10-Q
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2006
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD
FROM
TO
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COMMISSION FILE NUMBER 1-9516
American Real Estate Partners,
L.P.
(Exact name of registrant as
specified in its charter)
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Delaware
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13-3398766
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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767 Fifth Avenue,
Suite 4700, New York, NY
(Address of principal
executive offices)
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10153
(Zip Code)
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(212) 702-4300
(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 þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12-b-2
of the Exchange Act. (Check One).
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Large
accelerated filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of August 8, 2006, there were 61,856,830 depositary
units and 11,340,243 preferred units outstanding.
INDEX
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Page No.
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FINANCIAL
INFORMATION
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Financial
Statements
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Consolidated Balance
Sheets June 30, 2006 and December 31,
2005
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3
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Consolidated
Statements of Operations Three Months Ended
June 30, 2006 and 2005
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4
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Consolidated
Statements of Operations Six Months Ended
June 30, 2006 and 2005
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5
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Consolidated
Statement of Changes in Partners Equity and Comprehensive
Income Six Months Ended June 30, 2006
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6
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Consolidated
Statements of Cash Flows Six Months Ended
June 30, 2006 and 2005
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7
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Notes to
Consolidated Financial Statements
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9
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1.
General
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9
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2.
Related Party Transactions
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10
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3.
Acquisitions
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11
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4.
Operating Units
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12
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5.
Investments and Related Matters
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17
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6.
Inventories, Net
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18
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7.
Trade, Notes and Other Receivables, Net
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18
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8.
Other Current Assets
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18
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9.
Property, Plant and Equipment
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19
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10.
Other Non-Current Assets
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19
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11.
Other Non-Current Liabilities
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19
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12.
Minority Interests
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20
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13.
Long Term Debt
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20
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14.
Other Income (Expense)
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22
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15.
Unit Options
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22
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16.
Preferred Units
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23
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17.
Earnings Per Limited Partnership Unit
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23
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18.
Asset Retirement Obligations Oil and Gas
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24
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19.
Oil and Gas Derivatives
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24
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20.
Segment Reporting
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25
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21.
Income Taxes
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28
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22.
Commitments and Contingencies
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28
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23.
Subsequent Events
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29
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Managements
Discussion and Analysis of Financial Condition and Results of
Operations
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1.
Overview
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30
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2.
Results of Operations
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30
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3.
Liquidity and Capital Resources
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42
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4.
Certain Trends and Uncertainties
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48
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Quantitative and
Qualitative Disclosures About Market Risk
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48
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Controls and
Procedures
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48
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OTHER
INFORMATION
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49
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Legal
Proceedings
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49
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Risk
Factors
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50
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Exhibits
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51
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Signatures
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52
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Certifications
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54
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EX-31.1: CERTIFICATION |
EX-31.2: CERTIFICATION |
EX-32.1: CERTIFICATION |
EX-32.2: CERTIFICATION |
2
Part I. Financial
Information
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Item 1.
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Financial
Statements
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AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 2006
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June 30,
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December 31,
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2006
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2005
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(Unaudited)
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(In $000s)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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463,677
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$
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576,123
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Investments
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901,262
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820,699
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Inventories, net
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285,716
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244,239
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Trade, notes and other receivables,
net
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213,937
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255,014
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Other current assets
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284,140
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287,985
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|
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Total current assets
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2,148,732
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2,184,060
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Property, plant and equipment, net:
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Oil and Gas
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796,250
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742,459
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Gaming
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617,064
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441,059
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Real Estate
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288,351
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285,694
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Home Fashion
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115,986
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166,026
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Total property, plant and
equipment, net
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1,817,651
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1,635,238
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Investments
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16,324
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15,964
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Intangible assets
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26,714
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23,402
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Other assets
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108,494
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107,798
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Total assets
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$
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4,117,915
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$
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3,966,462
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LIABILITIES AND PARTNERS
EQUITY
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Current liabilities:
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Accounts payable
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$
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127,626
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$
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93,807
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Accrued expenses
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158,209
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225,690
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Current portion of long-term debt
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21,601
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24,155
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Securities sold not yet purchased
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81,722
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75,883
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Margin liability on marketable
securities
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144,596
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131,061
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Total current liabilities
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533,754
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550,596
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Long-term debt
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1,506,287
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1,411,666
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Other non-current liabilities
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77,751
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89,085
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Preferred limited partnership units:
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$10 liquidation preference, 5%
cumulative
pay-in-kind;
11,400,000 authorized; 11,340,243 and 10,800,397 issued and
outstanding as of June 30, 2006 and December 31,
2005, respectively
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114,820
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112,067
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Total long-term liabilities
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1,698,858
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1,612,818
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Total liabilities
|
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2,232,612
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2,163,414
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Minority interests
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263,784
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304,599
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Commitments and contingencies
(Note 21)
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Partners equity:
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Limited partners:
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Depositary units: 67,850,000
authorized; 62,994,030 outstanding as of June 30, 2006 and
December 31, 2005, respectively
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1,849,194
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1,728,572
|
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General partner:
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(215,754
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)
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(218,202
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)
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Treasury units at cost:
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1,137,200 depositary units
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|
(11,921
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)
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|
(11,921
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)
|
|
|
|
|
|
|
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Partners equity
|
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1,621,519
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|
1,498,449
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|
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|
Total liabilities and
partners equity
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$
|
4,117,915
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$
|
3,966,462
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See notes to consolidated financial statements.
3
AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
Three Months Ended June 30, 2006 and 2005
|
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Three Months Ended
|
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|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
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|
(Unaudited)
|
|
|
|
(In 000s, except per unit amounts)
|
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|
Revenues:
|
|
|
|
|
|
|
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|
Oil and Gas
|
|
$
|
86,606
|
|
|
$
|
73,360
|
|
Gaming
|
|
|
134,780
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|
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|
122,568
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|
Real Estate
|
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|
49,065
|
|
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|
25,455
|
|
Home Fashion
|
|
|
237,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
507,599
|
|
|
|
221,383
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
|
40,078
|
|
|
|
40,933
|
|
Gaming
|
|
|
119,657
|
|
|
|
105,576
|
|
Real Estate
|
|
|
34,214
|
|
|
|
21,426
|
|
Home Fashion
|
|
|
285,487
|
|
|
|
|
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Holding Company
|
|
|
3,675
|
|
|
|
1,939
|
|
Acquisition costs
|
|
|
|
|
|
|
3,362
|
|
|
|
|
|
|
|
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483,111
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|
173,236
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|
|
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|
|
|
Operating income
|
|
|
24,488
|
|
|
|
48,147
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(31,614
|
)
|
|
|
(28,825
|
)
|
Interest income
|
|
|
13,694
|
|
|
|
14,234
|
|
Other income (expense), net
|
|
|
46,122
|
|
|
|
(19,820
|
)
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes and minority interests
|
|
|
52,690
|
|
|
|
13,736
|
|
Income tax expense
|
|
|
(9,155
|
)
|
|
|
(9,030
|
)
|
Minority interests
|
|
|
25,828
|
|
|
|
615
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations
|
|
|
69,363
|
|
|
|
5,321
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
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Income from discontinued operations
|
|
|
440
|
|
|
|
388
|
|
Gain on sales and disposition of
real estate
|
|
|
1,308
|
|
|
|
2,644
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations
|
|
|
1,748
|
|
|
|
3,032
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
71,111
|
|
|
$
|
8,353
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to:
|
|
|
|
|
|
|
|
|
Limited partners
|
|
$
|
69,696
|
|
|
$
|
(2,797
|
)
|
General partner
|
|
|
1,415
|
|
|
|
11,150
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
71,111
|
|
|
$
|
8,353
|
|
|
|
|
|
|
|
|
|
|
Net earnings per LP unit:
|
|
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
1.10
|
|
|
$
|
(0.12
|
)
|
Income from discontinued operations
|
|
|
0.03
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per LP
unit
|
|
$
|
1.13
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average LP units
outstanding:
|
|
|
61,857
|
|
|
|
46,271
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings:
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
1.08
|
|
|
$
|
(0.12
|
)
|
Income from discontinued operations
|
|
|
0.03
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per LP
unit
|
|
$
|
1.11
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average LP units and
equivalent partnership units outstanding
|
|
|
64,523
|
|
|
|
46,271
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
4
AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
Six Months Ended June 30, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
(In 000s, except per
|
|
|
|
unit amounts)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
194,898
|
|
|
$
|
89,038
|
|
Gaming
|
|
|
261,498
|
|
|
|
245,235
|
|
Real Estate
|
|
|
70,399
|
|
|
|
43,410
|
|
Home Fashion
|
|
|
480,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,007,433
|
|
|
|
377,683
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
|
83,382
|
|
|
|
78,003
|
|
Gaming
|
|
|
227,020
|
|
|
|
209,579
|
|
Real Estate
|
|
|
51,649
|
|
|
|
37,255
|
|
Home Fashion
|
|
|
566,935
|
|
|
|
|
|
Holding Company
|
|
|
14,980
|
|
|
|
4,847
|
|
Acquisition costs
|
|
|
|
|
|
|
3,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
943,966
|
|
|
|
333,046
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
63,467
|
|
|
|
44,637
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(62,202
|
)
|
|
|
(52,005
|
)
|
Interest income
|
|
|
26,286
|
|
|
|
26,585
|
|
Other income (expense), net
|
|
|
67,593
|
|
|
|
6,132
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes and minority interests
|
|
|
95,144
|
|
|
|
25,349
|
|
Income tax expense
|
|
|
(17,812
|
)
|
|
|
(12,436
|
)
|
Minority interests
|
|
|
40,951
|
|
|
|
1,547
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations
|
|
|
118,283
|
|
|
|
14,460
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
976
|
|
|
|
1,089
|
|
Gain on sales and disposition of
real estate
|
|
|
1,559
|
|
|
|
21,367
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations
|
|
|
2,535
|
|
|
|
22,456
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
120,818
|
|
|
$
|
36,916
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to:
|
|
|
|
|
|
|
|
|
Limited partners
|
|
$
|
118,414
|
|
|
$
|
40,330
|
|
General partner
|
|
|
2,404
|
|
|
|
(3,414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
120,818
|
|
|
$
|
36,916
|
|
|
|
|
|
|
|
|
|
|
Net earnings per LP unit:
|
|
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.87
|
|
|
$
|
0.40
|
|
Income from discontinued operations
|
|
|
0.04
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per LP
unit
|
|
$
|
1.91
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
Weighted average LP units
outstanding:
|
|
|
61,857
|
|
|
|
46,185
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.83
|
|
|
$
|
0.40
|
|
Income from discontinued operations
|
|
|
0.04
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per LP
unit
|
|
$
|
1.87
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
Weighted average LP units and
equivalent partnership units outstanding
|
|
|
64,663
|
|
|
|
46,185
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
5
AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
IN PARTNERS EQUITY AND COMPREHENSIVE INCOME
Six Months Ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
Partners
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Equity
|
|
|
Depositary
|
|
|
Held in Treasury
|
|
|
Partners
|
|
|
|
(Deficit)
|
|
|
Units
|
|
|
Amounts
|
|
|
Units
|
|
|
Equity
|
|
|
|
(In $000s)
|
|
|
|
(Unaudited)
|
|
|
Balance, December 31, 2005
|
|
$
|
(218,202
|
)
|
|
$
|
1,728,572
|
|
|
$
|
(11,921
|
)
|
|
|
1,137
|
|
|
$
|
1,498,449
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
2,404
|
|
|
|
118,414
|
|
|
|
|
|
|
|
|
|
|
|
120,818
|
|
Net unrealized gains on securities
available for sale
|
|
|
172
|
|
|
|
8,462
|
|
|
|
|
|
|
|
|
|
|
|
8,634
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
2,576
|
|
|
|
126,869
|
|
|
|
|
|
|
|
|
|
|
|
129,445
|
|
CEO LP unit options
|
|
|
124
|
|
|
|
6,124
|
|
|
|
|
|
|
|
|
|
|
|
6,248
|
|
Partnership distribution
|
|
|
(252
|
)
|
|
|
(12,371
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,623
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2006
|
|
$
|
(215,754
|
)
|
|
$
|
1,849,194
|
|
|
$
|
(11,921
|
)
|
|
|
1,137
|
|
|
$
|
1,621,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive gains at June 30, 2006 were
$8.8 million.
See notes to consolidated financial statements.
6
AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
Six Months ended June 30, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $000s)
|
|
|
|
(Unaudited)
|
|
|
Cash Flows from Operating
Activities:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
118,283
|
|
|
$
|
14,460
|
|
Adjustments to reconcile net
earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation, depletion and
amortization
|
|
|
92,401
|
|
|
|
69,163
|
|
Investment gains
|
|
|
(62,661
|
)
|
|
|
(380
|
)
|
Change in fair market value of Oil
and Gas derivative contracts
|
|
|
(57,611
|
)
|
|
|
31,833
|
|
Preferred LP unit interest expense
|
|
|
2,753
|
|
|
|
2,636
|
|
Minority interests
|
|
|
(40,951
|
)
|
|
|
(1,547
|
)
|
Stock based compensation expense
|
|
|
6,248
|
|
|
|
|
|
Deferred income tax expense
|
|
|
8,287
|
|
|
|
8,595
|
|
Impairment loss on fixed assets
|
|
|
26,726
|
|
|
|
175
|
|
Net cash used in activities on
trading securities
|
|
|
(26,750
|
)
|
|
|
(3,987
|
)
|
Other, net
|
|
|
(1,335
|
)
|
|
|
2,847
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Decrease (increase) in trade notes
and other receivables
|
|
|
41,245
|
|
|
|
(19,638
|
)
|
Decrease in other assets
|
|
|
30,065
|
|
|
|
18,827
|
|
Increase in inventory
|
|
|
(41,477
|
)
|
|
|
|
|
Increase in accounts payable,
accrued expenses and other liabilities
|
|
|
2,068
|
|
|
|
9,449
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by continuing
operations
|
|
|
97,291
|
|
|
|
132,433
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
2,535
|
|
|
|
22,456
|
|
Depreciation and amortization
|
|
|
51
|
|
|
|
176
|
|
Net gain from property transactions
|
|
|
(1,559
|
)
|
|
|
(21,367
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by discontinued
operations
|
|
|
1,027
|
|
|
|
1,265
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
98,318
|
|
|
|
133,698
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(131,384
|
)
|
|
|
(148,512
|
)
|
Decrease in other investments
|
|
|
|
|
|
|
33,928
|
|
Purchases of marketable equity and
debt securities
|
|
|
(162,782
|
)
|
|
|
(116,820
|
)
|
Proceeds from sales from marketable
equity and debt securities
|
|
|
162,701
|
|
|
|
25,017
|
|
Net proceeds from the sales and
disposition of real estate
|
|
|
|
|
|
|
8,414
|
|
Net proceeds from sales and
disposition of fixed assets
|
|
|
11,806
|
|
|
|
|
|
Acquisitions of businesses, net of
cash acquired
|
|
|
(169,649
|
)
|
|
|
(180,000
|
)
|
Other
|
|
|
|
|
|
|
1,631
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(289,308
|
)
|
|
|
(376,342
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Discontinued
Operations:
|
|
|
|
|
|
|
|
|
Net proceeds from the sales and
disposition of real estate
|
|
|
8,327
|
|
|
|
48,365
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(280,981
|
)
|
|
|
(327,977
|
)
|
|
|
|
|
|
|
|
|
|
(continued on next page)
7
AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
Six Months ended June 30, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In $000s)
|
|
|
|
(Unaudited)
|
|
|
Cash Flows from Financing
Activities:
|
|
|
|
|
|
|
|
|
Partners equity:
|
|
|
|
|
|
|
|
|
Members contribution
|
|
$
|
|
|
|
$
|
9,279
|
|
Partnership distributions
|
|
|
(12,623
|
)
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
Proceeds from senior notes payable
|
|
|
|
|
|
|
480,000
|
|
Proceeds from credit facilities
|
|
|
60,000
|
|
|
|
62,100
|
|
Repayment of credit facilities
|
|
|
(4,009
|
)
|
|
|
|
|
Decrease in due to affiliates
|
|
|
|
|
|
|
(16,342
|
)
|
Proceeds from mortgages payable
|
|
|
34,250
|
|
|
|
4,425
|
|
Mortgages paid upon disposition of
properties
|
|
|
|
|
|
|
(3,775
|
)
|
Periodic principal payments
|
|
|
(2,216
|
)
|
|
|
(2,932
|
)
|
Debt issuance costs
|
|
|
(5,185
|
)
|
|
|
(8,587
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
70,217
|
|
|
|
524,168
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued
operations:
|
|
|
|
|
|
|
|
|
Mortgages paid upon disposition of
properties
|
|
|
|
|
|
|
(6,927
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
70,217
|
|
|
|
517,241
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents
|
|
|
(112,446
|
)
|
|
|
322,962
|
|
Cash and cash equivalents,
beginning of period
|
|
|
576,123
|
|
|
|
806,309
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period
|
|
$
|
463,677
|
|
|
$
|
1,129,271
|
|
|
|
|
|
|
|
|
|
|
Supplemental information
|
|
|
|
|
|
|
|
|
Cash payments for interest, net of
amounts capitalized
|
|
$
|
50,547
|
|
|
$
|
24,667
|
|
Cash payments for income taxes,
net of refunds
|
|
$
|
8,389
|
|
|
$
|
3,017
|
|
Net unrealized gains (losses) on
securities available for sale
|
|
$
|
8,634
|
|
|
$
|
(5,658
|
)
|
LP unit issuance
|
|
$
|
|
|
|
$
|
456,998
|
|
Change in tax asset related to
acquisition
|
|
$
|
|
|
|
$
|
4,105
|
|
Debt conversion relating to
Atlantic Coast
|
|
$
|
|
|
|
$
|
29,500
|
|
See notes to consolidated financial statements.
8
AMERICAN
REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES
FORM 10-Q
June 30, 2006
American Real Estate Partners, L.P. (the Company or
AREP) is a master limited partnership formed in
Delaware on February 17, 1987. AREP is a diversified
holding company owning subsidiaries engaged in the following
operating businesses: (1) Oil and Gas; (2) Gaming;
(3) Real Estate and (4) Home Fashion.
We own a 99% limited partner interest in American Real Estate
Holdings Limited Partnership, or AREH. AREH, the operating
partnership, holds our investments and conducts our business
operations. Substantially all of our assets and liabilities are
owned by AREH and substantially all of our operations are
conducted through AREH and its subsidiaries. American Property
Investors, Inc., or API, owns a 1% general partner interest in
both us and AREH, representing an aggregate 1.99% general
partner interest in us and AREH. API is owned and controlled by
Mr. Carl C. Icahn.
The accompanying consolidated financial statements and related
notes should be read in conjunction with the consolidated
financial statements and related notes contained in our annual
report on
Form 10-K,
as amended, for the year ended December 31, 2005. The
financial statements have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission
related to interim financial statements. The financial
information contained herein is unaudited; however, all
adjustments which, in the opinion of management, are necessary
to present fairly the results for the interim periods, have been
made. All such adjustments are of a normal and recurring nature.
Certain prior year amounts have been reclassified in order to
conform to the current year presentation.
The consolidated financial statements include the accounts of
the Company and its wholly and majority owned subsidiaries in
which control can be exercised. The Company is considered to
have control if it has a direct or indirect ability to make
decisions about an entitys activities through voting or
similar rights. All material intercompany accounts and
transactions have been eliminated in consolidation.
Because of the diversified nature of our business the results of
operations for quarterly and other interim periods are not
indicative of the results to be expected for the full year.
Variations in the amount and timing of gains and losses on our
investments and derivative contracts in our Oil and Gas segment
can be significant. In addition, the results of our Gaming and
Home Fashion segments are seasonal.
Change
in Reporting Entity
Our historical financial statements were revised to reflect the
acquisition of interests in five entities in the second quarter
of 2005 which were under common control of Mr. Icahn. In
accordance with generally accepted accounting principles, assets
transferred between entities under common control are accounted
for at historical cost similar to a pooling of interests, and
the financial statements of such previously separate companies
for periods prior to the acquisition, from the original date of
their acquisition by Mr. Icahn, are revised on a combined
basis.
Discontinued
Operations
Certain of our real estate properties are classified as
discontinued operations. The properties classified as
discontinued operations have changed during 2006 and,
accordingly, certain amounts in the statements of operations and
cash flows for the six months ended June 30, 2005 have been
reclassified to conform to the current classification of
properties.
Acquisition
of the Assets of WestPoint Stevens Inc.
