(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2014 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware (State or other jurisdiction of incorporation or organization) | 13-3391527 (I.R.S. Employer Identification No.) | |
4670 S. Fort Apache, Ste. 190 Las Vegas, Nevada (Address of principal executive offices) | 89147 (Zip Code) |
Large Accelerated Filer o | Accelerated Filer o | |
Non Accelerated Filer o (Do not check if a smaller reporting company) | Smaller reporting company þ |
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PART I. | Financial Information | ||
Item 1. | Consolidated Financial Statements | ||
Unaudited Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 | 3 | ||
Consolidated Balance Sheets as of March 31, 2014 (Unaudited), and December 31, 2013 | 4 | ||
Unaudited Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2014 | 5 | ||
Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 | 6 | ||
Notes to Consolidated Financial Statements (Unaudited) | 7 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 33 | |
Item 4. | Controls and Procedures | 33 | |
PART II. | Other Information | ||
Item 6. | Exhibits | 34 | |
Signatures | 35 |
2 |
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) |
Three months ended March 31, | ||||||||
2014 | 2013 | |||||||
Revenues | ||||||||
Casino | $ | 27,481 | $ | 35,792 | ||||
Food and beverage | 1,966 | 2,146 | ||||||
Hotel | 123 | 127 | ||||||
Management fees | 494 | 477 | ||||||
Other operations | 385 | 584 | ||||||
30,449 | 39,126 | |||||||
Operating costs and expenses | ||||||||
Casino | 14,461 | 18,050 | ||||||
Food and beverage | 2,099 | 2,075 | ||||||
Hotel | 108 | 130 | ||||||
Other operations | 731 | 1,273 | ||||||
Project development and acquisition costs | 55 | 43 | ||||||
Selling, general and administrative | 10,630 | 12,234 | ||||||
Depreciation and amortization | 2,455 | 2,210 | ||||||
30,539 | 36,015 | |||||||
Operating (loss) income | (90 | ) | 3,111 | |||||
Other expense | ||||||||
Interest expense | (1,517 | ) | (1,885 | ) | ||||
Other expense | (1 | ) | (3 | ) | ||||
Other expense, net | (1,518 | ) | (1,888 | ) | ||||
(Loss) income before income taxes | (1,608 | ) | 1,223 | |||||
Income tax (benefit) expense | (526 | ) | 647 | |||||
Net (loss) income | (1,082 | ) | 576 | |||||
Net (loss) income per common share | $ | (.06 | ) | $ | .03 | |||
Weighted-average number of common shares outstanding | 18,870,681 | 18,721,816 |
3 |
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except shares) |
March 31, 2014 | December 31, 2013 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and equivalents | $ | 14,519 | $ | 14,936 | ||||
Accounts receivable, net of allowance for doubtful accounts of $429 and $471 | 1,735 | 1,869 | ||||||
Prepaid expenses | 4,757 | 6,288 | ||||||
Other | 735 | 726 | ||||||
21,746 | 23,819 | |||||||
Property and equipment, net of accumulated depreciation of $24,907 and $23,096 | 91,671 | 91,168 | ||||||
Other long-term assets | ||||||||
Goodwill | 18,127 | 18,127 | ||||||
Intangible assets, net of accumulated amortization of $4,697 and $4,055 | 14,909 | 15,533 | ||||||
Long-term deposits | 2,593 | 761 | ||||||
Loan fees, net of accumulated amortization of $2,698 and $2,327 | 3,189 | 3,558 | ||||||
Deferred tax asset | 1,321 | 1,321 | ||||||
40,139 | 39,300 | |||||||
$ | 153,556 | $ | 154,287 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 2,347 | $ | 2,661 | ||||
Accrued player club points and progressive jackpots | 1,848 | 1,999 | ||||||
Accrued payroll and related | 2,921 | 3,276 | ||||||
