has reason to believe that such ownership would be inconsistent with the declared policies of the State of Nevada. If such beneficial holder, who must be found suitable, is a corporation, partnership, trust or other form of business organization, it must submit detailed business and financial information including a list of its beneficial owners. The applicant must pay all costs of the investigation incurred by the Gaming Authorities in connection with conducting such investigation.

 

Moreover, given that the Company is a registered public company under the Nevada Act any person who acquires more than 5% of the Company’s voting securities must be reported to the Gaming Commission. The Nevada Act requires beneficial owners of more than 10% of a registered public company’s voting securities apply to the Gaming Commission for a finding of suitability within 30 days after the Chairman of the Gaming Board mails the written notice requiring such filing. However, an “institutional investor,” as defined in the Nevada Act, that acquires more than 10%, but not more than 25%, of a registered public company’s voting securities (and if any such voting securities were acquired other than through a debt restructuring) may apply to the Gaming Commission for a waiver of a finding of suitability if that institutional investor holds the voting securities for investment purposes only. An institutional investor that has obtained a waiver may hold more than 25%, but not more than 29%, of a registered public company’s voting securities and maintain its waiver if the additional ownership results from equity repurchase by such registered company. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors or managers of the registered public company, any change in the corporate charter, bylaws, management, policies or operations of the registered public company, or any of its gaming affiliates or any other action which the Gaming Commission finds to be inconsistent with holding such registered company’s voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include:

 

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voting on all matters voted on by equity holders;

 

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making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and

 

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other activities as the Gaming Commission may determine to be consistent with such investment intent.

  

 

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Gaming Commission or by the Chairman of the Gaming Board may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any equity holder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the equity of a registered public company beyond the period of time as may be prescribed by the Gaming Commission may be guilty of a criminal offense. The Company may become subject to disciplinary action if, after receipt of notice that a person is unsuitable to be an equity holder or to have any other relationship with the Company or Aliante Gaming, the Company:

 

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pays that person any dividend or interest upon voting securities;

 

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allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person;

 

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pays remuneration in any form to that person for services rendered or otherwise; or

 

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fails to pursue all lawful efforts to require the unsuitable person to relinquish his voting securities for cash at fair market value.

 

We are required to disclose to the Gaming Board and the Gaming Commission the identities of all holders of our debt securities. The Gaming Commission may, in its discretion, require the holder of any debt or similar security of a registered public company to file applications, be investigated and be found suitable to own the debt or other security of such a registered company. If the Gaming Commission determines that a person is unsuitable to own the security, then pursuant to Nevada law, the registered public company can be sanctioned, including the loss of its approvals, if without the prior approval of the Gaming Commission, it:

 

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pays to the unsuitable person any dividend, interest, or any distribution whatsoever;

 

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recognizes any voting right by the unsuitable person in connection with debt securities;

 

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pays the unsuitable person remuneration in any form; or

 

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makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction.

 

We are required to maintain a current membership interest ledger in Nevada, which may be examined by the Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial holder to the Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We are also required to render maximum assistance in determining the identity of the beneficial owner. The Gaming Commission has the power to require our securities to bear a legend indicating that the securities are subject to the Nevada Act.

 

We also may not make a public offering of securities without the prior approval of the Gaming Commission if the proceeds from the offering are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for those purposes or similar transactions. Furthermore, any such approval, if granted, does not constitute a finding, recommendation or approval by the Gaming Commission or the Gaming Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful.

 

Changes in the control of the Company through merger, consolidation, equity or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby that person obtains control (including foreclosure on the pledged equity interests), may not occur without the prior approval of the Gaming Commission. Entities seeking to acquire control or ownership of a registered public company must satisfy the Gaming Board and Gaming Commission in a variety of stringent standards prior to assuming control of such registered company. The Gaming Commission may also require the equity holders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

 

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defensive tactics affecting Nevada corporate gaming licensees and registered public companies that are affiliated with those operations may be injurious to stable and productive corporate gaming. The Gaming Commission has established regulations to ameliorate the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to: (1) assure the financial stability of corporate gaming licensees and their affiliates; (2) preserve the beneficial aspects of conducting business in the corporate form; and (3) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Gaming Commission before the registered public company can make exceptional repurchases of voting securities above the current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the registered public company’s board of directors or managers in response to a tender offer made directly to such registered company’s equity holders for the purposes of acquiring control of the registered public company.

 

 

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada, Clark County and City of North Las Vegas. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either:

 

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a percentage of the gross revenues received;

 

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the number of gaming devices operated; or

 

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the number of table games operated.

 

In addition, the Company pays live entertainment tax on admission fees for live entertainment provided at the property.

 

Any person who is licensed, required to be licensed, registered, required to be registered or is under common control with such persons (collectively, “Licensees”), and who is, or who proposes to become, involved in a gaming venture outside of Nevada, is required to deposit with the Gaming Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Gaming Board of the Licensees’ participation in foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Gaming Commission. Thereafter, Licensees are also required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Gaming Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to a foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities, or enter into associations, that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ, contract with or associate with a person in the foreign operation who has been denied a license or a finding of suitability in Nevada on the grounds of personal unsuitability.

 

The sale of alcoholic beverages by the Company on the premises of the Casino is subject to licensing, control and regulation by the applicable local authorities. The Company has obtained gaming and liquor licenses from the City of North Las Vegas. All licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any such licenses, and any such disciplinary action could, and revocation of such licenses would, have a material adverse effect upon the results of operations of the Company.

 

Environmental Matters

 

Compliance with federal, state and local laws enacted for the protection of the environment to date had no material effect upon our capital expenditures, earnings or competitive position and we do not anticipate any material adverse effects in the future based on the nature of our operations.

 

Employees

 

As of February 12, 2016, the Company and its subsidiary, Aliante Gaming, had 782 full time equivalent employees. Aliante Gaming is not currently subject to any collective bargaining agreement or similar arrangement with any union. However, union activists have actively sought to organize employees at the Casino in the past, and we believe that such efforts are ongoing at this time.

 

Financial Information

 

The primary source of our revenue and income is from our casino operations, although we view the hotel rooms, restaurants, bars, entertainment and services on the premises to be important adjuncts to our casino operations. Please refer to “Item 6. Selected Financial Data” and “Item 7. Discussion and Analysis of Financial Condition and Results of Operations” for information about our revenues, operating results and total assets and liabilities and to “Item 8. Financial Statements and Supplementary Data” for our financial statements and accompanying footnotes.

 

Available Information

 

We are a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and file annual reports, quarterly reports and other documents with the Securities and Exchange Commission (the “SEC”). You may read and copy any materials filed by the Company with the SEC at its Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings will also be available to the public from commercial document retrieval services and at the world wide web site maintained by the SEC at http://www.sec.gov.

 

 

Our internet website address is www.aliantegaming.com.

 

ITEM  1A.

RISK FACTORS.

 

The following risk factors should be considered carefully in addition to the other information contained in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those contained in the forward-looking statements. Factors that may cause such differences include, but are not limited to, those discussed below as well as those discussed elsewhere in this Annual Report on Form 10-K. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected.

 

Risks Related to Our Business

 

Any economic downturn may be protracted in our key market and may continue to negatively impact our revenues and other operating results.

 

We draw a substantial number of customers from the Las Vegas valley, as well as certain geographic areas, including Southern California, Arizona and Utah. The economies of these areas have been and may continue to be, negatively impacted due to a number of factors, including the credit crisis and a decrease in consumer confidence levels. These areas, especially Las Vegas, had recently experienced a severe economic downturn and adverse conditions in the local markets that negatively affected the Casino’s operations, and may continue to negatively affect our operations in the future.

 

Gaming and other leisure activities that we offer represent discretionary expenditures and participation in such activities have been particularly adversely impacted as a result of the economic downturn because consumers have less disposable income to spend on discretionary activities. The weak economic conditions adversely affected consumer spending at the Casino and may continue to adversely affect our business.

 

Furthermore, other uncertainties, including national and global economic conditions, other global events, or terrorist attacks or disasters in or around Southern Nevada could have a significant adverse effect on our business, financial condition and results of operations. In addition, due to the existing uncertainty in the capital and credit markets, we may not be able to refinance our existing debt or obtain additional credit facilities on terms acceptable to us or at all in order to meet these challenges.

 

Our business is sensitive to reductions in discretionary consumer spending as a result of downturns in the economy.

  

Consumer demand for the offerings of a casino hotel property such as ours is sensitive to downturns in the economy and the corresponding impact on discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences brought about by factors such as perceived or actual general economic conditions and customer confidence in the economy, unemployment, the uncertainty and distress in the housing and credit markets, the impact of high energy, fuel, food and healthcare costs, the potential for bank failures, perceived or actual changes in disposable consumer income and wealth, taxes, effects or fears of war and future acts of terrorism could further reduce customer demand for the amenities that we offer and materially and adversely affect our business and results of operations.

 

        Our casinos draw customers from the Las Vegas metropolitan area, as well as nearby geographic areas, including Southern California, Arizona and Utah. While the economies of these areas have shown significant recovery, we are unable to determine the sustainability or strength of the recovery. In addition, the overall economic outlook and residential real estate market in the United States, and in particular Las Vegas, remain uncertain and our target markets, in particular Las Vegas, continue to experience significantly higher rates of unemployment than the national average. The economic downturn and adverse conditions previously experienced in our target markets and in the United States generally resulted in a significant decline in spending in Las Vegas, which negatively affected our results of operations. Any slowing of the recovery or a return to an economic downturn would further negatively affect our results of operations.

 

We have limited liquidity and capital resources and may not be able to generate sufficient cash flows to finance all operating expenses, working capital needs and capital expenditures.

 

We have a limited amount of cash and we do not have a credit facility upon which to draw funds. We generated cash from operations of $18.9 million for the year ended December 31, 2015. We believe that our available cash and cash flows from our operations will provide sufficient liquidity to fund our cash requirements, interest payments and capital expenditures for 2016. 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.

 

 

On March 4, 2016, the Company secured a commitment from Wells Fargo Bank, National Association (“Wells Fargo”), subject to certain conditions, including, but not limited to, completing the loan documents, for a reducing Revolving Credit Facility (“Revolving Credit Facility”) in the initial principal amount of up to $50.0 million, with three options to increase the principal amount of the Revolving Credit Facility in an aggregate principal amount of up to $20.0 million for each option.  No assurance can be given that the Company and Wells Fargo will complete the loan documents for the Revolving Credit Facility.

 

We are entirely dependent on one property for all of our cash flow, which subjects us to greater risks than a gaming company with more operating properties.

 

We do not have material assets or operations other than the Casino and, therefore, we are entirely dependent upon the Casino for all of our cash flow. As a result, we are subject to a greater degree of risk than companies with multiple properties. The risks to which we have a greater degree of exposure include, but are not limited to:

 

●

global and local economic and competitive conditions;

 

●

changes in local and state governmental laws and regulations;

 

●

natural and other disasters and terrorism; and

 

●

the outbreak of an infectious disease.

 

Any of the factors outlined above, amongst others, could negatively affect our results of operations.

 

As part of a master planned community, the property is subject to certain covenants, conditions and restrictions with respect to transfers and use.

 

As part of a master planned community, the property owned by the Company is subject to covenants, conditions and restrictions (set forth in recorded instruments) with respect to transfers, and the use, improvement, restoration, maintenance and repair, of the property. Subject to certain exceptions, the City of North Las Vegas has approval rights over transfers of the property (or transfers of more than 40% in the aggregate of the equity interests in Aliante Gaming) to third parties. An architectural committee has approval rights over, among other things, the design and location of any improvements and the installation and maintenance of any signage on the property.

 

We may be forced to cancel certain of our material registered trademarks.

