0001104659-12-077749.txt : 20121114 0001104659-12-077749.hdr.sgml : 20121114 20121114125258 ACCESSION NUMBER: 0001104659-12-077749 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20120930 FILED AS OF DATE: 20121114 DATE AS OF CHANGE: 20121114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OCM HoldCo, LLC CENTRAL INDEX KEY: 0001353741 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 203626528 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-52042 FILM NUMBER: 121202643 BUSINESS ADDRESS: STREET 1: 333 SOUTH GRAND AVENUE, 28TH FLOOR STREET 2: C/O DOUG BAYERD CITY: LOS ANGELES STATE: CA ZIP: 90071 BUSINESS PHONE: (213) 830-6300 MAIL ADDRESS: STREET 1: 333 SOUTH GRAND AVENUE, 28TH FLOOR STREET 2: C/O DOUG BAYERD CITY: LOS ANGELES STATE: CA ZIP: 90071 10-Q 1 a12-20020_110q.htm 10-Q

Table of Contents

 

 

 

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 September 30, 2012

 

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 0-52042

 

OCM HOLDCO, LLC

(Exact name of Registrant as specified in its charter)

 

DELAWARE

 

20-3673772

(State or other jurisdiction of incorporation

or organization)

 

(I.R.S. Employer Identification No.)

 

333 SOUTH GRAND AVENUE

28th FLOOR

LOS ANGELES, CALIFORNIA, 90071

(Address of principal executive offices)

 

(213) 830-6300

(Registrant’s telephone number)

 

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 (Section 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 the definitions 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

 

Smaller reporting company x

(Do not check if a smaller reporting company)

 

 

 

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

 

 

 



Table of Contents

 

OCM HOLDCO, LLC

Index

Form 10-Q

 

 

 

 

PAGE

 

 

Forward Looking Statements

3

 

 

 

 

Part I

 

Financial Information

4

 

 

 

 

Item 1.

 

Consolidated Financial Statements

4

 

 

Balance Sheets

4

 

 

Statements of Operations

5

 

 

Statements of Changes in Members’ Equity

6

 

 

Statements of Cash Flows

7

 

 

Notes to Consolidated Financial Statements

8

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

16

Item 4.

 

Controls and Procedures

16

 

 

 

 

Part II

 

Other Information

17

Item 1.

 

Legal Proceedings

17

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

17

Item 3.

 

Defaults Upon Senior Securities

17

Item 4.

 

Mine Safety Disclosures

17

Item 5.

 

Other Information

17

Item 6.

 

Exhibits

17

 

 

Signatures

18

 

2



Table of Contents

 

Forward Looking Statements.

 

In addition to historical information, this Form 10-Q contains forward-looking statements that involve risks and uncertainties that could cause our actual results to differ materially from those contained in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the notes to the financial statements of OCM HoldCo, LLC set forth in the section entitled “Financial Statements.” When used in this report, the words “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” “seeks,” and similar expressions are generally intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements after the date of this document. You should carefully review the information described in this Form 10-Q. You should also carefully review the risk factors described in the previously filed Form 10-K for the year ended December 31, 2011, and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “Commission”).

 

3



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PART I—FINANCIAL STATEMENTS

 

Item 1. Financial Statements.

 

OCM HoldCo, LLC and Subsidiaries

Consolidated Balance Sheets

 

 

 

September 30,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash

 

$

8,075,496

 

$

8,270,647

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

Investment in Cannery Casino Resorts, LLC

 

133,631,360

 

135,570,746

 

Gaming and related licenses

 

805,698

 

805,698

 

Deferred tax assets

 

15,487,979

 

17,824,158

 

 

 

$

158,000,533

 

$

162,471,249

 

 

 

 

 

 

 

LIABILITIES AND MEMBERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable and accrued expenses, including $208,027 and $138,135 to related parties

 

$

212,385

 

$

163,678

 

Taxes payable

 

2,628

 

 

Deferred tax liabilities

 

155,016

 

321,286

 

Related party loans

 

750,000

 

750,000

 

 

 

1,120,029

 

1,234,964

 

 

 

 

 

 

 

Members’ equity

 

156,880,504

 

161,236,285

 

 

 

$

158,000,533

 

$

162,471,249

 

 

See notes to consolidated financial statements.

 

4



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OCM HoldCo, LLC and Subsidiaries

Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2012 and 2011

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Income (loss)

 

 

 

 

 

 

 

 

 

Interest income

 

$

1,923

 

$

2,810

 

$

5,989

 

$

3,824

 

Equity in loss of unconsolidated investees

 

(1,328,171

)

(819,653

)

(1,939,387

)

(1,868,072

)

Gain on sale of unconsolidated investee

 

 

 

 

799,289

 

 

 

(1,326,248

)

(816,843

)

(1,933,398

)

(1,064,959

)

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

Professional fees

 

38,873

 

53,361

 

177,807

 

191,389

 

Administrative fees and other expenses

 

13,129

 

15,368

 

39,647

 

42,348

 

Interest expense, related parties

 

11,018

 

10,484

 

32,392

 

30,710

 

 

 

63,020

 

79,213

 

249,846

 

264,447

 

 

 

 

 

 

 

 

 

 

 

Loss before income tax benefit

 

(1,389,268

)

(896,056

)

(2,183,244

)

(1,329,406

)

 

 

 

 

 

 

 

 

 

 

Income tax (provision) benefit

 

1,410,017

 

1,176,212

 

(2,172,537

)

2,386,125

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

20,749

 

$

280,156

 

$

(4,355,781

)

$

1,056,719

 

 

See notes to consolidated financial statements.

