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AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 13, 2014

With the exception of historical facts, the matters discussed in this quarterly report on Form 10-Q are forward looking statements. Forward-looking statements may relate to, among other things, future actions, future performance generally, business development activities, future capital expenditures, strategies, the outcome of contingencies such as legal proceedings, future financial results, financing sources and availability and the effects of regulation and competition. When we use the words "believe", "intend", "expect", "may", "will", "should", "anticipate", "could", "estimate", "plan", "predict", "project", or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements.

These forward-looking statements are based on the current plans and expectations of our management and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. These factors include, but are not limited to: the size of our indebtedness, our indebtedness' effect on our business, the adverse effect of government regulation and other matters affecting the gaming industry, increased operating costs of our properties, increased competition in the gaming industry, adverse effects of economic downturns and terrorism, our failure to make necessary capital expenditures, increased costs associated with our growth strategy, the loss of key personnel, risks associated with geographical market concentration, our failure to satisfy our working capital needs from operations or our indebtedness, our inability to raise additional money, our dependence on water, energy and technology services, adverse effects of increasing energy costs, and the availability of and costs associated with potential sources of financing.

You should also read, among other things, the risks and uncertainties described in the section entitled Risk Factors in Item 1A of our annual report on Form 10-K, filed with the SEC on March 31, 2014 (SEC File No. 000-52975).

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

The following discussion contains management's discussion and analysis of financial condition and results of operations. Management's discussion and analysis should be read in conjunction with "Item 1. Financial Statements" of this quarterly report on Form 10-Q and Management's Discussion and Analysis of Financial Condition and Results of Operations presented in our annual report on Form 10-K for the year ended December 31, 2013.

Overview

We own and operate four gaming and entertainment properties in Clark County, Nevada. These properties are the Stratosphere Casino Hotel & Tower, or the Stratosphere, which is located on the Las Vegas Strip and caters to visitors to Las Vegas, two off-Strip casinos, Arizona Charlie's Decatur and Arizona Charlie's Boulder, which cater primarily to residents of Las Vegas and the surrounding communities, and the Aquarius Casino Resort, in Laughlin, Nevada, or the Aquarius, which caters to locals and tourists. The Stratosphere is one of the most recognized landmarks in Las Vegas, our two Arizona Charlie's properties are well-known casinos in their respective marketplaces and the Aquarius has the largest hotel in Laughlin. Each of our properties offers customers a value-oriented experience by providing competitive odds in our casinos, quality rooms in our hotels, award-winning dining facilities and, at the Stratosphere and Aquarius, an offering of competitive value-oriented entertainment attractions. We believe the value we offer our customers, together with a strong focus on customer service, will enable us to continue to attract customers to our properties.

Our operating results are greatly dependent on the volume of customers at our properties, which in turn affects the price we can charge for our non-gaming amenities. A substantial portion of our operating income is generated from our gaming operations, more specifically, slot play (including video poker). Approximately 51.6% of our gross revenue for the three months ended June 30, 2014 was generated from our gaming operations. Hotel and food and beverage sales generated similar percentages of our gross revenue during the three months ended June 30, 2014, with hotel sales representing 20.1% and food and beverage sales representing 19.4%. The majority of our revenue is cash based through customers wagering with cash or paying for non-gaming amenities with cash or credit card. 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 maintenance capital expenditures and provide excess cash for future development.

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Las Vegas is one of the largest entertainment markets in the country. Las Vegas hotel occupancy rates are among the highest of any major market in the United States. We believe that the Las Vegas gaming market has two distinct sub-segments: the tourist market, which tends to be concentrated on the Las Vegas Strip and Downtown Las Vegas, and the local market, which includes the surrounding Las Vegas area.

We use certain key measurements to evaluate operating revenue. Casino revenue measurements include "table games drop" and "slot coin-in," which are measures of the total amounts wagered by patrons. "Win" or "hold percentage" represents the percentage of table games drop or slot coin-in that is retained by the casino and recorded as casino revenue. Hotel revenue measurements include hotel occupancy rate, which is the average percentage of available hotel rooms occupied during a period, and average daily room rate, which is the average price of occupied rooms per day. Food and beverage revenue measurements include number of covers, which is the number of guests served, and the average check amount per guest.