On August 8, 2005, WestPoint International, Inc., or WPI,
an indirect subsidiary of the Company, completed the acquisition
of substantially all of the assets of WestPoint Stevens Inc., or
WPS. Operating results for WPI are included with AREPs
results beginning as of August 8, 2005.
9
Acquisition
of the Assets of the Flamingo Laughlin and Traymore
Site
On May 19, 2006, our wholly owned subsidiaries, AREP
Boardwalk Properties LLC and AREP Laughlin Corporation,
consummated the purchase of the Flamingo Laughlin Hotel and
Casino, or the Flamingo Laughlin, in Laughlin, Nevada and
7.7 acres of land, known as the Traymore Site, adjacent to
the Sands Hotel and Casino, in Atlantic City, New Jersey, from
affiliates of Harrahs Operating Company, Inc. AREP
Laughlin Corporation was formed by AREH to own and operate the
Flamingo Laughlin and AREH contributed 100% of the stock of AREP
Laughlin to American Casino and Entertainment Properties LLC, or
ACEP, on April 4, 2006. Operating results for the Flamingo
Laughlin are included with AREPs results beginning as of
May 19, 2006.
Investments
We classify our marketable securities as either
available-for-sale
or trading based upon whether the objective of the
purchase is to generate profits on short-term differences in
price. Securities that are classified as
available-for-sale
are reported at fair value with unrealized gains and losses
reported as a separate component of partners equity.
Trading securities are carried at fair value with unrealized
gains and losses included in net earnings (loss). For purposes
of determining gains and losses on sales, the cost of securities
is based on specific identification. Effective January 1,
2006, certain trading securities were reclassified to
available-for-sale
based on a reassessment of the manner in which we hold
investments. (See Note 5 for details of investments and
note 14 for details of gains and losses on investments.)
Filing
Status of Subsidiaries
National Energy Group, Inc., or National Energy Group, and
Atlantic Coast Entertainment Holdings, Inc., or Atlantic Coast,
are reporting companies under the Securities Exchange Act of
1934. In addition, ACEP, voluntarily files annual, quarterly and
current reports.
On February 14, 2006, NEG, Inc., or NEG, our newly formed
subsidiary, in connection with a planned initial public
offering, filed with the Securities and Exchange Commission, or
SEC, a Registration Statement on
Form S-1.
Amendments to the
Form S-1
were filed May 5, 2006, June 22, 2006, and
July 31, 2006. The Registration Statement has not yet
become effective. On June 29, 2006, NEG, in connection with
a planned merger with National Energy Group, filed with the SEC
a Registration Statement on
Form S-4.
On July 31, 2006, NEG Oil & Gas LLC, which is
currently our wholly-owned subsidiary, in connection with a
planned offering of senior notes due 2014, filed with the SEC a
Registration Statement on
Form S-1.
New
Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board
(FASB) issued Interpretation (FIN)
No. 48, Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement
No. 109. This Interpretation prescribes a recognition
threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected
to be taken in a tax return, and provides guidance on
derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. This
Interpretation is effective for fiscal years beginning after
December 15, 2006. The Company is currently assessing the
impact of the Interpretation on its financial statements.
|
|
Note 2.
|
Related
Party Transactions
|
a. Administrative
Services
In July 2005, we entered into a new license agreement with an
affiliate for the non-exclusive use of approximately
1,514 square feet of office space for which we pay monthly
base rent of $13,000 plus 16.4% of certain additional
rent. The terms of the license agreement were reviewed and
approved by the audit committee of the Board of Directors of
API. The license agreement expires in May 2012. Under the
agreement, base rent is subject to increases in July 2008 and
December 2011. Additionally, we are entitled to certain annual
rent credits each December, beginning December 2005 and
continuing through December 2011. In the three months ended
June 30, 2006 and 2005, the Company paid rent of
approximately $32,000 and $39,000, respectively. In the six
months ended June 2006 and June 2005, the Company paid rent of
approximately $85,000 and $78,000, respectively.
10
In the three months ended June 30, 2006 and 2005, we paid
approximately $197,000 and $340,000, respectively, to an
affiliate for telecommunication services. In the six months
ended June 30, 2006 and 2005, we paid approximately
$415,000 and $567,000, respectively, to an affiliate for
telecommunication services.
An affiliate provided certain professional services to WPI for
which WPI incurred charges of approximately $81,000 and $139,000
in the three and six months ended June 30, 2006,
respectively.
An affiliate provided certain administrative services to us for
which we incurred charges of approximately $21,000 and $43,000
in the three and six months ended June 30, 2005,
respectively. No such charges were incurred in 2006.
We provided certain administrative services to affiliates for
which we charged $147,000 and $260,000 in the three and six
months ended June 30, 2006, respectively, and $18,000 in
the three and six months ended June 30, 2005. In May 2006,
the affiliate remitted $500,000 to us as an advance payment for
future services (including the services for the three months
ended June 30, 2006). As of June 30, 2006, current
liabilities in the consolidated balance sheet included $359,000
to be applied to our charges to the affiliate for services to be
provided to it.
b. Securities
Ownership
As of August 8, 2006, affiliates of Mr. Icahn owned
9,813,346 preferred units and 55,655,382 depositary units, which
represent 86.5% and 90.0% of the outstanding preferred units and
depositary units, respectively.
On May 19, 2006, our wholly owned subsidiaries, AREP
Boardwalk Properties and AREP Laughlin Corporation, or AREP
Laughlin, consummated the purchase of the Flamingo Laughlin and
7.7 acres of land adjacent to The Sands Hotel and Casino, or the
Traymore Site, from affiliates of Harrahs Operating
Company, Inc. The transaction was completed pursuant to a
previously announced asset purchase agreement, dated as of
November 28, 2005, between AREP Laughlin, AREP Boardwalk
LLC, Harrahs and certain affiliated entities. Under the
agreement, AREP Laughlin acquired the Flamingo and AREP
Boardwalk Properties LLC, an assignee of AREP Boardwalk LLC,
acquired the Traymore Site, for an aggregate purchase price of
approximately $170.0 million (excluding transaction costs
and working capital of approximately $5.7 million). We
acquired the Flamingo Laughlin and the Traymore Site consistent
with our strategy of buying undervalued and out-of-favor assets
complimentary to our existing businesses.
The Flamingo Laughlin is located on approximately 18 acres
of land located next to the Colorado River in Laughlin, Nevada
and is a tourist-oriented gaming and entertainment destination.
The Flamingo Laughlin is the largest hotel in Laughlin with
1,907 rooms in two 18-story towers and a 57,000 square-foot
casino with seven restaurants, 35,000 square-feet of
meeting space and a 3,300-seat amphitheater. The property
features an outdoor pool, fitness center, lighted tennis courts
and 2,420 parking spaces.
The following table summarizes the estimated fair values of the
net assets acquired on May 19, 2006 (in $000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 19, 2006
|
|
|
|
Fair Value
|
|
|
|
Flamingo
|
|
|
|
|
|
|
|
|
|
Laughlin
|
|
|
Traymore Site
|
|
|
Total
|
|
|
Current assets
|
|
$
|
7,172
|
|
|
$
|
|
|
|
$
|
7,172
|
|
Land
|
|
|
13,000
|
|
|
|
61,651
|
|
|
|
74,651
|
|
Building and equipment
|
|
|
95,336
|
|
|
|
|
|
|
|
95,336
|
|
Intangible assets
|
|
|
3,397
|
|
|
|
|
|
|
|
3,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired
|
|
|
118,905
|
|
|
|
61,651
|
|
|
|
180,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed
|
|
|
(4,874
|
)
|
|
|
|
|
|
|
(4,874
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
114,031
|
|
|
$
|
61,651
|
|
|
$
|
175,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purchase price allocations for the Flamingo Laughlin are
based on estimated fair values as determined by independent
appraisers. Had the acquisitions of the Flamingo Laughlin and
the Traymore Site occurred at the
11
beginning of 2006, our consolidated unaudited pro forma net
revenue, net income and diluted earnings per share for the three
and six months ended June 30, 2006 would not have been
materially different than the amounts we reported, and,
therefore, pro forma results are not presented.
The results of operations of Flamingo Laughlin from May 19, 2006
to June 30, 2006 were included in the Companys
consolidated earnings for the three months and six months ended
June 30, 2006.
Call
Agreement
On June 5, 2006, AREH entered into a call agreement with
ACE Gaming, LLC, or ACE Gaming, pursuant to which AREH granted
ACE Gaming the right to acquire all of AREHs membership
interests in AREP Boardwalk Properties, LLC, or AREP Boardwalk
Properties. ACE Gaming is a wholly owned subsidiary of Atlantic
Coast which owns and operates The Sands Hotel and Casino in
Atlantic City, New Jersey, or The Sands. AREP Boardwalk
Properties purchased 7.7 acres of land adjacent to The
Sands property, or the Traymore Site, on May 19, 2006 and
has an arrangement with ACE Gaming to manage the surface parking
lots on its behalf.
The Call Agreement allows ACE Gaming to acquire AREP Boardwalk
Properties until June 5, 2007 for $61.7 million (the
acquisition cost of the Traymore Site), plus certain closing,
financing and operating costs as defined in the Call Agreement.
We conduct our operating businesses in four principal areas: Oil
and Gas, Gaming, Real Estate and Home Fashion.
a. Oil
and Gas
We conduct our Oil and Gas operations through our wholly-owned
subsidiary, NEG Oil & Gas LLC, or NEG Oil &
Gas (formerly AREP Oil & Gas LLC). NEG Oil &
Gas includes our 50.01% ownership interest in National Energy
Group, a direct 50% membership interest in NEG Holding LLC, or
NEG Holdings, an indirect membership interest (through National
Energy Group) in NEG Holdings, and a 100% ownership interest in
National Onshore LP and National Offshore LP. Our Oil and Gas
operations consist of exploration, development, and production
operations principally in Texas, Oklahoma, Louisiana, and
Arkansas and offshore in the Gulf of Mexico.
Summary balance sheets for NEG Oil & Gas as of
June 30, 2006 and December 31, 2005, included in the
consolidated balance sheets, are as follows (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Current assets
|
|
$
|
111,742
|
|
|
$
|
172,188
|
|
Oil and gas properties, full cost
method
|
|
|
796,250
|
|
|
|
742,459
|
|
Other assets
|
|
|
43,120
|
|
|
|
43,648
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
951,112
|
|
|
$
|
958,295
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
54,017
|
|
|
$
|
103,726
|
|
Credit facility (non-current)
|
|
|
300,000
|
|
|
|
300,000
|
|
Other noncurrent liabilities
|
|
|
51,749
|
|
|
|
60,479
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
405,766
|
|
|
$
|
464,205
|
|
|
|
|
|
|
|
|
|
|
12
Summarized unaudited statements of operations for the three and
six month periods ended June 30, 2006 and 2005, including
amounts related to unrealized derivative gains (losses), are as
follows (in $000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Gross oil and gas revenues
|
|
$
|
71,135
|
|
|
$
|
69,662
|
|
|
$
|
152,318
|
|
|
$
|
125,925
|
|
Realized derivative losses
|
|
|
(6,600
|
)
|
|
|
(4,834
|
)
|
|
|
(18,687
|
)
|
|
|
(7,967
|
)
|
Unrealized derivative gains
(losses)
|
|
|
20,359
|
|
|
|
6,936
|
|
|
|
57,611
|
|
|
|
(31,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas revenues
|
|
|
84,894
|
|
|
|
71,764
|
|
|
|
191,242
|
|
|
|
86,125
|
|
Plant revenues
|
|
|
1,712
|
|
|
|
1,596
|
|
|
|
3,656
|
|
|
|
2,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
86,606
|
|
|
|
73,360
|
|
|
|
194,898
|
|
|
|
89,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas operating expenses
|
|
|
13,684
|
|
|
|
12,175
|
|
|
|
27,729
|
|
|
|
25,539
|
|
Depreciation, depletion and
amortization
|
|
|
23,654
|
|
|
|
24,506
|
|
|
|
47,788
|
|
|
|
44,809
|
|
General and administrative expenses
|
|
|
2,740
|
|
|
|
4,252
|
|
|
|
7,865
|
|
|
|
7,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost and expenses
|
|
|
40,078
|
|
|
|
40,933
|
|
|
|
83,382
|
|
|
|
78,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
46,528
|
|
|
$
|
32,427
|
|
|
$
|
111,516
|
|
|
$
|
11,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas operating expenses comprise expenses that are
directly attributable to exploration, development and production
operations including lease operating expenses, transportation
expenses, gas plant operating expenses, ad valorem and
production taxes.
For the three months ended June 30, 2006 and 2005, natural
gas comprised 63% and 68% of gross oil and gas revenues,
respectively. For the six months ended June 30, 2006 and
2005, natural gas comprised 65% and 66% of gross oil and gas
revenues, respectively.
b. Gaming
We own and operate gaming properties in Nevada and Atlantic
City. Our Nevada properties include the Stratosphere Casino
Hotel and Tower, Arizona Charlies Decatur, and Arizona
Charlies Boulder in Las Vegas and the Flamingo Laughlin
Hotel and Casino in Laughlin. Results for the Flamingo Laughlin
are included from the date of acquisition, May 19, 2006.
Our Atlantic City operations are based on our ownership of The
Sands through our majority ownership of Atlantic Coast.
Summary balance sheets for our Gaming segment as of
June 30, 2006 and December 31, 2005, included in the
consolidated balance sheets, are as follows (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Current assets
|
|
$
|
135,300
|
|
|
$
|
158,250
|
|
Property, plant and equipment, net
|
|
|
617,064
|
|
|
|
441,059
|
|
Other non-current assets
|
|
|
61,039
|
|
|
|
57,632
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
813,403
|
|
|
$
|
656,941
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
70,403
|
|
|
$
|
59,271
|
|
Long term debt
|
|
|
280,005
|
|
|
|
217,335
|
|
Other non-current liabilities
|
|
|
12,743
|
|
|
|
14,926
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
363,151
|
|
|
$
|
291,532
|
|
|
|
|
|
|
|
|
|
|
13
Summarized unaudited statements of operations for the three and
six months ended June 30, 2006 and 2005 are as follows (in
$000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
89,190
|
|
|
$
|
81,168
|
|
|
$
|
174,562
|
|
|
$
|
166,238
|
|
Hotel
|
|
|
22,025
|
|
|
|
18,602
|
|
|
|
42,346
|
|
|
|
36,689
|
|
Food and beverage
|
|
|
25,024
|
|
|
|
23,307
|
|
|
|
47,499
|
|
|
|
45,249
|
|
Tower, retail and other income
|
|
|
10,000
|
|
|
|
10,241
|
|
|
|
18,757
|
|
|
|
19,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenues
|
|
|
146,239
|
|
|
|
133,318
|
|
|
|
283,164
|
|
|
|
267,294
|
|
Less promotional allowances
|
|
|
11,459
|
|
|
|
10,750
|
|
|
|
21,666
|
|
|
|
22,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
134,780
|
|
|
|
122,568
|
|
|
|
261,498
|
|
|
|
245,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
30,771
|
|
|
|
27,595
|
|
|
|
58,617
|
|
|
|
55,322
|
|
Hotel
|
|
|
9,261
|
|
|
|
8,033
|
|
|
|
17,332
|
|
|
|
14,759
|
|
Food and beverage
|
|
|
17,243
|
|
|
|
14,842
|
|
|
|
32,521
|
|
|
|
28,784
|
|
Tower, retail and other income
|
|
|
4,453
|
|
|
|
4,324
|
|
|
|
8,414
|
|
|
|
8,171
|
|
Selling, general and administrative
|
|
|
47,685
|
|
|
|
41,421
|
|
|
|
90,465
|
|
|
|
83,963
|
|
Depreciation and amortization
|
|
|
10,244
|
|
|
|
9,361
|
|
|
|
19,671
|
|
|
|
18,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
119,657
|
|
|
|
105,576
|
|
|
|
227,020
|
|
|
|
209,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
15,123
|
|
|
$
|
16,992
|
|
|
$
|
34,478
|
|
|
$
|
35,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c. Real
Estate
Our real estate operations consist of rental real estate,
property development, and associated resort activities.
A summary of real estate assets as of June 30, 2006 and
December 31, 2005, included in the consolidated balance
sheets, is as follows (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Rental properties:
|
|
|
|
|
|
|
|
|
Finance leases, net
|
|
$
|
71,493
|
|
|
$
|
73,292
|
|
Operating leases
|
|
|
45,681
|
|
|
|
50,012
|
|
Property development
|
|
|
125,187
|
|
|
|
116,007
|
|
Resort properties
|
|
|
45,990
|
|
|
|
46,383
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
$
|
288,351
|
|
|
$
|
285,694
|
|
|
|
|
|
|
|
|
|
|
In addition to the above are properties held for sale. The
amount included in other current assets related to such
properties was $23.8 million and $27.2 million as of
June 30, 2006 and December 31, 2005, respectively (see
Note 8). The operating results of certain of these
properties are classified as discontinued operations.
14
Summarized unaudited statements of operations attributable to
real estate operations are as follows (in $000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income on financing leases
|
|
$
|
1,715
|
|
|
$
|
1,801
|
|
|
$
|
3,450
|
|
|
$
|
3,767
|
|
Rental income
|
|
|
2,402
|
|
|
|
2,113
|
|
|
|
4,535
|
|
|
|
4,213
|
|
Property development
|
|
|
37,852
|
|
|
|
14,459
|
|
|
|
49,236
|
|
|
|
22,739
|
|
Resort operations
|
|
|
7,096
|
|
|
|
7,082
|
|
|
|
13,178
|
|
|
|
12,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
49,065
|
|
|
|
25,455
|
|
|
|
70,399
|
|
|
|
43,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental real estate
|
|
|
978
|
|
|
|
1,091
|
|
|
|
2,173
|
|
|
|
2,331
|
|
Property development
|
|
|
25,976
|
|
|
|
13,265
|
|
|
|
35,952
|
|
|
|
21,450
|
|
Resort operations
|
|
|
7,260
|
|
|
|
7,070
|
|
|
|
13,524
|
|
|
|
13,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
34,214
|
|
|
|
21,426
|
|
|
|
51,649
|
|
|
|
37,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
14,851
|
|
|
$
|
4,029
|
|
|
$
|
18,750
|
|
|
$
|
6,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
Real Estate
As of June 30, 2006, we owned 47 rental real estate
properties. These primarily consist of fee and leasehold
interests in real estate in 23 states. Most of these
properties are net-leased to single corporate tenants.
Approximately 87% of these properties are currently net-leased,
4% are operating properties and 9% are vacant.
We market portions of our commercial real estate portfolio for
sale. Unaudited sale activity was as follows (in $000s, except
unit data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Properties sold
|
|
|
4
|
|
|
|
7
|
|
|
|
8
|
|
|
|
11
|
|
Proceeds received
|
|
$
|
7,354
|
|
|
$
|
4,856
|
|
|
$
|
8,327
|
|
|
$
|
48,320
|
|
Mortgage debt repaid
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,702
|
|
Total gain recorded
|
|
$
|
1,308
|
|
|
$
|
2,644
|
|
|
$
|
1,559
|
|
|
$
|
15,844
|
|
Gain recorded in operations
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
186
|
|
Gain recorded in discontinued
operations(i)
|
|
$
|
1,308
|
|
|
$
|
2,644
|
|
|
$
|
1,559
|
|
|
$
|
15,658
|
|
|
|
|
(i) |
|
A gain of $5.7 million on the sale of resort properties was
recognized in the six months ended June 30, 2005 in
addition to gains on the rental portfolio. |
Property
Development and Associated Resort Activities
We own, primarily through our Bayswater subsidiary, residential
development properties. Bayswater, a real estate investment,
management and development company, focuses primarily on the
construction and sale of single-family houses, multi-family
homes and lots in subdivisions and planned communities, and raw
land for residential development. Our New Seabury development
property in Cape Cod, Massachusetts, and our Grand Harbor and
Oak Harbor development property in Vero Beach, Florida each
include land for current and future residential development of
approximately 425 and 1,000 units of residential housing,
respectively. Both developments operate golf and resort
activities. We are also developing residential communities in
Naples, Florida and Westchester County, New York.