 

5



Table of Contents

 

OCM HoldCo, LLC and Subsidiaries

Consolidated Statements of Changes in Members’ Equity (Unaudited)

For the Nine Months Ended September 30, 2012 and 2011

 

 

 

Total members’
equity

 

Accumulated other
comprehensive
income (loss)

 

Invested capital and
accumulated earnings

 

 

 

 

 

 

 

 

 

2012

 

 

 

 

 

 

 

Balances, beginning of period

 

$

161,236,285

 

$

(27,064

)

$

161,263,349

 

Net loss

 

(4,355,781

)

 

(4,355,781

)

 

 

 

 

 

 

 

 

Balances, end of period

 

$

156,880,504

 

$

(27,064

)

$

156,907,568

 

 

 

 

 

 

 

 

 

2011

 

 

 

 

 

 

 

Balances, beginning of period

 

$

159,582,027

 

$

(135,296

)

$

159,717,323

 

Net income

 

1,056,719

 

 

1,056,719

 

Equity in other comprehensive income of unconsolidated investee, net of tax:

 

 

 

 

 

 

 

Unrealized gain on investments

 

111,106

 

111,106

 

 

Unrealized loss on interest rate swap agreements

 

(823

)

(823

)

 

 

 

 

 

 

 

 

 

Balances, end of period

 

$

160,749,029

 

$

(25,013

)

$

160,774,042

 

 

See notes to consolidated financial statements.

 

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Table of Contents

 

OCM HoldCo, LLC and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2012 and 2011

 

 

 

2012

 

2011

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Net (loss) income

 

$

(4,355,781

)

$

1,056,719

 

Adjustments to reconcile net (loss) income to net cash used in operating activities:

 

 

 

 

 

Equity in loss of unconsolidated investees

 

1,939,387

 

1,868,072

 

Gain on sale of unconsolidated investee

 

 

(799,289

)

Deferred income taxes

 

2,169,909

 

(2,386,125

)

Increase in accounts payable and accrued expenses

 

48,706

 

99,300

 

Taxes payable

 

2,628

 

 

Net cash used in operating activities

 

(195,151

)

(161,323

)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Proceeds from the sale of unconsolidated investee

 

 

8,000,000

 

Net cash provided by investing activities

 

 

8,000,000

 

 

 

 

 

 

 

Net (decrease) increase in cash

 

(195,151

)

7,838,677

 

Cash, beginning of period

 

8,270,647

 

506,264

 

 

 

 

 

 

 

Cash, end of period

 

$

8,075,496

 

$

8,344,941

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

Noncash financing and investing activity

 

 

 

 

 

Equity in other comprehensive income of unconsolidated investees

 

$

 

$

110,283

 

 

See notes to consolidated financial statements.

 

7



Table of Contents

 

OCM HoldCo, LLC and Subsidiaries

 

Notes to Consolidated Financial Statements

 

NOTE 1— Basis of Presentation and Organization

 

The consolidated financial statements of OCM HoldCo, LLC (“OCM”), a Delaware limited liability company, as of September 30, 2012 and December 31, 2011, and for the three and nine month periods ended September 30, 2012 and 2011, include the accounts of OCM and its wholly-owned subsidiaries (collectively, the “Company”). The interim financial statements presented herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “Commission”) applicable to interim financial information.  Certain information and disclosures normally included in the annual 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.  In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods have been made (consisting of normal recurring adjustments).  Results of operations for the current interim periods are not necessarily indicative of results to be expected for the full fiscal year.  All significant intercompany accounts and transactions have been eliminated in consolidation.

 

All of OCM’s issued and outstanding Class A Units are held by OCM VoteCo, LLC, a Delaware limited liability company (“VoteCo”), and all of OCM’s issued and outstanding non-voting Class B Units are held by OCM InvestCo, LLC, a Nevada limited liability company (“InvestCo”).  The rights of the Class A Units and Class B Units are substantially identical with the exception that the Class B Units are not entitled to any management or voting rights with respect to the Company, except as provided by applicable law.  Neither class has dividend or liquidation preferences, atypical participation rights, or preferred, convertible, or redeemable features.  In general, any sale, assignment or transfer of such units is subject to the prior approval of the gaming regulators of Nevada and Pennsylvania.  VoteCo is responsible for the operations of the Company, including the appointment and removal of managers.  VoteCo has a de minimus economic interest in the Company, less than 0.00015%, and its total equity contributions are limited to $100.

 

Cannery Casino Resorts, LLC (“CCR”) is an unconsolidated investee of OCM.  In connection with the execution and delivery of the Series B Preferred Purchase Agreement and the transactions related thereto, CCR issued, effective as of March 12, 2009, an aggregate of 71,614 Series B Preferred Units of CCR (the “Series B Units”) to Crown CCR Group Investments One, LLC, a Delaware limited liability company (“Crown One”), and Crown CCR Group Investments Two, LLC, a Delaware limited liability company (“Crown Two”), which are wholly owned subsidiaries of Crown Limited, an Australian company (“Crown Parent” and collectively with Crown One and Crown Two, the “Crown Parties”).  In accordance with the terms and provisions of CCR’s Revised Operating Agreement, the Series B Units are convertible on a one-to-one basis (subject to adjustment upon the occurrence of certain events) into Series A2 Preferred Units of CCR (the “Series A2 Units”) at the election of the holder upon the attainment of all requisite regulatory approvals under applicable gaming laws.  Both the Series B Units and the Series A2 Units are non-voting securities, except that so long as the aggregate percentage interests of the holders of the Series A2 Units is greater than or equal to 20%, such holders are entitled to appoint a non-voting representative to CCR’s management committee.  On March 8, 2011, Crown One and Crown Two notified CCR of their attainment of all requisite gaming approvals and of their election to convert their Series B Units into Series A2 Units.  Accordingly, the Series B Units held by Crown One and Crown Two were converted to Series A2 Units effective as of such date.  The Company indirectly holds 92,690 Series A1 Preferred Units of CCR (“Series A1 Units” and collectively with the Series A2 Units, the “Series A Units”), which, after giving effect to the conversion of the Series B Units, represent a 31.71% interest in the aggregate Series A Units of CCR.

 

On May 17, 2011, the Company entered into a Unit Purchase Agreement for the sale of its 33-1/3% indirect equity interest in NP Land, LLC, a Nevada limited liability company (“NP Land”) for $8 million in cash.  The equity interest was sold to the owner of the remaining 66-2/3% equity interest in NP Land.  This transaction closed on May 19, 2011.

 

On January 5, 2006, OCM entered into an Option to Purchase CCR Units of OCM AcquisitionCo, LLC (“Option Agreement”) with its subsidiary OCM Blocker, LLC (Blocker”), to purchase all of Blocker’s outstanding Class A Units and Class B Units (collectively, the “CCR Units”) in OCM AcquisitionCo, LLC (“AcquisitionCo”), along with any other equity interests in AcquisitionCo that Blocker may have owned at the time of exercise.  OCM paid approximately $15.2 million as consideration for the execution and delivery of the Option Agreement.  The Option Agreement expired on January 5, 2012 unexercised.  As a result of the expiration, OCM recognized an expense for the $15.2 million, and Blocker recognized a gain for the same amount as of January 5, 2012.  The transaction was eliminated during consolidation.

