Welcome to the Full House Resorts’ Second Quarter 2016 Earnings Call. Today’s conference is being recorded. At this time, I'd like to turn the conference over to Mr. Lewis Fanger, Chief Financial Officer of Full House Resorts. Please go ahead, sir.

Good afternoon. Welcome to the Full House Resorts second quarter 2016 earnings call. As usual we may make forward-looking statements on this call and if we do well you know the usual [indiscernible] and we also may reference non-GAAP results as well for reconciliation of any non-GAAP measures please look to our earnings release or any of our 10Q or 10K filings as filed with the SEC. And with that let me turn it over to Dan.

We purposely started a little bit late because we just filed an S3 offering. We wanted to make sure that was up and available for everybody to look at so I could reference it and it's a rights offering for $5 million and I will address that a little more later. I apologize. We wanted to get that out earlier this morning but the legal profession being what it is and everything that had to be wrapped up on that kind of being a foot race here at the end to get it filed, but it is filed and it is available and we will address it. First let me address the earnings results, we’re actually pretty good but the quarter was complicated by the acquisition financing and win percentages that were light compared to what they formally and in particular compared to last year with a little above normal. Starting with the Silver Slipper, the revenue was up slightly despite a pretty big negative swing in win percentage. The normal with that property and normal varies from property to property depending on the number of times tips are used before the loss are cashed in and they tends to be fairly consistent number at one property but you can't really compare property to property but if you take the Silver Slipper the average for the last three years was 17.4, last year in the quarter was 18.7 that’s only a little bit above normal and this year it was 16.7 which only a little below normal but when you're comparing from year to year it actually had a pretty big impact. The table game drop was actually up 8.2% but the revenues we got from table games because that's when the swing win percentage were actually down. The revenues…

Yes, and please come up with questions because maybe it will highlight something I missed.

[Operator Instructions]. And we will take our first question from Chad Beynon with Macquarie.

This is actually [indiscernible] on for Chad. Looking at the Silver Slipper it appears that the new property in [indiscernible] hasn't really affected results in the Gulf part. These [indiscernible] has performed relatively stable?

You know that property is like an hour away from us. So it doesn't really affect us directly, you're talking about the Scarlet Pearl. Probably more importantly about a year ago the Island View added a big hotel tower like 400 rooms it was pretty significant investment and their casino revenues didn't rise much and so they've kind of put it into overdrive to try to make sure that they fill those rooms and that's affected us up. Now maybe because they're 20 or 30 minutes east of us so they are 20 to 30 minutes or maybe 30 minutes west of block city [ph]. So it's kind of like maybe Island View is impacted by the Scarlet Pearl and therefore we're being indirectly hurt by the Scarlet Pearl. So I'm going to say the Scarlet Pearl has had no effect but it's pretty minimal and frankly the Scarlet Pearl if you go there you arrive -- you’re within sight of [indiscernible] and that’s like I don’t know if you give me a fantastic hamburger and it's about three feet from me and there's a McDonald's hamburger that's a foot from the I'm probably going to reach for the three feet and so I think actually in an odd way the Scarlet Pearl is a positive for us because there's no limit on the number of casinos in Mississippi and there's all sorts of lamb that people are always looking at trying to finance a new casino and an if I remember correctly Chad they invested somewhere in the neighborhood of $300 million and I don't think they are getting much of a return and that's going to make a really hard for about a dozen other projects that are floating out there at any given time to try to get their financing. You know this is a pretty built up market. It's hard to make the numbers work on a new casino in Mississippi and every now and then somebody gets a dream they get running out and try to make it go but I think the numbers are hard to make work in the case of the Scarlet Pearl the owner wrote a really large equity check, I think it's over 50% equity in the project and he's going to end up with a pretty low return on his equity and I think that's going to stabilize the market for a while in an odd way.

And then just across the portfolio in general, a lot of competitors were noting that May and June were a bit weaker than expected, kind of notwithstanding some of those negative whole trend, can you kind of talk about some of the monthly trends you saw across your portfolio in general?