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Results of Operations

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

The following table sets forth the results of our operations for the periods indicated. Three months ended June 30, 2014 2013 (in millions) Income Statement Data: Revenues: Casino $ 49.5 $ 50.7 Hotel 19.3 17.9 Food and beverage 18.6 17.8

Tower, retail, entertainment and other 8.5 8.5

Gross revenues 95.9 94.9 Less promotional allowances 6.5 6.5 Net revenues 89.4 88.4 Costs and expenses: Casino 15.9 16.1 Hotel 8.9 8.5 Food and beverage 14.1 13.5 Other operating expenses 2.9 2.9

Selling, general and administrative 32.1 28.4

Depreciation and amortization 7.3 8.0 Total costs and expenses 81.2 77.4 Income from operations $ 8.2 $ 11.0 EBITDA Reconciliation: Net income $ 1.7 $ 0.1 Interest expense 6.5 10.9 Depreciation and amortization 7.3 8.0 EBITDA $ 15.5 $ 19.0



We believe that our presentation of EBITDA is an important supplemental measure of our operating performance to investors. EBITDA is a commonly used measure of performance in our industry which we believe, when considered with measures calculated in accordance with United States Generally Accepted Accounting Principles (GAAP), gives investors a more complete understanding of operating results before the impact of investing and financing transactions and income taxes and facilitates comparisons between us and our competitors. Although EBITDA is a non-GAAP measure, we believe this measure will be used by investors in their assessment of our operating performance and the valuation of our company.

Our consolidated gross revenues increased 1.1% to $95.9 million for the three months ended June 30, 2014 from $94.9 million for the three months ended June 30, 2013. Our consolidated income from operations and EBITDA decreased 25.5% and 18.4% to $8.2 million and $15.5 million for the three months ended June 30, 2014 compared to $11.0 million and $19.0 million for the three months ended June 30, 2013, respectively. The increase in our gross revenues is due primarily to higher hotel and food and beverage revenues caused by higher occupancy for the hotel and higher food covers for food and beverage. The decrease in income from operations and EBITDA is due primarily to share-based compensation expense of $3.0 million for the three months ended June 30 2014 compared to none for the three months ended June 30, 2013.

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For the three months ended June 30, 2014 and 2013, certain expenses had an impact on income from operations and EBITDA. For the three months ended June 30, 2014 our Selling, General and Administrative ("SG&A") expense included a $3.0 million non-cash expense for share-based compensation as well as an increase of approximately $452,000 in advertising and marketing related expenses, $122,000 in legal fees and $122,000 in utilities. In addition, for the three months ended June 30, 2014, our sales tax expense decreased by $246,000 compared to the same period in 2013. The decrease in sales tax is related to complimentary and employee meals. The company began accruing for sales tax on complimentary and employee meals in February 2012 based on a decision by the Nevada Tax Commission which was subsequently rescinded in July 2013. In addition, ACEP Interactive, our licensed internet gaming subsidiary, spent approximately $186,000 during the second quarter of 2014 to operate acePLAYPoker.com, which became operational in February 2013, compared to approximately $195,000 in the second quarter of 2013.

Casino

Casino revenues consist of revenues from slot machines, table games, poker, race and sports book, bingo and keno. Casino revenues decreased 2.4% to $49.5 million for the three months ended June 30, 2014, compared to $50.7 million for the three months ended June 30, 2013. Our slot revenues decreased 2.8% while table revenues increased 3.4%. Slot revenues decreased due to a 4.0% decrease in coin-in and table revenues increased due to a 0.3 percentage point increase in hold compared to the three months ended June 30, 2013. For the three months ended June 30, 2014, slot machine revenues were 85.3% of casino revenues, and table game revenues were 12.1% of casino revenues, compared to 85.4% and 11.4% of casino revenues, respectively, for the three months ended June 30, 2013. Other casino revenues, consisting of race and sports book, poker, bingo and keno, decreased 13.3% for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Bingo revenues decreased 60.5% due to a 4.7 percentage point decrease in hold percentage and a 7.8% decrease in patrons. Race and sports book revenues increased 16.6% compared to the three months ended June 30, 2013 due to a combination of a 5.2% increase in handle and a 1.3 percentage point increase in hold percentage. Casino operating expenses decreased 1.2% to $15.9 million for the three months ended June 30, 2014, compared to $16.1 million for the three months ended June 30, 2013. The decrease in expenses was due primarily to lower revenue taxes, supplies, repair and maintenance expenses and labor costs. Our casino operating margin was 67.9% for the three months ended June 30, 2014, compared to 68.2% for the three months ended June 30, 2013.

