UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-54480
ALST CASINO HOLDCO, LLC
(Exact name of registrant as specified in its charter)
|
Delaware |
|
45-2487922 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
7300 Aliante Parkway, North Las Vegas, NV |
|
89084 |
|
(Address of principal executive offices) |
|
(Zip Code) |
(702) 692-7777
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
|
Large accelerated filer o |
Accelerated filer o |
|
|
|
|
Non-accelerated filer x (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 14, 2014, there were 432,213 units outstanding of the registrant’s common units.
ALST CASINO HOLDCO, LLC
|
|
| |
|
|
|
|
|
2 | ||
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
9 | |
|
16 | ||
|
16 | ||
|
|
|
|
|
|
| |
|
|
|
|
|
17 | ||
|
17 | ||
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
17 | |
|
17 | ||
|
17 | ||
|
17 | ||
|
18 | ||
|
|
|
|
|
|
19 |
ALST CASINO HOLDCO, LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
|
|
|
September 30, |
|
December 31, |
| ||
|
|
|
2014 |
|
2013 |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Current assets: |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
13,137 |
|
$ |
9,850 |
|
|
Receivables, net |
|
845 |
|
1,038 |
| ||
|
Inventories |
|
644 |
|
638 |
| ||
|
Prepaid gaming taxes |
|
1,453 |
|
1,314 |
| ||
|
Prepaid expenses and other current assets |
|
1,341 |
|
1,024 |
| ||
|
Total current assets |
|
17,420 |
|
13,864 |
| ||
|
Property and equipment, net |
|
63,561 |
|
65,450 |
| ||
|
Intangible assets, net |
|
2,094 |
|
2,224 |
| ||
|
Other assets, net |
|
6,436 |
|
6,391 |
| ||
|
Total assets |
|
$ |
89,511 |
|
$ |
87,929 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND MEMBERS’ EQUITY |
|
|
|
|
| ||
|
|
|
|
|
|
| ||
|
Current liabilities: |
|
|
|
|
| ||
|
Current portion of long-term debt |
|
$ |
1,359 |
|
$ |
2,044 |
|
|
Accounts payable |
|
1,174 |
|
2,285 |
| ||
|
Accrued payroll and related |
|
1,387 |
|
864 |
| ||
|
Accrued gaming and related |
|
1,796 |
|
1,568 |
| ||
|
Accrued expenses and other current liabilities |
|
587 |
|
529 |
| ||
|
Total current liabilities |
|
6,303 |
|
7,290 |
| ||
|
Long-term debt, less current portion |
|
50,799 |
|
48,172 |
| ||
|
Total liabilities |
|
57,102 |
|
55,462 |
| ||
|
Members’ equity: |
|
|
|
|
| ||
|
Members’ capital |
|
37,254 |
|
37,254 |
| ||
|
Additional paid-in-capital |
|
25 |
|
25 |
| ||
|
Accumulated deficit |
|
(4,870 |
) |
(4,812 |
) | ||
|
Total members’ equity |
|
32,409 |
|
32,467 |
| ||
|
Total liabilities and members’ equity |
|
$ |
89,511 |
|
$ |
87,929 |
|
The accompanying notes are an integral part of these condensed financial statements.
ALST CASINO HOLDCO, LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands)
|
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
| ||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
Revenues: |
|
|
|
|
|
|
|
|
| ||||
|
Casino |
|
$ |
13,372 |
|
$ |
11,347 |
|
$ |
40,665 |
|
$ |
34,960 |
|
|
Food and beverage |
|
3,471 |
|
2,978 |
|
10,707 |
|
9,458 |
| ||||
|
Room |
|
1,433 |
|
1,247 |
|
4,602 |
|
4,017 |
| ||||
|
Other |
|
788 |
|
865 |
|
2,503 |
|
2,409 |
| ||||
|
Gross revenues |
|
19,064 |
|
16,437 |
|
58,477 |
|
50,844 |
| ||||
|
Promotional allowances |
|
(1,384 |
) |
(1,070 |
) |
(4,569 |
) |
(3,488 |
) | ||||
|
Net revenues |
|
17,680 |
|
15,367 |
|
53,908 |
|
47,356 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Casino |
|
6,092 |
|
5,312 |
|
18,442 |
|
16,866 |
| ||||
|
Food and beverage |
|
3,173 |
|
2,871 |
|
8,965 |
|
8,431 |
| ||||
|
Room |
|
728 |
|
619 |
|
2,138 |
|
1,814 |
| ||||
|
Other |
|
394 |
|
390 |
|
1,107 |
|
1,104 |
| ||||
|
Selling, general and administrative |
|
5,684 |
|
5,599 |
|
15,989 |
|
15,993 |
| ||||
|
Depreciation and amortization |
|
1,331 |
|
1,115 |
|
3,739 |
|
3,279 |
| ||||
|
Gain on disposal of assets, net |
|
— |
|
— |
|
(136 |
) |
— |
| ||||
|
Total operating costs and expenses |
|
17,402 |
|
15,906 |
|
50,244 |
|
47,487 |
| ||||
|
Operating income (loss) |
|
278 |
|
(539 |
) |
3,664 |
|
(131 |
) | ||||
|
Interest expense, net |
|
(1,348 |
) |
(1,247 |
) |
(3,723 |
) |
(4,010 |
) | ||||
|
Net loss |
|
$ |
(1,070 |
) |
$ |
(1,786 |
) |
$ |
(59 |
) |
$ |
(4,141 |
) |
The accompanying notes are an integral part of these financial statements.
