10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2005
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from            to

Commission File Number: 333-118149

American Casino & Entertainment Properties LLC

(Exact name of registrant as specified in its charter)

Delaware	20-0573058
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2000 Las Vegas Boulevard South Las Vegas, NV (Address of principal executive offices)	89104 (Zip Code)

(702) 380-7777

(Registrant’s telephone number, including area code)

     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 þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes o          No þ

TABLE OF CONTENTS

		Page
Part I	FINANCIAL INFORMATION
	Item 1.  Unaudited Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004		2
	Condensed Consolidated Statements of Income for the three months ended June 30, 2005 and June 30, 2004 (unaudited)		3
	Condensed Consolidated Statements of Income for the six months ended June 30, 2005 and June 30, 2004 (unaudited)		4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and June 30, 2004 (unaudited)		5
	Notes to Condensed Consolidated Financial Statements (unaudited)		6
	Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations		8
	Item 3.  Quantitative and Qualitative Disclosures About Market Risk		14
	Item 4.  Controls and Procedures		14
Part II	OTHER INFORMATION
	Item 6.  Exhibits		II-1

1

PART I.     FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

		As of		As of
		June 30, 2005		December 31, 2004
		(Unaudited)
		(In thousands)
ASSETS
Current Assets:
	Cash and cash equivalents	$	97,071	$	75,161
	Cash and cash equivalents-restricted		501		448
	Investments-restricted		2,826		2,546
	Accounts receivable, net		3,414		3,942
	Related party receivables		858		388
	Deferred income taxes		2,685		2,685
	Other current assets		10,285		10,311
Total Current Assets			117,640		95,481
Property and Equipment, net			315,009		314,609
Debt issuance and deferred financing costs, net			6,923		7,447
Lessee incentive			—		367
Deferred income taxes			39,827		46,437
Total Other Assets			46,750		54,251
TOTAL ASSETS		$	479,399	$	464,341
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
	Accounts payable-trade	$	3,066	$	4,429
	Accounts payable-construction		805		805
	Accrued expenses		22,633		22,759
	Accrued payroll and related expenses		9,304		10,779
	Current portion of capital lease obligation		461		450
Total Current Liabilities			36,269		39,222
Long-Term Liabilities:
	Notes payable		215,000		215,000
	Accrued lessee incentive		40		568
	Capital lease obligations, less current portion		3,065		3,298
	Other		5,257		5,257
Total Long-Term Liabilities			223,362		224,123
Total Liabilities			259,631		263,345
Commitments and Contingencies
Member’s Equity:
Member’s Equity			219,768		200,996
	Total Member’s Equity		219,768		200,996
Total Liabilities and Member’s Equity		$	479,399	$	464,341

See notes to condensed consolidated financial statements.

2

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

			Three Months			Three Months
			Ended			Ended
			June 30, 2005			June 30, 2004
			(Unaudited)
			(In thousands)
Revenues:
	Casino		$	43,791		$	39,799
	Hotel			15,712			13,835
	Food and beverage			17,892			16,719
	Tower, retail and other			9,219			8,604
		Gross Revenues		86,614			78,957
	Less promotional allowances			5,105			5,597
		Net Revenues		81,509			73,360
Costs and Expenses:
	Casino			15,400			15,486
	Hotel			6,844			5,940
	Food and beverage			12,958			12,044
	Other operating expenses			4,074			3,415
	Selling, general and administrative			18,998			19,147
	Depreciation and amortization			5,730			6,431
	Gain on sale of assets			(2	)		(148	)
		Total Costs And Expenses		64,002			62,315
Income From Operations				17,507			11,045
Other Income (expense):
	Interest income			356			691
	Interest expense			(4,561	)		(5,376	)
		Total other expense, net		(4,205	)		(4,685	)
Income Before Income Taxes				13,302			6,360
Provision for income taxes				4,621			1,390
Net Income			$	8,681		$	4,970

See notes to condensed consolidated financial statements.

