Exhibit 99.5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
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 000-54193
STATION CASINOS LLC
(Exact name of registrant as specified in its charter)
Nevada (State or other jurisdiction of incorporation or organization) |
| 27-3312261 (I.R.S. Employer Identification No.) |
1505 South Pavilion Center Drive, Las Vegas, Nevada
(Address of principal executive offices)
89135
(Zip Code)
(702) 495-3000
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 x No o
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 o (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
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of April 30, 2013, 100 shares of the registrant’s voting units were outstanding and 100 shares of the registrant’s non-voting units were outstanding.
STATION CASINOS LLC
INDEX
Part I. | Financial Information | 3 |
Item 1. | Financial Statements | 3 |
| Condensed Consolidated Balance Sheets—March 31, 2013 (unaudited) and December 31, 2012 | 4 |
| Condensed Consolidated Statements of Operations — Three months ended March 31, 2013 and 2012 (unaudited) | 5 |
| Condensed Consolidated Statements of Comprehensive (Loss) Income — Three months ended March 31, 2013 and 2012 (unaudited) | 6 |
| Condensed Consolidated Statements of Cash Flows—Three months ended March 31, 2013 and 2012 (unaudited) | 7 |
| Notes to Condensed Consolidated Financial Statements (unaudited) | 9 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 43 |
Item 4. | Controls and Procedures | 45 |
Part II. | Other Information | 46 |
Item 1. | Legal Proceedings | 46 |
Item 1A. | Risk Factors | 46 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 46 |
Item 3. | Defaults Upon Senior Securities | 46 |
Item 4. | Mine Safety Disclosures | 46 |
Item 5. | Other Information | 46 |
Item 6. | Exhibits | 47 |
Signature |
| 48 |
STATION CASINOS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except units data)
|
| March 31, 2013 |
| December 31, 2012 |
| ||
|
| (unaudited) |
|
|
| ||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 102,155 |
| $ | 128,880 |
|
Restricted cash |
| 1,424 |
| 1,980 |
| ||
Receivables, net |
| 32,371 |
| 30,931 |
| ||
Inventories |
| 8,449 |
| 7,938 |
| ||
Prepaid gaming tax |
| 19,596 |
| 18,415 |
| ||
Prepaid expenses and other current assets |
| 12,628 |
| 9,108 |
| ||
Total current assets |
| 176,623 |
| 197,252 |
| ||
Property and equipment, net of accumulated depreciation of $205,561 and $174,796 at March 31, 2013 and December 31, 2012, respectively |
| 2,193,306 |
| 2,212,463 |
| ||
Goodwill |
| 200,694 |
| 200,694 |
| ||
Intangible assets, net of accumulated amortization of $29,397 and $25,093 at March 31, 2013 and December 31, 2012, respectively |
| 204,953 |
| 208,676 |
| ||
Land held for development |
| 220,120 |
| 220,120 |
| ||
Investments in joint ventures |
| 9,792 |
| 9,629 |
| ||
Native American development costs |
| 3,940 |
| 3,255 |
| ||
Other assets, net |
| 65,208 |
| 46,854 |
| ||
Total assets |
| $ | 3,074,636 |
| $ | 3,098,943 |
|
LIABILITIES AND MEMBERS’ EQUITY |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
| $ | 16,077 |
| $ | 21,631 |
|
Accrued interest payable |
| 9,698 |
| 7,983 |
| ||
Accrued expenses and other current liabilities |
| 113,220 |
| 123,537 |
| ||
Current portion of long-term debt |
| 18,589 |
| 17,544 |
| ||
Total current liabilities |
| 157,584 |
| 170,695 |
| ||
Long-term debt, less current portion |
| 2,183,702 |
| 2,056,057 |
| ||
Deficit investment in joint venture |
| 2,319 |
| 2,356 |
| ||
Interest rate swaps and other long-term liabilities, net |
| 38,388 |
| 30,974 |
| ||
Total liabilities |
| 2,381,993 |
| 2,260,082 |
| ||
Commitments and contingencies (Note 8) |
|
|
|
|
| ||
Members’ equity: |
|
|
|
|
| ||
Voting units; 100 units authorized, issued and outstanding |
| — |
| — |
| ||
Non-voting units; 100 units authorized, issued and outstanding |
| — |
| — |
| ||
Additional paid-in capital |
| 825,491 |
| 826,109 |
| ||
Accumulated other comprehensive loss |
| (26,694 | ) | (25,672 | ) | ||
Accumulated deficit |
| (147,397 | ) | (6,605 | ) | ||
Total Station Casinos LLC members’ equity |
| 651,400 |
| 793,832 |
| ||
Noncontrolling interest |
| 41,243 |
| 45,029 |
| ||
Total members’ equity |
| 692,643 |
| 838,861 |
| ||
Total liabilities and members’ equity |
| $ | 3,074,636 |
| $ | 3,098,943 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
STATION CASINOS LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, unaudited)
|
| Three Months Ended March 31, |
| ||||
|
| 2013 |
| 2012 |
| ||
Operating revenues: |
|
|
|
|
| ||
Casino |
| $ | 220,857 |
| $ | 230,179 |
|
Food and beverage |
| 60,685 |
| 60,949 |
| ||
Room |
| 27,272 |
| 27,858 |
| ||
Other |
| 15,844 |
| 16,433 |
| ||
Management fees |
| 9,840 |
| 7,765 |
| ||
Gross revenues |
| 334,498 |
| 343,184 |
| ||
Promotional allowances |
| (22,707 | ) | (24,985 | ) | ||
Net revenues |
| 311,791 |
| 318,199 |
| ||
Operating costs and expenses: |
|
|
|
|
| ||
Casino |
| 84,819 |
| 88,162 |
| ||
Food and beverage |
| 41,768 |
| 42,294 |
| ||
Room |
| 11,133 |
| 10,880 |
| ||
Other |
| 6,159 |
| 5,875 |
| ||
Selling, general and administrative |
| 70,489 |
| 70,005 |
| ||
Development and preopening |
| 140 |
| 55 |
| ||
Depreciation and amortization |
| 35,331 |
| 30,701 |
| ||
Management fee expense |
| 11,746 |
| 11,781 |
| ||
Write-downs and other charges, net |
| 2,513 |
| 451 |
| ||
|
| 264,098 |
| 260,204 |
| ||
Operating income |
| 47,693 |
| 57,995 |
| ||
Earnings from joint ventures |
| 519 |
| 545 |
| ||
Operating income and earnings from joint ventures |
| 48,212 |
| 58,540 |
| ||
Other expense: |
|
|
|
|
| ||
Interest expense, net |
| (43,299 | ) | (49,620 | ) | ||
Loss on extinguishment of debt |
| (146,787 | ) | — |
| ||
Change in fair value of derivative instruments |
| (272 | ) | — |
| ||
|
| (190,358 | ) | (49,620 | ) | ||
Net (loss) income |
| (142,146 | ) | 8,920 |
| ||
Less: net (loss) income attributable to noncontrolling interest |
| (1,354 | ) | 2,086 |
| ||
Net (loss) income attributable to Station Casinos LLC members |
| $ | (140,792 | ) | $ | 6,834 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
STATION CASINOS LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(amounts in thousands, unaudited)
|
| Three Months Ended March 31, |
| ||||
|
| 2013 |
| 2012 |
| ||
|
|
|
|
|
| ||
Net (loss) income |
| $ | (142,146 | ) | $ | 8,920 |
|
Other comprehensive (loss) income: |
|
|
|
|
| ||
Unrealized loss on interest rate swaps: |
|
|
|
|
| ||
Unrealized loss arising during period |
| (4,067 | ) | (5,030 | ) | ||
Less: Reclassification of unrealized loss on interest rate swaps into operations |
| 3,107 |
| 3,121 |
| ||
Unrealized loss on interest rate swaps, net |
| (960 | ) | (1,909 | ) | ||
Unrealized (loss) gain on available-for-sale securities |
| (62 | ) | 69 |
| ||
Comprehensive (loss) income |
| (143,168 | ) | 7,080 |
| ||
Less: comprehensive (loss) income attributable to noncontrolling interests |
| (1,354 | ) | 2,086 |
| ||
Comprehensive (loss) income attributable to Station Casinos LLC members |
| $ | (141,814 | ) | $ | 4,994 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
STATION CASINOS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands, unaudited)
|
| Three Months Ended March 31, |
| ||||
|
| 2013 |
| 2012 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net (loss) income |
| $ | (142,146 | ) | $ | 8,920 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
| 35,331 |
| 30,701 |
| ||
Change in fair value of derivative instruments |
| 272 |
| — |
| ||
Provision for doubtful accounts |
| 333 |
| 559 |
| ||
Write downs and other charges, net |
| 1,333 |
| 19 |
| ||
Amortization of debt discount and debt issuance costs |
| 11,162 |
| 19,580 |
| ||
Interest—paid in kind |
| 993 |
| 1,017 |
| ||
Share-based compensation |
| 1,090 |
| — |
| ||
Earnings from joint ventures |
| (519 | ) | (545 | ) | ||
Distributions from joint ventures |
| 291 |
| — |
| ||
Loss on extinguishment of debt |
| 146,787 |
| — |
| ||
Changes in assets and liabilities: |
|
|
|
|
| ||
Restricted cash |
| 556 |
| 19 |
| ||
Receivables, net |
| (1,773 | ) | (4,671 | ) | ||
Inventories and prepaid expenses |
| (5,212 | ) | (3,388 | ) | ||
Accounts payable |
| (5,586 | ) | 257 |
| ||
Accrued interest payable |
| 4,205 |
| 5,643 |
| ||
Accrued expenses and other current liabilities |
| 5,413 |
| 8,646 |
| ||
Other, net |
| 3,193 |
| 730 |
| ||
Net cash provided by operating activities |
| 55,723 |
| 67,487 |
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Capital expenditures, net of related payables |
| (29,020 | ) | (10,472 | ) | ||
Proceeds from sale of property and equipment |
| 175 |
| 32 |
| ||
Distributions in excess of earnings from joint ventures |
| 27 |
| 449 |
| ||
Native American development costs |
| (685 | ) | (2,766 | ) | ||
Other, net |
| (932 | ) | (1,452 | ) | ||
Net cash used in investing activities |
| (30,435 | ) | (14,209 | ) | ||
STATION CASINOS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(amounts in thousands, unaudited)
|
| Three Months Ended March 31, |
| ||||
|
| 2013 |
| 2012 |
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Proceeds from issuance of 7.50% Senior Notes |
| 499,935 |
| — |
| ||
Repayment of Propco senior notes due 2018 |
| (625,000 | ) | — |
| ||
Borrowings under credit agreement with original maturity dates greater than three months |
| 1,611,622 |
| — |
| ||
Payments under credit agreements with original maturities of three months or less, net |
| (5,000 | ) | (5,800 | ) | ||
Payments under credit agreements with original maturities greater than three months |
| (1,498,271 | ) | (39,178 | ) | ||
Distributions to members and noncontrolling interests |
| (1,846 | ) | (3,096 | ) | ||
Debt issuance costs |
| (35,331 | ) | (324 | ) | ||
Payments on other debt |
| (420 | ) | (648 | ) | ||
Capital contributions from noncontrolling interests |
| 2,298 |
| — |
| ||
Net cash used in financing activities |
| (52,013 | ) | (49,046 | ) | ||
Cash and cash equivalents: |
|
|
|
|
| ||
(Decrease) increase in cash and cash equivalents |
| (26,725 | ) | 4,232 |
| ||
Balance, beginning of period |
| 128,880 |
| 93,662 |
| ||
Balance, end of period |
| $ | 102,155 |
| $ | 97,894 |
|
Supplemental cash flow disclosures: |
|
|
|
|
| ||
Cash paid for interest, net of $0 and $1,286 capitalized, respectively |
| $ | 22,976 |
| $ | 22,252 |
|
Non-cash investing and financing activities: |
|
|
|
|
| ||
Change in property and equipment included in accrued expenses and other current liabilities |
| $ | 7,064 |
| $ | 2,425 |
|
Issuance of note payable with option by Fertitta Interactive in exchange for redemption of noncontrolling interest |
| $ | 4,600 |
| $ | — |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
Station Casinos LLC, a Nevada limited liability company (the “Company” or “Station” ), is a gaming and entertainment company that owns and operates nine major hotel/casino properties and seven smaller casino properties (three of which are 50% owned) in the Las Vegas metropolitan area. The Company also manages a casino in southwestern Michigan for a Native American tribe.
In November 2012, the Company acquired a 50.1% ownership interest in Fertitta Interactive LLC (“Fertitta Interactive”) for $20.7 million. Fertitta Interactive operates Ultimate Gaming and was formed in 2011 with the purchase of Cyber-Arts, a California based company which has developed a proprietary real money and social gaming platform. Ultimate Gaming launched its real money online poker platform in Nevada on April 30, 2013. During the three months ended March 31, 2013, Fertitta Interactive redeemed the equity interests of one of its noncontrolling interest holders in exchange for a note payable with an option which allows the holder to repurchase the equity interest in Fertitta Interactive within two years. As a result, the Company’s ownership interest in Fertitta Interactive increased to 57.3%. The obligation related to this transaction is included in other long-term liabilities on the Condensed Consolidated Balance Sheet at March 31, 2013.
The accompanying condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). 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 management believes 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 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. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Company’s Annual Report on Form 10—K for the year ended December 31, 2012.
The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates.
Principles of Consolidation
The amounts shown in the accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries, including Fertitta Interactive and MPM Enterprises, LLC (“MPM”), which is 50% owned and controlled by the Company and required to be consolidated. Investments in all other 50% or less owned affiliated companies are accounted for under the equity method.
MPM is considered a variable interest entity under the provisions of Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“ASC Topic 810”). Under the terms of the MPM operating agreement, the Company was required to provide the majority of MPM’s financing. In addition, based on a qualitative analysis, the Company believes it directs the most significant activities that impact MPM’s economic performance and has the right to receive benefits and the obligation to absorb losses that could potentially be significant to MPM. As a result, the Company is considered the primary beneficiary of MPM as defined in ASC Topic 810 and therefore consolidates MPM in its consolidated financial statements. The creditors of MPM have no recourse to the general credit of the Company, and the assets of MPM may be used only to settle MPM’s obligations. MPM’s assets that are reflected in the Company’s Condensed Consolidated Balance Sheets at March 31, 2013 and December 31, 2012 include intangible assets of $49.8 million and $52.3 million, respectively, and receivables of $3.5 million and $2.7 million, respectively.
The third party holdings of equity interests in MPM and Fertitta Interactive are referred to herein as noncontrolling interests. The portion of net income (loss) attributable to noncontrolling interests is presented separately on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income, and the portion of members’ equity attributable to noncontrolling interests is presented separately on the Condensed Consolidated Balance Sheets.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Certain amounts in the condensed consolidated financial statements for the prior year period have been reclassified to be consistent with the current year presentation. These reclassifications had no effect on the previously reported net income.
Income Taxes
The Company is a limited liability company treated as a partnership for income tax purposes and as such, is a pass-through entity and is not liable for income tax in the jurisdictions in which it operates. As a result, no provision for income taxes has been made in the condensed consolidated financial statements. Each member of the Company includes its respective share of the Company’s taxable income in its income tax return. Due to the Company’s status as a pass-through entity, it has recorded no liability associated with uncertain tax positions.
