Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - NGA Holdco, LLC | Financial_Report.xls |
EX-32.2 - SECTION 906 CERTIFICATION - PRINCIPAL FINANCIAL OFFICER - NGA Holdco, LLC | d195487dex322.htm |
EX-31.1 - SECTION 302 CERTIFICATION - PRINCIPAL EXECUTIVE OFFICER - NGA Holdco, LLC | d195487dex311.htm |
EX-31.2 - SECTION 302 CERTIFICATION - PRINCIPAL FINANCIAL OFFICER - NGA Holdco, LLC | d195487dex312.htm |
EX-32.1 - SECTION 906 CERTIFICATION - PRINCIPAL EXECUTIVE OFFICER - NGA Holdco, LLC | d195487dex321.htm |
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 June 30, 2011
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to
Commission File No. 0-52734
NGA HOLDCO, LLC
(Exact name of registrant as specified in its charter)
Nevada | 20-8349236 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
21 Waterway Avenue, Suite 150
The Woodlands, TX 77380
(Address of principal executive offices)
Telephone: (713) 559-7400
(Registrants telephone number, including area code)
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 ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
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. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Table of Contents
FORM 10-Q
INDEX
ii
Table of Contents
FINANCIAL INFORMATION
Item 1. | Financial Statements (Unaudited). |
NGA HOLDCO, LLC
June 30, 2011 and December 31, 2010 (unaudited)
June 30, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 498,353 | $ | 498,299 | ||||
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|
|
|
|||||
Total current assets |
498,353 | 498,299 | ||||||
Investment in Eldorado |
28,816,383 | 28,197,330 | ||||||
Due from related party |
5,179,772 | 5,179,772 | ||||||
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|
|
|||||
Total Assets |
$ | 34,494,508 | $ | 33,875,401 | ||||
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|
|||||
LIABILITIES AND MEMBERS EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ | 8,546 | $ | 30,064 | ||||
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|
|
|
|||||
Total current liabilities |
8,546 | 30,064 | ||||||
Due to related party |
2,756,195 | 2,568,903 | ||||||
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|
|
|||||
Total Liabilities |
2,764,741 | 2,598,967 | ||||||
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|
|
|||||
Members Equity: |
||||||||
Class A unit (1 Unit issued and outstanding) |
3,806 | 3,806 | ||||||
Class B units (9,999 Units issued and outstanding) |
36,322,652 | 36,322,652 | ||||||
Accumulated deficit |
(4,596,691 | ) | (5,050,024 | ) | ||||
|
|
|
|
|||||
Total Members equity |
31,729,767 | 31,276,434 | ||||||
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|
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Total Liabilities & Members equity |
$ | 34,494,508 | $ | 33,875,401 | ||||
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|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
Table of Contents
NGA HOLDCO, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2011 and 2010 (unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Income (Loss): |
||||||||||||||||
Equity income (loss) on Eldorado |
$ | 744,624 | $ | 209,185 | $ | 619,053 | $ | (415,197 | ) | |||||||
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|
|||||||||
Total income (loss) |
744,624 | 209,185 | 619,053 | (415,197 | ) | |||||||||||
Expenses: |
||||||||||||||||
Legal, licensing, and other expenses |
51,690 | 73,771 | 165,720 | 206,418 | ||||||||||||
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|
|||||||||
Net income (loss) before income taxes |
692,934 | 135,414 | 453,333 | (621,615 | ) | |||||||||||
Income tax expense |
| | | | ||||||||||||
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|
|
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|||||||||
Net income (loss) |
$ | 692,934 | $ | 135,414 | $ | 453,333 | $ | (621,615 | ) | |||||||
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|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Table of Contents
NGA HOLDCO, LLC
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS EQUITY
Six Months Ended June 30, 2011 (unaudited)
Class A Unit |
Class B Units |
Accumulated Deficit |
Total Members Equity |
|||||||||||||
Balance, December 31, 2010 |
$ | 3,806 | $ | 36,322,652 | $ | (5,050,024 | ) | $ | 31,276,434 | |||||||
Net income |
| | 453,333 | 453,333 | ||||||||||||
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|
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|||||||||
Balance, June 30, 2011 |
$ | 3,806 | $ | 36,322,652 | $ | (4,596,691 | ) | $ | 31,729,767 | |||||||
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Table of Contents
NGA HOLDCO, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2011 and 2010 (unaudited)
Six Months Ended June 30, |
||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income (loss) |
$ | 453,333 | $ | (621,615 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
Equity (income) loss on Eldorado |
(619,053 | ) | 415,197 | |||||
Decrease in accounts payable and accrued liabilities |
(21,518 | ) | (15,380 | ) | ||||
Increase in due to related parties |
187,292 | 221,899 | ||||||
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Net cash provided by operating activities: |
$ | 54 | $ | 101 | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Net cash provided (used) by investing activities: |
$ | | $ | | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Net cash provided (used) by financing activities: |
$ | | $ | | ||||
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|
|
|
|||||
Net increase in cash |
$ | 54 | $ | 101 | ||||
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Cash at beginning of the period |
$ | 498,299 | $ | 473,093 | ||||
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Cash at end of the period |
$ | 498,353 | $ | 473,194 | ||||
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|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Table of Contents
NGA HoldCo, LLC
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Organization
NGA HoldCo, LLC, a Nevada limited liability company (the Company), was formed on January 8, 2007 at the direction of Newport Global Opportunities Fund LP (Newport), a Delaware limited partnership, for the purpose of holding equity, either directly or indirectly through affiliates, in one or more entities related to the gaming industry. The unaudited condensed consolidated financial statements represent the financial position and results of operations of the Company and its two wholly owned subsidiaries; NGA Blocker, LLC (Blocker) and NGA Acquisition Co. LLC (Acquisition Co).