15
Unaudited property development sales activity was as follows (in
$000s except unit data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Units sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Seabury, Massachusetts
|
|
|
20
|
|
|
|
1
|
|
|
|
30
|
|
|
|
1
|
|
Grand Harbor/Oak Harbor, Florida
|
|
|
6
|
|
|
|
5
|
|
|
|
8
|
|
|
|
11
|
|
Falling Waters, Florida
|
|
|
9
|
|
|
|
23
|
|
|
|
9
|
|
|
|
47
|
|
Westchester, New York
|
|
|
6
|
|
|
|
3
|
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
32
|
|
|
|
53
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Seabury, Massachusetts
|
|
$
|
21,352
|
|
|
$
|
423
|
|
|
$
|
30,385
|
|
|
$
|
423
|
|
Grand Harbor/Oak Harbor, Florida
|
|
|
4,123
|
|
|
|
3,250
|
|
|
|
6,444
|
|
|
|
6,673
|
|
Falling Waters, Florida
|
|
|
2,261
|
|
|
|
4,212
|
|
|
|
2,261
|
|
|
|
9,068
|
|
Westchester, New York
|
|
|
10,116
|
|
|
|
6,574
|
|
|
|
10,146
|
|
|
|
6,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,852
|
|
|
$
|
14,459
|
|
|
$
|
49,236
|
|
|
$
|
22,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
d. Home
Fashion
We conduct our Home Fashion operations through our majority
ownership in WPI.
Summary balance sheets for Home Fashion as of June 30, 2006
and December 31, 2005, as included in the consolidated
balance sheets, are as follows (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Current assets
|
|
$
|
543,226
|
|
|
$
|
583,496
|
|
Property plant and equipment, net
|
|
|
115,986
|
|
|
|
166,026
|
|
Intangible and other assets
|
|
|
25,888
|
|
|
|
23,402
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
685,100
|
|
|
$
|
772,924
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
104,768
|
|
|
$
|
103,931
|
|
Other liabilities
|
|
|
1,003
|
|
|
|
5,214
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
105,771
|
|
|
$
|
109,145
|
|
|
|
|
|
|
|
|
|
|
Unaudited summarized statements of operations for the three and
six months ended June 30, 2006 are as follows (in $000s):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2006
|
|
|
June 30, 2006
|
|
|
Revenues
|
|
$
|
237,148
|
|
|
$
|
480,638
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
224,222
|
|
|
|
452,582
|
|
Selling, general and administrative
|
|
|
40,698
|
|
|
|
84,015
|
|
Restructuring and impairment
charges
|
|
|
20,567
|
|
|
|
30,338
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
285,487
|
|
|
|
566,935
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(48,339
|
)
|
|
$
|
(86,297
|
)
|
|
|
|
|
|
|
|
|
|
Total depreciation for the three month period ended
June 30, 2006 was $9.5 million, of which
$7.7 million was included in cost of sales and
$1.8 million was included in selling, general and
administrative expenses. Total expenses for the three month
period ended June 30, 2006 include $18.8 million of
impairment charges related to the
16
fixed assets of plants that will be closed and $1.7 million
of restructuring charges (of which approximately
$0.1 million relate to severance and $1.6 million
relate to continuing costs related to closed plants).
For the six month period ended June 30, 2006, total
depreciation was $19.9 million, of which $16.3 million
was included in cost of sales and $3.6 million was included
in selling, general and administrative expenses. Total expenses
for the six month period include $26.5 million of
impairment charges related to the fixed assets of plants that
will be closed and $3.8 million of restructuring charges
(of which approximately $1.3 million relate to severance
and $2.5 million relate to continuing costs related to
closed plants).
Impairment and restructuring charges for the three and six
months ended June 30, 2006 are included in Home Fashion
operating expenses in the accompanying consolidated statements
of operations.
To improve WPIs competitive position, we intend to
restructure its operations to significantly reduce its cost of
goods sold by closing certain plants located in the United
States, sourcing goods from lower cost overseas facilities, and
acquiring manufacturing facilities and entering into joint
ventures. The Company has incurred impairment charges to
write-down the value of WPI plants taken out of service to their
estimated liquidation value.
Included in restructuring expenses are cash charges associated
with the ongoing costs of closed plants, employee severance,
benefits and related costs. The amount of accrued restructuring
costs at December 31, 2005 was $0.1 million. During
the six months ended June 30, 2006, we incurred additional
restructuring costs of $3.8 million, of which
$3.6 million was paid during the period. As of
June 30, 2006 the accrued liability balance was
$0.3 million which is included in accounts payable and
accrued expenses in our consolidated balance sheet.
We expect our restructuring charges will continue to be incurred
throughout 2006 and into 2007. As of June 30, 2006, WPI
expects to incur future restructuring costs over the next year
relating to the current restructuring plan of between
$10 million and $15 million.
|
|
Note 5.
|
Investments
and Related Matters
|
Investments consist of the following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006
|
|
|
December 31, 2005
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
Carrying
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Current Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity and debt
securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
33,301
|
|
|
$
|
39,232
|
|
Other investments
|
|
|
|
|
|
|
19,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current trading
|
|
|
|
|
|
|
19,000
|
|
|
|
33,301
|
|
|
|
39,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and agency
obligations
|
|
|
3,237
|
|
|
|
3,189
|
|
|
|
3,346
|
|
|
|
3,346
|
|
Marketable equity and debt
securities
|
|
|
845,221
|
|
|
|
853,348
|
|
|
|
746,731
|
|
|
|
746,839
|
|
Other investments
|
|
|
25,035
|
|
|
|
25,725
|
|
|
|
31,282
|
|
|
|
31,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current available for sale
|
|
|
873,493
|
|
|
|
882,262
|
|
|
|
781,359
|
|
|
|
781,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current investments
|
|
$
|
873,493
|
|
|
$
|
901,262
|
|
|
$
|
814,660
|
|
|
$
|
820,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
|
|
16,324
|
|
|
|
16,324
|
|
|
|
15,964
|
|
|
|
15,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current
|
|
$
|
16,324
|
|
|
$
|
16,324
|
|
|
$
|
15,964
|
|
|
$
|
15,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the third quarter of 2005, we began using the services of an
unaffiliated third party investment manager to manage certain
fixed income investments. As of June 30, 2006,
$462.2 million had been invested at the discretion of such
manager in a diversified portfolio consisting predominantly of
short-term investment grade debt securities. Investments managed
by the third party investment manager are classified as
available for sale securities in the above table.
17
Securities
Sold Not Yet Purchased
As of June 30, 2006 and December 31, 2005, liabilities
of $81.7 million (unaudited) and $75.9 million,
respectively, had been recorded related to short sales of
securities.
Margin
Liability on Marketable Securities
As of June 30, 2006 and December 31, 2005, liabilities
of $144.6 million (unaudited) and $131.1 million,
respectively, had been recorded related to purchases of
securities that had been made on margin. The margin liability is
secured by the securities we purchased and cannot exceed certain
pre-established percentages of the fair market value of the
securities collateralizing the liability. If the margin
liability exceeds such percentages, we will be subject to a
margin call and required to fund the account to return the
margin balance to the pre-established percentages of the fair
market value of the securities collateralizing the liability.
Inventories, net, relate solely to our Home Fashion segment and
consist of the following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
32,777
|
|
|
$
|
33,083
|
|
Goods in process
|
|
|
120,742
|
|
|
|
100,337
|
|
Finished goods
|
|
|
132,197
|
|
|
|
110,819
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
285,716
|
|
|
$
|
244,239
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 7.
|
Trade,
Notes and Other Receivables, Net
|
Trade notes and other receivables, net, consist of the following
(in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Trade receivables Home
Fashion
|
|
$
|
152,596
|
|
|
$
|
173,050
|
|
Allowance for doubtful
accounts Home Fashion
|
|
|
(8,281
|
)
|
|
|
(8,313
|
)
|
Trade receivables Oil
and Gas
|
|
|
48,101
|
|
|
|
58,956
|
|
Allowance for doubtful
accounts Oil and Gas
|
|
|
(4,903
|
)
|
|
|
(5,572
|
)
|
Other
|
|
|
26,424
|
|
|
|
36,893
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
213,937
|
|
|
$
|
255,014
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8.
|
Other
Current Assets
|
Other current assets consist of the following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets held for sale
|
|
$
|
42,116
|
|
|
$
|
49,876
|
|
Restricted cash
|
|
|
180,025
|
|
|
|
161,210
|
|
Other
|
|
|
61,999
|
|
|
|
76,899
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
284,140
|
|
|
$
|
287,985
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2006, assets held for sale consists of
$23.8 million of real estate assets and $18.3 million
of WPI assets. As of December 31, 2005, assets held for
sale consists of $27.2 million of real estate assets and
$22.7 million of WPI assets.
18
Restricted cash is primarily composed of funds required as
collateral for the outstanding short securities and derivative
positions. Additionally, restricted cash consists of balances
for escrow deposits and funds held to collateralize letters of
credit.
|
|
Note 9.
|
Property,
Plant and Equipment
|
Property, plant and equipment consists of the following (in
$000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Land
|
|
$
|
257,411
|
|
|
$
|
182,539
|
|
Buildings and improvements
|
|
|
467,623
|
|
|
|
374,160
|
|
Proved oil and gas properties
|
|
|
1,331,324
|
|
|
|
1,229,923
|
|
Machinery, equipment and furniture
|
|
|
341,731
|
|
|
|
357,018
|
|
Assets leased to others
|
|
|
135,694
|
|
|
|
141,997
|
|
Construction in progress
|
|
|
91,877
|
|
|
|
69,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,625,660
|
|
|
|
2,355,530
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation,
depletion and amortization
|
|
|
(808,009
|
)
|
|
|
(720,292
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
|
1,817,651
|
|
|
$
|
1,635,238
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization expense related to
property, plant and equipment for the three month periods ended
June 30, 2006 and 2005 were $44.6 million and
$35.1 million, respectively. Depreciation, depletion and
amortization expense related to property, plant and equipment
for the six month periods ended June 30, 2006 and 2005 were
$89.7 million and $66.2 million, respectively.
|
|
Note 10.
|
Other
Non-Current Assets
|
Other non-current assets consist of the following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Deferred taxes
|
|
$
|
44,592
|
|
|
$
|
51,511
|
|
Deferred finance costs, net of
accumulated amortization of $5,467 and $4,076 as of
June 30, 2006 and December 31, 2005, respectively
|
|
|
30,769
|
|
|
|
29,822
|
|
Restricted deposits
|
|
|
29,491
|
|
|
|
24,805
|
|
Other
|
|
|
3,642
|
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
108,494
|
|
|
$
|
107,798
|
|
|
|
|
|
|
|
|
|
|
Restricted deposits primarily represent amounts escrowed with
respect to asset retirement obligations at our Oil and Gas
operations (see Note 18).
|
|
Note 11.
|
Other
Non-Current Liabilities
|
Other non-current liabilities consist of the following (in
$000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Asset retirement obligations (see
Note 18)
|
|
$
|
42,589
|
|
|
$
|
41,228
|
|
Derivative liability (see
Note 19)
|
|
|
6,105
|
|
|
|
17,893
|
|
Other long-term liabilities
|
|
|
29,057
|
|
|
|
29,964
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
77,751
|
|
|
$
|
89,085
|
|
|
|
|
|
|
|
|
|
|
19
|
|
Note 12.
|
Minority
Interests
|
Minority interests consist of the following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
WPI
|
|
$
|
206,241
|
|
|
$
|
247,015
|
|
Atlantic Coast
|
|
|
57,543
|
|
|
|
57,584
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
263,784
|
|
|
$
|
304,599
|
|
|
|
|
|
|
|
|
|
|
Long-term debt consists of the following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Senior unsecured 7.125% notes
due 2013 AREP
|
|
$
|
480,000
|
|
|
$
|
480,000
|
|
Senior unsecured 8.125% notes
due 2012 AREP
|
|
|
351,083
|
|
|
|
350,922
|
|
Senior secured 7.85% notes
due 2012 ACEP
|
|
|
215,000
|
|
|
|
215,000
|
|
Borrowings under credit
facility ACEP
|
|
|
60,000
|
|
|
|
|
|
Borrowings under credit
facility NEG Oil & Gas
|
|
|
300,000
|
|
|
|
300,000
|
|
Mortgages payable
|
|
|
113,546
|
|
|
|
81,512
|
|
Other
|
|
|
8,259
|
|
|
|
8,387
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
1,527,888
|
|
|
|
1,435,821
|
|
Less current portion, including
debt related to real estate held for sale
|
|
|
21,601
|
|
|
|
24,155
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,506,287
|
|
|
$
|
1,411,666
|
|
|
|
|
|
|
|
|
|
|
Senior
unsecured notes restrictions and covenants
AREP
Both issuances of our senior unsecured notes restrict the
payment of cash dividends or distributions, the purchase of
equity interests or the purchase, redemption, defeasance or
acquisition of debt subordinated to the senior unsecured notes.
The notes also restrict the incurrence of debt, or the issuance
of disqualified stock, as defined, with certain exceptions,
provided that we may incur debt or issue disqualified stock if,
immediately after such incurrence or issuance, the ratio of the
aggregate principal amount of all outstanding indebtedness of
AREP and its subsidiaries on a consolidated basis to the
tangible net worth of AREP and its subsidiaries on a
consolidated basis would have been less than 1.75 to 1.0. As of
June 30, 2006, such ratio was less than 1.75 to 1.0. Based
on this ratio, we and AREH could have incurred up to
approximately $1.5 billion of additional indebtedness.
In addition, both issuances of notes require that on each
quarterly determination date we and the guarantor of the notes
(currently only AREH) maintain a minimum ratio of cash flow to
fixed charges each as defined, of 1.5 to 1, for the four
consecutive fiscal quarters most recently completed prior to
such quarterly determination date. For the four quarters ended
June 30, 2006, the ratio of cash flow to fixed charges was
in excess of 1.5 to 1.0.
The notes also require, on each quarterly determination date,
that the ratio of total unencumbered assets, as defined, to the
principal amount of unsecured indebtedness, as defined, be
greater than 1.5 to 1.0 as of the last day of the most recently
completed fiscal quarter. As of June 30, 2006, such ratio
was in excess of 1.5 to 1.0.
Senior
secured 7.85% notes due 2012 ACEP
ACEPs 7.85% senior secured notes due 2012 restrict
the payment of cash dividends or distributions by ACEP, the
purchase of its equity interests, the purchase, redemption,
defeasance or acquisition of debt subordinated to ACEPs
notes and investments as restricted payments.
ACEPs notes also prohibit the incurrence of debt, or the
issuance of disqualified or preferred stock, as defined, by
ACEP, with certain exceptions, provided that ACEP may incur debt
or issue disqualified stock if, immediately after such
incurrence or issuance, the ratio of consolidated cash flow to
fixed charges (each as defined) for the most recently ended four
full fiscal quarters for which internal
20
financial statements are available immediately preceding the
date on which such additional indebtedness is incurred or
disqualified stock or preferred stock is issued would have been
at least 2.0 to 1.0, determined on a pro forma basis giving
effect to the debt incurrence or issuance. As of June 30,
2006, such ratio was in excess of 2.0 to 1.0. The ACEP notes
also restrict the creation of liens, the sale of assets,
mergers, consolidations or sales of substantially all of its
assets, the lease or grant of a license, concession, other
agreements to occupy, manage or use our assets, the issuance of
capital stock of restricted subsidiaries and certain related
party transactions. The ACEP notes allow it to incur
indebtedness, among other things, of up to $50 million
under credit facilities, non-recourse financing of up to
$15 million to finance the construction, purchase or lease
of personal or real property used in its business, permitted
affiliate subordinated indebtedness (as defined), the issuance
of additional 7.85% senior secured notes due 2012 in an
aggregate principal amount not to exceed 2.0 times net cash
proceeds received from equity offerings and permitted affiliate
subordinated debt, and additional indebtedness of up to
$10.0 million.
ACEP
Senior Secured Revolving Credit Facility
Effective May 11, 2006, ACEP, and certain of ACEPs
subsidiaries, as Guarantors, entered into an amended and
restated credit agreement with Wells Fargo Bank N.A., as
syndication agent, Bear Stearns Corporate Lending Inc., as
administrative agent, and certain other lender parties. As of
June 30, 2006, the interest rate on the outstanding
borrowings under the credit facility was 6.76% per annum.
The credit agreement amends and restates, and is on
substantially the same terms, as a credit agreement entered into
as of January 29, 2004. Under the credit agreement, ACEP
will be permitted to borrow up to $60.0 million.
Obligations under the credit agreement are secured by liens on
substantially all of the assets of ACEP and its subsidiaries.
The credit agreement has a term of four years and all amounts
will be due and payable on May 10, 2010. As of
June 30, 2006, there were $60.0 million of borrowings
under the credit agreement. The borrowings were incurred to
finance a portion of the purchase price of the Flamingo Laughlin.
The credit agreement includes covenants that, among other
things, restrict the incurrence of additional indebtedness by
ACEP and its subsidiaries, the issuance of disqualified or
preferred stock, as defined, the creation of liens by ACEP or
its subsidiaries, the sale of assets, mergers, consolidations or
sales of substantially all of ACEPs assets, the lease or
grant of a license or concession, other agreements to occupy,
manage or use ACEPs assets, the issuance of capital stock
of restricted subsidiaries and certain related party
transactions. The credit agreement also requires that, as of the
last date of each fiscal quarter, ACEPs ratio of
consolidated first lien debt to consolidated cash flow not be
more than 1.0 to 1.0. As of June 30, 2006, this ratio was
0.72 to 1.0. As of June 30, 2006, ACEP was in compliance
with each of the covenants.
The restrictions imposed by ACEPs senior secured notes and
the credit facility likely will limit our receiving payments
from the operations of our principal hotel and gaming properties.
NEG
Oil & Gas LLC Senior Secured Revolving Credit
Facility
On December 22, 2005, NEG Oil & Gas entered into a
credit facility, with Citicorp USA, Inc., as administrative
agent, Bear Stearns Corporate Lending Inc., as syndication
agent, and certain other lenders. As of June 30, 2006, the
interest rate on the outstanding borrowings under the credit
facility was 7.38% per annum. Commitment fees for the
unused credit facility range from 0.375% to 0.50% and are
payable quarterly.
Under the credit facility, NEG Oil & Gas will be
permitted to borrow up to the lesser of $500.0 million or
the borrowing base, which is currently set at
$335.0 million. Borrowings under the credit facility are
subject to a borrowing base determination based on, among other
things, the oil and gas properties of NEG Oil & Gas and
its subsidiaries and the reserves and production related to
those properties. The borrowing base is subject to semi-annual
redeterminations, based on engineering reports to be provided by
NEG Oil & Gas by March 31 and September 30 of
each year, beginning March 31, 2006. The credit facility
has a term of five years and all amounts will be due and payable
on December 20, 2010. As of June 30, 2006, NEG
Oil & Gas had remaining borrowing availability under
the credit facility of $12.9 million representing the
borrowing base less $300 million debt outstanding and
outstanding letters of credit of $22.1 million.
The credit facility contains covenants that, among other things,
restrict the incurrence of indebtedness by NEG Oil &
Gas and its subsidiaries, the creation of liens by them, hedging
contracts, mergers and issuances of securities by them and
distributions and investments by NEG Oil & Gas and its
subsidiaries. It also requires NEG Oil & Gas to
maintain: (1) a ratio of consolidated total debt to
consolidated EBITDA (for the four fiscal quarter periods ending
on
21
the date of the consolidated balance sheet used to determine
consolidated total debt), as defined, of not more than 3.5 to
1.0; (2) consolidated tangible net worth, as defined, of
not less than $240 million, plus 50% of consolidated net
income for each fiscal quarter ending after December 31,
2005 for which consolidated net income is positive; and
(3) a ratio of consolidated current assets to consolidated
current liabilities of not less than 1.0 to 1.0. These covenants
may have the effect of limiting distributions by NEG
Oil & Gas. As of June 30, 2006, NEG Oil &
Gas was in compliance with each of the covenants. The
restrictions imposed by the NEG Oil & Gas credit
facility likely will limit our receiving payments from the
operations of our oil and gas properties.
Real
Estate Mortgages Payable
On June 30, 2006, indirect subsidiaries of the Company
engaged in property development and associated resort activities
entered into a $32.5 million loan agreement with Textron
Financial Corp. The loan is secured by a mortgage on the
Companys New Seabury golf course and resort in Mashpee,
Massachusetts. The loan bears interest at the rate of
7.96% per annum and matures in five years with a balloon
payment due of $30.0 million. Annual debt service payments
of $3.0 million are required, which are payable in monthly
installment amounts based on a 25 year amortization
schedule.