ALST CASINO HOLDCO, LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
|
|
|
Nine Months Ended |
| ||||
|
|
|
September 30, |
|
September 30, |
| ||
|
|
|
2014 |
|
2013 |
| ||
|
Cash flows from operating activities: |
|
|
|
|
| ||
|
Net loss |
|
$ |
(59 |
) |
$ |
(4,141 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation and amortization |
|
3,739 |
|
3,279 |
| ||
|
Gain on disposal of assets, net |
|
(136 |
) |
— |
| ||
|
Amortization of debt discount and debt issuance costs |
|
(39 |
) |
39 |
| ||
|
Paid in kind and accrued interest |
|
3,684 |
|
3,872 |
| ||
|
Changes in operating assets and liabilities: |
|
|
|
|
| ||
|
Restricted cash |
|
— |
|
304 |
| ||
|
Inventories and prepaid expenses |
|
(518 |
) |
(483 |
) | ||
|
Accounts payable |
|
(1,111 |
) |
(2,203 |
) | ||
|
Accrued payroll and other current liabilities |
|
809 |
|
(1,121 |
) | ||
|
Other, net |
|
148 |
|
2 |
| ||
|
Net cash provided by (used in) operating activities |
|
6,517 |
|
(452 |
) | ||
|
Cash flows from investing activities: |
|
|
|
|
| ||
|
Capital expenditures |
|
(1,729 |
) |
(2,433 |
) | ||
|
Proceeds from sale of property and equipment |
|
145 |
|
— |
| ||
|
Net cash used in investing activities |
|
(1,584 |
) |
(2,433 |
) | ||
|
Cash flows from financing activities: |
|
|
|
|
| ||
|
Principal payments on debt |
|
(1,646 |
) |
(740 |
) | ||
|
Net increase (decrease) in cash and cash equivalents |
|
3,287 |
|
(3,625 |
) | ||
|
Cash and cash equivalents, beginning of period |
|
9,850 |
|
11,276 |
| ||
|
Cash and cash equivalents, end of period |
|
$ |
13,137 |
|
$ |
7,651 |
|
|
|
|
|
|
|
| ||
|
Supplemental cash flow disclosure: |
|
|
|
|
| ||
|
Cash paid for interest |
|
$ |
963 |
|
$ |
99 |
|
The accompanying notes are an integral part of these financial statements.
ALST CASINO HOLDCO, LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Organization
ALST Casino Holdco, LLC (the “Company,” “we,” “us” or “our”), a Delaware limited liability company, was formed on May 11, 2011. We were formed to acquire substantially all of the equity interests of Aliante Gaming, LLC (“Aliante Gaming”) pursuant to its joint plan of reorganization under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”). The reorganization was completed on November 1, 2011 (the “Effective Date”), resulting in Aliante Gaming, the owner and operator of the Aliante Casino + Hotel, previously known as Aliante Station Casino + Hotel located in North Las Vegas, Nevada (the “Casino”), becoming our wholly owned subsidiary. Prior to the effective date, we conducted no operations and had no material assets or liabilities.
Background
Prior to the Effective Date, Aliante Gaming was a wholly owned subsidiary of Aliante Holding, LLC (“Aliante Holding”), which was a 50/50 joint venture partnership between Aliante Station, LLC (“Aliante Station”), a wholly owned subsidiary of Station Casinos, Inc. (“Old Station”) and G.C. Aliante, LLC, an affiliate of the Greenspun Corporation.
Soon after the casino opened in November 2008, Aliante Gaming experienced lower than expected operating results as a result of macroeconomic conditions, including a downturn in the Las Vegas area and low consumer confidence levels. As a result, Aliante Gaming failed to (i) remain in compliance with certain financial maintenance covenants set forth in its $430.0 million credit facility (the “Previous Facility”) and (ii) make scheduled principal or interest payments under the Previous Facility since April 2009.
On April 12, 2011 (the “Petition Date”), Aliante Gaming, together with Aliante Holding and Aliante Station, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Case”), in the United States Bankruptcy Court for the District of Nevada, Northern Division (the “Bankruptcy Court”) to preserve their assets and the value of their estates.
The Chapter 11 Case was jointly administered with certain subsidiaries of Old Station and Green Valley Ranch Gaming, LLC under the lead case In re Station Casinos, Inc., et. al. originally filed on July 28, 2009 (Jointly Administered Case No. 09-52477). Old Station emerged from Chapter 11 on June 17, 2011 as Station Casinos LLC (“New Station,” and collectively with Old Station, “Station”).
On May 20, 2011, Aliante Gaming, along with Aliante Holding, Aliante Station and certain other affiliates of Old Station, filed with the Bankruptcy Court an amended joint plan of reorganization (the “Plan”) resulting from negotiations with its lenders (the “Lenders”) under the Previous Facility and its International Swaps and Derivatives Association master agreement (the “Swap Agreement”). Under the Plan, Aliante Gaming and the Lenders agreed to enter into a series of restructuring transactions pursuant to which the Lenders received new equity of, and issued new debt to, Aliante Gaming, as reorganized, as of the Effective Date.
On the Effective Date, (i) 100% of the equity interests in Aliante Gaming previously held by Aliante Holding was canceled and ceased to be outstanding, (ii) each Lender received, on account, and in full satisfaction of its claims against Aliante Gaming arising under the Previous Facility and the Swap Agreement, its pro rata share of (a) 100% of the equity interests in Aliante Gaming (the “New Aliante Equity”), which was contributed to the Company in exchange for 432,003 units of our issued and outstanding membership interests (“Common Units”) and (b) 100% of $45.0 million in aggregate principal amount of senior secured term loans of Aliante Gaming (the “Senior Secured Loans”) under a new senior secured credit facility (the “Senior Secured Credit Facility”), (iii) the Previous Facility and the Swap Agreement were canceled (clauses (i), (ii) and (iii) referred to herein as the “Restructuring Transactions”) and (iv) each creditor holding an unsecured claim was paid in full.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results of the Company’s and Aliante Gaming’s financial position, results of operations and cash flows for the interim periods have been made. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the Company and its wholly owned subsidiary, Aliante Gaming. All material intercompany transactions are eliminated in consolidation.