On December 14, 2007, the date of the closing of its acquisition of a 17.0359% interest in Eldorado Resorts, LLC, a Nevada limited liability company (Resorts), the Company transferred in part to Resorts and in part to Donald L. Carano (Carano), respectively, free and clear of any liens, ownership of a total of $38,045,363 original principal amount of First Mortgage Bonds due 2012, co-issued by Eldorado Casino Shreveport Joint Venture (the Louisiana Partnership) and Shreveport Capital Corporation, a wholly owned subsidiary of the Louisiana Partnership (the New Shreveport Notes), together with 11,000 preferred shares issued by Shreveport Gaming Holdings, Inc. (SGH), then a partner of the Louisiana Partnership that is not affiliated with Resorts or the Company, in exchange for a 17.0359% interest in Resorts. In May 2007, Newport contributed 100% of the New Shreveport Notes held by Newport since August 2006 and 11% of the preferred shares held since August 2006 (collectively, the Eldorado Shreveport Investments) to the Company. The Eldorado Shreveport Investments were transferred to the Company at the fair value as of the transfer date.
Effective April 1, 2009, Resorts became a wholly-owned subsidiary of Eldorado HoldCo LLC, a Nevada limited liability company (Eldorado), when all of the members of Resorts, including Acquisition Co., the subsidiary of the Company through which the Company held its interest in Resorts, exchanged their interests in Resorts for identical interests in Eldorado. Eldorado, which was formed to be a holding company for Resorts, conducts no operations of its own and, other than its ownership of Resorts, has no assets or liabilities.
The Company has had no revenue generating business since inception. Its current business plan consists primarily of its holding of a 17.0359% equity interest in Eldorado and its 40% equity interest in Mesquite Gaming, LLC, a Nevada limited liability company (Mesquite Gaming), which was acquired on August 1, 2011. For more information concerning this acquisition, see Note 6 below. Eldorado, through Resorts, owns and operates the Eldorado Hotel and Casino (the Eldorado-Reno) located in Reno, Nevada. Through two wholly owned subsidiaries, Resorts owns all of the partnership interests of the Louisiana Partnership, and operates, pursuant to a management agreement, the Eldorado Shreveport Hotel and Casino in Shreveport, Louisiana (the Eldorado-Shreveport), which is owned by the Louisiana Partnership. Eldorado Limited Liability Company (ELLC), a Nevada limited liability company 96.1858% owned by Resorts, is a 50% joint venture partner in a general partnership that owns and operates the Silver Legacy Resort Casino (Silver Legacy), a hotel and casino property adjacent to Eldorado-Reno. Resorts also own a 21.25% interest in Tamarack Junction, a small casino in South Reno.
The Companys one issued and outstanding Class A Unit, representing all of its voting equity, is held by NGA VoteCo, LLC, a Nevada limited liability company (VoteCo). All of the Companys issued and outstanding Class B Units, representing all of its non-voting equity, are held by NGA No VoteCo, LLC, a Nevada limited liability company (InvestCo). VoteCo is owned by Timothy T. Janszen and Ryan L. Langdon, each of whom owns a 42.85% interest, and Roger A. May, who owns a 14.3% interest. Messrs. Janszen, Langdon and May collectively are referred to as the VoteCo Equityholders. InvestCo is owned by Newport, a Delaware limited partnership formed primarily for the purpose of seeking long-term capital appreciation and current income by acquiring, holding and disposing of investments made in distressed debt securities and equities. Newport holds all of InvestCos issued and outstanding voting securities. At present, the Company has no plans to issue any additional Class A Units or Class B Units.
The VoteCo Equityholders, through VoteCo, control all matters of the Company that are subject to the vote of members, including the appointment and removal of managers. Messrs. Janszen, Langdon and May are the Companys managers and Mr. Janszen is also the Companys operating manager. The Class B Units issued to InvestCo allow it and its investors to invest in the Company without having any voting power or power to control the operations or affairs of the Company, except as otherwise required by law. If InvestCo and its investors had any of the power to control the operations or affairs of the Company afforded to the holders of the Class A Units, they and their respective constituent equityholders would generally be required, in connection with the Companys investment in Eldorado, to be licensed or found suitable under the gaming laws and regulations of the States of Nevada and Louisiana as well as various local regulations in those states.