 

We use a variety of Marks in our operations pursuant to a license agreement with North Valley. Under the terms of the North Valley license, we will own all right, title and interest in, and may register with the United States Patent and Trademark Office, any composite trademarks consisting of “ALIANTE” (or another Mark); provided, that upon termination of either of the license agreements, we must cease and desist using all such composite Marks and immediately cancel or withdraw any trademark applications or registrations for any composite Marks. In addition, if we have to cease and desist using the “ALIANTE” Mark due to a legal challenge to the validity of our licenses, or for any reason, we may be unable to obtain a new license to use such Marks on favorable terms, or at all, which could affect the goodwill associated with the Casino’s operations and negatively impact our business.

 

The infringement of intellectual property used in our business could adversely affect our business.

 

We own or have licenses to use key intellectual property used in our business, including consumer information. We will take steps to safeguard this intellectual property from infringement by third parties, such as prosecuting trademark and copyright violations, if and when necessary, and limiting access to the proprietary customer information. Despite such measures, we cannot provide assurance that we will be successful in defending against the infringement of intellectual property used in our business or that the proprietary information used in our business will not be disseminated to our competitors and any such infringement or dissemination could have an adverse effect on the results of our operations.

 

Our operations may be adversely impacted by increases in energy prices.

 

The Casino uses significant amounts of electricity, natural gas and other forms of energy. While no shortages of energy have been experienced, the substantial increases in the cost of electricity, natural gas and gasoline in the United States in general, and in Southern Nevada in particular, may negatively affect our operating results. In addition, energy price increases in such areas could result in a decline in disposable income of potential customers and a corresponding decrease in visitation and spending at the Casino, which could negatively impact revenues.

 

 

The casino, hotel and resort industry is capital intensive and we may not be able to finance expansion and renovation projects, which could put us at a competitive disadvantage.

 

Casino properties have an ongoing need for renovations and other capital improvements to remain competitive, including replacement, from time to time, of furniture, fixtures and equipment. We may also need to make capital expenditures to comply with applicable laws and regulations.

 

Renovations and other capital improvements of a casino property such as the Casino require significant capital expenditures. In addition, renovations and capital improvements of a casino property usually generate little or no cash flow until the project is completed. We may not be able to fund such projects solely from cash provided from operating activities. Consequently, we may be required to rely upon the availability of debt or equity capital to fund renovations and capital improvements and our ability to carry them out will be limited if we cannot obtain satisfactory debt or equity financing, which will depend on, among other things, market conditions. No assurances can be made that we will be able to obtain additional equity or debt financing or that we will be able obtain such financing on favorable terms. Our failure to renovate the Casino, as necessary, may put us at a competitive disadvantage to casinos offering more modern and better maintained facilities.

 

We depend on the North Las Vegas locals and repeat visitor market as our key market. As a result, we may not be able to attract a sufficient number of guests and gaming customers to make our operations profitable.

 

Our operating strategies emphasize attracting and retaining customers from the North Las Vegas local and repeat visitor market. We cannot be sure that we will be able to attract a sufficient number of guests, gaming customers and other visitors in North Las Vegas to make our operations profitable. During the economic downturn, North Las Vegas has not experienced population growth at the expected rates or at the same rates as it experienced prior to the economic downturn. There can be no assurance that population growth in North Las Vegas will return to historic levels or that we will be able to successfully adapt our business strategy to the current economic downturn or any further economic slowdown. A material number of our hotel rooms are rented by the United States Air Force for use by air force personnel visiting nearby Nellis Air Force Base, especially during week days. Not only do we receive room revenues, but these persons also utilize other revenue producing amenities of our resort during such stays. If there are any material cutbacks in such business, our hotel occupancy, room revenue and other resort revenues will be adversely impacted, especially during off peak times.

 

We may face intense competition and experience a loss of market share.

 

The gaming industry is highly competitive. We compete for local gaming customers with other locals-oriented casino-hotels in the vicinity of the Casino. If our competitors operate more successfully or if additional competitors are established in and around the locations in which we conduct business, we may lose market share. There can be no assurance that we will be successful in retaining the loyalty of shared customers, nor is there any assurance that we will be successful in competing for other locals-oriented casino customers.

 

The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.

 

A majority of our gaming revenue is attributable to slot machines. To be competitive it is important that the Casino offers the most popular and technologically advanced slot machine games to its customers. We believe that a substantial majority of the slot machines sold in the United States in recent years were manufactured by a limited number of companies. A deterioration in our commercial arrangements with any of these slot machine manufacturers could hinder our ability to acquire the slot machines desired by our customers, or could result in manufacturers significantly increasing the cost of these machines. Alternatively, significant industry demand for new slot machines may result in us being unable to acquire the desired number of new slot machines or result in manufacturers’ increasing the cost of these machines. The inability to obtain new and up-to-date slot machine games could impair our competitive position and result in decreased gaming revenues. In addition, increases in the costs associated with acquiring slot machine games could adversely affect our profitability.

 

In recent years, the prices of new slot machines have risen more rapidly than the domestic rate of inflation. Furthermore, in recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring gaming operators to execute participation lease arrangements in order for them to be able to offer such machines to customers. Participation slot machine leasing arrangements typically require the payment of a fixed daily rental fee. Such agreements may also include a percentage payment to the manufacturer of “coin-in” or “net win.” Generally, a slot machine participation lease is more expensive over the long term than the cost of purchasing a new slot machine.

 

 

For competitive reasons, we may be forced to purchase new, more contemporary slot machines or enter into participation lease arrangements that are more expensive than the costs currently associated with the continued operation of the Casino’s existing slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased investment and participation lease costs, our profitability could be adversely affected.

 

In addition, if any of the slot machine manufacturers that Aliante Gaming contracts with were to experience financial distress and fail to provide the agreed upon products or services to us, our business and operations may be adversely affected.

 

We may incur losses that are not adequately covered by insurance which may harm our results of operations.

 

Although we maintain insurance customary and appropriate for our business, we cannot assure that insurance will be available or adequate to cover all loss and damage to which our business or our assets might be subjected. The lack of adequate insurance for certain types or levels of risk could expose us to significant losses in the event that a catastrophe occurred for which we are underinsured. Any losses we incur that are not adequately covered by insurance may decrease our future operating income, require us to find replacements or repairs for destroyed property and reduce the funds available for payments of our obligations.

 

We may be subject to litigation resulting from our operations which, if adversely determined, could result in substantial losses.

 

We will be, from time to time, during the ordinary course of operating our businesses, subject to various litigation claims and legal disputes, including contract, lease, employment and regulatory claims as well as claims made by visitors to the Casino. Certain litigation claims may not be covered entirely or at all by our insurance policies or our insurance carriers may seek to deny coverage. In addition, litigation claims can be expensive to defend and may divert our attention from the operations of our businesses. Further, litigation involving visitors to the Casino, even if without merit, can attract adverse media attention. As a result, litigation can have a material adverse effect on our businesses and, because we cannot predict the outcome of any action, it is possible that adverse judgments or settlements could significantly reduce our earnings or result in losses.

 

Union organization activities could disrupt our business by discouraging patrons from visiting the Casino, causing labor disputes or work stoppages, and, if successful, could significantly increase our labor costs.

 

We are not currently subject to any collective bargaining agreement or similar arrangement with any union. However, union activists have actively sought to organize employees at the Casino in the past, and we believe that such efforts are ongoing at this time and will continue to occur in the future. Accordingly, there can be no assurance that the Casino will not ultimately be unionized. Union organization efforts that may occur in the future could cause disruptions and discourage patrons from visiting the Casino and may cause us to incur significant costs, any of which could have a material adverse effect on our results of operations and financial condition. In addition, union activities may result in labor disputes, including work stoppages, which could have a material adverse effect on our business, financial condition and results of operation. Furthermore, unfavorable union contract settlements or collective bargaining agreements, should they be entered into, could cause significant increases in our labor costs, which could have a material adverse effect on the business of the Casino and our financial condition and results of operation.

 

We depend on the continued services of key employees. If we do not retain our key personnel or attract and retain other highly skilled employees, our business may suffer.

 

Our ability to maintain our competitive position will be dependent to a large degree on the services of our senior management team and other key personnel. The loss of the services of our senior managers, or the inability to attract and retain additional senior management personnel could have a material adverse effect on our business.

 

Members of our Board of Managers are likely to devote some of their time to other businesses, which could have a negative impact on the Company’s management.

 

Members of our Board of Managers are not required to commit their full time to the Company’s affairs, which could create a conflict when allocating their time between Company matters and their other commitments. All of the members of our Board of Managers are engaged in several other business endeavors aside from their commitments to the Company. In addition, members of our Board of Managers are not obligated to devote any specific number of hours to the Company’s affairs. If the other business affairs of members of our Board of Managers require them to devote more time to such affairs, it could limit their ability to devote time to the Company’s affairs and could have a negative impact on the quality of the Company’s governance. We cannot assure that these time conflicts will be resolved in the Company’s favor.

 

  

We are subject to extensive state and local regulation and licensing, and gaming authorities will have significant control over our operations, which could have an adverse effect on our business.

 

We are subject to extensive regulation by the state, county and city in which we operate. These laws, regulations and ordinances generally concern the responsibility, financial stability and character of the owners and managers of gaming operations as well as persons financially interested or involved in gaming operations. As such, Gaming Authorities can require us to disassociate ourselves from suppliers or business partners found unsuitable by the regulators or, alternatively, cease operations. Holders of our Common Units who fail to obtain any licenses, authorizations, qualifications or findings of suitability, as may be required by Gaming Authorities, will not be entitled to exercise any rights of ownership with respect to, or receive any income from, our Common Units.

 

For a summary of gaming and other regulations that will affect our business, see “Item 1. Business - Regulation and Licensing.” The regulatory environment may change in the future and any such change could have a material adverse effect on our results of operations.

 

Changes to the gaming tax laws could have an adverse effect on results of operations by increasing the cost of operating our business.

 

The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state legislators and officials have proposed changes in taxes, or in the administration of tax laws, affecting the gaming industry. Worsening economic conditions could intensify the efforts of state and local governments to raise revenues through increases in gaming taxes and fees.  Material increases in fees and taxes paid by us or the adoption of additional taxes or fees in Nevada could have a material adverse effect on our results of operations.

 

Our failure to maintain the integrity of our customer or company data could have a material adverse effect on our results of operations and cash flows, and/or subject us to costs, fines or lawsuits.

 

We face cybersecurity threats, which may range from uncoordinated individual attempts to sophisticated and targeted measures directed at us. Cyber-attacks and security breaches may include, but are not limited to, attempts to access information, including customer and company information, computer viruses, denial of service and other electronic security breaches. Our information systems may also be subject to operator error or inadvertence releases of data. In addition, our third-party information system service providers face risks relating to cybersecurity similar to ours, and we do not directly control any of such parties’ information security operations.

 

Our business requires the collection and retention of large volumes of customer data, including credit card numbers and other personally identifiable information in various information systems that we maintain and in those maintained by third-parties with whom we contract to provide data services. We also maintain important internal company data such as personally identifiable information about our employees and information relating to our operations. The integrity and protection of that customer and company data is important to us. Our collection of such customer and company data is subject to extensive regulation by private groups such as the payment card industry as well as governmental authorities, including gaming authorities.

 

Our systems may be unable to satisfy applicable regulations or employee and customer expectations. A significant theft, loss or fraudulent use of customer or company data maintained by us or by a third-party service provider could have an adverse effect on our reputation, cause a material disruption to our operations and management team, and result in remediation expenses, regulatory penalties and litigation by customers and other parties whose information was subject to such attacks, all of which could have a material adverse effect on our business, results of operations and cash flows.

 

Risks Related to Our Indebtedness

 

We have significant indebtedness.

 

As of December 31, 2015, we had $49.2 million in outstanding principal amount of debt which includes $48.5 million in outstanding principal under the Senior Secured Credit Agreement. We have no ability to draw on the Senior Secured Credit Facility. Our substantial indebtedness could:

 

●

make it more difficult to satisfy obligations with respect to the instruments governing our outstanding indebtedness;

 

●

increase vulnerability to general adverse economic and industry conditions;

  

 

●

require us to dedicate a substantial portion of cash flow from operations to debt service, thereby reducing the availability of cash flow to fund working capital, capital expenditures and other general corporate purposes;

 

●

limit flexibility in planning for, or reacting to, competitive pressures and changes in the business and the industry in which we operate;

 

●

place us at a competitive disadvantage compared to our competitors that have less debt; and

 

●

limit, among other things, our ability to borrow additional funds.

