FULL HOUSE RESORTS INC - Annual Report: 2013 (Form 10-K)

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þ	Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended: December 31, 2013
o	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Delaware	13-3391527
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or Organization)	Identification No.)

 

 

 

 

Common Stock, $.0001 per Share	The NASDAQ Stock Market LLC
(Title of Each Class)	(Name of Each Exchange on Which Registered)

 

 

 

 

 

 

 

 

 

 

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TABLE OF CONTENTS

 

 

Item 1. Business.

 

Background

 

 

 

 

Properties Currently Operating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross proceeds		$	48.8
Plus:  April 2012 wind-up fee received, net of $0.03 million wind-up fee and holdback receivable			0.9
Net proceeds			49.7
Less:  Our interest in joint venture			(5.7	)
Full House gain on sale of joint venture			44.0
Less: contract right owned by subsidiary			(2.8	)
Consolidated gain on sale of joint venture		$	41.2

 

 

 

 

 

 

 

 

 

 

 

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

 

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establishment and application of responsible accounting practices and procedures;

 

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maintenance of effective control over the financial practices and financial stability of licensees, including procedures for internal controls and the safeguarding of assets and revenues;

 

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recordkeeping and reporting to the Nevada gaming authorities;

 

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fair operation of games; and

 

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the raising of revenues through taxation and licensing fees.

 

 

 

 

 

 

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pay that person any dividend or interest upon our voting securities;

 

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

 

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give remuneration in any form to that person.

 

 

 

 

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pay to the unsuitable person any dividends, interest or any distribution whatsoever;

 

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recognize any voting right by such unsuitable person in connection with such securities;

 

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pay the unsuitable person remuneration in any form; or

 

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

 

 

 

 

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assure the financial stability of corporate gaming licensees and their affiliates;

 

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preserve the beneficial aspects of conducting business in the corporate form; and

 

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promote a neutral environment for the orderly governance of corporate affairs.

 

 

 

 

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knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation;

 

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fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations;

 

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engages in any activity or enters into any association that is unsuitable because it poses an unreasonable threat to the control of gaming in Nevada, reflects or tends to reflect, discredit or disrepute upon the State of Nevada or gaming in Nevada, or is contrary to the gaming policies of Nevada;

 

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engages in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees; or

 

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employs, contracts with or associates with a person in the foreign operation who has been denied a license or a finding of suitability in Nevada on the ground of unsuitability.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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the establishment and application of responsible accounting practices and procedures;

 

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maintenance of effective control over the financial practices and financial stability of licensees, including procedures for internal controls and the safeguarding of assets and revenues, including recordkeeping and requiring the filing of periodic reports to the Mississippi Gaming Commission;

 

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the prevention of cheating and fraudulent practices;

 

 

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

 

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ensuring that gaming licensees, to the extent practicable, employ Mississippi residents.

 

 

 

 

 

 

 

 

 

 

 

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pay that person any dividend or interest upon our voting securities;

 

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recognize the exercise, directly or indirectly of any voting right conferred through securities held by that person;

 

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Pay the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or

 

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Fail to pursue all lawful efforts to require the unsuitable person to divest himself of the securities including, if necessary, the immediate purchase of the securities for cash at fair market value.

 

 

 

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pay to the unsuitable person any dividends, interest or any distribution whatsoever;

 

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recognize any voting right by such unsuitable person in connection with such securities;

 

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pay the unsuitable person remuneration in any form; or

 

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

 

 

 

 

 

 

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assure the financial stability of corporate gaming licensees and their affiliates;

 

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preserve the beneficial aspects of conducting business in the corporate form; and

 

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promote a neutral environment for the orderly governance of corporate affairs.

 

 

 

 

 

 

 

 

 

 

 

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inspect and examine certain tribal gaming facilities;

 

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perform background checks on persons associated with tribal gaming;

 

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inspect, copy and audit all records of tribal gaming facilities;

 

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hold hearings, issue subpoenas, take depositions, and adopt regulations; and

 

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penalize violators of the Regulatory Act.

 

 

 

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ownership;

 

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security;

 

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personnel background;

 

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recordkeeping and auditing of the tribe’s gaming enterprises;

 

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use of the revenues from gaming; and

 

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protection of the environment and the public health and safety.

 

 

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adequate accounting procedures and verifiable financial reports, copies of which must be furnished to the tribe;

 

 

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tribal access to the daily operations of the gaming enterprise, including the right to verify gross revenues and income;

 

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minimum guaranteed payments to the tribe, which must have priority over the retirement of development and construction costs;

 

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a ceiling on the repayment of such development and construction costs; and

 

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a contract term not exceeding five years and a management fee not exceeding 30% of net revenues as defined by the agency and a determination by the chairman of the NIGC that the fee is reasonable considering the circumstances; provided that the NIGC may approve up to a seven-year term and a management fee not to exceed 40% of net revenues if the NIGC is satisfied that the capital investment required or the income projections for the particular gaming activity justify the larger profit allocation and longer term.

 

 

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each person with management responsibility for a management agreement;

 

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each of our directors; and

 

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the ten persons who have the greatest direct or indirect financial interest in a management agreement to which we are a party, or

 

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in the case of a publicly traded company, the holders of 5% or more of the ownership interest in the company.