VoteCo, InvestCo, the Company and each of the Companys wholly owned subsidiaries are managed by Timothy T. Janszen, the operating manager of each entity. NGA Blocker, LLC, a Nevada limited liability company (Blocker), is a holding company that has elected to be taxed as a corporation. Because Blocker is a separately taxed, non-flow through entity, Blocker is taxed on its share of the income relating to the Companys investment in Eldorado rather than the Companys investors.
5
Table of Contents
The Companys acquisition in December 2007 of a 17.0359% interest in Resorts was pursuant to the terms and conditions of a Purchase Agreement, dated July 20, 2007 (the Purchase Agreement). The parties to the Purchase Agreement were Resorts, AcquisitionCo, which is the subsidiary through which the Company acquired its interest in Resorts, and Carano, now the presiding member of Eldorados Board of Managers and the Chief Executive Officer of Eldorado who then held the same positions with Resorts, from whom a portion of the 17.0359% interest was acquired. The closing of this transaction occurred on December 14, 2007 (Closing) after necessary gaming licenses and approvals were obtained from Nevada and Louisiana, respectively. The Company owns indirectly through its subsidiaries 17.0359% of Eldorado, and Carano or members of his family own directly or indirectly approximately 51% of Eldorado. Carano continues in the roles in the management of Eldorado and Resorts in which he served Resorts prior to Closing.
The 17.0359% equity interest in Resorts acquired by the Company included a new 14.47% membership interest acquired directly from Resorts (the 14.47% Interest) and a previously outstanding 3% membership interest (that, as a result of the issuance of the 14.47% Interest, was reduced to a 2.5659% interest) acquired from Carano (the 2.5659% Interest). In consideration for its equity interest, AcquisitionCo:
| transferred to Resorts, free and clear of any liens, ownership of $31,133,250 original principal amount of the New Shreveport Notes together with the right to all interest paid with respect thereto after the closing date, and |
| transferred to Carano, free and clear of any liens, $6,912,113 original principal amount of New Shreveport Notes together with the right to all interest paid with respect thereto after the closing date and a preferred stock equity interest representing a capital contribution amount of $286,889 issued by SGH. |
At closing, Resorts and Carano paid Newport in cash the respective amounts owed to AcquisitionCo for interest on the respective amounts of New Shreveport Notes received at closing that was accrued and unpaid through the date of closing.
Under the terms of the Purchase Agreement, Resorts was entitled, prior to or immediately following the Companys acquisition of its interest in Resorts, to make a distribution to the members of Resorts other than AcquisitionCo of up to $10 million. On July 25, 2007 Resorts made the $10 million distribution to its members which was funded through borrowings under Resorts credit facility as permitted by the Purchase Agreement.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company prepares its financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).
The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Blocker and AcquisitionCo. All intercompany transactions have been eliminated in consolidation.
In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments, all of which are normal and recurring, necessary to present fairly the financial position of the Company as of June 30, 2011 and December 31, 2010, and the results of its operations for the three and six months ended June 30, 2011 and 2010, and its cash flows for the six months ended June 30, 2011 and 2010. The results of operations for such periods are not necessarily indicative of the results to be expected for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on April 13, 2011.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments purchased with an original maturity of three months or less at the time of purchase. Cash equivalents are stated at cost plus accrued interest, which approximates fair value.
6
Table of Contents
Investment in Eldorado
The Company accounts for its 17.0359% investment in Eldorado using the equity method of accounting. The Company considers on a quarterly basis whether the fair value of its equity method investment has declined below its carrying value whenever adverse events or changes in circumstances indicate that the recorded value may not be recoverable. If the Company considers any such decline to be other than temporary, then a write-down would be recorded to estimated fair value. Evidence of a loss in value that may be other than temporary might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the Companys investment or the inability of Eldorado to sustain an earnings capacity that would justify the carrying amount of the investment. In evaluating whether the loss in value is other than temporary, the Company considers: 1) the length of time and the extent to which the fair value has been less than cost; 2) the financial condition and near-term prospects of Eldorado, including any specific events which may influence the operations of Eldorado; 3) the Companys intent and ability to retain its investment in Eldorado for a period of time sufficient to allow for any anticipated recovery in fair value; 4) the condition and trend of the economic cycle; 5) Eldorados financial performance and projections; 6) trends in the general market; and 7) Eldorados capital strength and liquidity.
In determining whether the fair value of the investment in Eldorado is less than its carrying value, the Company uses a discounted cash flow model as its principal technique. The Companys model incorporates an estimated weighted-average cost of capital that a market participant would use in evaluating the investment in a purchase transaction. The estimated weighted-average cost of capital is based on the risk free interest rate and other factors such as current risk premiums. The Company uses the discounted cash flow model as it provides greater detail and opportunity to reflect specific facts, circumstances and economic conditions for its investment. Comparable business transactions are often limited in number, contain dated information, and require significant adjustments due to differences in the size of the business, markets served and other factors. The Company therefore believes that in its circumstance, this makes comparisons to business transactions less reliable than the discounted cash flows model. However, the Company does consider comparable business transactions as a reasonableness test of our principal technique.