WPI
Secured Revolving Credit Agreement
On June 16, 2006, our subsidiary, WestPoint Home, Inc.,
entered into a loan and security agreement with Bank of America,
N.A., as Administrative Agent and lender. Other lenders may be
added from time to time. Under the five-year agreement,
WestPoint Home will be permitted to borrow on a revolving credit
basis up to $250.0 million (subject to a monthly borrowing
base calculation) at any one time outstanding, including a
$75.0 million sub-limit that may be used for letters of
credit. Borrowings under the agreement bear interest, at the
election of WestPoint Home, either at the prime rate adjusted by
an applicable margin ranging from minus 0.25% to plus 0.50% or
LIBOR adjusted by an applicable margin ranging from plus 1.25%
to 2.00%. WestPoint Home pays an unused line fee of 0.25% to
0.275%. Obligations under the agreement are secured by WestPoint
Homes receivables, inventory and certain machinery and
equipment.
The agreement contains covenants including, among others,
restrictions on the incurrence of indebtedness, investments,
redemption payments, distributions, acquisition of stock,
securities or assets of any other entity and capital
expenditures. However, WestPoint Home is not precluded from
effecting any of these transactions if excess availability,
after giving effect to such transaction, meets a minimum
threshold.
As of June 30, 2006, there were no borrowings under the
agreement, but there were outstanding letters of credit of
approximately $33.7 million.
|
|
Note 14.
|
Other
Income (Expense)
|
Unaudited other income (expense), net, is comprised of the
following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Net realized gains on sales of
marketable securities
|
|
$
|
22,855
|
|
|
$
|
5,009
|
|
|
$
|
56,286
|
|
|
$
|
5,009
|
|
Net realized losses on securities
sold short
|
|
|
(27,044
|
)
|
|
|
(10,021
|
)
|
|
|
(32,175
|
)
|
|
|
(10,021
|
)
|
Unrealized gains (losses) on
marketable securities
|
|
|
4,272
|
|
|
$
|
(917
|
)
|
|
|
19,750
|
|
|
|
3,105
|
|
Unrealized gains (losses) on
securities sold short
|
|
|
44,276
|
|
|
|
(15,395
|
)
|
|
|
18,800
|
|
|
|
2,287
|
|
Other
|
|
|
1,763
|
|
|
|
1,504
|
|
|
|
4,932
|
|
|
|
5,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,122
|
|
|
$
|
(19,820
|
)
|
|
$
|
67,593
|
|
|
$
|
6,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 29, 2005, we granted 700,000 nonqualified unit
options to our then chief executive officer. The option
agreement permitted our chief executive officer to purchase up
to 700,000 of our depositary units at an exercise price of
$35 per unit and vested over a period of eight years. On
March 14, 2006, our chief executive officer resigned
22
from that position, became a director and Vice-Chairman of the
Board of API, and was designated as principal executive officer.
These changes in status caused the options to be cancelled in
accordance with their terms.
In accordance with SFAS 123(R) Share Based Payment,
the cancellation required that any previously unrecognized
compensation cost be recognized at the date of cancellation and
accordingly we recorded a compensation charge of
$6.2 million related to the previously unrecognized
compensation cost.
Pursuant to the terms of the preferred units, on
February 8, 2006 we declared our scheduled annual preferred
unit distribution payable in additional preferred units at the
rate of 5% of the liquidation preference per preferred unit of
$10. The distribution was paid on March 31, 2006 to holders
of record as of March 15, 2006. A total of 539,846
additional preferred units were issued. As of June 30,
2006, 11,340,243 preferred units are issued and outstanding. In
March 2006, the number of authorized preferred units was
increased to 11,400,000.
|
|
Note 17.
|
Earnings
Per Limited Partnership Unit
|
Basic earnings per LP unit are based on earnings attributable to
limited partners. Net earnings available for limited partners
are divided by the weighted average number of limited
partnership units outstanding. Diluted earnings per LP unit are
based on earnings before the preferred unit distribution as the
numerator with the denominator based on the weighted average
number of units and equivalent units outstanding assuming
conversion. The preferred units are considered to be equivalent
units.
The following table sets forth the computation of basic and
diluted earnings per LP units (in 000s, except per unit data)
(unaudited).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Attributable to limited partners:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) from
continuing operations
|
|
$
|
67,983
|
|
|
$
|
(5,769
|
)
|
|
$
|
115,929
|
|
|
$
|
18,321
|
|
Add preferred unit distribution(1)
|
|
|
1,389
|
|
|
|
|
|
|
|
2,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before discontinued
operations
|
|
|
69,372
|
|
|
$
|
(5,769
|
)
|
|
|
118,627
|
|
|
|
18,321
|
|
Income from discontinued operations
|
|
|
1,713
|
|
|
|
2,972
|
|
|
|
2,485
|
|
|
|
22,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss)
|
|
$
|
71,085
|
|
|
$
|
(2,797
|
)
|
|
$
|
121,112
|
|
|
$
|
40,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average LP units
outstanding
|
|
|
61,857
|
|
|
|
46,271
|
|
|
|
61,857
|
|
|
|
46,185
|
|
Dilutive effect of redemption of
preferred LP units(2)
|
|
|
2,666
|
|
|
|
|
|
|
|
2,761
|
|
|
|
|
|
Dilutive effect of unit options
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average LP units and
equivalent partnership units outstanding
|
|
|
64,523
|
|
|
|
46,271
|
|
|
|
64,663
|
|
|
|
46,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
1.10
|
|
|
$
|
(0.12
|
)
|
|
$
|
1.87
|
|
|
$
|
0.40
|
|
Income from discontinued operations
|
|
|
0.03
|
|
|
|
0.06
|
|
|
|
0.04
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per LP unit
|
|
$
|
1.13
|
|
|
$
|
(0.06
|
)
|
|
$
|
1.91
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
$
|
1.08
|
|
|
$
|
(0.12
|
)
|
|
$
|
1.83
|
|
|
$
|
0.40
|
|
Income from discontinued operations
|
|
|
0.03
|
|
|
|
0.06
|
|
|
|
0.04
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per LP unit
|
|
$
|
1.11
|
|
|
$
|
(0.06
|
)
|
|
$
|
1.87
|
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes adjustment for interest expense associated with
Preferred LP units distribution (see Note 16). |
23
|
|
|
(2) |
|
As their effect would have been anti-dilutive, 3,904,994 and
3,788,634 units have been excluded from the weighted
average LP units and equivalent partnership units outstanding
for the three and six months ended June 30, 2005,
respectively. |
|
|
Note 18.
|
Asset
Retirement Obligations Oil and Gas
|
Our asset retirement obligations represent expected future costs
to plug and abandon our wells, dismantle facilities, and
reclamate sites at the end of the related assets useful
lives.
As of June 30, 2006 and December 31, 2005, we had
$28.5 million and $24.3 million, respectively, held in
various escrow accounts relating to the asset retirement
obligations for certain offshore properties, which is included
in other non-current assets in the consolidated balance sheet.
The following table summarizes changes in our asset retirement
obligations during the six months ended June 30, 2006 and
the year ended December 31, 2005, respectively (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Beginning of year
|
|
$
|
41,228
|
|
|
$
|
56,524
|
|
Add: Accretion
|
|
|
1,361
|
|
|
|
3,019
|
|
Drilling additions
|
|
|
|
|
|
|
2,067
|
|
Less: Revisions
|
|
|
|
|
|
|
(2,813
|
)
|
Settlements
|
|
|
|
|
|
|
(431
|
)
|
Dispositions
|
|
|
|
|
|
|
(17,138
|
)
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
42,589
|
|
|
$
|
41,228
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 19.
|
Oil and
Gas Derivatives
|
The following is a summary of our commodity price collar
agreements as of June 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
Type of Contract
|
|
Production Month
|
|
Volume Per Month
|
|
Floor
|
|
Ceiling
|
|
|
No cost collars
|
|
July-Dec 2006
|
|
31,000 Bbls
|
|
|
41.65
|
|
|
45.25
|
|
No cost collars
|
|
July-Dec 2006
|
|
16,000 Bbls
|
|
|
41.75
|
|
|
45.40
|
|
No cost collars
|
|
July-Dec 2006
|
|
570,000 MMBTU
|
|
|
6.00
|
|
|
7.25
|
|
No cost collars
|
|
July-Dec 2006
|
|
120,000 MMBTU
|
|
|
6.00
|
|
|
7.28
|
|
No cost collars
|
|
July-Dec 2006
|
|
500,000 MMBTU
|
|
|
4.50
|
|
|
5.00
|
|
No cost collars
|
|
July-Dec 2006
|
|
46,000 Bbls*
|
|
|
60.00
|
|
|
68.50
|
|
No cost collars
|
|
Jan-Dec 2007
|
|
30,000 Bbls
|
|
|
57.00
|
|
|
70.50
|
|
No cost collars
|
|
Jan-Dec 2007
|
|
30,000 Bbls
|
|
|
57.50
|
|
|
72.00
|
|
No cost collars
|
|
Jan-Dec 2007
|
|
930,000 MMBTU
|
|
|
8.00
|
|
|
10.225
|
|
No cost collars
|
|
Jan-Dec 2007
|
|
1,000 Bbls
|
|
|
65.00
|
|
|
87.40
|
|
No cost collars
|
|
Jan-Dec 2007
|
|
7,000 Bbls
|
|
|
65.00
|
|
|
86.00
|
|
No cost collars
|
|
Jan-Dec 2007
|
|
330,000 MMBTU
|
|
|
9.60
|
|
|
12.10
|
|
No cost collars
|
|
Jan-Dec 2007
|
|
100,000 MMBTU
|
|
|
9.55
|
|
|
12.60
|
|
No cost collars
|
|
Jan -Dec 2008
|
|
46,000 Bbls
|
|
|
55.00
|
|
|
69.00
|
|
No cost collars
|
|
Jan-Dec 2008
|
|
750,000 MMBTU
|
|
|
7.00
|
|
|
10.35
|
|
No cost collars
|
|
Jan-Dec 2008
|
|
9,000 Bbls
|
|
|
65.00
|
|
|
81.25
|
|
No cost collars
|
|
Jan-Dec 2008
|
|
70,000 MMBTU
|
|
|
8.75
|
|
|
11.90
|
|
No cost collars
|
|
Jan-Dec 2008
|
|
270,000 MMBTU
|
|
|
8.80
|
|
|
11.45
|
|
No cost collars
|
|
Jan-Dec 2009
|
|
19,000 Bbls
|
|
|
65.00
|
|
|
78.50
|
|
No cost collars
|
|
Jan-Dec 2009
|
|
26,000 Bbls
|
|
|
65.00
|
|
|
77.00
|
|
No cost collars
|
|
Jan-Dec 2009
|
|
330,000 MMBTU
|
|
|
7.90
|
|
|
10.80
|
|
No cost collars
|
|
Jan-Dec 2009
|
|
580,000 MMBTU
|
|
|
7.90
|
|
|
11.00
|
|
24
|
|
|
* |
|
The company participates in a second ceiling at $84.50 on
July-Dec 2006 46,000 Bbls swap. |
We record derivative contracts as assets or liabilities in the
balance sheet at fair value. As of June 30, 2006 and
December 31, 2005, these derivatives were recorded as a
liability of $28.3 million (including a current liability
of $22.2 million) and $85.9 million (including a
current liability of $68.0 million), respectively. The
long-term portion is included in other non-current liabilities.
We have elected not to designate any of these instruments as
hedges for accounting purposes and, accordingly, both realized
and unrealized gains and losses are included in oil and gas
revenues.
|
|
Note 20.
|
Segment
Reporting
|
We report the following six reportable segments: (1) Oil
and Gas; (2) Gaming; (3) Rental Real Estate;
(4) Property Development; (5) Associated Resort
Activities and (6) Home Fashion. Our three real estate
related operating and reportable segments are all individually
immaterial and have been aggregated for purposes of the
accompanying consolidated balance sheets and statements of
operations.
We assess and measure segment operating results based on segment
earnings from operations as disclosed below. Segment earnings
from operations are not necessarily indicative of cash available
to fund cash requirements nor synonymous with cash flow from
operations. As discussed above, the terms of financings for the
Oil and Gas, Gaming, Home Fashion and Property Development
segments impose restrictions on their ability to transfer funds
to us, including restrictions on dividends, distributions, loans
and other transactions.
25
The revenues and net segment operating income for each of the
reportable segments are summarized as follows for the three and
six months ended June 30, 2006 and 2005 (in $000s)
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
86,606
|
|
|
$
|
73,360
|
|
|
$
|
194,898
|
|
|
$
|
89,038
|
|
Gaming
|
|
|
134,780
|
|
|
|
122,568
|
|
|
|
261,498
|
|
|
|
245,235
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental real estate
|
|
|
4,117
|
|
|
|
3,914
|
|
|
|
7,985
|
|
|
|
7,980
|
|
Property development
|
|
|
37,852
|
|
|
|
14,459
|
|
|
|
49,236
|
|
|
|
22,739
|
|
Resort operations
|
|
|
7,096
|
|
|
|
7,082
|
|
|
|
13,178
|
|
|
|
12,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
49,065
|
|
|
|
25,455
|
|
|
|
70,399
|
|
|
|
43,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Fashion
|
|
|
237,148
|
|
|
|
|
|
|
|
480,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
507,599
|
|
|
$
|
221,383
|
|
|
$
|
1,007,433
|
|
|
$
|
377,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net segment operating income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
46,528
|
|
|
$
|
32,427
|
|
|
$
|
111,516
|
|
|
$
|
11,035
|
|
Gaming
|
|
|
15,123
|
|
|
|
16,992
|
|
|
|
34,478
|
|
|
|
35,656
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental real estate
|
|
|
3,139
|
|
|
|
2,823
|
|
|
|
5,812
|
|
|
|
5,649
|
|
Property development
|
|
|
11,876
|
|
|
|
1,194
|
|
|
|
13,284
|
|
|
|
1,289
|
|
Resort operations
|
|
|
(164
|
)
|
|
|
12
|
|
|
|
(346
|
)
|
|
|
(783
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate earnings
|
|
|
14,851
|
|
|
|
4,029
|
|
|
|
18,750
|
|
|
|
6,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Fashion
|
|
|
(48,339
|
)
|
|
|
|
|
|
|
(86,297
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating income
(loss)
|
|
|
28,163
|
|
|
|
53,448
|
|
|
|
78,447
|
|
|
|
52,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holding Company costs(i)
|
|
|
(3,675
|
)
|
|
|
(5,301
|
)
|
|
|
(14,980
|
)
|
|
|
(8,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income
|
|
|
24,488
|
|
|
|
48,147
|
|
|
|
63,467
|
|
|
|
44,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(31,614
|
)
|
|
|
(28,825
|
)
|
|
|
(62,202
|
)
|
|
|
(52,005
|
)
|
Interest income
|
|
|
13,694
|
|
|
|
14,234
|
|
|
|
26,286
|
|
|
|
26,585
|
|
Other income (expense), net
|
|
|
46,122
|
|
|
|
(19,820
|
)
|
|
|
67,593
|
|
|
|
6,132
|
|
Income tax expense
|
|
|
(9,155
|
)
|
|
|
(9,030
|
)
|
|
|
(17,812
|
)
|
|
|
(12,436
|
)
|
Minority interests
|
|
|
25,828
|
|
|
|
615
|
|
|
|
40,951
|
|
|
|
1,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
69,363
|
|
|
$
|
5,321
|
|
|
$
|
118,283
|
|
|
$
|
14,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Holding company costs include general and administrative
expenses and acquisition costs of the holding company. General
and administrative expenses of the segments are included in
their respective operating expenses in the accompanying
statements of earnings. |
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Depreciation, depletion and
amortization (D,D&A) by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
23,654
|
|
|
$
|
24,506
|
|
|
$
|
47,788
|
|
|
$
|
44,809
|
|
Gaming
|
|
|
10,244
|
|
|
|
9,361
|
|
|
|
19,671
|
|
|
|
18,580
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental real estate
|
|
|
416
|
|
|
|
410
|
|
|
|
832
|
|
|
|
1,030
|
|
Property development
|
|
|
104
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
Resort operations
|
|
|
821
|
|
|
|
870
|
|
|
|
1,567
|
|
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
1,341
|
|
|
|
1,280
|
|
|
|
2,503
|
|
|
|
2,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Fashion
|
|
|
9,534
|
|
|
|
|
|
|
|
19,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D,D&A in operating expenses
|
|
|
44,773
|
|
|
|
35,147
|
|
|
|
89,860
|
|
|
|
66,157
|
|
Amortization in interest expense
|
|
|
1,257
|
|
|
|
1,407
|
|
|
|
2,541
|
|
|
|
3,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total D,D&A for continuing
operations
|
|
$
|
46,030
|
|
|
$
|
36,554
|
|
|
$
|
92,401
|
|
|
$
|
69,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
951,112
|
|
|
$
|
958,295
|
|
Gaming
|
|
|
813,403
|
|
|
|
656,941
|
|
Real Estate
|
|
|
485,883
|
|
|
|
442,594
|
|
Home Fashion
|
|
|
685,100
|
|
|
|
772,924
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
2,935,498
|
|
|
|
2,830,754
|
|
Reconciling items (ii)
|
|
|
1,182,417
|
|
|
|
1,135,708
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,117,915
|
|
|
$
|
3,966,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(ii) |
|
Reconciling items relate principally to cash and investments of
the Holding Company. |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
Oil and Gas
|
|
$
|
101,614
|
|
|
$
|
134,017
|
|
Gaming
|
|
|
25,506
|
|
|
|
13,077
|
|
Rental Real Estate
|
|
|
32
|
|
|
|
|
|
Hotel and resort operating
properties
|
|
|
1,224
|
|
|
|
1,418
|
|
Home Fashion
|
|
|
3,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
131,384
|
|
|
$
|
148,512
|
|
|
|
|
|
|
|
|
|
|
27
Our subsidiaries recorded the following income tax expense
attributable to continuing operations for its taxable
subsidiaries for the three and six months ended June 30,
2006 and 2005 (in $000s) (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Current
|
|
$
|
(3,679
|
)
|
|
$
|
(2,488
|
)
|
|
$
|
(9,525
|
)
|
|
$
|
(3,841
|
)
|
Deferred
|
|
|
(5,476
|
)
|
|
|
(6,542
|
)
|
|
|
(8,287
|
)
|
|
|
(8,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9,155
|
)
|
|
$
|
(9,030
|
)
|
|
$
|
(17,812
|
)
|
|
$
|
(12,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our effective income tax rate was 17.4% and 65.7% for the three
months ended June 30, 2006 and 2005, respectively. Our
effective income tax rate was 18.7% and 49.1% for the six months
ended June 30, 2006 and 2005, respectively. The difference
between the effective tax rate and the statutory federal rate of
35% is principally due to income or losses from partnership
entities in which taxes are the responsibility of the partners,
and losses incurred by WPI for which no tax benefit was
recognized.
|
|
Note 22.
|
Commitments
and Contingencies
|
We and our subsidiaries are from time to time parties to various
legal proceedings arising out of our businesses. We believe
however, that other than the proceedings discussed below, there
are no proceedings pending or threatened against us which, if
determined adversely, would have a material adverse effect on
our business, financial condition, results of operations or
liquidity.
GB
Holdings
On April 4, 2006, the Official Committee of Unsecured
Creditors, or the Committee, of GB Holdings, Inc., or GBH, filed
a proposed Plan of Reorganization, or the Plan, and Disclosure
Statement in which they indicated that they intend to challenge
the transaction in July 2004 that, among other things, resulted
in the transfer of The Sands to ACE Gaming, a wholly owned
subsidiary of Atlantic Coast, the exchange of certain of
GBHs notes for 3% senior secured convertible notes of
Atlantic Coast, and our owning 58.2% of the outstanding Atlantic
Coast shares of common stock. As of June 30, 2006, we owned
58.2% of the outstanding stock of Atlantic Coast and GBH owned
41.7% of such stock. We also own approximately 77.5% of the
outstanding shares of common stock of GBH. If the Committee
succeeds in challenging these transactions, they indicated that
they intend to seek to rescind the July 2004 transactions and
attempt to equitably subordinate, in bankruptcy, our claims
against GBH to the claims of other creditors. Under the Plan,
they propose to place all of the assets of GBH in a Liquidating
Trust for the benefit of the creditors. The Trust would be
managed by a five-member board, four of whom would be appointed
by the other creditors and one of whom would be appointed by a
limited group of equity holders of GBH that would not include
us. The assets that would be placed in the Trust include the
2,882,938 shares of Atlantic Coast stock owned by GBH as
well as any litigation claims owned by the debtor or the estate,
including any claims challenging the July 2004 transactions. We
filed an objection to the Disclosure Statement on several
grounds. At a hearing held on May 31, 2006, the Bankruptcy
Court directed the Committee to make several revisions to their
Disclosure Statement before the Disclosure Statement and the
Committees Plan could be distributed to GBHs
creditors and stockholders. The Committee has yet to make such
revisions.
