UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 
 Form 10-K/A Amendment No. 1 
  (Mark One)x

          

          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2008 OR  o

          

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to Commission File Number: 000-52975 
 American Casino & Entertainment Properties LLC (Exact Name of Registrant as Specified in Its Charter) 
  Delaware

          

          20-0573058(State or Other Jurisdiction of Incorporation or Organization)

          

          (I.R.S. Employer Identification No.)
  2000 Las Vegas Boulevard South Las Vegas, NV

          

          89104(Address of Principal Executive Offices)

          

          (Zip Code)
 (702) 380-7777 (Registrants Telephone Number, Including Area Code) 
 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class A Membership Interests 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No x Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§220.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):  Large Accelerated Filer o

          

          Accelerated Filer o

          

          Non-Accelerated Filer x

          

          Smaller Reporting Company o(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x As of the last business day of the registrants most recently completed second fiscal quarter, none of the voting and non-voting common equity was held by non-affiliates. The registrants common equity is not listed or traded on any exchange or market.
     TABLE OF CONTENTS EXPLANATORY NOTE The purpose of this Amendment No. 1 on Form 10-K/A is to revise Part II, Items 6 through 8 of our previously filed Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission, or the SEC, on March 31, 2009. Accordingly, Part II, Items 6 through 8, on the Form 10-K are hereby amended along with the cover page. As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, new certifications by our principal executive officer and principal financial officer are being filed or furnished as exhibits to this Amendment No. 1 on Form 10-K/A under Item 15 hereof. No attempt has been made in this Amendment No. 1 on Form 10-K/A to modify or update the other disclosures presented in the Form 10-K. This Amendment No. 1 on Form 10-K/A does not reflect events occurring after the filing of the Form 10-K or modify or update those disclosures. Accordingly, this Amendment No. 1 on Form 10-K/A should be read in conjunction with the Form 10-K and our other filings with the SEC.
 1    TABLE OF CONTENTS ITEM 6. SELECTED FINANCIAL DATA The following table summarizes certain of our selected historical consolidated financial data (see Note 1 Notes To Consolidated Financial Statements), which you should read in conjunction with the consolidated financial statements and the related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere in this annual report on Form 10-K. The selected historical consolidated financial data as of December 31, 2008, (Successor) 2007, 2006, 2005, and 2004, (Predecessor) period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 through February 20, 2008 and the years ended December 31, 2007, 2006, 2005, and 2004 (Predecessor), each has been derived from our audited consolidated financial statements at those dates and for those periods.  Successor

          

          PredecessorPeriod from February 21, 2008 through December 31, 2008

          

          Period from January 1, 2008 through February 20, 2008

          

          Years Ended December 31,2007

          

          2006

          

          2005

          

          2004(In Thousands, Except Ratios)Income Statement Data:Revenues:Casino

          

          $

          219,956

          

          

          $

          36,539

          

          

          $

          265,138

          

          

          $

          220,814

          

          

          $

          182,939

          

          

          $

          167,972Hotel

          

          

          69,483

          

          

          

          11,683

          

          

          

          88,242

          

          

          

          75,587

          

          

          

          61,861

          

          

          

          54,653Food and beverage

          

          

          77,230

          

          

          

          12,354

          

          

          

          91,160

          

          

          

          83,667

          

          

          

          70,060

          

          

          

          66,953Tower, retail and other

          

          

          34,179

          

          

          

          4,651

          

          

          

          40,074

          

          

          

          35,912

          

          

          

          35,413

          

          

          

          33,778Gross revenues

          

          

          400,848

          

          

          

          65,227

          

          

          

          484,614

          

          

          

          415,980

          

          

          

          350,273

          

          

          

          323,356Less promotional allowances

          

          

          36,097

          

          

          

          5,608

          

          

          

          40,406

          

          

          

          30,281

          

          

          

          22,291

          

          

          

          23,375Net revenues

          

          

          364,751

          

          

          

          59,619

          

          

          

          444,208

          

          

          

          385,699

          

          

          

          327,982

          

          

          

          299,981Costs and expenses:Casino

          

          

          72,498

          

          

          

          12,363

          

          

          

          87,984

          

          

          

          80,060

          

          

          

          63,216

          

          

          

          61,985Hotel

          

          

          29,406

          

          

          

          4,682

          

          

          

          35,396

          

          

          

          33,419

          

          

          

          26,957

          

          

          

          24,272Food and beverage

          

          

          56,770

          

          

          

          9,183

          

          

          

          68,398

          

          