In performing this impairment test, the Company takes steps to ensure that appropriate and reasonable cash flow projections and assumptions are used. The Company also performs sensitivity analyses on the key assumptions used, including the weighted-average cost of capital.
Fair Value of Financial Instruments
The fair value of cash and cash equivalents and accounts payable and accrued liabilities approximates their carrying value due to the immediate or short term maturity of these financial instruments.
3. Membership Units and Related Rights
The Companys Operating Agreement has created two classes of membership units, the Class A Units and the Class B Units. VoteCo holds one Class A Unit of the Company, representing the Companys only outstanding voting equity. InvestCo holds 9,999 Class B Units of the Company representing all of the Companys outstanding non-voting equity. With the exception of voting rights, the rights of a Class A Unit and a Class B Unit are identical.
Each of the Companys membership units, both Class A and Class B, represent a percentage interest in the Company equal to the quotient determined by dividing one by the aggregate number of units, both Class A and Class B, held by all members as of the date of the determination. The economic rights, risks and rewards are all shared by the members ratably according to their respective percentage interests.
Distributions
Subject to all applicable gaming approvals, distributions by the Company will be made to its members at such times and in such amounts as approved by the Operating Manager in good faith in accordance with the provisions of the Companys operating agreement and, if and when made, will be distributed by the Company to its members in proportion to their respective percentage interests in the Company. There is no formal agreement between Newport and the Company regarding the settlement of the due to/from related parties; however, such amounts are expected to be settled upon sale of the Companys investment in Eldorado.
Restrictions on Transfer
Unless approved in advance by the Operating Manager and by applicable gaming authorities, no member of the Company may transfer all or any portion of its membership units. In addition, transfers or issuances of any membership units to any person who is required to be, and has not been, found suitable to be licensed or to hold such membership units by applicable gaming authorities, are prohibited and will be null and void and of no force or effect as of the inception of the attempted transfer or issuance.
7
Table of Contents
As of the date the Company receives notice from any applicable gaming authority that a member of the Company or a transferee of any membership interest in the Company (1) is required to be licensed but is unsuitable to be licensed or (2) is unsuitable to hold a membership interest in the Company, then the unsuitable member or transferee may not, for so long as the unsuitability determination remains in force and effect,
| receive any share of any cash distribution, or any other property or payments upon the dissolution of the Company, |
| exercise directly or through a trustee or nominee any voting rights conferred by any membership interest in the Company, |
| participate in the management of the business or affairs of the Company, or |
| receive any remuneration in any form from the Company for services rendered or otherwise. |
Member and Company Manager Compensation
No member or manager of the Company is entitled to receive any compensation from the Company for any services rendered to or on behalf of the Company, or otherwise, in his, her or its capacity as a member or manager of the Company. A manager of the Company is entitled to reimbursement from the first available funds of the Company for direct out-of-pocket costs and expenses incurred by the manager on behalf of the Company that directly related to the business and affairs of the Company.
4. Investment in Eldorado
The Companys 17.0359% investment in Eldorado (which was acquired on April 1, 2009 in exchange for a 17.0359% interest originally acquired in Resorts, as described in Note 1) is accounted for under the equity method. The investment, which is reported as Equity income (loss) on Eldorado on the consolidated statement of operations, was originally recorded at fair value and is adjusted by the Companys share of earnings, losses, distributions, and adjustments related to the amortization of definite-lived intangibles of the investment. The Companys allocated income and loss related to Eldorado for the three and six months ended June 30, 2011 and 2010, respectively, are included as a component of net income (loss) on the consolidated statement of operations. As of June 30, 2011 and December 31, 2010, there was no indication that impairment may have existed in relation to the investment in Eldorado.