 

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These consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed with the Commission on March 30, 2012, from which the balance sheet information as of December 31, 2011 was derived.

 

NOTE 2—Selected condensed consolidated operating information for unconsolidated investees

 

Selected unaudited condensed consolidated operating information for Cannery Casino Resorts, LLC, and Subsidiaries follows:

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

119,538,969

 

$

135,611,739

 

$

378,275,440

 

$

402,930,049

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

$

6,495,256

 

$

6,621,739

 

$

25,455,065

 

$

22,054,539

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,188,491

)

$

(2,533,526

)

$

(6,116,009

)

$

(6,250,318

)

 

NOTE 3—Income taxes

 

OCM is a limited liability company and, accordingly, is treated as a partnership for federal income tax purposes with the tax effect of its activities recognized in the income tax returns of its members.

 

OCM owns over 99.99% of the equity interest in Blocker, which has elected to be taxed as a corporation and which, in turn, owns 100% of AcquisitionCo and OCM LandCo, LLC.  The Blocker subsidiaries own the investment in CCR, a Nevada limited liability company that is treated as a partnership for federal income tax purposes.  Accordingly, equity in the earnings of CCR are generally taxable to Blocker along with other tax attributes (permanent differences) and business tax credits. The principal exception to this generalization is earnings from the corporate, taxpaying subsidiaries of CCR that own and operate The Meadows, a racetrack and casino in Pennsylvania.

 

Management believes it is likely that the undistributed earnings from these tax-paying subsidiaries of CCR will eventually be realized as a gain through the disposition of the Company’s investment in CCR.  Blocker incurs interest expense on intercompany indebtedness that is deducted for income tax purposes but is eliminated (a permanent difference), along with the related debt, in this consolidation.  OCM also incurs certain other costs, primarily associated with being a reporting company, including professional and other fees, which, for tax reporting purposes, flow through to its members.  Because of these circumstances, the Company’s estimated effective tax rate, for the periods presented, differs significantly from the federal statutory rate of 35%.

 

Management also believes that a valuation allowance for the Company’s deferred tax assets is not necessary because of the Company’s general business plan of eventually, following the likely economic recovery (Note 5), selling its appreciated investment in unconsolidated investees before its net operating loss carryforwards begin to expire in 2021 and, thus, realizing the related deferred tax assets.

 

Management has made an analysis of its state and federal tax returns that remain subject to examination by major authorities (consisting of tax years 2009 through 2011) and concluded that the Company has no recordable liability as a result of certain uncertain tax positions taken.  The Company is generally subject to audit for tax years 2009 and forward.

 

On June 23, 2011, the Internal Revenue Services (“IRS”) proposed adjustments for certain deductions on certain CCR subsidiary corporate income tax returns for tax years ended December 31, 2007 through 2009. The deductions primarily relate to a loss attributable to the dismantling of the temporary casino facility. The IRS has taken a position that this loss deduction should be disallowed in full. However, CCR management vigorously defended its position and maintains that the position taken was proper and supported by applicable laws and regulations. CCR management has reached a tentative settlement with IRS Appeals Office in which the parties have agreed to allow 70% of this loss deduction. The net effect of the adjustment is a reduction of the net operating loss carry forward for the CCR subsidiary in future years of approximately $6.9 million.

 

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Table of Contents

 

NOTE 4—Related party loans

 

On July 15, 2010, the Company borrowed $750,000 from certain affiliates of the Company in order to cover existing and future expenses of the Company anticipated to arise during the next two years. Interest will be accrued at the prime rate plus 2% on the outstanding principal amount, and unpaid interest will be compounded monthly.  The notes evidencing this loan are due and payable on demand.  The Company has accrued interest of $92,251 and $59,859 as of September 30, 2012 and December 31, 2011, respectively.

 

NOTE 5—Contingencies

 

The United States recently experienced a recession accompanied by, among other things, weakness in the commercial and investment banking systems resulting in reduced credit and capital financing availability, and highly curtailed gaming, other recreational, construction and real estate market activities and general discretionary consumer spending. Although capital market activity and liquidity have improved of late, the recovery from this recession period is fragile and there can be no assurance that our business, which has been severely affected by the downturn, will fully recover to pre-recession levels.

 

The Company often carries cash on deposit with financial institutions substantially in excess of federally-insured limits, and the risk of losses related to such concentrations has been increasing as a result of recent economic developments and uncertainties discussed in the foregoing paragraph.  The extent of any loss that might be incurred as a result of uninsured deposits in the event of a future failure of a bank or other financial institutions, if any, is not subject to estimation at this time.

 

NOTE 6—Financial Instruments

 

Except for cash, the fair value of which equals its carrying value, the only significant financial instrument the Company has is its investment in an unconsolidated investee accounted for on the equity method for which fair value disclosure is not required.

 

NOTE 7—Subsequent Events

 

On October 2, 2012, CCR and Washington Trotting Association, a subsidiary of CCR (“WTA”) entered into two syndicated credit facilities with Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, swing line lender and letter of credit issuer, Bank of America, N.A., Goldman Sachs Bank USA (“GS”) and Wells Fargo Gaming Capital, LLC, as co-syndication agents, Credit Suisse AG, Cayman Islands Branch and Macquarie Capital (USA) Inc. (“MC”), as co-documentation agents and Deutsche Bank Securities Inc. (“DBSI”), Merrill Lynch, Pierce, Fenner & Smith Incorporated, GS, Wells Fargo Securities, LLC, Credit Suisse Securities (USA) LLC and MC, as Joint Lead Arrangers and Book Running Managers.  Provisions of the new credit facilities included: a $425 million first lien facility consisting of a six-year $385 million term loan and a five-year $40 million revolving loan (collectively referred to herein as the “First Lien Credit Facility”), and a seven-year $165 million second lien term loan facility (the “Second Lien Credit Facility”).  Portions of the proceeds were used to pay off then-existing $443.5 million debt that was outstanding from the May 18, 2007 refinancing and $86.9 million of the proceeds were distributed to certain owners of the Series C Preferred Units of CCR.