Hotel

Hotel revenues increased 7.8% to $19.3 million for the three months ended June 30, 2014 from $17.9 million for the three months ended June 30, 2013. Occupancy increased for all properties while average daily room rates increased for Arizona Charlie's Decatur and Arizona Charlie's Boulder. In addition, the increase in revenue was aided by a 47.1% increase in resort fee revenue at the Stratosphere. The resort fee at the Stratosphere was increased in April of 2013 and again in May of 2014. Overall room occupancy increased to 72.5% for the three months ended June 30, 2014 compared to 68.5% for the three months ended June 30, 2013. Our hotel expenses increased 4.7% to $8.9 million for the three months ended June 30, 2014, compared to $8.5 million for the three months ended June 30, 2013 due primarily to higher labor costs and supplies expense. The increased costs were related to higher occupancy during the second quarter of 2014 compared to the second quarter of 2013. Due to the increase in revenues, our hotel operating margin increased to 53.9% for the three months ended June 30, 2014 as compared to 52.5% for the three months ended June 30, 2013.

Food & Beverage

Food and beverage revenues increased 4.5% to $18.6 million for the three months ended June 30, 2014, compared to $17.8 million for the three months ended June 30, 2013. Revenues increased at all properties. Overall, food covers and beverage covers increased 5.9% and decreased 3.5%, respectively, for the three months ended June 30, 2014, compared to the three months ended June 30, 2013. Average revenue per cover for the three months ended June 30, 2014 decreased 1.2% compared to the three months ended June 30, 2013. Our food and beverage expenses increased 4.4% to $14.1 million for the three months ended June 30, 2014 compared to $13.5 million for the three months ended June 30, 2013 due to higher food and beverage cost of goods and labor costs. Our food and beverage operating margin was 24.2% for both the three months ended June 30, 2014 and 2013.

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Tower, Retail, Entertainment and Other

Tower, retail, entertainment and other revenues of $8.5 million for the three months ended June 30, 2014, were unchanged compared to the three months ended June 30, 2013. Tower revenues increased 4.4% for the three months ended June 30, 2014, compared to the three months ended June 30, 2013. Sky Jump revenues increased 6.3% due to a 7.0% increase in patrons. Tower guests increased 2.1% and revenue per guest increased 2.3% compared to the three months ended June 30, 2013. Entertainment revenue declined 46.2% for the three months ended June 30, 2014, compared to the three months ended June 30, 2013 due primarily to fewer events at the Aquarius and for the Stratosphere a 43.9% decrease in patrons. Retail revenue increased 4.9% for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Other operating revenue decreased 8.1% for the three months ended June 30, 2014 compared to the three months ended June 30, 2013. Other operating revenues declined due to a 50.7% decrease in project development revenue. Project development revenues consist of revenues received in exchange for construction management services provided to certain hotel and gaming entities. Other operating expenses of $2.9 million for the three months ended June 30, 2014 were unchanged compared to the three months ended June 30, 2013 as higher labor costs were offset by reduced entertainment fees.

Promotional Allowances

Promotional allowances are comprised of the retail value of goods and services provided to casino patrons under various marketing programs. As a percentage of casino revenues, promotional allowances increased to 13.1% for the three months ended June 30, 2014 from 12.8% for the three months ended June 30, 2013. The increase in promotional allowances as a percentage of casino revenues was due to the decline in casino revenues.

Selling, General and Administrative (''SG&A'')

Selling, general and administrative expenses are primarily comprised of payroll, marketing, advertising, utilities and other administrative expenses. These expenses increased 13.0% to $32.1 million, or 33.5% of gross revenues, for the three months ended June 30, 2014, compared to $28.4 million, or 29.9% of gross revenues for the three months ended June 30, 2013. The increase was due to a $3.0 million non-cash expense for share-based compensation as well as an increase of approximately $452,000 in advertising and marketing related expenses, $122,000 in legal fees and $122,000 in utilities. These increased expenses were partially offset by reduced sales tax expenses and management fees. During the three months ended June 30, 2013, we expensed approximately $213,000 in sales tax expenses for complimentary meals provided to customers and employees. The company began accruing for sales tax on complimentary and employee meals in February 2012 based on a decision by the Nevada Tax Commission which was subsequently rescinded in July 2013. Additionally, we expensed approximately $186,000 related to our interactive gaming initiative during the three months ended June 30, 2014 compared to approximately $195,000 during the three months ended June 30, 2013.