A roll forward of the Companys equity investment in Eldorado is as follows:
Total | ||||
Beginning balance at January 1, 2011 |
$ | 28,197,330 | ||
Equity income on Eldorado |
619,053 | |||
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|
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Ending balance at June 30, 2011 |
$ | 28,816,383 | ||
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Summarized balance sheet information for Eldorado is as follows (in thousands):
June 30, 2011 |
December 31, 2010 |
|||||||
Current assets |
$ | 54,460 | $ | 57,747 | ||||
Investment in joint ventures |
41,362 | 42,994 | ||||||
Property and equipment, net |
204,746 | 209,996 | ||||||
Intangible assets, net |
20,720 | 20,720 | ||||||
Other assets, net |
8,676 | 2,186 | ||||||
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Total assets |
$ | 329,964 | $ | 333,643 | ||||
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Current liabilities |
$ | 37,927 | $ | 27,685 | ||||
Long-term liabilities |
191,747 | 190,764 | ||||||
13% Preferred equity interest |
| 19,289 | ||||||
Non-controlling interest |
4,746 | 4,807 | ||||||
Partners equity |
95,544 | 91,098 | ||||||
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|
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Total liabilities and partners equity |
$ | 329,964 | $ | 333,643 | ||||
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8
Table of Contents
Summarized results of operations for Eldorado are as follows (in thousands):
Three months ended June 30, 2011 |
Six
months ended June 30, 2011 |
|||||||
Net operating revenues |
$ | 65,644 | $ | 127,383 | ||||
Operating expenses |
(58,297 | ) | (113,894 | ) | ||||
Loss on sale/disposition of long-lived assets |
(25 | ) | (38 | ) | ||||
Equity income (loss) of unconsolidated affiliates |
584 | (1,122 | ) | |||||
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Operating income |
7,906 | 12,329 | ||||||
Other expense, net |
(3,362 | ) | (8,438 | ) | ||||
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Net income |
4,544 | 3,891 | ||||||
Net (income) loss attributable to noncontrolling interest |
(14 | ) | 61 | |||||
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Net income attributable to the Company |
$ | 4,530 | $ | 3,952 | ||||
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|
Effective March 1, 1994, ELLC (96% owned by Resorts) and Galleon, Inc. (a Nevada corporation and now an indirect wholly owned subsidiary of MGM Resorts International (formerly MGM MIRAGE)), entered into a joint venture (the Silver Legacy Joint Venture) pursuant to a joint venture agreement to develop the Silver Legacy Resort Casino (the Silver Legacy). The Silver Legacy consists of a casino and hotel located in Reno, Nevada, which began operations on July 28, 1995. Each partner owns a 50% interest in the Silver Legacy Joint Venture.
Summarized balance sheet information for the Silver Legacy Joint Venture is as follows (in thousands):
June 30, 2011 |
December 31, 2010 |
|||||||
Current assets |
$ | 42,730 | $ | 38,817 | ||||
Property and equipment, net |
222,487 | 229,119 | ||||||
Other assets, net |
7,299 | 7,315 | ||||||
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|
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Total assets |
$ | 272,516 | $ | 275,251 | ||||
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Current liabilities |
$ | 160,843 | $ | 18,510 | ||||
Long-term liabilities |
8,379 | 150,911 | ||||||
Partners equity |
103,294 | 105,830 | ||||||
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|
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Total liabilities and partners equity |
$ | 272,516 | $ | 275,251 | ||||
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Summarized results of operations for the Silver Legacy Joint Venture are as follows (in thousands):
Three months ended June 30, 2011 |
Six months ended June 30, 2011 |
|||||||
Net revenues |
$ | 33,595 | $ | 61,420 | ||||
Operating expenses |
(29,107 | ) | (57,080 | ) | ||||
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|
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Operating income |
4,488 | 4,340 | ||||||
Other expense, net |
(3,762 | ) | (7,522 | ) | ||||
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Net income (loss) |
$ | 726 | $ | (3,182 | ) | |||
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5. Related Parties
InvestCo owns 99.99% of the Company which is a non-voting interest. The other .01% of the Company, which is the only voting interest of the Company, is owned by VoteCo. InvestCo is wholly owned by Newport. In May 2007, Newport contributed to the Company 100% of the New Shreveport Notes held by Newport since August 2006 and 11% of the SGH preferred shares held since August 2006 that comprised the Companys Eldorado Shreveport investments (the Eldorado Shreveport Investments). The Eldorado Shreveport Investments were transferred to the Company at fair market value at the date of transfer. VoteCo is responsible for the operations of the Company and is wholly owned by the managers of Newport.
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At June 30, 2011 and December 31, 2010, the Company was owed $5,179,772 from Newport, representing $5,118,168 of interest earned and received on the Eldorado Shreveport Investments and $61,600 of preferred dividend earned and received on the 11,000 SGH preferred shares. At June 30, 2011 and December 31, 2010, the Company owed $2,756,195 and $2,568,903, respectively, to Newport for expenses paid by Newport on the Companys behalf. There is no formal agreement outlining the settlement of the receivable and payable between Newport and the Company. Accordingly, the receivable and payable are reflected as a non-current asset and a non-current liability, respectively, at June 30, 2011 and December 31, 2010.
6. Subsequent Events
On August 1, 2011, the acquisition by NGA Holdco, LLC, a Nevada limited liability company (the Company), through its wholly owned subsidiary, NGA AcquisitionCo, a Nevada limited liability company, LLC (AcquisitionCo), of a 40% equity interest (the 40% Interest) in Mesquite Gaming, LLC, a Nevada limited liability company (Mesquite Gaming), was completed upon the transfer to Mesquite Gaming of all of the assets of Black Gaming, LLC (Black Gaming), including its direct and indirect ownership interests in its subsidiaries, for $8,222,222 in cash. The assets acquired by Mesquite Gaming include the CasaBlanca Hotel & Casino and the Virgin River Hotel & Casino, each in Mesquite, Nevada, two golf courses, a bowling center, a gun club, restaurants, and banquet and conference facilities. The transfer of the Black Gaming assets to Mesquite Gaming and the acquisition by AcquisitionCo of the 40% Interest were pursuant to a joint plan of reorganization (the Plan) filed by Black Gaming and its subsidiaries with the United States Bankruptcy Court for the District of Nevada (the Court) on March 1, 2010, and approved by the Court on June 28, 2010. The Purchase price paid for the 40% Interest was provided by Newport Global Opportunities Fund LP, a Delaware limited partnership (Newport), and Newport Global Credit Fund (Master) LP, a Delaware limited partnership (Master), in the respective amounts of $7,222,222 and $1,000,000. Prior to the acquisition by AcquisitionCo of the 40% Interest, Newport owned all of the equity interests in NGA No VoteCo, LLC, a Nevada limited liability company (InvestCo). In consideration for Masters contribution of its portion of the funds used to purchase the 40% Interest, Master became a second member of InvestCo, which owns all of the Companys outstanding Class B Units, representing all of its non-voting equity. As a result of the acquisition of the 40% Interest, the Companys financial statements will, from August 1, 2011 (the date of consummation of the acquisition), reflect the Companys allocable share of the net income (loss) of Mesquite Gaming, which was formed for the purpose of acquiring the assets of Black Gaming pursuant to the Plan.