We cannot predict the outcome of the GBH Bankruptcy proceedings
or the potential impact on us.
WPI
litigation
In November and December 2005, the U.S. District Court for
the Southern District of New York rendered a decision in
Contrarian Funds Inc. v. WestPoint Stevens, Inc.
et al., and issued orders reversing certain provisions
of the bankruptcy court order pursuant to which we acquired our
ownership of a majority of the common stock of a newly formed
company, WPI. WPI acquired substantially all of the assets of
WPS. On April 13, 2006, the Bankruptcy Court entered a
remand order which provides, among other things, that all of the
shares and rights to acquire shares of WPI issued to us and the
other first lien lenders or held in escrow pursuant to court
order constituted replacement collateral, be sold
other than 5,250,000 shares that we acquired for cash. The
5,250,000 shares represent approximately 27% of the
19,498,389 shares of WPI now outstanding. According
28
to the remand order, we would share pro rata with the
other first lien lenders in proceeds realized from the
disposition of the replacement collateral and, to the extent
there is remaining replacement collateral after satisfying first
lien lender claims, we would share pro rata with the
other second lien lenders in any further proceeds. We were
holders of approximately 39.99% of the outstanding first lien
debt and approximately 51.21% of the outstanding second lien
debt. On April 13, 2006, the Bankruptcy Court also entered
an order staying the remand order pending its appeal. The other
first lien lenders have filed a notice of appeal of the remand
order, and have filed a motion with the District Court to lift
the stay entered by the Bankruptcy Court. We have filed a notice
of appeal of the remand order and an objection to the motion to
lift the stay. No hearing has been scheduled on the motion of
the other first lien lenders to lift the stay, and no order has
been entered by the District Court on that motion. A hearing on
the appeals of the remand order has been scheduled by the
District Court for September, 20, 2006. We also intend to
appeal the prior order of the District Court that modified and
vacated portions of the original sale order as entered by the
Bankruptcy Court.
We cannot predict the outcome of these proceedings or the
ultimate impact on our investment in WPI or the business
prospects of WPI.
|
|
Note 23.
|
Subsequent
Events
|
Declaration
of Distribution on Depositary Units
On August 7, 2006, the Board of Directors approved payment
of a quarterly cash distribution of $0.10 per unit on our
depositary units in the third quarter of 2006 consistent with
the distribution policy adopted in 2005. The distribution will
be paid on September 5, 2006 to depositary unitholders of
record at the close of business on August 21, 2006.
Oil &
Gas Property Acquisition
On July 10, 2006, our Oil and Gas segment acquired an
additional interest in its East Breaks 160 offshore block from
BP America for approximately $14.1 million which increased
our percentage interest in East Breaks 160 to approximately 66%.
As a condition to closing the acquisition, we were required to
issue a $16 million letter of credit to BP America to
collateralize the potential plugging and abandonment liability
associated with the offshore block. The purchase price was paid
from cash on hand and the letter of credit reduced the
availability under the Oil and Gas senior secured revolving
credit facility to approximately $12.9 million.
29
|
|
ITEM 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Managements discussion and analysis of financial condition
and results of operations is comprised of the following sections:
1. Overview
2. Results of Operations
|
|
|
|
|
Consolidated Financial Results
|
|
|
|
Oil and Gas
|
|
|
|
Gaming
|
|
|
|
Real Estate
|
|
|
|
Home Fashion
|
|
|
|
Corporate and Investments
|
3. Liquidity and Capital Resources
|
|
|
|
|
Consolidated Financial Results
|
|
|
|
Oil and Gas
|
|
|
|
Gaming
|
|
|
|
Real Estate
|
|
|
|
Home Fashion
|
4. Certain Trends and Uncertainties
Overview
American Real Estate Partners, L.P., or AREP, is a master
limited partnership formed in Delaware on February 17,
1987. We are a diversified holding company owning subsidiaries
engaged in the following operating businesses: (1) Oil and
Gas; (2) Gaming; (3) Real Estate; and (4) Home
Fashion. Our primary business strategy is to continue to grow
and enhance the value of our businesses. We may also seek to
acquire additional businesses that are distressed or in
out-of-favor
industries and will consider the divestiture of businesses from
which we do not foresee adequate future cash flow or
appreciation potential. In addition, we invest our available
liquidity in debt and equity securities with a view to enhancing
returns as we continue to assess further acquisitions of
operating businesses.
We own a 99% limited partner interest in American Real Estate
Holdings Limited Partnership, or AREH. AREH and its subsidiaries
hold our investments and substantially all of our operations are
conducted through AREH and its subsidiaries. American Property
Investors, Inc., or API, owns a 1% general partner interest in
both us and AREH, representing an aggregate 1.99% general
partner interest in us and AREH. API is owned and controlled by
Carl C. Icahn. As of June 30, 2006, affiliates of
Mr. Icahn beneficially owned approximately 90% of our
outstanding depositary units and approximately 86.5% of our
outstanding preferred units.
In addition to our Oil and Gas, Gaming, Real Estate and Home
Fashion segments, we discuss the Holding Company. The Holding
Company includes the unconsolidated results of AREH and AREP
and, principally, includes investment activity and expenses
associated with the activities of a holding company.
Results
of Operations
Overview
The key factors affecting the financial results for the three
months ended June 30, 2006 compared to the three months
ended June 30, 2005 were:
|
|
|
|
|
Increase in operating income of $14.1 million from Oil and
Gas attributable primarily to an increase in unrealized gains on
derivative positions of $13.4 million;
|
|
|
|
Increase in operating income of $10.7 million from Real
Estate property development attributable primarily to increased
sales activity at our New Seabury and Westchester, New York
properties;
|
30
|
|
|
|
|
Operating losses of $48.3 million from our Home Fashion
segment, of which $20.5 million relates to restructuring
costs, consisting primarily of impairment charges in connection
with the closing of plants; offset in part by $25.7 million
relating to the minority interests share in WPIs
losses.
|
|
|
|
Increase in net realized and unrealized gains on investments of
$65.7 million.
|
The key factors affecting the financial results for the six
months ended June 30, 2006 compared to the six months ended
June 30, 2005 were:
|
|
|
|
|
Increase in operating income of $100.5 million from Oil and
Gas attributable primarily to an increase in unrealized gains on
derivative positions of $89.4 million, partially offset by
an increase in realized derivative losses of $10.7 million;
|
|
|
|
Increase in operating income of $12.0 million from Real
Estate property development, attributable primarily to
$30.4 million of additional sales at our New Seabury and
Westchester, New York properties;
|
|
|
|
Operating losses of $86.3 million from our Home Fashion
segment, of which $30.3 million relates to restructuring
costs, consisting primarily of impairment charges in connection
with the closing of plants, offset in part by $40.8 million
relating to the minority interests share in WPIs
losses;
|
|
|
|
Increase in Holding Company costs of $10.1 million
principally due to a $6.2 million non-cash compensation
charge related to the cancellation of unit options and higher
legal and professional fees;
|
|
|
|
Increase in net realized and unrealized gains on investments of
$62.3 million; and
|
|
|
|
Reduced income from discontinued operations resulting from a
$19.9 million decline in gains on sales of net lease
properties.
|
Consolidated
Results
Three
months ended June 30, 2006 compared to three months ended
June 30, 2005.
Revenues for the second quarter of 2006 increased by
$286.2 million, or 129.3%, as compared to the second
quarter of 2005. This increase reflects the inclusion of WPI
($237.1 million), and increases of $13.2 million from
Oil and Gas, $12.2 million from Gaming and
$23.6 million from Real Estate.
Operating income for the second quarter of 2006 decreased by
$23.7 million, or 49.1%, as compared to the second quarter
of 2005. The decrease results primarily from the inclusion of
operating losses from WPI of $48.3 million, of which
$20.5 million relates to restructuring costs. Second
quarter 2006 results were benefited by improved Oil and Gas and
Real Estate operating performance contributing to increases in
operating income for these segments of $14.1 million and
$10.8 million, respectively.
Interest expense for the second quarter of 2006 increased by
$2.8 million, or 9.7%, as compared to the second quarter of
2005. This increase is primarily due to an increase in
borrowings under credit facilities and margin interest expense
incurred in the holding companys investment brokerage
accounts. Other income increased by $65.9 million from the
prior year, primarily reflecting net realized and unrealized
gains on investments.
Six
months ended June 30, 2006 compared to six months ended
June 30, 2005.
Revenues for the first six months of 2006 increased by
$629.8 million, or 166.7%, as compared to the first six
months of 2005. This increase reflects the inclusion of WPI
($480.6 million), and increases of $105.9 million for
Oil and Gas, $16.3 million for Gaming and
$27.0 million for Real Estate.
Operating income for the first six months of 2006 increased by
$18.8 million, or 42.2%, as compared to the first six
months of 2005. The increase is primarily attributable to
increases in operating income for Oil and Gas and Real Estate of
$100.5 million and $12.6 million, respectively, offset
by the inclusion of $86.3 of operating losses from WPI, of which
$30.3 million relates to restructuring costs, and an
increase in Holding Company costs of $10.1 million. The
operating losses from WPI are offset, in part, by
$40.8 million relating to the WPI minority interests
share of such losses.
Interest expense for the first six months of 2006 increased by
$10.2 million, or 19.6%, as compared to the first six
months of 2005. This increase includes a full six months in 2006
of interest on the $480 million of senior notes issued on
February 7, 2005, an increase in borrowings under credit
facilities, as well as margin interest expense
31
incurred in the holding companys investment brokerage
accounts. Other income (expense), net increased by
$61.5 million from the prior period, primarily reflecting
net realized and unrealized gains on investments.
Oil
and Gas
The following table summarizes key operating data for the Oil
and Gas segment (in $000s) (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Gross oil and gas revenues
|
|
$
|
71,135
|
|
|
$
|
69,662
|
|
|
$
|
152,318
|
|
|
$
|
125,925
|
|
Realized derivative losses
|
|
|
(6,600
|
)
|
|
|
(4,834
|
)
|
|
|
(18,687
|
)
|
|
|
(7,967
|
)
|
Unrealized derivative gains
(losses)
|
|
|
20,359
|
|
|
|
6,936
|
|
|
|
57,611
|
|
|
|
(31,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas revenues
|
|
|
84,894
|
|
|
|
71,764
|
|
|
|
191,242
|
|
|
|
86,125
|
|
Plant revenues
|
|
|
1,712
|
|
|
|
1,596
|
|
|
|
3,656
|
|
|
|
2,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
86,606
|
|
|
|
73,360
|
|
|
|
194,898
|
|
|
|
89,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas operating expenses
|
|
|
13,684
|
|
|
|
12,175
|
|
|
|
27,729
|
|
|
|
25,539
|
|
Depreciation, depletion and
amortization
|
|
|
23,654
|
|
|
|
24,506
|
|
|
|
47,788
|
|
|
|
44,809
|
|
General and administrative expenses
|
|
|
2,740
|
|
|
|
4,252
|
|
|
|
7,865
|
|
|
|
7,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost and expenses
|
|
|
40,078
|
|
|
|
40,933
|
|
|
|
83,382
|
|
|
|
78,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
46,528
|
|
|
$
|
32,427
|
|
|
$
|
111,516
|
|
|
$
|
11,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2006 and 2005, natural
gas comprised 63% and 68% of gross oil and gas revenues,
respectively. For the six months ended June 30, 2006 and
2005, natural gas comprised 65% and 66% of gross oil and gas
revenues, respectively.
32
Other data related to Oil and Gas operations is as follows
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months Ended
|
|
|
|
Ended June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Production data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBbls)
|
|
|
350
|
|
|
|
378
|
|
|
|
718
|
|
|
|
731
|
|
Natural gas (MMcf)
|
|
|
7,316
|
|
|
|
6,970
|
|
|
|
14,720
|
|
|
|
12,993
|
|
Natural gas liquids (MBbls)
|
|
|
45
|
|
|
|
95
|
|
|
|
146
|
|
|
|
186
|
|
Natural gas equivalents (MMcfe)
|
|
|
9,688
|
|
|
|
9,810
|
|
|
|
19,904
|
|
|
|
18,492
|
|
Average Sales
Price(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil average sales price (per Bbl)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price including realized gains or
losses on derivative contracts
|
|
$
|
59.12
|
|
|
$
|
47.56
|
|
|
$
|
57.29
|
|
|
$
|
47.88
|
|
Price excluding realized gains or
losses on derivative contracts
|
|
|
70.22
|
|
|
|
51.87
|
|
|
|
66.27
|
|
|
|
51.25
|
|
Natural gas average sales price
(per Mcf)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price including realized gains or
losses on derivative contracts
|
|
|
5.77
|
|
|
|
6.31
|
|
|
|
5.91
|
|
|
|
5.95
|
|
Price excluding realized gains or
losses on derivative contracts
|
|
|
6.14
|
|
|
|
6.77
|
|
|
|
6.74
|
|
|
|
6.38
|
|
Natural gas liquids (per Bbl)
|
|
|
36.54
|
|
|
|
29.93
|
|
|
|
37.64
|
|
|
|
30.17
|
|
Expense per Mcfe:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil and gas operating
expenses
|
|
$
|
1.41
|
|
|
$
|
1.24
|
|
|
$
|
1.39
|
|
|
$
|
1.38
|
|
Depreciation, depletion and
amortization
|
|
|
2.44
|
|
|
|
2.50
|
|
|
|
2.40
|
|
|
|
2.42
|
|
General and administrative expenses
|
|
|
.28
|
|
|
|
.43
|
|
|
|
.40
|
|
|
|
.41
|
|
|
|
|
(1) |
|
Excludes the effect of unrealized gains and losses on derivative
contracts. |
Three
months ended June 30, 2006 compared to the three months
ended June 30, 2005
Gross oil and gas revenues for the second quarter of 2006,
before realized and unrealized derivative gains and losses,
increased $1.5 million, or 2.1%, as compared to the second
quarter of 2005. The increase is primarily attributable to
higher average sales prices ($3.2 million) offset by a
decrease in product volumes ($1.7 million). Including the
effects of realized and unrealized derivative gains and losses,
oil and gas revenues increased 18.3% to $84.9 million in
the second quarter of 2006 from $71.8 million for the
second quarter of 2005. Unrealized derivative gains in the
second quarter of 2006 were $20.4 million compared to
unrealized derivative gains of $6.9 million in the prior
year period. Unrealized derivative gains and losses resulted
from
mark-to-market
adjustments on our unsettled positions at the end of each period.
During the second quarter of 2006, our average realized price of
natural gas, including the effects of realized derivative
losses, decreased by 8.6% to $5.77 per Mcf from
$6.31 per Mcf for the second quarter of 2005. Our natural
gas production volume increased by 0.3 Bcf, or 5.0%, to
7.3 Bcf compared to 7.0 Bcf in second quarter of 2005. Our
natural gas production volume increased primarily due to our
successful drilling activity.
During the second quarter of 2006, our average realized price of
oil, including the effects of realized derivative losses,
increased by 24.3% to $59.12 per Bbl from $47.56 per
Bbl for the second quarter of 2005. Our oil production volume
decreased by 28 MBbls, or 7.4%, to 350 MBbls compared
to 378 MBbls in the second quarter of 2005. Our oil
production volume decreased primarily due to third party
pipeline repairs and maintenance which shut down our production
facility in South Texas for approximately one month during the
quarter.
Oil and gas operating expenses for the second quarter of 2006
increased $1.5 million, or 12.4%, to $13.7 million
compared to $12.2 million for the second quarter of 2005.
Oil and gas operating expenses per Mcfe increased $0.17, or
13.7%, compared to the second quarter of 2005. The increase in
oil and gas operating expenses is primarily due to an overall
increase in costs in the oil and gas industry combined with an
increase in the
33
number of wells as a result of our drilling activity. This
increase is partially offset by severance tax refunds of
$1.4 million that we received in 2006 from drilling wells
that qualified for severance tax exemptions.
Depletion, depreciation and amortization, or DD&A, for the
second quarter of 2006 decreased $0.8 million, or 3.5%, to
$23.7 million compared to $24.5 million during the
second quarter of 2005. DD&A per Mcfe decreased $0.06, or
2.4%, to $2.44 per Mcfe as compared to $2.50 per Mcfe
in the second quarter of 2005.
General and administrative expenses, or G&A, for the second
quarter of 2006 decreased $1.6 million, or 35.6%, to
$2.7 million as compared to $4.3 million during the
second quarter of 2005. G&A per Mcfe decreased $0.15, or
34.9%, to $0.28 for the quarter compared to $0.43 for the second
quarter of 2005. The decrease in general and administrative
expenses was primarily attributable a reduction in franchise
taxes and legal expenses compared to 2005.
Six
months ended June 30, 2006 compared to the six months ended
June 30, 2005
Gross oil and gas revenues for the first half of 2006, before
realized and unrealized derivative gains and losses, increased
$26.4 million, or 21.0%, as compared to the first half of
2005. The increase is primarily attributable to an increase in
volume ($9.3 million) and an increase in average sales
price ($17.1 million). Including the effects of realized
and unrealized derivative gains and losses, oil and gas revenues
increased 122.1% to $191.2 million in the first six months
of 2006 from $86.1 million in the first half of 2005.
Unrealized derivative gains in 2006 were $57.6 million
compared to unrealized derivative losses of $31.8 million
in 2005. Unrealized derivative gains and losses resulted from
mark-to-market
adjustments on our unsettled positions at the end of each period.
During the first half of 2006, our average realized price of
natural gas, including the effects of realized derivative
losses, decreased by 0.7% to $5.91 per Mcf from $5.95 per
Mcf for the six months ended June 30, 2005. Our natural gas
production volume increased by 1.7 Bcf, or 13.3%, to
14.7 Bcf compared to 13.0 Bcf in the six months ended
June 30, 2005. Our natural gas production volume increased
primarily due to our successful drilling activity.
During the first half of 2006, our average realized price of
oil, including the effects of realized derivative losses,
increased by 19.7% to $57.29 per Bbl from $47.88 per
Bbl over the same period in 2005. Our oil production volume
decreased by 13 MBbls, or 1.8%, to 718 MBbls compared
to 731 MBbls in the six months ended June 30, 2005.
Our oil production volume decreased primarily due to third party
pipeline repairs and maintenance which shut in our production
facility in South Texas for approximately one month during the
second quarter of 2006.
Oil and gas operating expenses increased $2.2 million, or
8.6%, to $27.7 million for the first half of 2006 compared
to $25.5 million for first half of 2005. Oil and gas
operating expenses per Mcfe increased $.01, or 0.7%, compared to
the first half of 2005. The increase in oil and gas operating
expenses is primarily due to an overall increase in costs in the
oil and gas industry combined with an increase in the number of
wells as a result of our drilling activity. This increase is
partially offset by severance tax refunds of $3.3 million
that we received in 2006 from drilling wells that qualified for
severance tax exemptions.
Depletion, depreciation and amortization increased
$3.0 million, or 6.6%, to $47.8 million during the
first half of 2006 as compared to $44.8 million during the
first half of 2005. DD&A per Mcfe decreased $0.02, or 0.8%,
to $2.40 per Mcfe as compared to $2.42 in the first half of 2005.
General and administrative expenses increased $0.2 million,
or 2.7%, to $7.9 million during the first half of 2006 as
compared to $7.7 million during the first half of 2005.
G&A per Mcfe decreased $0.01, or 2.4%, to $0.40 for the
first half of 2006 compared to $0.41 for the prior year period.
The increase in general and administrative expenses was
primarily attributable to the payment of employee bonuses in the
first half of 2006 offset by a decrease in franchise taxes and
legal expenses.