 

On October 2, 2012, in connection with CCR entering into the First Lien Credit Facility and Second Lien Credit Facility, and in accordance with the terms and conditions of the Waiver and Amendment to Third Amended and Restated Operating Agreement of CCR (the “Waiver and Amendment”), by and among Crown CCR Group Investments One, LLC, a Delaware limited liability company (“Crown One”) and Crown CCR Group Investments Two, LLC, a Delaware limited liability company (“Crown Two” and collectively, the “Crown Parties”), Millennium Gaming, Inc., a Nevada corporation (“Millennium”), and AcquisitionCo (i) redeemed 39,384, 6,391, and 6,390 Series C Preferred Units held by AcquisitionCo, Crown One, and Crown Two, respectively (collectively, the “Series C Redemption”), and (ii) accepted contributions of 10,000, 7,241, 2,797 and 2,797 Series C Preferred Units from Millennium Gaming, AcquisitionCo, Crown One, and Crown Two, respectively (collectively, the “Series C Capital Contribution”).  AcquisitionCo received $65.6 million from CCR in connection with the Series C Redemption.  Following the Series C Redemption and the Series C Capital Contribution, the Company continued to indirectly hold a 31.71% interest in the aggregate Series A Units of CCR.

 

Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following management discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

10



Table of Contents

 

Overview

 

The Company’s activities consist solely of holding substantial, noncontrolling equity interests in gaming enterprises and related assets.

 

Background

 

Overview

 

The Company and its consolidated subsidiaries were formed on July 22, 2005, at the direction of affiliates of Oaktree Capital Management, L.P., a Delaware limited partnership (“Oaktree”), for the purpose of participating in various activities relating to the gaming industry.

 

All of the Company’s issued and outstanding Class A Units are held by OCM VoteCo, LLC, a Delaware limited liability company (“VoteCo”), and all of the Company’s issued and outstanding non-voting Class B Units are held by OCM InvestCo, LLC, a Nevada limited liability company (“InvestCo”).  VoteCo and InvestCo are affiliates of Oaktree.  VoteCo is responsible for the operations of the Company, including the appointment and removal of managers.  VoteCo has a de minimus economic interest in the Company, less than 0.00015%, and its total equity contributions are limited to $100.

 

In 2006, the Company, through a wholly-owned subsidiary, OCM AcquisitionCo, LLC, a Nevada limited liability company (“AcquisitionCo”), acquired a 42% equity interest in Cannery Casino Resorts, LLC (“CCR”), and a 33-1/3% equity interest in NP Land, LLC, a Nevada limited liability company (“NP Land”).  The Company subsequently sold its 33-1/3% equity interest in NP Land in a transaction that closed on May 19, 2011 (see Recent Developments below).  On March 8, 2011, the equity interest in CCR was reduced to 31.71% upon the conversion of CCR Series B Units held by the Crown Parties (see Recent Developments below).  The Company’s current business consists primarily of its ownership of these equity interests.  CCR, through wholly-owned subsidiaries, owns and operates the Cannery Hotel and Casino (“The Cannery”), located in North Las Vegas, Nevada, the Eastside Cannery Casino and Hotel (the “Eastside Cannery”), located in Las Vegas, Nevada, and operated the Rampart Casino (the “Rampart”), located in  the Summerlin area of northwest Las Vegas.  CCR, through a subsidiary, operated the Rampart under a 10-year sublease agreement with Hotspur Casinos Nevada, Inc. (“Hotspur”), which owns the hotel and resort facilities in which the casino is housed.  This sublease expired on March 31, 2012. Hotspur took over management of the casino on April 1, 2012.  In addition, CCR, through a wholly-owned subsidiary, PA Meadows, LLC, a Delaware limited liability company (“PA Meadows”), owns and operates a racetrack and a casino at The Meadows, an operating harness racetrack located in North Strabane Township, Washington County, Pennsylvania.

 

On May 18, 2007, CCR consummated an $860 million refinancing consisting of a $110 million five-year first lien revolving credit facility, a $350 million six-year first lien term loan, a $285 million six-year delay draw first lien term loan, and a $115 million seven-year second lien term loan (collectively, the “Credit Agreements”).  Portions of the proceeds were used to retire then-existing debt, and to partially fund the completion of the Eastside Cannery and the permanent casino facility at The Meadows.  The Eastside Cannery (which replaced a former casino) opened on August 28, 2008, and the 350,000 square-foot permanent casino at The Meadows opened on April 15, 2009.

 

The primary asset of NP Land is approximately 22 acres of land (the current site of the Eastside Cannery), which land is currently leased to a wholly-owned subsidiary of CCR.

 

On December 11, 2007, the Company entered into a definitive purchase agreement (the “Original Purchase Agreement”) by and among (i) Crown Limited, an Australian company (“Crown”), (ii) Crown CCR Group Investments One, LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Crown (“Crown One”), and Crown CCR Group Investments Two, LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Crown (“Crown Two” and collectively with Crown and Crown One, the “Crown Parties”), (iii) Millennium Gaming, Inc., a Nevada corporation (“Millennium,” and together with the Company, the “Original Equityholders”), (iv) the Company, and (v) CCR (collectively, CCR with Millennium and the Company, the “Seller Parties”), pursuant to which Crown One and Crown Two (collectively, the “Purchasers”) were to purchase, directly or indirectly, all of the membership units of CCR from the Original Equityholders.

 

On March 12, 2009, the Seller Parties and the Crown Parties entered into a Termination and Settlement Agreement (the “Termination and Settlement Agreement”), whereby the parties agreed to (a) terminate the Original Purchase Agreement, and (b) settle and release claims among the parties to the Original Purchase Agreement relating to the Original Purchase Agreement, and in connection therewith, Crown One and Crown Two, collectively, paid the Original Equityholders a cash payment of $50 million, of which the Company received $21 million.