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Overview
The following managements discussion and analysis relates to the Companys unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this report.
The Company and its subsidiaries were formed as legal entities in January 2007 for the primary purpose of holding equity, directly or indirectly through affiliates, in one or more entities related to the gaming industry, and to exercise the rights, and manage the distributions received, in connection with those holdings. On December 14, 2007, our affiliate, NGA Acquisition Co. LLC (AcquisitionCo), acquired a 17.0359% interest in Eldorado Resorts, LLC, a Nevada limited liability company (Resorts). Effective April 1, 2009, Resorts became a wholly-owned subsidiary of Eldorado HoldCo LLC, a Nevada limited liability company (Eldorado), when all of the members of Resorts, including Acquisition Co., the subsidiary of the Company through which the Company held its interest in Resorts, exchanged their interests in Resorts for identical interests in Eldorado. Eldorado, which was formed to be a holding company for Resorts, conducts no operations of its own and, other than its ownership of Resorts, has no assets or liabilities (see note 1 of the notes to the Companys unaudited condensed consolidated financial statements included in this report).
From the date the investments conveyed by the Company for its 17.0359% interest in a Resorts were first acquired by Newport Global Opportunities Fund LP (Newport) in August 2006 until the Companys acquisition of the 17.0359% interest in Resorts, the unaudited condensed consolidated financial statements presented reflect the Companys activity with respect to such investments, which consisted principally of bonds and preferred shares associated with Eldorado Shreveport (the Eldorado Shreveport Investments). The related statements of operations reflect the interest earned by Newport associated with the Eldorado Shreveport Investments from August 2006 and any direct expenses associated with the acquisition of the 17.0359% interest in Resorts.
The Company has had no revenue generating business since inception and its current business plan consists primarily of its holding of a 17.0359% equity interest in Eldorado. Its only operations through June 30, 2011 have consisted of interest income earned on the Eldorado Shreveport Investments and, since December 14, 2007, the pro-rata net income (loss) allocation (as the case may be) related to the Resorts/Eldorado investment and nominal administrative expenses.
Eldorado, through Resorts, owns and operates the Eldorado Hotel & Casino (the Eldorado-Reno), a premier hotel/casino and entertainment facility in Reno, Nevada. Through two wholly owned subsidiaries, Resorts indirectly owns and, pursuant to a management agreement, operates the Eldorado Casino Shreveport, an all-suite art deco-style hotel and a tri-level riverboat dockside casino complex situated on the Red River in Shreveport, Louisiana (the Eldorado-Shreveport). Resorts 96% owned subsidiary, Eldorado Limited Liability Company, a Nevada limited liability company (ELLC), owns a 50% interest in a general partnership (the Silver Legacy Joint Venture) which owns the Silver Legacy Resort Casino (the Silver Legacy), a major, themed hotel/casino located adjacent to Eldorado-Reno. In addition, Resorts owns a 21.25% interest in Tamarack, a small casino in south Reno.
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On June 1, 2011, Resorts and Eldorado Capital Corp., a Nevada Corporation that is a wholly owned subsidiary of Resorts, completed the issuance of $180 million of 8.625% Senior Secured Notes due June 15, 2019. Also on June 30, 2014, Resorts entered into a new $30 million senior secured revolving credit facility (the New Credit Facility) available until June 20, 2014, which consists of a $15 million term loan requiring principal payments of $1.25 million each quarter beginning September 30, 2011, and a $15 million revolving credit facility. Proceeds from the Senior Secured Notes, together with borrowings under the New Credit Facility, were used to redeem approximately $ 230 million of previously outstanding debt owed by Resorts and its subsidiaries, of which approximately $31 million was held by Resorts. The remaining previously outstanding debt was called and redeemed on August 1, 2011 utilizing $9.7 million of restricted cash which was set aside on June 1, 2011 for the purpose of redeeming the notes that were called. Interest on the Senior Secured Notes is payable semiannually each June 15 and December 15 (commencing on December 15, 2011) to holders of record on the preceding June 1 or December 1, respectively. Interest on the credit facility is payable on the last day of the Eurodollar Rate loan, provided, however, that if the period exceeds three months the interest will be payable on the respective dates that fall every three months after the beginning of the loan period. For each Base Rate loan, interest is payable as the end of the respective quarter. The interest period cannot exceed the maturity date of the credit facility for either a Eurodollar loan or Base Rate loan.