Significant Accounting Policies
A description of the Company’s significant accounting policies can be found in Item 7 of its Annual Report on Form 10—K for the year ended December 31, 2012.
Recently Issued and Recently Adopted Accounting Standards
In July 2012, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment , (“ASU 2012-02”). ASU 2012-02 amends the guidance in Accounting Standards Codification 350-302 on testing indefinite-lived intangible assets, other than goodwill, for impairment by allowing an entity to perform a qualitative impairment assessment before proceeding to the two-step impairment test. If the entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not (i.e., a likelihood of more than 50 percent) impaired, the entity would not need to calculate the fair value of the asset. In addition, ASU 2012-02 does not amend the requirement to test these assets for impairment between annual tests if there is a change in events or circumstances; however, it does revise the examples of events and circumstances that an entity should consider in interim periods. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption being permitted. The adoption of this standard did not have a material effect on the Company’s financial position or results of operations.
In October 2012, the FASB issued Accounting Standards Update 2012-04, Technical Corrections and Improvements, (“ASU 2012-04”). ASU 2012-04 clarifies the FASB Accounting Standards Codification (the “Codification”) or corrects unintended application of guidance and includes amendments identifying when the use of fair value should be linked to the definition of fair value in Topic 820, Fair Value Measurement . Amendments to the Codification without transition guidance are effective upon issuance. Amendments subject to transition guidance are effective for fiscal periods beginning after December 15, 2012. The Company adopted the amendments without transition guidance on the issuance date, and the adoption did not have a material effect on the Company’s financial position or results of operations. The Company adopted the amendments with transition guidance during the first quarter of 2013, and the adoption did not have a material effect on the Company’s financial position or results of operations.
In February 2013, the FASB issued ASU 2013-02, Comprehensive Income — Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income . This amendment requires an entity to provide information about the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income by component. If the amount being reclassified is required to be reclassified in its entirety to net income, an entity must disclose, either on the face of the statement of net income or in the notes, the line item locations of significant amounts reclassified out of accumulated other comprehensive income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other required disclosures that provide additional detail about those amounts, such as when a portion of an amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of to income or expense in the same reporting period. The new guidance is effective prospectively for reporting periods beginning after December 15, 2012, and early adoption is permitted. The Company adopted this guidance during the first quarter of 2013, and the adoption did not have a material impact on its financial position or results of operations.
In February 2013, the FASB issued ASU 2013-04, Liabilities (Topic 405)—Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date. This amendment provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in GAAP.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Examples of obligations within this guidance are debt arrangements, other contractual obligations, and settled litigation and judicial rulings. This guidance is effective for the Company during the first quarter of 2014, and early adoption is permitted. Upon adoption, the guidance is required to be applied retrospectively to all prior periods presented for any obligations that exist at the beginning of an entity’s fiscal year of adoption which are within its scope. The Company will adopt this guidance during the first quarter of 2014 and does not expect the adoption to have a material effect on its financial position or results of operations.
A variety of proposed or otherwise potential accounting guidance is currently under study by standard-setting organizations and certain regulatory agencies. Due to the tentative and preliminary nature of such proposed accounting guidance, the Company has not yet determined the effect, if any, that the implementation of such proposed accounting guidance would have on its condensed consolidated financial statements.
2. Native American Development
The Company has entered into development and management agreements with Native American tribes under which it has made reimbursable advances for certain costs. At March 31, 2013, the carrying value of the Company’s advances to Native American tribes was $3.9 million, representing advances to the North Fork Rancheria of Mono Indians. Following is a summary of the status of the Company’s Native American development projects.
The Federated Indians of Graton Rancheria
The Company has entered into development and management agreements with the Federated Indians of Graton Rancheria (the “FIGR”), a federally recognized Indian tribe, pursuant to which the Company has agreed to assist the FIGR in developing, financing and operating a gaming and entertainment facility located in Sonoma County, California.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table outlines the status of the FIGR project and the Company’s evaluation at March 31, 2013 of each of the critical milestones necessary to complete the project.
|
| As of March 31, 2013 |
Federally recognized as a tribe by the Bureau of Indian Affairs (“BIA”) |
| Yes |
Date of recognition |
| Federal recognition was terminated during the 1950’s and restored on December 27, 2000. There is currently no evidence to suggest that recognition might be terminated in the future. |
Tribe has possession of or access to usable land upon which the project is to be built |
| On October 1, 2010 the Department of the Interior (“DOI”) accepted approximately 254 acres of land for the project into trust on behalf the FIGR. |
Status of regulatory and governmental approvals: |
|
|
Tribal–state compact |
| The FIGR have entered into a Class III gaming compact with the State of California, which was fully executed on April 27, 2012 and ratified by the California legislature on May 10, 2012. |
Approval of gaming compact by DOI |
| The FIGR compact was deemed approved by the DOI and became effective when published in the Federal Register on July 11, 2012. |
Approval of management agreement by NIGC |
| Class II and Class III gaming management agreement was approved by the National Indian Gaming Commission (“NIGC”) on August 1, 2012. |
DOI acceptance of usable land into trust on behalf of the tribe |
| October 1, 2010 |
Gaming licenses: |
|
|
Type |
| Class II and Class III |
Number of gaming devices allowed |
| The FIGR compact limits the number of Class III gaming devices to be operated at the facility to 3,000. There is no limitation on the number of Class II gaming devices that the FIGR may operate. |
City agreement |
| The FIGR entered into a Memorandum of Understanding (“MOU”) with the City of Rohnert Park (the “City”) under which the tribe has agreed to pay one—time and recurring mitigation contributions, subject to certain contingencies. Most of such payments will be included in the 15% of net proceeds payable under the FIGR compact. In order to reflect changes in the location of the site, the scope of the FIGR’s project, the amount of the payments being made to the City, and the potential demand on City services, the City and the FIGR negotiated and entered into a First Amended and Restated Memorandum of Understanding, which became effective on April 17, 2013. |
Date of city agreement |
| Original MOU: October 14, 2003; First Amended and Restated MOU: April 17, 2013 |
County and other agreements |
| On October 23, 2012, an Intergovernmental Mitigation Agreement (“IMA”) between the FIGR and Sonoma County (the “County”) became effective. The IMA sets forth certain payments the FIGR will make to the County to mitigate any potential off-reservation impacts arising from the FIGR’s project. Most of the mitigation payments provided for in the IMA will be included in the 15% of net proceeds payable under the FIGR compact. In addition, on July 23, 2012, the City and the FIGR entered into a Joint Exercise of Powers Agreement for Wastewater Services pursuant to which the City will provide wastewater services to the FIGR’s reservation, including the project. Also, on September 25, 2012, an agreement between the FIGR, the City and the County entitled the Joint Exercise of Powers Agreement for Implementation of Mitigation Measures for Widening Wilfred Avenue, became effective (the “Wilfred Avenue JEPA”). Under the Wilfred Avenue JEPA, the FIGR has agreed to pay the full cost of improvements to Wilfred Avenue and Business Park Drive. |
Financing |
| Third-party financing for the project totaling $850 million closed on August 22, 2012. |
Construction status |
| In progress |
Expected opening date |
| Fourth quarter of 2013 |
The Company has evaluated the likelihood that the FIGR project will be successfully completed and opened, and has concluded that at March 31, 2013, the likelihood of successful completion is in the range of 95% to 100%. The Company’s evaluation is based on its consideration of all available positive and negative evidence about the status of the project, including the status of required regulatory approvals, and the progress being made toward the achievement of all milestones and the likelihood of successful resolution of all contingencies.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
There can be no assurance that the FIGR project will be successfully completed nor that future events and circumstances will not change the Company’s estimates of the timing, scope, and potential for successful completion or that such changes will not be material.
North Fork Rancheria of Mono Indian Tribe
The Company has entered into development and management agreements with the North Fork Rancheria of Mono Indians (the “Mono”), a federally recognized Indian tribe, pursuant to which the Company has agreed to assist the Mono in developing, financing and operating a gaming and entertainment facility to be located in Madera County, California.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table outlines the status of the Mono project and the Company’s evaluation at March 31, 2013 of each of the critical milestones necessary to complete the project.
|
| As of March 31, 2013 |
Federally recognized as a tribe by the BIA |
| Yes |
Date of recognition |
| Federal recognition was terminated in 1961 and restored in 1983. There is currently no evidence to suggest that recognition might be terminated in the future. |
Tribe has possession of or access to usable land upon which the project is to be built |
| The DOI accepted approximately 305 acres of land for the project into trust for the benefit of the Mono on February 5, 2013. |
Status of obtaining regulatory and governmental approvals: |
|
|
Tribal–state compact |
| A new compact was negotiated and signed by the Governor of California and the Mono on August 31, 2012. The compact was submitted to the California legislature for ratification during the 2013 legislative session. The Company believes that the compact will be ratified by the legislature due to the precedent set by the ratification of numerous tribal-state gaming compacts in the past. |
Approval of gaming compact by DOI |
| Approval of the gaming compact by the DOI is expected to occur after the compact has been ratified by the California legislature. The Company believes the DOI will approve the compact because the terms and conditions thereof are consistent with past compacts that have been approved. |
Record of decision regarding environmental impact published by BIA |
| On November 26, 2012, the record of decision for the Environmental Impact Statement for the project was issued by the BIA. On December 3, 2012, the Notice of Intent to take land into trust was published in the Federal Register. |
BIA accepting usable land into trust on behalf of the tribe |
| The Mono site was accepted into trust on February 5, 2013. |
Approval of management agreement by NIGC |
| Approval of the amended and restated management agreement by the NIGC is expected to occur following the legislative ratification of the compact and approval of the compact by the Secretary of the Interior (“Secretary”). The Company believes the amended and restated management agreement will be approved because the terms and conditions thereof are acceptable under the Indian Gaming Regulatory Act and are consistent with previously approved management agreements. |
Gaming licenses: |
|
|
Type |
| Current plans for the project include Class II and Class III gaming, which requires that the California legislature ratify the compact and that the Secretary approve the compact or allow it to become effective. There is currently no evidence to indicate that the legislature will not ratify the compact. (See comments above.) The NIGC must also approve the Company’s management agreement. |
Number of gaming devices allowed |
| The compact permits a maximum of 2,000 Class III slot machines at the facility. There is no limit on the number of Class II gaming devices that the Mono can offer. |
Agreements with local authorities |
| The Mono have entered into memoranda of understanding with the City of Madera, the County of Madera and the Madera Irrigation District under which the Mono agreed to pay one-time and recurring mitigation contributions, subject to certain contingencies. |
The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurance as to when, or if, these approvals will be obtained. The Company currently estimates that construction of the facility may begin in 2014 and estimates that the facility would be completed and opened for business approximately 18 months after construction begins. There can be no assurance, however, that the project will be completed and opened within this time frame or at all. The Company expects to assist the Mono in obtaining third—party financing for the project once all necessary regulatory approvals have been received and prior to commencement of construction; however, there can be no assurance that the Company will be able to obtain such financing for the project on acceptable terms or at all.
Pursuant to the development agreement, the Company has made reimbursable advances to the Mono which are expected to be repaid from the proceeds of third-party financing or from the project’s gaming revenues. At March 31, 2013, the carrying value of the advances was $3.9 million.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company has evaluated the likelihood that the Mono project will be successfully completed and opened, and has concluded that at March 31, 2013, the likelihood of successful completion is in the range of 65% to 75%. The Company’s evaluation is based on its consideration of all available positive and negative evidence about the status of the project, including, but not limited to, the status of required regulatory approvals, as well as the progress being made toward the achievement of all milestones and the successful resolution of all contingencies. There can be no assurance that the project will be successfully completed nor that future events and circumstances will not change the Company’s estimates of the timing, scope, and potential for successful completion or that any such changes will not be material. In addition, there can be no assurance that the Company will recover all of its investment in the project even if it is successfully completed and opened for business.
3. Long-term Debt
Long-term debt consists of the following (amounts in thousands):
|
| March 31, 2013 |
| December 31, 2012 |
| ||
|
| (unaudited) |
|
|
| ||
Term Loan, due March 1, 2020, interest at a margin above LIBOR or base rate (5.00% at March 31, 2013), net of unamortized discount of $56.7 million |
| $ | 1,568,263 |
| $ | — |
|
Revolving Credit Facility, due March 1, 2018, interest at a margin above LIBOR or base rate |
| — |
| — |
| ||
7.50% Senior Notes, due March 1, 2021, net of unamortized discount of $6.4 million |
| 493,592 |
| — |
| ||
Propco Term Loan Tranche B-1, due June 16, 2016, interest at a margin above LIBOR or base rate (3.21% at December 31, 2012), net of unamortized discount of $18.1 million |
| — |
| 125,883 |
| ||
Propco Term Loan Tranche B-2, due June 16, 2016, interest at a margin above LIBOR or base rate (4.21% at December 31, 2012), net of unamortized discount of $62.1 million |
| — |
| 663,564 |
| ||
Propco Senior Notes, due June 18, 2018, interest at an increasing fixed rate (3.66% at December 31, 2012), net of unamortized discount of $97.1 million |
| — |
| 527,903 |
| ||
Propco Revolver, due June 16, 2016, interest at a margin above LIBOR or base rate (3.40% at December 31, 2012), net of unamortized discount of $6.3 million |
| — |
| 47,727 |
| ||
Opco and GVR joint Term Loan, due September 28, 2019, interest at a margin above LIBOR or base rate (5.50% at December 31, 2012), net of unamortized discount of $4.1 million |
| — |
| 569,438 |
| ||
Restructured Land Loan, due June 16, 2016, interest at a margin above LIBOR or base rate (3.70% and 3.71% at March 31, 2013 and December 31, 2012, respectively), net of unamortized discount of $13.5 million and $14.3 million, respectively |
| 96,713 |
| 94,943 |
| ||
Other long-term debt, weighted-average interest of 3.88% and 3.88% at March 31, 2013 and December 31, 2012, respectively, maturity dates ranging from 2014 to 2027 |
| 43,723 |
| 44,143 |
| ||
Total long-term debt |
| 2,202,291 |
| 2,073,601 |
| ||
Current portion of long-term debt |
| (18,589 | ) | (17,544 | ) | ||
Total long-term debt, net |
| $ | 2,183,702 |
| $ | 2,056,057 |
|
On March 1, 2013, the Company entered into a new credit agreement with a $350 million revolving credit facility and a $1.625 billion term loan facility and issued $500 million in aggregate principal amount of 7.50% senior notes. The net proceeds of these transactions, together with cash on hand, were used to (i) repurchase all of the Company’s outstanding senior notes due 2018, (ii) repurchase all amounts outstanding under the $931.3 million NP Propco LLC (“Propco”) credit agreement, (iii) repay all amounts outstanding under the $575.0 million NP Opco LLC (“Opco”) credit agreement, and (iv) pay associated fees and expenses. The refinancing transactions are described in more detail below.