Fair Value of Financial Instruments
The estimated fair value of the Company’s financial instruments has been determined by the Company using available market information and valuation methodologies. However, considerable judgment is required to develop the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of certain nonfinancial assets. ASU No. 2014-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. Management is currently assessing the impact of the adoption of this accounting pronouncement on the Company’s 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 provide required 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 the accounting pronouncement upon the effective date.
No other new accounting pronouncements issued or effective during 2014 or 2013 have had or are expected to have a material impact on the Company’s financial position or results of operations.
A variety of proposed or otherwise potential accounting standards are currently under 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.
Reclassifications
The consolidated financial statements reflect certain reclassifications to prior year amounts to conform the classification in the current period. These reclassifications have no effect on previously reported operating income and net loss.
Note 3. Receivables
Receivables, net consist of the following (in thousands):
|
|
|
September 30, |
|
December 31, |
| ||
|
|
|
2014 |
|
2013 |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
Casino |
|
$ |
134 |
|
$ |
58 |
|
|
Hotel |
|
89 |
|
196 |
| ||
|
Other |
|
669 |
|
847 |
| ||
|
|
|
892 |
|
1,101 |
| ||
|
Allowance for doubtful accounts |
|
(47 |
) |
(63 |
) | ||
|
Receivables, net |
|
$ |
845 |
|
$ |
1,038 |
|
Note 4. Long-term Debt
Long-term debt consists of the following (in thousands):
|
|
|
September 30, |
|
December 31, |
| ||
|
|
|
(unaudited) |
|
|
| ||
|
Senior Secured Credit Facility, interest payable quarterly (paid in kind at 10%, cash interest at 6%), principal due November 1, 2018, net of unamortized discount at September 30, 2014 and December 31, 2013 of $8.5 million and $8.3 million, respectively |
|
$ |
50,123 |
|
$ |
47,420 |
|
|
Equipment financing, payable in 72 monthly installments including interest at a fixed rate of 2.5% |
|
1,283 |
|
1,972 |
| ||
|
Special Improvement District assessment, payable in 32 semi-annual installments including interest at a fixed rate of 5.8% |
|
752 |
|
824 |
| ||
|
Long-term debt |
|
52,158 |
|
50,216 |
| ||
|
Less current portion of long-term debt |
|
(1,359 |
) |
(2,044 |
) | ||
|
Long-term debt, net |
|
$ |
50,799 |
|
$ |
48,172 |
|
Senior Secured Credit Facility
On November 1, 2011, the Company and Aliante Gaming entered into the Senior Secured Credit Facility, which provided for $45.0 million in principal amount of Senior Secured Loans, which were deemed made on the same date without any funding being provided. The Senior Secured Credit Facility represented an already outstanding obligation of Aliante Gaming as of November 1, 2011. Through November 1, 2014, the Senior Secured Loans bear interest at a rate to be elected by Aliante Gaming, such rate being either (i) 10% per annum, payable in kind, which interest will be added to the principal amount of the Senior Secured Loans quarterly in arrears and subsequently treated as principal of the Senior Secured Loans, or (ii) 6% per annum, which interest will be payable in cash quarterly in arrears. Following November 1, 2014, the Senior Secured Loans will bear interest at a rate of 6% per annum, which interest will be payable in cash quarterly in arrears. The outstanding principal amount of the Senior Secured Loans and all accrued and unpaid interest thereon will be payable on the maturity date, which 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. 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 through June 30, 2014, the principal outstanding balance as of September 30, 2014 and December 31, 2013 was $58.6 million and $55.7 million, respectively. The Company paid cash interest during the quarter ended September 30, 2014, of $0.9 million. There is currently no availability for borrowings under the Senior Secured Credit Facility.
The Senior Secured Credit Facility is guaranteed by the Company and by each domestic wholly owned subsidiary of Aliante Gaming and is secured by a first-priority (a) pledge of 100% of the Company’s equity interest in Aliante Gaming, (b) pledge of 100% of the equity interests in Aliante Gaming’s domestic subsidiaries (if any) and 65% of the equity interests of Aliante Gaming’s “first-tier” foreign subsidiaries (if any) and (c) security interest in substantially all of Aliante Gaming’s tangible and intangible assets, as well as those of each subsidiary guarantor (if any), in each case, other than any assets that may not be pledged pursuant to applicable gaming laws and subject to customary exceptions. The Senior Secured Credit Facility includes various covenants and mandatory prepayments which are customary for similar types of financings and does not contain any financial maintenance covenants.
In establishing the amortization of the debt discount on its Senior Secured Loans in November 2011, the Company expected that it would elect the cash interest payment option beginning in the first quarter of 2013. During the first quarter of 2013, this was subsequently revised to assume cash interest payments would begin during the second quarter of 2013. During the second quarter of 2013, the Company further evaluated the date it would commence the cash interest payment option, determining the Company would instead elect to defer the cash interest option until contractually required to do so beginning in November 2014. During the second quarter of 2014, this was subsequently revised to assume cash interest payments would begin with the interest period commencing on June 30, 2014. As a result of this change in the expected method of payment, the Company recorded an adjustment to its accrual during the second quarter of 2013 to increase interest expense by $0.5 million using the retroprective 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.
Fair Value of Debt
It was not practicable to determine the fair market value of the Senior Secured Credit Facility due to the lack of comparable credit facilities and the involvement of our majority shareholder in negotiating the terms and conditions directly with the lender. It is unlikely the Company could obtain similar financing on the same terms with another lender without the involvement and resources of our majority shareholder given our financial condition and history of operating losses. The fair value of our equipment financing and spread assessment debt approximates to fair value.