Operational highlights for Eldorado for the three months ended June 30, 2011 included net operating revenues of approximately $65.6 million and operating expenses of approximately $58.3 million. Eldorados equity in net income of unconsolidated affiliates was approximately $0.6 million while interest expense and the gain on the early retirement of debt were approximately $5 million and $1.6 million, respectively, for the period. The net result for the quarter was net income of approximately $4.5 million, compared with net income of approximately $1.4 million for the corresponding quarter of 2010.
Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010
The Companys net income, which largely reflects the Companys share of the net income (loss) of Eldorado, was $692,934 for the quarter ended June 30, 2011 compared to net income of $135,414 for the same period in 2010. The Companys equity income on Eldorado increased by $535,439, primarily as a result of increased revenues, decreased operating expenses, and a $1.9 million decrease in other expenses for Eldorado when compared to the same period in 2010. The $1.9 million decrease in other expenses was largely attributable to a $1.64 million gain by Eldorado on the early retirement of a substantial portion of its debt. The increase in the Companys net income was also positively affected by a $22,081 decrease to the Companys legal and licensing expenses during the quarter when compared to the same period in 2010. This decrease was due to fewer expenses being incurred in connection with the acquisition on August 1, 2011 of a 40% interest in Mesquite Gaming (see Subsequent Events, below).
Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010
The Companys net income, which largely reflects the Companys share of the net income (loss) of Eldorado, was $453,333 for the six months ended June 30, 2011 compared to a net loss of $621,615 for the same period in 2010. The Companys equity income on Eldorado increased by approximately $1 million, primarily as a result of consistent revenues, a $4.1 million decrease to operating expenses, and a $2.1 million decrease in other expenses for Eldorado when compared to the same period in 2010. The $2.1 million decrease in other expenses was largely attributable to a $1.64 million gain by Eldorado on the early retirement of a substantial portion of its debt. The increase in the Companys net income was also positively affected by a $40,698 decrease to the Companys legal and licensing expenses during the first six months of 2011 when compared to the same period in 2010. This decrease was due to fewer expenses being incurred in connection with the acquisition on August 1, 2011 of a 40% interest in Mesquite Gaming (see Subsequent Events, below).
Eldorado Prior Period Adjustments
During the quarter, Eldorado determined that its consolidated statement of operations for the three and six months ended June 30, 2010 should be adjusted to reflect a reclassification in casino revenues and expenses associated with cash coupons at Eldorado Shreveport which were included in casino expenses in such periods rather than treated as a reduction in casino revenue.
Additionally, during the preparation of their financial statements for the three and six months ended June 30, 2011, Eldorado identified errors in the classification of certain casino expenses and selling, general and administrative expenses which were recorded within the food, beverage and entertainment, hotel and other operating expenses. Management determined that Eldorado Shreveport had not allocated the estimated cost of complimentary services to be charged to the casino department from the food, beverage and entertainment, hotel and other operations departments on a consistent basis with Eldorado Reno. These reclassifications resulted in the following adjustments for Eldorado in revenues and expenses in the prior year periods:
As Presented |
As Corrected |
As Presented |
As Corrected |
|||||||||||||
Three months ended June 30, 2010 |
Six months ended June 30, 2010 |
|||||||||||||||
(in thousands) | ||||||||||||||||
Operating Revenues: |
||||||||||||||||
Casino |
$ | 54,008 | $ | 52,003 | $ | 106,357 | $ | 102,242 | ||||||||
Operating Expenses: |
||||||||||||||||
Casino |
28,532 | 30,837 | 57,559 | 62,115 | ||||||||||||
Food, beverage and entertainment |
10,933 | 7,694 | 21,082 | 14,499 | ||||||||||||
Hotel |
2,563 | 2,087 | 4,878 | 3,953 | ||||||||||||
Other |
2,635 | 991 | 5,128 | 1,890 | ||||||||||||
Selling, general and administrative |
10,862 | 11,911 | 21,545 | 23,620 |
The summarized results of operations for Eldorado for the three and six months ended June 30, 2011, which are included herein in note 4 of the notes to the Companys unaudited condensed consolidated financial statements, reflect the properly allocated amounts. Management notes that though these adjustments delayed the completion of Eldorados financial statements, and the filing of the Companys financial statements, for the three and six months ended June 30, 2011, they had no effect on Eldorados or the Companys operating income and net income (loss) for either period.
Reclassifications
As discussed above, certain reclassifications, which have no effect on previously reported net income (loss) for Eldorado or the Company, have been made to Eldorados 2010 statements of operations to conform to the 2011 presentation. Pursuant to guidance in the American Institute of Certified Public Accountants recently issued Audit and Accounting Guide Gaming, Eldorado reclassified amounts paid under its slot participation agreements from casino revenues to casino expenses. The total amount reclassified for both the three and six months ended June 30, 2010 was $0.2 million. Eldorado has reclassified the amount received for its resort fee from other revenues to hotel revenues. The total amount reclassified for the three and six months ended June 30, 2010 was $0.2 million and $0.4 million, respectively.