 

 

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is an elected member of the tribal government that owns the facility being managed;

 

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has been or is convicted of a felony or misdemeanor gaming offense;

 

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has knowingly and willfully provided materially false information to the NIGC or a tribe;

 

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has refused to respond to questions from the NIGC;

 

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is a person whose prior history, reputation and associations pose a threat to the public interest or to effective gaming regulation and control, or create or enhance the chance of unsuitable, unfair or illegal activities in gaming or the business and financial arrangements incidental thereto; or

 

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has tried to influence any decision or process of tribal government relating to gaming.

 

 

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the management company has materially breached the terms of the management agreement, or the tribe’s gaming ordinance; or

 

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a trustee, exercising the skill and diligence to which a trustee is commonly held, would not approve such management agreement.

 

 

 

 

 

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which additional states, if any, will approve casino gaming on tribal land;

 

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the timing of any such approval;

 

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the types of gaming permitted by each tribal-state compact;

 

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any limits on the number of gaming machines allowed per facility; or

 

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whether states will attempt to renegotiate or take other steps that may affect existing compacts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 3. Legal Proceedings.

 

 

Item 4. Mine Safety Disclosures.

 

 

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

				High				Low
	Year Ended December 31, 2013
	First Quarter			$	3.58			$	2.75
	Second Quarter				3.32				2.58
	Third Quarter				3.05				2.61
	Fourth Quarter				3.03				2.70
	Year Ended December 31, 2012
	First Quarter			$	3.59			$	2.45
	Second Quarter				3.15				2.76
	Third Quarter				4.00				2.60
	Fourth Quarter				3.82				2.73

 

 

 

 

 

 

 

 

 

 

Overview

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The $16.0 million increase in total revenues for the year ended December 31, 2013 consisted of the following changes by revenue type: an $18.9 million, or 17%, increase in casino revenues, a $1.7 million, or 28%, increase in food and beverage revenues, a $0.1 million, or 18%, increase in hotel revenues, and a $0.7 million, or 32%, increase in other revenues, offset by a $5.5 million, or 77%, decrease in management fees, as discussed above. The increases in casino and food and beverage revenues were due to the revenue at the Silver Slipper Casino, representing a full year of operations, offset by a $16.5 million, or 21%, decrease in casino revenues and $0.7 million, or 18%, decrease in food and beverage revenues at the Rising Star Casino Resort, due to increased competition as discussed above.  The Rising Star Casino Resort’s hotel revenue for the year ended December 31, 2013 was $0.6 million, an increase of $0.1 million, or 18%, over the prior year due to the addition of the 104 new rooms in November. The Rising Star Casino Resort had an occupancy rate of 90%, an average daily rate (“ADR”) of $63 and hotel revenue per available room (“RevPAR”) of $57, for the year ended December 31, 2013, as compared to an occupancy rate of 97%, an ADR of $63 and RevPAR of $61, for the year ended December 31, 2012. The Rising Star Casino Resort’s hotel revenue consisted of approximately 89% of complimentary room sales for the year ended December 31, 2013, as compared to approximately 90% of complimentary room sales for the year ended December 31, 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During the year ended December 31, 2012, we prepaid, at our discretion, the principal payment of $1.3 million due April 1, 2013 on the First Lien Credit Agreement, in order to reduce interest costs.  As a practice, we consistently prepaid our quarterly payments before their due dates in 2013, and during the year ended December 31, 2013, we prepaid, at our discretion, the sum of $8.8 million in quarterly principal payments, which were due through July 1, 2015.  The next scheduled principal payment is due October 1, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

			December 31, 2013				December 31, 2012
Revenues
Casino		$	131,581			$	112,649
Food and beverage			7,967				6,223
Hotel			582				493
Management fees			1,678				7,180
Other operations			2,919				2,215
			144,727				128,760
Operating costs and expenses
Casino			67,779				62,976
Food and beverage			7,847				5,973
Hotel			656				547
Other operations			5,056				5,067
Project development and acquisition costs			67				1,861
Selling, general and administrative			46,974				37,003
Depreciation and amortization			9,388				6,884
			137,767				120,311
Operating gains (losses)
Gain on sale of joint  venture			--				41,189
Impairment loss			(4,000	)			--
			(4,000	)			41,189
Operating income			2,960				49,638
Other (expense) income
Interest expense			(7,268	)			(2,731	)
Gain on derivative instrument			--				8
Other expense, net			(15	)			(6	)
Loss on extinguishment of debt			--				(1,719	)
Other expense, net			(7,283	)			(4,448	)
(Loss) income before income taxes			(4,323	)			45,190
Income tax (benefit) expense			(361	)			15,175
Net (loss) income			(3,962	)			30,015
Income attributable to noncontrolling interest in consolidated joint venture			--				(2,181	)
Net (loss) income attributable to the Company		$	(3,962	)		$	27,834
Net (loss) income attributable to the Company per common share		$	(0.21	)		$	1.49
Weighted-average number of common shares outstanding			18,740,162				18,677,544