Equipment Financing
During 2008, Aliante Gaming entered into an equipment financing arrangement which terminates in November 2014 and is accounted for as a capital lease. The agreement calls for monthly payments of approximately $80,000 with a residual payment of $1.1 million to be paid in November 2014.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Background
The following discussion and analysis of our results of operations and financial condition for the three and nine months ending September 30, 2014 and 2013 should be read in conjunction with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.
ALST Casino Holdco, LLC (the “Company,” “we,” “us” or “our”), a Delaware limited liability company, was formed on May 11, 2011. We were formed to acquire substantially all of the equity interests of Aliante Gaming, LLC (“Aliante Gaming”) pursuant to its joint plan of reorganization under Chapter 11 of the United States Bankruptcy Code. The reorganization was completed on November 1, 2011 (the “Effective Date”), resulting in Aliante Gaming, the owner and operator of Aliante Casino + Hotel, previously known as Aliante Station Casino + Hotel located in North Las Vegas, Nevada (the “Casino”), becoming our wholly owned subsidiary. The Casino is a full-service casino and hotel offering high quality accommodations, gaming, dining, entertainment, retail and other resort amenities. Prior to November 1, 2011, we conducted no operations and had no material assets or liabilities.
On November 1, 2011, the Company and Aliante Gaming entered into a senior secured credit facility (the “Senior Secured Credit Facility”) with the holders (the “Lenders”) of our membership interests (the “Common Units”), also referred to as “Members”. The Lenders own 100% of our Common Units. The Senior Secured Credit Facility is further described under “- Liquidity and Capital Resources”.
Overview
Our operating results are greatly dependent on the level of gaming revenue generated at the Casino. Gaming revenue is generally defined as gaming wins less gaming losses. A substantial portion of our operating income is generated from our gaming operations, primarily from slot play. We use our non-gaming revenue departments to drive customer traffic to the Casino. The majority of our revenue is cash-based, and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Additionally, our business is capital intensive, and we rely heavily on the ability of the Casino to generate operating cash flow to repay debt financing and fund maintenance capital expenditures.
Promotional allowances consist primarily of free slot play and complimentary food and beverages furnished to customers. Upon redemption, the retail value of such services is included in the respective revenue classifications and is then deducted as promotional allowances. We calculate income from operations as net revenues less total operating costs and expenses. Income from operations represents only those amounts that relate to operations and excludes interest income, interest expense and other non-operating income and expenses.
We consider various performance measures in assessing financial condition and results of operations including fluctuations in revenues, expenses and margins as compared to prior periods and internal plans. Additionally, we measure changes in selling, general and administrative expenses as a percent of net revenues, which indicate management’s ability to control costs. We also evaluate our profitability based upon Adjusted EBITDA (see “Results of Operations” for additional information), which represents earnings before interest, taxes, depreciation and amortization, management fees, restructuring and other charges and other non-recurring items, as applicable. The measures listed above are not a comprehensive list of all factors considered by us in assessing our financial condition and operating performance, and we may consider other individual measures as required by trends and discrete events arising in a specific period, but these are the key indicators.
We are organized as a limited liability company and are not subject to federal income taxes. Accordingly, a provision for income taxes is not included in our condensed financial statements.
Results of Operations
The following table highlights the results of operations and reconciles Adjusted EBITDA to net income (loss) for the three and nine months ended September 30, 2014 as compared to the prior year period (in thousands, except percentages):
|
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||
|
|
|
September 30, |
|
September 30, |
|
Percent |
|
September 30, |
|
September 30, |
|
Percent |
| ||||
|
|
|
2014 |
|
2013 |
|
Change |
|
2014 |
|
2013 |
|
Change |
| ||||
|
Net revenues |
|
$ |
17,680 |
|
$ |
15,367 |
|
15.1 |
% |
$ |
53,908 |
|
$ |
47,356 |
|
13.8 |
% |
|
Adjusted EBITDA(a) |
|
$ |
1,609 |
|
$ |
576 |
|
179.1 |
% |
$ |
7,267 |
|
$ |
3,148 |
|
130.9 |
% |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Depreciation and amortization |
|
1,331 |
|
1,115 |
|
19.4 |
% |
3,739 |
|
3,279 |
|
14.0 |
% | ||||
|
Gain on disposal of assets, net |
|
— |
|
— |
|
|
|
(136 |
) |
— |
|
|
| ||||
|
Operating income (loss) |
|
278 |
|
(539 |
) |
|
|
3,664 |
|
(131 |
) |
|
| ||||
|
Interest expense, net |
|
(1,348 |
) |
(1,247 |
) |
8.1 |
% |
(3,723 |
) |
(4,010 |
) |
-7.2 |
% | ||||
|
Net (loss) |
|
$ |
(1,070 |
) |
$ |
(1,786 |
) |
|
|
$ |
(59 |
) |
$ |
(4,141 |
) |
|
|
(a) EBITDA, earnings before interest, taxes, depreciation and amortization, is a widely used measure of operating performance in the gaming industry. We have traditionally adjusted EBITDA when evaluating the Casino’s operating performance because we believe that the inclusion or exclusion of certain non-cash recurring, non-recurring items is necessary to present the most accurate measure of the Casino’s operating results and as a means to assess results period over period. We refer to the financial measure that adjusts for these items as Adjusted EBITDA. We believe, when considered with measures calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), Adjusted EBITDA is a useful financial performance measurement for assessing the Casino’s operating performance and is used by management in making financial and operational decisions. In this regard, Adjusted EBITDA is a key metric used by us in our budgeting process, when calculating returns on investment of existing and proposed projects and in the evaluation of incentive compensation related to property management. Adjusted EBITDA consists of net income (loss) plus interest, taxes, depreciation and amortization and other non-recurring items, as applicable. We believe that while items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluation of the Casino’s operating performance, it is useful to exclude such items when analyzing current results and trends compared to other periods because these items can vary significantly depending on specific underlying transactions, the ability of management to control such items or events and may not be comparable between the periods being presented. Also, we believe excluded items may not relate specifically to the Casino’s operating trends or be indicative of future results. For example, lease terminations will be significantly different in periods when we terminate a lease agreement and it is not expected to be comparable period over period, nor is the amount expected to follow any particular trend from period-to-period. Therefore, we use Adjusted EBITDA as the primary measure of the Casino’s operating performance. We believe that our Members use Adjusted EBITDA as an appropriate financial measure in determining the value of their investment. To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. The impact of interest, taxes, depreciation and amortization, and other non-recurring items, as applicable, each of which can significantly affect our results of operations and liquidity, should be considered in evaluating our operating performance, and cannot be determined from Adjusted EBITDA. Adjusted EBITDA is used in addition to, and in conjunction with, GAAP measures and should not be considered as an alternative to net income (loss), or any other GAAP operating performance measure. To compensate for the inherent limitations of the disclosure of Adjusted EBITDA, we provide relevant disclosure of our depreciation and amortization, interest and other items in our reconciliations to GAAP financial measures and condensed financial statements, all of which should be considered when evaluating our performance. In addition, it should be noted that not all gaming companies that report Adjusted EBITDA or adjustments to such measures, may calculate Adjusted EBITDA, or such adjustments, in the same manner as us, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.