 

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Simultaneously with the execution and delivery of the Termination and Settlement Agreement and in accordance with the terms thereof, the Crown Parties, the Original Equityholders and CCR entered into a Preferred Purchase Agreement (the “Preferred Purchase Agreement”).  On April 24, 2009, CCR sold to the Purchasers 71,614 Series B Preferred Units of CCR (the “Series B Units”) for an aggregate purchase price of $320 million in cash (the “Preferred Purchase Price”) in accordance with the terms and conditions of the Preferred Purchase Agreement.  Of the Preferred Purchase Price, $20 million represents reimbursement of certain project costs incurred by CCR related to various project costs at The Meadows.  The Series B Units have no coupon and are not subject to mandatory redemption.  The “Crown Option Agreement,” as described below, was not affected.

 

Simultaneously with the execution and delivery of the Termination and Settlement Agreement and in accordance with the terms thereof, the Crown Parties, the Original Equityholders and CCR entered into an Option Agreement (the “Crown Option Agreement”), which granted the Crown Parties, subject to the terms and conditions set forth in the Crown Option Agreement, the option to complete the purchase of all of the direct and indirect interests of the Original Equityholders in CCR on terms substantially similar to the terms of the Original Purchase Agreement.  The exercise period under the Crown Option Agreement expired in accordance with its terms in March 2011.

 

In May 2009, CCR distributed $26.21 million of the Preferred Purchase Price to the Company, and concurrent with such distribution, the Company, through AcquisitionCo, made a $5.21 million equity investment in CCR for the purpose of maintaining CCR’s compliance with its debt covenants.  The additional equity contribution by AcquisitionCo was funded by an equity contribution from OCM Blocker, LLC, which in turn was funded by a loan from the Company.

 

On March 3, 2010, CCR sold: (i) 18,375 Series C Preferred Units to Crown One and Crown Two, collectively; (ii) 10,000 Series C Preferred Units to Millennium; and (iii) 46,625 Series C Preferred Units to AcquisitionCo.  The rights, preferences and privileges of the Series C Preferred Units are set forth in the Revised Operating Agreement.

 

On March 3, 2010, CCR entered into Amendment No. 1 to the First Lien Credit Agreement, by and among CCR, Washington Trotting Association, Inc., a subsidiary of CCR, (“WTA”), Bank of America, N.A. (“Bank of America”), as Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer, and the lenders from time to time party thereto (the “First Lien Amendment”).  Pursuant to the First Lien Amendment, among other matters, (i) the interest rate margins applicable to term loans and revolving loans under the First Lien Credit Agreement have been fixed at 4.25% for Eurodollar rate loans and 3.25% for base rate loans, in lieu of a range dependent upon the borrowers’ consolidated leverage ratio; (ii) the maximum amount of revolving loans has been permanently reduced from $110 million to $70 million; (iii) the consolidated leverage ratio that the borrowers are required to maintain as of each quarter end date through the remaining term of the First Lien Credit Agreement has been adjusted; and (iv) the borrowers will be permitted to transfer a portion of Pennsylvania real property where The Meadows Racetrack and Casino is located, which is mortgaged under the First Lien Credit Agreement, for construction of a hotel.  In addition to these matters, other covenants and provisions of the First Lien Credit Agreement that are affected by the First Lien Amendment include covenants requiring maintenance of minimum consolidated EBITDA, compliance with cash management procedures and application of the proceeds of certain transactions, including the issuance of securities, to repay the outstanding indebtedness under the First Lien Credit Agreement. The First Lien Credit Agreement was further amended by the First Lien Amendment No. 2 on February 7, 2012. Among other matters, the First Lien Amendment No. 2 extended the maturity date for revolving loans under the First Lien Credit Agreement from May 18, 2012 to February 18, 2013.

 

On March 8, 2011, Crown One and Crown Two notified CCR of their attainment of all requisite gaming approvals and of their election to convert their Series B Units into Series A2 Units.  Accordingly, the Series B Units held by Crown One and Crown Two were converted to Series A2 Units effective as of such date.  The Company indirectly holds 92,690 Series A1 Units of CCR (“Series A1 Units” and collectively with the Series A2 Units, the “Series A Units”), which, after giving effect to the conversion of the Series B Units, represent a 31.71% interest in the aggregate Series A Units of CCR.

 

On May 17, 2011, the Company entered into a Unit Purchase Agreement for the sale of its 33-1/3% equity interest in NP Land for $8 million in cash.  The equity interest was sold to the owner of the remaining 66-2/3% equity interest in NP Land.  The transaction closed on May 19, 2011.

 

Recent Developments

 

On January 5, 2006, OCM entered into an Option to Purchase CCR Units of OCM AcquisitionCo, LLC (“Option Agreement”) with its subsidiary OCM Blocker, LLC (Blocker”), to purchase all of Blocker’s outstanding Class A Units and Class B Units (collectively, the “CCR Units”) in OCM AcquisitionCo, LLC (“AcquisitionCo”), along with any other equity interests in AcquisitionCo that Blocker may have owned at the time of exercise.  OCM paid approximately $15.2 million as consideration for the execution and delivery of the Option Agreement.  The Option Agreement expired on January 5, 2012 unexercised.  As a result of the

 

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expiration, OCM recognized an expense for the $15.2 million, and Blocker recognized a gain for the same amount as of January 5, 2012.  The transaction was eliminated during consolidation.

 

On October 2, 2012 (the “Closing Date”), Cannery Casino Resorts, LLC (“CCR”), an unconsolidated investee of OCM HoldCo, LLC (the “Company”) and Washington Trotting Association, Inc. (a subsidiary of CCR and together, the “Borrowers”) entered into two syndicated credit facilities with Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, swing line lender and letter of credit issuer, Bank of America, N.A., Goldman Sachs Bank USA (“GS”) and Wells Fargo Gaming Capital, LLC, as co-syndication agents, Credit Suisse AG, Cayman Islands Branch and Macquarie Capital (USA) Inc. (“MC”), as co-documentation agents and Deutsche Bank Securities Inc. (“DBSI”), Merrill Lynch, Pierce, Fenner & Smith Incorporated, GS, Wells Fargo Securities, LLC, Credit Suisse Securities (USA) LLC and MC, as Joint Lead Arrangers and Book Running Managers.  Provisions of the new credit facilities included: a $425 million first lien facility consisting of a six-year $385 million term loan and a five-year $40 million revolving loan (collectively referred to herein as the “First Lien Credit Facility”), and a seven-year $165 million second lien term loan facility (the “Second Lien Credit Facility”).  Portions of the proceeds were used to pay off then-existing $443.5 million debt that was outstanding from the May 18, 2007 refinancing and $86.9 million of the proceeds were distributed to certain owners of the Series C Preferred Units of CCR.