Well I can't remember, May was a bad calendar and then June was a catch up calendar if I remember correctly and then so May was kind of a hiccup but then when you realized it one last week than normal and that you kind of picked it up in the adjoining month and ended up kind of okay. I was talking with one of our general managers last night we were kicking ourselves because it seems like every four years you have a weak couple of weeks with the Olympics. Everybody stays on the watch as the Olympics is on television and you don't see it Tahoe where people are having vacation but you see in a market like Fallon we have local people and it's a little bit soft. We're kind of kicking ourselves that we didn't dream up some promotion that says every time they play the American anthem we will pass on [indiscernible] or something and this is a guy like me who's been around the industry for a long time. We're both kicking ourselves that we knew that there would be this Olympic phenomena. Now a part of that we're actually having a pretty good August but just the last week was a little bit soft and I'll bet you'll find people grumping about the Olympics as they did four years ago and eight years ago and twelve years ago. But back in -- by the way it's not huge, it's just a little soft, same way it's just soft and then you realize you know when I'm talking -- the Olympics playing in the background, you hear the Olympics play at the background, maybe what it looks like. But I didn't see anything in the second quarter that was untoward if that's what you're wondering. I will mention it's raining a fair amount in Louisiana and Louisiana is a place where it does rain a fair amount and 10,000 people have been evacuated from Baton Rouge and so on and so forth and Baton Rouge is like an hour and half west of us. So far we're okay. We actually had an okay weekend and our property has not been flooded, our roads leading to us aren't flooded and our customers live where it's raining but they seem to be still coming. I think it has affected other people in Louisiana. We're actually in Mississippi on the edge of Louisiana, but we're doing okay despite the rain.

And then just one last follow up, could you just maybe please just highlight on some of the trends you’re seeing with rated versus unrated and then maybe just across the players in general?

Well most of our players are rated but if you're talking about really high end we have really small really high end. If you’re trying to look for a macroeconomic features I didn't pick up on anything like recession or something. I wish we could make book on the presidential race that would be a very popular bet but you got to go to London to do that and I think it's been okay but you know what I'm not sure we know, you almost have to ask somebody like Penn or Pinnacle who has got a large number of properties. We're more focused on what sort of promotion did the Hollywood did in St. Louis last week and there's something going on in the macro economy, I'm not sure we pick up on it as quickly as they would.

And it really does depend on by the property. If you look at the Silver Slipper in Q2 our retail business that’s an R-Rated play actually did quite well. We defined in the rated player too but it really depends by the property and I don’t know if you can really get a whole of ton of useful information from us given how small we are as a company.

And we have two questions left. Next we will go to Howard Rosencrans with Value Advisory.

The maintenance CapEx number that you gave out on an ongoing basis excluding the growth CapEx number was 6 million?

No 3 million a year but the 10 million that we intend to spend on all these different projects is kind of a two year time frame. So over that two year time frame it would be 6 million but it's about 3 million a year and about half of that should be slots. And frankly you don't have to look a few, add up we’re at 2800 spots now? Where are we with Cripple Creek? Somebody will look at that number, so let's say it's in the ballpark of 3000 slots and if you went to replace all the slot machines today it would cost you about $22,000 a slot machine that's $66 million. So what's the turnover rate on the slots well if it's once in 10 years that 6 million. Fortunately slot machines last a long time and you don't really have to change over a large part of the floor every year, you just have to refresh it enough that that -- it's sounds like going of the county fair every year as long as they had one new ride people still want to go to the county fair and probably 20 of the rides are sold, you probably shouldn’t be getting on it. But you do have to constantly refresh that casino floor and that's probably a 1.5 million of the 3 million right there and the rest of it is stuff like groups and a little bit leak [ph]. We had a chiller blowout of the Silver Slipper the other day and you know so it's just stuff that you have to replace that you would. And it's a little bit subjective what that number is but that's kind of the number we've settled on and I view that as stuff we have to do that we don't really expect and rely on it but if you don't do it you're property eventually gets more and more tired and then you got a problem.

And just to understand your where you stand on your debt for the moment. It's due in -- there is a piece due in '19, the other piece is due in '22 but you have to pay it at the same time in '19 or the back end question to that was, can you do something to reduce the rate meaningfully or you have to get to a four times leverage ratio would seem with your free cash flow levels or your projected free cash flow levels if I take out the growth CapEx you have a good amount of free cash flow I would hope somebody would be more than willing in this friendly environment to lend you at a friendlier rate.