Other accrued expenses | 2,469 | 3,139 | ||||||
Deferred tax liability | 66 | 66 | ||||||
Current portion of capital lease obligation | 689 | 736 | ||||||
10,340 | 11,877 | |||||||
Long-term debt, net of current portion | 59,500 | 57,500 | ||||||
Deferred tax liability | 113 | 113 | ||||||
Capital lease obligation, net of current portion | 6,793 | 6,983 | ||||||
76,746 | 76,473 | |||||||
Stockholders’ equity | ||||||||
Common stock, $.0001 par value, 100,000,000 shares authorized; 20,227,276 and 20,107,276 shares issued | 2 | 2 | ||||||
Additional paid-in capital | 45,428 | 45,350 | ||||||
Treasury stock, 1,356,595 common shares | (1,654 | ) | (1,654 | ) | ||||
Retained earnings | 33,034 | 34,116 | ||||||
76,810 | 77,814 | |||||||
$ | 153,556 | $ | 154,287 |
4 |
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) |
Common stock | Additional paid-in | Treasury stock | Retained | Total stockholders’ | ||||||||||||||||||||||||
Three months ended | Shares | Dollars | Capital | Shares | Dollars | earnings | Equity | |||||||||||||||||||||
March 31, 2014 | ||||||||||||||||||||||||||||
Beginning balances | 20,107 | $ | 2 | $ | 45,350 | 1,357 | $ | (1,654 | ) | $ | 34,116 | $ | 77,814 | |||||||||||||||
Issuance of share-based compensation | 120 | -- | -- | -- | -- | -- | -- | |||||||||||||||||||||
Previously deferred share-based compensation recognized | -- | -- | 78 | -- | -- | -- | 78 | |||||||||||||||||||||
Net loss | -- | -- | -- | -- | -- | (1,082 | ) | (1,082 | ) | |||||||||||||||||||
Ending balances | 20,227 | $ | 2 | $ | 45,428 | 1,357 | $ | (1,654 | ) | $ | 33,034 | $ | 76,810 |
5 |
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) |
Three months ended March, 31, | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (1,082 | ) | $ | 576 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation | 1,814 | 1,554 | ||||||
Amortization of loan fees | 370 | 494 | ||||||
Amortization of player loyalty program, land lease and water rights | 641 | 656 | ||||||
Other | 1 | 2 | ||||||
Deferred and share-based compensation | 79 | 343 | ||||||
Increases and decreases in operating assets and liabilities: | ||||||||
Accounts receivable, net | 134 | 355 | ||||||
Prepaid expenses | 1,530 | 2,495 | ||||||
Other assets | (9 | ) | 17 | |||||
Accounts payable and accrued expenses | (1,664 | ) | (1,187 | ) | ||||
Taxes payable | -- | (6 | ) | |||||
Net cash provided by operating activities | 1,814 | 5,299 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (2,019 | ) | (1,224 | ) | ||||
Deposits and other related costs | (1,964 | ) | (94 | ) | ||||
Other | (10 | ) | -- | |||||
Net cash used in investing activities | (3,993 | ) | (1,318 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of long term debt on capital lease obligation | (237 | ) | -- | |||||
Borrowings of long term debt | 2,000 | -- | ||||||
Other | (1 | ) | (21 | ) | ||||
Net cash provided by (used in) financing activities | 1,762 | (21 | ) | |||||
Net (decrease) increase in cash and equivalents | (417 | ) | 3,960 | |||||
Cash and equivalents, beginning of period | 14,936 | 20,603 | ||||||
Cash and equivalents, end of period | $ | 14,519 | $ | 24,563 |
2014 | 2013 | |||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | 1,212 | $ | 1,370 | ||||
Cash received from net loss carryback, net of cash paid of $0.05 million for income taxes in 2014 and cash received from income tax refund, net of cash paid of $.03 million for income taxes in 2013 | $ | (1,915 | ) | $ | (1,474 | ) | ||
Non-Cash investing activities: | ||||||||