 

The term loans under the First Lien Credit Facility (the “First Lien Term Loans”) and the revolving loans under the First Lien Credit Facility bear interest at a LIBOR index plus 4.75%, and the term loans under the Second Lien Credit Facility (the “Second Lien Term Loans”) bear interest at a LIBOR index plus 8.75%, with a LIBOR floor of 1.25% for each of the First Lien Term Loans and Second Lien Term Loans.  The interest rate on the First Lien Credit Facility is subject to one-step down based upon compliance with a consolidated total leverage ratio below a certain threshold.  Interest payments are payable quarterly for both the First Lien Term Loans and Second Lien Term Loans. The First Lien Term Loans also require quarterly principal payments in an amount equal to 0.25% of the aggregate principal amount of the First Lien Term Loans commencing on December 31, 2012, with the remaining outstanding principal due on the maturity date. Unlike the First Lien Credit Facility, the Second Lien Credit Facility does not amortize and requires the outstanding principal balance to be repaid on its maturity date.

 

Additional details related to the First Lien Credit Facility and Second Lien Credit Facility are as follows:

 

·                  The terms of the credit facilities are set forth in two agreements.  Under the First Lien Credit Facility agreement, the $385 million term facility was borrowed in a single installment on the Closing Date, and the $40 million revolving facility was not funded on the Closing Date, but is available thereafter until the fifth anniversary of the Closing Date. Interest rates under the First Lien Credit Facility and the Second Lien Credit Facility float with LIBOR rate indexes, as explained above.

 

·                  Both the First Lien Credit Facility and the Second Lien Credit Facility require CCR to maintain a consolidated total leverage ratio below certain thresholds.  In addition, the First Lien Credit Facility also requires CCR to maintain a consolidated interest coverage ratio above certain thresholds.

 

·                  Both credit facilities are subject to various other affirmative and negative covenants and reporting obligations in favor of the lenders, including, among other restrictions, restrictions on other indebtedness, capital expenditures, liens, investments, fundamental changes, asset dispositions, affiliate transactions, and restricted payments.

 

·                  The Borrowers’ obligations under each of the credit facilities are guaranteed by certain of their subsidiaries on a senior secured basis and are secured by substantially all of the real and personal property, including certain accounts of CCR and its subsidiaries.  The liens securing the Borrowers’ obligations under the Second Lien Credit Facility are subordinated to the liens securing the Borrowers’ obligations under the First Lien Credit Facility.

 

On October 2, 2012, in connection with CCR entering into the First Lien Credit Facility and Second Lien Credit Facility, and in accordance with the terms and conditions of the Waiver and Amendment to Third Amended and Restated Operating Agreement of CCR (the “Waiver and Amendment”), by and among Crown CCR Group Investments One, LLC, a Delaware limited liability company (“Crown One”) and Crown CCR Group Investments Two, LLC, a Delaware limited liability company (“Crown Two” and collectively, the “Crown Parties”), Millennium Gaming, Inc., a Nevada corporation (“Millennium”), and OCM AcquisitionCo, LLC, a wholly-owned subsidiary of the Company (“AcquisitionCo”), CCR (i) redeemed 39,384, 6,391, and 6,390 Series C Preferred Units held by AcquisitionCo, Crown One, and Crown Two, respectively (collectively, the “Series C Redemption”), and (ii) accepted contributions of 10,000, 7,241, 2,797 and 2,797 Series C Preferred Units from Millennium Gaming, AcquisitionCo, Crown One, and Crown Two, respectively (collectively, the “Series C Capital Contribution”).  AcquisitionCo received $65.6 million from CCR in connection with the Series C Redemption.  Following the Series C Redemption and the Series C Capital Contribution, the Company continued to indirectly hold a 31.71% interest in the aggregate Series A Units of CCR.

 

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Operations Analysis

 

Results of Operations

 

Material variables and factors affecting the Company’s income before income taxes for the three months ended September 30, 2012 compared to the three months ended September 30, 2011, are as follows:

 

·                  CCR’s net loss increased approximately $1.65 million for the three months ended September 30, 2012, compared to the same period for the prior year, due to the operational highlights for CCR discussed below.  This increase resulted in a $0.51 million increase in equity in loss of unconsolidated investees.

 

Material variables and factors affecting the Company’s income before income taxes for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011, are as follows:

 

·                  CCR’s net loss decreased approximately $0.13 million for the nine months ended September 30, 2012, compared to the same period for the prior year, due to the operational highlights for CCR discussed below.  Conversely, prior to the sale of the Company’s equity interest in NP Land on May 19, 2011, NP Land generated $0.8 million in net income.  The net impact of these factors resulted in a $0.07 million increase in equity in loss of unconsolidated investees.

 

Material tax attributes of the Company’s unconsolidated investees, primarily CCR, flow to the Company through OCM Blocker, LLC, an entity in which the Company owns 99.99% of the equity interest, are either nonrecurring or vary significantly.  Further, significant income of CCR is taxable to corporate subsidiaries of CCR.  Management believes that the undistributed earnings from CCR’s tax-paying subsidiaries will be realized as a gain through an eventual sale of the Company’s investment in CCR.  (See Note 3 to the consolidated financial statements for additional details.)

 

During 2012, the Company’s operations are related to its investments in CCR.  During 2011, the Company’s operations are primarily related to its investments in CCR and, to a much lesser extent, NP Land, which was sold on May 19, 2011.  The United States recently experienced a recession accompanied by, among other things, weakness in the commercial and investment banking systems resulting in reduced credit and capital financing availability, and highly curtailed gaming, other recreational, construction and real estate market activities and general discretionary consumer spending. Although capital market activity and liquidity have improved of late, the recovery from this recession period is fragile and there can be no assurance that our business, which has been severely affected by the downturn, will fully recover to pre-recession levels.