Interest Expense

Interest expense decreased 40.4% to $6.5 million for the three months ended June 30, 2014, compared to $10.9 million for the three months ended June 30, 2013. The decrease was due primarily to the redemption of the 11% Senior Secured Notes and repricing of the First Lien Facilities effective February 24, 2014.

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Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

The following table sets forth the results of our operations for the periods indicated. Six months ended June 30, 2014 2013 (in millions) Income Statement Data: Revenues: Casino $ 102.8$ 104.5 Hotel 36.3 32.6 Food and beverage 36.4 34.9 Tower, retail, entertainment and other 16.4 16.1 Gross revenues 191.9 188.1 Less promotional allowances 13.5 13.3 Net revenues 178.4 174.8 Costs and expenses: Casino 32.4 32.8 Hotel 17.1 16.4 Food and beverage 27.6 26.7 Other operating expenses 5.9 5.6 Selling, general and administrative 61.2 58.1 Pre-opening costs - 0.1 Depreciation and amortization 14.7 16.3 Total costs and expenses 158.9 156.0 Income from operations $ 19.5$ 18.8 EBITDA Reconciliation: Net income (loss) $ 6.2$ (2.9 ) Interest expense 13.3 21.7 Depreciation and amortization 14.7 16.3 EBITDA $ 34.2$ 35.1



Our consolidated gross revenues increased 2.0% to $191.9 million for the six months ended June 30, 2014 from $188.1 million for the six months ended June 30, 2013. Our consolidated income from operations and EBITDA increased 3.7% and decreased 2.6% to $19.5 million and $34.2 million for the six months ended June 30, 2014 compared to $18.8 million and $35.1 million for the six months ended June 30, 2013, respectively. The increase in our gross revenues and income from operations is due primarily to higher hotel and food and beverage revenues caused by higher occupancy and average daily room rates for the hotel and higher food covers for food and beverage. Income from operations and EBITDA were negatively impacted by share-based compensation expense of $3.0 million for the six months ended June 30 2014 compared to none for the six months ended June 30, 2013.

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For the six months ended June 30, 2014 and 2013, certain expenses had an impact on income from operations and EBITDA. For the six months ended June 30, 2014 our Selling, General and Administrative ("SG&A") expense included a $3.0 million non-cash expense for share-based compensation as well as a $405,000 increase in utilities, a $214,000 increase in legal fees and a $129,000 increase in advertising and marketing related costs. For the six months ended June 30, 2014, our repair and maintenance expense decreased by $616,000 and sales tax expense decreased by $472,000 compared to the same period in 2013. The decrease in repairs is due to the completion of various projects at Aquarius. The decrease in sales tax is related to complimentary and employee meals. The company began accruing for sales tax on complimentary and employee meals in February 2012 based on a decision by the Nevada Tax Commission which was subsequently rescinded in July 2013. In addition, ACEP Interactive, our licensed internet gaming subsidiary, spent approximately $385,000 during the six months ended June 30, 2014 to operate acePLAYPoker.com, which became operational in February 2013, compared to approximately $434,000 in the six months ended June 30, 2013.

Casino

Casino revenues consist of revenues from slot machines, table games, poker, race and sports book, bingo and keno. Casino revenues decreased 1.6% to $102.8 million for the six months ended June 30, 2014, compared to $104.5 million for the six months ended June 30, 2013. Our slot revenues decreased 2.1% while table revenues increased 2.5%. Slot revenues decreased due to a 2.2% decrease in coin-in compared to the six months ended June 30, 2013. Table revenues increased due to a 0.7% increase in drop and a 0.4 percentage point increase in hold percentage. For the six months ended June 30, 2014, slot machine revenues were 85.1% of casino revenues, and table game revenues were 11.8% of casino revenues, compared to 85.6% and 11.3% of casino revenues, respectively, for the six months ended June 30, 2013. Other casino revenues, consisting of race and sports book, poker, bingo and keno, decreased 3.0% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Bingo revenues decreased 50.4% due to a 4.0 percentage point decrease in hold percentage and a 5.2% decrease in patrons. Race and sports book revenues increased 27.8% compared to the six months ended June 30, 2013 due to a combination of a 3.1% decrease in handle and a 3.2 percentage point increase in hold percentage. Keno revenues increased 72.0% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013 due to a 15.5 percentage point increase in hold. Casino operating expenses decreased 1.2% to $32.4 million for the six months ended June 30, 2014, compared to $32.8 million for the six months ended June 30, 2013. The decrease in expenses was due primarily to lower revenue taxes, repair and maintenance expenses and labor costs. Our casino operating margin was 68.5% for the six months ended June 30, 2014, compared to 68.6% for the six months ended June 30, 2013.