3

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

			Six Months			Six Months
			Ended			Ended
			June 30, 2005			June 30, 2004
			(Unaudited)
			(In thousands)
Revenues:
	Casino		$	91,520		$	82,391
	Hotel			31,505			27,723
	Food and beverage			34,968			33,420
	Tower, retail and other			17,425			16,580
		Gross Revenues		175,418			160,114
	Less promotional allowances			11,071			11,745
		Net Revenues		164,347			148,369
Costs and Expenses:
	Casino			31,300			31,182
	Hotel			12,867			11,536
	Food and beverage			25,334			23,664
	Other operating expenses			7,712			6,566
	Selling, general and administrative			38,685			37,327
	Depreciation and amortization			11,173			12,314
	Gain on sale of assets			(21	)		(144	)
		Total Costs And Expenses		127,050			122,445
Income From Operations				37,297			25,924
Other Income (expense):
	Interest income			523			955
	Interest expense			(9,100	)		(9,747	)
		Total other expense, net		(8,577	)		(8,792	)
Income Before Income Taxes				28,720			17,132
Provision for income taxes				9,948			5,944
Net Income			$	18,772		$	11,188

See notes to condensed consolidated financial statements.

4

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

				Six Months			Six Months
				Ended			Ended
				June 30, 2005			June 30, 2004
				(In thousands)
Cash Flows From Operating Activities:
	Net Income			$	18,772		$	11,188
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			11,173			12,314
		Gain on sale or disposal of assets			(21	)		(144	)
		Provision for deferred income taxes			6,610			2,830
		Changes in operating assets and liabilities:
			Restricted cash		(53	)		(447	)
			Accounts receivable, net		528			(498	)
			Other assets		917			(678	)
			Accounts payable — trade		(1,363	)		(2,882	)
			Accrued expenses		(2,129	)		2,455
Net Cash Provided By Operating Activities					34,434			24,138
Cash Flows From Investing Activities:
	(Increase) decrease in investments — restricted				(280	)		52
	Sale of marketable securities				—			4,200
	Acquisition of property and equipment				(11,590	)		(9,925	)
	Related party receivables				(470	)		44
	Cash proceeds from sale of property and equipment				38			398
Net Cash Used In Investing Activities					(12,302	)		(5,231	)
Cash Flows From Financing Activities:
	Debt issuance and deferred financing costs				—			(1,060	)
	Proceeds from related note payable				—			215,000
	Member Contribution				—			28,219
	Capital distribution				—			(187,816	)
	Payments on related party notes payable				—			(101,252	)
	Payments on capital lease obligation				(222	)		(25	)
Net Cash Used In Financing Activities					(222	)		(46,934	)
	Net increase (decrease) in cash and cash equivalents				21,910			(28,027	)
	Cash and cash equivalents — beginning of period				75,161			77,258
Cash and Cash Equivalents — end of period				$	97,071		$	49,231
Supplemental Disclosures of Cash Flow Information:
	Cash paid during the period for interest			$	8,596		$	2,342
	Cash paid during the period for income taxes			$	2,500		$	—
Non-Cash Investing And Financing Activities
	Net assets contributed by parent			$	—		$	6,886
	Change in tax asset related to acquisition			$	—		$	12,721

See notes to condensed consolidated financial statements.

5

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. The Company

      American Casino & Entertainment Properties LLC (the “Company” or “ACEP”) was formed in Delaware on December 29, 2003. The Company is a holding company that was formed for the purpose of acquiring the entities that own and operate the Stratosphere Casino Hotel & Tower (“Stratosphere”), Arizona Charlie’s Decatur and Arizona Charlie’s Boulder in Las Vegas, Nevada. Stratosphere had been owned by a subsidiary of our indirect parent, American Real Estate Holdings Limited Partnership (“AREH”). Arizona Charlie’s Decatur and Arizona Charlie’s Boulder were owned by Carl C. Icahn and one of his affiliated entities. Our senior management team has been responsible for the management of all three properties since 2002.

      ACEP is a subsidiary of American Entertainment Properties Corp. (“AEP”), and its ultimate parent is American Real Estate Partners, L.P. (“AREP”), a Delaware master limited partnership whose units are traded on the New York Stock Exchange. As of June 30, 2005, affiliates of Mr. Icahn owned 9,346,044 Preferred Units and 55,655,382 Depositary Units, which represent approximately 86.5% of the outstanding Preferred Units and approximately 90% of the outstanding Depositary Units of AREP. Mr. Icahn is the Chairman of the Board of Directors of American Property Investors, Inc., AREP’s general partner.