Liquidity and Capital Resources
The Company incurred approximately $0.2 million of costs associated with its investment in Eldorado and the Mesquite Gaming acquisition during the six month periods ended June 30, 2011 and June 30, 2010. Expenses incurred related to accounting and legal fees for the preparation of regulatory filings, along with travel and legal expenses related to the acquisition of a 40% interest in Mesquite Gaming (see Subsequent Events, below). For the remainder of 2011, the Company expects to incur additional costs of approximately $0.1 million. These costs will be financed by member contributions.
Subsequent Events
On August 1, 2011, the acquisition by NGA Holdco, LLC, a Nevada limited liability company (the Company), through its wholly owned subsidiary, NGA AcquisitionCo, a Nevada limited liability company, LLC (AcquisitionCo), of a 40% equity interest (the 40% Interest) in Mesquite Gaming, LLC, a Nevada limited liability company (Mesquite Gaming), was completed upon the transfer to Mesquite Gaming of all of the assets of Black Gaming, LLC (Black Gaming), including its direct and indirect ownership interests in its subsidiaries, for $8,222,222 in cash. The assets acquired by Mesquite Gaming include the CasaBlanca Hotel & Casino and the Virgin River Hotel & Casino, each in Mesquite, Nevada, two golf courses, a bowling center, a gun club, restaurants, and banquet and conference facilities. The transfer of the Black Gaming assets to Mesquite Gaming and the acquisition by AcquisitionCo of the 40% Interest were pursuant to a joint plan of reorganization (the Plan) filed by Black Gaming and its subsidiaries with the United States Bankruptcy Court for the District of Nevada (the Court) on March 1, 2010, and approved by the Court on June 28, 2010. The Purchase price paid for the 40% Interest was provided by Newport Global Opportunities Fund LP, a Delaware limited partnership (Newport), and Newport Global Credit Fund (Master) LP, a Delaware limited partnership (Master), in the respective amounts of $7,222,222 and $1,000,000. Prior to the acquisition by AcquisitionCo of the 40% Interest, Newport owned all of the equity interests in NGA No VoteCo, LLC, a Nevada limited liability company (InvestCo). In consideration for Masters contribution of its portion of the funds used to purchase the 40% Interest, Master became a second member of InvestCo, which owns all of the Companys outstanding Class B Units, representing all of its non-voting equity. As a result of the acquisition of the 40% Interest, the Companys financial statements will, from August 1, 2011 (the date of consummation of the acquisition), reflect the Companys allocable share of the net income (loss) of Mesquite Gaming, which was formed for the purpose of acquiring the assets of Black Gaming pursuant to the Plan.
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Critical Accounting Estimates and Policies
A description of our critical accounting policies can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2010. There have been no material changes to those policies during the three months ended June 30, 2011.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Not Applicable.
Item 4. | Controls and Procedures. |
Evaluation of disclosure controls and procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the Exchange Act), our management, including our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that as of the end of the period covered by this report our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective.
Changes in internal control over financial reporting
As required by Rule 13a-15(d) under the Exchange Act, our management, including our principal executive officer and principal financial officer, has evaluated our internal control over financial reporting to determine whether any changes to our internal control over financial reporting occurred during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, no such changes to our internal control over financial reporting occurred during the quarter ended June 30, 2011.
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OTHER INFORMATION
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 furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Principal Financial Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following financial statements from NGA Holdco, LLC Quarterly Report on Form 10-Q for the three and six months ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheet; (ii) the Condensed Consolidated Statement of Income; (iii) the Condensed Consolidated Statement of Comprehensive Income; (iv) the Condensed Consolidated Statement of Cash Flows; (v) the Condensed Consolidated Statement of Changes in Equity and (vi) the Notes to Condensed Consolidated Financial Statements. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NGA HOLDCO, LLC | ||||||
Date: September 14, 2011 | By: | /S/ Timothy T. Janszen | ||||
Timothy T. Janszen | ||||||
Operating Manager | ||||||
(Principal Executive Officer) | ||||||
Date: September 14, 2011 | By: | /S/ ROGER A. MAY | ||||
Roger A. May | ||||||
Manager | ||||||
(Principal Financial Officer) |
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EXHIBIT INDEX
Exhibit |
Description | |
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 furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Principal Financial Officer furnished as required by Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following financial statements from NGA Holdco, LLC Quarterly Report on Form 10-Q for the three and six months ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheet; (ii) the Condensed Consolidated Statement of Income; (iii) the Condensed Consolidated Statement of Comprehensive Income; (iv) the Condensed Consolidated Statement of Cash Flows; (v) the Condensed Consolidated Statement of Changes in Equity and (vi) the Notes to Condensed Consolidated Financial Statements. |
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