Hotel

Hotel revenues increased 11.3% to $36.3 million for the six months ended June 30, 2014 from $32.6 million for the six months ended June 30, 2013. Occupancy increased for all properties while average daily room rates declined slightly at the Aquarius and increased for all other properties. In addition, the increase in revenue was aided by a 75.4% increase in resort fee revenue at the Stratosphere. The resort fee at the Stratosphere was increased in April of 2013 and again in May of 2014. Overall room occupancy increased to 69.4% for the six months ended June 30, 2014 compared to 66.3% for the six months ended June 30, 2013. Our hotel expenses increased 4.3% to $17.1 million for the six months ended June 30, 2014, compared to $16.4 million for the six months ended June 30, 2013 due primarily to higher labor costs, commissions and brokers fees and supplies expense. The increased costs were related to higher occupancy during the first six months of 2014 compared to the first six months of 2013. Due to the increase in revenues, our hotel operating margin increased to 52.9% for the six months ended June 30, 2014 as compared to 49.7% for the six months ended June 30, 2013.

Food & Beverage

Food and beverage revenues increased 4.3% to $36.4 million for the six months ended June 30, 2014, compared to $34.9 million for the six months ended June 30, 2013. Revenues increased at all properties. Overall, food covers and beverage covers increased 4.9% and decreased 2.7%, respectively, for the six months ended June 30, 2014, compared to the six months ended June 30, 2013. Average revenue per cover for the six months ended June 30, 2014 decreased 0.3% compared to the six months ended June 30, 2013. Our food and beverage expenses increased 3.4% to $27.6 million for the six months ended June 30, 2014 compared to $26.7 million for the six months ended June 30, 2013 due to higher food and beverage cost of goods, labor costs and supplies. Due to the increase in revenues, our food and beverage operating margin increased to 24.2% for the six months ended June 30, 2014 as compared to 23.5% for the six months ended June 30, 2013.

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Tower, Retail, Entertainment and Other

Tower, retail, entertainment and other revenues increased 1.9% to $16.4 million for the six months ended June 30, 2014, compared to $16.1 million for the six months ended June 30, 2013. Tower revenues increased 6.3% for the six months ended June 30, 2014, compared to the six months ended June 30, 2013. Sky Jump revenues increased 14.4% due to a 16.5% increase in patrons. Tower guests increased 6.9% while revenue per guest decreased 0.6% compared to the six months ended June 30, 2013. Entertainment revenue declined 29.7% for the six months ended June 30, 2014, compared to the six months ended June 30, 2013 due primarily to fewer events at the Aquarius and a 26.5% decrease in patrons at the Stratosphere. Retail revenue increased 4.6% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Other operating revenue decreased 7.8% for the six months ended June 30, 2014 compared to the six months ended June 30, 2013. Other operating revenues declined due to a 41.3% decrease in project development revenue. Project development revenues consist of revenues received in exchange for construction management services provided to certain hotel and gaming entities. Other operating expenses increased 5.4% to $5.9 million for the six months ended June 30, 2014 compared to $5.6 million for the six months ended June 30, 2013. The increase in other operating expenses was due primarily to higher labor costs.

Promotional Allowances

Promotional allowances are comprised of the retail value of goods and services provided to casino patrons under various marketing programs. As a percentage of casino revenues, promotional allowances increased to 13.1% for the six months ended June 30, 2014 from 12.7% for the six months ended June 30, 2013. Increased food promotions were partially offset by reduced entertainment and room promotions.

Pre-opening Expenses

We did not incur any pre-opening costs for the six months ended June 30, 2014. Pre-opening costs of $114,000 for the six months ended June 30, 2013 consisted primarily of equipment, labor costs and supplies for Pin Up, a burlesque show at the Stratosphere. Pin Up opened to the public on March 2, 2013.