Note 2. Basis of Presentation

      The condensed consolidated financial statements have been prepared in accordance with the accounting policies described in our 2004 audited consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the notes to the 2004 consolidated audited financial statements presented in our Annual Report on Form 10-K for the year ended December 31, 2004 filed with the SEC on March 16, 2005 (SEC File No. 333-118149).

      In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments (consisting only of a normal recurring nature), which are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Interim results are not necessarily indicative of results to be expected for any future interim period or for the entire fiscal year.

Principles of Consolidation

      The consolidated financial statements include the accounts of ACEP and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

6

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 3. Related Party Transactions

      As of May 26, 2004, the Company entered into an intercompany services arrangement, to provide management and consulting services, with Atlantic Coast Entertainment Holdings, Inc. (“Atlantic Coast”), the owner of the Sands Hotel and Casino in Atlantic City, New Jersey. Atlantic Coast is majority owned by AREP. The Company is compensated based upon an allocation of salaries plus an overhead charge of 15% of the salary allocation plus reimbursement of reasonable out-of-pocket expenses. During the three months ended June 30, 2005 and 2004, the Company billed Atlantic Coast and its affiliates for services under the agreement approximately $179,000 and $67,000, respectively. The Company billed Atlantic Coast approximately $315,000 and $116,000 for the six months ended June 30, 2005 and 2004, respectively.

      During the three months ended June 30, 2005 and 2004 and six months ended June 30, 2005 and 2004, the Company made payments to XO Communications, Inc., which, since January 2003, has been controlled by affiliates of Mr. Icahn, for certain telecommunications services provided to us. The payments of approximately $44,000 and $42,000 for the three months ended June 30, 2005 and 2004 and $86,000 and $81,000, for the six months ended June 30, 2005 and 2004, respectively. The services provided approximated fair value.

      As of June 30, 2005 and December 31, 2004, the Company was owed approximately $858,000 and $388,000, respectively, from related parties. This receivable is primarily related to the intercompany services agreement with Atlantic Coast.

7

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

      The following discussion contains management’s discussion and analysis of our results of operations and financial condition. On May 26, 2004, we completed the purchase of Charlie’s Holding LLC, a newly formed entity that acquired Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, from Carl C. Icahn and Starfire Holding Corporation, which is wholly-owned by Mr. Icahn. Additionally, on that date, American Real Estate Holdings Limited Partnership (“AREH”) contributed to us 100% of the capital stock of Stratosphere Corporation. These transactions represent a merger of entities under the common control of Mr. Icahn. Our financial statements for all periods (including for periods preceding the acquisitions) are consolidated.

Overview

      We own and operate three gaming and entertainment properties in the Las Vegas metropolitan area. The three properties are the Stratosphere Casino Hotel & Tower (“Stratosphere”), which is located on the Las Vegas Strip and caters to visitors to Las Vegas, and two off-Strip casinos, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, which cater primarily to residents of Las Vegas and the surrounding communities. The Stratosphere is one of the most recognized landmarks in Las Vegas and our two Arizona Charlie’s properties are well-recognized casinos in their respective marketplaces.

      Each of our properties offers customers a value-oriented experience by providing competitive odds in our casinos, high-quality rooms in our hotels, award-winning dining facilities and, at the Stratosphere, an offering of competitive value-oriented entertainment attractions. We believe the value we offer our patrons, together with a strong focus on customer service, will enable us to continue to attract customers to our properties.

      We currently offer gaming, hotel, dining, entertainment, tower visits, retail and other amenities at our properties. The following table provides certain summary information for each of our properties:

	Casino		Number of		Number		Number
	Square		Hotel		of		of
	Footage		Rooms		Slots		Table Games
Stratosphere		80,000		2,444		1,408		48
Arizona Charlie’s Decatur		52,000		258		1,500		15
Arizona Charlie’s Boulder		41,000		303		849		14

      We use certain key measurements to evaluate operating revenue. Casino revenue measurements include table games drop and slot handle as volume measurements which consist of the amounts wagered by patrons. Win or hold percentage represents the percentage of table games drop or slot handle that is won by the casino and recorded as casino revenue. Hotel revenue measurements include hotel occupancy rate, which is the average percentage of available hotel rooms occupied during a period, and average daily room rate, which is the average price of occupied rooms per day. Food and beverage revenue measurements include number of covers, which is the number of guest checks and the average check amount.