The following table highlights the various sources of revenues and expenses for the three and nine months ended September 30, 2014 as compared to the prior year period (in thousands, except percentages):
|
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||
|
|
|
September 30, |
|
September 30, |
|
Percent |
|
September 30, |
|
September 30, |
|
Percent |
| ||||
|
|
|
2014 |
|
2013 |
|
Change |
|
2014 |
|
2013 |
|
Change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Casino revenues |
|
$ |
13,372 |
|
$ |
11,347 |
|
17.8 |
% |
$ |
40,665 |
|
$ |
34,960 |
|
16.3 |
% |
|
Casino expenses |
|
6,092 |
|
5,312 |
|
14.7 |
% |
18,442 |
|
16,866 |
|
9.3 |
% | ||||
|
Profit Margin |
|
54.4 |
% |
53.2 |
% |
|
|
54.6 |
% |
51.8 |
% |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Food and beverage revenue |
|
3,471 |
|
2,978 |
|
16.6 |
% |
10,707 |
|
9,458 |
|
13.2 |
% | ||||
|
Food and beverage expenses |
|
3,173 |
|
2,871 |
|
10.5 |
% |
8,965 |
|
8,431 |
|
6.3 |
% | ||||
|
Profit Margin |
|
8.6 |
% |
3.6 |
% |
|
|
16.3 |
% |
10.9 |
% |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Room revenue |
|
1,433 |
|
1,247 |
|
14.9 |
% |
4,602 |
|
4,017 |
|
14.6 |
% | ||||
|
Room expenses |
|
728 |
|
619 |
|
17.6 |
% |
2,138 |
|
1,814 |
|
17.9 |
% | ||||
|
Profit Margin |
|
49.2 |
% |
50.4 |
% |
|
|
53.5 |
% |
54.8 |
% |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other revenue |
|
788 |
|
865 |
|
-8.9 |
% |
2,503 |
|
2,409 |
|
3.9 |
% | ||||
|
Other expenses |
|
394 |
|
390 |
|
1.0 |
% |
1,107 |
|
1,104 |
|
0.3 |
% | ||||
|
Profit Margin |
|
50.0 |
% |
54.9 |
% |
|
|
55.8 |
% |
54.2 |
% |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Selling, general and administrative expenses |
|
5,684 |
|
5,599 |
|
1.5 |
% |
15,989 |
|
15,993 |
|
0.0 |
% | ||||
|
Percent of net revenues |
|
32.1 |
% |
36.4 |
% |
|
|
29.7 |
% |
33.8 |
% |
|
| ||||
Casino. Casino revenues increased 17.8% to $13.4 million for the three months ended September 30, 2014 as compared to $11.3 million for the three months ended September 30, 2013. The $2.0 million increase in casino revenues is due primarily to an increase in slot revenue. Casino expenses increased 14.7% to $6.1 million for the three months ended September 30, 2014 as compared to $5.3 million for the three months ended September 30, 2013, primarily due to the increase in casino promotional spending that drove the increase in slot revenue. The net impact of these factors resulted in a 1.2 percentage point improvement in the casino operating margin for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013.
Casino revenues increased to $40.7 million for the nine months ended September 30, 2014 as compared to $35.0 million for the nine months ended September 30, 2013 primarily due to a 16.4% increase in slot handle. The increase is primarily a result of an increase in gaming patron visitation. Casino expenses increased 9.3% to $18.4 million for the nine months ended September 30, 2014 as compared to $16.9 million for the nine months ended September 30, 2013, primarily due to an increase in casino promotional spending. The casino operating margin increased to 54.6% for the nine months ended September 30, 2014 as compared to 51.8% for the nine months ended September 30, 2013 primarily due to the increase in casino revenues.
Food and Beverage. Food and beverage revenues increased 16.6% to $3.5 million for the three months ended September 30, 2014 as compared to $3.0 million for the same period in the prior year and revenues increased 13.2% to $10.7 million for the nine months ended September 30, 2014 as compared to $9.5 million for the prior year period, primarily as a result of the addition of the Farm 24/7 restaurant which opened in November 2013. Food and beverage expenses increased 10.5% to $3.2 million for the three months ended September 30, 2014 as compared to the same period in the prior year, and $0.5 million or 6.3% for the nine months ended September 30, 2014 as compared to the same period prior year, primarily as a result of increased revenue and related food costs. The food and beverage operating margin increased to 16.3% for the nine months ended September 30, 2014 as compared to 10.9% for the nine months ended September 30, 2013 as a result of an increase in the number of patrons served, which was offset in part by an increase in food costs as a percentage of food revenue.