34
Gaming
The following table summarizes the key operating data for our
gaming segment for the periods indicated (in $000s) (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
$
|
89,190
|
|
|
$
|
81,168
|
|
|
$
|
174,562
|
|
|
$
|
166,238
|
|
Hotel
|
|
|
22,025
|
|
|
|
18,602
|
|
|
|
42,346
|
|
|
|
36,689
|
|
Food and beverage
|
|
|
25,024
|
|
|
|
23,307
|
|
|
|
47,499
|
|
|
|
45,249
|
|
Tower, retail and other income
|
|
|
10,000
|
|
|
|
10,241
|
|
|
|
18,757
|
|
|
|
19,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross revenues
|
|
|
146,239
|
|
|
|
133,318
|
|
|
|
283,164
|
|
|
|
267,294
|
|
Less promotional allowances
|
|
|
11,459
|
|
|
|
10,750
|
|
|
|
21,666
|
|
|
|
22,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
134,780
|
|
|
|
122,568
|
|
|
|
261,498
|
|
|
|
245,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
|
30,771
|
|
|
|
27,595
|
|
|
|
58,617
|
|
|
|
55,322
|
|
Hotel
|
|
|
9,261
|
|
|
|
8,033
|
|
|
|
17,332
|
|
|
|
14,759
|
|
Food and beverage
|
|
|
17,243
|
|
|
|
14,842
|
|
|
|
32,521
|
|
|
|
28,784
|
|
Other operating expenses
|
|
|
4,453
|
|
|
|
4,324
|
|
|
|
8,414
|
|
|
|
8,171
|
|
Selling, general and administrative
|
|
|
47,685
|
|
|
|
41,421
|
|
|
|
90,465
|
|
|
|
83,963
|
|
Depreciation and amortization
|
|
|
10,244
|
|
|
|
9,361
|
|
|
|
19,671
|
|
|
|
18,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,657
|
|
|
|
105,576
|
|
|
|
227,020
|
|
|
|
209,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
15,123
|
|
|
$
|
16,992
|
|
|
$
|
34,478
|
|
|
$
|
35,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As disclosed in Note 3 to our consolidated financial
statements, we acquired the Flamingo Laughlin on May 19,
2006. Net revenues and operating loss for Flamingo Laughlin
through June 30, 2006 were $11.3 million and
$1.0 million, respectively. These amounts are included in
the table above. The results of operations discussed below
refers to our gaming properties excluding the results of
Flamingo Laughlin.
Three
months ended June 30, 2006 compared to three months ended
June 30, 2005
Gross revenues increased to $133.6 million, or 0.2%, from
the second quarter of 2006 compared to $133.3 million for
the second quarter of 2005. Nevada and Atlantic City gross
revenues increased 0.7% and decreased 0.8%, respectively.
Casino revenues increased to $81.6 million, or 0.5%, for
the second quarter of 2006 compared to $81.2 million for
the second quarter of 2005. Slot machine, table games and other
casino revenues were $63.0 million, $16.4 million and
$2.2 million, respectively, compared to $64.5 million,
$14.7 million and $2.0 million, respectively, for the
second quarter of 2006 compared to the second quarter of 2005.
The increase was primarily due to an increase in slot and table
games hold percentage offset by reduced coin-in and anticipated
disruptions at the Arizona Charlies location in Boulder
resulting from our renovations to expand the casino floor. The
renovations were completed in July 2006. Nevada and
Atlantic City casino revenues increased 0.5% and 0.6%,
respectively.
Non-casino revenues decreased to $52.0 million, or 0.4%,
for the second quarter of 2006 compared to $52.3 million
for the second quarter of 2005. Hotel revenues increased by
$1.2 million as a result of increased occupancy, which was
offset by decreased food and beverage and other revenues. Nevada
and Atlantic City non-casino revenues increased 0.9% and
decreased 6.3%, respectively.
Promotional allowances decreased to $10.1 million, or 6.5%,
for the second quarter of 2006, from $10.8 million for the
second quarter of 2005. The decrease was primarily due to
redirecting our Atlantic City spending to more profitable
players which was partially offset by increased expenses for our
casino player acquisition program in Nevada.
35
Casino operating expenses increased to $27.8 million, or
0.7%, for the second quarter of 2006, compared to
$27.6 million for the second quarter of 2005. This increase
was primarily due to increased participation expense and labor
costs in Nevada, partially offset by decreased labor costs and
reduced participation expense in Atlantic City.
Non-casino operating expenses increased to $27.8 million,
or 2.2%, for the second quarter of 2006 compared to
$27.2 million for the second quarter of 2005. The increase
was primarily due to labor, services and guest relations costs
as a result of increased hotel occupancy and union benefits.
Selling, general and administrative expenses increased to
$42.9 million, or 3.7%, for the second quarter of 2006
compared to $41.4 million for the second quarter of 2005.
The increase was primarily due to increases in payroll and
marketing expenses in Nevada partially offset by reductions in
marketing and insurance expenses in Atlantic City.
Six
months ended June 30, 2006 compared to six months ended
June 30, 2005
Gross revenues increased to $270.5 million, or 1.2%, for
the first half of 2006 compared to $267.3 million for the
first half of 2005. Nevada and Atlantic City gross revenues
increased 2.1% and decreased 0.4%, respectively.
Casino revenues increased to $167.0 million, or 0.5%, for
the first half of 2006 compared to $166.2 million for the
first half of 2005. Slot machine, table games and other casino
revenues were $125.8 million, $36.0 million and
$5.2 million, respectively, compared to
$128.4 million, $32.3 million and $5.5 million,
respectively, for the first half of 2006 compared to the first
half of 2005. The increase was primarily due to an increase in
slot and table games hold percentage offset by reduced coin-in.
Nevada and Atlantic City casino revenues increased 0.5% and
0.4%, respectively.
Non-casino revenues increased to $103.5 million, or 2.4%,
for the first half of 2006 compared to $101.4 million for
the first half of 2005. Hotel revenues increased by
$3.5 million as a result of increased occupancy, which was
offset by decreased food and beverage and other revenues. Nevada
and Atlantic City non-casino revenues increased 3.7% and
decreased 3.5%, respectively.
Promotional allowances decreased to $20.3 million, or 8.1%,
for the first half of 2006 compared to $22.2 million for
the first half of 2005. The decrease was primarily due to
redirecting our Atlantic City spending to more profitable
players which was partially offset by increased expenses for our
casino player acquisition program in Nevada.
Casino operating expenses increased to $55.7 million, or
0.7%, for the first half of 2006 compared to $55.3 million
for the first half of 2005. This increase was primarily due to
increased participation expense and labor costs in Nevada,
partially offset by decreased labor costs and reduced
participation expense in Atlantic City.
Non-casino operating expenses increased to $55.1 million,
or 6.6%, for the first half of 2006 compared to
$51.7 million for the first half of 2005. The increase was
primarily due to labor, services and guest relations costs as a
result of increased hotel occupancy and union benefits.
Selling, general and administrative expenses increased to
$85.2 million, or 1.4%, for the first half of 2006 compared
to $84.0 million for the first half of 2005. The increase
was primarily due to increases in payroll and marketing expenses
in Nevada partially offset by reductions in marketing and
insurance expenses in Atlantic City.
36
Results
by Location
The following is an analysis of revenue and operating income, by
geographical location, (including the Flamingo Laughlin), for
our Gaming segment (in $000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nevada
|
|
$
|
93,124
|
|
|
$
|
81,509
|
|
|
$
|
179,069
|
|
|
$
|
164,347
|
|
Atlantic City
|
|
|
41,656
|
|
|
|
41,059
|
|
|
|
82,429
|
|
|
|
80,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gaming
|
|
$
|
134,780
|
|
|
$
|
122,568
|
|
|
$
|
261,498
|
|
|
$
|
245,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nevada
|
|
$
|
14,681
|
|
|
$
|
17,757
|
|
|
$
|
33,304
|
|
|
$
|
37,797
|
|
Atlantic City
|
|
|
442
|
|
|
|
(765
|
)
|
|
|
1,174
|
|
|
|
(2,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gaming
|
|
$
|
15,123
|
|
|
$
|
16,992
|
|
|
$
|
34,478
|
|
|
$
|
35,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2005, we began to incur operating losses relating to the
operation of The Sands, one of the casinos included in our
Gaming segment. Although those operating losses have recently
been eliminated and The Sands has continued to generate positive
cash flow, there can be no assurance that our efforts will
continue to be successful. Accordingly, we continue to evaluate
whether there is an impairment under SFAS No. 144. In
the event that a change in operations results in a future
reduction of cash flows, we may determine that an impairment
under SFAS No. 144 has occurred at The Sands, and an
impairment charge may be required. The carrying value of
property, plant and equipment of The Sands at June 30, 2006
was $141.6 million.
Real
Estate
Our real estate activities comprise three segments: rental real
estate, property development, and associated resort activities.
The operating performance of the three segments was as follows
(in $000s) (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income on financing leases
|
|
$
|
1,715
|
|
|
$
|
1,801
|
|
|
$
|
3,450
|
|
|
$
|
3,767
|
|
Rental income
|
|
|
2,402
|
|
|
|
2,113
|
|
|
|
4,535
|
|
|
|
4,213
|
|
Property development
|
|
|
37,852
|
|
|
|
14,459
|
|
|
|
49,236
|
|
|
|
22,739
|
|
Resort operations
|
|
|
7,096
|
|
|
|
7,082
|
|
|
|
13,178
|
|
|
|
12,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
49,065
|
|
|
|
25,455
|
|
|
|
70,399
|
|
|
|
43,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental real estate
|
|
|
978
|
|
|
|
1,091
|
|
|
|
2,173
|
|
|
|
2,331
|
|
Property development
|
|
|
25,976
|
|
|
|
13,265
|
|
|
|
35,952
|
|
|
|
21,450
|
|
Resort operations
|
|
|
7,260
|
|
|
|
7,070
|
|
|
|
13,524
|
|
|
|
13,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
34,214
|
|
|
|
21,426
|
|
|
|
51,649
|
|
|
|
37,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
14,851
|
|
|
$
|
4,029
|
|
|
$
|
18,750
|
|
|
$
|
6,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
Rental
Real Estate
We market portions of our commercial real estate portfolio for
sale. Unaudited sale activity was as follows (in $000s, except
unit data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Six Month Ended June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Properties sold
|
|
|
4
|
|
|
|
7
|
|
|
|
8
|
|
|
|
11
|
|
Proceeds received
|
|
$
|
7,354
|
|
|
$
|
4,856
|
|
|
$
|
8,327
|
|
|
$
|
48,320
|
|
Mortgage debt repaid
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,702
|
|
Total gain recorded
|
|
$
|
1,308
|
|
|
$
|
2,644
|
|
|
$
|
1,559
|
|
|
$
|
15,844
|
|
Gain recorded in operations
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
186
|
|
Gain recorded in discontinued
operations(i)
|
|
$
|
1,308
|
|
|
$
|
2,644
|
|
|
$
|
1,559
|
|
|
$
|
15,658
|
|
|
|
|
(i) |
|
A gain of $5.7 million on the sale of resort properties was
recognized in the six months ended June 30, 2005 in
addition to gains on the rental portfolio. |
Three
months ended June 30, 2006 compared to the three months
ended June 30, 2005
Revenues increased to $4.1 million, or 5.2%, in the second
quarter of 2006 from $3.9 million in the second quarter of
2005. The increase was primarily attributable to leasing of
previously vacant space. Operating expenses decreased to
$1.0 million, or 10.3%, in the second quarter of 2006, from
$1.1 million in the second quarter of 2005, primarily due
to decreased environmental expenses.
Six
months ended June 30, 2006 compared to the six months ended
June 30, 2005
Revenues were $8.0 million in both the first half of 2006
and 2005. Increased rents in 2006 were offset by increased
financing lease amortization and the sale of a financing lease
property in 2005. Operating expenses decreased to
$2.2 million, or 6.8%, in the first half of 2006 from
$2.3 million in the first half of 2005, primarily due to
decreased environmental expenses.
Property
Development
Property development sales activity was as follows (in $000s
except unit data) (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
Units sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Seabury, Massachusetts
|
|
|
20
|
|
|
|
1
|
|
|
|
30
|
|
|
|
1
|
|
Grand Harbor/Oak Harbor, Florida
|
|
|
6
|
|
|
|
5
|
|
|
|
8
|
|
|
|
11
|
|
Falling Waters, Florida
|
|
|
9
|
|
|
|
23
|
|
|
|
9
|
|
|
|
47
|
|
Westchester, New York
|
|
|
6
|
|
|
|
3
|
|
|
|
6
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
32
|
|
|
|
53
|
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Seabury, Massachusetts
|
|
$
|
21,352
|
|
|
$
|
423
|
|
|
$
|
30,385
|
|
|
$
|
423
|
|
Grand Harbor/Oak Harbor, Florida
|
|
|
4,123
|
|
|
|
3,250
|
|
|
|
6,444
|
|
|
|
6,673
|
|
Falling Waters, Florida
|
|
|
2,261
|
|
|
|
4,212
|
|
|
|
2,261
|
|
|
|
9,068
|
|
Westchester, New York
|
|
|
10,116
|
|
|
|
6,574
|
|
|
|
10,146
|
|
|
|
6,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,852
|
|
|
$
|
14,459
|
|
|
$
|
49,236
|
|
|
$
|
22,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
Three
months ended June 30, 2006 compared to the three months
ended June 30, 2005
Revenues increased to $37.9 million, or 161.8%, in the
second quarter of 2006 from $14.5 million in the second
quarter of 2005. This increase was due to an increase in the
number and prices of units sold.
Operating expenses increased to $26.0 million, or 95.8%, in
the second quarter of 2006 from $13.3 million in the same
period in 2005. Operating expenses increased due to an increase
in the number and costs of higher priced units sold. In the
second quarter of 2006, we sold 41 units with an average
cost of $634,000 and profit margin of 31.4%. In the second
quarter of 2005, we sold 32 units with an average cost of
$415,000 and profit margin of 8.3%.
Six
months ended June 30, 2006 compared to the six months ended
June 30, 2005
Revenues increased to $49.2 million, or 116.5%, in the
first half of 2006 from $22.7 million in the first half of
2005. This increase was due to an increase in the average price
of units sold partially offset by a decrease in the number of
units sold.
Operating expenses increased to $36.0 million, or 67.6%, in
the first half of 2006 from $21.5 million in the first half
of 2005. This increase was due to an increase in the costs of
higher priced units sold partially offset by a decrease in the
number of units sold. In the first half of 2006, we sold
53 units with an average cost of $678,000 and profit margin
of 27.0%. In the first half of 2005, we sold 62 units with
an average cost of $346,000 and profit margin of 5.7%.
The primary driver of our increased property development sales
and profits was the recent approval of the development of our
New Seabury resort property located in Cape Cod, Massachusetts.
However, due to the current residential/vacation real estate
slowdown our property development sales and profits are expected
to decline from current levels for the balance of 2006 and
possibly into 2007.
Resort
Activities
Three
months ended June 30, 2006 compared to the three months
ended June 30, 2005
Revenues were $7.1 million in both the second quarter of
2006 and 2005. Operating expenses increased to
$7.3 million, or 2.7%, in the second quarter of 2006, from
$7.1 million in the second quarter of 2005.
Six
months ended June 30, 2006 compared to the six months ended
June 30, 2005
Revenues increased to $13.2 million, or 3.8%, in the first
half of 2006, from $12.7 million in the first half of 2005.
This increase is primarily attributable to increased club dues.
Operating expenses were $13.5 million in both the first
half of 2006 and 2005.
Home
Fashion
WPI, through its wholly-owned indirect subsidiary, WestPoint
Home, Inc., is engaged in the business of manufacturing,
sourcing, marketing and distributing bed and bath home fashion
products, including among others, sheets, pillowcases,
comforters, blankets, bedspreads, pillows, mattress pads, towels
and related products. WPI recognizes revenue primarily through
the sale of home fashion products to a variety of retail and
institutional customers. WPI also operates 32 retail outlet
stores that sell home fashion products consisting principally of
products manufactured by WPI. In addition, WPI receives a small
portion of its revenues through the licensing of its trade marks.
A recent court order may result in our ownership of WPI being
reduced to less than 50%. If we were to own less than 50% of the
outstanding common stock, we would have to evaluate whether we
should consolidate WPI and our financial statements could be
materially different than those presented as of June 30,
2006 and for the period then ended. (See Note 22 of notes
to the consolidated financial statements.)
39
Results
of Operations
Summarized statement of operations for the three and six months
ended June 30, 2006 is as follows (in $000s) (unaudited):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2006
|
|
|
June 30, 2006
|
|
|
Revenues
|
|
$
|
237,148
|
|
|
$
|
480,638
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
224,222
|
|
|
|
452,582
|
|
Selling, general and administrative
|
|
|
40,698
|
|
|
|
84,015
|
|
Restructuring and impairment
charges
|
|
|
20,567
|
|
|
|
30,338
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
285,487
|
|
|
|
566,935
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(48,339
|
)
|
|
$
|
(86,297
|
)
|
|
|
|
|
|
|
|
|
|
On August 8, 2005, WestPoint International, Inc., or WPI,
an indirect subsidiary of the Company, completed the acquisition
of substantially all of the assets of WestPoint Stevens Inc., or
WPS. Operating results for WPI are included with AREPs
results beginning as of August 8, 2005. Therefore, no
comparable data is available for the three and six months ended
June 30, 2005.
Three
months ended June 30, 2006
Net sales for the second quarter of 2006 were
$237.1 million. Bed product revenues were
$134.8 million and bath product revenues were
$84.4 million. Other sales, consisting primarily of sales
from WPIs retail outlet stores, were $17.9 million.
Total depreciation for the period was $9.5 million, of
which $7.7 million was included in cost of sales and
$1.8 million was included in selling, general and
administrative expenses.
Gross earnings before selling, general and administrative
expenses for the period were $12.9 million and reflect a
gross profit margin of 5.5%. Gross margins during the second
quarter were impacted by the carrying costs of certain
U.S. based manufacturing facilities scheduled to be closed
during 2006 and 2007. Selling, general and administrative
expenses were $40.7 million for the period and as a
percentage of net sales represent 17.2%.
Total expenses for the period include $18.8 million of
impairment charges related to the fixed assets of plants that
will be closed and $1.7 million of restructuring charges
(of which approximately $1.6 million relates to continuing
costs related to closed plants).
Six
months ended June 30, 2006
Net sales for the first half of 2006 were $480.6 million.
Bed product revenues were $270.8 million and bath product
revenues were $174.9 million. Other sales, consisting
primarily of sales from WPIs retail outlet stores were
$34.9 million. Total depreciation for the period was
$19.9 million, of which $16.3 million was included in
cost of sales and $3.6 million was included in selling,
general and administrative.
Gross earnings before selling, general and administrative
expenses for the period were $28.1 million and reflect a
gross profit margin of 5.8%. Gross margins during the period
were impacted by the carrying costs of certain U.S. based
manufacturing facilities scheduled to be closed during 2006 and
2007. Selling, general and administrative expenses were
$84.0 million for the period and as a percentage of net
sales represent 17.5%.
Total expenses for the period include $26.5 million of
impairment charges related to the fixed assets of plants that
will be closed and $3.8 million of restructuring charges
(of which approximately $1.3 million relates to severance
and $2.5 million relates to continuing costs related to
closed plants).
We expect to continue our restructuring efforts and,
accordingly, expect that restructuring charges and operating
losses will continue to be incurred throughout 2006 and 2007. If
our restructuring efforts are unsuccessful, we may be required
to record additional impairment charges related to the carrying
value of long-lived assets. Additionally, as part of the
restructuring efforts, we expect to record impairment charges as
additional plants are closed.
40
Holding
Company
Investment
Activities
The Holding Company invests a portion of its available liquidity
in short-term fixed income instruments managed by a third party
investment manager to achieve a targeted quarterly return in
excess of LIBOR. Other Holding Company investments include
investments in debt and equity-related securities based upon
managements view that the Company will, over time, achieve
a superior rate of return. For the second quarter and first half
of 2006, we had significant realized and unrealized gains and
losses from several positions, including short positions and
activity relating to derivative instruments.
General
and Administrative Expenses
General and administrative expenses related to the Holding
Company are principally related to payroll and professional fees
and expenses of the Holding Company.
Three
months ended June 30, 2006 compared to the three months
ended June 30, 2005
General and administrative costs increased $1.8 million, or
89.5%, to $3.7 million in the second quarter of 2006, as
compared to $1.9 million in the second quarter of 2005 due
largely to higher legal and professional fees.
Six
months ended June 30, 2006 compared to the six months ended
June 30, 2005
General and administrative costs increased $10.1 million,
or 209.1%, to $15.0 million in the first half of 2006, as
compared to $4.9 million in the first half of 2005 due
largely to the impact of a compensation charge related to the
cancellation of options ($6.2 million), and higher legal
and professional fees.
On June 29, 2005, we granted 700,000 nonqualified unit
options to our chief executive officer. The option agreement
permitted our chief executive officer to purchase up to 700,000
of our depositary units at an exercise price of $35 per
unit and vested over a period of eight years. On March 14,
2006, our chief executive officer resigned from that position,
became a director and Vice-Chairman of the Board of API, and was
designated to be principal executive officer. These changes in
status caused the options to be cancelled in accordance with
their terms. In accordance with SFAS 123(R) Share Based
Payment, the cancellation required that any previously
unrecognized compensation cost be recognized at the date of
cancellation and accordingly we recorded a compensation charge
of $6.2 million related to the previously unrecognized
compensation cost.