Tender Offer
On February 14, 2013, the Company commenced a cash tender offer and consent solicitation for any and all of its existing senior notes due 2018 pursuant to which the Company offered to purchase the notes at a purchase price of $991.50 in cash, plus a $10 consent payment, per $1,000 in principal amount (the “Tender Offer”). The Tender Offer was completed and the Company repurchased all of the senior notes on March 1, 2013.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7.50% Senior Notes
In March 2013, the Company issued, in a private offering, $500 million in principal amount of 7.50% senior notes due March 1, 2021 (the “7.50% Senior Notes”) pursuant to an indenture, dated as of March 1, 2013 (the “Indenture”), among the Company, the guarantors party thereto (the “Guarantors”) and Wells Fargo Bank, National Association, as trustee. The 7.50% Senior Notes are guaranteed by all subsidiaries of the Company other than NP Landco Holdco LLC and Fertitta Interactive and their respective subsidiaries, and MPM. Interest is due March 1 and September 1 of each year commencing September 1, 2013. Prior to March 1, 2016, the Company may redeem the 7.50% Senior Notes plus accrued and unpaid interest and a make-whole premium. Prior to March 1, 2016, the Company is also entitled to redeem up to 35% of the original aggregate principal amount of the 7.50% Senior Notes with proceeds of certain equity financings at the redemption prices specified in the Indenture. On or after March 1, 2016, the Company may redeem all or a portion of the 7.50% Senior Notes at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest to the applicable redemption date:
Year beginning March 1, |
| Percentage |
|
2016 |
| 105.625 | % |
2017 |
| 103.750 | % |
2018 |
| 101.875 | % |
2019 and thereafter |
| 100.000 | % |
If the Company experiences certain change of control events (as defined in the Indenture), the Company must offer to repurchase the 7.50% Senior Notes at a purchase price in cash equal to 101% of the aggregate principal amount outstanding plus accrued and unpaid interest thereon to the date of repurchase.
The Indenture contains certain customary covenants limiting, among other things, the Company’s ability and the ability of its subsidiaries (other than its unrestricted subsidiaries) to incur or guarantee additional debt, create liens, transfer and sell assets, merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’s assets, enter into certain transactions with affiliates, engage in lines of business other than its core business and related businesses, or pay dividends or distributions (other than customary tax distributions). These covenants are subject to a number of exceptions and qualifications as set forth in the Indenture. The Indenture also provides for events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the 7.50% Senior Notes to be declared due and payable.
New Credit Facility
On March 1, 2013, the Company entered into a new credit facility, which includes a $350 million revolving credit facility (the “Revolving Credit Facility”) and a $1.625 billion term loan facility (the “Term Loan Facility” and collectively, the “New Credit Facility”).
The Term Loan Facility is fully drawn and will mature on March 1, 2020. Subject to the satisfaction of certain conditions, amounts may be borrowed under the Revolving Credit Facility, which shall be fully available at any time prior to maturity on March 1, 2018. At the Company’s option, the Company has the right to increase its borrowings under the New Credit Facility in an aggregate principal amount not to exceed the greater of (a) $350 million and (b) an unlimited amount (subject to certain conditions and pro forma first lien leverage of less than or equal to 4.5x).
The interest rates under the Revolving Credit Facility are at the Company’s option, either (i) LIBOR plus a margin of up to 3.50%, or (ii) a base rate plus a margin of up to 2.50% subject to a leverage based grid. The interest rates under the Term Loan Facility are at the Company’s option, either (i) LIBOR plus 4.00%, or (ii) a base rate plus 3.00%; provided, however, that in no event will LIBOR be less than 1.00% over the term of the Term Loan Facility. Additionally, the Company is subject to fees of 0.50% per annum on the unused portion of the Revolving Credit Facility.
All of the Company’s obligations under the New Credit Facility are guaranteed by all subsidiaries of the Company other than unrestricted subsidiaries. The New Credit Facility is secured by substantially all of the Company’s current and future personal property assets and substantially all current and future personal property assets of the restricted subsidiaries and mortgages on the real property and improvements owned or leased by the following subsidiaries: NP Boulder LLC, NP Lake Mead LLC, NP Fiesta LLC, NP Palace LLC, NP Red Rock LLC, NP Santa Fe LLC, NP Sunset LLC, NP Texas LLC, and Station GVR Acquisition, LLC and certain after-acquired real property based on thresholds. The New Credit Facility is also secured by a pledge of all of the Company’s equity.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company is required to make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the sum of the original principal amount and the aggregate amount of any increased commitments under the Term Loan Facility beginning on June 30, 2013. In addition to the scheduled principal amortization payments on the Term Loan Facility, the Company will be required to make certain mandatory prepayments on the Term Loan Facility with a portion of its excess cash flow as follows: (A)(i) 50% of excess cash flow so long as no default has occurred and its total leverage ratio is above 4.50 to 1.00 or a default has occurred and is continuing, (ii) 25% of excess cash flow so long as no default has occurred and its total leverage ratio is less than or equal to 4.50 to 1.00, or (iii) 0% of excess cash flow so long as no default has occurred and its total leverage ratio is less than or equal to 3.50 to 1.00 and (B) 100% of all net cash proceeds of asset sales or other dispositions, the issuance or incurrence of additional debt, and receipt of insurance proceeds and condemnation awards, in each case subject to certain customary carve-outs and reinvestment provisions. The Company must pay a premium if it prepays the Term Loan Facility prior to March 1, 2014. On or after March 1, 2014, the Company may, at its option, prepay the Term Loan Facility at par.
The credit agreement governing the New Credit Facility contains a number of customary covenants that, among other things and subject to certain exceptions, restrict the Company’s ability and the ability of its restricted subsidiaries to incur additional indebtedness or become a guarantor; create liens on collateral; engage in mergers, consolidations or asset dispositions; make distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries or make capital expenditures. The credit agreement governing the Revolving Credit Facility under the New Credit Facility also includes requirements that the Company maintain a maximum total leverage ratio ranging from 8.00 to 1.00 in 2013 to 5.00 to 1.00 in 2017 and a minimum interest coverage ratio ranging from 2.00 to 1.00 in 2013 to 3.00 to 1.00 in 2017, provided that a default of the financial ratio covenants shall only become an event of default under the Term Loan Facility if the lenders providing the Revolving Credit Facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. The testing of these financial ratio covenants began with the fiscal quarter ended March 31, 2013. At March 31, 2013, the Company was in compliance with all applicable covenants.
The credit agreement governing the New Credit Facility contains a number of customary events of default (subject to grace periods and cure rights). If any event of default occurs, the lenders under the New Credit Facility would be entitled to take various actions, including accelerating amounts due thereunder and taking all actions permitted to be taken by a secured creditor.
The Company evaluated the refinancing transactions in accordance with the accounting standards for debt modifications and extinguishments. Because certain lenders under the 7.50% senior notes and the new credit facility were lenders under the previous debt arrangements, the Company applied the accounting guidance on a lender by lender basis. As a result of its evaluation, the Company recognized a loss on debt extinguishment of $146.8 million, primarily representing the write-off of unamortized debt discount and debt issuance costs related to the previous debt. The Company accounted for the portions of the transactions that did not meet the criteria for debt extinguishment as debt modifications.
In connection with the refinancing transactions, the Company paid $35.3 million in fees and costs, of which $22.8 million was capitalized. Unamortized debt issuance costs are included in other assets on the Company’s Condensed Consolidated Balance Sheets.
Concurrently with the refinancing transactions, the Company amended its existing interest rate swap agreements. See Note 4 for additional information.
Borrowing Availability
At March 31, 2013, the Company’s borrowing availability was $313.3 million under the Revolving Credit Facility, which is net of outstanding letters of credit and similar obligations totaling $36.7 million.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Derivative Instruments
The Company’s objective in using derivative instruments is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps as a primary part of its cash flow hedging strategy. The Company’s interest rate swaps utilized as cash flow hedges involve the receipt of variable—rate payments in exchange for fixed—rate payments over the life of the agreements without exchange of the underlying notional amount. The Company does not use derivative financial instruments for trading or speculative purposes.
In March 2013, the Company refinanced its existing debt under the Propco and Opco credit agreements and the Propco senior notes. In connection with the refinancing, the Company amended one of its interest rate swaps to include a minimum interest rate of 1.00% on the floating leg to match the terms of the New Credit Facility (see Note 3). The Company also amended its other interest rate swap to include a minimum interest rate of 1.00% on the floating leg to match the terms of the New Credit Facility as well as to extend the maturity and adjust the notional amount. These amendments resulted in the discontinuation of the Company’s two cash flow hedging relationships that existed at the time, and as a result of the discontinuation, cumulative deferred losses of $1.1 million that had been previously recognized in other comprehensive income will be amortized as an increase to interest expense as the previously hedged interest payments continue to occur through July 2015.
As of March 31, 2013, the Company has two outstanding interest rate swaps with initial notional amounts totaling $1.1 billion, which effectively convert $1.1 billion of its floating-rate debt to a fixed rate of 6.0%. In accordance with the accounting guidance in ASC Topic 815, Derivatives and Hedging, the Company has designated the full notional amount of both of its outstanding swaps as cash flow hedges of interest rate risk. Under the terms of the swap agreements, the Company pays fixed rates ranging from 1.77% to 2.13% and receives variable rates based on one-month LIBOR (subject to a minimum of 1.00%).
For derivative instruments that are designated and qualify as cash flow hedges of forecasted interest payments, the effective portion of the gain or loss is reported as a component of other comprehensive income (loss) until the interest payments being hedged are recorded as interest expense, at which time the amounts in other comprehensive income (loss) are reclassified as an adjustment to interest expense. Gains or losses on any ineffective portion of derivative instruments in cash flow hedging relationships are recorded as a component of change in fair value of derivative instruments in the Condensed Consolidated Statements of Operations. Ineffectiveness results from both of the Company’s designated swaps having fair values other than zero at the time they were designated. For the three months ended March 31, 2013, the Company has recorded $68 thousand of such ineffectiveness.
Certain derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements, but do not meet the hedge accounting requirements. The Company records any changes in the fair value of interest rate swaps not designated in hedging relationships in change in fair value of derivative instruments in its statements of operations. Prior to the March 2013 amendment and re-designation of the interest rate swaps described above, a portion of one of the Company’s interest rate swaps was not designated in a hedging relationship. For the three months ended March 31, 2013, the Company recorded a loss of $0.2 million related to the non-designated portion of its interest rate swaps. As of March 31, 2013, the Company no longer has any hedges that are not designated in cash flow hedging relationships.
The table below presents the fair value of the Company’s derivative financial instruments, exclusive of any accrued interest, as well as their classification on the Condensed Consolidated Balance Sheets (amounts in thousands):
|
|
|
| Fair value |
| ||||
|
| Balance sheet classification |
| March 31, 2013 |
| December 31, 2012 |
| ||
|
|
|
| (unaudited) |
|
|
| ||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
| ||
Interest rate swaps |
| Other long–term liabilities |
| $ | 26,438 |
| $ | 21,140 |
|
|
|
|
|
|
|
|
| ||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
| ||
Interest rate swaps |
| Other long–term liabilities |
| $ | — |
| $ | 2,746 |
|
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations (amounts in thousands, unaudited):
Derivatives in |
| Amount of Loss on Derivatives |
| Location of Loss |
| Amount of Loss Reclassified from |
| Location of |
| Amount of Loss on Derivatives |
| ||||||||||||
Hedging |
| Three Months Ended March 31, |
| Income (Effective |
| Three Months Ended March 31, |
| Effectiveness |
| Three Months Ended March 31, |
| ||||||||||||
Relationships |
| 2013 |
| 2012 |
| Portion) |
| 2013 |
| 2012 |
| Testing) |
| 2013 |
| 2012 |
| ||||||
Interest rate swaps |
| $ | 4,067 |
| $ | 5,030 |
| Interest expense, net |
| $ | 3,107 |
| $ | 3,121 |
| Change in fair value of derivative instruments |
| $ | 68 |
| $ | — |
|
Losses reclassified from accumulated other comprehensive income (loss) into interest expense, net includes reclassifications of deferred losses related to discontinued cash flow hedging relationships. Approximately $13.1 million of the deferred losses included in accumulated other comprehensive loss on the Condensed Consolidated Balance Sheet at March 31, 2013 is expected to be reclassified into earnings during the next twelve months.
The table below presents the effect of the Company’s derivative financial instruments not designated in hedging relationships on the Condensed Consolidated Statements of Operations (amounts in thousands, unaudited):
|
|
|
| Amount of Loss on Derivative Instruments |
| ||||
Derivatives Not Designated as Hedging |
|
|
| Three Months Ended March 31, |
| ||||
Instruments |
| Location of Loss on Derivative Instruments Recognized in Income |
| 2013 |
| 2012 (a) |
| ||
Interest rate swaps |
| Change in fair value of derivative instruments |
| $ | 204 |
| $ | — |
|
(a) During the three months ended March 31, 2012, the Company had no derivative instruments that were not designated in hedging relationships.
As of March 31, 2013, the Company had not posted any collateral related to these interest rate swap agreements; however, the Company’s obligations under the agreements are subject to the security and guarantee arrangements applicable to the related credit agreements. The swap agreements contains cross-default provisions under which the Company could be declared in default on its obligations under the agreements if certain conditions of default exist on the New Credit Facility. As of March 31, 2013, the termination value of the interest rate swaps was a net liability of $29.0 million which represents the amount the Company could have been required to pay to settle the obligations had it been in breach of the provisions of the swap arrangements.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012, aggregated by the level in the fair value hierarchy within which those measurements fall (amounts in thousands):
|
|
|
| Fair Value Measurement at Reporting Date Using |
| ||||||||
|
| Balance as of |
| Quoted Prices |
| Significant |
| Significant |
| ||||
|
| (unaudited) |
| ||||||||||
Assets |
|
|
|
|
|
|
|
|
| ||||
Available-for-sale securities (a) |
| $ | 354 |
| $ | 354 |
| $ | — |
| $ | — |
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
Interest rate swaps |
| $ | 26,438 |
| $ | — |
| $ | 26,438 |
| $ | — |
|
|
|
|
| Fair Value Measurement at Reporting Date Using |
| ||||||||
|
| Balance as of |
| Quoted Prices |
| Significant |
| Significant |
| ||||
Assets |
|
|
|
|
|
|
|
|
| ||||
Available-for-sale securities (a) |
| $ | 416 |
| $ | 416 |
| $ | — |
| $ | — |
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
Interest rate swaps |
| $ | 23,886 |
| $ | — |
| $ | 23,886 |
| $ | — |
|
(a) Available-for-sale securities are included in other assets in the Condensed Consolidated Balance Sheets.
The fair value of available-for-sale securities is based on quoted prices in active markets.
The fair values of interest rate swaps are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. To comply with the provisions of ASC Topic 820 Fair Value Measurements and Disclosures , the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Fair Value of Long-term Debt
The following table presents information about the estimated fair value of the Company’s long-term debt compared with its carrying value (amounts in millions):
|
| March 31, 2013 |
| December 31, 2012 |
| ||
|
| (unaudited) |
|
|
| ||
Aggregate fair value |
| $ | 2,259.9 |
| $ | 2,139.9 |
|
Aggregate carrying amount |
| 2,202.3 |
| 2,073.6 |
| ||
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The estimated fair value of the Company’s long-term debt is based on quoted market prices from various banks for similar instruments, which is considered a Level 2 input under the fair value measurement hierarchy.