Selling, General and Administrative (''SG&A'')

Selling, general and administrative expenses are primarily comprised of payroll, marketing, advertising, utilities and other administrative expenses. These expenses increased 5.3% to $61.2 million, or 31.9% of gross revenues, for the six months ended June 30, 2014, compared to $58.1 million, or 30.9% of gross revenues for the six months ended June 30, 2013. The increase was due primarily to an increase in labor costs, a $405,000 increase in utilities, a $214,000 increase in legal fees and a $129,000 increase in advertising and marketing related costs. These increased expenses were partially offset by lower repair and maintenance and sales tax expenses. During the six months ended June 30, 2014 labor cost included approximately $3.0 million in non-cash expense for share-based compensation. During the six months ended June 30, 2013, we expensed approximately $1.0 million in repair and maintenance expenses for projects at the Aquarius and $424,000 in sales tax expenses for complimentary meals provided to customers and employees. The company began accruing for sales tax on complimentary and employee meals in February 2012 based on a decision by the Nevada Tax Commission which was subsequently rescinded in July 2013. Additionally, we expensed approximately $385,000 related to our interactive gaming initiative during the six months ended June 30, 2014 compared to approximately $434,000 during the six months ended June 30, 2013.

Interest Expense

Interest expense decreased 38.7% to $13.3 million for the six months ended June 30, 2014, compared to $21.7 million for the six months ended June 30, 2013. The decrease was due primarily to the redemption of the 11% Senior Secured Notes and repricing of the First Lien Facilities effective February 24, 2014.

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Financial Condition

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, renovation projects 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, financial market risks, the ability to maintain existing management, competition within the gaming industry, the cyclical nature of the hotel business and gaming business, economic conditions, regulatory matters and litigation and other risks described in our filings with the SEC. In addition, renovation projects entail significant risks, including shortages of materials or skilled labor, unforeseen regulatory problems, work stoppages, weather interference, floods, unanticipated cost increases, and disruption to business. The anticipated costs and construction periods are based on budgets, conceptual design documents and construction schedule estimates. There can be no assurance that the budgeted costs or construction period will be met. All forward-looking statements are based on our current expectations and projections about future events.

As of June 30, 2014 we had $67.0 million in cash and cash equivalents compared to $72.7 million on June 30, 2013. Net cash provided by operating activities was $22.3 million for the six months ended June 30, 2014 compared to $15.8 million for the six months ended June 30, 2013. The increase in cash flow from operations was driven primarily by increased net revenue and decreased interest expense.

During the six months ended June 30, 2014, our total capital expenditures were $6.4 million (including approximately $205,000 in non-cash items), of which approximately $1.2 million was spent on slot machine replacements and conversions, $1.3 million on upgrading our information technology systems, $1.2 million for renovations to our rooms, public areas and food and beverage venues and $2.7 million on our facilities and operations. For the six months ended June 30, 2013, our total capital expenditures were $5.9 million (including approximately $9,000 in non-cash items), of which approximately $1.4 million was spent on slot machine replacements and conversions, $1.4 million on replacement building controls at the Stratosphere and Aquarius, $800,000 for renovations to our rooms, public areas and food and beverage venues and $2.3 million on our facilities and operations.

Our primary cash requirements for the next twelve months are expected to include (i) expenses associated with ongoing day-to-day operations, (ii) interest and principal payments on indebtedness, (iii) payments for design and development costs of future projects, and (iv) regular maintenance and other capital expenditures. We currently anticipate that we will spend approximately $21.4 million on regular maintenance and renovation capital projects during 2014.

On February 24, 2014, we entered into an amendment of the First Lien Credit Agreement. Among other changes, the Amendment reduces the interest rates on the Term Loans by 125 basis points per annum. Interest will now accrue, at our election, (i) at the adjusted eurodollar rate plus 3.50% per annum or (ii) at the Base Rate plus 2.50% per annum. Additionally, the minimum adjusted eurodollar rate was reduced by 25 basis points from 1.25% per annum to 1.00% per annum. We expect to reduce our cash paid on interest by approximately $3.2 million in the first year following the amendment of the First Lien Credit Agreement.

We believe our cash flow from operations and our cash balances will be sufficient to fund our operations, interest payments and capital expenditures for the next twelve months. However, our ability to fund our operations, make payments on our debt and fund planned capital expenditures will depend on our ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control as well as the factors described in the section entitled Risk Factors in Item 1A of our annual report on Form 10-K, filed with the SEC on March 31, 2014 (SEC File No. 000-52975).

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

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