Interest
Income and Expense
Three
months ended June 30, 2006 compared to the three months
ended June 30, 2005
Interest expense increased 9.7%, to $31.6 million, during
the second quarter of 2006 as compared to $28.8 million in
the second quarter of 2005. This increase is primarily
attributable to the margin interest expense incurred in the
holding companys brokerage accounts and additional
borrowings at ACEP. Interest income was consistent with the
prior period due to higher interest earned on cash balances
during the period, offsetting $5.1 million earned on WPS
secured bank debt in the six months ended June 30, 2005.
Six
months ended June 30, 2006 compared to the six months ended
June 30, 2005
Interest expense increased 19.6% to $62.2 million, during
the six months ended June 30, 2006 as compared to
$52.0 million in the six months ended June 30, 2005.
This increase reflects higher borrowing levels in 2006 as a
result of the issuance of the $480 million senior notes in
February 2005 and additional borrowings at ACEP. Interest income
was consistent with the prior period due to higher interest
earned on cash balances during the period, offsetting
$5.1 million earned on WPS secured bank debt in the first
half of 2005.
Other
Income (Expense), net
See Note 14 of notes to the consolidated financial
statements for discussion of Other Income (Expense).
41
Minority
Interests
Minority interest increased by $25.2 million and
$39.4 million for the three and six months ended
June 30, 2006, respectively, compared to the comparable
periods in the prior year primarily as a result of the impact of
the minority interests share of the losses incurred by WPI.
Effective
Income Tax Rate
Our effective income tax rate was 17.4% and 65.7% for the three
months ended June 30, 2006 and 2005, respectively. Our
effective income tax rate was 18.7% and 49.1% for the six months
ended June 30, 2006 and 2005, respectively. The difference
between the effective tax rate and the statutory federal rate of
35% is principally due to income or losses from partnership
entities in which taxes are the responsibility of the partners,
and losses incurred by WPI for which no tax benefit was
recognized.
During the six months ended June 30, 2006 and 2005, we paid
$8.4 million and $3.0 million in income taxes,
respectively.
Seasonality
The results of operations for Gaming, Resort operations,
Property Development operations and Home Fashion are seasonal in
nature. Results for Oil & Gas and Rental Real Estate
are generally not seasonal. Generally, our Nevada gaming and
entertainment properties are not affected by seasonal trends.
However, we tend to have increased customer flow in the fourth
quarter of the year. Our Atlantic City property is highly
seasonal in nature, with peak activity occurring from May to
September. Resort operations are highly seasonal with peak
activity in Cape Cod from June to September and in Florida from
November to February. Sales activity for our Property
Development operations in Cape Cod and New York typically peak
in late summer and remain active in the fall and spring months
while in Florida our peak selling season is during the winter
months. The Home Fashion segment experiences its peak sales
season in the fall.
Liquidity
and Capital Resources
Consolidated
Financial Results
We are a holding company. In addition to cash and cash
equivalents, U.S. government and agency obligations,
marketable equity and debt securities and other short-term
investments, our assets consist primarily of investments in our
subsidiaries. As we continue to make significant investments in
operating businesses, we will reduce the liquid assets at AREP
and AREH to fund those businesses. Consequently, our cash flow
and our ability to meet our debt service obligations and make
distributions with respect to depositary units and preferred
units likely will depend on the cash flow of our subsidiaries
and the payment of funds to us by our subsidiaries in the form
of loans, dividends, distributions or otherwise.
The operating results of our subsidiaries may not be sufficient
to make distributions to us. In addition, our subsidiaries are
not obligated to make funds available to us, and distributions
and intercompany transfers from our subsidiaries to us may be
restricted by applicable law or covenants contained in debt
agreements and other agreements to which these subsidiaries may
be subject or enter into in the future. The terms of any
borrowings of our subsidiaries or other entities in which we own
equity may restrict dividends, distributions or loans to us. For
example, the notes issued by our indirect wholly-owned
subsidiary, ACEP, contain restrictions on dividends and
distributions and loans to us, as well as on other transactions
with us. ACEP, NEG Oil & Gas, WPI and the resort
operations at our New Seabury development each also have
financing agreements that have the effect of restricting
dividends, distributions and other transactions with us. These
agreements may preclude our receiving payments from our
subsidiaries which account for a significant portion of our
revenues and cash flows. We may enter into similar agreements
for other segments or subsidiaries. To the degree any
distributions and transfers are impaired or prohibited, our
ability to make payments on our debt will be limited.
As of June 30, 2006, the Holding Company had a cash and
cash equivalents balance of $162.5 million, short-term
investments of $897.3 million (of which $462.2 million
was invested in short-term fixed-income securities) and total
debt of $831.1 million, which primarily relates to the
senior unsecured notes.
42
We actively pursue various means to raise cash from our
subsidiaries. To date, such means include payment of dividends
from subsidiaries, obtaining loans or other financings based on
the asset values of subsidiaries or selling debt or equity
securities of subsidiaries through capital market transactions.
As a result of financing transactions at our subsidiaries, we
will face significant limitations on the amounts of cash that we
can receive from our subsidiaries. Our ability to make future
interest payments, therefore, will be based on receiving cash
from those subsidiaries that do not have restrictions and from
other financing and liquidity sources available to AREP and AREH.
In February 2005, we issued $480.0 million principal amount
of 7.125% senior notes due 2013. In May 2004, we issued
$353.0 million principal amount of 8.125% senior notes
due 2012. Additionally, in December 2005, NEG Oil & Gas
entered into a revolving credit facility which allows for
borrowings of up to $500.0 million based upon a borrowing
base determination. The borrowing base is $335.0 million,
of which $300.0 million has been borrowed at closing and is
outstanding. See Borrowings below for additional
information concerning credit facilities for our gaming, real
estate and home fashion segments.
Cash
Flows
Net cash provided by continuing operating activities was
$97.3 million for the first half of 2006 as compared to net
cash provided by continuing operating activities of
$132.4 million in the first half of 2005. The change in
cash provided by continuing operations for the six months ended
June 30, 2006 was due to cash requirements related to
trading securities and changes in various working capital asset
categories. Our cash and cash equivalents and investments in
marketable equity and debt securities decreased by
$31.5 million at June 30, 2006, from December 31,
2005, primarily due to capital expenditures of
$131.4 million and acquisitions of $169.6 million,
offset in part by cash generated from operations of
$98.3 million and proceeds from borrowings of
$94.2 million.
We are continuing to pursue the purchase of assets, including
assets that may not generate positive cash flow, are difficult
to finance or may require additional capital, such as properties
for development, non-performing loans, securities of companies
that are undergoing or that may undergo restructuring, and
companies that are in need of capital. All of these activities
require us to maintain a strong capital base and liquidity.
Borrowings
Long-term
debt consists of the following (in $000s):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Senior unsecured 7.125% notes
due 2013 AREP
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|
$
|
480,000
|
|
|
$
|
480,000
|
|
Senior unsecured 8.125% notes
due 2012 AREP
|
|
|
351,083
|
|
|
|
350,922
|
|
Senior secured 7.85% notes
due 2012 ACEP
|
|
|
215,000
|
|
|
|
215,000
|
|
Borrowings under credit
facility ACEP
|
|
|
60,000
|
|
|
|
|
|
Borrowings under credit
facility NEG Oil & Gas
|
|
|
300,000
|
|
|
|
300,000
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|
Mortgages payable
|
|
|
113,546
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|
|
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81,512
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|
Other
|
|
|
8,259
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|
|
|
8,387
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|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
1,527,888
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|
|
|
1,435,821
|
|
Less current portion, including
debt related to real estate held for sale
|
|
|
21,601
|
|
|
|
24,155
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,506,287
|
|
|
$
|
1,411,666
|
|
|
|
|
|
|
|
|
|
|
Senior
unsecured notes restrictions and covenants
AREP
Both issuances of our senior unsecured notes restrict the
payment of cash dividends or distributions, the purchase of
equity interests or the purchase, redemption, defeasance or
acquisition of debt subordinated to the senior unsecured notes.
The notes also restrict the incurrence of debt, or the issuance
of disqualified stock, as defined, with certain exceptions,
provided that we may incur debt or issue disqualified stock if,
immediately after such incurrence or issuance, the ratio of the
aggregate principal amount of all outstanding indebtedness of
AREP and its subsidiaries on a consolidated basis to the
tangible net worth of AREP and its subsidiaries on a
consolidated
43
basis would have been less than 1.75 to 1.0. As of June 30,
2006, such ratio was less than 1.75 to 1.0, and accordingly,
based on this ratio, we and AREH could have incurred up to
approximately $1.5 billion of additional indebtedness.
In addition, both issuances of notes require that on each
quarterly determination date we and the guarantor of the notes
(currently only AREH) maintain a minimum ratio of cash flow to
fixed charges each as defined, of 1.5 to 1, for the four
consecutive fiscal quarters most recently completed prior to
such quarterly determination date. For the four quarters ended
June 30, 2006, the ratio of cash flow to fixed charges was
in excess of 1.5 to 1.0.
The notes also require, on each quarterly determination date,
that the ratio of total unencumbered assets, as defined, to the
principal amount of unsecured indebtedness, as defined, be
greater than 1.5 to 1.0 as of the last day of the most recently
completed fiscal quarter. As of June 30, 2006, such ratio
was in excess of 1.5 to 1.0.
Senior
secured 7.85% notes due 2012 ACEP
ACEPs 7.85% senior secured notes due 2012 restrict
the payment of cash dividends or distributions by ACEP, the
purchase of its equity interests, the purchase, redemption,
defeasance or acquisition of debt subordinated to ACEPs
notes and investments as restricted payments.
ACEPs notes also prohibit the incurrence of debt, or the
issuance of disqualified or preferred stock, as defined, by
ACEP, with certain exceptions, provided that ACEP may incur debt
or issue disqualified stock if, immediately after such
incurrence or issuance, the ratio of consolidated cash flow to
fixed charges (each as defined) for the most recently ended four
full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such
additional indebtedness is incurred or disqualified stock or
preferred stock is issued would have been at least 2.0 to 1.0,
determined on a pro forma basis giving effect to the debt
incurrence or issuance. As of June 30, 2006, such ratio was
in excess of 2.0 to 1.0. The ACEP notes also restrict the
creation of liens, the sale of assets, mergers, consolidations
or sales of substantially all of its assets, the lease or grant
of a license, concession, other agreements to occupy, manage or
use our assets, the issuance of capital stock of restricted
subsidiaries and certain related party transactions. The ACEP
notes allow it to incur indebtedness, among other things, of up
to $50 million under credit facilities, non-recourse
financing of up to $15 million to finance the construction,
purchase or lease of personal or real property used in its
business, permitted affiliate subordinated indebtedness (as
defined), the issuance of additional 7.85% senior secured
notes due 2012 in an aggregate principal amount not to exceed
2.0 times net cash proceeds received from equity offerings and
permitted affiliate subordinated debt, and additional
indebtedness of up to $10.0 million.
ACEP
Senior Secured Revolving Credit Facility
Effective May 11, 2006 ACEP and certain of ACEPs
subsidiaries, as Guarantors, entered into an amended and
restated credit agreement with Wells Fargo Bank N.A., as
syndication agent, Bear Stearns Corporate Lending Inc., as
administrative agent, and certain other lender parties. As of
June 30, 2006, the interest rate on the outstanding
borrowings under the credit facility was 6.76% per annum.
The credit agreement amends and restates, and is on
substantially the same terms, as a credit agreement entered into
as of January 29, 2004. Under the credit agreement, ACEP
will be permitted to borrow up to $60.0 million.
Obligations under the credit agreement are secured by liens on
substantially all of the assets of ACEP and its subsidiaries.
The credit agreement has a term of four years and all amounts
will be due and payable on May 10, 2010.
The credit agreement includes covenants that, among other
things, restrict the incurrence of additional indebtedness by
ACEP and its subsidiaries, the issuance of disqualified or
preferred stock, as defined, the creation of liens by ACEP or
its subsidiaries, the sale of assets, mergers, consolidations or
sales of substantially all of ACEPs assets, the lease or
grant of a license or concession, other agreements to occupy,
manage or use ACEPs assets, the issuance of capital stock
of restricted subsidiaries and certain related party
transactions. The Credit agreement also requires that, as of the
last date of each fiscal quarter, ACEPs ratio of
consolidated first lien debt to consolidated cash flow not be
more than 1.0 to 1.0. As of June 30, 2006, this ratio was
0.72 to 1.0.
The restrictions imposed by ACEPs senior secured notes and
the credit facility likely will limit our receiving payments
from the operations of our principal hotel and gaming properties.
44
NEG
Oil & Gas LLC Senior Secured Revolving Credit
Facility
On December 22, 2005, NEG Oil & Gas entered into a
credit facility, with Citicorp USA, Inc., as administrative
agent, Bear Stearns Corporate Lending Inc., as syndication
agent, and certain other lender parties. As of June 30,
2006, the interest rate on the outstanding borrowings under the
credit facility was 7.38%. Commitment fees for the unused credit
facility range from 0.375% to 0.50% and are payable quarterly.
Under the credit facility, NEG Oil & Gas will be
permitted to borrow up to the lesser of $500.0 million or
the borrowing base, which is currently set at
$335.0 million. Borrowings under the credit facility are
subject to a borrowing base determination based on the oil and
gas properties of NEG Oil & Gas and its subsidiaries
and the reserves and production related to those properties. The
initial borrowing base was set at $335.0 million and will
be subject to semi-annual redeterminations, based on engineering
reports to be provided by NEG Oil & Gas by
March 31 and September 30 of each year, beginning
March 31, 2006. The credit facility has a term of five
years and all amounts will be due and payable on
December 20, 2010. As of June 30, 2006, NEG
Oil & Gas had remaining borrowing availability under
the credit facility of $12.9 million representing the
borrowing base less $300 million debt outstanding and
outstanding letters of credit of $22.1 million.
The credit facility contains covenants that, among other things,
restrict the incurrence of indebtedness by NEG Oil &
Gas and its subsidiaries, the creation of liens by them, hedging
contracts, mergers and issuances of securities by them and
distributions and investments by NEG Oil & Gas and its
subsidiaries. It also requires NEG Oil & Gas to
maintain: (1) a ratio of consolidated total debt to
consolidated EBITDA (for the four fiscal quarter period ending
on the date of the consolidated balance sheet used to determine
consolidated total debt), as defined, of not more than 3.5 to
1.0; (2) consolidated tangible net worth, as defined, of
not less than $240 million, plus 50% of consolidated net
income for each fiscal quarter ending after December 31,
2005 for which consolidated net income is positive; and
(3) a ratio of consolidated current assets to consolidated
current liabilities of not less than 1.0 to 1.0. These covenants
may have the effect of limiting distributions by NEG
Oil & Gas. As of June 30, 2006, NEG Oil &
Gas was in compliance with each of the covenants.
Real
Estate Mortgages Payable
On June 30, 2006, indirect subsidiaries of the Company
engaged in property development and associated resort activities
entered into a $32.5 million loan agreement with Textron
Financial Corp. The loan is secured by a mortgage on the
Companys New Seabury golf course and resort in Mashpee,
Massachusetts. The loan bears interest at the rate of
7.96% per annum and matures in five years with a balloon
payment due of $30.0 million. Annual debt service payments
of $3.0 million are required, which are payable in monthly
installments based on a 25 year amortization schedule.
WPI
Secured Revolving Credit Agreement
On June 16, 2006, our subsidiary, WestPoint Home, Inc.,
entered into a loan and security agreement with Bank of America,
N.A., as Administrative Agent and lender. Other lenders may be
added from time to time. Under the five-year agreement,
WestPoint Home will be permitted to borrow on a revolving credit
basis up to $250.0 million (subject to a monthly borrowing
base calculation) at any one time outstanding, including a
$75.0 million sub-limit that may be used for letters of
credit. Borrowings under the agreement bear interest, at the
election of WestPoint Home, either at the prime rate adjusted by
an applicable margin ranging from minus 0.25% to plus 0.50% or
LIBOR adjusted by an applicable margin ranging from plus 1.25%
to 2.00%. WestPoint Home pays an unused line fee of 0.25% to
0.275%. Obligations under the agreement are secured by WestPoint
Homes receivables, inventory and certain machinery and
equipment.
The agreement contains covenants including, among others,
restrictions on the incurrence of indebtedness, investments,
redemption payments, distributions, acquisition of stock,
securities or assets of any other entity and capital
expenditures. However, WestPoint Home is not precluded from
effecting any of these transactions if excess availability,
after giving effect to such transaction, meets a minimum
threshold.
As of June 30, 2006, there were no borrowings under the
agreement, but there were outstanding letters of credit of
approximately $33.7 million.
45
Quarterly
Distribution
On May 10, 2006, our directors voted to approve
managements recommendation to pay a dividend of
$0.10 per depositary unit in the second quarter of 2006.
The distribution was paid on June 1, 2006 to depositary
unit holders of record at the close of business on May 22,
2006. On August 7, 2006, the Board of Directors approved
payment of a quarterly cash distribution of $0.10 per unit
on its depositary units in the third quarter of 2006 consistent
with the distribution policy adopted in 2005. The distribution
will be paid on September 5, 2006 to depositary unitholders
of record at the close of business on August 21, 2006.
The payment of future distributions will be determined by the
Board of Directors quarterly, based upon the factors described
above and other factors that it deems relevant at the time that
declaration of a distribution is considered. There can be no
assurance as to whether or in what amounts any future
distributions might be paid.
Contractual
Commitments
As of June 30, 2006, other than the increase in long-term
debt in our gaming and real estate segments totaling
$94.2 million and the changes noted below relating to our
oil and gas derivative contracts there were no other material
changes in our contractual obligations or any other long-term
liabilities reflected on our consolidated balance sheet as
compared to those reported in our
Form 10-K,
as amended, filed with the Securities and Exchange Commission on
March 31, 2006.
Derivative
Obligations
As discussed in Note 19 to the consolidated financial
statements, our derivative obligations decreased to
$28.3 million as of June 30, 2006 as compared to
$85.9 million as of December 31, 2005. The fair value
of the derivative contracts that mature in less than a year is
$22.2 million. The amount, if any, that we will be required
to pay with respect to any contract will be determined at the
maturity date and may vary from the fair value as reported at
this time depending on market prices for oil and gas and the
stated contract terms.
Off
Balance Sheet Arrangements
We do not maintain any off-balance sheet transactions,
arrangements, obligations or other relationships with
unconsolidated entities or others.
Segment
Liquidity and Capital Resources
Oil
and Gas
NEG Oil & Gas derives its cash primarily from the sale
of oil and natural gas and borrowings. During the
first half of 2006, cash flows from operations provided by
our oil and gas segment was $97.0 million compared to
$56.1 million in 2005. The increase was primarily
attributable to higher revenues due to increased production and
higher price realizations.
During the first half of 2006, our oil and gas capital
expenditures aggregated $101.6 million. NEG Oil &
Gas capital expenditures for the remainder of 2006 are
forecasted to be approximately $111.5 million. The planned
capital expenditures do not include any major acquisitions that
we may consider from time to time and for which NEG
Oil & Gas may need to obtain additional financing.
As of June 30, 2006, NEG Oil & Gas had
$55.5 million in unrestricted cash and $12.9 million
in availability under its credit facility. NEG Oil &
Gas believes that cash flows from operations, cash on hand and
availability under its credit facility will be sufficient to
fund the forecasted capital expenditures for the remainder of
2006.
Historically, we have funded our Oil and Gas capital
expenditures from Oil and Gas operating cash flows and bank
borrowings. Our Oil and Gas operating cash flows may fluctuate
significantly due to changes in oil and gas commodity prices,
production interruptions and other factors. The timing of most
of our Oil and Gas capital expenditures is discretionary because
we have no long-term capital expenditure commitments. We may
vary our capital expenditures as circumstances warrant in the
future.
On February 14, 2006, NEG, Inc., or NEG, our newly formed
subsidiary, in connection with a planned initial public
offering, filed with the SEC, a Registration Statement on
Form S-1.
Amendments to the
Form S-1
were filed
46
May 5, 2006, June 22, 2006, and July 31, 2006.
The Registration Statement has not yet become effective. On
June 29, 2006, NEG, in connection with a planned merger
with National Energy Group, filed with the SEC a Registration
Statement on
Form S-4.
On July 31, 2006, NEG Oil & Gas LLC, which is
currently our wholly-owned subsidiary, in connection with a
planned offering of senior notes due 2014, filed with the SEC a
Registration Statement on
Form S-1.