Accrued property and equipment capital expenditures | $ | 648 | $ | -- |
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1. | BASIS OF PRESENTATION |
2. | SHARE-BASED COMPENSATION |
7 |
3. | GOODWILL AND OTHER INTANGIBLES |
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March 31, 2014 (unaudited) | ||||||||||||||||||||
Estimated Life (years) | Gross Carrying Value | Accumulated Amortization | Cumulative Expense / Disposals | Intangible Asset, Net | ||||||||||||||||
Amortizing Intangible assets: | ||||||||||||||||||||
Player Loyalty Program - Rising Star | 3 | $ | 1,700 | $ | (1,700 | ) | $ | -- | $ | -- | ||||||||||
Player Loyalty Program - Silver Slipper | 3 | 5,900 | (2,950 | ) | -- | 2,950 | ||||||||||||||
Land Lease and Water Rights - Silver Slipper | 46 | 1,420 | (47 | ) | -- | 1,373 | ||||||||||||||
Capital One Bank Loan Fees | 3 | 4,889 | (2,330 | ) | -- | 2,559 | ||||||||||||||
ABC Funding, LLC Loan Fees | 4 | 998 | (368 | ) | -- | 630 | ||||||||||||||
Non-amortizing intangible assets: | ||||||||||||||||||||
Gaming License-Indiana | Indefinite | 9,900 | -- | -- | 9,900 | |||||||||||||||
Gaming License-Mississippi | Indefinite | 147 | -- | (26 | ) | 121 | ||||||||||||||
Gaming Licensing-Nevada | Indefinite | 554 | -- | (29 | ) | 525 | ||||||||||||||
Trademark | Indefinite | 40 | -- | -- | 40 | |||||||||||||||
$ | 25,548 | $ | (7,395 | ) | $ | (55 | ) | $ | 18,098 |
Other Intangible assets subtotal | $ | 19,661 | $ | (4,697 | ) | $ | (55 | ) | $ | 14,909 | ||||||
Loan Fees subtotal | 5,887 | (2,698 | ) | -- | 3,189 | |||||||||||
$ | 25,548 | $ | (7,395 | ) | $ | (55 | ) | $ | 18,098 |
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December 31, 2013 | ||||||||||||||||||||
Estimated Life (years) | Gross Carrying Value | Accumulated Amortization | Cumulative Expense / Disposals | Intangible Asset, Net | ||||||||||||||||
Amortizing Intangible assets: | ||||||||||||||||||||
Player Loyalty Program - Rising Star | 3 | $ | 1,700 | $ | (1,558 | ) | $ | -- | $ | 142 | ||||||||||
Player Loyalty Program - Silver Slipper | 3 | 5,900 | (2,458 | ) | -- | 3,442 | ||||||||||||||
Land Lease and Water Rights - Silver Slipper | 46 | 1,420 | (39 | ) | -- | 1,381 | ||||||||||||||
Capital One Bank Loan Fees | 3 | 4,887 | (2,019 | ) | -- | 2,868 | ||||||||||||||
ABC Funding, LLC Loan Fees | 4 | 998 | (308 | ) | -- | 690 | ||||||||||||||
Non-amortizing intangible assets: | ||||||||||||||||||||
Gaming License-Indiana | Indefinite | 9,900 | -- | -- | 9,900 | |||||||||||||||
Gaming License-Mississippi | Indefinite | 118 | -- | (13 | ) | 105 | ||||||||||||||
Gaming Licensing-Nevada | Indefinite | 552 | -- | (29 | ) | 523 | ||||||||||||||
Trademark | Indefinite | 40 | -- | -- | 40 | |||||||||||||||
$ | 25,515 | $ | (6,382 | ) | $ | (42 | ) | $ | 19,091 | |||||||||||
Other Intangible assets subtotal | $ | 19,630 | $ | (4,055 | ) | $ | (42 | ) | $ | 15,533 | ||||||||||
Loan Fees subtotal | 5,885 | (2,327 | ) | -- | 3,558 | |||||||||||||||
$ | 25,515 | $ | (6,382 | ) | $ | (42 | ) | $ | 19,091 |
10 |
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2014 | 2013 | |||||||
Long-term debt, net of current portion: | ||||||||
Term loan agreement, $50.0 million on June 29, 2012, funded on October 1, 2012, maturing June 29, 2016, with variable interest as described in the fifth succeeding paragraph. (the average interest rate was 4.75% and 5.4% during the quarter ended March 31, 2014 and year ended December 31, 2013, respectively). | $ | 37,500 | $ | 37,500 | ||||
Term loan agreement, $20.0 million on October 1, 2012, maturing October 1, 2016, interest rate is fixed at 13.25% per annum. | 20,000 | 20,000 | ||||||
Revolving loan agreement, $2.0 million funded on March 24, 2014, maturing June 29, 2016, with variable interest as described in the fifth succeeding paragraph. (the average interest rate was 4.75% during the quarter ended March 31, 2014). | 2,000 | -- | ||||||
Less current portion | -- | -- | ||||||
$ | 59,500 | $ | 57,500 |
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2014 | ||||||||||||||||||||||||
Casino Operations | ||||||||||||||||||||||||
Northern Nevada | Midwest | Gulf Coast | Development/ Management | Corporate | Consolidated | |||||||||||||||||||
Revenues | $ | 4,387 | $ | 13,248 | $ | 12,321 | $ | 493 | $ | -- | $ | 30,449 | ||||||||||||
Selling, general and administrative expense | 1,448 | 3,884 | 4,126 | -- | 1,172 | 10,630 | ||||||||||||||||||
Depreciation and amortization | 217 | 847 | 1,386 | -- | 5 | 2,455 | ||||||||||||||||||
Operating income (loss) | 148 | (250 | ) | 751 | 438 | (1,177 | ) | (90 | ) | |||||||||||||||
Net income (loss) | 97 | (248 | ) | 495 | 320 | (1,746 | ) | (1,082 | ) |
2013 | ||||||||||||||||||||||||
Casino Operations | ||||||||||||||||||||||||
Northern Nevada | Midwest | Gulf Coast | Development/ Management | Corporate | Consolidated | |||||||||||||||||||
Revenues | $ | 5,325 | $ | 19,614 | $ | 13,710 | $ | 477 | $ | -- | $ | 39,126 | ||||||||||||
Selling, general and administrative expense | 1,484 | 4,405 | 4,606 | -- | 1,739 | 12,234 | ||||||||||||||||||
Depreciation and amortization | 180 | 747 | 1,281 | -- | 2 | 2,210 | ||||||||||||||||||
Operating income (loss) | 960 | 1,955 | 1,502 | 435 | (1,741 | ) | 3,111 | |||||||||||||||||
Net income (loss) | 634 | 965 | 990 | 381 | (2,394 | ) | 576 |
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2014 | ||||||||||||||||||||||||
Casino Operations | ||||||||||||||||||||||||
Northern Nevada | Midwest | Gulf Coast | Development/ Management | Corporate | Consolidated | |||||||||||||||||||
Total assets | $ | 11,935 | $ | 54,867 | $ | 71,898 | $ | 59 | $ | 14,797 | $ | 153,556 | ||||||||||||
Property and equipment, net | 7,143 | 35,748 | 48,733 | -- | 47 | 91,671 | ||||||||||||||||||
Goodwill | 1,809 | 1,647 | 14,671 | -- | -- | 18,127 | ||||||||||||||||||
Liabilities | 1,692 | 12,296 | 2,663 | -- | 60,095 | 76,746 |
2013 | ||||||||||||||||||||||||
Casino Operations | ||||||||||||||||||||||||
Northern Nevada | Midwest | Gulf Coast | Development/ Management | Corporate | Consolidated | |||||||||||||||||||
Total assets | $ | 13,838 | $ | 55,523 | $ | 71,662 | $ | 59 | $ | 13,205 | $ | 154,287 | ||||||||||||
Property and equipment, net | 7,352 | 36,427 | 47,338 | -- | 51 | 91,168 | ||||||||||||||||||
Goodwill | 1,809 | 1,647 | 14,671 | -- | -- | 18,127 | ||||||||||||||||||
Liabilities | 2,056 | 12,718 | 3,559 | -- | 58,140 | 76,473 |
On March 21, 2014, we entered into a definitive agreement with The Majestic Star Casino LLC ("Majestic Star") to acquire all of the outstanding membership interests of the entity operating Fitz Tunica Casino & Hotel ("Majestic Mississippi, LLC"), located in Tunica, Mississippi, for a purchase price of $62.0 million. The closing of the agreement is subject to the completion of financing, licensing, and other customary conditions. On May 7, 2014 we informed Majestic Star of our financing efforts and our belief that we will not likely be successful in obtaining financing for the purchase of Majestic Mississippi, LLC. As a result, we have requested Majestic Star to consider termination of the agreement.