 

Our Senior Secured Credit Agreement imposes restrictive covenants on us that will limit our flexibility in operating our business and may adversely affect our ability to compete or engage in favorable business or financing activities.

 

Our Senior Secured Credit Agreement has covenants that impose operational and financial restrictions on the Company and our subsidiary, Aliante Gaming. Pursuant to the Senior Secured Credit Facility, we are required to be a passive holding company and our actions will be limited to, among other things, owning the equity interests of Aliante Gaming, maintaining our legal existence as a public company, participating in administrative matters and performing our obligations in connection with the Senior Secured Credit Facility and other agreements entered into in connection therewith. In addition, the Senior Secured Credit Facility imposes various restrictions on Aliante Gaming and any future subsidiaries, including, among other restrictions, limitations on the ability to:

 

●

incur additional debt;

 

●

make payments on subordinated obligations;

 

●

make distributions and repurchase equity;

 

●

make investments;

 

●

grant liens on our property to secure debt;

 

●

enter into certain transactions with affiliates;

 

●

sell assets or enter into mergers or consolidations;

 

●

sell equity interests in subsidiaries;

 

●

create dividend and other payment restrictions affecting subsidiaries; and

 

●

change the nature of our line of business.

 

The Senior Secured Credit Facility also imposes various customary affirmative covenants on Aliante Gaming and its subsidiaries including, among others, reporting covenants, covenants to maintain insurance, and maintain properties and other covenants customary in senior credit financings of this type.

 

As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. The restrictions caused by such covenants could also place us at a competitive disadvantage to less leveraged competitors. A failure to comply with the covenants contained in the Senior Secured Credit Facility, or other indebtedness that we may incur in the future, could result in an event of default, which, if not cured or waived, could result in the acceleration of the indebtedness and have a material adverse effect on our business, financial condition and results of operations.

 

On March 4, 2016, the Company secured a commitment from Wells Fargo, subject to certain conditions, including, but not limited to, completing the loan documents, for a Revolving Credit Facility in the initial principal amount of up to $50.0 million, with three options to increase the principal amount of the Revolving Credit Facility in an aggregate principal amount of up to $20.0 million for each option.  No assurance can be given that the Company and Wells Fargo will complete the loan documents for the Revolving Credit Facility.

 

 

If we are unable to repay amounts owing under the Senior Secured Credit Facility when due, the Lenders, or affiliates thereof, under the Senior Secured Credit Facility could proceed against the collateral. If the indebtedness under the Senior Secured Credit Facility were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full. Moreover, in the event that such indebtedness is accelerated, there can be no assurance that we will be able to refinance it on acceptable terms, or at all. In addition, the Lenders under the Senior Secured Credit Facility are also our Members, see “Risks Related to our Common Units - Potential conflicts of interest may exist, or may arise, based on debt and management interests of the principal equity holders of the Company.”

 

Our ability to service all of our indebtedness depends on our ability to generate cash flow, which is subject to factors that are beyond our control.

 

Our ability to make any scheduled payments on, or to refinance, our debt obligations depends on our financial condition and operating performance, which is subject to general economic, financial, competitive and other factors that are beyond our control. In addition, deterioration in the economic performance of the Casino may cause us to reduce or delay investments and capital expenditures, or to sell assets. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

 

The volatility and disruption of the capital and credit markets and adverse changes in the global economy may negatively impact our ability to access financing.

 

Although we believe that we will have sufficient funds for our capital needs, there can be no assurance that we will not need additional capital in the future. Due to the continuing uncertainty in the capital and credit markets and the recent global recession, our access to capital may not be available on terms that are attractive or at all.

 

Risks Related to Our Common Units

 

As a “publicly traded corporation” under the Nevada Act, each holder of more than 10% of our voting securities must be found suitable by the Gaming Authorities or we may be required to sever all relationships with such equity holder.

 

As a “publicly traded corporation” under the Nevada Act, persons who acquire beneficial ownership of more than 5% of our voting securities will be required to report their acquisition to the Gaming Authorities and persons who acquire beneficial ownership of more than 10% of our voting securities will be required to apply to the Gaming Authorities for a finding of suitability. Notwithstanding these provisions, under the Nevada Act, the Gaming Authorities may at any time, in their discretion, require the holder of any of our securities to file applications, be investigated and be found suitable to own our securities if they have reason to believe that the security ownership would be inconsistent with the declared policies of Nevada. Typically, so long as we are a “publicly traded corporation” under the Nevada Act, the Gaming Authorities will require only our equity holders having beneficial ownership of more than 10% of our voting securities to be found suitable.

 

If we cease to be a “publicly traded corporation” under the Nevada Act, or if required by the Gaming Authorities, each of our equity holders would be required to be found suitable by the Gaming Authorities. If any equity holder fails to be found suitable, we may be required to sever all relationships, including through redemption of Common Units, with such equity holder, which may have a material adverse effect on our business and our equity holders. In addition, such holders of Common Units who fail to obtain necessary licenses, authorizations, qualifications or findings of suitability will not be entitled to exercise any rights of ownership with respect to, or receive any income from, the Common Units.

 

The transferability of our Common Units is very limited and subject to the prior approval of our Board of Managers.

 

There is currently no established public trading market for our Common Units, and there are no plans, proposals, arrangements or understandings with any person with regard to the development of a trading market for our Common Units. In addition, our limited liability company agreement requires the approval of our Board of Managers prior to certain transfers of our Common Units. It is expected that the Board of Managers will only consent to transfers of Common Units in very limited circumstances. Accordingly, we do not expect a public market will develop for our Common Units.

 

We currently have no plans to pay dividends on our Common Units, so holders of our Common Units may not receive funds without selling their Common Units.

 

We currently have no plans to pay dividends on our Common Units and our ability to make distributions on our Common Units may be restricted by the terms of our Senior Secured Credit Facility and by the Gaming Authorities. Any payment of future dividends will be at the discretion of our Board of Managers and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that our Board of Managers deems relevant. The terms governing our outstanding debt also include limitations on the ability of Aliante Gaming to pay dividends to the Company. Accordingly, our holders may have to sell some or all of their Common Units in order to generate cash flow from their investment in us.

 

 

Our Board of Managers authorized on March 25, 2015 a unit repurchase program under which the Company may repurchase units up to an aggregate cost not to exceed $5 million in private negotiated transactions. Our unit repurchase program could require the use of a significant portion of our available cash or our cash flow from operations. Accordingly, the unit repurchase program will be dependent upon factors such as levels of cash generation from operations, cash requirements for capital projects and economic and market conditions. No repurchases have been made under the repurchase program as of December 31, 2015. The Senior Secured Credit Facility also restricts our ability to repurchase units.

 

Potential conflicts of interest may exist, or may arise, based on debt and management interests of the principal equity holders of the Company.

 

Pursuant to the governance structure of the Company, a majority of our managers will primarily be persons designated by certain Lenders holding greater than 10% of our Common Units (“Principal Lenders” or “Principal Members”). In addition, many major actions require approval of a majority of the managers which include those managers designated by the Principal Members. The Principal Members may have interests that are different than, or in addition to, other equity holders of the Company, which could adversely affect such equity holders.

 

The Lenders under the Senior Secured Credit Facility may have an incentive for the Company to act or omit to act, in each case, in a manner that enhances the ability of the Company to service its indebtedness or the Lenders to recover on the Senior Secured Credit Facility, rather than seeking to maximize the value of the equity of the Company.

 

The interests of the Principal Members could conflict with or differ from the interests of other holders of our Common Units. For example, the concentration of ownership held by the Principal Members could delay, defer or prevent a change of control of the Company or impede a merger, takeover or other business combination that other holders of our Common Units may otherwise view favorably. So long as the Principal Members continue to beneficially own a significant amount of our equity, even if such amount is less than 50%, they may be able to strongly influence or effectively control our decisions. For example, our operating agreement requires a majority of our Board of Managers to vote on any matter and our Principal Members have the right to designate three of four managers.

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM  2.

PROPERTIES

 

We own the land and building on which the Casino is located in North Las Vegas, Nevada. Substantially all of the property that we own is subject to liens to secure borrowings under the Senior Secured Credit Facility.

 

The Casino is an approximately 700,000 square foot casino and hotel facility situated on approximately 40 acres that we own within the 1,905 acre Aliante master-planned community. The property lies between three of the main thoroughfares that run through the master-planned community with Elkhorn Road to the north, the Las Vegas Beltway to the South and North Aliante Parkway to the west. See “Item 1. Business - Narrative Description of Business” for a further description of the facility.

 

ITEM  3.

LEGAL PROCEEDINGS

 

The Company is currently a party to litigation arising in the ordinary course of business. In the opinion of management, all pending legal matters will not have a material effect on the business, financial position or results of operations of the Company.

 

ITEM  4.

MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

PART II

 

ITEM  5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information

 

All of our outstanding Common Units are privately held and there is no established public trading market for our Common Units.

 

Holders

 

As of March 28, 2016, there were 12 holders of record of our Common Units.

 

Dividends

 

There were no dividends paid during the years ended December 31, 2015 and 2014. We did not make, and do not anticipate paying in the foreseeable future, any dividends on our Common Units. Our Board of Managers authorized a unit repurchase program under which the Company may repurchase units up to an aggregate cost not to exceed $5 million in privately negotiated transactions. The price and timing of any purchases of units will depend on factors such as levels of cash generated from operations, cash requirements for capital projects and economic and market conditions. No repurchases have been made under the repurchase program as of December 31, 2015. The Senior Secured Credit Facility restricts our ability to declare or make distributions on our Common Units, including, but not limited to, our ability to repurchase units.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Information regarding our securities authorized for issuance under equity compensation plans is included under “Item 12. - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”.

 

Issuer Purchases of Equity Securities

 

There were no purchases of our Common Units made by, or on behalf of us during the year ended December 31, 2015.

  

 

ITEM 6.

SELECTED FINANCIAL DATA

 

On November 1, 2011, Aliante Gaming, the owner and operator of the Casino, became our wholly owned subsidiary pursuant to the Plan. Prior to November 1, 2011, we conducted no operations and had no material assets or liabilities. As a result, the following selected financial data presents our financial results as of and for the years ended December 31, 2015, 2014, 2013 and 2012, the period from November 1, 2011 through December 31, 2011 (the “Successor Period”) and for the Predecessor, Aliante Gaming, for the period from January 1, 2011 through October 31, 2011. The historical financial results for the Predecessor are not comparable to our current financial condition or our future results of operations following November 1, 2011 due to the adoption of fresh-start reporting in accordance with ASC Topic 852. The selected financial data presented below have been derived from our and the Predecessor’s financial statements which are contained elsewhere in this Annual Report on Form 10-K. The selected financial data set forth below are qualified in their entirety by, and should be read in conjunction with, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements, the notes thereto and other financial and statistical information included elsewhere in this Annual Report on Form 10-K.