6. Members’ Equity
Changes in Equity and Noncontrolling Interests
The changes in equity and noncontrolling interest for the three months ended March 31, 2013 were as follows (amounts in thousands):
|
| Voting units |
| Non-voting units |
| Additional |
| Accumulated |
| Accumulated |
| Total Station |
| Noncontrolling |
| Total members’ |
| ||||||||
Balances, December 31, 2012 |
| $ | — |
| $ | — |
| $ | 826,109 |
| $ | (25,672 | ) | $ | (6,605 | ) | $ | 793,832 |
| $ | 45,029 |
| $ | 838,861 |
|
Unrealized losses on interest rate swaps |
| — |
| — |
| — |
| (960 | ) | — |
| (960 | ) | — |
| (960 | ) | ||||||||
Unrealized gain on available-for-sale securities |
| — |
| — |
| — |
| (62 | ) | — |
| (62 | ) | — |
| (62 | ) | ||||||||
Share-based compensation |
| — |
| — |
| 1,060 |
| — |
| — |
| 1,060 |
| 38 |
| 1,098 |
| ||||||||
Capital contributions from noncontrolling interests |
| — |
| — |
| — |
| — |
| — |
| — |
| 2,298 |
| 2,298 |
| ||||||||
Redemption of noncontrolling interest |
| — |
| — |
| (1,499 | ) | — |
| — |
| (1,499 | ) | (3,101 | ) | (4,600 | ) | ||||||||
Distributions |
| — |
| — |
| (179 | ) | — |
| — |
| (179 | ) | (1,667 | ) | (1,846 | ) | ||||||||
Net loss |
| — |
| — |
| — |
| — |
| (140,792 | ) | (140,792 | ) | (1,354 | ) | (142,146 | ) | ||||||||
Balances, March 31, 2013 (unaudited) |
| $ | — |
| $ | — |
| $ | 825,491 |
| $ | (26,694 | ) | $ | (147,397 | ) | $ | 651,400 |
| $ | 41,243 |
| $ | 692,643 |
|
Noncontrolling interest represents ownership interests in consolidated subsidiaries of the Company that are held by owners other than the Company. Noncontrolling interests include (a) a 50% ownership interest in MPM, (b) ownership interests of the former mezzanine lenders and former unsecured creditors of Station Casinos, Inc. who hold warrants to purchase stock in CV Propco LLC and NP Tropicana LLC, and (c) minority ownership interests in Fertitta Interactive.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component were as follows (amounts in thousands):
|
| Three Months Ended March 31, |
| ||||||||||||||||
|
| 2013 |
| 2012 |
| ||||||||||||||
|
| Unrealized |
| Unrealized gain |
| Total |
| Unrealized |
| Unrealized gain |
| Total |
| ||||||
Balance at beginning of year |
| $ | (25,778 | ) | $ | 106 |
| $ | (25,672 | ) | $ | (20,047 | ) | $ | (107 | ) | $ | (20,154 | ) |
Other comprehensive income before reclassifications: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Deferred losses on interest rate swaps |
| (4,067 | ) | — |
| (4,067 | ) | (5,030 | ) | — |
| (5,030 | ) | ||||||
Unrealized (loss) gain on available-for-sale securities |
| — |
| (62 | ) | (62 | ) | — |
| 69 |
| 69 |
| ||||||
|
| (4,067 | ) | (62 | ) | (4,129 | ) | (5,030 | ) | 69 |
| (4,961 | ) | ||||||
Deferred losses on interest rate swaps reclassified into income |
| 3,107 |
| — |
| 3,107 |
| 3,121 |
| — |
| 3,121 |
| ||||||
Other comprehensive (loss) income for the period, net |
| (960 | ) | (62 | ) | (1,022 | ) | (1,909 | ) | 69 |
| (1,840 | ) | ||||||
Balance at end of period |
| $ | (26,738 | ) | $ | 44 |
| $ | (26,694 | ) | $ | (21,956 | ) | $ | (38 | ) | $ | (21,994 | ) |
The deferred losses on interest rate swaps reclassified out of accumulated other comprehensive loss are included in interest expense, net on the Condensed Consolidated Statements of Operations.
7. Write-downs and Other Charges, Net
Write-downs and other charges, net consisted of the following (amounts in thousands, unaudited):
|
| Three Months Ended March 31, |
| ||||
|
| 2013 |
| 2012 |
| ||
Loss on disposal of assets, net |
| $ | 878 |
| $ | 19 |
|
Severance expense |
| 911 |
| 306 |
| ||
Other charges |
| 724 |
| 126 |
| ||
Write-downs and other charges, net |
| $ | 2,513 |
| $ | 451 |
|
8. Commitments and Contingencies
In March 2008, in the matter captioned Sparks Nugget, Inc. vs. State ex rel. Department of Taxation, the Nevada Supreme Court ruled that food purchased for use in complimentary meals provided to patrons and employees is not subject to Nevada use tax. The Company has filed refunds for the periods from March 2000 through February 2008, and began claiming this exemption on its sales and use tax returns for periods subsequent to February 2008 given the Nevada Supreme Court decision. The amount subject to these refunds is approximately $15.6 million plus interest. The Department of Taxation subsequently audited the Company and issued a sales tax deficiency on the cost of food used in complimentary meals provided to patrons and employees for the period March 2000 through February 2008. On July 9, 2012, a Nevada Administrative Law Judge concluded that the State’s sales tax deficiency for the Company’s complimentary meals provided to patrons and employees for the period March 2000 through February 2008 will be allowed, but only to the extent of use tax previously paid for these meals. The Administrative Law Judge did award the Company a refund of approximately $0.7 million of use tax paid on certain non-gaming related promotional meals. The Company appealed the decision. On October 1, 2012, the Nevada Tax Commission upheld the Administrative Law Judge’s decision. The Company has appealed that portion of the decision that denied the refund.
The Department of Taxation has issued a regulation that as of February 15, 2012, complimentary meals provided to customers are subject to sales tax at the retail value of the meal and employee meals are subject to sales tax at the cost of the meal.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On June 25, 2012 the Nevada Tax Commission adopted the Department of Taxation’s regulation. The Department of Taxation has issued guidance delaying the payment of this sales tax until the earlier of (1) approval of the regulation by the Legislative Commission, (2) affirmation by the Nevada Supreme Court, (3) the effective date of relevant legislation or (4) June 30, 2013. As of March 31, 2013, the Company has accrued a liability for the estimated amount of sales tax on complimentary food and employee meals for the period February 15, 2012 through March 31, 2013.
The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. As with all litigation, no assurance can be provided as to the outcome, and litigation inherently involves significant costs.
9. Management Fee Revenue
The Company holds a 50% interest in MPM, which manages the Gun Lake Casino in Allegan County, Michigan, on behalf of the Match–E–Be–Nash–She–Wish Band of Pottawatomi Indians of Michigan, a federally recognized Native American tribe commonly referred to as the Gun Lake Tribe. Gun Lake Casino, which opened in February 2011, is located on approximately 147 acres on U.S. Highway 131 and 129th Avenue, approximately 25 miles south of Grand Rapids, Michigan and 27 miles north of Kalamazoo, Michigan, and includes approximately 1,500 slot machines, 28 table games and various dining options. The Seventh Amended and Restated Management Agreement dated January 3, 2013 (the “Gun Lake Management Agreement”) has a term of seven years from the opening of the facility and provides for a management fee of 30% of the project’s net income to be paid to MPM. MPM’s management fee revenue from Gun Lake Casino included in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012 totaled $8.2 million and $7.6 million, respectively. Pursuant to the terms of the MPM operating agreement, the Company’s portion of the management fee is 50% of the first $24 million of management fees, 83% of the next $24 million of management fees and 93% of any management fees in excess of $48 million, each calculated on an annual basis. In addition, the Company is the managing partner of Barley’s Casino & Brewing Company (“Barley’s”), The Greens Gaming and Dining (“The Greens”) and Wildfire Casino & Lanes (“Wildfire Lanes”) and receives a management fee equal to 10% of earnings before interest, taxes depreciation and amortization from those properties. Management fee revenue for the three months ended March 31, 2013 also includes $1.5 million in reimbursable payroll costs, primarily related to the Graton project.
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10 . Condensed Consolidating Financial Information
As described in Note 3—Long-term Debt, in March 2013 the Company issued the 7.50% Senior Notes, which are guaranteed by the Guarantors. The following condensed consolidating financial statements present information about the Company, the Guarantors and the non-guarantor subsidiaries. These condensed consolidating financial statements are presented in the provided form because (i) the Guarantors are wholly owned subsidiaries of the Company (the issuer of the Senior Notes), and (ii) the guarantees are joint and several; however, such guarantees are not joint and several on a full and unconditional basis as the guarantees may be released under certain circumstances customary for such arrangements.
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 2013
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 4,226 |
| $ | 93,568 |
| $ | 4,361 |
| $ | — |
| $ | 102,155 |
|
Restricted cash |
| 1,067 |
| 357 |
| — |
| — |
| 1,424 |
| |||||
Receivables, net |
| 1,178 |
| 26,946 |
| 4,652 |
| (405 | ) | 32,371 |
| |||||
Intercompany receivables |
| 302,993 |
| — |
| — |
| (302,993 | ) | — |
| |||||
Inventories |
| 10 |
| 8,248 |
| 191 |
| — |
| 8,449 |
| |||||
Prepaid gaming tax |
| — |
| 19,494 |
| 102 |
| — |
| 19,596 |
| |||||
Prepaid expenses and other current assets |
| 5,104 |
| 7,134 |
| 390 |
| — |
| 12,628 |
| |||||
Total current assets |
| 314,578 |
| 155,747 |
| 9,696 |
| (303,398 | ) | 176,623 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property and equipment, net |
| 44,808 |
| 2,130,182 |
| 18,316 |
| — |
| 2,193,306 |
| |||||
Goodwill |
| 1,234 |
| 193,898 |
| 5,562 |
| — |
| 200,694 |
| |||||
Intangible assets, net |
| 1,045 |
| 146,581 |
| 57,327 |
| — |
| 204,953 |
| |||||
Land held for development |
| — |
| 121,100 |
| 99,020 |
| — |
| 220,120 |
| |||||
Investments in joint ventures |
| — |
| 9,792 |
| — |
| — |
| 9,792 |
| |||||
Native American development costs |
| — |
| 3,940 |
| — |
| — |
| 3,940 |
| |||||
Investments in subsidiaries |
| 2,430,347 |
| 64,234 |
| — |
| (2,494,581 | ) | — |
| |||||
Other assets, net |
| 41,657 |
| 23,136 |
| 415 |
| — |
| 65,208 |
| |||||
Total assets |
| $ | 2,833,669 |
| $ | 2,848,610 |
| $ | 190,336 |
| $ | (2,797,979 | ) | $ | 3,074,636 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND MEMBERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 1,082 |
| $ | 14,425 |
| $ | 570 |
| $ | — |
| $ | 16,077 |
|
Accrued interest payable |
| 9,653 |
| 11 |
| 34 |
| — |
| 9,698 |
| |||||
Accrued expenses and other current liabilities |
| 10,590 |
| 99,740 |
| 3,295 |
| (405 | ) | 113,220 |
| |||||
Current portion of long-term debt |
| 18,026 |
| 552 |
| 11 |
| — |
| 18,589 |
| |||||
Intercompany payables |
| — |
| 302,745 |
| 248 |
| (302,993 | ) | — |
| |||||
Total current liabilities |
| 39,351 |
| 417,473 |
| 4,158 |
| (303,398 | ) | 157,584 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt, less current portion |
| 2,083,036 |
| 3,941 |
| 96,725 |
| — |
| 2,183,702 |
| |||||
Deficit investment in joint venture |
| — |
| 2,319 |
| — |
| — |
| 2,319 |
|
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS (continued)
MARCh 31, 2013
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Interest rate swaps and other long-term liabilities, net |
| 18,639 |
| 15,149 |
| 4,600 |
| — |
| 38,388 |
| |||||
Total liabilities |
| 2,141,026 |
| 438,882 |
| 105,483 |
| (303,398 | ) | 2,381,993 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Members’ equity: |
|
|
|
|
|
|
|
|
|
|
| |||||
Total Station Casinos LLC members’ equity |
| 651,400 |
| 2,377,985 |
| 43,610 |
| (2,421,595 | ) | 651,400 |
| |||||
Noncontrolling interest |
| 41,243 |
| 31,743 |
| 41,243 |
| (72,986 | ) | 41,243 |
| |||||
Total members’ equity |
| 692,643 |
| 2,409,728 |
| 84,853 |
| (2,494,581 | ) | 692,643 |
| |||||
Total liabilities and members’ equity |
| $ | 2,833,669 |
| $ | 2,848,610 |
| $ | 190,336 |
| $ | (2,797,979 | ) | $ | 3,074,636 |
|
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 2012
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 2,841 |
| $ | 121,840 |
| $ | 4,199 |
| $ | — |
| $ | 128,880 |
|
Restricted cash |
| 1,571 |
| 409 |
| — |
| — |
| 1,980 |
| |||||
Receivables, net |
| 888 |
| 27,894 |
| 3,755 |
| (1,606 | ) | 30,931 |
| |||||
Intercompany receivables |
| — |
| 194,982 |
| — |
| (194,982 | ) | — |
| |||||
Inventories |
| 9 |
| 7,739 |
| 190 |
| — |
| 7,938 |
| |||||
Prepaid gaming tax |
| — |
| 18,228 |
| 187 |
| — |
| 18,415 |
| |||||
Prepaid expenses and other current assets |
| 2,850 |
| 5,879 |
| 379 |
| — |
| 9,108 |
| |||||
Total current assets |
| 8,159 |
| 376,971 |
| 8,710 |
| (196,588 | ) | 197,252 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property and equipment, net |
| 46,386 |
| 2,147,751 |
| 18,326 |
| — |
| 2,212,463 |
| |||||
Goodwill |
| 1,234 |
| 193,898 |
| 5,562 |
| — |
| 200,694 |
| |||||
Intangible assets, net |
| 1,045 |
| 147,347 |
| 60,284 |
| — |
| 208,676 |
| |||||
Land held for development |
| — |
| 121,100 |
| 99,020 |
| — |
| 220,120 |
| |||||
Investments in joint ventures |
| — |
| 9,629 |
| — |
| — |
| 9,629 |
| |||||
Native American development costs |
| — |
| 3,255 |
| — |
| — |
| 3,255 |
| |||||
Investments in subsidiaries |
| 2,406,278 |
| 69,671 |
| — |
| (2,475,949 | ) | — |
| |||||
Other assets, net |
| 7,925 |
| 38,511 |
| 418 |
| — |
| 46,854 |
| |||||
Total assets |
| $ | 2,471,027 |
| $ | 3,108,133 |
| $ | 192,320 |
| $ | (2,672,537 | ) | $ | 3,098,943 |
|
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS (continued)
DECEMBER 31, 2012
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
LIABILITIES AND MEMBERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Accounts payable |
| $ | 892 |
| $ | 18,965 |
| $ | 1,774 |
| $ | — |
| $ | 21,631 |
|
Accrued interest payable |
| 5,175 |
| 2,797 |
| 11 |
| — |
| 7,983 |
| |||||