Room. The following table shows key information for hotel operations:
|
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||||||
|
|
|
September 30, |
|
September 30, |
|
Percent |
|
September 30, |
|
September 30, |
|
Percent |
| ||||
|
|
|
2014 |
|
2013 |
|
Change |
|
2014 |
|
2013 |
|
Change |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Occupancy |
|
85 |
% |
80 |
% |
|
|
87 |
% |
84 |
% |
|
| ||||
|
Average daily rate |
|
$ |
85 |
|
$ |
84 |
|
1.4 |
% |
$ |
89 |
|
$ |
86 |
|
3.9 |
% |
|
Revenue per available room |
|
$ |
72 |
|
$ |
67 |
|
7.9 |
% |
$ |
78 |
|
$ |
73 |
|
6.8 |
% |
Room revenue includes income from hotel room sales, meeting room rentals and evenue from spa operations. Room revenues increased by 14.9% to $1.4 million for the three months ended September 30, 2014 as compared to $1.2 million for the prior year period. The increase in room revenues is attributable to more room nights sold and an increase in average daily rate. Room revenues increased by 14.6% to $4.6 million for the nine month ended September 30, 2014 as compared to $4.0 million in the prior year period. The increase is primarily due to higher occupancy during non-peak periods and an increase in average daily rate. Room expenses increased by 17.6% and 17.9%, respectively, for the three and nine months ended September 30, 2014 as compared to the prior year periods 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 decreased by $0.1 million, or 8.9%, during the three months ended September 30, 2014 as compared to the same period in the prior year mainly due to reduced percentage rent received from leased outlets. Other revenue increased by 3.9% during the nine month ended September 30, 2014 as compared to the same period in the prior year, primarily due to increased sales in the gift shop resulting from an increase in patron visits. Other expenses remained relatively flat during the three and nine months ended September 30, 2014 as compared to the prior year periods.
Selling, General and Administrative (“SG&A”). SG&A expenses were relatively flat for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. SG&A expenses also remained relatively flat for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013.
Depreciation and Amortization. Depreciation and amortization increased by $0.2 million for the three months ending September 30, 2014 and by $0.5 million for the nine months ended September 30, 2014, as compared to the same periods in the prior year, primarily due to incremental depreciation associated with 2014 and 2013 fixed asset additions.
Operating Income (Loss). As a result of the factors discussed above, operating income was $0.3 million for the three months ended September 30, 2014, compared to a loss of $0.5 million for the three months ended September 30, 2013; and operating income was $3.7 million for the nine months ended September 30, 2014 as compared to a loss of $0.1 million for the nine months ended September 30, 2013.
Interest Expense. Interest expense, net for the three and nine months ended September 30, 2014 was $1.1 million and $2.4 million, respectively. Interest expense is primarily related to the Senior Secured Credit Facility, which had $58.6 million in Senior Secured Loans outstanding as of September 30, 2014. The Senior Secured Loans bear interest at a rate to be elected by Aliante Gaming, such rate being either (i) 10% per annum, which interest will be added to the principal amount of the Senior Secured Loans quarterly in arrears and subsequently treated as principal of the Senior Secured Loans, or (ii) 6% per annum, which interest will be payable in cash quarterly in arrears. As of September 30, 2014, Aliante Gaming has elected the cash interest payment option. The Company paid $0.9 million in cash interest related to the Senior Secured Credit Facility during the three-months ended September 30, 2014.
Net (Loss). As a result of the factors discussed above, net loss for the three and nine months ended September 30, 2014 was $1.1 million and $0.06 million and a net loss of $1.8 million and $4.1 million for the three and nine months ended September 30, 2013, respectfully.
Liquidity and Capital Resources
Our cash flows will be affected by a variety of factors, many of which are outside of our control, including recovery of the local gaming market, recovery of the housing market and community surrounding the Casino, competition and other general business conditions. We believe that our available cash and cash flows from our operations will provide sufficient liquidity to fund our cash requirements and capital expenditures for 2014. We expect to fund capital expenditures for maintenance of the Casino through cash flow from operating results. However, we cannot assure that we will generate sufficient income and liquidity to meet all of our liquidity requirements and other obligations. Our results for future periods are subject to numerous uncertainties which may result in liquidity problems, and in turn affect our ability to meet our obligations while attempting to meet competitive pressures or adverse economic conditions.
Senior Secured Credit Facility
On November 1, 2011, the Company and Aliante Gaming entered into the Senior Secured Credit Facility, which provided for $45.0 million in principal amount of Senior Secured Loans, which were deemed made on the same date without any funding being provided. The Senior Secured Credit Facility represented an already outstanding obligation of Aliante Gaming as of November 1, 2011. Through November 1, 2014, the Senior Secured Loans bear interest at a rate to be elected by Aliante Gaming, such rate being either (i) 10% per annum, payable in kind, which interest will be added to the principal amount of the Senior Secured Loans quarterly in arrears and subsequently treated as principal of the Senior Secured Loans, or (ii) 6% per annum, which interest will be payable in cash quarterly in arrears. Following November 1, 2014, the Senior Secured Loans will bear interest at a rate of 6% per annum, which interest will be payable in cash quarterly in arrears. The outstanding principal amount of the Senior Secured Loans and all accrued and unpaid interest thereon will be payable on the maturity date, which 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. 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 through June 30, 2014, the principal outstanding balance as of September 30, 2014 and December 31, 2013 was $58.6 million and $55.7 million, respectively. The Company paid cash interest during the quarter ended September 30, 2014, of $0.9 million. There is currently no availability for borrowings under the Senior Secured Credit Facility.