  

		Successor																				Predecessor
																		Period from				Period from
																		November 1, 2011				January 1, 2011
																		Through				Through
		Year Ended December 31,																December 31,				October 31,
(in thousands)		2015				2014				2013				2012				2011				2011
Income statement data:
Revenues:
Casino		$	63,630			$	55,483			$	47,476			$	53,939			$	9,704			$	43,197
Other			27,737				24,163				21,341				22,380				4,110				18,818
Gross revenues			91,367				79,646				68,817				76,319				13,814				62,015
Promotional allowances			(7,210	)			(6,257	)			(4,735	)			(5,638	)			(950	)			(4,523	)
Net revenues			84,157				73,389				64,082				70,681				12,864				57,492
Operating costs and expenses:
Casino			26,645				25,000				22,699				22,854				3,961				19,244
Other			18,194				16,626				15,510				13,495				2,435				11,006
Selling, general and administrative			22,189				21,618				21,387				25,678				4,356				18,799
Depreciation and amortization			5,368				4,999				4,662				3,208				522				3,901
Management fees			—				—				—				1,516				377				1,496
Preopening expenses			—				—				—				—				—				34
Restructuring and other charges (a)			—				—				—				—				—				2,550
(Gain) on disposal of assets, net			(125	)			(136	)			(177	)			7				—				—
Total operating costs and expenses			72,271				68,107				64,081				66,758				11,651				57,030
Operating income			11,886				5,282				1				3,923				1,213				462
Interest expense, net			(5,741	)			(5,055	)			(5,262	)			(4,047	)			(640	)			(8,502	)
Income (loss) before reorganization items			6,145				227				(5,261	)			(124	)			573				(8,040	)
Reorganization items, net (b)			—				—				—				—				—				373,039
Net income (loss)		$	6,145			$	227			$	(5,261	)		$	(124	)		$	573			$	364,999
Balance sheet data (as of period end)
Total assets		$	91,956			$	90,178			$	87,929			$	90,928			$	89,038
Long-term debt, including current portion			43,652				51,299				50,216				46,107				43,201
Member’s equity			38,839				32,694				32,467				37,728				37,827

 

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(a)

Restructuring and other charges are comprised of expenses related to the evaluation of financial and strategic alternatives and include legal, consulting and other professional services associated with the Predecessor’s reorganization efforts prior to the Petition Date, including preparation for the bankruptcy filing.

(b)	Reorganization items are comprised of the discharge of liabilities subject to compromise and the revaluation of assets and liabilities in addition to expenses incurred after the Petition Date including legal and advisory fees in connection with the Restructuring Transactions.

 

  

ITEM  7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Background

 

We were formed on May 11, 2011 to acquire substantially all of the equity interests of Aliante Gaming pursuant to the Plan. The reorganization of Aliante Gaming was completed on November 1, 2011, resulting in Aliante Gaming, the owner and operator of Aliante Casino + Hotel, previously known as Aliante Station Casino + Hotel, in North Las Vegas, Nevada, becoming our wholly owned subsidiary. Aliante Casino + Hotel 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, we entered into the Senior Secured Credit Facility, as further described under “- Liquidity and Capital Resources.” In addition, on November 1, 2011, 100% of the outstanding equity interests of Aliante Gaming, which were previously owned by Aliante Holding, were cancelled, and new equity of Aliante Gaming, as reorganized, was issued to the Lenders. The Lenders contributed 100% of the new equity interests in Aliante Gaming to the Company in consideration for the issuance of the Senior Secured Loans under the Senior Secured Credit Facility and 100% of the Company’s Common Units.

 

Additionally, on November 1, 2011, we adopted fresh-start reporting in accordance with ASC Topic 852, which resulted in a new reporting entity for accounting purposes. Accordingly, the carrying values of Aliante Gaming’s assets and liabilities were adjusted to their estimated fair values as of the November 1, 2011. As a result, the historical financial results of Aliante Gaming are not indicative of our current financial condition or our results of operations following November 1, 2011. In addition, our future results of operations will be subject to significant business, economic and competitive uncertainties and contingencies, some of which are beyond our control.

 

On November 1, 2012, New Station ceased providing management services to Aliante Gaming.

 

Overview

 

Our revenues are primarily derived from gaming revenues, which include revenues from slot machines and table games. Gaming revenues are generally defined as gaming wins less gaming losses. Our largest component of gaming revenues is from slot machines. 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 revenue, 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, lease termination, gain (loss) on disposal of assets, net, impairment loss, 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 they 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 financial statements.

 

The following discussion and analysis should be read in conjunction with “Item 6. Selected Financial Data” and our financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

 

 

Results of Operations

 

The following table highlights the results of operations and reconciles Adjusted EBITDA to net income (loss) for the years ended 2015, 2014 and 2013 (in thousands, except percentages):

 

		Year Ended				Year Ended								Year Ended
		December 31,				December 31,				Percent				December 31,				Percent
		2015				2014				Change				2013				Change
Net revenues		$	84,157			$	73,389				14.7	%		$	64,082				14.5	%
Adjusted EBITDA (a)		$	17,129			$	10,145				68.8	%		$	4,486				126.1	%
Less:
Depreciation and amortization			5,368				4,999				7.4	%			4,662				7.2	%
(Gain) loss on disposal of assets, net			(125	)			(136	)			(7.7	)%			(177	)			(23.4	)%
Operating income			11,886				5,282				125.0	%			1			n/m		%
Interest expense, net			(5,741	)			(5,055	)			13.6	%			(5,262	)			(3.9	)%
Net income (loss)		$	6,145			$	227				2,608.3	%		$	(5,261	)			104.3	%

 

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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 used 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) less 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.

  

 

The following table highlights the various sources of revenues and expenses for the years ended 2015, 2014 and 2013 as compared to the prior year (in thousands, except percentages):

 

		Year Ended				Year Ended								Year Ended
		December 31,				December 31,				Percent				December 31,				Percent
		2015				2014				Change				2013				Change
Casino revenues		$	63,630			$	55,483				14.7	%		$	47,476				16.9	%
Casino expenses			26,645				25,000				6.6	%			22,699				10.1	%
Margin			58.1	%			54.9	%							52.2	%
Food and Beverage revenue		$	17,144			$	14,794				15.9	%		$	12,927				14.4	%
Food and Beverage expenses			13,523				12,285				10.1	%			11,566				6.2	%
Margin			21.1	%			17.0	%							10.5	%
Room revenue		$	7,100			$	6,086				16.7	%		$	5,274				15.4	%
Room expenses			3,144				2,862				9.9	%			2,505				14.3	%
Margin			55.7	%			53.0	%							52.5	%
Other revenue		$	3,493			$	3,283				6.4	%		$	3,140				4.6	%
Other expenses			1,527				1,479				3.2	%			1,439				2.8	%
Margin			56.3	%			54.9	%							54.2	%
Selling, general and administrative expenses		$	22,189			$	21,618				2.6	%		$	21,387				1.1	%
Percent of net revenues			26.4	%			29.5	%							33.4	%

 

Casino.

 

Casino revenues increased 14.7% to $63.6 million for the year ended December 31, 2015, as compared to $55.5 million for the year ended December 31, 2014, primarily due to an increase in slot revenue as a result of an increase in gaming patron visitation and spend per visit. Casino expenses increased 6.6% to $26.6 million for the year ended December 31, 2015, as compared to $25.0 million for the year ended December 31, 2014, primarily due to the increase in promotional spending that drove the increase in slot revenue. The net impact of these factors resulted in a 3.2 percentage point improvement in the casino operating margin for the year ended December 31, 2015 as compared to the year ended December 31, 2014.

 

Casino revenues increased 16.9% to $55.5 million for the year ended December 31, 2014, as compared to $47.5 million for the year ended December 31, 2013, primarily due to an increase in slot revenue. Casino expenses increased 10.1% to $25.0 million for the year ended December 31, 2013 primarily due to an increase in casino promotional spending. The casino operating margin increased to 54.9% for the year ended December 31, 2014 as compared to 52.2% for the year ended December 31, 2013 primarily due to the increase in casino revenues.

 

Food and Beverage.

 

Food and beverage revenues increased 15.9% to $17.1 million for the year ended December 31, 2015, as compared to $14.8 million for the year ended December 31, 2014, primarily as a result of increased visitor volume in our casual dining restaurants. Food and beverage expenses increased 10.1% to $13.5 million for the year ended December 31, 2015 as compared to the year ended December 31, 2014, primarily as a result of increased food costs associated with increased sales. The net impact of these factors resulted in a 4.1 percentage point improvement in the food and beverage operating margin for the year ended December 31, 2015 as compared to the year ended December 31, 2014.

 

Food and beverage revenues increased 14.4% to $14.8 million for the year ended December 31, 2014, as compared to $12.9 million for the year ended December 31, 2013, primarily as a result of the addition of the Farm 24/7 restaurant which opened in November 2013. Food and beverage expenses increased 6.2% to $12.3 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013, primarily as a result of increased food costs associated with increased sales. The net impact of these factors resulted in a 6.5 percentage point improvement in the food and beverage operating margin for the year ended December 31, 2014 as compared to the year ended December 31, 2013.

 

 

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

 

		Year Ended				Year Ended								Year Ended
		December 31,				December 31,				Percent				December 31,				Percent
		2015				2014				Change				2013				Change
Occupancy			92	%			87	%							82	%
Average daily rate		$	93			$	89				5.0	%		$	86				2.9	%
Revenue per available room		$	86			$	76				13.3	%		$	71				9.1	%

 

Room revenue includes income from hotel room sales, meeting room rentals and revenue from spa operations. Room revenues increased by 16.7% to $7.1 million for the year ended December 31, 2015 as compared to $6.1 million for the year ended December 31, 2014. The increase in room revenues is attributable to more room nights sold and an increase in average daily rate. Room expenses increased by 9.9% to $3.1 million for the year ended December 31, 2015 as compared to $2.9 million for the year ended December 31, 2014 mainly due to increased wages and laundry costs associated with increased occupancy.

 

Room revenues increased by 15.4% to $6.1 million for the year ended December 31, 2014 as compared to $5.3 million for the year ended December 31, 2013. The increase in room revenues is attributable to more room nights sold and an increase in average daily rate. Room expenses increased by 14.3% to $2.9 million for the year ended December 31, 2014 as compared to $2.5 million for the year ended December 31, 2013 mainly due to increased wages and 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 $0.2 million, or 6.4%, for the year ended December 31, 2015 as compared to the year ended December 31, 2014 due to an increase in entertainment revenue and increased percentage rent received from leased outlets. Other expenses increased by 3.2% for the year ended December 31, 2015 as compared to the year ended December 31, 2014 mainly due to an increase in salaries and wages in the call center.

 

Other revenues increased by $0.1 million, or 4.6%, for the year ended December 31, 2014 as compared to the year ended December 31, 2013 mainly due to increased sales in the gift shop resulting from an increase in patron visits. Other expenses increased by 2.8% to $1.5 million for the year ended December 31, 2014 as compared to $1.4 million for the year ended December 31, 2013 mainly due to an increase in fees paid to entertainers.

 

Selling, General and Administrative (“SG&A”).

 

SG&A expenses increased by approximately 2.6% for the year ended December 31, 2015, as compared to prior year due to an increase in SG&A salaries, wages, and incentive payment accruals. SG&A expenses remained relatively flat for the year ended December 31, 2014 as compared to the year ended December 31, 2013.

 

Adjusted EBITDA.

 

Adjusted EBITDA increased 68.8% to $17.1 million for the year ended December 31, 2015 as compared to December 31, 2014, and increased 126.1% to $10.1 million for the year ended December 31, 2014 as compared to December 31, 2013, as a result of the factors discussed above for casino, food and beverage, room, other revenues and expenses and SG&A.

 

Depreciation and Amortization.

 

Depreciation and amortization increased 7.4% to $5.4 million for the year ended December 31, 2015, as compared to $5.0 million for the year ended December 31, 2014 as a result of additional depreciation of 2015 capital expenditures.

 

Operating Income.

 

As a result of the factors discussed above, the operating income for the year ended December 31, 2015 was $11.9 million as compared to $5.3 million for the year ended December 31, 2014.

  

 

Interest Expense.

 

Our outstanding principal indebtedness at December 31, 2015, excluding unamortized debt discount of $5.6 million was approximately $49.2 million compared to approximately $59.3 million, excluding unamortized debt discount of $8.0 million as of December 31, 2014. Interest expense related to our Senior Secured Credit Facility approximated $3.2 million for the year ended December 31, 2015. Also included in interest expense is a $2.4 million charge for the amortization of debt discount. 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. The Company elected to begin paying cash interest effective June 30, 2014.  The Company paid $3.2 million in cash interest related to the Senior Secured Credit Facility during the year-ended December 31, 2015. Interest expense decreased by approximately $207,000 for the year ended 2013 as compared to the year ended 2014 mainly due to interest expense not being added to the outstanding principle balance of the Senior Secured Debt and the interest rate decreasing from 10% per annum to 6% per annum effective June 30, 2014.