Well first of the $10 million of stuff we're spending -- I mean the second lien piece is expensive. It's a 13.5 plus there were upfront fees plus the warrants and everything else it's expensive debt, but frankly the return we expect to get on this 10 even though it's unlevered is even higher than that. otherwise we wouldn’t be doing this. We'd be trying to pay down cycling debt, but when we were doing the refinancing the first lien debt was willing to roll basically and they reduce their amortization to help us make these investments and there was very few fees on that almost none. but they only wanted to go to a new three year term. The second lien debt had fees and warrants and all this stuff and it has a grid as our leverage gets better the cost on that debt comes down, not dramatically but it does come down. And it can get down to 12.5% and it's none -- if we tried to pay it off today it's one of one off three in next year and one of two and one of one and then particularly, but they were willing to go out six years. I would too if I was getting 13.5%. And so we kind of -- but they said they're willing to go six but they don't want to be years after the first lien. So the way we resolved is we said okay, the first lien will go three years and the second lien at our choice is either due at a six year term or six months after the first lien comes due. Now the real intent is to work with the bank group to now do a normal five year term on that. So that the…

Does this take you out of the box to get out on the street and tell the story until after the rights are complete?

Yes because they recognize with the S3 we are in registration. So everything I've said is in the registration statement which I hope I'm pretty clear with it. So we have to be careful to adhere to what's in the registration statement but we’re more than happy to talk to anybody at any time and frankly you will see us out about but we have to be -- we have to be careful since we are technically in registration that we are not just technically if we are in registration.

I will tell you Howard, the last year and a half for us it's really been about just fixing day to day operations kind of keeping our heads down and just building it piece by piece and we are really excited to get this rights offering done and for the first time really go out on the road and sell the story which we haven't had time to do yet quite frankly.

And these things don't happen by themselves. I'm mean you know by pushing people to get this stuff done, to get the designs done, to get the bulldozer up the Fallon and blow up their executive office building. In any company there's an inertia on this stuff. So when you start telling people who have been in those offices for 30 years that you're going to move the offices and tear them down and put a parking lot, their first impressions is that makes a lot of sense because we have these entrances. But then when you start saying yeah we're going to blow up your office, we need you to clean it up and move out because we're going to blow up your office and then you run into the inertia and when the bulldozer is outside of that building and they park it there for a few days just to kind of incentivize them we will get them out of those offices and move it along. So a good part of what I do is provide adrenaline to an organization.

And we do have another question up from Brian Warner with Performance Capital.

Just a few little [indiscernible]. Can you give us a little more color on what the ferry boats impact might be on sort of traffic to Rising Star and how that might translate on to EBITDA? I know it's a big under-utilized property and then additionally I'm just wondering sort of how you’re feeling about the occupancies at the new hotel tower at the Slipper now that’s -- I don’t know if stabilized the right word but how you are generally feeling about that and then just lastly candidly you know with the gaming and leisure properties of the world out there looking for properties sort of all the time. Are you guys way-off the opportunity to dramatically reduce your total cost of debt and capital and versus sort of running the business on a going forward basis. I mean I assume at some point it's something you’re going to consider.

Okay. I'm going to take those on reverse order. The REIT thing is certainly a possibility, we’ve thought about it from time to time. Frankly we have been so busy on other stuff that we haven't focused on it but it's certainly a possibility at some point. And of course they like nice stable properties so they would love this over Slipper fit right in our portfolio. I probably have to stabilize Rising Sun a little better and I think if they got to know the Cripple Creek which we just bought they would be interested in that too. So it is something that we could do down the road, but we don't have any urgency to do it you know as you can see despite being a fairly leveraged company our capital needs aren't that much. I mean we looked at and we said $5 million of equity capital and at one point I will just write the check and then a company can't just sell me $5 million worth of stock. So here we have a rights offering and which is a good way for all shareholders to participate in that. At the moment the deals somewhat is quite fresh. We just paid a lot of fees and so on but sure somewhere down the road when we're trying to refinance all this debt would we consider GOPI [ph] or some other REIT? Of course we would. And I don't think there's an urgent need for it but something we always keep in mind. And by the way if you run the math we very easily could pay off our debt with that sort of sales lease back. If you go to the Silver Slipper occupancy, we’re now up plus 90%. The goal is 100%. I will tell…

Hey David that’s probably all that we have time for today.

I will turn the call back over to Dan Lee for any additional comments or closing remarks.

I will just add Lewis and I are around, call us at anytime, we’re always available and switch to 702-221-7800 and we have to be careful of what we say because we’re on registration but we have not hired a solicitation agent or even a information agent because we’re pretty small company and we think we can answer the phones and answer people's questions and save the money. So on that I thank everybody for your attention. I apologize for having to start it a little bit. We had a lot to talk about but I wanted to make sure the S3 got filed first. Thank you.

That concludes today's conference. Thank you for your participation. You may now disconnect.