Accrued expenses and other current liabilities |
| 8,397 |
| 112,350 |
| 4,396 |
| (1,606 | ) | 123,537 |
| |||||
Current portion of long-term debt |
| 11,231 |
| 6,301 |
| 12 |
| — |
| 17,544 |
| |||||
Intercompany payables |
| 194,698 |
| — |
| 284 |
| (194,982 | ) | — |
| |||||
Total current liabilities |
| 220,393 |
| 140,413 |
| 6,477 |
| (196,588 | ) | 170,695 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Long-term debt, less current portion |
| 1,393,469 |
| 567,628 |
| 94,960 |
| — |
| 2,056,057 |
| |||||
Deficit investment in joint venture |
| — |
| 2,356 |
| — |
| — |
| 2,356 |
| |||||
Interest rate swaps and other long-term liabilities, net |
| 18,304 |
| 12,670 |
| — |
| — |
| 30,974 |
| |||||
Total liabilities |
| 1,632,166 |
| 723,067 |
| 101,437 |
| (196,588 | ) | 2,260,082 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Members’ equity: |
|
|
|
|
|
|
|
|
|
|
| |||||
Total Station Casinos LLC members’ equity |
| 793,832 |
| 2,349,537 |
| 45,854 |
| (2,395,391 | ) | 793,832 |
| |||||
Noncontrolling interest |
| 45,029 |
| 35,529 |
| 45,029 |
| (80,558 | ) | 45,029 |
| |||||
Total members’ equity |
| 838,861 |
| 2,385,066 |
| 90,883 |
| (2,475,949 | ) | 838,861 |
| |||||
Total liabilities and members’ equity |
| $ | 2,471,027 |
| $ | 3,108,133 |
| $ | 192,320 |
| $ | (2,672,537 | ) | $ | 3,098,943 |
|
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2013
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
| |||||
Casino |
| $ | — |
| $ | 219,016 |
| $ | 1,841 |
| $ | — |
| $ | 220,857 |
|
Food and beverage |
| — |
| 60,515 |
| 170 |
| — |
| 60,685 |
| |||||
Room |
| — |
| 26,522 |
| 750 |
| — |
| 27,272 |
| |||||
Other |
| 13 |
| 15,151 |
| 2,862 |
| (2,182 | ) | 15,844 |
| |||||
Management fees |
| — |
| 1,286 |
| 8,554 |
| — |
| 9,840 |
| |||||
Gross revenues |
| 13 |
| 322,490 |
| 14,177 |
| (2,182 | ) | 334,498 |
| |||||
Promotional allowances |
| — |
| (22,583 | ) | (124 | ) | — |
| (22,707 | ) | |||||
Net revenues |
| 13 |
| 299,907 |
| 14,053 |
| (2,182 | ) | 311,791 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Casino |
| — |
| 84,153 |
| 666 |
| — |
| 84,819 |
| |||||
Food and beverage |
| — |
| 41,727 |
| 41 |
| — |
| 41,768 |
| |||||
Room |
| — |
| 10,639 |
| 494 |
| — |
| 11,133 |
| |||||
Other |
| — |
| 4,451 |
| 1,708 |
| — |
| 6,159 |
| |||||
Selling, general and administrative |
| 228 |
| 65,679 |
| 6,764 |
| (2,182 | ) | 70,489 |
| |||||
Development and preopening |
| 13 |
| 127 |
| — |
| — |
| 140 |
| |||||
Depreciation and amortization |
| 784 |
| 30,403 |
| 4,144 |
| — |
| 35,331 |
| |||||
Management fee expense |
| — |
| 11,482 |
| 264 |
| — |
| 11,746 |
| |||||
Write-downs and other charges, net |
| 428 |
| 2,081 |
| 4 |
| — |
| 2,513 |
| |||||
|
| 1,453 |
| 250,742 |
| 14,085 |
| (2,182 | ) | 264,098 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating (loss) income |
| (1,440 | ) | 49,165 |
| (32 | ) | — |
| 47,693 |
| |||||
Earnings (losses) from subsidiaries |
| 28,764 |
| (1,205 | ) | — |
| (27,559 | ) | — |
| |||||
Earnings from joint ventures |
| — |
| 519 |
| — |
| — |
| 519 |
| |||||
Operating income (loss) and earnings (losses) from subsidiaries and joint ventures |
| 27,324 |
| 48,479 |
| (32 | ) | (27,559 | ) | 48,212 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other expense: |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense, net |
| (33,951 | ) | (6,687 | ) | (2,661 | ) | — |
| (43,299 | ) | |||||
Loss on debt extinguishment |
| (135,271 | ) | (11,516 | ) | — |
| — |
| (146,787 | ) | |||||
Change in fair value of derivative instruments |
| (248 | ) | (24 | ) | — |
| — |
| (272 | ) | |||||
Net (loss) income |
| (142,146 | ) | 30,252 |
| (2,693 | ) | (27,559 | ) | (142,146 | ) | |||||
Less: net loss applicable to noncontrolling interest |
| (1,354 | ) | (1,354 | ) | (1,354 | ) | 2,708 |
| (1,354 | ) | |||||
Net (loss) income applicable to Station Casinos LLC members |
| $ | (140,792 | ) | $ | 31,606 |
| $ | (1,339 | ) | $ | (30,267 | ) | $ | (140,792 | ) |
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2012
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
| |||||
Casino |
| $ | — |
| $ | 228,264 |
| $ | 1,915 |
| $ | — |
| $ | 230,179 |
|
Food and beverage |
| — |
| 60,787 |
| 162 |
| — |
| 60,949 |
| |||||
Room |
| — |
| 27,094 |
| 764 |
| — |
| 27,858 |
| |||||
Other |
| 5 |
| 14,867 |
| 2,429 |
| (868 | ) | 16,433 |
| |||||
Management fees |
| — |
| 171 |
| 7,594 |
| — |
| 7,765 |
| |||||
Gross revenues |
| 5 |
| 331,183 |
| 12,864 |
| (868 | ) | 343,184 |
| |||||
Promotional allowances |
| — |
| (24,864 | ) | (121 | ) | — |
| (24,985 | ) | |||||
Net revenues |
| 5 |
| 306,319 |
| 12,743 |
| (868 | ) | 318,199 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
| |||||
Casino |
| — |
| 87,466 |
| 696 |
| — |
| 88,162 |
| |||||
Food and beverage |
| — |
| 42,249 |
| 45 |
| — |
| 42,294 |
| |||||
Room |
| — |
| 10,439 |
| 441 |
| — |
| 10,880 |
| |||||
Other |
| — |
| 4,638 |
| 1,237 |
| — |
| 5,875 |
| |||||
Selling, general and administrative |
| (45 | ) | 68,105 |
| 2,813 |
| (868 | ) | 70,005 |
| |||||
Development and preopening |
| — |
| 55 |
| — |
| — |
| 55 |
| |||||
Depreciation and amortization |
| 657 |
| 26,907 |
| 3,137 |
| — |
| 30,701 |
| |||||
Management fee expense |
| — |
| 11,683 |
| 98 |
| — |
| 11,781 |
| |||||
Write-downs and other charges, net |
| (7 | ) | 457 |
| 1 |
| — |
| 451 |
| |||||
|
| 605 |
| 251,999 |
| 8,468 |
| (868 | ) | 260,204 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating (loss) income |
| (600 | ) | 54,320 |
| 4,275 |
| — |
| 57,995 |
| |||||
Earnings from subsidiaries |
| 44,501 |
| 3,304 |
| — |
| (47,805 | ) | — |
| |||||
Earnings from joint ventures |
| — |
| 545 |
| — |
| — |
| 545 |
| |||||
Operating (loss) income and earnings from subsidiaries and joint ventures |
| 43,901 |
| 58,169 |
| 4,275 |
| (47,805 | ) | 58,540 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other expense: |
|
|
|
|
|
|
|
|
|
|
| |||||
Interest expense, net |
| (34,981 | ) | (12,047 | ) | (2,592 | ) | — |
| (49,620 | ) | |||||
Net income |
| 8,920 |
| 46,122 |
| 1,683 |
| (47,805 | ) | 8,920 |
| |||||
Less: net income applicable to noncontrolling interest |
| 2,086 |
| 2,086 |
| 2,086 |
| (4,172 | ) | 2,086 |
| |||||
Net income (loss) applicable to Station Casinos LLC members |
| $ | 6,834 |
| $ | 44,036 |
| $ | (403 | ) | $ | (43,633 | ) | $ | 6,834 |
|
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2013
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Net (loss) income |
| $ | (142,146 | ) | $ | 30,252 |
| $ | (2,693 | ) | $ | (27,559 | ) | $ | (142,146 | ) |
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
| |||||
Unrealized loss on interest rate swaps: |
|
|
|
|
|
|
|
|
|
|
| |||||
Unrealized loss arising during period |
| (4,067 | ) | (2,581 | ) | — |
| 2,581 |
| (4,067 | ) | |||||
Less: Reclassification of unrealized loss on interest rate swaps into operations |
| 3,107 |
| 937 |
| — |
| (937 | ) | 3,107 |
| |||||
Unrealized loss on interest rate swaps, net |
| (960 | ) | (1,644 | ) | — |
| 1,644 |
| (960 | ) | |||||
Unrealized loss on available—for—sale securities |
| (62 | ) | — |
| — |
| — |
| (62 | ) | |||||
Comprehensive (loss) income |
| (143,168 | ) | 28,608 |
| (2,693 | ) | (25,915 | ) | (143,168 | ) | |||||
Less: comprehensive loss attributable to noncontrolling interests |
| (1,354 | ) | (1,354 | ) | (1,354 | ) | 2,708 |
| (1,354 | ) | |||||
Comprehensive (loss) income attributable to Station Casinos LLC members |
| $ | (141,814 | ) | $ | 29,962 |
| $ | (1,339 | ) | $ | (28,623 | ) | $ | (141,814 | ) |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2012
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Net income |
| $ | 8,920 |
| $ | 46,122 |
| $ | 1,683 |
| $ | (47,805 | ) | $ | 8,920 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
| |||||
Unrealized loss on interest rate swaps: |
|
|
|
|
|
|
|
|
|
|
| |||||
Unrealized loss arising during period |
| (5,030 | ) | (1,313 | ) | — |
| 1,313 |
| (5,030 | ) | |||||
Less: Reclassification of unrealized loss on interest rate swaps into operations |
| 3,121 |
| 355 |
| — |
| (355 | ) | 3,121 |
| |||||
Unrealized loss on interest rate swaps, net |
| (1,909 | ) | (958 | ) | — |
| 958 |
| (1,909 | ) | |||||
Unrealized gain on available—for—sale securities |
| 69 |
| — |
| — |
| — |
| 69 |
| |||||
Comprehensive income |
| 7,080 |
| 45,164 |
| 1,683 |
| (46,847 | ) | 7,080 |
| |||||
Less: comprehensive income attributable to noncontrolling interests |
| 2,086 |
| 2,086 |
| 2,086 |
| (4,172 | ) | 2,086 |
| |||||
Comprehensive income (loss) attributable to Station Casinos LLC members |
| $ | 4,994 |
| $ | 43,078 |
| $ | (403 | ) | $ | (42,675 | ) | $ | 4,994 |
|
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2013
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net (loss) income |
| $ | (142,146 | ) | $ | 30,252 |
| $ | (2,693 | ) | $ | (27,559 | ) | $ | (142,146 | ) |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Depreciation and amortization |
| 784 |
| 30,403 |
| 4,144 |
| — |
| 35,331 |
| |||||
Change in fair value of derivative instruments |
| 248 |
| 24 |
| — |
| — |
| 272 |
| |||||
Provision for doubtful accounts |
| — |
| 275 |
| 58 |
| — |
| 333 |
| |||||
Write—downs and other charges, net |
| 1 |
| 1,332 |
| — |
| — |
| 1,333 |
| |||||
(Earnings) losses from subsidiaries |
| (28,764 | ) | 1,205 |
| — |
| 27,559 |
| — |
| |||||
Amortization of debt discount and debt issuance costs |
| 10,321 |
| 1 |
| 840 |
| — |
| 11,162 |
| |||||
Interest — paid in kind |
| — |
| — |
| 993 |
| — |
| 993 |
| |||||
Share—based compensation |
| — |
| 1,060 |
| 30 |
| — |
| 1,090 |
| |||||
Earnings from joint ventures |
| — |
| (519 | ) | — |
| — |
| (519 | ) | |||||
Distributions from joint ventures |
| — |
| 291 |
| — |
| — |
| 291 |
| |||||
Loss on extinguishment of debt |
| 135,271 |
| 11,516 |
| — |
| — |
| 146,787 |
| |||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Restricted cash |
| 504 |
| 52 |
| — |
| — |
| 556 |
| |||||
Receivables, net |
| (290 | ) | (528 | ) | (955 | ) | — |
| (1,773 | ) | |||||
Inventories and prepaid expenses |
| (2,255 | ) | (3,030 | ) | 73 |
| — |
| (5,212 | ) | |||||
Accounts payable |
| 190 |
| (4,540 | ) | (1,236 | ) | — |
| (5,586 | ) | |||||
Accrued interest payable |
| 7,221 |
| (3,039 | ) | 23 |
| — |
| 4,205 |
| |||||
Accrued expenses and other current liabilities |
| 2,332 |
| 4,297 |
| (1,216 | ) | — |
| 5,413 |
| |||||
Intercompany receivables and payables |
| (514,043 | ) | 514,147 |
| (104 | ) | — |
| — |
| |||||
Other, net |
| 2,921 |
| 266 |
| 6 |
| — |
| 3,193 |
| |||||
Net cash (used in) provided by operating activities |
| (527,705 | ) | 583,465 |
| (37 | ) | — |
| 55,723 |
| |||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Capital expenditures, net of related payables |
| (65 | ) | (28,578 | ) | (377 | ) | — |
| (29,020 | ) | |||||
Proceeds from sale of property and equipment |
| 30 |
| 145 |
| — |
| — |
| 175 |
| |||||
Distributions in excess of earnings from joint ventures |
| — |
| 27 |
| — |
| — |
| 27 |
| |||||
Distributions from subsidiaries |
| 5,532 |
| 1,667 |
| — |
| (7,199 | ) | — |
| |||||
Native American development costs |
| — |
| (685 | ) | — |
| — |
| (685 | ) | |||||
Investment in subsidiaries |
| — |
| (2,262 | ) | — |
| 2,262 |
| — |
| |||||
Other, net |
| — |
| (350 | ) | (582 | ) | — |
| (932 | ) | |||||
Net cash provided by (used in) investing activities |
| 5,497 |
| (30,036 | ) | (959 | ) | (4,937 | ) | (30,435 | ) | |||||
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (continued)
FOR THE THREE MONTHS ENDED MARCH 31, 2013
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Proceeds from issuance of 7.50% Senior Notes |
| 499,935 |
| — |
| — |
| — |
| 499,935 |
| |||||
Repayment of Propco senior notes due 2018 |
| (625,000 | ) | — |
| — |
| — |
| (625,000 | ) | |||||
Borrowings under credit agreement with original maturity dates greater than three months |
| 1,611,622 |
| — |
| — |
| — |
| 1,611,622 |
| |||||
Payments under credit agreements with original maturity dates of three months or less, net |
| (5,000 | ) | — |
| — |
| — |
| (5,000 | ) | |||||
Payments under credit agreements with original maturity dates greater than three months |
| (924,644 | ) | (573,562 | ) | (65 | ) | — |
| (1,498,271 | ) | |||||
Distributions to members and noncontrolling interests |
| (179 | ) | (5,532 | ) | (3,334 | ) | 7,199 |
| (1,846 | ) | |||||
Debt issuance costs |
| (32,724 | ) | (2,607 | ) | — |
| — |
| (35,331 | ) | |||||
Payments on other debt |
| (417 | ) | — |
| (3 | ) | — |
| (420 | ) | |||||
Capital contributions from members |
| — |
| — |
| 2,262 |
| (2,262 | ) | — |
| |||||
Capital contributions from noncontrolling interests |
| — |
| — |
| 2,298 |
| — |
| 2,298 |
| |||||
Net cash provided by (used in) financing activities |
| 523,593 |
| (581,701 | ) | 1,158 |
| 4,937 |
| (52,013 | ) | |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
| |||||
Increase (decrease) in cash and cash equivalents |
| 1,385 |
| (28,272 | ) | 162 |
| — |
| (26,725 | ) | |||||
Balance, beginning of period |
| 2,841 |
| 121,840 |
| 4,199 |
| — |
| 128,880 |
| |||||
Balance, end of period |
| $ | 4,226 |
| $ | 93,568 |
| $ | 4,361 |
| $ | — |
| $ | 102,155 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash paid for interest |
| $ | 14,408 |
| $ | 8,568 |
| $ | — |
| $ | — |
| $ | 22,976 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Change in property and equipment included in accrued expenses and other current liabilities |
| $ | 93 |
| $ | 6,582 |
| $ | 389 |
| $ | — |
| $ | 7,064 |
|
Issuance of note payable with option by Fertitta Interactive in exchange for redemption of noncontrolling interest |
| $ | — |
| $ | — |
| $ | 4,600 |
| $ | — |
| $ | 4,600 |
|
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2012
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Net income |
| $ | 8,920 |
| $ | 46,122 |
| $ | 1,683 |
| $ | (47,805 | ) | $ | 8,920 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Depreciation and amortization |