 

Net Income (Loss).

 

As a result of the factors discussed above, net income was $6.1 million for the year ended December 31, 2015 as compared to net income of $0.2 million for the year ended December 31, 2014.

 

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 2016, see “Risk Factors — We have limited liquidity and capital resources and may be unable to generate sufficient cash flows to finance all operating expenses, working capital needs and capital expenditures.” We expect to fund future capital expenditures for maintenance of the Casino through cash generated from our operating activities and we expect that we will generate sufficient income and liquidity to meet all of our operating cash requirements. Our results for future periods are subject to numerous uncertainties which may result in liquidity problems, which could 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 and provided for interest to be paid at a rate to be elected by Aliante Gaming, such rate being either (i) 10% per annum, payable in kind and 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. Effective June 30, 2014 Aliante Gaming elected the cash interest payment option with accrued interest being payable in kind through June 30, 2014. As a result of accruing interest in kind through June 30, 2014, and the $10 million pay down in the second quarter of 2015, the principal outstanding balance as of December 31, 2015 and December 31, 2014 was $48.5 million and $58.5 million, respectively. The Company paid cash interest during the year ended December 31, 2015 of $3.2 million. There is currently no availability for borrowings under the Senior Secured Credit Facility. The outstanding principal amount of the Senior Secured Loans and all accrued and unpaid interest thereon will be payable on the maturity date, which will 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.

 

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 $0.5 million using the retrospective approach. During the second quarter of 2014, the company recorded an adjustment in its accrual to decrease interest expense by $0.2 million. 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.

 

During the second quarter 2015, the Board of Managers authorized two optional $5 million principal payments on the Senior Secured Credit Facility which were paid on June 11, 2015 and June 30, 2015. As a result of these payments, the Company recorded an adjustment during the second quarter of 2015 to increase interest expense by $0.7 million using the retrospective approach.    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 been applied since inception.

 

On March 4, 2016, the Company secured a commitment from Wells Fargo Bank, National Association, subject to certain conditions, including, but not limited to, completing the loan documents, for a Revolving Credit Facility in the initial principal amount of up to $50.0 million, with three options to increase the principal amount of the Revolving Credit Facility in an aggregate principal amount of up to $20.0 million for each option.  The Revolving Credit Facility is expected to mature five years from the date of Closing and interest will accrue at LIBOR or at a base rate plus a margin based on the total leverage ratio. The Revolving Credit Facility is expected to finance the repayment of the Senior Secured Loan, pay fees, commissions and expenses incurred in connection with the revolving credit facility and finance ongoing working capital requirements and other general business purposes of the Company.  No assurance can be given that the Company and Wells Fargo will complete the loan documents for the Revolving Credit Facility.

 

Year Ending December 31, 2016

 

Our primary cash requirements for 2016 are expected to include approximately $3.0 million for maintenance capital expenditures and $2.9 million for interest payments on indebtedness. We do not expect to pay dividends to the Common Unit Holders in 2016. We have no availability for borrowings under the Senior Secured Credit Facility and we had $17.8 million in cash and cash equivalents as of December 31, 2015.

 

In addition, in March 2015, the Board of Managers authorized a unit repurchase program under which the Company may repurchase units up to an aggregate cost not to exceed $5 million in privately negotiated transactions to the extent management believes the units are reasonably priced and such repurchases appear to be an attractive use of available capital and in the best interest of unit holders. No such unit repurchases took place during the year ending December 31, 2015. The price and timing of any purchases of units will depend on factors such as levels of cash generated from operations, cash requirements for capital projects and economic and market conditions.

 

Cash Flows Summary

 

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

 

		Year Ended December 31, 2015				Year Ended December 31, 2014				Year Ended December 31, 2013
Net cash provided by operating activities		$	18,933			$	8,364			$	2,708
Net cash used in investing activities			(4,900	)			(2,282	)			(3,167	)
Net cash used in financing activities			(10,076	)			(2,044	)			(967	)
Net increase (decrease) in cash and cash equivalents		$	3,957			$	4,038			$	(1,426	)

  

 

Year Ended December 31, 2015

 

For the year ended December 31, 2015, cash provided by operating activities increased by approximately 126.4%. The increase is primarily related to the increase in operating income. The $4.9 million of cash used in investing activities is primarily related to the addition of capital equipment; and the $10.1 million of cash used in financing activities is primarily related to principal payments on debt.

 

Year Ended December 31, 2014

 

For the year ended December 31, 2014, the $8.4 million of cash provided by operating activities is primarily related to the increase in operating income; the $2.3 million of cash used in investing activities is primarily related to the addition of capital equipment; and the $2.0 million of cash used in financing activities is primarily related to principal payments on debt.

 

Inflation

 

We do not believe that inflation has had a significant impact on our revenues, results of operations or cash flows in the last three fiscal years.

 

Off Balance Sheet Arrangements

 

As of December 31, 2015, 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

 

The following table summarizes our contractual obligations and commitments (in thousands):

 

		Payments Due by Period
		Total				Less than 1 year				2 - 3 years				4 - 5 years				More than 5 years
Contractual obligations:
Senior Secured Credit Facility (a)		$	48,543			$	—			$	48,543				—			$	—
Interest payments on Senior Secured Credit Facility (b)			8,259				2,921				5,338				—				—
Other debt (c)			675				81				176				197				221
Interest payments on other debt (d)			156				38				61				40				17
Total contractual obligations		$	57,632			$	3,040			$	54,118			$	237			$	238

 

---

(a)	Amounts represent the principal amount outstanding as of December 31, 2015, 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.

(b)

The amounts shown represent 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.

(c)	Other debt includes principal payments on equipment financing and special improvement district assessment.

(d)	Includes interest payments on special improvement district assessment.

 

Critical Accounting Policies

 

The preparation of our financial statements requires management to adopt accounting policies and make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. Our business and industry is highly regulated. The majority of our revenue is cash-based and therefore is not subject to any significant or complex estimation procedures. A description of our accounting policies can be found in our financial statements which are included elsewhere in this Annual Report on Form 10-K.

 

 

We have determined that the following accounting policies and related estimates are critical to the preparation of our financial statements:

 

Property and Equipment

 

Property and equipment are initially recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the terms of the capitalized lease, whichever is less, beginning the month after the respective assets are placed in service. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

 

We make estimates and assumptions when accounting for capital expenditures. Whether an expenditure is considered a maintenance expense or a capital asset is a matter of judgment. Our depreciation expense is highly dependent on the assumptions made about the assets estimated useful lives. We determine the estimated useful lives based on experience with similar assets, engineering studies and our estimate of the usage of the asset. Whenever events or circumstances occur which change the estimated useful life of an asset, we account for the change prospectively.

 

Intangible Assets

 

We account for intangible assets in accordance with ASC Topic 350, Intangibles - Goodwill and Other (“ASC Topic 350”). Our finite-lived intangible assets include trademark and customer relationship intangibles. Finite-lived intangible assets are amortized over their estimated useful lives which is the period over which the asset is expected to contribute directly or indirectly to future cash flows. Management periodically evaluates the remaining useful lives of these intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization. Management reviews our finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

 

Impairment of Long-Lived Assets

 

We evaluate our long-lived assets including property and equipment, finite-lived intangible assets and other long-lived assets for impairment in accordance with the accounting guidance in the Impairment or Disposal of Long-Lived Assets Subsections of ASC Topic 360-10, Property, Plant and Equipment. Assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We measure recoverability of these assets by comparing the estimated future cash flows of the asset, on an undiscounted basis, to its carrying value. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparables, when available. For assets to be disposed of, we recognize the asset to be sold at the lower of carrying value or fair value less costs of disposal. Fair value of assets to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

 

Inherent in the calculation of fair values are various estimates. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. If our ongoing estimates of future cash flows are not met, we may have to record impairment charges in future accounting periods. Our estimates of cash flows are based on the current regulatory, political and economic climates, recent operating information and budgets of the Casino. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to the Casino.

 

Player Reward Program

 

The Casino’s player reward program, or Program, allows participants to redeem points earned from their gaming activity for complimentary slot play, food, beverages, hotel rooms, movie passes, entertainment tickets, spa treatments or merchandise from gift shops. Under the Program, participants may accumulate points over time that can be redeemed at their discretion under the terms of the Program. At the time points are redeemed for complimentaries under the Program, the retail value is recorded as revenue with a corresponding offsetting amount included in promotional allowances. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses on our statements of operations.

 

We record a liability for the estimated cost of the outstanding points under the Program that we believe will ultimately be redeemed. The estimated cost of the outstanding points under the Program is calculated based on the total number of points earned but not yet achieving necessary redemption levels, converted to a redemption value, times the average cost. The redemption value is estimated based on the average number of points needed to redeem for rewards. The average cost is the incremental direct departmental cost for which the points are anticipated to be redeemed. We record the estimated cost of points expected to be redeemed for free slot play under the Program as a reduction of casino revenue. When calculating the average cost we use historical point redemption patterns to determine the redemption distribution between gaming, food, beverage, rooms, entertainment and merchandise, as well as estimated breakage.

 

 

Income Taxes

 

We are a limited liability company disregarded as an entity separate from its owners for income tax purposes and as such, are a pass-through entity and not liable for income tax in the jurisdiction in which we operate. As a result, no provision for income taxes has been made in our financial statements.

  

Recently Issued Accounting Standards

 

In May 2014, the FASB issued a new accounting standard for revenue recognition which requires entities to recognize revenue when it transfers promised goods or services to customers, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard supersedes the existing accounting guidance for revenue recognition, including industry-specific guidance, and amends certain accounting guidance for recognition of gains and losses on the transfer of non-financial assets. For public companies, the new guidance is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017. Upon adoption, financial statement issuers may elect to apply the new standard either retrospectively to each prior reporting period presented, or using a modified retrospective approach by recognizing the cumulative effect of initial application and providing certain additional disclosures. Management is currently assessing the impact of the adoption of this accounting pronouncement on the Company’s condensed consolidated financial statements in future periods.

 

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern — Disclosure of Uncertainties about an Entity’s Ability to continue as a Going Concern (Subtopic 205-40).  ASU No. 2014-15 requires management to provide an interim and annual assessment concerning an entity’s ability to continue as a going concern, and also requires disclosures under certain circumstances.  ASU No. 2014-15 is effective for fiscal years beginning after December 15, 2016, and for annual periods and interim periods thereafter.  Early application is permitted.  It is currently management’s intent to adopt this accounting pronouncement upon the effective date. On April 1, 2015, the FASB proposed deferring the effective date of ASU No. 2014-15 by one year to December 15, 2017 for annual reporting periods beginning after that date.  The FASB also proposed permitting early adoption of the standard, but not before the original effective of December 31, 2016. Management is currently assessing the impact of the adoption of this accounting pronouncement on the Company’s consolidated financial statements in future periods.

 

In April 2015, the FASB issued amended accounting guidance that changes the balance sheet presentation of debt issuance costs. Under the amended guidance, debt issuance costs will be presented on the balance sheet as a direct deduction from the related debt liability rather than as an asset. For public companies, the new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015 (including interim periods within those fiscal years), and is required to be applied on a retrospective basis. Early adoption is permitted. Management is currently assessing the impact of the adoption of this accounting pronouncement on the Company’s condensed consolidated financial statements in future periods.

 

In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost and net realizable value test. The guidance applies only to inventories for which cost is determined by methods other than last-in first-out and the retail inventory method. The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. It is currently management’s intent to adopt this accounting pronouncement upon the effective date.

 

No other new accounting pronouncements issued or effective during this period have 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 review and study 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 any such proposed or revised standards would have on our consolidated financial statements.