          

          60,052

          

          

          

          51,784

          

          

          

          48,495Other operating expenses

          

          

          15,337

          

          

          

          2,341

          

          

          

          17,943

          

          

          

          16,856

          

          

          

          15,372

          

          

          

          14,035Selling, general and administrative

          

          

          113,786

          

          

          

          18,511

          

          

          

          126,008

          

          

          

          107,073

          

          

          

          81,321

          

          

          

          78,720Depreciation and amortization

          

          

          31,288

          

          

          

          5,062

          

          

          

          36,034

          

          

          

          28,620

          

          

          

          23,305

          

          

          

          23,516Pre-opening costs

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          1,904

          

          

          

          

          

          

          

          (Gain) loss on sale of assets

          

          

          875

          

          

          

          

          

          

          

          8

          

          

          

          239

          

          

          

          (25

          )

          

          

          96Management fee  related party

          

          

          2,578

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Impairment of assets

          

          

          11,894

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Total costs and expenses

          

          

          334,432

          

          

          

          52,142

          

          

          

          371,771

          

          

          

          328,223

          

          

          

          261,930

          

          

          

          251,119Income from operations

          

          

          30,319

          

          

          

          7,477

          

          

          

          72,437

          

          

          

          57,476

          

          

          

          66,052

          

          

          

          48,862Other income (expense):Loss on early extinguishment of debt

          

          

          

          

          

          

          (13,580

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Interest income

          

          

          813

          

          

          

          322

          

          

          

          2,367

          

          

          

          2,239

          

          

          

          1,617

          

          

          

          1,049Interest expense

          

          

          (2601

          )

          

          

          (2,564

          )

          

          

          (20,574

          )

          

          

          (21,314

          )

          

          

          (18,846

          )

          

          

          (18,939

          )Interest expense  related party

          

          

          (59,946

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Total other expense, net

          

          

          (61,734

          )

          

          

          (15,822

          )

          

          

          (18,207

          )

          

          

          (19,075

          )

          

          

          (17,229

          )

          

          

          (17,890

          )Income (loss) before income taxes

          

          

          (31,415

          )

          

          

          (8,345

          )

          

          

          54,230

          

          

          

          38,401

          

          

          

          48,823

          

          

          

          30,972Provision (benefit) for income taxes

          

          

          

          

          

          

          (2,920

          )

          

          

          15,602

          

          

          

          12,758

          

          

          

          16,789

          

          

          

          10,100Net income (loss)

          

          $

          (31,415

          )

          

          $

          (5,425

          )

          

          $

          38,628

          

          

          $

          25,643

          

          

          $

          32,034

          

          

          $

          20,872OTHER FINANCIAL DATA:Capital expenditures

          

          $

          34,934

          

          

          $

          5,265

          

          

          $

          22,465

          

          

          $

          46,851

          

          

          $

          28,219

          

          

          $

          14,009
 2    TABLE OF CONTENTS  Successor

          

          PredecessorAs of December 31,2008

          

          2007

          

          2006

          

          2005

          

          2004(In Thousands)Balance Sheet Data:Cash and cash equivalents

          

          $

          30,366

          

          

          $

          107,265

          

          

          $

          54,912

          

          

          $

          108,316

          

          

          $

          75,161Total assets

          

          

          1,303,310

          

          

          

          605,098

          

          

          

          575,826

          

          

          

          494,257

          

          

          

          464,341Total debt(1)

          

          

          1,109,810

          

          

          

          257,330

          

          

          

          257,825

          

          

          

          218,298

          

          

          

          218,748Members equity

          

          

          151,298

          

          

          

          296,369

          

          

          

          257,741

          

          

          

          232,098

          

          

          

          200,996
  (1)