| 657 |
| 26,907 |
| 3,137 |
| — |
| 30,701 |
| |||||
Provision for doubtful accounts |
| — |
| 453 |
| 106 |
| — |
| 559 |
| |||||
Write—downs and other charges, net |
| (7 | ) | 26 |
| — |
| — |
| 19 |
| |||||
Earnings from subsidiaries |
| (44,501 | ) | (3,304 | ) | — |
| 47,805 |
| — |
| |||||
Amortization of debt discount and debt issuance costs |
| 15,615 |
| 3,258 |
| 707 |
| — |
| 19,580 |
| |||||
Interest — paid in kind |
| — |
| — |
| 1,017 |
| — |
| 1,017 |
| |||||
Earnings from joint ventures |
| — |
| (545 | ) | — |
| — |
| (545 | ) | |||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Restricted cash |
| (8 | ) | 27 |
| — |
| — |
| 19 |
| |||||
Receivables, net |
| (666 | ) | (3,689 | ) | (316 | ) | — |
| (4,671 | ) | |||||
Inventories and prepaid expenses |
| 689 |
| (4,046 | ) | (31 | ) | — |
| (3,388 | ) | |||||
Accounts payable |
| 1,593 |
| (958 | ) | (378 | ) | — |
| 257 |
| |||||
Accrued interest payable |
| 5,832 |
| (188 | ) | (1 | ) | — |
| 5,643 |
| |||||
Accrued expenses and other current liabilities |
| (326 | ) | 8,520 |
| 452 |
| — |
| 8,646 |
| |||||
Intercompany receivables and payables |
| 47,503 |
| (47,550 | ) | 47 |
| — |
| — |
| |||||
Other, net |
| — |
| 321 |
| 409 |
| — |
| 730 |
| |||||
Net cash provided by operating activities |
| 35,301 |
| 25,354 |
| 6,832 |
| — |
| 67,487 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Capital expenditures, net of related payables |
| (413 | ) | (9,984 | ) | (75 | ) | — |
| (10,472 | ) | |||||
Proceeds from sale of property and equipment |
| 9 |
| 23 |
| — |
| — |
| 32 |
| |||||
Distributions in excess of earnings from joint ventures |
| — |
| 449 |
| — |
| — |
| 449 |
| |||||
Distributions from subsidiaries |
| 3,139 |
| 3,031 |
| — |
| (6,170 | ) | — |
| |||||
Native American development costs |
| — |
| (2,766 | ) | — |
| — |
| (2,766 | ) | |||||
Other, net |
| (497 | ) | (957 | ) | 2 |
| — |
| (1,452 | ) | |||||
Net cash provided by (used in) investing activities |
| 2,238 |
| (10,204 | ) | (73 | ) | (6,170 | ) | (14,209 | ) | |||||
STATION CASINOS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (continued)
FOR THE THREE MONTHS ENDED MARCH 31, 2012
(amounts in thousands, unaudited)
|
| Parent |
| Guarantor |
| Non-Guarantor |
| Eliminations |
| Consolidated |
| |||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Payments under credit agreements with original maturities of three months or less, net |
| (200 | ) | (5,600 | ) | — |
| — |
| (5,800 | ) | |||||
Payments under credit agreements with original maturities greater than three months |
| (34,200 | ) | (4,701 | ) | (277 | ) | — |
| (39,178 | ) | |||||
Distributions to members |
| (48 | ) | (3,139 | ) | (6,079 | ) | 6,170 |
| (3,096 | ) | |||||
Debt issuance costs |
| (301 | ) | (23 | ) | — |
| — |
| (324 | ) | |||||
Payments on other debt |
| (366 | ) | — |
| (282 | ) | — |
| (648 | ) | |||||
Net cash used in financing activities |
| (35,115 | ) | (13,463 | ) | (6,638 | ) | 6,170 |
| (49,046 | ) | |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
| |||||
Increase in cash and cash equivalents |
| 2,424 |
| 1,687 |
| 121 |
| — |
| 4,232 |
| |||||
Balance, beginning of period |
| (2,420 | ) | 93,774 |
| 2,308 |
| — |
| 93,662 |
| |||||
Balance, end of period |
| $ | 4 |
| $ | 95,461 |
| $ | 2,429 |
| $ | — |
| $ | 97,894 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
|
|
| |||||
Cash paid for interest, net of amounts capitalized |
| $ | 13,533 |
| $ | 8,719 |
| $ | — |
| $ | — |
| $ | 22,252 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
| |||||
Change in property and equipment included in accrued expenses and other current liabilities |
| $ | — |
| $ | 2,425 |
| $ | — |
| $ | — |
| $ | 2,425 |
|
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012.
Overview
We are a premier gaming and entertainment company established in 1976 that develops and operates casino entertainment facilities. We currently own and operate nine major hotel/casino properties and seven smaller casino properties (three of which are 50% owned) in the Las Vegas metropolitan area. We also manage the Gun Lake Casino in Allegan County, Michigan and have a contract to manage the Graton Resort and Casino in Sonoma County, California, which commenced construction in June 2012 and is expected to open by the end of 2013.
We also hold a majority ownership interest in Fertitta Interactive which launched its real money online gaming operations under the Ultimate Gaming brand on April 30, 2013. We have made a significant investment in Fertitta Interactive and we expect that we will continue to make significant capital contributions to support its business strategy. Online gaming is a new and rapidly evolving industry, and while we remain optimistic about the future of this business and the potential expansion into other states which may legalize online gaming, there can be no assurance that Fertitta Interactive will achieve profitability or that we will be able to recover our investment.
Our operating results are greatly dependent on the level of gaming revenue generated at our properties. A substantial portion of our operating income is generated from our gaming operations, primarily from slot machine play. We use our non-gaming revenue departments, including food and beverage, room, spa and entertainment, to drive customer traffic to our properties. The majority of our revenue is cash-based and as a result, fluctuations in our revenue have a direct impact on our cash flows from operations. Management fee revenue is primarily related to the management fees we receive from Gun Lake Casino. Because our business is capital intensive, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing, fund capital expenditures and provide excess cash for future development.
Results of Operations
The following table presents information about our consolidated revenues and expenses (dollars in thousands):
Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012
|
| Three Months Ended March 31, |
| Percent |
| ||||
|
| 2013 |
| 2012 |
| change |
| ||
Net revenues |
|
|
|
|
|
|
| ||
|
| $ | 311,791 |
| $ | 318,199 |
| (2.0 | )% |
Management fee revenue |
| 9,840 |
| 7,765 |
| 26.7 | % | ||
Operating income |
| 47,693 |
| 57,995 |
| (17.8 | )% | ||
|
|
|
|
|
|
|
| ||
Casino revenues |
| 220,857 |
| 230,179 |
| (4.0 | )% | ||
Casino expenses |
| 84,819 |
| 88,162 |
| (3.8 | )% | ||
Margin |
| 61.6 | % | 61.7 | % |
|
| ||
|
|
|
|
|
|
|
| ||
Food and beverage revenues |
| $ | 60,685 |
| $ | 60,949 |
| (0.4 | )% |
Food and beverage expenses |
| 41,768 |
| 42,294 |
| (1.2 | )% | ||
Margin |
| 31.2 | % | 30.6 | % |
|
| ||
|
|
|
|
|
|
|
| ||
Room revenues |
| $ | 27,272 |
| $ | 27,858 |
| (2.1 | )% |
Room expenses |
| 11,133 |
| 10,880 |
| 2.3 | % | ||
Margin |
| 59.2 | % | 60.9 | % |
|
| ||
|
|
|
|
|
|
|
| ||
Other revenues |
| $ | 15,844 |
| $ | 16,433 |
| (3.6 | )% |
Other expenses |
| 6,159 |
| 5,875 |
| 4.8 | % | ||
|
|
|
|
|
|
|
| ||
Selling, general and administrative |
| $ | 70,489 |
| $ | 70,005 |
| 0.7 | % |
Percent of net revenues |
| 22.6 | % | 22.0 | % |
|
| ||
|
|
|
|
|
|
|
| ||
Depreciation and amortization |
| 35,331 |
| 30,701 |
| 15.1 | % | ||
Management fee expense |
| 11,746 |
| 11,781 |
| (0.3 | )% | ||
Write-downs and other charges, net |
| 2,513 |
| 451 |
| n/m |
| ||
Earnings from joint ventures |
| 519 |
| 545 |
| (4.8 | )% | ||
Interest expense, net |
| 43,299 |
| 49,620 |
| (12.7 | )% | ||
Loss on extinguishment of debt |
| 146,787 |
| — |
| n/m |
| ||
Change in fair value of derivative instruments |
| (272 | ) | — |
| n/m |
| ||
Net (loss) income attributable to noncontrolling interest |
| (1,354 | ) | 2,086 |
| n/m |
|
n/m = Not meaningful
Net Revenues. Consolidated net revenues for the three months ended March 31, 2013 decreased by 2.0%, to $311.8 million as compared to $318.2 million for the three months ended March 31, 2012. We believe the year over year decrease in revenues is partially due to the negative impact on the discretionary spending of our patrons resulting from the January 2013 expiration of the federal payroll tax cut. In addition, the prior year period included one extra day of activity as a result of the leap year.
Operating Income. Consolidated operating income was $47.7 million for the three months ended March 31, 2013 as compared to $58.0 million for the three months ended March 31, 2012. The decrease in consolidated operating income is primarily the result of decreased casino profitability, costs related to Fertitta Interactive, and an increase in depreciation expense, all as described below.
Casino. Casino revenues decreased 4.0% to $220.9 million for the three months ended March 31, 2013 as compared to $230.2 million for the three months ended March 31, 2012. The $9.3 million decrease is primarily due to decreased casino volume at our properties. Casino expenses decreased by 3.8% for the three months ended March 31, 2013 compared to the same period in the prior year, due to the decline in revenues, as well as cost saving measures across most categories of casino expenses.
Food and Beverage. Food and beverage revenues decreased slightly for the three months ended March 31, 2013 as compared to the prior year period, primarily driven by decreased beverage revenues. Several bars and lounges were closed for conversion or remodeling during the current year period. Food revenues increased slightly during the current year period, driven by improvements in the number of restaurant guests served and the average guest check, which partially offset the decrease in beverage revenues. Food and beverage expenses decreased slightly for the three months ended March 31, 2013 as compared to the prior year period due to cost saving measures and the decreased beverage volume.
Room. The following table presents key information about our hotel operations:
|
| Three Months Ended March 31, |
| Percent |
| ||||
|
| 2013 |
| 2012 |
| Change |
| ||
Occupancy |
| 87.8 | % | 87.8 | % | — | % | ||
Average daily rate |
| $ | 76 |
| $ | 77 |
| (1.3 | )% |
Revenue per available room |
| $ | 66 |
| $ | 67 |
| (1.3 | )% |
Occupancy is calculated by dividing total occupied rooms, including complimentary rooms, by total rooms available. Average daily rate (“ADR”) is calculated by dividing total room revenue, which includes the retail value of complimentary rooms, by total rooms occupied, including complimentary rooms. Revenue per available room is calculated by dividing total room revenue by total rooms available.
Room revenues decreased 2.1% for the three months ended March 31, 2013 as compared to the same period in the prior year as a result of a slight decrease in ADR, while occupancy remained flat as compared to the prior year period. Room expenses increased 2.3% for the three months ended March 31, 2013 compared to room expenses for the same period in the prior year.
Other. Other revenues primarily include revenues from gift shops, bowling, entertainment, leased outlets and spas. Other revenues were $15.8 million for the three months ended March 31, 2013 compared to $16.4 million for the three months ended March 31, 2012. The decrease in other revenues primarily relates to leased outlets. Other expenses increased slightly to $6.2 million for the three months ended March 31, 2013 as compared to $5.9 million for the prior year period.
Management Fee Revenue. Our management fee revenue primarily represents fees earned by our 50% owned consolidated investee, MPM, for the management of Gun Lake Casino, which opened in February 2011. MPM is a variable interest entity and required to be consolidated. MPM receives a management fee equal to 30% of Gun Lake Casino’s net income (as defined in the management agreement). In addition, we are the managing partner of Barley’s, The Greens and Wildfire Lanes and receive management fees equal to 10% of earnings before interest, taxes, depreciation and amortization (“EBITDA”) from these properties. For the three months ended March 31, 2013, management fee revenue increased to $9.8 million as compared to $7.8 million in the prior year periods primarily due to improved operating results at Gun Lake Casino. Management fee revenue for the three months ended March 31, 2013 also includes $1.5 million in reimbursable payroll costs, primarily related to the Graton project.
Selling, General and Administrative (“SG&A”). SG&A expense for the three months ended March 31, 2013 increased slightly to $70.5 million as compared to $70.0 million for the prior year period. The increase is due to $2.6 million of SG&A expense of Fertitta Interactive, which we acquired in November 2012, as well as $1.1 million of profit unit expense and $1.5 million in reimbursable expenses related to Native American properties we manage pursuant to management agreements, partially offset by cost saving measures. Excluding Fertitta Interactive and the reimbursed expenses, SG&A expense for the three months ended March 31, 2013 decreased by approximately 5% as compared to the prior year period.
Depreciation and Amortization. Depreciation and amortization expense for the three months ended March 31, 2013 was $35.3 million compared to $30.7 million for the prior year period. The increase in depreciation and amortization is due primarily to shorter lived capital expenditures placed into service during the last twelve months. In addition, the acquisition of Fertitta Interactive resulted in a $1.0 million increase in amortization expense for the three months ended March 31, 2013 as compared to the prior year period.
Management Fee Expense. We have long-term management agreements with affiliates of Fertitta Entertainment to manage our properties. Under the management arrangements, we pay a base fee equal to two percent of gross revenues and an incentive fee equal to five percent of positive EBITDA (as defined in the agreements) for each of our managed properties. Management fee expense for the three months ended March 31, 2013 and 2012 was $11.7 million and $11.8 million, respectively.