8

Results of Operations

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004

			Three Months Ended
			June 30,
			2005		2004		% Change
			(In millions)
INCOME STATEMENT DATA:
Revenues:
	Casino		$	43.8	$	39.8		10.1	%
	Hotel			15.7		13.8		13.8	%
	Food and beverage			17.9		16.7		7.2	%
	Tower, retail and other			9.2		8.6		7.0	%
		Gross revenues		86.6		78.9		9.8	%
Less promotional allowances				5.1		5.6		(8.9	)%
		Net revenues		81.5		73.3		11.2	%
Costs and expenses:
	Casino			15.4		15.5		(0.6	)%
	Hotel			6.8		5.9		15.3	%
	Food and beverage			13.0		12.0		8.3	%
Other operating expenses				4.1		3.4		20.6	%
	Selling, general and administrative			19.0		19.1		(0.5	)%
	Depreciation and amortization			5.7		6.4		(10.9	)%
		Total costs and expenses		64.0		62.2		2.9	%
Income from operations			$	17.5	$	11.1		57.7	%

Gross Revenues

      Gross revenues increased 9.8% to $86.6 million for the three months ended June 30, 2005 from $78.9 million for the three months ended June 30, 2004. This increase was primarily due to an increase in casino revenues, as well as increases in hotel, food and beverage, tower, retail and other revenues, primarily attributable to an increase in business volume, as discussed below.

Casino Revenues

      Casino revenues increased 10.1% to $43.8 million for the three months ended June 30, 2005 from $39.8 million for the three months ended June 30, 2004. For the three months ended June 30, 2005, slot machine revenues were $36.5 million, or 83.4% of casino revenues, and table game revenues were $5.7 million, or 13.0% of casino revenues, compared to $32.7 million and $5.9 million, respectively, for the three months ended June 30, 2004. This increase was primarily due to an increase in hold percentage.

Non-Casino Revenues

      Hotel revenues increased 13.8% to $15.7 million for the three months ended June 30, 2005 from $13.8 million for the three months ended June 30, 2004. This increase was primarily due to an increase in the average daily room rate from $55.09 to $60.86, or 10.5% and an increase in the hotel occupancy from 90.3% to 92.8%. The increase in the average daily room rate and hotel occupancy was primarily attributable to an increase in direct bookings and a decrease in rooms sold through wholesalers and an increase in tourism in the Las Vegas market.

9

      Food and beverage revenues increased 7.2% to $17.9 million for the three months ended June 30, 2005 from $16.7 million or for the three months ended June 30, 2004. This increase was primarily due to an increase in our catering and upscale dining business.

      Tower, retail and other revenue increased 7.0% to $9.2 million for the three months ended June 30, 2005 from $8.6 million for the three months ended June 30, 2004. This increase was primarily due to increased tower visitation, which was primarily attributable to the opening of the Insanity ride on March 10, 2005.

Operating Expenses

      Hotel operating expenses increased 15.3% to $6.8 million, or 43.3% of hotel revenues, for the three months ended June 30, 2005 from $5.9 million, or 42.8% of hotel revenues, for the three months ended June 30, 2004. This increase was primarily due to an increase in labor costs and supplies as a result of an increase in business volume.

      Food and beverage operating expenses increased 8.3% to $13.0 million, or 72.6% of food and beverage revenues for the three months ended June 30, 2005 from $12.0 million, or 71.9% of food and beverage revenues, for the three months ended June 30, 2004. This increase was primarily due to an increase in labor costs and costs associated with an increase in business volume.

      Other operating expenses increased 20.6% to $4.1 million, or 44.6% of tower, retail and other revenues for the three months ended June 30, 2005 from $3.4 million, or 39.5% of tower, retail and other revenues, for the three months ended June 30, 2004. This increase was primarily due to an increase in labor costs related to the opening of the Insanity ride.

Interest Expense

      Interest expense in 2005 was primarily attributable to interest expense associated with the $215.0 million principal amount of 7.85% senior secured notes due 2012, which were issued on January 29, 2004. In addition, interest expense in 2004 included interest paid on related parties notes which were repaid in 2004.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

			Six Months Ended
			June 30,
			2005		2004		% Change
INCOME STATEMENT DATA:
Revenues:
	Casino		$	91.5	$	82.4		11.0	%
	Hotel			31.5		27.7		13.7	%
	Food and beverage			35.0		33.4		4.8	%
	Tower, retail and other			17.4		16.6		4.8	%
		Gross revenues		175.4		160.1		9.6	%
Less promotional allowances				11.1		11.7		(5.1	)%
		Net revenues		164.3		148.4		10.7	%
Costs and expenses:
	Casino			31.3		31.2		0.3	%
	Hotel			12.9		11.5		12.2	%
	Food and beverage			25.3		23.7		6.8	%
	Other operating expenses			7.7		6.6		16.7	%
	Selling, general and administrative			38.6		37.2		3.8	%
	Depreciation and amortization			11.2		12.3		(8.9	)%
		Total costs and expenses		127.0		122.5		3.8	%
Income from operations			$	37.3	$	25.9		43.6	%

10

Gross Revenues

      Gross revenues increased 9.6% to $175.4 million for the six months ended June 30, 2005 from $160.1 million for the six months ended June 30, 2004. This increase was primarily due to an increase in casino revenues, as well as increases in hotel, food and beverage, tower, retail and other revenues, primarily attributable to an increase in business volume, as discussed below.

Casino Revenues

      Casino revenues increased 11.0% to $91.5 million for the six months ended June 30, 2005 from $82.4 million for the six months ended June 30, 2004, of which slot machine revenues were $74.1 million, or 80.9% of casino revenues, and table game revenues were $12.6 million, or 13.8% of casino revenues, for the six months ended June 30, 2005 compared to $66.3 million and $12.8 million for the six months ended June 30, 2005 and 2004, respectively. This increase was primarily due to an increase in hold percentage.

Non-Casino Revenues

      Hotel revenues increased 13.7% to $31.5 million for the six months ended June 30, 2005 from $27.7 million for the six months ended June 30, 2004. This increase was primarily due to an increase in the average daily room rate from $55.78 to $63.72, or 14.2%. The increase in the average daily room rate was primarily attributable to a change in our hotel market mix and an increase in tourism in the Las Vegas market.

Operating Expenses

      Hotel operating expenses increased 12.2% to $12.9 million, or 41.0% of hotel revenues, for the six months ended June 30, 2005 from $11.5 million, or 41.5% of hotel revenues, for the six months ended June 30, 2004. This increase was primarily due to an increase in labor costs and supplies as a result of an increase in business volume.

      Food and beverage operating expenses increased 6.8% to $25.3 million, or 72.3% of food and beverage revenues for the six months ended June 30, 2005, from $23.7 million, or 71.0% of food and beverage revenues for the six months ended June 30, 2004. This increase was primarily due to an increase in labor costs and costs associated with an increase in business volume.

      Other operating expenses increased 16.7% to $7.7 million, or 44.3% of tower, retail and other revenues for the six months ended June 30, 2005, from $6.6 million, or 39.8% of tower, retail and other revenues for the six months ended June 30, 2004. This increase was primarily due to an increase in labor costs related to the opening of the Insanity ride.

Interest Expense

      Interest expense in 2005 was primarily attributable to interest expense associated with the $215.0 million principal amount of 7.85% senior secured notes due 2012, which were issued on January 29, 2004. In addition, interest expense in 2004 included interest paid on related parties notes which were repaid in 2004.

Financial Condition

Liquidity and Capital Resources

      Our primary source of cash is from the operation of our properties. At June 30, 2005, we had cash and cash equivalents of $97.1 million. For the six months ended June 30, 2005, net cash provided by operating activities totaled approximately $34.4 million compared to approximately $24.1 million for the six months ended June 30, 2004. In addition to cash from operations, cash is available to us, if necessary, under our senior secured revolving credit facility entered into by us, as borrower, and certain of our subsidiaries, as guarantors. The senior secured revolving credit facility allows for borrowings of up to $20.0 million, subject to us complying with financial and other covenants (discussed below), until January 29, 2008. We had availability under our credit facility of $20.0 million at June 30, 2005, subject to continuing compliance with existing covenant restrictions.