The Senior Secured Credit Facility is guaranteed by the Company and by each domestic wholly owned subsidiary of Aliante Gaming and is secured by a first-priority (a) pledge of 100% of the Company’s equity interest in Aliante Gaming, (b) pledge of 100% of the equity interests in Aliante Gaming’s domestic subsidiaries (if any) and 65% of the equity interests of Aliante Gaming’s “first-tier” foreign subsidiaries (if any) and (c) security interest in substantially all of Aliante Gaming’s tangible and intangible assets, as well as those of each subsidiary guarantor (if any), in each case, other than any assets that may not be pledged pursuant to applicable gaming laws and subject to customary exceptions. The Senior Secured Credit Facility includes various covenants and mandatory prepayments which are customary for similar types of financings and does not contain any financial maintenance covenants.
In establishing the amortization of the debt discount on its Senior Secured Loans in November 2011, the Company expected that it would elect the cash interest payment option beginning in the first quarter of 2013. During the first quarter of 2013, this was subsequently revised to assume cash interest payments would begin during the second quarter of 2013. During the second quarter of 2013, the Company further evaluated the date it would commence the cash interest payment option, determining the Company would instead elect to defer the cash interest option until contractually required to do so beginning in November 2014. During the second quarter of 2014, this was subsequently revised to assume cash interest payments would begin with the interest period commencing on June 30, 2014. As a result of this change in the expected method of payment, the Company recorded an adjustment to its accrual during the second quarter of 2013 to increase interest expense by $0.5 million using the retroprective 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.
Nine Months Ended September 30, 2014
Our primary cash requirements for the remainder of 2014 are expected to include approximately $0.7 million for capital expenditures and $2.2 million for principal and interest payments on indebtedness. We do not expect to make distributions to the Members in 2014. We have no availability for borrowings under the Senior Secured Credit Facility and we had $13.1 million in cash and cash equivalents as of September 30, 2014. Approximately one third of our cash is used on the casino floor with the other two thirds are reserved for other general purposes.
Nine months ended September 30, 2014 and 2013
The following table summarizes our historical cash flows (in thousands):
|
|
|
Nine Months Ended |
| ||||
|
|
|
September 30, |
|
September 30, |
| ||
|
|
|
2014 |
|
2013 |
| ||
|
Net cash provided by (used in) operating activities |
|
$ |
6,517 |
|
$ |
(450 |
) |
|
Net cash used in investing activities |
|
(1,584 |
) |
(2,433 |
) | ||
|
Net cash used in financing activities |
|
(1,646 |
) |
(740 |
) | ||
|
|
|
|
|
|
| ||
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
3,287 |
|
$ |
(3,623 |
) |
For the nine months ended September 30, 2014, net cash provided by operating activities was $6.5 million as compared to $0.5 million of cash used in operating activities for the nine months ended September 30, 2013. The increase in cash flows from operating activities is primarily the result of changes in net working capital and net income. For the nine months ended September 30, 2014 and 2013, cash used in investing activities primarily consisted of capital expenditures. Cash used in financing activities represents principal payments on debt for the nine months ended September 30, 2014 and 2013. There were no distributions to the Members during the nine months ended September 30, 2014 or 2013.
Off Balance Sheet Arrangements
As of September 30, 2014, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations
As of September 30, 2014, there were no material changes to the contractual obligations previously reported under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (the “SEC”) on March 27, 2014.
Critical Accounting Policies
A description of our critical accounting policies can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. Such statements contain words such as “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “may,” “will,” “might,” “should,” “could,” “would,” “seek,” “pursue,” and “anticipate” or the negative or other variation of these or similar words, or may include discussions of strategy or risks and uncertainties. Forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements concerning:
· projections of future results of operations or financial condition;
· expectations regarding our business and results of operations;
· expenses and our ability to operate efficiently;
· expectations regarding trends that will affect our market and the gaming industry generally and the impact of those trends on our business and results of operations;
· our ability to comply with the covenants in the agreements governing our outstanding indebtedness;
· our ability to meet our projected debt service obligations, operating expenses and maintenance capital expenditures;
· expectations regarding the availability of capital resources; and
· the impact of regulation on our business and our ability to maintain necessary approvals for our property.
Any forward-looking statement is based upon a number of estimates and assumptions that, while considered reasonable by us, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, and are subject to change. Actual results of operations may vary materially from any forward-looking statement made herein. Forward-looking statements should not be regarded as a representation by us or any other person that the forward-looking statements will be achieved. Undue reliance should not be placed on any forward-looking statements. Some of the contingencies and uncertainties to which any forward-looking statement contained herein is subject include, but are not limited to, the following:
· the economic downturn, and in particular the economic downturn in Las Vegas, Nevada, and its effect on consumer spending and our business;
· the effects of intense competition that exists in the gaming industry;
· the risk that new gaming licenses or gaming activities, such as internet gaming, are approved and result in additional competition;
· the risk that we are dependent on one property for all of our cash flow;
· the impact of extensive regulation from gaming and other government authorities on our ability to operate our business and the risk that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines or take other actions that adversely affect us;
· risks associated with changes to applicable gaming and tax laws could have a material adverse effect on our financial condition; and
· the impact of general business conditions, including competitive practices, changes in customer demand and the cyclical nature of the gaming and hospitality business generally, and general economic conditions on our business and results of operations.
You should consider the areas of risk and uncertainty described elsewhere in this Quarterly Report on Form 10-Q, as well as those discussed under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014. Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of September 30, 2014, there were no material changes to the information previously reported under “Item 7A. Quantitative and Qualitative Disclosures About market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 27, 2014.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of its Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). The design of any system of control is based in part upon certain assumptions about the likelihood of future events, and we cannot assure that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
During the quarter ended September 30, 2014, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to affect, our internal control over financial reporting.