Write-downs and Other Charges, Net. Write-downs and other charges, net includes charges related to non-routine transactions such as losses on asset disposals, severance expense, legal settlements and other non-routine charges. For the three months ended March 31, 2013, write-downs and other charges, net increased to $2.5 million as compared to $0.5 million in the prior year period due to increases in losses on asset disposals, severance and lease termination costs.
Earnings From Joint Ventures. We hold 50% investments in Barley’s, The Greens, Wildfire Lanes and Losee Elkhorn Properties, LLC, which we account for using the equity method. Our earnings from these investments totaled $0.5 million for the three months ended March 31, 2013 and 2012, respectively.
Interest Expense, Net. Interest expense, net, for the three months ended March 31, 2013 was $43.3 million as compared to $49.6 million for the same period in the prior year. The decrease in interest expense is primarily due to lower debt discount and debt issuance cost amortization during the current year period. We refinanced approximately $2.1 billion of our long-term debt during the first quarter of 2013, the majority of which was accounted for as a debt extinguishment, and as a result, our debt discount and debt issuance costs have decreased significantly.
Loss on Extinguishment of Debt. During the three months ended March 31, 2013, we recognized a $146.8 million loss on debt extinguishment related to the refinancing of our senior notes and the Propco and Opco credit facilities, primarily representing the write-off of unamortized debt discount and debt issuance costs related to the previous debt. See Liquidity and Capital Resources — Refinancing Transactions below for additional information about the refinancing transactions.
Change in Fair Value of Derivative Instruments. Changes in fair value of derivative instruments represents fair value changes for the ineffective portion of designated interest rate swaps and any interest rate swaps not designated in hedging relationships. Fluctuations in interest rates can cause the fair value of our interest rate swaps to change each reporting period.
At December 31, 2012, we had two interest rate swaps which effectively converted a portion of our floating-rate debt to a fixed rate. A portion of one of these swaps was designated in a hedging relationship, and the other swap was designated in a hedging relationship, but had a small amount of ineffectiveness. In connection with the refinancing transactions in March 2013, we amended our interest rate swaps to more closely match the terms of the new credit arrangement. These amendments resulted in the discontinuation of the two existing cash flow hedging relationships, and accordingly, cumulative deferred losses totaling $1.1 million that had been recognized in other comprehensive income will be amortized as an increase to interest expense as the previously hedged interest payments continue to occur through July 2015. The amended interest rate swaps, which have been designated as cash flow hedges, effectively convert $1.1 billion of our variable-rate debt to a fixed rate of 6.0%.
For the three months ended March 31, 2013, amortization of the deferred losses on discontinued cash flow hedging relationships increased our interest expense by $2.7 million. In addition, we recognized losses totaling $0.3 million related to changes in the fair value of the undesignated and ineffective portions of the interest rate swaps prior to the amendment and the ineffective portions of the swaps after the amendment.
Net (Loss) Income Attributable to Noncontrolling Interest. For the three months ended March 31, 2013, the portion of consolidated net loss attributable to noncontrolling interest was a net loss of $1.4 million, which includes $2.0 million in net losses attributable to noncontrolling interests of Fertitta Interactive, partially offset by net income of $0.6 million attributable to noncontrolling interests of MPM. For the three months ended March 31, 2012, net income attributable to noncontrolling interests was $2.1 million, representing net income attributable to the noncontrolling members of MPM.
Liquidity and Capital Resources
The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions and our subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A—Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2012.
Capital Resources
At March 31, 2013, we had $102.2 million in cash and cash equivalents, which is primarily used for the day-to-day operations of our properties. At March 31, 2013, our borrowing availability was $313.3 million under our revolving credit facility, which is net of outstanding letters of credit and similar obligations totaling $36.7 million. Our restricted cash totaled $1.4 million at March 31, 2013, primarily representing escrow balances related to the June 2011 restructuring transactions.
Our primary cash requirements for the remainder of 2013 are expected to include (i) principal and interest payments on our indebtedness, which includes interest from our cash flow hedges, totaling $14.1 million and $92.2 million, respectively, (ii) approximately $55 million to $60 million for maintenance and other capital expenditures and investments, including investments to support the operations of Fertitta Interactive, and (iii) payments totaling approximately $1.7 million related to our existing and potential Native American projects. Our cash flow may be affected by a variety of factors, many of which are outside our control, including regulatory issues, competition, financial markets and other general business conditions. We believe that cash flows from operations, available borrowings under our credit agreement and existing cash balances will be adequate to satisfy our anticipated uses of capital for the foreseeable future, and we are continually evaluating our liquidity position and our financing needs. We cannot provide assurance, however, that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.
Refinancing Transactions
On March 1, 2013, we entered into a new credit agreement with a $350 million revolving credit facility and a $1.625 billion term loan facility, and we issued $500 million in aggregate principal amount of 7.50% Senior Notes. We used the proceeds to repay all amounts outstanding under the Propco and Opco credit agreements, to repurchase all of our outstanding senior notes due 2018, and to pay associated fees and expenses. These transactions are described in more detail below.
Tender Offer. On February 14, 2013, we commenced a cash tender offer and consent solicitation for any and all of our senior notes due 2018 pursuant to which we offered to repurchase the notes at a purchase price of $991.50 in cash, plus a $10.00 consent payment, per $1,000 in principal amount. We completed the tender offer and repurchased all of the senior notes on March 1, 2013.
7.50% Senior Notes. On March 1, 2013, we issued, in a private offering, $500 million in aggregate principal amount of 7.50% Senior Notes due March 1, 2021 (the “Indenture”). Interest is due March 1 and September 1 of each year commencing September 1, 2013. On or after March 1, 2016, we may redeem the 7.50% Senior Notes, in whole or in part, at the redemption prices specified in the Indenture. Prior to March 1, 2016, we may redeem the 7.50% Senior Notes plus accrued and unpaid interest, and a make-whole premium. Prior to March 1, 2016, we are also entitled to redeem up to $175 million of 7.50% Senior Notes with proceeds of certain equity financings at the redemption prices specified in the Indenture.
The 7.50% Senior Notes are guaranteed by our existing and future restricted subsidiaries that guarantee our obligations under the New Credit Facility.
If we experience certain change of control events (as defined in the Indenture), we must offer to repurchase the 7.50% Senior Notes at a purchase price in cash equal to 101% of the aggregate principal amount of 7.50% Senior Notes plus accrued and unpaid interest to the date of repurchase.
The Indenture contains certain customary covenants limiting, among other things, our ability and the ability of our restricted subsidiaries, which includes all of our operating properties in the Las Vegas area, to incur or guarantee additional debt, create liens, transfer and sell assets, merge, consolidate, sell, transfer or otherwise dispose of all or substantially all of our assets, enter into certain transactions with affiliates, and engage in lines of business other than our core business and related businesses, and our restricted subsidiaries’ ability to pay dividends or distributions (other than customary tax distributions). These covenants are subject to a number of exceptions and qualifications as set forth in the Indenture. The Indenture also provides for events of default which would permit or require the principal and accrued interest on the 7.50% Senior Notes to be declared due and payable.
New Credit Facility. On March 1, 2013, we entered into the New Credit Facility, which includes a $1.625 billion term loan (the “Term Loan Facility”) and a $350 million revolving credit facility.
The Term Loan Facility is fully drawn and will mature on March 1, 2020. Subject to the satisfaction of certain conditions, amounts may be borrowed under the Revolving Credit Facility, which will be fully available at any time prior to maturity on March 1, 2018. At our option and upon compliance with certain conditions, we have the right to increase our borrowings under the New Credit Facility in an aggregate total principal amount not to exceed the greater of (a) $350.0 million or (b) an unlimited amount (subject to certain conditions and to pro forma first lien leverage of less than or equal to 4.50x).
The interest rate on the Term Loan Facility is at our option, either (i) LIBOR plus 4.00%, or (ii) a base rate plus 3.00%; with a minimum LIBOR rate of 1.00%. The interest rate on the Revolving Credit Facility is at our option, either (i) LIBOR plus a margin up to 3.50%, or (ii) a base rate plus a margin up to 2.50%, subject to a leverage based grid. We are also required to pay a fee of 0.50% per annum on the unused portion of the Revolving Credit Facility.
The New Credit Facility is secured by substantially all of our personal property assets and substantially all personal property assets of the restricted subsidiaries and mortgages on certain real property. The New Credit Facility is also secured by a pledge of all of our equity. Borrowings under the New Credit Facility are guaranteed by all of our existing and future subsidiaries other than those that we designate as unrestricted subsidiaries.
We will be required to make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the sum of the original principal amount under the Term Loan Facility and the aggregate amount of any increased commitments under the Term Loan Facility beginning on June 30, 2013. In addition to the scheduled principal payments on the Term Loan Facility, we will be required to make certain mandatory prepayments on the Term Loan Facility with a portion of our excess cash flow as follows: (A)(i) 50% of excess cash flow so long as our total leverage ratio is above 4.50 to 1.00 or a default has occurred and is continuing, (ii) 25% of excess cash flow so long as no default has occurred and our total leverage ratio is less than or equal to 4.50 to 1.00 but greater than 3.50 to 1.00, or (iii) 0.0% of excess cash flow so long as no default has occurred and our total leverage ratio is less than or equal to 3.50 to 1.00, and (B) 100% of all net cash proceeds of asset sales or other dispositions, the issuance or incurrence of additional debt, and the receipt of insurance proceeds and condemnation awards, in each case subject to certain customary carve-outs and reinvestment provisions.
We must pay a premium if we prepay the Term Loan Facility prior to March 1, 2014. On or after March 1, 2014, we may, at our option, prepay the Term Loan Facility at par.
The credit agreement governing the New Credit Facility contains a number of customary covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of the restricted subsidiaries to incur additional indebtedness or become a guarantor; create liens on collateral; engage in mergers, consolidations or asset dispositions; make distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries or make capital expenditures. The credit agreement governing the New Credit Facility also requires that we maintain a maximum total leverage ratio and a minimum interest coverage ratio, provided that a default of the financial ratio covenants shall only become an event of default under the Term Loan Facility if the lenders providing the Revolving Credit Facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. These financial ratio covenants include a maximum total leverage ratio ranging from 8.00:1.00 in 2013 to 5.00:1.00 in 2017 and a minimum interest coverage ratio of 2.00:1.00 in 2013 to 3.00:1.00 in 2017. The testing of these financial ratio covenants began with the fiscal quarter ended March 31, 2013, and at March 31, 2013, we were in compliance with all applicable covenants.
The credit agreement governing the New Credit Facility contains a number of customary events of default (subject to grace periods and cure rights). If any event of default occurs, the lenders under the New Credit Facility would be entitled to take various actions, including accelerating amounts due thereunder.
Cash Flow Information
Following is a summary of our cash flow information (amounts in thousands):
|
| Three Months Ended March 31, |
| ||||
|
| 2013 |
| 2012 |
| ||
Cash flows provided by (used in): |
|
|
|
|
| ||
Operating activities |
| $ | 55,723 |
| $ | 67,487 |
|
Investing activities |
| (30,435 | ) | (14,209 | ) | ||
Financing activities |
| (52,013 | ) | (49,046 | ) | ||
Cash Flow from Operations. Our operating cash flows primarily consist of operating income generated by our properties (excluding depreciation, amortization and other non-cash charges), interest paid and changes in working capital accounts such as inventories, prepaid expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted primarily on a cash basis. Our food and beverage, room and other revenue are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations. During the three months ended March 31, 2013, net cash provided by operating activities totaled $55.7 million, compared to net cash provided by operating activities of $67.5 million for the three months ended March 31, 2012. The decrease in cash provided by operating activities is primarily due to decreased profitability in our casino operations during the three months ended March 31, 2013 as compared to the prior year period as discussed under Results of Operations above, and the negative impact of normal fluctuations in working capital.
Investing Activities. During the three months ended March 31, 2013, cash paid for capital expenditures totaled $29.0 million as compared to capital expenditures of $10.5 million for the prior year period. Our capital expenditures include various remodeling projects as well as the purchase of gaming equipment, computer equipment and software. In addition, during the three months ended March 31, 2013, we paid $0.7 million in reimbursable advances to the Mono tribe for its development project, as compared to advances of $0.2 million and $2.6 million, respectively, to the Mono and the FIGR during the prior year period.
Financing Activities. During the three months ended March 31, 2013, we refinanced approximately $2.1 billion of our outstanding debt as described under Refinancing Transactions above. In connection with the refinancing, we paid debt issuance costs of approximately $35.3 million. In addition, during the three months ended March 31, 2013 we paid $0.2 million in distributions to our members, representing the members’ taxes due on our results of operations.
During the three months ended March 31, 2013, our consolidated variable interest entity, MPM, paid $1.7 million in distributions to noncontrolling interest holders, and Fertitta Interactive received $2.3 million of capital contributions from noncontrolling interest holders to fund its operations.
Off-Balance Sheet Arrangements
We have not entered into any transactions with special purpose entities nor do we have any derivative arrangements other than the previously discussed interest rate swaps. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity. At March 31, 2013, we had outstanding letters of credit and similar obligations totaling $36.7 million.
Contractual Obligations
Except for changes related to our long-term debt and interest rate swaps resulting from the March 1, 2013 refinancing transactions, there have been no material changes to the contractual obligations previously reported in our Annual Report on Form 10-K for the year ended December 31, 2012.
The following table summarizes our contractual obligations at March 31, 2013 related to long-term debt and interest rate swaps (amounts in thousands):
|
| Payments Due by Period |
| |||||||||||||
|
| Less than 1 |
| 1-3 years |
| 3-5 years |
| Thereafter |
| Total |
| |||||
Long-term debt and interest rate swaps (a) |
| $ | 151,173 |
| $ | 296,619 |
| $ | 408,206 |
| $ | 2,337,859 |
| $ | 3,193,857 |
|
(a) Includes principal and contractual interest payments on long-term debt and projected cash payments on interest rate swaps based on interest rates in effect at March 31, 2013. See Notes 3 and 4 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information related to long-term debt and derivative instruments.
Native American Development
Following is a summary of our Native American development project activity for the three months ended March 31, 2013. Additional information about these projects is included in Note 2 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, and in Note 8 to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2012.
The Federated Indians of Graton Rancheria (“FIGR”)
Construction of the FIGR casino project is proceeding on schedule and within budget. We anticipate that the project will be completed and opened for business during the fourth quarter of 2013.
We have evaluated the likelihood that the FIGR project will be successfully completed and opened, and have concluded that at March 31, 2013, the likelihood of successful completion is in the range of 95% to 100%. Our evaluation is based on our consideration of all available positive and negative evidence about the status of the project, including the status of required regulatory approvals, and the progress being made toward the achievement of all milestones and the likelihood of successful resolution of all contingencies. There can be no assurance that the project will be successfully completed nor that future events and circumstances will not change our estimates of the timing, scope, and potential for successful completion or that such changes will not be material.
North Fork Rancheria of Mono Indian Tribe (“Mono”)
On February 5, 2013, the Department of the Interior (“DOI”) accepted 305 acres of land into trust on behalf of the Mono for the development of the project. In connection with the DOI accepting the site into trust, the terms of the development and management agreements with the Mono were amended. Subject to the approval of the National Indian Gaming Commission (“NIGC”), the management agreement was amended to increase the management fee that we will receive from 24% to 30% of the facility’s net income. The tribal-state Class III gaming compact between the State of California and the Mono remains subject to the ratification of the California legislature and the DOI must then either approve or reject the compact or otherwise allow it to become effective by operation of law. No assurances can be provided as to whether the California legislature will ratify the compact, or whether the DOI will approve the compact or otherwise allow it to become effective.
We currently estimate that construction of the facility may begin in 2014 and we estimate that the facility would be completed and opened for business approximately 18 months after construction begins. There can be no assurance, however, that the project will be completed and opened within this time frame or at all. We expect to assist the Mono in obtaining third-party financing for the project once all necessary regulatory approvals have been received and before construction has commenced, however there can be no assurance that financing for the project will be obtained on acceptable terms or at all.
Pursuant to the development agreement, we have made reimbursable advances to the Mono which are expected to be repaid from the proceeds of third-party financing or from the project’s gaming revenues. At March 31, 2013, the carrying value of the advances was $3.9 million.
We have evaluated the likelihood that the Mono project will be successfully completed and opened, and have concluded that at March 31, 2013, the likelihood of successful completion is in the range of 65% to 75%. Our evaluation is based on our consideration of all available positive and negative evidence about the status of the project, including, but not limited to, the status of required regulatory approvals, as well as the progress being made toward the achievement of all milestones and the successful resolution of all contingencies.
There can be no assurance that the project will be successfully completed nor that future events and circumstances will not change our estimates of the timing, scope, and potential for successful completion or that any such changes will not be material. In addition, there can be no assurance that we will recover all of our investment in the project even if it is successfully completed and opened for business.
Regulation and Taxes
We are subject to extensive regulation by the Nevada gaming authorities and will be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future, including the NIGC, the Gun Lake Tribal Gaming Commission and the Federated Indians of Graton Rancheria Tribal Gaming Commission.
The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor. The current legislative session began February 4, 2013. There have been no specific proposals during the current legislative session to increase gaming taxes, however there are no assurances that an increase in gaming taxes will not be proposed and passed by the Nevada Legislature in the future.
In March 2008, in the matter captioned Sparks Nugget, Inc. vs. State ex rel. Department of Taxation, the Nevada Supreme Court ruled that food purchased for use in complimentary meals provided to patrons and employees is not subject to Nevada use tax. We filed refunds for the periods from March 2000 through February 2008, and began claiming this exemption on our sales and use tax returns for periods subsequent to February 2008 given the Nevada Supreme Court decision. The amount subject to these refunds is approximately $15.6 million plus interest. The Department of Taxation subsequently audited us and issued a sales tax deficiency on the cost of food used in complimentary meals provided to patrons and employees for the period March 2000 through February 2008. On July 9, 2012, a Nevada Administrative Law Judge concluded that the State’s sales tax deficiency for our complimentary meals provided to patrons and employees for the period March 2000 through February 2008 will be allowed, but only to the extent of use tax previously paid for these meals. The Administrative Law Judge did award us a refund of approximately $0.7 million of use tax paid on certain non-gaming related promotional meals. We appealed the decision. On October 1, 2012, the Nevada Tax Commission upheld the Administrative Law Judge’s decision. We have appealed that portion of the decision that denied the refund.
The Department of Taxation has issued a regulation that as of February 15, 2012, complimentary meals provided to customers are subject to sales tax at the retail value of the meal and employee meals are subject to sales tax at the cost of the meal. On June 25, 2012 the Nevada Tax Commission adopted the Department of Taxation’s regulation. The Department of Taxation has issued guidance delaying the payment of this sales tax until the earlier of (1) approval of the regulation by the Legislative Commission, (2) affirmation by the Nevada Supreme Court, (3) the effective date of relevant legislation or (4) June 30, 2013. As of March 31, 2013, we have accrued a liability for the estimated amount of sales tax on complimentary food and employee meals for the period February 15, 2012 through March 31, 2013.
We believe that our recorded tax balances are adequate. However, it is not possible to determine with certainty the likelihood of possible changes in tax law or in the administration of such law, regulations or compact provisions. Such changes, if adopted, could have a material adverse effect on our operating results.
Description of Certain Indebtedness
On March 1, 2013, we entered into a series of transactions to refinance the debt outstanding under our senior notes and the Propco and Opco credit agreements. A description of our indebtedness is included in Note 3 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Derivative Instruments
We have entered into various interest rate swaps to manage our exposure to interest rate risk. In connection with the March 1, 2013 refinancing, we amended our interest rate swaps, as described in Note 4 to the accompanying condensed consolidated financial statements. At March 31, 2013 we have two floating-to-fixed interest rate swaps with notional amounts totaling $1.1 billion. These interest rate swaps effectively fix the interest rates on a portion of our variable-rate debt at 6%. As of March 31, 2013, we paid a weighted-average fixed interest rate of 1.88% and received a weighted-average variable interest rate of 1.00% on our interest rate swaps.
The difference between amounts received and paid under the designated portions of interest rate swap agreements, as well as any costs or fees, is recorded as a reduction of, or an addition to, interest expense as incurred over the life of the interest rate swaps. For the three months ended March 31, 2013, our interest rate swaps increased our interest expense by $3.1 million. The changes in the fair value of the effective portions of our designated interest rate swaps is recognized in other comprehensive income. The changes in the fair value of any ineffective portion of designated swaps, as well as changes in the fair value of any non-designated portion of our interest rate swaps, are recognized in change in fair value of derivative instruments as they occur.
Critical Accounting Policies and Estimates
A description of our critical accounting policies and estimates can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2013.
Forward-looking Statements
When used in this report and elsewhere by management from time to time, the words “may”, “might”, “could”, “believes”, “anticipates”, “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansions, development and acquisition projects, legal proceedings and employee matters. Certain important factors, including but not limited to, financial market risks, could cause our actual results to differ materially from those expressed in our forward-looking statements. Further information on potential factors which could affect our financial condition, results of operations and business including, without limitation, the impact of our substantial indebtedness; the effects of local and national economic, credit and capital market conditions on consumer spending and the economy in general, and on the gaming and hotel industries in particular; the effects of competition, including locations of competitors and operating and market competition; changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; risks associated with construction projects, including shortages of materials or labor, unexpected costs, unforeseen permitting or regulatory issues and weather; litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; acts of war or terrorist incidents or natural disasters; risks associated with the collection and retention of data about our customers, employees, suppliers and business partners; and other risks described in our filings with the Securities and Exchange Commission. All forward-looking statements are based on our current expectations and projections about future events. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices.
Our primary exposure to market risk is interest rate risk associated with our long-term debt. We evaluate our exposure to market risk by monitoring interest rates in the marketplace. We attempt to limit our exposure to interest rate risk by managing the mix of our long-term and short-term borrowings, and by using interest rate swaps to hedge against the earnings effects of interest rate fluctuations. Borrowings under our credit agreements bear interest at a margin above LIBOR or base rate (each as defined in the credit agreements) as selected by us. The total amount of outstanding borrowings is expected to fluctuate and may be reduced from time to time.
At March 31, 2013, $1.74 billion of the borrowings under our credit agreements are based on LIBOR plus applicable margins of 3.50% to 4.00%, and none of our outstanding borrowings are based on the base rate. The LIBOR rate underlying $1.625 billion of LIBOR-based borrowings outstanding under the New Credit Agreement was 1.00%, which is the LIBOR floor stipulated in the agreement. The LIBOR rate underlying the borrowings under the land loan is 0.2037% at March 31, 2013. The weighted-average interest rates for variable rate debt shown in the following table are calculated using the rates in effect as of March 31, 2013. We cannot predict the LIBOR or base rate interest rates that will be in effect in the future, and actual rates will vary.
We are also exposed to interest rate risk related to our interest rate swap agreements which we use to hedge a portion of our variable rate debt. As of March 31, 2013, we have two variable-to-fixed interest rate swaps with notional amounts totaling $1.1 billion which effectively hedge a portion of the interest rate risk on borrowings under our credit agreements. Our interest rate swaps are matched with specific debt obligations. Our interest rate swaps are designated as cash flow hedges and qualify for hedge accounting. We do not use derivative financial instruments for trading or speculative purposes. Interest differentials resulting from designated interest rate swap agreements are recorded on an accrual basis as an adjustment to interest expense. Interest rate movements also affect the fair value of our interest rate swaps, which is reflected as a long-term liability in our Consolidated Balance Sheets. The fair values of interest rate swaps are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. To comply with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures , we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. Fair value is subject to significant estimation and a high degree of variability between periods; however, to the extent that the interest rate swaps are effective in hedging the designated risk, the changes in the fair value of these swaps are deferred in other comprehensive income on our Condensed Consolidated Balance Sheets. Certain future events, including prepayment, refinancing or acceleration of the hedged debt, could cause all or a portion of these hedges to become ineffective, in which case the changes in the fair value of the ineffective portion of the interest rate swaps would be recognized in the statement of operations in the period of change. In addition, we are exposed to credit risk should our counterparties fail to perform under the terms of the interest rate swap agreements; however, we seek to minimize our exposure to this risk by entering into interest rate swap agreements with highly rated counterparties, and we do not believe we are exposed to significant credit risk as of March 31, 2013.
Based on our outstanding borrowings as of March 31, 2013, an assumed 1% increase in variable interest rates would cause our annual interest cost to increase by approximately $2.2 million, after giving effect to our interest rate swaps. The estimated fair value of our long-term debt at March 31, 2013 is $2.3 billion.
The terms of our long-term debt and interest rate swap agreements have changed since December 31, 2012 as a result of the March 1, 2013 refinancing transactions. Accordingly, the following tables present updates to the information previously reported under Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2012.
Information about future principal maturities, excluding original issue discounts, of our long-term debt and the weighted-average contractual interest rates in effect at March 31, 2013 is as follows (dollars in millions):
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| Expected maturity date |
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| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| Thereafter |
| Total |
| Fair Value |
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Long-term debt: |
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Fixed rate |
| $ | 1.9 |
| $ | 2.5 |
| $ | 2.7 |
| $ | 2.8 |
| $ | 2.9 |
| $ | 530.9 |
| $ | 543.7 |
| $ | 543.7 |
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Weighted-average interest rate |
| 4.44 | % | 4.27 | % | 4.27 | % | 4.28 | % | 4.17 | % | 7.28 | % | 7.21 | % |
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Variable rate |
| $ | 12.2 |
| $ | 16.3 |
| $ | 16.3 |
| $ | 126.5 |
| $ | 16.3 |
| $ | 1,547.6 |
| $ | 1,735.2 |
| $ | 1,716.2 |
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Weighted-average interest rate |
| 5.00 | % | 5.00 | % | 5.00 | % | 3.87 | % | 5.00 | % | 5.00 | % | 4.92 | % |
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The following table provides information about our interest rate swaps at March 31, 2013 (dollars in millions):
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| Expected maturity date |
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| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| Thereafter |
| Total |
| Fair Value |
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Interest rate swaps: |
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Notional amount |
| $ | 48.5 |
| $ | 80.1 |
| $ | 42.2 |
| $ | 47.1 |
| $ | 872.8 |
| $ | — |
| $ | 1,090.7 |
| $ | 26.4 |
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Weighted-average fixed interest rate payable (a) |
| 2.04 | % | 2.04 | % | 1.77 | % | 1.77 | % | 1.77 | % | — | % | 1.88 | % |
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Weighted-average variable interest rate receivable (b) |
| 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | — | % | 1.00 | % |
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(a) Based on actual fixed rates payable.
(b) Based on actual variable rates receivable.
Additional information about our long-term debt and interest rate swap agreements is included in Notes 3 and 4 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Item 4. Controls and Procedures
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective, at the reasonable assurance level, and are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II—OTHER INFORMATION
Item 1. Legal Proceedings
Station and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. As with all litigation, no assurance can be provided as to the outcome of such matters and litigation inherently involves significant costs.
Item 1A. Risk Factors
A description of our risk factors can be found in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material changes in the risk factors described in such Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds—None.
Item 3. Defaults Upon Senior Securities—None.
Item 4. Mine Safety Disclosures—None.
Item 5. Other Information—None.
Item 6. Exhibits
(a) Exhibits | ||
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| No. 4.1 — | Supplemental Indenture dated as of March 1, 2013, by and among Station Casinos LLC, certain of its wholly owned subsidiaries (as guarantors) and Wells Fargo Bank, National Association, as trustee (Incorporated herein by reference to the Company’s Current Report on Form 8-K dated March 1, 2013.) |
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| No. 4.2 — | Indenture dated as of March 1, 2013, by and among the Company, certain of its wholly owned subsidiaries (as guarantors) and Wells Fargo Bank, National Association, as trustee (Incorporated herein by reference to the Company’s Current Report on Form 8-K dated March 1, 2013.) |
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| No. 10.1 — | Credit Agreement dated as of March 1, 2013, by and among the Company, the financial institutions from time to time named therein, and Deutsche Bank AG Cayman Islands Branch, as Administrative Agent, and Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Lead Arrangers and Joint Bookrunners (Incorporated herein by reference to the Company’s Current Report on Form 8-K/A filed on March 5, 2013.) |
No. 31.1—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| No. 31.2—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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| No. 32.1—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| No. 32.2—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| No. 101.INS*—XBRL Instance Document |
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| No. 101.SCH*—XBRL Taxonomy Extension Schema Document |
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| No. 101.CAL*—XBRL Taxonomy Extension Calculation Linkbase Document |
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| No. 101.DEF*—XBRL Taxonomy Extension Definition Linkbase Document |
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| No. 101.LAB*—XBRL Taxonomy Extension Label Linkbase Document |
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| No. 101.PRE*—XBRL Taxonomy Extension Presentation Linkbase Document |
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| STATION CASINOS LLC, Registrant |
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DATE: May 15, 2013 | /s/ MARC J. FALCONE |
| Marc J. Falcone Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) |
Exhibit 31.1
CERTIFICATION
I, Frank J. Fertitta III, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Station Casinos 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 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)) 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 consolidated 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.
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: May 15, 2013
/s/ FRANK J. FERTITTA III |
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Frank J. Fertitta III |
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Chief Executive Officer |
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Exhibit 31.2
CERTIFICATION
I, Marc J. Falcone, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Station Casinos LLC;
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)) 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 consolidated 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.
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: May 15, 2013
/s/ MARC J. FALCONE |
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Marc J. Falcone |
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Executive Vice President, Chief Financial Officer and Treasurer |
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(Principal Financial Officer) |
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Exhibit 32.1
Station Casinos 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 certifies as follows:
1. Frank J. Fertitta III is the Chief Executive Officer of Station Casinos LLC (the “Company”).
2. The undersigned certifies to the best of his knowledge:
(A) The Company’s Form 10-Q for the quarter ended March 31, 2013 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: May 15, 2013
/s/ FRANK J. FERTITTA III |
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Frank J. Fertitta III |
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Chief Executive Officer |
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Exhibit 32.2
Station Casinos 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 certifies as follows:
1. Marc J. Falcone is the Principal Financial Officer of Station Casinos LLC (the “Company”).
2. The undersigned certifies to the best of his knowledge:
(A) The Company’s Form 10-Q for the quarter ended March 31, 2013 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: May 15, 2013
/s/ MARC J. FALCONE |
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Marc J. Falcone |
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Executive Vice President, Chief Financial Officer and Treasurer |
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(Principal Financial Officer) |
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