11

      Our primary use of cash is for capital spending and to pay the interest on our 7.85% senior secured notes, which mature in 2012 with interest payments due February 1 and August 1 of each year. Our capital spending was approximately $11.6 million and $9.9 million for the six months ended June 30, 2005 and 2004, respectively. We have estimated our 2005 capital expenditures to be approximately $25.0 million, which we anticipate to include approximately $8.1 million to refurbish rooms, install the new Insanity ride and construct a night club at the Stratosphere and approximately $4.5 million to expand the gaming floor, including purchasing slot machines, at Arizona Charlie’s Boulder. The remainder of our capital spending estimate for 2005 will be for upgrades or maintenance to our existing assets.

      We believe operating cash flows and borrowings available under the senior secured revolving credit facility will be adequate to meet our anticipated requirements for working capital, capital spending and scheduled interest payments on the notes and under the senior secured revolving credit facility, lease payments and other permitted indebtedness at least through the next twelve months. Although no additional financing is currently contemplated, we will seek, if necessary and to the extent permitted under the indenture governing the notes and the terms of the senior secured revolving credit facility, additional financing through bank borrowings or debt or equity financings. However, additional financing, if needed, may not be available to us, or if available, the financing may not be on terms favorable to us. Our estimates of our reasonably anticipated liquidity needs may not be accurate and new business developments or other unforeseen events could occur, resulting in the need to raise additional funds.

      Our 7.85% senior secured notes due 2012 restrict the payment of cash dividends or distributions, the purchase of equity interests, the purchase, redemption, defeasance or acquisition of debt subordinated to the investments as “restricted payments.” The notes also prohibit the incurrence of debt, or the issuance of disqualified or preferred stock, as defined, with certain exceptions, provided that we may incur debt or issue disqualified stock if, immediately after such incurrence or issuance, the ratio of consolidated cash flow to fixed charges (each as defined) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional indebtedness is incurred or disqualified stock or preferred stock is issued would have been at least 2.0 to 1.0, determined on a pro forma basis giving effect to the debt incurrence or issuance. As of June 30, 2005, such ratio was 4.1 to 1.0. The notes also restrict the creation of liens, the sale of assets, mergers, consolidations or sales of substantially all of our assets, the lease or grant of a license, concession, other agreement to occupy manage or use our assets, the issuance of capital stock of restricted subsidiaries and certain related party transactions. The notes allow us to incur indebtedness, among other things, of up to $50 million under credit facilities, non-recourse financing of up to $15 million to finance the construction, purchase or lease of personal or real property used in our business, permitted affiliate subordinated indebtedness (as defined), the issuance of additional 7.85% senior secured notes due 2012 in an aggregate principal amount not to exceed 2.0 times net cash proceeds received from equity offerings and permitted affiliate subordinated debt and additional indebtedness of up to $10.0 million.

      Additionally as described above, we have a senior secured revolving credit facility allows for borrowings of up to $20.0 million, including our issuance of letters of credit of up to $10.0 million. Loans made under the senior secured revolving facility will mature and the commitments under them will terminate in January 2008. The facility contains restrictive covenants similar to those contained in the 7.85% senior secured notes due 2012. In addition, the facility requires that, as of the last date of each fiscal quarter, our ratio of net property, plant and equipment for key properties to consolidated first lien debt be not less than 5.0 to 1.0 and our ratio of consolidated first lien debt to consolidated cash flow be not more than 1.0 to 1.0. At June 30, 2005, these ratios were 89.3 to 1.0 and 0.0 to 1.0, respectively. At June 30, 2005, there were no borrowings or letters of credit outstanding under the facility.

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Forward-Looking Statements

      With the exception of historical matters, the matters discussed in this report are forward looking statements. Forward-looking statements may relate to, among other things, future performance generally, business development activities, future capital expenditures, financing sources and availability and the effects of regulation and competition. When we use the words “believe,” “intend,” “expect,” “may,” “will,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements.

      We warn you that forward-looking statements are only predictions. Actual events or results may differ as a result of risks that we face. Forward-looking statements speak only as of the date they were made and we undertake no obligation to update them.

TRENDS AND OTHER UNCERTAINTIES

•  We are a holding company and will depend on the business of our subsidiaries to satisfy our obligations under the notes.