 

 

ITEM 7A.     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. We are not subject to market risk only with respect to interest rates on outstanding debt as all of our outstanding debt as of December 31, 2015 bears interest at fixed interest rates. As of December 31, 2015, we had principal amounts outstanding of $48.5 million in Senior Secured Loans at a fixed interest rate of 6% per annum and approximately $0.7 million in interest bearing debt at a fixed interest rate of 5.8% per annum. However, if additional debt is incurred to refinance the Senior Secured Loans, or otherwise, future earnings and cash flow may be affected by changes in interest rates.

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements and schedules listed in Item 15 are included in this Annual Report on Form 10-K beginning on page 
F-1.

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A.

CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As of the end of the period covered by this Annual Report on Form 10-K, 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 provide assurance 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 Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer to allow timely decisions regarding required disclosure. The evaluation conducted did not include an evaluation of the Predecessor.

 

Management Report on Internal Control Over Financial Reporting

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Managers regarding the preparation and fair presentation of published financial statements.

 

All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further because of changes in conditions, the effectiveness of internal controls may vary over time.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated 1992 Framework. The Company is in the process of adopting the 2013 Framework. Based on our assessment we believe that, as of December 31, 2015, the Company’s internal control over financial reporting is effective based on those criteria.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by the Company’s registered public accounting firm pursuant to Item 308 of Regulation S-K under the Securities Act that permits the Company to provide only management’s report in this annual report.

 

 

Changes in Internal Control Over Financial Reporting

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

ITEM 9B.

OTHER INFORMATION

 

None.

 

 

PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Managers and Executive Officers

 

Pursuant to the terms of the Amended and Restated Operating Agreement of the Company (the “Operating Agreement”), our Board of Managers is comprised of four members designated as follows: (i) the three Lenders who are a holders of greater than 10% of our Common Units are each entitled to designate one individual to serve on the Board of Managers; and (ii) the Lenders who are holders of less than 10% of our Common Units are entitled to vote as a group on the election of one individual to serve on the Board of Managers.

 

In accordance with the terms of the Operating Agreement, the Board of Managers may appoint executive officers at any time. Our current officers are Soohyung Kim, as Chief Executive Officer and Secretary , Ellis Landau, as President and Treasurer , and Robert Schaffhauser, as Chief Financial Officer.

 

The following table sets forth the members of the Board of Managers and executive officers of the Company and provides their respective ages and positions with the Company.

 

Name		Age		Position
Soohyung Kim		41		Manager, Chief Executive Officer and Secretary
Ellis Landau		72		Manager, President and Treasurer
Eugene I. Davis		61		Manager
Charles Atwood		67		Manager
Robert Schaffhauser		69		Chief Financial Officer

 

Set forth below is a description of the backgrounds, including business experience, for each member of the Board of Managers and executive officers of the Company as of March 28, 2016.

 

Soohyung Kim. On November 1, 2011, Mr. Kim was appointed to the Company’s Board of Managers in accordance with the terms of the Operating Agreement. In addition, on November 1, 2011, the Board of Managers appointed Mr. Kim as Chief Executive Officer and Secretary. Mr. Kim is the Managing Partner of Standard General, a New York-based investment manager. Mr. Kim was formerly Director of Research and Founding Partner of Cyrus Capital Partners. Prior to that, he was a Principal at Och-Ziff Capital Management where he helped launch its fixed income business. Mr. Kim is a member of the Board of Directors of Media General Broadcasting. He is also a member of the Board of Directors of the following charities: Greenwich House, Coalition for Queens, Carey Institute of Ecosystem Studies and the Stuyvesant Alumni Association. He graduated with an A.B. from the Wilson School of Public and International Affairs at Princeton University. Mr. Kim brings to our Board of Managers his operating and leadership experience as Chief Investment Officer of an investment firm. Through his involvement with Standard General he has provided leadership to companies that have been in distressed and turn-around situations and are undergoing dramatic changes. He brings to our Board of Managers extensive experience in finance, business development, mergers and acquisitions, and business restructuring and integration.

 

Ellis Landau. On November 1, 2011, Mr. Landau was appointed to the Company’s Board of Managers in accordance with the terms of the Operating Agreement. On February 6, 2012, Mr. Landau was appointed President and Treasurer. In 2006, Mr. Landau retired as Executive Vice President and Chief Financial Officer of Boyd Gaming Corporation, a position he held since he joined the company in 1990. Mr. Landau previously worked for Ramada Inc., later known as Aztar Corporation, where he served as Vice President and Treasurer, as well as U-Haul International in Phoenix and the Securities and Exchange Commission in Washington, D.C. On December 1, 2014 Mr. Landau was appointed to the Board of Directors of Full House Resorts, a regional gaming company based in Las Vegas, Nevada. From 2007 to 2011, Mr. Landau was a member of the Board of Directors of Pinnacle Entertainment, Inc., a leading gaming company. He served as Chairman of the Audit Committee and as a member of its Nominating and Governance Committee, and on its Compliance Committee. In addition, Mr. Landau is active in non-profit organizations. He is a Member of the Las Vegas Regional Board of the Anti-Defamation League and a member of the National Executive Commission, the Budget Committee, a Trustee and Secretary of the ADL Foundation and he is a Member of the Board and serves as Treasurer of the Las Vegas Philharmonic and serves on the Board of Nathan Adelson Hospice, the only non-profit hospice in Las Vegas, Nevada. Mr. Landau is currently a member of the Board of Managers of Pricefalls, LLC, an early stage e-commerce company. In addition, Mr. Landau serves as a member of the Board of Directors of A-Mark Precious Metals Inc., a public, full service precious metals trading company based in Santa Monica, California.  For A-Mark, he serves as Chairman of the Audit Committee and a member of the Compensation Committee. He received his Bachelor of Arts in economics from Brandeis University in 1965 and his M.B.A. in finance from Columbia University Business School in 1967. He served in the United States Army Reserve from 1967 to 1973. Mr. Landau has served as a member of the board of directors of a national gaming company and an executive officer of another gaming company bringing his experience in the industry to our Board of Managers. Mr. Landau has achieved success in the personal field and has demonstrated integrity and high personal and professional ethics, sound business judgment, and willingness to devote the time to his duties on our Board of Managers, in order to contribute to the Company’s overall corporate goals.

 

 

Eugene I. Davis. On November 1, 2011, Mr. Davis was appointed to the Company’s Board of Managers in accordance with the terms of the Operating Agreement. Since 1999, Mr. Davis has served as Chairman and Chief Executive Officer of PIRINATE Consulting Group, LLC, a privately held consulting firm specializing in turnaround management, merger and acquisition consulting and hostile and friendly takeovers, proxy contests and strategic planning advisory services for domestic and international public and private business entities. Since forming PIRINATE in 1997, Mr. Davis has advised, managed, sold, liquidated and served as a Chief Executive Officer, Chief Restructuring Officer, Director, Committee Chairman and Chairman of the Board of a number of businesses operating in diverse sectors such as telecommunications, automotive, manufacturing, high-technology, medical technologies, metals, energy, financial services, consumer products and services, import-export, mining and transportation and logistics. Previously, Mr. Davis served as President, Vice Chairman and Director of Emerson Radio Corporation and Chief Executive Officer and Vice Chairman of Sport Supply Group, Inc. He began his career as an attorney and international negotiator with Exxon Corporation and Standard Oil Company (Indiana) and as a partner in two Texas-based law firms, where he specialized in corporate/securities law, international transactions and restructuring advisory. Mr. Davis holds a bachelor’s degree from Columbia College, a master of international affairs degree (MIA) in international law and organization from the School of International Affairs of Columbia University, and a Juris Doctorate from Columbia University School of Law. Mr. Davis is also a director of Spectrum Brands, Inc., WMI Holdings Corp., and U.S. Concrete, Inc., Hercules Offshore, Inc. and Geno Shipping and Trading Limited. He is also a director of Trump Entertainment Resorts, Inc. and Harbinger Group, Inc. During the past five years, Mr. Davis has also been a director of Ambassadors International, Inc., American Commercial Lines Inc., Delta Airlines, Foamex International Inc., Dex One Corp., Footstar, Inc., Granite Broadcasting Corporation, GSI Group, Inc., Ion Media Networks, Inc., Knology, Inc., Media General, Inc., Mosaid Technologies, Inc., Ogelbay Norton Company, Orchid Cellmark, Inc., PRG-Schultz International Inc., Roomstore, Inc., Rural/Metro Corp., SeraCare Life Sciences, Inc., Silicon Graphics International, Smurfit-Stone Container Corporation, Solutia Inc., Spansion, Inc., Tipperary Corporation, Viskase, Inc. and YRC Worldwide, Inc.

 

Charles Atwood. On July 26, 2012, Mr. Atwood was appointed to the Company’s Board of Managers in accordance with the terms of the Operating Agreement. Mr. Atwood retired in December 2008 as Vice Chairman of the Board of Directors for Harrah’s Entertainment, Inc., now Caesars Entertainment, Inc. Mr. Atwood joined Harrah’s in 1979 and held numerous finance and development positions during his tenure. He was named Chief Financial Officer in 2001, joined Harrah’s Board of Directors in July 2005, and became Vice Chairman in 2006. On March 12, 2015 Mr. Atwood was elected to the Board of Directors of Pinnacle Entertainment, an owner, operator and developer of casinos and related hospitality and entertainment facilities. Mr. Atwood is the Lead Trustee of the Board of Trustees for Equity Residential, a REIT listed on the New York Stock Exchange. He is also a member of the board of directors of Gala Coral Group, a London-based company. Mr. Atwood received a Bachelor of Science Degree in Business Administration from the University of Southern Mississippi and a Masters of Business Administration Degree in Finance from Tulane University.

 

Robert Schaffhauser. Mr. Schaffhauser was appointed Chief Financial Officer on March 7, 2013. Mr. Schaffhauser has served as the Chief Financial Officer for Aliante Gaming, an affiliate of the Company, since December 27, 2012. Prior to joining Aliante Gaming, Mr. Schaffhauser served as the Executive Vice President-Finance and Principal Financial Officer for Colony Resorts LVH Acquisitions, LLC (d/b/a the Las Vegas Hilton) where for a period of eight years, he was responsible for business planning and administrative functions (including finance, legal, human resources, information technology and purchasing). Mr. Schaffhauser, for a period of over eight years, also served as a senior financial officer for various affiliates of Trump Hotels & Casinos. Mr. Schaffhauser holds a bachelor degree in Accounting from Rutgers University.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires the Company’s executive officers, members of the Board of Managers and Members who own more than 10% of the Company’s Common Units to file reports of ownership and reports of changes in ownership on Forms 3, 4 and 5 with the SEC. Executive officers, members of the Board of Managers and 10% stockholders are required by the SEC to furnish the Company with all Forms 3, 4 and 5 they file. To our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports were required during the past fiscal year, all Section 16(a) filing requirements applicable to our officers and managers were met.

 

 

Code of Ethics

 

We have adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to all of our members of the Board of Managers, executive officers (including our principal executive officer and principal financial officer) and employees. The Code of Ethics and any waivers or amendments to the Code of Ethics are available to any person without charge, upon request directed to the Company’s Secretary at 7300 Aliante Parkway, North Las Vegas, NV 89084.

 

Nominating Committee

 

Given our status as a privately-held company, we do not currently hold member meetings nor do we have a policy or procedures with respect to member recommendations for nominees to the Board of Managers. In addition, we do not currently have a policy with respect to considering and identifying Board of Manager nominees. There have been no material changes to the Company’s Operating Agreement which outlines the procedures by which the Members nominate individuals for the Board of Managers. All of the holders of our Common Units are parties to the Company’s Operating Agreement.