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● | Overview | |
● | Key performance indicators | |
● | Results of continuing operations | |
● | Liquidity and capital resources | |
● | Off-balance-sheet arrangements | |
● | Seasonality | |
● | Regulation and taxes | |
● | Critical accounting estimates and policies |
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First Lien Credit Agreement | ||||||||||||
Applicable Period | Maximum Total Leverage Ratio | Maximum First Lien Leverage Ratio | Minimum Fixed Charge Coverage Ratio | |||||||||
Initial funding date through and including December 31, 2014 | 4.00 | x | 2.75 | x | 1.10 | x | ||||||
January 1, 2015 through and including December 31, 2015 | 3.75 | x | 2.50 | x | 1.10 | x | ||||||
January 1, 2016 and thereafter | 3.50 | x | 2.25 | x | 1.10 | x | ||||||
Second Lien Credit Agreement | ||||||||||||
Applicable Period | Maximum Total Leverage Ratio | Maximum First Lien Leverage Ratio | Minimum Fixed Charge Coverage Ratio | |||||||||
Initial funding date through and including September 30, 2013 | 4.00 | x | 3.00 | x | 1.00 | x | ||||||
October 1, 2013 through and including September 30, 2014 | 3.75 | x | 2.75 | x | 1.00 | x | ||||||
October 1, 2014 and thereafter | 3.50 | x | 2.50 | x | 1.00 | x |
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● | our growth strategies; |
● | our potential acquisitions and investments; |
● | successful integration of acquisitions; |
● | risks related to development and construction activities; |
● | anticipated trends in the gaming industries; |
● | patron demographics; |
● | general market and economic conditions, including but not limited to, the effects of local and national economic, housing and energy conditions on the economy in general and on the gaming and lodging industries in particular; |
● | access to capital and credit, including our ability to finance future business requirements; |
● | our dependence on key personnel; |
● | the availability of adequate levels of insurance; |
31 |
● | changes in federal, state, and local laws and regulations, including environmental and gaming licenses or legislation and regulations; |
● | ability to obtain and maintain gaming and other governmental licenses; |
● | regulatory approvals; |
● | impact of weather; |
● | competitive environment, including increased competition in our target market areas; |
● | increases in the effective rate of taxation at any of our properties or at the corporate level; and |
● | risks, uncertainties and other factors described from time to time in this and our other SEC filings and reports. |
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2.1 | Interest Purchase Agreement by and among The Majestic Star Casino, LLC, Majestic Mississippi, LLC and Full House Resorts, Inc. dated as of March 21, 2014 (Incorporated by reference to Exhibit 2.1.1 to Full House’s Current Report on Form 8-k as filed with the SEC on March 24, 2014) | |
31.1 | Certification of principal executive officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of principal financial officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of principal executive officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of principal financial officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS | XBRL Instance* | |
101.SCH | XBRL Taxonomy Extension Schema* | |
101.CAL | XBRL Taxonomy Extension Calculation* | |
101.DEF | XBRL Taxonomy Extension Definition* | |
101.LAB | XBRL Taxonomy Extension Labels* | |
101.PRE | XBRL Taxonomy Extension Presentation* |
34 |
FULL HOUSE RESORTS, INC. | ||
Date: May 13, 2014 | ||
By: | /s/ DEBORAH J. PIERCE | |
Deborah J. Pierce | ||
Chief Financial Officer | ||
(on behalf of the Registrant and | ||
as principal financial officer) |
35 |