Gaming
Our Gaming segment derives cash primarily from casino, hotel and
related activities. During the first half of 2006, cash flows
from operations provided by our gaming segment was
$47.2 million compared to $37.5 million in 2005. The
increase from 2005 to 2006 was due to increased revenues.
Management believes that cash flows from operations and cash on
hand will be sufficient to fund the forecasted capital
expenditures for the remainder of 2006.
Under terms of the senior secured notes of ACEP, the ability to
pay dividends and engage in other transactions with AREP are
limited.
Capital spending for the existing Nevada operations was
$16.6 million and $11.6 million for the first half of
2006 and 2005, respectively. Capital spending for the Atlantic
City operations was $8.9 million (including
$5.8 million for purchases of land) and $1.5 million
for the first half of 2006 and 2005, respectively. We have
estimated our combined capital expenditures for the remainder of
2006 to be $29.6 million for Nevada and Atlantic City,
excluding Flamingo Laughlin.
Real
Estate
Our real estate operations generate cash through rentals and
leases and asset sales (principally sales of rental properties)
and the operation of resorts. All of these operations generate
cash flows from operations.
Real estate development activities require a significant use of
funds. With our renewed development activity at New Seabury and
Grand Harbor, it is expected that cash expenditures over the
next year will approximate $75 million. Such amounts will
be funded through advances from our existing cash reserves and
then from unit sales and, to the extent such proceeds are
insufficient, by AREP from available cash.
Home
Fashion
For the first half of 2006, our Home Fashion segment had a
negative cash flow from operations of $46.2 million. Such
negative cash flow was principally due to ongoing restructuring
actions and changes in working capital. As discussed above, we
expect to continue our restructuring efforts and, accordingly,
expect that restructuring charges and operating losses will
continue to be incurred throughout 2006 and 2007.
At June 30, 2006, the Home Fashion segment had
approximately $81.4 million of unrestricted cash and cash
equivalents. On June 16, 2006, WPIs operating
subsidiary, WestPoint Home, entered into a $250.0 million
senior secured revolving credit facility, or the Senior Credit
Facility, from a third party with an expiration date of
June 15, 2011. With the Senior Credit Facility in place,
funds totaling approximately $31.5 million previously
required to cash collateralize letters of credit were returned
to WPI. The borrowing availability under the Senior Credit
Facility is subject to a monthly borrowing base calculation less
outstanding loans, letters of credit and other reserves under
the facility. At June 30, 2006, WPI had unused borrowing
availability of approximately $168.7 million resulting from
a calculated borrowing base of $227.4 million, less an
availability block of $25.0 million and outstanding letters
of credit of approximately $33.7 million. The new Senior
Credit Facility imposes various operating and financial
restrictions on WPI and its subsidiaries. These restrictions
include limitations on indebtedness, liens, asset sales,
transactions with affiliates, acquisitions, mergers, capital
expenditures, dividends and investments. Borrowing under the
Senior Credit Facility will be used for general business
purposes including restructuring and international expansion.
Capital expenditures by WPI were $3.0 million for the
period January 1, 2006 through June 30, 2006. Capital
expenditures for the remainder of 2006 are expected to total
approximately $9.3 million. Additionally, WPI may expend
significant amounts in connection with exploring overseas joint
ventures and acquisitions, and such amounts may be significant.
47
Forward
Looking Statements
Statements included in Managements Discussion and
Analysis of Financial Condition and Results of Operations
which are not historical in nature are intended to be, and are
hereby identified as, Forward Looking Statements for
purposes of the safe harbor provided by Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended by Public Law 104-67.
Forward looking statements regarding managements present
plans or expectations involve risks and uncertainties and
changing economic or competitive conditions, as well as the
negotiation of agreements with third parties, which could cause
results to differ from present plans or expectations, and such
differences could be material. Readers should consider that such
statements speak only as of the date hereof.
Certain
Trends and Uncertainties
We have in the past and may in the future make forward looking
statements. Certain of the statements contained in this document
involve risks and uncertainties. Our future results could differ
materially from those statements. Factors that could cause or
contribute to such differences include, but are not limited to
those discussed in this document. These statements are subject
to risks and uncertainties that could cause actual results to
differ materially from those predicted. Also, please see Risk
Factors in our annual report on
Form 10-K,
as amended, for the year ended December 31, 2005.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Market risk is the risk of loss arising from adverse changes in
market rates and prices, such as interest rates, foreign
currency exchange rates and commodity prices. Our significant
market risks are primarily associated with interest rates,
equity prices and derivatives. Reference is made to
Part II, item 7A of
Form 10-K/A
for 2005 that we filed with the Securities and Exchange
Commission on March 31, 2006 for disclosures relating to
interest rates and our equity prices. As of June 30, 2006
there have been no material changes in the market risks in these
two categories. The following address our market risks
associated with commodity price risks.
Our Home Fashion and Oil and Gas operating units selectively use
commodity futures contracts, forward purchase commodity
contracts, option contracts and price collars
primarily to reduce the risk of changes to cotton and oil and
gas prices. The Holding Company currently holds derivative
instruments for trading purposes.
The Oil and Gas segments revenues are derived from the
sale of its crude oil and natural gas production. The prices for
oil and gas remain extremely volatile and sometimes experience
large fluctuations as a result of relatively small changes in
supply, weather conditions, economic conditions and government
actions. If energy prices decline significantly, revenues and
cash flow would significantly decline. In addition, a noncash
write-down of our oil and gas properties could be required under
full cost accounting rules if prices declined significantly,
even if it is only for a short period of time. From time to
time, we enter into derivative financial instruments to manage
oil and gas price risk related to revenue.
We use price collars to reduce the risk of changes
in oil and gas prices. Under these arrangements, no payments are
due by either party so long as the market price is above the
floor price set in the collar below the ceiling. If the price
falls below the floor, the counter-party to the collar pays the
difference to us and if the price is above the ceiling, the
counter-party receives the difference from us.
See Note 19 to the consolidated financial statements for
details on our commodity price collar agreements.
|
|
Item 4.
|
Controls
and Procedures
|
As of June 30, 2006, our management, including our
Principal Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of the
Companys and our subsidiaries disclosure controls
and procedures pursuant to the Exchange Act
Rule 13a-15(e)
and
15d-15(e).
Based upon such evaluation, our Principal Executive Officer and
Chief Financial Officer concluded that our disclosure controls
and procedures are currently effective to ensure that
information required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and include
controls and procedures designed to ensure that information
required to be disclosed by us in such reports is accumulated
and communicated to our management,
48
including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure.
During the first half of 2006, we continued to implement
processes to address a significant deficiency in our
consolidation process noted by management in 2004 during its
evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures and our internal controls
over financial reporting. These processes included the
implementation and testing of our new accounting and
consolidation program and continuing to retain the services of
an independent consultant to evaluate the effectiveness of our
internal controls. We continue to monitor the progress of our
subsidiaries in implementing processes to correct any
significant deficiencies noted in their disclosure and control
procedures.
During the third quarter of 2005, we identified a significant
deficiency related to our periodic reconciliation, review and
analysis of investment accounts. This significant deficiency is
not believed to be a material weakness and arose from a lack of
monitoring and review controls. We have hired additional
personnel in order to provide the appropriate level of control.
Changes
in Internal Control Over Financial Reporting
There have not been any changes in our internal control over
financial reporting during the six months ended June 30,
2006 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
PART II.
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
We are from time to time parties to various legal proceedings
arising out of our businesses. We believe however, that other
than the proceedings discussed below, there are no proceedings
pending or threatened against us which, if determined adversely,
would have a material adverse effect on our business, financial
condition, results of operations or liquidity.
GB
Holdings
On April 4, 2006, the Official Committee of Unsecured
Creditors, or the Committee, of GB Holdings, Inc., or GBH, filed
a proposed Plan of Reorganization, or the Plan, and Disclosure
Statement in which they indicated that they intend to challenge
the transaction in July 2004 that, among other things, resulted
in the transfer of The Sands to ACE Gaming LLC, a wholly owned
subsidiary of Atlantic Coast, the exchange of certain of
GBHs notes for 3% senior secured convertible notes of
Atlantic Coast, and our owning 58.2% of the outstanding Atlantic
Coast shares of common stock. As of June 30, 2006, we owned
58.2% of the outstanding stock of Atlantic Coast and GBH owned
41.7% of such stock. We also own approximately 77.5% of the
outstanding shares of common stock of GBH. If the Committee
succeeds in challenging these transactions, they indicated that
they intend to seek to rescind the July 2004 transactions and
attempt to equitably subordinate, in bankruptcy, AREPs
claims against GBH to the claims of other creditors. Under the
Plan, they propose to place all of the assets of GBH in a
Liquidating Trust for the benefit of the creditors. The Trust
would be managed by a five-member board, four of whom would be
appointed by the other creditors and one of whom would be
appointed by a limited group of equity holders of GBH that would
not include us. The assets that would be placed in the Trust
include the 2,882,938 shares of Atlantic Coast stock owned
by GBH as well as any litigation claims owned by the debtor or
the estate, including any claims challenging the July 2004
transactions. We filed an objection to the Disclosure Statement
on several grounds. At a hearing held on May 31, 2006, the
Bankruptcy Court directed the Committee to make several
revisions to their Disclosure Statement before the Disclosure
Statement and the Committees Plan could be distributed to
GBHs creditors and stockholders. The Committee has yet to
make such revisions.
We cannot predict the outcome of the GBH Bankruptcy proceedings
or the potential impact on us.
WPI
litigation
In November and December 2005, the U.S. District Court for
the Southern District of New York rendered a decision in
Contrarian Funds Inc. v. WestPoint Stevens, Inc.
et al., and issued orders reversing certain provisions
of
49
the bankruptcy court order pursuant to which we acquired our
ownership of a majority of the common stock of a newly formed
company, WPI. WPI acquired substantially all of the assets of
WPS. On April 13, 2006, the Bankruptcy Court entered a
remand order which provides, among other things, that all of the
shares and rights to acquire shares of WPI issued to us and the
other first lien lenders or held in escrow pursuant to court
order constituted replacement collateral, be sold
other than 5,250,000 shares that we acquired for cash. The
5,250,000 shares represent approximately 27% of the
19,498,389 shares of WPI now outstanding. According to the
remand order, we would share pro rata with the other
first lien lenders in proceeds realized from the disposition of
the replacement collateral and, to the extent there is remaining
replacement collateral after satisfying first lien lender
claims, we would share pro rata with the other second
lien lenders in any further proceeds. We were holders of
approximately 39.99% of the outstanding first lien debt and
approximately 51.21% of the outstanding second lien debt. On
April 13, 2006, the Bankruptcy Court also entered an order
staying the remand order pending its appeal. The other first
lien lenders have filed a notice of appeal of the remand order,
and have filed a motion with the District Court to lift the stay
entered by the Bankruptcy Court. We have filed a notice of
appeal of the remand order and an objection to the motion to
lift the stay. No hearing has been scheduled on the motion of
the other first lien lenders to lift the stay, and no order has
been entered by the District Court on that motion. A hearing on
the appeals of the remand order has been scheduled by the
District Court for September 20, 2006. We also intend to
appeal the prior order of the District Court that modified and
vacated portions of the original sale order as entered by the
Bankruptcy Court.
We cannot predict the outcome of these proceedings or the
ultimate impact on our investment in WPI or the business
prospects of WPI.
In addition to the risk factor set forth below, the discussion
of our business and operations should be read together with the
risk factors contained in Item 1A of our Annual Report of
Form 10-K
for the fiscal year ended December 31, 2005, filed with the
Securities and Exchange Commission on March 16, 2006, and
amended on March 31, 2006, which describe various risks and
uncertainties to which we are or may become subject. This report
is available, without charge, on our website,
http://www.areplp.com/investor.shtml as soon as reasonably
practicable after they are filed electronically with the SEC.
These risks and uncertainties have the potential to affect our
business, financial condition, results of operations, cash
flows, strategies or prospects in a material and adverse manner.
Home
Fashion
A recent court order may result in our ownership of WPI
being reduced to less than 50%. Uncertainties arising from this
decision may adversely affect WPIs operations and
prospects and the value of our investment in it.
In November and December 2005, the U.S. District Court for
the Southern District of New York rendered a decision in
Contrarian Funds Inc. v. WestPoint Stevens, Inc.
et al., and issued orders reversing certain provisions
of the bankruptcy court order pursuant to which we acquired our
ownership of a majority of the common stock of a newly formed
company, WPI. WPI acquired substantially all of the assets of
WPS. On April 13, 2006, the Bankruptcy Court entered a
remand order which provides, among other things, that all of the
shares and rights to acquire shares of WPI issued to us and the
other first lien lenders or held in escrow pursuant to court
order constituted replacement collateral, other than
5,250,000 shares that we acquired for cash. The
5,250,000 shares represent approximately 27% of the
19,498,389 shares of WPI now outstanding. According to the
remand order, we would share pro rata with the other
first lien lenders in proceeds realized from the disposition of
the replacement collateral and, to the extent there is remaining
replacement collateral after satisfying first lien lender
claims, we would share pro rata with the other second
lien lenders in any further proceeds. We were holders of
approximately 39.99% of the outstanding first lien debt and
approximately 51.21% of the outstanding second lien debt. On
April 13, 2006, the Bankruptcy Court also entered an order
staying the remand order pending its appeal. The other first
lien lenders have filed a notice of appeal of the remand order,
and have filed a motion with the District Court to lift the stay
and no ordered has been entered by the District Court on that
motion. A hearing on the appeals of the remand order has been
scheduled by the District Court for September 20, 2006. We
also intend to appeal the prior order that modified and vacated
portions of the original sale order.
50
We currently own approximately 67.7% of the outstanding shares
of common stock of WPI. As a result of the District Courts
order and the proceedings on remand, our percentage of the
outstanding shares of common stock of WPI could be reduced to
less than 50% and perhaps substantially less. If we were to lose
control of WPI, it could adversely affect the business and
prospects of WPI and the value of our investment in it. In
addition, we consolidated the results and balance sheet of WPI
as of June 30, 2006 and December 31, 2005 and for the
period from the date of acquisition through June 30, 2006.
If we were to own less than 50% of the outstanding common stock,
we would have to evaluate whether we should consolidate WPI and
our financial statements could be materially different than as
presented as of June 30, 2006 and December 31, 2005
and for the periods then ended.
We cannot guarantee that we will be able to recover our
investment made in connection with the acquisition of the
Flamingo Laughlin and we may have difficulties combining the
operations of the Flamingo Laughlin with our existing
operations.
On May 19, 2006, our wholly-owned subsidiary, AREP
Laughlin, acquired the Flamingo Laughlin from affiliates of
Harrahs Operating Company, Inc., or Harrahs. The
transaction was completed pursuant to an asset purchase
agreement, dated as of November 28, 2005, between AREP
Laughlin, AREP Boardwalk LLC, a wholly-owned subsidiary of AREP,
Harrahs and certain affiliated entities. Under the
agreement, AREP Laughlin acquired the Flamingo and AREP
Boardwalk Properties LLC, as assignee of AREP Boardwalk LLC,
acquired 7.7 acres of land in Atlantic City, New Jersey,
known as the Traymore site, for an aggregate purchase price of
approximately $170.0 million, subject to adjustment. The
portion of the purchase price attributable to the Flamingo
Laughlin is approximately $109.0 million.
In addition, we currently plan to spend approximately
$40.0 million through 2008 to refurbish rooms, upgrade
amenities and acquire new gaming equipment for the Flamingo
Laughlin. Acquisitions generally involve significant risks,
including difficulties in the assimilation of the operations,
services and corporate culture of the acquired company. We may
not be able to combine successfully the operations of the
Flamingo Laughlin with our existing operations. There are a
large number of systems that must be integrated including
management information, purchasing, accounting and finance,
sales, billing and payroll and benefits. The integration of the
Flamingo Laughlin into our existing operations also will require
significant attention from management, possibly reducing its
ability to focus on other operations or projects. Any delays or
increased costs of combining could adversely affect us and
disrupt our operations.
The benefits from the acquisition of the Flamingo Laughlin are
based on projections and assumptions, including, related to our
program to upgrade and refurbish the facilities, as well as
recent results. As a result, we cannot be certain that we will
realized the anticipated benefits.
The list of exhibits required by Item 601 of
Regulation S-K
and filed as part of this report is set forth in the
Exhibit Index.
51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMERICAN REAL ESTATE PARTNERS, L.P.
By: American Property Investors, Inc., its general
partner
Hillel Moerman
Chief Financial Officer (Principal
Financial Officer and duly authorized officer)
Date: August 9, 2006
52
Exhibits Index
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Exhibit No.
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Description
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Exhibit 10
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.1 -
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Amended and Restated Credit
Agreement, dated as of May 9, 2006, among American
Casino & Entertainment Properties LLC, Bear Stearns
Corporate Lending Inc., as Administrative Agent, Wells Fargo
Bank, as Syndication Agent, CIT Services Corporation and
Comerica West Incorporated as Co- Documentation Agents, and
other lender parties thereto (incorporated by reference to
Exhibit 10.1 to American Real Estate Partners, L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on May 17, 2006).
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Exhibit 10
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.2 -
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Reaffirmation Agreement, dated as
of May 9, 2006, among the Grantors thereto and Bear Sterns
Corporate Lending Inc., as Administrative Agent (incorporated by
reference to Exhibit 10.2 to American Real Estate Partners,
L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on May 17, 2006).
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Exhibit 10
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.3 -
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First Modification to Deed of
Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing made by Stratosphere Corporation, as Trustor, to
Lawyers Title of Nevada, as Trustee, for the benefit of
Wilmington Trust Company, in its capacity as Indenture Trustee,
for the benefit of the Secured Parties, as Beneficiary, dated as
of May 9, 2006 (incorporated by reference to
Exhibit 10.3 to American Real Estate Partners, L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on May 17, 2006).
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Exhibit 10
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.4 -
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First Modification to Deed of
Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing made by Stratosphere Corporation, as Trustor, to
Lawyers Title of Nevada, as Trustee, for the benefit of Bear
Sterns Corporate Lending Inc., in its capacity as Administrative
Agent, for the benefit of the Secured Parties, as Beneficiary,
dated as of May 9, 2006 (incorporated by reference to
Exhibit 10.4 to American Real Estate Partners, L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on May 17, 2006).
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Exhibit 10
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.5 -
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First Modification to Deed of
Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing made by Stratosphere Land Corporation, as
Trustor, to Lawyers Title of Nevada, as Trustee, for the benefit
of Bear Sterns Corporate Lending Inc., in its capacity as
Administrative Agent, for the benefit of the Secured Parties, as
Beneficiary, dated as of May 9, 2006 (incorporated by
reference to Exhibit 10.5 to American Real Estate Partners,
L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on May 17, 2006).
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Exhibit 10
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.6 -
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First Modification to Deed of
Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing made by Fresca, LLC, as Trustor, to Lawyers Title
of Nevada, as Trustee, for the benefit of Bear Sterns Corporate
Lending Inc., in its capacity as Administrative Agent, for the
benefit of the Secured Parties, as Beneficiary, dated as of
May 9, 2006 (incorporated by reference to Exhibit 10.6
to American Real Estate Partners, L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on May 17, 2006).
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Exhibit 10
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.7 -
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First Modification to Deed of
Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing made by Arizona Charlies, LLC, as Trustor,
to Lawyers Title of Nevada, as Trustee, for the benefit of Bear
Sterns Corporate Lending Inc., in its capacity as Administrative
Agent, for the benefit of the Secured Parties, as Beneficiary,
dated as of May 9, 2006 (incorporated by reference to
Exhibit 10.7 to American Real Estate Partners, L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on May 17, 2006).
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Exhibit 10
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.8 -
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Loan and Security Agreement, dated
as of June 16, 2006, among WestPoint Home, Inc., as the
Borrower, the Lenders from time to time party thereto, and Bank
of America, N.A., as the Administrative Agent (incorporated by
reference to Exhibit 10.1 to American Real Estate Partners,
L.P.s
Form 8-K
(SEC File
No. 1-9156),
filed on June 22, 2006).
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Exhibit 31
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.1 -
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Certification of Chief Executive
Officer pursuant to Securities Exchange Act Rule 13a-14(a).
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Exhibit 31
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.2 -
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Certification of Chief Financial
Officer pursuant to Securities Exchange Act Rule 13a-14(a).
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Exhibit 32
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.1 -
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Certification of Principal
Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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Exhibit 32
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.2 -
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Certification of Principal
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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53