 

 

 

 

			December 31, 2013				December 31, 2012
ASSETS
Current assets
Cash and equivalents		$	14,936			$	20,603
Accounts receivable, net of allowance for doubtful accounts of $471 and $959			1,869				2,657
Prepaid expenses			6,288				5,744
Deferred tax asset			--				2,110
Other			726				1,225
			23,819				32,339
Property, equipment and capital lease assets, net of accumulated depreciation			91,168				83,673
Other long-term assets
Goodwill			18,127				22,127
Intangible assets, net of accumulated amortization of $4,055 and $1,506			15,533				18,106
Long term deposits			761				301
Loan fees, net of accumulated amortization of $2,327 and $496			3,558				5,159
Deferred tax asset			1,321				1,020
			39,300				46,713
		$	154,287			$	162,725
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	2,661			$	2,532
Income taxes payable			--				7
Accrued player club points and progressive jackpots			1,999				2,378
Accrued payroll and related			3,276				4,107
Other accrued expenses			3,139				3,808
Deferred tax liability			66				--
Current portion of capital lease obligation			736				--
Current portion of long-term debt			--				2,500
			11,877				15,332
Long-term debt, net of current portion			57,500				66,250
Deferred tax liability			113				10
Capital lease obligation, net of current portion			6,983				--
			76,473				81,592
Stockholders’ equity
Common stock, $.0001 par value, 100,000,000 shares authorized;  20,107,276   and 20,036,276 shares issued			2				2
Additional paid-in capital			45,350				44,707
Treasury stock, 1,356,595 common shares			(1,654	)			(1,654	)
Retained earnings			34,116				38,078
			77,814				81,133
		$	154,287			$	162,725

 

See notes to consolidated financial statements.

 

 

										Additional																Total
		Common stock								paid-in				Treasury stock								Retained				Stockholders’
December 31, 2013		Shares				Dollars				capital				Shares				Dollars				Earnings				Equity
Beginning balances			20,036			$	2			$	44,707				1,357			$	(1,654	)		$	38,078			$	81,133
Issuance of share based compensation			65				--				--				--				--				--				--
Previously deferred share-based compensation recognized			--				--				623				--				--				--				623
Issuances of common stock			6				--				20				--				--				--				20
Net (loss)			--				--				--				--				--				(3,962	)			(3,962	)
Ending balances			20,107			$	2			$	45,350				1,357			$	(1,654	)		$	34,116			$	77,814

 

										Additional																				Total
		Common stock								paid-in				Treasury stock								Retained				Noncontrolling				Stockholders’
December 31, 2012		Shares				Dollars				capital				Shares				Dollars				Earnings				interest				Equity
Beginning balances			20,030			$	2			$	43,448				1,357			$	(1,654	)		$	8,508			$	5,141			$	55,445
Previously deferred share-based compensation recognized			--				--				1,242				--				--				--				--				1,242
Issuances of common stock			6				--				17				--				--				--				--				17
Distributions to non-controlling interest in consolidated joint venture			--				--				--				--				--				--				(3,586	)			(3,586	)
Sale of interest in joint venture			--				--				--				--				--				1,736				(3,736	)			(2,000	)
Net income			--				--				--				--				--				27,834				2,181				30,015
Ending balances			20,036			$	2			$	44,707				1,357			$	(1,654	)		$	38,078			$	--			$	81,133

 

See notes to consolidated financial statements

 

 

			2013				2012
Cash flows from operating activities:
Net (loss) income attributable to the Company		$	(3,962	)		$	27,834
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Non-controlling interest in consolidated joint venture			--				2,181
Gain on sale of joint venture			--				(41,189	)
Stockman’s goodwill impairment adjustment			4,000				--
Depreciation			6,839				5,270
Amortization of gaming and other rights			--				593
Amortization of  loan fees			1,831				2,395
Amortization of player loyalty program, land lease and water rights			2,550				1,021
Other			24				90
Deferred and share-based compensation			643				1,259
Increases and decreases in operating assets and liabilities:
Accounts receivable, net			788				2,840
Prepaid expenses			(544	)			(1,460	)
Deferred tax			1,977				(1,724	)
Other assets			499				(442	)
Accounts payable and accrued expenses			(2,359	)			(567	)
Income taxes payable			(7	)			(2,402	)
Net cash provided by (used in) operating activities			12,279				(4,301	)
Cash flows from investing activities:
Proceeds from sale of joint venture, less holdback			--				49,658
Purchase of property and equipment			(6,162	)			(2,986	)
Deposits and other related costs			(333	)			(1,286	)
Other			29				(115	)
Net cash (used in) provided by investing activities			(6,466	)			45,271
Cash flows from financing activities:
Repayment of long-term debt and interest rate swap			(11,250	)			(28,187	)
Distributions to non-controlling interest in consolidated joint venture			--				(3,323	)
Loan fees			(230	)			(3,564	)
Net cash used in financing activities			(11,480	)			(35,074	)
Net (decrease) increase in cash and equivalents			(5,667	)			5,896
Cash and equivalents, beginning of year			20,603				14,707
Cash and equivalents, end of year		$	14,936			$	20,603