•  We face substantial competition in the hotel and casino industry.

•  The existence of legalized gambling in other jurisdictions may reduce the number of visitors to Las Vegas.

•  The gaming industry is highly regulated and the Nevada gaming authorities and state and municipal licensing authorities have significant control over our operations.

•  Potential changes in the tax or regulatory environment could increase our expenses and reduce our cash flow.

•  Economic downturns, terrorism and the uncertainty of war, as well as other factors affecting discretionary consumer spending, could reduce the number of our visitors or the amount of money visitors spend at our casinos.

•  We cannot predict the extent to which war, future security alerts or additional terrorist attacks may interfere with our operations. Our properties rely exclusively on the Las Vegas economic market, and changes adversely impacting that market could reduce our revenue and cash flow.

•  The loss of management and other key personnel could significantly harm our business, and the quality of individuals hired for positions in the hotel and gaming operations will be critical to the success of our business.

•  We may incur higher costs or work slow-downs or stoppages due to union activities in Las Vegas.

•  We are heavily dependent on the Stratosphere for a large percentage of our operating cash flow.

•  Our reliance on slot machine revenues and the concentration of manufacturing of slot machines in certain companies could impose additional costs on us.

•  We may be subject to the pension liabilities of our affiliates.

•  Our insurance coverage may not be adequate to cover all possible losses that the Stratosphere, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder could suffer.

•  Our substantial indebtedness could reduce our cash flow and prevent us from fulfilling our obligations under the 7.85% senior secured notes due 2012.

•  Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

13

•  The terms of the senior secured revolving credit facility and other agreements we may enter into may restrict our current and future operations, particularly our ability to respond to changes or to take some actions.

•  Our failure to comply with the covenants contained in the senior secured revolving credit facility, the indenture governing the 7.85% senior secured notes due 2012 or any other agreement governing our first-priority lien debt, including our failure as a result of events beyond our control, could result in an event of default, which would materially and adversely affect our financial condition.

•  To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

•  We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. All of our debt is at a fixed rate of interest. We can borrow, from time to time, up to $20.0 million under the senior secured revolving credit facility for working capital purposes. At June 30, 2005, there were no borrowings under the facility.

      The fair value of our long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. As such, the estimated fair value of long-term debt outstanding is approximately $227.9 million as of June 30, 2005.

      We do not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure.

Item 4. Controls and Procedures

      As of June 30, 2005, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to the Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are currently effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

      During the quarter ended June 30, 2005, there were no changes in our internal controls over financial reporting that materially affected, or are likely to affect, our internal control over financial reporting.

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SIGNATURES

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

American Casino & Entertainment Properties LLC

By:  /s/ Denise Barton

Denise Barton

Senior Vice President, Chief Financial Officer,

Treasurer and Secretary

(Principal Financial and Accounting Officer)

Date: August 8, 2005

15

PART II. OTHER INFORMATION

Item 6. Exhibits

Exhibit No.			Description
	31	.1	Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.

II-1 EX-31.1 2 y11726exv31w1.htm EX-31.1: CERTIFICATION

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

      I, Richard P. Brown, President and Chief Executive Officer of American Casino Entertainment Properties LLC, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of American Casino & Entertainment Properties LLC (the “Registrant”) for the period ended June 30, 2005 (the “Report”);

      2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

      3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

      4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

      a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

      b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

      c) disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

      5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

      a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

By:  /s/ Richard P. Brown

Richard P. Brown

President and Chief Executive Officer of

American Casino & Entertainment Properties LLC

Date: August 8, 2005

EX-31.1

EXHIBIT 31.1

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

      I, Denise Barton, Senior Vice President, Chief Financial Officer, Treasurer and Secretary of American Casino & Entertainment Properties LLC, certify that:

      1. I have reviewed this quarterly report on Form 10-Q of American Casino & Entertainment Properties LLC (the “Registrant”) for the period ended June 30, 2005 (the “Report”);

      2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

      3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

      4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have:

      a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

      b) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

      c) disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

      5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

      a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

By:  /s/ Denise Barton

Denise Barton

Senior Vice President, Chief Financial

Officer, Treasurer and Secretary of

American Casino & Entertainment Properties LLC

Date: August 8, 2005