 

Audit Committee

 

Our Board of Managers does not have a separately designated standing audit committee (“Audit Committee”). Our entire Board of Managers is serving as our Audit Committee which is currently comprised of Soohyung Kim, Ellis Landau, Eugene I. Davis and Charles Atwood. In light of the absence of a public trading market for our Common Units, our Board of Managers has not designated any member of the Audit Committee as an “audit committee financial expert”; however, each member would be considered an “audit committee financial expert” under applicable SEC rules and regulations and Mr. Davis and Mr. Atwood would be considered independent as independence is defined in Section 303A.02 of the listing standards of the New York Stock Exchange (the “NYSE”). Although we are not subject to the rules promulgated by the NYSE, we have used the independence requirements of the listing standards of the NYSE as a benchmark to determine whether our members of the Board of Managers would be independent. Mr. Kim and Mr. Landau would not be considered independent under the NYSE listing standards due to their positions as executive officers of the Company.

 

Manager Independence

 

Our Board of Managers is composed of Soohyung Kim, Ellis Landau, Eugene I. Davis and Charles Atwood. Though not formally considered by our Board of Managers because our Common Units are not traded on any national securities exchange, based upon the listing standards of the NYSE, we believe that Mr. Davis and Mr. Atwood would be considered independent as independence is defined in Section 303A.02 of the listing standards of the NYSE. Although we are not subject to the rules promulgated by the NYSE, we have used the independence requirements of the listing standards of the NYSE as a benchmark to determine whether our members of the Board of Managers would be independent. Mr. Kim and Mr. Landau would not be considered independent under the NYSE listing standards due to their positions as executive officers of the Company.

 

ITEM 11.

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Overview

 

The Board of Managers has the authority to appoint executive officers and fix their compensation in accordance with the terms of the Operating Agreement. The compensation of executive officers is designed to provide compensation that is competitive in the marketplace and to incentivize executive officers to increase our revenues and maximize value to our members. The Board of Managers does not delegate the authority to establish executive officer compensation to any other person and has not retained any compensation consultants to determine or recommend the amount or form of executive and director compensation. Instead, the Board of Managers relies on its prior experience and upon the recommendations of its Chief Executive Officer in determining compensation for the Company’s executives. As of December 31, 2015, the executive officers of the Company, whom we refer to as our “Named Executive Officers” are:

 

●     Soohyung Kim, Chief Executive Officer and Secretary;

●     Ellis Landau, President and Treasurer; and

●     Robert Schaffhauser, Chief Financial Officer.

  

 

Compensation Philosophy and Objectives

 

Our executive compensation philosophy is designed to attract and retain talented key executives, while supporting our key business objectives and maximizing value for our members. In setting the compensation of our Named Executive Officers, we evaluate the scope of their responsibilities and apply our general knowledge of compensation practices in the Las Vegas hotel and casino market. The amount and form of compensation paid to our Named Executive Officers is also determined by the position and anticipated duties and responsibilities of the officer within the organization. The primary components of our executive compensation are base salary and an annual cash bonus. Base salary and the annual cash bonus are determined based on job function and each executive’s contribution to our performance and achievement of our overall business objectives. However, in 2013, no bonuses were paid to our Named Executive Officers. In 2014 and 2015, Mr. Schaffhauser was the only named Executive Officer who earned a bonus. Mr. Schaffhauser earned a bonus in the amount of $125,120 for 2014 and $155,430 for 2015. The bonuses were paid in the first quarter of 2015 and 2016, respectively.

 

Elements of Executive Compensation

 

Base Salary

 

We view executive officer base salaries as a tool that provides executives with a reasonable base level of compensation relative to their duties and responsibilities. In setting base salaries the Company reviews salaries for comparable positions in the Las Vegas marketplace. The base salary for Mr. Schaffhauser was set in connection with the entry of an employment agreement by the Company with Mr. Schaffhauser. The base salary paid to Mr. Schaffhauser in 2015 and 2014 was$275,000 and $250,000 respectively. As of December 31, 2015, we have not entered into any agreements with Messrs. Kim and Landau and they currently receive no compensation for serving in their respective capacities as executive officers.

 

Bonus

 

In 2014, the Company established an annual cash bonus program to reward certain key employees, including Mr. Schaffhauser, for the achievement of the Company’s overall business objectives. The Company has paid out $1.3 million under the 2014 cash bonus program. Of this amount, $0.4 million was paid out in 2014 and $0.9 million was paid out in 2015.

 

The Company has also established a 2015 cash bonus program. Qualifying key employees have received a cash bonus based upon an evaluation of the key employee’s performance and upon the achievement of the Company’s overall business objectives. The Company has paid out $1.7 million under the 2015 cash bonus program. Of this amount, $0.4 million was paid out in 2015 and $1.3 million was paid out in 2016.

 

Mr. Schaffhauser is the only named Executive Officer who participated in the 2014 and 2015 cash bonus programs.

 

Executive Benefits and Perquisites

 

Mr. Schaffhauser, like our other employees, qualifies to participate in the Aliante Gaming 401(k) Retirement Plan, as well as group medical, dental, life and disability insurance programs that are offered to employees of Aliante Gaming. Messrs. Kim and Landau do not participate in the aforementioned plans as they are not engaged as employees of the Company or of Aliante Gaming.

 

  

Summary Compensation Table

Name and Principal Position		Year		Salary ($)				Annual Bonus ($)				All Other Compensation ($)				Total ($)
Soohyung Kim (1)		2015			—				—				—				—
Chief Executive Officer and Secretary		2014			—				—				—				—
		2013			—				—				—				—
Ellis Landau (2)		2015			—				—				—				—
President and Treasurer		2014			—				—				—				—
		2013			—				—				—				—
Robert Schaffhauser (3)		2015		$	275,000			$	155,430	(4)			—			$	430,430
Chief Financial Officer		2014			250,000				125,120	(4)			—				375,120
		2013			—				—				—				—

 

---

(1)

Mr. Kim was appointed as Chief Executive Officer and Secretary of the Company on November 1, 2011. Mr. Kim is an employee of Standard General. Mr. Kim’s customary duties include, among other things, serving in management positions with respect to portfolio companies and carrying out customary responsibilities in connection with those roles. Mr. Kim receives compensation as an employee of Standard General and is not separately compensated in connection with services to the Company.

(2)

Mr. Landau was appointed as President and Treasurer of the Company on February 6, 2012. Mr. Landau is not employed by the Company and has not received any compensation for serving in the capacity as an executive officer.

(3)

Mr. Schaffhauser was hired by Aliante Gaming as Chief Financial Officer on December 27, 2012, and was appointed by the Board of Managers as Chief Financial Officer of the Company and of Aliante Gaming on March 7, 2013. Mr. Schaffhauser received a salary of $250,000 for 2014 and 2013 and $275,000 for 2015.

(4)

Mr. Schaffhauser was paid his 2015 bonus in 2016 and was paid his 2014 bonus in 2015.

 

Grants of Plan-Based Awards Table

 

We had no equity incentive plan as of December 31, 2015 and did not grant any stock or option awards to our Named Executive Officers in 2015, 2014 or 2013 in their capacity as an executive officer.

 

Outstanding Equity Awards at Fiscal Year-End Table

 

We had no outstanding equity awards for our Named Executive Officers at December 31, 2015, 2014 or 2013 in their capacity as an executive officer.

 

Option Exercises and Stock Vested Table

 

We had no option exercises or stock vest for our Named Executive Officers during the years ended December 31, 2015, 2014 or 2013 in their capacity as an executive officer.

 

Pension Benefits

 

We had no defined benefit plan or supplemental executive retirement plan at December 31, 2015, 2014 or 2013.

 

Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans

 

We had no nonqualified defined contribution or other nonqualified deferred compensation plans offered to our Named Executive Officers at December 31, 2015, 2014 or 2013.

 

Employment Agreement

 

Effective December 11, 2015, the Company and Aliante Gaming entered into a new employment agreement with Mr. Schaffhauser (the new “Schaffhauser Employment Agreement”). The Schaffhauser Employment Agreement superseded and replaced the December 27, 2012 employment agreement previously entered into by and between Mr. Schaffhauser and Aliante Gaming. Pursuant to the Schaffhauser Employment Agreement, the Company and Aliante Gaming agreed to employ Mr. Schaffhauser for an initial term of two years with an effective commencement date of December 9, 2015. The initial term will be automatically renewed for subsequent one-year terms unless the Schaffhauser Employment Agreement has been terminated in accordance with its terms or either party provides the other with notice of non-renewal at least 90 days prior to the expiration of the then applicable term. The Schaffhauser Employment Agreement provides for a base salary of $275,000 per year (“Base Salary”), and a discretionary bonus. Mr. Schaffhauser is eligible for a long-term incentive payment in the event of (1) a change in control of the Company, (2) the sale of the Company, (3) the continuation of Mr. Schaffhauser’s employment through December 31, 2018, (4) the termination of Mr. Schaffhauser’s employment without cause, or (5) Mr. Schaffhauser’s death or disability. The long-term incentive payment is to be based on the attainment of certain measurable growth objectives and a five (5) year vesting schedule, commencing on Mr. Schaffhauser’s initial employment by Aliante Gaming.

 

The Schaffhauser Employment Agreement also provides certain additional benefits and perquisites made generally available to the management of Aliante Gaming.

 

In the event of termination of Mr. Schaffhauser’s employment without cause, Mr. Schaffhauser is entitled to a termination payment equal to (i) the Base Salary which remains unpaid for the period up to the date of termination (ii) an amount equal to one (1) year’s Base Salary, and (iii) a performance bonus, if applicable, prorated based upon the number of days of his employment during the year of termination. Mr. Schaffhauser would also be entitled to a long-term incentive payout if his employment is terminated without cause.

 

 

Pursuant to the Schaffhauser Employment Agreement, Mr. Schaffhauser has agreed to certain restrictive covenants during the term of his employment and for specified periods following termination, including but not limited to, not divulging confidential information, non-competition and non-solicitation. Mr. Schaffhauser cannot engage in competition with Aliante Gaming, or own any interest in or perform any services for certain businesses engaged in competition with Aliante Gaming, within a specified restricted area and during a specified restriction period. In addition Mr. Schaffauser must assign all intellectual property conceived or developed by Mr. Schaffhauser during the term of his employment.

 

We have no agreements or arrangements, written or unwritten, that provide for any payment to Messrs. Kim or Landau at or in connection with any resignation of their positions as executive officers, or a change-in-control with respect to the Company as of December 31, 2015.

 

Compensation of Directors

 

The following table discloses the compensation for each member of our Board of Managers for the year ended December 31, 2015.

 

DIRECTOR COMPENSATION

Name		Fees Earned
Soohyung Kim (a)		$	—
Ellis Landau			82,000
Eugene I. Davis			82,000
Charles Atwood			82,000

 

---

(a) Soohyung Kim has waived all compensation otherwise due and is not separately compensated in connection with serving on the Board of Managers.

 

Narrative to Director Compensation Table

 

In accordance with terms of the Operating Agreement, except with respect to any member of the Board of Managers who is employed by the Company, no member of the Board of Managers is entitled to receive remuneration for services rendered or goods provided to the Company for their services other than customary manager fees established by the Board of Managers. However, the Company shall reimburse the Board of Managers for all reasonable travel and accommodation expenses incurred in connection with meeting of the Board of Managers.

 

Narrative Disclosure of the Registrant’s Compensation Policies and Practices as They Relate to the Registrants Risk Management

 

The employees of our wholly-owned subsidiary, Aliante Gaming, are compensated through the compensation programs or policies of Aliante Gaming. We have discussed the compensation program and policies of Aliante Gaming with management and have determined that any risks associated with compensation programs or policies applicable to the employees of Aliante Gaming are not reasonably likely to have a material adverse effect on our Company.

 

Compensation Committee Interlocks and Insider Participation

 

We currently do not have a standing compensation committee. The Board of Managers is responsible for considering and determining the compensation related to our executive officers and Board of Managers. The current members of our Board of Managers are Soohyung Kim, Ellis Landau, Eugene I. Davis and Charles Atwood. In addition, Mr. Kim and Mr. Landau are current executive officers of the Company. During 2015, none of our executive officers served as a member of the compensation committee (or other committee serving an equivalent function) of another entity, one of whose executive officers served as a member of our Board of Managers.

 

 

Compensation Committee Report

 

We, as the Board of Managers, have reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on this review and discussion with management, the Board of Managers have recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the year ended December 31, 2015.

 

Respectfully Submitted,

 

Soohyung Kim

Ellis Landau

Eugene I. Davis

Charles Atwood

 

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

Security Ownership of Certain Beneficial Owners and Management

 

The following table shows each person who beneficially owned more than 5% of our Common Units as of February 12, 2016.

 

Name and Address		Number of Common Units				Percentage of Outstanding Common Units
North LV Holdco, LLC (1)			136,807				31.653	%
North LV Holdco II, LLC (2)			85,086				19.686	%
North LV Holdco III, LLC (3)			85,086				19.686	%
Halcyon ALST, LLC (4)			35,780				8.2780	%
NYBEQ LLC (5)			35,134				8.129	%
Credit Agricole Leasing (USA) Corporation (6)			25,095				5.806	%
Merrill, Lynch, Pierce, Fenner & Smith Inc., a wholly owned subsidiary of Bank of America Corporation (7)			27,825				6.438	%

 

Name and Address		Number of Common Units				Percentage of Outstanding Common Units
Soohyung Kim (8)			—				—
Ellis Landau (8)(9)			170,292				39.400	%
Eugene I. Davis (8)			90				*
Charles Atwood (8)			—				—
Robert Schaffhauser (8)			—				—
All executive officers and directors as a group (5 persons)			170,382				39.421	%

 

---

*	Represents holding percentage of less than 1%

(1)	The address of North LV Holdco LLC is 767 Fifth Avenue, New York, NY 10153. North LV Holdco LLC is an affiliate of Standard General LP.

(2)	The address of North LV Holdco II, LLC is Ellis Landau, c/o ALST Casino Holdco, LLC, 7300 Aliante Parkway, North Las Vegas, NV, 89084. North LV Holdco II, LLC is an affiliate of Apollo Management, L.P.

(3)	The address of North LV Holdco III, LLC is Ellis Landau, c/o ALST Casino Holdco, LLC, 7300 Aliante Parkway, North Las Vegas, NV 89084. North LV Holdco III, LLC is an affiliate of TPG Capital L.P.

(4)	The address of Halcyon ALST, LLC is 477 Madison Avenue, 8th Floor, New York, NY 10022.

(5)	The address of NYBEQ LLC is c/o Natixis, 9 West 57th Street, 15th Floor, New York, NY 10019. NYBEQ LLC is an affiliate of Natixis.

(6)	The address of Credit Agricole Leasing (USA) Corporation is 1301 Avenue of the Americas, New York, NY 10019-6022.

(7)	The address of Merrill, Lynch, Pierce, Fenner & Smith Inc. is 214 N. Tryon St., NC1-027-15-01, Charlotte, NC 28255, Attn: Information Manager.

(8)	The address of such persons is c/o ALST Casino Holdco, LLC, 7300 Aliante Parkway, North Las Vegas, NV, 89084.

(9)

Reflects 85,086 of Common Units held by North LV Holdco II, LLC and 85,086 Common Units held by North LV Holdco III, LLC in which Mr. Landau is the sole member and may be deemed to beneficially own, and 120 Common Units held by Mr. Landau directly. The address of Mr. Landau is c/o ALST Casino Holdco, LLC, 7300 Aliante Parkway, North Las Vegas, NV, 89084.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

As of December 6, 2011, the Board of Managers approved the 2011 Equity Plan as authorized by the Operating Agreement which provides for a maximum of 43,200 non-voting Incentive Units. On December 6, 2011 the Company issued 500 Incentive Units to Ellis Landau and 250 Incentive Units to Eugene I. Davis. On April 4, 2014 the Company issued 250 Incentive Units to Charles Atwood. As of December 31, 2015, there were 42,200 Incentive Units available for issuance under the Equity Plan. No Incentive Units, or Common Units, were issued by the Company during 2015 with respect to any compensation plans.

  

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Transactions with Related Parties

 

On November 1, 2011, the Company and Aliante Gaming entered into the Senior Secured Credit Facility with, Wilmington Trust FSB, as administrative agent, and the lenders named therein, which are holders of our Common Units. As discussed in “Item 1. Business - Background” the Senior Secured Credit Facility consists of $45.0 million of Senior Secured Loans. In addition, the Lenders own 100% of our Common Units. Pursuant to the Operating Agreement the Lenders have the right to designate up to four individuals to serve on the Company’s Board of Managers. The members of our Board of Managers that are designated by the Lenders could be deemed to have a material direct or indirect interest in the Senior Secured Credit Agreement by virtue of their relationship with the Lenders. For a further discussion of the Senior Secured Credit Facility see “Item 1A. Risk Factors - We have significant indebtedness”, “Item 1A. Risk Factors - Our indebtedness imposes restrictive covenants on us that will limit our flexibility in operating our business and may adversely affect our ability to compete or engage in favorable business or financing activities.” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources”.

 

Review, Approval or Ratification of Transactions with Related Parties

 

Our Code of Ethics requires that the Company obtain the approval of the Board of Managers before entering into any contract or other arrangement on behalf of the Company that constitutes a “related-party” transaction (as defined in Item 404 of Regulation S-K promulgated by the SEC). Such transactions are brought to the attention of the Board of Managers by management or the affected related person. In its review and determination, the Board of Managers considers all relevant facts and circumstances, such as the business interest of the Company in such transaction, the benefits to the Company of the transaction, whether the terms of the transaction are no less favorable than those available with unrelated third parties and the nature of the related party’s interest in such transaction. In addition, the Company’s Operating Agreement requires approval of the Members that hold at least two-thirds of the outstanding Units at the time, for transactions between the Company, or a subsidiary of the Company, on one hand and any Member or any Affiliate (as defined in the Operating Agreement) of such Member, on the other hand, subject to certain limited exceptions.

 

Manager Independence

 

Our Board of Managers is composed of Soohyung Kim, Ellis Landau, Eugene I. Davis and Charles Atwood. Though not formally considered by our Board of Managers because our Common Units are not traded on any national securities exchange, based upon the listing standards of the NYSE, we believe that Mr. Davis and Mr. Atwood would be considered independent as independence is defined in Section 303A.02 of the listing standards of the NYSE. Although we are not subject to the rules promulgated by the NYSE, we have used the independence requirements of the listing standards of the NYSE as a benchmark to determine whether our members of the Board of Managers would be independent. Mr. Kim and Mr. Landau would not be considered independent under the NYSE listing standards due to their positions as executive officers of the Company.

 

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table summarizes the aggregate fees the Company paid or accrued to Ernst & Young LLP (“E&Y”), our independent auditor, during 2015 and 2014:

 

		Aggregate Fees
		2015				2014
Category
Audit fees		$	145,350			$	142,500
Audit-related fees			12,750				12,500
Tax fees			133,134				102,580
All other fees			—				—

 

Audit fees include the aggregate fees paid or accrued for professional services rendered for our annual audit and the quarterly reviews of our financial statements. Audit-related fees include the aggregate fees paid or accrued for assurance and related services that are reasonably related to the performance of the audit or review of financial statements provided in connection with other regulatory or statutory filings including services related to SEC periodic filings. Tax fees include the aggregate fees paid or accrued for professional services rendered for tax compliance, tax advice and tax planning.

 

The Board of Managers has adopted a policy that requires advance approval of all audit, audit-related, tax and other services performed by the independent auditors. The policy provides for pre-approval by the Board of Managers of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Board of Managers must approve the permitted service before the independent auditor is engaged to perform it. All of the fees described in the table above were pre-approved by the Board of Managers.

 

 

PART IV

 

ITEM  15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a)(1).     Financial Statements.

 

Financial statements and notes thereto that are included in Part II of this report are listed below:

 

	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of December 31, 2015 and 2014	F-2
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013	F-3
Consolidated Statements of Changes in Members’ Equity for the years ended December 31, 2015, 2014 and 2013	F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013	F-5
Notes to Consolidated Financial Statements	F-6

  

 

(a)(2).

Financial Statement Schedules.

 

We have omitted financial statement schedules because they are not required or are not applicable, or the required information is shown in the financial statements or notes to the financial statements.

 

(a)(3).

Exhibits.

 

Exhibit Number		Description
2.1		First Amended Prepackaged Joint Chapter 11 Plan of Reorganization for Subsidiary Debtors, Aliante Debtors and Green Valley Ranch Gaming, LLC dated May 20, 2011 with Respect to Subsidiary Debtors and Aliante Debtors. (Incorporated herein by reference to the Company’s Form 10 dated October 24, 2011)
3.1		Articles of Organization of the Company. (Incorporated herein by reference to the Company’s Form 10 dated October 24, 2011)
3.2		Amended and Restated Operating Agreement of ALST Casino Holdco, LLC. (Incorporated herein by reference to the Company’s Form 8-K dated November 4, 2011)
10.1		License Agreement between North Valley Enterprises, LLC and Aliante Gaming, LLC dated January 6, 2006. (Incorporated herein by reference to the Company’s Amendment No. 1 to Form 10 dated October 28, 2011)
10.2		Credit Agreement, dated as of November 1, 2011, by and among Aliante Gaming, LLC, ALST Casino Holdco, LLC, Wilmington Trust, National Association, as administrative agent, and the lenders party thereto. (Incorporated herein by reference to the Company’s Form 8-K dated November 4, 2011)
10.3		Management Agreement, dated as of November 1, 2011, by and between Aliante Gaming, LLC and Station Casinos, LLC. (Incorporated herein by reference to the Company’s Form 8-K dated November 4, 2011)
10.4		License Agreement, dated as of November 1, 2011, by and between ALST Casino Holdco, LLC and Station Casinos, LLC. (Incorporated herein by reference to the Company’s Form 8-K dated November 4, 2011)
10.5		ALST Casino Holdco, LLC 2011 Equity Plan. (Incorporated herein by reference to the Company’s Form 10-K dated March 30, 2012)
10.6		Employment Agreement between Aliante Gaming, LLC and Robert Schaffhauser, dated as of December 27, 2012. (Incorporated herein by reference to the Company’s Form 8-K dated March 13, 2013)
10.7		Addendum to the Employment Agreement of Robert Schaffhauser (Incorporated herein by reference to the Company’s Form 10-Q dated November 14, 2014)
10.8		Employment Agreement between Aliante Gaming, LLC and Robert Schaffhauser, dated as of December 11, 2015. (Incorporated herein by reference to the Company’s Form 8-K dated December 17, 2015).
21.1		Subsidiaries of the Registrant.
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.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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: March 28, 2016	By:	/s/ SOOHYUNG KIM
	Name:	Soohyung Kim
	Title:	Manager, Chief Executive Officer and Secretary

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ SOOHYUNG KIM		Manager, Chief Executive Officer and Secretary		March 28, 2016
Soohyung Kim		(Principal Executive Officer)
/s/ ROBERT SCHAFFHAUSER		Chief Financial Officer (Principal Financial Officer)		March 28, 2016
Robert Schaffhauser
/s/ ELLIS LANDAU		Manager		March 28, 2016
Ellis Landau
/s/ EUGENE I. DAVIS		Manager		March 28, 2016
Eugene I. Davis
/s/ CHARLES ATWOOD		Manager		March 28, 2016
Charles Atwood

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Managers and Members of ALST Casino Holdco, LLC:

 

We have audited the accompanying consolidated balance sheets of ALST Casino Holdco, LLC and subsidiary (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of operations, changes in members’ equity, and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ALST Casino Holdco, LLC and subsidiary at December 31, 2015, and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with U.S. generally accepted accounting principles.

 

 

/s/ Ernst & Young LLP

 

Las Vegas, Nevada

March 28, 2016

 

  

ALST CASINO HOLDCO, LLC

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

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

 

  

ALST CASINO HOLDCO, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

 

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

 

  

ALST CASINO HOLDCO, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

(in thousands)

 

 

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

 

  

ALST CASINO HOLDCO, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

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

 

  

ALST CASINO HOLDCO, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

 

 

 

 

 

 

 

F-14