 

Operational highlights for CCR for the three and nine months ended September 30, 2012 and 2011 are as follows:

 

Three months ended September 30, 2012 and 2011

 

·                  Revenues (net) decreased 11.9% for the three months ended September 30, 2012, as compared to the corresponding period in the prior year, due primarily to the expiration of the 10-year casino sub lease at the Rampart Casino.  The Rampart Casino lease expired on March 31, 2012, in connection with the cessation of the 10-year casino sub lease agreement with Hotspur Casino Nevada, Inc. (“Hotspur”). On April 1, 2012, Hotspur assumed the operations at the Rampart Casino. Collectively, revenues (net) for Cannery Hotel and Casino and Eastside Hotel and Casino decreased $2.0 million due primarily to lower customer spending as compared to the same period last year. Revenues (net) at The Meadows remained relatively unchanged for the three month period ended September 30, 2012 as compared to the same corresponding period in the prior year.

 

·                  Income from operations decreased 2.0% for the three months ended September 30, 2012 as compared to the corresponding period in the prior year, due primarily to the declines in revenues (as discussed in the previous paragraph). The declines in revenues were partially offset by reduced operating costs in connection with the cessation of the 10-year casino sublease agreement at the Rampart Casino on March 31, 2012 (as previously discussed) and a non-recurring $1.0 million litigation reserve recorded in the prior year.

 

·                  Net loss increased $1.7 million for the three months ended September 30, 2012, as compared to the corresponding period in the prior year, due primarily to decrease in revenues (as previously discussed) and increased income tax expense of $1.5 million.

 

Nine months ended September 30, 2012 and 2011

 

·                  Revenues (net) decreased 6.1% for the nine months ended September 30, 2012, as compared to the corresponding period in the prior year, due primarily to the expiration of the lease at the Rampart Casino.  Operations at the Rampart Casino came to an end on March 31, 2012, in connection with the expiration of the 10-year casino sub lease agreement with Hotspur Casino

 

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Nevada (“Hotspur”). On April 1, 2012, Hotspur assumed the operations at the Rampart Casino. Collectively, revenues (net) for Cannery Hotel and Casino and Eastside Hotel and Casino decreased $1.9 million due primarily to lower customer spend as compared to the same period last year. The reduction in revenues was partially offset by increased revenues (net) at The Meadows of $6.2 million. The gains in net revenues at The Meadows are mainly attributed to increased casino and pari-mutual revenues at The Meadows of $4.5 million and $1.4 million, respectively, and due partly to the mild winter in the Northeast region as compared to the nine months period ended September 30, 2011.  Additionally, on April 15, 2012, The Meadows opened a new parking structure accommodating approximately 1,300 vehicles. Other income from consulting fees received contributed approximately $2.4 million in additional revenue for the nine months ended September 30, 2012.  On April 1, 2011, CCR entered into a consulting agreement with the Jackson Rancheria of Mewuk Indians of California. Pursuant to the agreement, CCR receives a monthly consulting fee and an annual incentive fee that is calculated on a percentage of incremental increase of Earnings Before Interest, Taxes, Depreciation and Amortization (as defined in the agreement).

 

·                  Income from operations increased $3.4 million for the nine months ended September 30, 2012, as compared to the corresponding period in the prior year, due primarily to reduced operating cost in connection with the expiration of the 10-year casino sublease agreement at the Rampart Casino on March 31, 2012 (as previously discussed) and a $1.0 million litigation reserve from the prior year. The gains in income was partially offset by a onetime charge of $1.9 million at the Rampart Casino related to certain assets and liabilities of Rampart Casino assumed by Rampart’s landlord, Hotspur, due to the expiration of the 10-year casino sub lease agreement on March 31, 2012 (as previously discussed).

 

·                  Net loss decreased 2.2% for the nine months ended September 30, 2012, as compared to the corresponding period in the prior year, due primarily to gains in income from operations (as previously discussed), partially offset by increased income tax expense of $4.0 million.

 

On June 23, 2011, the Internal Revenue Services (“IRS”) proposed adjustments for certain deductions on certain CCR subsidiary corporate income tax returns for tax years ended December 31, 2007 through 2009. The deductions primarily relate to a loss attributable to the dismantling of the temporary casino facility. The IRS has taken a position that this loss deduction should be disallowed in full. However, CCR management vigorously defended its position and maintains that the position taken was proper and supported by applicable laws and regulations. CCR management has reached a tentative settlement with IRS Appeals Office in which the parties have agreed to allow 70% of this loss deduction. The net effect of the adjustment is a reduction of the net operating loss carry forward for the CCR subsidiary in future years of approximately $6.9 million.

 

Liquidity and Capital Resources

 

The United States recently experienced a recession accompanied by, among other things, weakness in the commercial and investment banking systems resulting in reduced credit and capital financing availability, and highly curtailed gaming, other recreational, construction and real estate market activities and general discretionary consumer spending. Although capital market activity and liquidity have improved of late, the recovery from this recession period is fragile and, consequently, the Company’s liquidity and capital resources, cannot be estimated at this time but may likely be significant.

 

As disclosed above, the Company, from time to time, has made equity contributions to CCR in connection with CCR maintaining compliance with its debt covenants, including approximately $10.8 million in 2009, and approximately $46.6 million in 2010, in connection with AcquisitionCo’s purchase of the Series C Units.  The Company has no current investment or other financing plans, and the Company’s recurring prospective need for liquidity and capital resources is principally associated with being a reporting company.  On July 15, 2010, the Company borrowed $750,000 from certain affiliates of the Company in order to cover existing and future expenses of the Company anticipated to arise during the next two years. Interest will be accrued at the prime rate plus 2% on the outstanding principal amount, and unpaid interest will be compounded monthly.  The notes evidencing this loan are due and payable on demand.  To the extent the Company needs additional liquidity and capital resources to satisfy those needs, the Company’s members are the expected source of funding.

 

Inflation

 

The Company does not believe that inflation has had a material effect on its results of operations in recent years.  However, there is no assurance that inflation will not adversely affect its business in the future.

 

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Off Balance Sheet Arrangements

 

Credit Agreements

 

On May 18, 2007, CCR entered into two new syndicated credit facilities totaling $860 million: a $745 million first lien facility and a $115 million second lien term loan facility (collectively, the “Credit Agreements”) (see Overview above).  Portions of the proceeds were used to retire the then existing debt, including $250 million credit facility, and to partially fund the completion of the Eastside Cannery and the permanent casino facility at The Meadows.