The Company is currently a party to litigation arising in the ordinary course of business. As with all litigation, no assurance can be provided as to the outcome, and litigation inherently involves significant costs.
The only change from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 is set forth below.
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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
None.
|
Exhibit |
|
Description |
|
|
|
|
|
10.7 |
|
Addendum to the employment agreement between Aliante Gaming, LLC and Robert Schaffhauser, dated as of December 27, 2012. |
|
|
|
|
|
31.1 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
31.2 |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.1 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.2 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
101.INS |
|
XBRL Instance Document. |
|
|
|
|
|
101.SCH |
|
XBRL Taxonomy Extension Schema. |
|
|
|
|
|
101.CAL |
|
XBRL Taxonomy Extension Calculation Linkbase. |
|
|
|
|
|
101.DEF |
|
XBRL Taxonomy Extension Definition Linkbase. |
|
|
|
|
|
101.LAB |
|
XBRL Taxonomy Extension Label Linkbase. |
|
|
|
|
|
101.PRE |
|
XBRL Taxonomy Extension Presentation Linkbase. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
ALST CASINO HOLDCO, LLC, Registrant | ||
|
|
|
| |
|
Dated: November 14, 2014 |
By: |
/s/ SOOHYUNG KIM | |
|
|
|
Name: |
Soohyung Kim |
|
|
|
Title: |
Manager, Chief Executive Officer and Secretary |
Exhibit 10.7
ADDENDUM TO EXECUTIVE EMPLOYMENT AGREEMENT
This Addendum to Executive Employment Agreement (this “Addendum”) is made and entered into as of this 29th day of September 2014, by and between Aliante Gaming, LLC, a Nevada limited liability company, dba Aliante Casino + Hotel (the “Company”) and Robert Schaffhauser (“Executive”).
WHEREAS, the Company and Executive entered into an Executive Employment Agreement dated as of December 27, 2012 (the “Agreement”), which sets forth the specific terms of employment and compensation of Executive; and
WHEREAS, the parties desire to amend certain provisions of the Agreement through this Addendum.
NOW THEREFORE, in consideration of the mutual promises, covenants and agreements contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:
1. Paragraph 2 of the Agreement is hereby amended to provide that the Term of the Agreement shall be extended through December 26, 2016. Upon the expiration of the foregoing Term, this Agreement shall automatically renew for successive one (1) year Terms, subject to the same terms and conditions of this Agreement, unless the Company shall have provided to Executive, or Executive shall have provided to the Company, at least ninety (90) days’ written notice of non-renewal, in which event this Agreement shall expire at the end of the then applicable Term.
2. Paragraph 4 of the Agreement is hereby amended to provide that, effective December 27, 2014, the Base Salary shall be increased to Two Hundred Seventy-Five Thousand Dollars ($275,000.00), payable in such installments as the Company pays its similarly placed Executives, subject to usual and customary deductions for withholding taxes and similar charges, and customary contributions to health and benefit programs in which Executive is enrolled.
3. Paragraph 6.2(b) of the Agreement is hereby amended to provide that the Salary Termination Payment shall be equal to Executive’s Base Salary for twelve (12) months, paid in equal installments over the a twelve (12)-month period, in accordance with the Company’s regular payroll practices; provided, however, the Salary Termination Payment shall be paid in a single lump sum payment in the event of Sale.
4. Other than the amendments to the Agreement as specifically provided herein, all other terms and conditions of the Agreement shall remain in full force and effect. In the event any terms of the Agreement are inconsistent or contrary to this Addendum, the terms of this Addendum shall control. All capitalized terms used herein shall have the same meaning as set forth in the Agreement.
IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND HEREBY, the parties hereto have executed and delivered this Agreement as of the year and date first above written.
|
EXECUTIVE |
|
ALIANTE GAMING, LLC | ||
|
|
|
|
|
|
|
|
|
|
By: |
ALST Casino Holdco, LLC, |
|
By: |
/s/ Robert Schaffhauser |
|
|
its managing member |
|
|
Robert Schaffhauser |
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Soohyung Kim |
|
|
|
|
|
Soohyung Kim, CEO |
Exhibit 31.1
CERTIFICATION
I, Soohyung Kim, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ALST Casino Holdco, LLC;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) 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
(d) disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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; and
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.
Date: November 14, 2014
|
|
/s/ SOOHYUNG KIM |
|
|
Soohyung Kim |
|
|
Manager, Chief Executive Officer and Secretary |
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Robert E. Schaffhauser, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ALST Casino Holdco, LLC;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) 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
(d) disclosed in this report any change in the registrant’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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; and
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.
Date: November 14, 2014
|
|
/s/ ROBERT E. SCHAFFHAUSER |
|
|
Robert E. Schaffhauser |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
Exhibit 32.1
ALST Casino Holdco, LLC
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certify as follows:
1. Soohyung Kim is the Chief Executive Officer of ALST Casino Holdco, LLC (the “Company”).
2. The undersigned certifies to the best of his knowledge:
(A) The Company’s Form 10-Q for the quarter ended September 30, 2014 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”); and
(B) The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 14, 2014
|
|
/s/ SOOHYUNG KIM |
|
|
Soohyung Kim |
|
|
Manager, Chief Executive Officer and Secretary |
|
|
(Principal Executive Officer) |
Exhibit 32.2
ALST Casino Holdco, LLC
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), the undersigned hereby certify as follows:
1. Robert E. Schaffhauser is the Chief Financial Officer of ALST Casino Holdco, LLC (the “Company”).
2. The undersigned certifies to the best of his knowledge:
(A) The Company’s Form 10-Q for the quarter ended September 30, 2014 accompanying this Certification, in the form filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (the “Exchange Act”); and
(B) The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 14, 2014
|
|
/s/ ROBERT E. SCHAFFHAUSER |
|
|
Robert E. Schaffhauser |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |