Lewis Fanger - Senior Vice President, Chief Financial Officer and Treasurer Daniel Lee - President & Chief Executive Officer.

Chad Beynon - Macquarie.

Good day, and welcome to the Full House Resorts’ Second Quarter 2017 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin..

Thank you. Good afternoon, everyone. Welcome to our second quarter earnings call. Before we begin, as always, we’ll remind you that today’s conference call may contain forward-looking statements that we’re making under the Safe Harbor provision of federal security laws.

I would also like to remind you that the company’s actual results could differ materially from the anticipated results in these forward-looking statements. Please see today’s press release under the caption “forward-looking statements” for the discussion of risks that may affect our results.

Also, we may make reference to non-GAAP measures such as EBITDA for a reconciliation of those measures, please see our website as well as the various press releases including the one today that we issued.

We’re also broadcasting this conference call at fullhouseresorts.com, where you can find today’s earnings release as well as all of our SEC filings.

And then lastly, really quickly we’ve been working on and completing by the way several growth projects at our properties, we know it’s not easy for you to go and visit all of our places and to help you more easily stay on track of those projects as well as keep up with the company in general, we did create a Facebook page.

You can find it directly at facebook.com/FHResorts our goal isn’t to overload you with info. So you can expect to post maybe once a week or so. With that all said, you’re ready, Dan..

Yeah and I tell you, I think if you go to the [Indiscernible] and frankly I tested it this morning, it wasn’t working. So we had somebody running around to make sure it works right.

So if you have any troubles, give it a couple of hours more to have it working, but I think if you like the site, you just click on like, and then anytime something is added to the site, you’ll get a notification through Facebook, but there’s also a way you can get a notification through email if you want.

And so we did this partially because as we travel, and I look at the steps, sometimes frankly I’ll take a picture of my own phone, something that’s coming together and we’ve decided be kind of fun to actually share that with people in a casual way, so we don’t want to have to file an 8-K every time we have a picture of a palm tree going in or something, but we definitely find a way to share with people and we decided to use Facebook for that, so that’s that.

Looking at the quarter, it’s a good quarter, real good quarter actually, but it’s still very much a transitional quarter. We’ve got stuff going on in every property, different improvements and big made all funded by cash gross and the small write off we did last fall.

And those improvements have really just starting to be completed and are going to continue to come in online over the next 12 to 18 months. And then meanwhile we are working on things that will extend our growth beyond the next 12 to 18 months.

So, in the quarter the weak spot was also ironically a strong spot, and that was the Grand Lodge Casino at the Hyatt Tahoe. It was completely refurbished, spent about $5 million of which we paid $1.5 million and our landlord was $3.5 million, our rent went up by $500,000 a year which is how end [Indiscernible] 3.5.

But as part of that deal, they gave us an extension on the lease. The lease is going to expire September of 2018. They added five years to it. They do have a right to buy us out, but we pay for the investment if they did, and I don’t expect them to ever exercise that right. But, and they asked [Indiscernible] stuff in there.

Probably most importantly they will have to go get license to Nevada for this small casino, it’s probably not where they are from. But from February to June, it was pretty torn up and especially March through June, there are periods of time where literally about 70% of the casino was under construction and closed.

So not surprisingly the earnings were up and in fact all of that was done on June 30, not because we wanted neatness in our financial statements, but because that was the days before the 4th of July weekend and we were really scrambling to be done before the 4th of July weekend.

And it was done and frankly the place looks great as a new contemporary bar, all new gaming tables, in fact the other ones were probably 30 years old, all new gaming chairs, all new slot chairs that are height adjustable, which is kind of what people expect these days and yet the majority of casinos probably don’t have it.

You know everybody’s body are different sizes, so for it to be comfortable push the button in the slot machine for a long period of time, it’s important to have a chair that’s comfortable. The lighting is different and much better than it used to be with VIP check-in areas that is truly VIP now.

We’ve removed the Poker room and replaced it with a new slot area. We have quite a few new slot machines, there is no reason we replace all the machines but we have quite a few new ones.

And quite honestly, the volumes and revenue in July were up very nicely and if the trend continues we’ll have a really nice return $300 million and a [Indiscernible] dollar investment. Of course you know one month doesn’t make it trend, but it’s a good start. So we’re pretty happy there and the extension on the lease is also very important.

Our small property in Thailand is also been under construction, but that construction is a lot less disruptive. We are not working in the casino itself, we are just working outside of it and creating a new arrival and custom lot on the west side. It’s actually been a real challenge to get that thing done in Fallon.

Basically Northern Nevada is booming, the unemployment rate is very low, and people are coming out to Reno to get to us they have to try by the test floor factory which is like a $6 billion construction project. So we are getting almost done, but it’s late. You know construction is kind of three things.

Are you on time? Is the quality good? And are you on budget? And it’s pretty hard to hit all three. And in all these projects we are doing well on the quality, we are doing well on the budget and we are disappointing late on a few of them But in Fallon, it’s now almost done.

We literally just hope that the worse, the guy was first to fill the new doors under the porte cochere backed out. He said he’s got too much work and can’t do it, so we try and send somebody to replace the glass doors, but otherwise porte cochere has done the parking lot and the landscape and that looks great and uses sign out.

It did well in the quarter, you’ll see Northern Nevada was down a lot, income was a small loss of $53,000 versus $6.4 last year virtually all of that is out of Grand Lodge and Fallon was pretty good in the quarter. So, now Silver Slipper is still the most important property, it had a really good quarter.

Back earlier in the year, we put up two big reader board signs at our key intersection where you turn off and that was quite honestly a little bit of a challenge because we found out the sign that existed was already larger than the court permitted and so if we altered the signs we were going to have a problem.

So we created a welcome center, which made it an onsite sign, which allowed us to put a readerboards, I’m not sure anybody ever stops at their little office there to say, welcome but it allowed us to revamp the sign there are two large readerboards that tell you where to go and what’s going out at the property.

And I think that’s helped and hopefully through the quarter, but and then John and his team had some pretty creative promotions going on that have worked and so that property was up 13% it also had a pretty good first quarter back and look and the income was up 23%.

Now the actual new state-of-the-art readerboards wasn’t open in the quarter, but we opened a new Oyster bar for the July 4th weekend which is an 18-seat restaurant on the casino floor very similar to the ones that are at the stations properties out here.

And we’ve been, and we have a Saturday two weeks ago where it hit 20 turns on a Saturday, that’s only 18 seats. So it’s pretty popular and it’s kind of quick, but high quality food, jump the wire and stuff like that and so – and it’s the first new food and beverage outlet property that’s opened about 10 or 12 years ago.

And so it’s a way for people to get good food quickly on the casino floor. It didn’t take a lot of [Indiscernible] not a very big place and seems to be doing really well. And then the beach club we finally got it open last week. I mentioned frustration getting stuff open.

You know top in south you would think we would have a beach club open in May or June or in August. But it rained virtually every day in June and frankly we were a little late in getting this thing organized and so it is done now, but there is still one big warning yet to come that covers the bar that we have some temporary umbrellas up and it’s open.

And frankly it’s spectacular.

It’s the nicest pool if you will a pool-type amenity along the entire Mississippi Gulf Coast because we are right out in the white sand beach with a bar and nice decking and nice chairs and it’s not huge, but our hotel is not huge really about 100 meters – rooms, and but this is a very nice setting almost like you would be at a fancy hotel in Saint Bart's or the Bahamas or something and very adult oriented, it’s got the bar, it’s got infinity edge, it’s got chase lounges.

You can go there for the day, but I told John in charge what you think you can charge for day people and I think the number you threw out was 50 bucks which is seems like a steep price to me, if people don’t pay 50 bucks to sit in the pool, and might be cheaper than to rent a room.

But if you stay at the hotel obviously you don’t have to do the charge. And so it’s very important amenity of the property, all of our competition has pools and in many cases bars and golf courses and so on. And this is an amenity that we think helps us in the summer, especially midweek to fill the hotel and fill it with people who gamble.

There is one of the things we found is customers -- high rollers when you hit the summer, their wives would dictate, their spouses would dictate that they go to one of our competitors where they have a pool that you could sit by in the heat of the summer. So now we have not only 8 pools, but really the best pool in the whole region.

At Rising Star the income was up 48%, so even more than Silver Slipper, but of course that’s in part because of course it’s close to the break even, so a 5% swing in revenue caused a really big swing at the bottom-line, but obviously that’s the trend we like and there, there really was nothing new in the quarter, but the RV Park is about done.

They are trying to literally finish up some bathrooms and get the sanitary permits from the state, and again I wish it were done a month ago.

But it is a great RV Park, it looks great, it’s very convenient to the casino, we got people stopping by everyday asking when it’s going to open because they want to use it and I think it’s going to be pretty successful.

The – we have been going through the room refurbishment program there, about four years ago they have refurbished most of the rooms frankly, but there were 70 rooms that had not been refurbished in many, many years. And we have been refurbishing those and that’s mostly done.

We now have the design for the pavilion; we are ordering the stuff to go on and re-renovate the pavilion and give it a much better sense for rival. We have designers working on the VIP room on the boat, but that probably won’t get done until next year. The ferryboat, we – the ferryboat is actually two things, it’s merely a tugboat and a barge.

We own the tugboat, faster sea trials, it’s brand new, and it’s a more temporarily down in the south. And the barge is being built, that will be delivered in the next few months upto Rising Sun, so we can start the ferryboat service over to Kentucky.

We’ve finally got the common speck from the core of engineers last week, and we are addressing those comments.

There is nothing insurmountable in them, it’s minor things like we want to know we are snaking [ph] this road down to the ramps between wetland and where there could be any inbounds of travel insurance or something, so they want to make sure that we are not violating either of those two things, and we owned quite a big piece of land, so we got lot of flexibility on where the road can go and we think we have an alignment now that addresses all of that.

State of Indiana had the same issue, so we are already starting to address this when we got the comment back from the core, and the state of Kentucky has already given us approval now for the road and landing that goes on in the Kentucky side. So we are getting close.

The core is probably still three or four months from having the final approval and then we go global.

That’s going to put us up against the winter and there is issues on construction if it’s too cold, but hopefully we could get most of that done before it’s gets too cold then Indiana is not like Cripple Creek at 9000 feet Indiana has relatively mild winter. And so that’s coming along.

Up the Cripple Creek, now that property earned $1.5 million in the quarter. We are really happy with that number.

The prior year number was only a partial quarter and also benefitted from other oddity in Colorado State gaming taxes, where its progressive tax rate and your first dollars of revenue are taxed lower than your last dollars of revenue and their fiscal year is July 1st to July 1st. And when we became the owner in the quarter, it started to clock again.

So we had that normally low gaming tax rate in the prior year but I think if you had an apples-to-apples good quarter even despite the swing in tax rate, so $1.5 million in the second quarter, the strongest quarter is the third quarter there, seasonally the strongest and we opened in early July the Crippled Cow.

We had a bar on the furthest part of our casino furthest from kind of on the center of activity that was pretty underutilized. The name Crippled Creek comes from a story that maybe folk lore but it’s taken us back locally, but some cowboy accidentally discharged his rifle.

It started off some cap, the cap tried to jump this Creek, it stumbled and broke its leg and became a Crippled Cow, and the Creek became Crippled Creek and the town became known as Crippled Creek. So we took fiber glass cow and stuck a cast on its leg and hoisted it up in the rafter and renamed the bar as the Crippled Cow.

We also brought in Peet's Coffee which was a great coffee that – and then we have local micro-brewed beers, so coffee is popular in the morning, beer is popular in the evening.

When coffee gets coffee gets popular again late at night and we put in a wood burning oven and we have wood-fired pizza not unlike California Pizza Kitchen and different recipes. They have a trademark on their recipes, but they don't have a trademark on a wood-fired pizza.

So, we have wood-fired pizza oven with great pizzas, its only been open 10 days and some two weeks, right and like the first weekend open they were slammed. They did served 200 pizzas on the first day which is really cooking in sort of places. It’s not very big place. So, that’s a small project.

There wasn’t a lot of money, but its kind of important to kind add something new ones in a while that people come and see and go look at. The other thing we added there was several months ago we put $1 million on display. We had it sitting and the bank earning nothing.

So we decided to take $1 million up, put it behind glass to get your picture taken with it and something Jack Binion has done for years in his properties and that when we need the money we’ll break the glass and take it out. But -- so we got a couple little things to going out there.

Beyond 12 to 18 months I mentioned we’re trying to figure out growth and we’re pretty deep into designing a hotel to go with Cripple Creek. I spend some time up at Black Hawk a few weeks ago. And its interesting in Black Hawk is a very booming gaming jurisdiction.

Now Black Hawk is 45 minutes up in mountains outside of Denver; Cripple Creek is 45 minutes up in the mountains of Colorado Springs, they are very comparable. Old gold mining towns that are convenient to these cities. Denver’s 3 million people, the Colorado Springs is 700,000.

They actually pretty similar per capita income and so on, and there some very wealthy neighborhoods in Colorado Springs around the Broadmoor and around Garden of the Gods. And those people who lived there do not come to Cripple Creek today.

And part of the reason for that is that the maximum bet in Colorado was $5 for almost 20 years, and about five years ago that change to a $100.

Let me put that in perspective, at $5 a hand you’d have to sit at the gaming table like 30 hours a day before we’d comp guest employee, it just not going to happen, and so, but also puts around the other way, a wealthy person is not going to be very attracted to such low stakes gambling, so it ends up being kind of a lowbrow activity where you have really budget oriented people who go there and then the hotel product that was built tended to be very small hotel rooms that you could rent for very little per night for people who paid cash of they go play slot machine.

And that was kind of the history of Colorado gaming, it was all those kind of very lowbrow and it took -- gaming is a regressive taxation. Anyway, meaning that, people who are less educated and earn less tend to gamble a higher proportion of their income than people are more educated and wealthier. Okay.

I guess shouldn’t be as far as to think about it. And when you have a maximum bet of $5 you make it even more regressive and so Colorado changed direction, made it a $100. Well, that’s a 20 fold change. And now it's a whole different thing.

If somebody is bidding a $100 a hand or even $25 a hand, if they're sitting there not very long, we’ll cap a room for them, we’ll cap a nice meal for them and so on.

And that’s after all, what that’s the bread-and-butter of Las Vegas and people always hear about the guys who are bidding $1,000 a hand in Las Vegas, but that’s actually pretty small part of the business, but $50, $25, a $100 a hand is the bigger part of the business.

And in the other markets we’re in like the hotel for Silver Slipper, I majority of the occupancies is comp to people who gambling enough and stay in Rising Sun.

So well, when you look at Black Hawk what’s happened in recent years was a Craig Nielsen's saw this change coming, as well few year ago, but he was founder of Ameristar and he went and built the Ameristar hotel there, which is now and it’s a wonderful property.

Lots of meeting group, nice hotel rooms and nice design feed into the casino and theatrical stop breaking now, but I think they’ve made $60 million or $70 year there. And then the large is Bronco Casino and Monarch is a nice casino.

They are now adding a $35 million hotel, and you look around then its like wow, they’ve caught on to it, and Cripple Creek really hasn’t – we haven’t have transition and we are the number two prior in town, I think number one is not much ahead of us, but we have the land to actually cause that transition in Cripple Creek, so we’re trying to design something that will do that.

That will allow Cripple Creek to reach out for a higher economic strata and that’s also better for the town because it comes less seasonal. You can have the meetings and conventions and that come in midweek year-round, more stable employment, more stable tax revenues and so on.

So, and we think we can get a really good return there by taking up place that makes only $5 million a year, and that’s what bigger place in town, we think we can make an investment that pretty dramatically improves that number and gets a good return investment.

Just to put in perspective I think Denver’s population is roughly four times that of Colorado Springs, but the revenues of those places are like eight to 10 times with Cripple Creek is. So there’s lot of opportunity there.

And then, we continue to look at Indiana as a growth opportunity for us mostly because we legally permitted to have a lot more slot machines than we need at Rising Sun and we’ve made a couple proposals where we relocate those in a new gaming jurisdiction and the legislature will meet again in January and we’ll look back at January, and we’ll be back every year until eventually we find the jurisdiction, and I think it will eventually happen.

I don’t if its this year or two years from now or three years from now, but it make sense for us and it make sense for the state, state originally legalized that they put this slot machines to all around the parameters and they didn’t have casinos in places like Ohio, and they didn't have as many in Illinois.

And so, to some extent the states gaming capacity is in the wrong place.

And so if they would lets relocate some of our capacity, the state picks up gaming revenues and taxes and employment and investment and it's a matter of finding the right location where we can make good money, where we also think we improve the local economy and provide local employment, and at the moment we think that Terre Haute being pretty close on that last year’s legislature and we expect to be back this year.

So, no guarantee that ever happens, but its logical that should that it should happen and we’ll working on it.

And then of course is other growth opportunities following every week we have somebody trying get us to look at one acquisition or another, one develop opportunity for another, and that we have to [Indiscernible] before you find one worth dating. So we’ll keep guessing [ph] and we’ll see.

So, on the refinancing, if you look at the numbers we’re right around five times, in other words our total indebtedness is right around fairly on a trailing 12 month basis. We might be a little above five times EBITDA. But we just had a good quarter. I think we like that ever good third quarter.

And as our ratios gets a little better we’re going to be able to refinance quite bit cheaper, and we’re been working on it for a while and people, none of our stuff has imminently do, so we don't have a school, but do intent to refinance when we’ve been do so and save those money, and I think as our numbers get better we’re going to get close to that opportunity.

Lewis did I hit everything..

Yes. You did, yes. Let’s take some Q&A.

Thank you. [Operator Instructions] And we’ll take our first question from Chad Beynon with Macquarie..

Hi, good afternoon. Thanks for taking my questions.

How are you?.

Good. But where everybody is Macquarie, but I’m sure you all know that..

Thanks. I wanted to start with operational questions.

Is Silver Slipper, the second quarter where we’ve seen really nice revenue growth, you kind of touched on some of things and I guess more importantly touched on some of things that are going to provide for higher growth going forward? So what do you seeing right now at that property? Is it really your players are staying longer because there are just enjoying the property or you growing the database.

There was some competition that opened up a little while ago. And in Biloxi it doesn't seem like you guys were faced given your location. But just trying to get a better sense of exactly what’s really driving that growth and how sustainable that is? Thanks..

Well, you know Biloxi in our east of us and their customers principally come from the East and frankly the other casinos in Biloxi were not much faced by that new competition. And the market didn't grow and that -- and I think the return on that new place is pretty suboptimal.

And I went and saw that little while ago and they did okay just building it, but I think their concept was that people would stop at their place before driving the last mile took over [Indiscernible] and yet to get to their place, you get off the freeway.

Go under the freeway, there are about three stop signals and then park behind their swimming pool next of their miniature golf course, quite I’d say, I don't think that really saves you any time.

It could be a -- from the same time because that you can go from Tallahassee Florida to Beau Rivage, I don’t think there is one traffic signal between your home and that parking garage. I was part of the team and help build that and it was $670 million in 1998, if I remember correct is when we're building it.

So, 20 years of inflation, the replacement cost even if inflation is lower the replacement cost of Beau Rivage, today is probably 1.3 billion or 1.5 billion and you build a $300 million place I don't care if you are 15 seconds faster to get to, its probably not going to work.

And then the hard rock has evolved over the years into a pretty competitive property right next to Beau Rivage, and then Boyd has Imperial Palace, which is a pretty big property.

And so, I actually think one of the strengths of the market from our perspective because if there is none limited number of licenses available at Mississippi, so its virtually always somebody running around trying to figure it out how to build a casino.

I don’t know how you make numbers work to build them completely new one, and the Scarlet Pearl improved. They spent $300 and something million dollars, I hear 325 or something and something like 200 million of that was equity, but I don't think they have positive EBITDA risk, they do is very small.

And so I think the next scope comes along since we want to build the $300 million place, I don’t where the hell you get the money. Now on the other hand if you have an existing place and you want to add a guestroom tower or meeting room space or something.

Well, if you can add a guestroom tower and you don’t have to add a front desk or add casino capacity, or add restaurant capacity and so on, the return on that guestroom tower can be pretty good if you do it right. And so that is something where we're considering. The first guestroom tower seems to have worked pretty well.

And now it was built by my predecessor frankly, I have to finish it but he had it designed and under construction and it has no meeting room space, and that’s one of our hurdles [ph] we’ve got no meeting room space with the property.

And John Ferrucci and his team have done a terrific job at cobbling stuff together, so we have a meeting room in a parking garage that literally is like carpets rolled out and fruit brought in from the kitchen and the fourth floor of our parking garage you can have a pretty good being there a wedding or a party, but you're in a parking garage.

It’s fairly obvious you’re in a parking garage. And then he turn the – there’s a space, everything there is elevated because of the occasional hurricane, it’s create a storm search of the building code requires you to elevate every seconds.

And so you get out of car, you open escalator to get to the casino, and even our guest room tower is 20 some like feet, up in the air, the lowest floor is more then 20 feet above the sea level and we are at sea level right on the beach.

And John and his team have taken that opening into the hotel and put in a beach bar that's all just temporary and even our beach club we had to be kind of created the swimming pool is okay under the code, but ironically bathrooms would not be, but if you can have the swimming pool, you could have bathrooms, and then you get into this weird thing of where you’re going to have bathrooms 30 feet up in the air or 25 feet up in the air, so you’re going to put bathrooms up on the spare tower thing and then the ADA requires you to have an elevator imagine how strange that is.

So what we did was found a company that makes high-end bathrooms for a weddings that somebody gets married up and field [ph] somewhere they have to bring in portable bathrooms on wheels and we bought one of those and we kind of built it into the deck though it looks and feels like a permanent bathroom, it actually turns out to be a very nice bathroom, but under the county code if there's a storm coming we’re supposed to unhook that thing, hook a truck up, yank it out and get it in land.

So it's a temporary structure and it’s actually design we may run over a bush or something but it is designed to get out of there, there’s a storm coming. So we had to be pretty creative and underneath the hotel John has a little beach bar that’s been popular, but we had no meeting room space at all.

And in some kind of pondering if we could build another hotel tower and add meeting room space that should have and would that get good return? And I think it would. And the irony is that probably get a good return whereas building a new casino probably wouldn't.

And our customers principally come from the West and largely the North Shore of Lake Pontchartrain which does not have casinos and turndown casinos when Louisiana proved years ago.

And the people who live there of kind of a choice of driving this long cause way across the lake and trying to find a parking place in downtown New Orleans or drive east to our place where approximately the same distance.

And now if we had – because of the hotel we have, we get people come and stay the night, they’re gambling in the casinos close later than it used to – use to be pretty quiet by mid night, because everybody went home. Now it’s not so quiet.

And we get incremental trips because we can say to somebody, hey, it's your birthday, why don't you come for the week end and so they get some incremental trips. And we also reach a little further away.

There's places like Hattiesburg which is inland and hot with the closest beach to Baton Rouge and Baton Rouge is 800,000 people were like an hour and a half from Baton Rouge, but this time here Baton Rouge is pretty hot and muggy, but you’ll get somebody come down at beach we did used this type of hotel at all.

So now with the 120 room hotel we open two years we do get some of the trade, we’re running 90% occupancy in the hotel.

And so, we’re in the early stages of pondering whether it would make sense for us to add another hotel tower at some point and that would be something else that would be in the category of where would you grow after the next 18 months.

But irony is I think it might make actually make sense for us to do something like that, but I don't think it makes sense for something to build new casino in that same market. I don't think the economics work. Now, look, it’s also a good economy.

If you look up the economic health of parishes in Louisiana you'll find three of the four wealthiest parishes those along the North Shore of Lake Pontchartrain. I think three out of three of the fastest-growing parishes on the North Shore of Lake Pontchartrain.

So it is a – our customer base is a growing area, its kind of the wealthy suburbs of the New Orleans, New Orleans is very space constraint and so people have moved across the lake and now our jobs and offices and so one moved across the lake.

So, I would like a very familiar with St Louis and there’s a suburb of St Louis called Clayton which at this point buys with downtown St. Louis as the economic heart of the St Louis metropolitan area and I think you have that same sort of thing evolving at the North Shore of Lake Pontchartrain. And Lewis if you have any thing to that..

Yes. I think the only other thing to add to that, Chad, it’s a property a year ago where we were really ramping the hotel and trying to figure who area best guest were, who to comp the rooms, who is actually going to spent more money in our casino if they were staying over night.

That’s sort of analysis is going on behind this scenes and fast forward today we have property that’s really firing on all cylinders and now it’s even more impressive. I don’t want to understate who awesome this new swimming pool that’s surrounded by this glorious palm grove.

It’s night and day different than what you would have seen six months ago is. We’re excited for what the next year is going to bring..

So the whole sense of arrival is way better, but I also mention, John Sheldon just passed me note here that we have a tiered players club that we implemented just about a year ago, so that’s starting to take hold. The used to have a players club and that’s pretty State of the art that you should have one.

Our food offerings; we have dungeon crabs back in the buffet. That’s popular, but I have to laugh actually one of our competitors has put dungeon crabs on their buffet and they always signs up, that says, their ad campaign is whose got the best legs in town. We do – we have done in this crab.

That’s like idiots you don’t eat the legs, it’s a claw, you eat the claw and anybody who lives down they knows that you’re eating the claw, not the legs. So maybe you get the best legs, you get the best claws, but anyway, though that’s fine. And then, we are getting better at it leveraging the hotel rooms and improving the wind per occupied room..

So, will say that much more than that because they are on our call right now to…. But guys over Pan, just you know, dungeon crabs, you do no eat the legs..

Lewis, could you provide CapEx for the quarter and just maybe how we should think about the cadence of this as we get through the rest of 2017?.

Sure.

In the Q we literally just put out, but lease for the six months is about $6.3 million of CapEx, if that helps you there?.

Okay. And then any guidance or help for the year. I know your -- there’s some projects that are finishing and some of those that are its kind of underway.

Should think about 10 or so million from a project standpoint as of all the announcements that you’ve given us so far?.

Yes. I think for the balance of the year, its going to be somewhere in the ballpark of 1.5 maybe 2 million bucks. Some of the spent that left you’re going to see lot of that trickle on that 2018, so there’s ferry boat is an example.

We spend about $260,000 on that already, the platform that we’re building, we get the greenlight for and that’s about $500 -- $550,000 or so, but lot of the road, right, that will start work on that later this year and the actual cash out the door will trickle into 2018.

If you think about something like Stockman were million one into that through the six-month period, so there’s some spend left. The landscaping as Dan mentioned, literally they’re putting their touches -- final touches on it as we speak, in the porte-cochere we’re trying to wrap up same of that – some of the labor issues there.

So you’ll see that that’s been hopefully be done before year-end. And then we’ve got a office building that we want to build as a part of that that probably spend wise trickles into 2018 even though the construction will start before year-end..

I mentioned that hotel room renovations visit there, that forecast and we talked about in that rights offering there is also $3 million a year of maintenance CapEx and like the room refurbishment of Rising Sun was never part of the 10 million, that’s part of maintenance CapEx..

That’s right. That’s right..

And the Crippled Cow was part of a 10 ten million.

I think we spent 60,000 on it maybe?.

Little above that..

Little about that, and then – and the Oyster Bar was not part of it because frankly we didn’t think about the Oyster Bar until March of this year. And then I came up with the idea and went down there either one of the oyster bars in last Vegas. And I had to stand on line for two hours to get a seat.

At one O’clock in the afternoon on weekend, and I thought that seems pretty popular and [Indiscernible] he jumped on it and thought it would work it.

So we move just quickly as possible on that and it was -- tell me a number; 200,000?.

Yes..

Yes. And it was not part of the 10 million. So, there is some money we’re spending outside of the 10 million. The 10 million really pertain to earning gross for us..

Yes. Six or seven, its right..

So the details in that aspect is and as a group those – they were late I think as a group they were in much on budget and the quality was really good, but that doesn’t stop us from brushing out and hanging a fabulous cow over a bar, if we think its make sense, it doesn’t cost to money..

So, you’ve got a good couple of million of bucks, the stuff that all --its not a huge number, but its not a small number either and we feel fine with all that realizing we’ve got $22 million of cash sitting on the balance sheet and only about $12 million needed in normal day to day operating.

Do you got it?.

Yeah. That’s perfect. Dan you mentioned growth opportunities and every regional gaming operator, this quarter is probably talked about those, the difference with you guys is you’re looking assets that are probably generating under 15 million and are passing on those resumes and they’re also putting their assets that are generating under that for sale.

So how should we think about -- you talked about you’re seeing a lot of opportunities, how should we think about the returns that you’re looking for, the markets that you’re looking for. What you would need to see, I wonder these properties to move forward on that instead of some internal CapEx like you talked about Bronco Billy’s or anything else.

Just kind of framing that would be helpful?.

Just to be clear we don’t have to acquire anything to have the stock feed work out well, I mean, all we do is execute the stuff we’re doing, I think we have a shot at getting us up to like 25 million EBITDA to a year. No promises but I think we’re shot at that, the next few years just with what we got.

And if we can get to that then the companies that worth eight times cash flow like I have previously recently sold for by then our debt are probably be done at $70 or $80 million and the stock doubles or triples. So I mean that, that’s why I don’t screw that up. Okay. I’m the biggest shareholder here and I don't want to screw that up.

So then you start looking at deals people bring to you and you start off with the basis of we do not want to screw up what we have, but sometimes you find some like Cripple Creek where I think was a great acquisition and its not only earning what we believed it would when we acquired but we’ve now figured out that its actually got a big growth opportunity side of it that was even bigger than I think we thought it was when we bought it.

And so, some times you buy with. I will tell you there is another one and you’re right, there’s a lot of kind of small deals that would move the needle for us, but they don't move needle for others so it's kind of nice as we don’t have the competition.

But there was a small casino stable business that we looked at that we could've bought for about six times cash flow, may little bit north of 1 million a year and we went a long ways down the road at looking at it.

And one of the things we stumbled into in the due diligence was that they are under the 50 employee limits, its own by the family and they do not provide healthcare to their employees and under the American, -- the Affordable Care Act if you have more than 50 employees you must provide a health plan and that's not cheap.

And so, if we acquired of them those employees were going to get a health plan, which I guess is all fine and good, but that meant earnings weren’t we thought it was. We had the seller and said, we need an adjustment on price because there is additional cost, but we weren’t aware of it.

He refused to make an adjustment price so we backed out the deal and walked away and that’s where it stands.

So I mean, that we’re careful and we’re very discipline that we don’t have to do anything, but we look at lot of steps and if we find something we think we can make a good return on investment that’s not putting the company at risk, not putting our basic story at risk then we’ll do it..

Yes. We are extremely diligent, Chad, when it comes to taking the tired and Dan is right, we’ve gone out of our way to make sure that we are not overpaying for anything. I can think of two things in recent memory where we were politely excuse from the project for refusing the budge on our price and that’s quite all right, I’ll tell you that.

If you think about the percentage of the company that this management team and this Board of Director owned it’s in the mid-teen and Dan is right, we go in to work every single day with the mantra of don’t mess it up and let’s just drive this stock price higher. So that’s goal number one..

Great. Thanks. Thank you both for the color. Appreciate it..

Thanks Chad..

Yes. I’ll answer that, I will say, there is something I think our team has – is pretty good at is finding the opportunities to improve properties. When I came in I thought we were closing Rising Sun.

The cash flow of it is just plummeted over the years, we got down to almost zero and over two years we turn it around and now especially with this variables and some of the other things we’re doing is actually a pretty good growth vehicle for us.

And so some of these other ones, these big companies are trying to sell some small assets, we go into it, look at it and say what can we do with this. And its actually little surprising to me how often, maybe it’s a function of casino business, how often the big companies kind of ignore the small things because I think it's not worth chasing.

And whereas in the hotel business which I also use follow as an analyst, a company like Marriott, they create teams of people so that somebody finds an opportunity to build the Fairfield in some way they jump on it and they don’t think of it as being too small.

They know if they built 500 Fairfield inns it moves the needle for and the casino business never develop that sophistication and I think that's actually good for us..

We’ll take our next question from Jim [Indiscernible]. Your line is open..

Hi, good afternoon guys. I had a couple of questions.

As Cripple Creek just for clarification the [Indiscernible] family at Monarch, the hotel casino, how were they building theirs, I think almost the 250 million?.

No. I’m sorry..

It’s okay. But….

I’m confusing what I think they might be earning..

All right, right, yes. That’s about correct. And the Ameristar doing about 70 million EBITDA. So, but if you look at Cripple Creek, right, copying it kind of Monarch, one of the slides in the Monarch deck is by far Black Hawk as a comp to cripple Creek.

I think they do approximately the same adjusted gross gaming revenue as Reno does, Reno’s got like almost 30,000 hotel rooms and Black Hawk only has a think at this point about 1100 hotel rooms. So if you divide that by the room key they're coming up with like almost $660,000 per available hotel room key.

So my question is, how many hotels are in Cripple Creek right now, how many rooms and what’s the adjusted gross revenue, the total spent say in Cripple Creek as a comp?.

I don’t have my paper front of me, but my recollection is that there is more like five or 600 rooms in Cripple Creek. And frankly both of those that are in one place and I visited those rooms and they’re really small and pretty beat up.

Most of the others are in small places, and like we have 14 rooms that are literally on the roof of our casino, and they are okay and there are some of the nicer rooms in town, but if you went to AAA and I did not sure you I know you would get four diamond and I’m sure you get three.

And then we have 10 other rooms and a building a block away which counts in the guestroom account and I look those rooms, there so small, it's a historical building. I'm convinced it was a bordello earlier in its life and almost embarrassed of putting anybody there.

And the former high school was converted into a bed-and-breakfast which is but he says is like the best hotel in town I stayed there. It’s okay. It’s little bit like staying in your elementary school classrooms, little weird, right. It’s literally its awkward.

And I guess that’s my point is like if I lived in Colorado Springs there is not a hotel in Cripple Creek where I would take my wife for her birthday..

Anecdotally the people from Cripple Creek would love to come and gamble there, but they can’t stay overnight.

So to your point, I mean, clearly you’re barking up the right tree, my question is I think you were stating the plan for 100 rooms, is that because you are saturated at that amount? Is it zoning or if you wanted to – do you have enough property even though more than 100 rooms if you wanted to?.

We have enough property to build more than 100 rooms and what kind of dealing with the issues of maybe it should have meeting room space which wasn't part of the original plan, maybe we should have more parking which wasn't part of the original plan. And part of the reason I was at the Black Hawk was looking at the same numbers you’re talking about.

I kept looking at and saying, Wow, there’s a black [ph] is just on paper, you look at the size of Denver and the size of Colorado Springs and you look at what's going on in the Black Hawk. I mean Monarch, if we’re right that 35 million is not the EBITDA, I think the total EBITDA of Black Hawk is 20% all the casinos combined and we’re five of the 20..

Okay..

Sorry, not even 20, right..

So Cripple Creek got some room to grow if you can add room capacity, right, I mean, you’re talking about [Indiscernible]?.

We’re the guys with enough land to do it. With that deal we have quite a bit of land, that was we’ve kind of detailed what we own and we already own quite a bit of land. We don't have to acquire more land. We lease with the right to buy. So we have the room to do it.

What is the trick here though is Cripple Creek and rightly so is very sensitive about its historical status.

It has much more of a historic downtown than does Black Hawk and its careful, you can't -- like if we went in and proposal of 30 story tall tower like the Ameristar and the middle of Cripple Creek I think we get turned down, and it would be right to be turned down because it would change the whole character of the town..

So you need to build an amenity that kind of maintain the historic integrity of the town..

We want to design something that -- is provides all modern services that feels like a four star hotel that maybe has really good restaurants and it ties into our existing casino really well, but isn’t jarring the town. We don’t to, we want to compliment the historic nature of the town, not try to make it Las Vegas on the mountain top.

And so that takes a lot of thought and frankly a lot of renderings and in fact just the other day our architect suddenly rendering of our hotel that was black. And I said there is no chance we are building a black hotel in the middle of this town.

I said it’s just why don’t we change the color, and they argued a little bit and I said, listen; I won’t build a black hotel in this town because we won’t approval to build a black hotel in this town. It looks like Darth Vador's hotel. I want a hotel that runs into the town and matches the color of the town which is predominantly brick.

And so we want something that like – you come to Las Vegas and you see Bellagio. And yes, it’s a little stunning because it has all these fountains and lakes in front of it in the middle of the desert. But it was kind of a pleasant surprise. You look and say that’s a pleasant building, its looks nice here and this is kind of a cool thing.

And I want the same thing I want you to find a building in Cripple Creek that blends in, it feels right in the place, but you look at it and say, that’s where I want to stay. That looks really nice. And so that’s what we are getting to and good design isn’t done quickly.

It -- you know God, we must have had 10 meetings there and you’ll have a meeting and people go in they think about it, and think about it when you come back together and you discover different things and you say what if we did this, what if we did that and so, you know we’re still pretty early in the process of that and then of course I have to get you know lots of government approvals and then I have to get financing, so this little weighs off.

But I do think there is a good opportunity there and we will get around to it at the right time when we have the design done..

Okay. And then I just had two more quick questions. As far as the debt is concerned, you’ve got two patches of that debt? Mr.

Fanger, right? One is very high yield and then the one is moderately priced? Can you instead of having to dig it out, can the higher patch debt what’s the implied interest rate on that?.

So we are at 13.5% on our second lien and then our first lien is that a LIBOR plus 425. And its 55 million on the second lien and then it’s about -- 43 left..

So I mean you guys are under kind of that lending cap or at or above that 5X level that would value to the capital markets on a refi. You know it’s wouldn’t be the biggest band offering by any stretch.

Do you guys have any sense or any feel if you talk to any wonders about kind of what a more amendable rate might look like?.

There is probably not a whole lot I can tell you now Jim, but what I can tell you is looking at – right now if you look at the trailing leverage; we are tad above that five times. Kind of looking at I will tell you we are extremely pleased with the results we’ve seen out of our properties in July in the first half of August.

You know if you could just step back a second, all those properties were under construction for the several months. At Grand Lodge, we only had a third of the casino open for us. And so, it’s nice to now be free of cranes and jack hammers and all that stuff and really have fresh properties, impressive new additions and all of that moving forward.

So I’ll tell you looking from our seats here, we feel better about this company than we ever had. Quite frankly, its I don’t mind where we are sitting right now it’s probably the best thing to tell you..

So I mean just kind of thinking forward, I mean are you guys better off as far as the rate kind of stacking and racking EBITDA as the quarter strip forward. There is no gun to your head, right? The more you hound under 5 times, could that be – obviously [Indiscernible] that would be advantageous to you as far as hitting the debt markets..

These are discussions we have with vendors virtually every day that the second lien debt has four years to go to maturity..

Six years from 2016, so 22 technically, although.....

But it accelerates to be six months after the first lien debt and the first lien debt is May of 19..

2019 that’s right..

Right. And so if we can move back the maturity on the first lien debt, the second lien debt automatically moves back, that’s right. And so you know one discussion in terms of maturities I think was fine, you know obviously with an improving credit I think our existing banks will probably move that maturity back pretty readily.

But you do start looking and saying, well are we better off waiting or not? I will share one of my frustrations is when you look at our ratios, and then you go and look at the borrowing cost of other companies with the same ratios or worse ratios, they borrow money a lot cheaper than we do. And we keep getting told that your promise yourself small.

And it’s actually not a diversity issue, we are more diverse than most of those guys. A lot of those guys, but the fact that it would be a 100 million in size instead of 200 or 300 million in size. And then, I’ve heard bankers say, you need to go acquire something so you can borrow money cheaper.

But then they show me some crappy acquisition and say, well, I'm not going to do a bad acquisition just to save a point on the interest expense. So, but that’s and it’s so frustrating because it seems to me that the price of debt should be laid to the risk the lender is taking which relates to the ratio and the diversity of the business..

I mean what is going on in gaming is more of a financial alchemy type of situation, you know creative you know creative cost cutting and synergies with much larger debt deals obviously. So, you guys are kind of......

Yes, I think some guy out there managing money and he’s got you know $1 billion to invest and he want to spend his time analyzing companies where he can make bigger investments because it’s more efficient use of his time.

And I'm looking at it and thinking, it's almost like when Mike Duncan [ph] wrote this thesis, it was that businesses go where he has had a well business like portfolio of junk bonds would get a higher return than investment grade bonds.

It seems like a well diversified portfolio of small, obligations of small debts would get you a much better return than investing in bigger names. But I think the number of people willing to do the smaller deals are still pretty small..

And then the last question obviously pertains to the Northern Nevada assets. I mean the news coming out of Reno these days is just gangbusters, and I think El Dorado just reported they announced that July was the best that they've had in 10 years and you name a Silicon Valley company they all seem to be moving into that area in the Washoe County.

As far as Fallon and Lake Tahoe go, I mean the economy in Northern Nevada is growing like a wee. I mean, how do you – I mean you guys are kind of outside of kind of the core Reno and trick the tower Reno industrial center. And then I think also in Fallon there is some movement around closing airspace and making that base larger as far as the U.S.

Defense Department is concerned.

Can you talk about kind of the Northern Nevada as the population grows, I mean some of the Metropolitan population growth numbers looking out five and ten years for Reno are amongst the highest growth rates in the country, should that hit you guys?.

Well and it’s really two very different properties, but at Reno, we benefit directly from the success of Silicon Valley because a lot of those people have come up in vacation at the Hyatt where they buy multimillion dollar homes in inclined [ph] village and so when they do well in the Silicon Valley generally it’s good for us, but then we do have an important secondary market of people they know who drives up to the lake, because it’s a pretty place for them to go.

And so we do get some of that spill over. So, yes, and that property is pretty sound, yes. That everything that’s happening in Northern Nevada is good for us.

In Fallon, a little less there because we are about an hour from Reno and the Tesla plant is half an hour from Reno in our direction and a lot of those other projects you are talking about are in that same industrial park.

So we and I think that is good for Fallon, but so far we’ve seen kind of the competitive impact in terms of trying to get construction done has been a bit of a challenge, I think eventually you are going to find people choosing to live in Fallon or Fernley rather than Reno because it’s an easier to commute to work at the Tesla plant and so on.

That hasn’t really happened yet, but I think it will eventually. Fallon is an agricultural community, which does quite well. They go [Indiscernible] and there is stuff there. It's also a retirement community, guys from the Navy go back to retire there because they like the weather of the high desert. And then the Navy base is pretty big business.

And yeah, Navy never tells you exactly what their plan is, but they seem to be building something really big out of that Navy base and I don’t think they do that if they would close that particular base and it’s a – and some of you may know that I’m a pilot by hobby, and if I fly from Las Vegas to Fallon I have to go way out and around Central Nevada which is where the nuclear test site was and Yucca Mountain and I mean they set off 500 pounds in the air over Central Nevada, so it’s not a place anybody lives.

And part of the region the Navy moved the top gun school from Miramar, which is where was the movie down here in San Diego was they couldn’t find a -- over California and even off the coast it was a bit of a problem and if they did, like one of the things they do, they chase out, you know if you got somebody chasing you and they are -- chase out the back of the chip.

Well chase has basically shredded aluminium. And in California if you chase out the back of your jet over the ocean, some seal might eat it, choke on it, die – California coastal commission [Indiscernible].

And Central Nevada, you chase the back of your jet, nobody cares, nobody here and you could be going 1500 miles an hour, sonic booms, nobody is going to hear it. And so, I think this is a very unique place to train, its probably the only place in the 48 states where you can fly at supersonic speeds and nobody cares.

And, so at the south end you have the Nellis Air Force space here that uses kind of the south part of Central Nevada and that’s very important for the Air Force.

There is a space called Indian Springs that’s about 20 miles outside of Las Vegas, that’s where they practise the drones and when you see movies of a guy in a trailer flying drones, those guys live in Las Vegas that drive out in Indian Springs and fly drones over Afghanistan from here.

But when they are practising they fly them over Central Nevada because there is nobody else flying out there, so if they screw up the drone, they are not going to hit me or something.

And then the Navy at the north end kind of come south from Fallon and then right in the middle of that place is the famous area 51 where Lewis' dad used to work and could inhibit [ph] Lewis what he actually did for living..

Now I really know who’s Dan..

...what you dad did for a living out there. But it’s a super secret air force space that government would not admit existed until the last couple of years. So I think we are pretty safe than that base closing and in fact if anything I think it’s getting bigger and I think that’s positive, but I don’t have a way of proving that..

Hey Jim, we’ve got to shut it down. We are over our allotted time. So apologies there, but apologies to everyone for going a little long, but that’s truly our enthusiasm for everything that on around here.

Do you have any closing words, Dan?.

No just want to thank everybody for their support and we are excited a bit. Sorry, I kept telling stories a little bit, but I hopefully answered everyone’s questions..

Thank you guys. See you next quarter..

That concludes today’s call. Thank you for your participation. You may now disconnect..