 

On March 3, 2010, CCR entered into the First Lien Amendment No. 1 which changed certain covenants and provisions of the Credit Agreement as previously described. The Credit Agreements were further amended by the First Lien Amendment No. 2 on February 7, 2012. Among other matters, the First Lien Amendment No. 2 extended the maturity date for revolving loans under the First Lien Credit Agreement from May 18, 2012 to February 18, 2013.

 

On October 2, 2012, CCR entered into two new syndicated credit facilities totaling $590 million: a $425 million first lien facility consisting of; (i) $385 million term loan borrowed at Closing Date; (ii) $40 million revolving loan unfunded at Closing Date, but available until the fifth anniversary of the Closing Date and; (iii) $165 million second lien term loan facility (collectively, the “2012 Credit Agreements”) (see Overview above).  Portions of the proceeds were used to retire $443.5 million of debt that was outstanding from the May 18, 2007 refinancing and $86.9 of the proceeds was distributed to certain owners of the Series C shares. The remaining value of the Series C shares was contributed to CCR, and there are no remaining Series C shares outstanding.

 

Critical Accounting Estimates and Policies.

 

Although the Company’s consolidated financial statements necessarily make use of certain accounting estimates by management, at this time, we believe no matters are the subject of such estimates that are so highly uncertain or susceptible to change as to present a significant risk of a material impact on its financial condition or results of operations as more fully explained in the following paragraph. Moreover, except as discussed below, the Company does not employ any critical accounting policies that are selected from among available alternatives or require the exercise of significant management judgment to apply except for carrying its investments in unconsolidated investees on the equity method of accounting rather than the fair value option. Similarly, except for the selection of depreciable lives and depreciation methods and assumptions used to estimate the fair value of hedge agreements and investments, consisting of preferred auction rate securities, the accounting policies of the Company’s unconsolidated investees also do not require the exercise of significant management judgment to apply.

 

The realization of substantially all of the Company’s assets is dependent upon an eventual sale of its investment in the unconsolidated investees following a likely economic recovery at a price sufficient to realize the carrying value of the Company’s assets.  Further, based in part on prior transactions with the Crown Parties, management believes, despite the current economic conditions, that the estimated fair value of the Company’s investment in unconsolidated investees exceeds the carrying value of its investment and all other assets by a substantial amount such that any risk of not realizing the carrying values and having a material impact on the Company’s financial condition or results of operation is remote.  Additionally, it is management’s opinion that the eventual sale of the Company’s appreciated investment in unconsolidated investees makes realization of its deferred tax assets more likely than not.

 

Recently Issued Accounting Pronouncements.

 

No recently issued accounting pronouncements not yet adopted are expected to have a material impact on our financial position, results of operations, or cash flows.

 

Item 3.       Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures.

 

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange of 1934, as amended (the “Exchange Act”).  Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of September 30, 2012, the Company’s disclosure controls and procedures are effective.

 

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Changes in internal control over financial reporting.

 

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

 

 

The following exhibits are filed or furnished with this report:

 

 

 

31.1

 

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification of Principal Executive Officer and Principal Financial Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

XBRL Instance Document**

101.SCH

 

XBRL Taxonomy Extension Schema Document**

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document**

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document**

 


**                                  Pursuant to Rule 406T of Regulation S-T, the Interactive Date Files on Exhibit 101 hereto 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 and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections

 

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SIGNATURES

 

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, hereunto duly authorized.

 

 

OCM HOLDCO, LLC

 

Registrant

 

 

 

Date: November 14, 2012

By:

/s/ Stephen A. Kaplan

 

 

Stephen A. Kaplan

 

 

Manager (principal executive officer)

 

 

 

Date: November 14, 2012

By:

/s/ Ronald N. Beck

 

 

Ronald N. Beck

 

 

Manager (principal financial and chief accounting officer)

 

18


EX-31.1 2 a12-20020_1ex31d1.htm EX-31.1

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Stephen A. Kaplan, a Manager of OCM HoldCo, LLC, certify that:

 

1.                I have reviewed this quarterly report on Form 10-Q of OCM HoldCo, 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 control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for 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 report is being prepared;

 

b)         Designed such internal control over financial reporting, or caused such internal control 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 that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 14, 2012

/s/ Stephen A. Kaplan

 

Stephen A. Kaplan

 

Manager

 


EX-31.2 3 a12-20020_1ex31d2.htm EX-31.2

EXHIBIT 31.2

 

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Ronald N. Beck, a Manager of OCM HoldCo, LLC, certify that:

 

1.              I have reviewed this quarterly report on Form 10-Q of OCM HoldCo, 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 control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for 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 report is being prepared;

 

b)                Designed such internal control over financial reporting, or caused such internal control 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 that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.              The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)                All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)                Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:  November 14, 2012

/s/ Ronald N. Beck

 

Ronald N. Beck

 

Manager

 


EX-32.1 4 a12-20020_1ex32d1.htm EX-32.1

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Each of the undersigned managers of OCM HoldCo, LLC (the “Company”) hereby certifies that the Company’s quarterly report on Form 10-Q for the period ended September 30, 2012 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 14, 2012

/s/ Stephen A. Kaplan

 

Stephen A. Kaplan

 

Manager

 

 

 

 

 

 

Date: November 14, 2012

/s/ Ronald N. Beck

 

Ronald N. Beck

 

Manager

 


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font-family:'Times New Roman',times,serif;"> <tr> <td> <p style="MARGIN: 0in 0in 0pt"><b><font style="FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" size="2">NOTE 7&#8212;Subsequent Events</font></b></p> <p style="MARGIN: 0in 0in 0pt"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" size="2">&#160;</font></p> <p style="MARGIN: 0in 0in 0pt; TEXT-INDENT: 0.5in"><font style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" size="2">On October 2, 2012, CCR and Washington Trotting Association, a subsidiary of CCR (&#8220;WTA&#8221;) entered into two syndicated credit facilities with Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, swing line lender and letter of credit issuer, Bank of America, N.A., Goldman Sachs Bank USA (&#8220;GS&#8221;) and Wells Fargo Gaming Capital, LLC, as co-syndication agents, Credit Suisse AG, Cayman Islands Branch and Macquarie Capital (USA) Inc. (&#8220;MC&#8221;), as co-documentation agents and Deutsche Bank Securities Inc. 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