          Total debt, including current portion, consists of the current and long-term portions of capital lease obligations and notes payable.
 3    TABLE OF CONTENTS ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS With the exception of historical facts, the matters discussed in this annual report on Form 10-K are forward looking statements. Forward-looking statements may relate to, among other things, future actions, future performance generally, business development activities, future capital expenditures, strategies, the outcome of contingencies such as legal proceedings, future financial results, financing sources and availability and the effects of regulation and competition. Also, please see Risk Factors in Item 1A of this annual report on Form 10-K. When we use the words believe, intend, expect, may,
will, should, anticipate, could, estimate, plan, predict, project, or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. These forward-looking statements are based on the current plans and expectations of our management and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. These factors include, but are not limited to: the size of our indebtedness, our indebtedness effect on our business, the adverse effect of government regulation and other matters affecting the gaming industry, increased operating costs of our properties, increased competition in the gaming industry, adverse effects of economic downturns and terrorism, our failure to make necessary capital
expenditures, increased costs associated with our growth strategy, the loss of key personnel, risks associated with geographical market concentration, our failure to satisfy our working capital needs from operations or our indebtedness, our inability to raise additional money, our dependence on water, energy and technology services, adverse effects of increasing energy costs, and the availability of and costs associated with potential sources of financing. You should also read, among other things, the risks and uncertainties described in the section entitled Risk Factors in Item 1A of this annual report on Form 10-K. We warn you that forward-looking statements are only predictions. Actual events or results may differ as a result of risks that we face. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update them. The following discussion contains managements discussion and analysis of financial condition and results of operations. Managements discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, our audited financial statements and related notes. On November 28, 2005, AREP Laughlin Corporation entered into an agreement to purchase the Flamingo Laughlin Hotel and Casino, now known as the Aquarius Casino Resort, or the Aquarius, in Laughlin, Nevada from Harrahs Operating Company, Inc. AREP Laughlin Corporation was formed by our former indirect parent, Icahn Enterprises Holdings L.P., or IEH, to acquire, own and operate the Aquarius, and IEH contributed 100% of the stock of AREP Laughlin to ACEP on April 4, 2006. The transaction was approved by the Nevada Gaming Commission upon recommendation of the Nevada Gaming Control Board and closed on May 19, 2006. The purchase price was $114.0
million, including working capital amounts. Accordingly, our financial statements include the financial position and results of operations of the Aquarius from May 19, 2006 forward. Overview We own and operate four gaming and entertainment properties in Clark County, Nevada. The four properties are the Stratosphere Casino Hotel & Tower, which is located on the Las Vegas Strip and caters to visitors to Las Vegas, two off-Strip casinos, Arizona Charlies Decatur and Arizona Charlies Boulder, which cater primarily to residents of Las Vegas and the surrounding communities, and the Aquarius Casino Resort, formerly known as the Flamingo Laughlin Hotel and Casino, in Laughlin, Nevada, or the Aquarius, which caters to visitors to Laughlin. The Stratosphere is one of the most recognized landmarks in Las Vegas, our two Arizona
Charlies properties are well-known casinos in their respective marketplaces and the Aquarius has the largest hotel in Laughlin. Each of our properties offers customers a value-oriented experience by providing competitive odds in our casinos, quality rooms in our hotels, award-winning dining facilities and, at the Stratosphere and Aquarius, an offering of competitive value-oriented entertainment attractions. We believe the value we offer our patrons, together with a strong focus on customer service, will enable us to continue to attract customers to our properties.
 4    TABLE OF CONTENTS Our operating results are greatly dependant on the volume of customers at our properties, which in turn affects the price we can charge for our non-gaming amenities. A substantial portion of our operating income is generated from our gaming operations, more specifically slot play. The majority of our revenue is cash based through customers wagering with cash or paying for non-gaming amenities with cash or credit card. Because our business is capital intensive, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing, fund maintenance capital expenditures and provide excess cash for future development. Las Vegas is one of the largest entertainment markets in the country. Las Vegas hotel occupancy rates are among the highest of any major market in the United States. We believe that the Las Vegas gaming market has two distinct sub-segments: the tourist market, which tends to be concentrated on the Las Vegas Strip and Downtown Las Vegas, and the local market, which includes the surrounding Las Vegas area. According to the Las Vegas Convention and Visitors Authority, or LVCVA, the number of visitors traveling to Las Vegas has increased over the last ten years from 30.6 million visitors in 1998 to 37.5 million visitors in 2008, a compound annual growth rate of 2.1%. The number of hotel and motel rooms in Las Vegas has increased from 109,365 at the end of 1998 to 140,529 at the end of 2008, a compound annual growth rate of 2.5%, giving Las Vegas the most hotel and motel rooms of any metropolitan area in the world. Despite this significant increase in the supply of rooms, the Las Vegas hotel occupancy rate exceeded 88% for each of the years from 1998
through 2008. Las Vegas saw declines in tourism in 2008 as the combined economic factors of the housing crisis, frozen credit markets, volatile gas prices and increased unemployment translated to reduced consumer confidence and travel spending in much of the country. According to the Las Vegas Convention and Visitors Authority statistical reports, even with attempts to stimulate demand in the slowed economy with discounted room rates, the hotel average daily room rate, or ADR, and occupancy decreased by approximately 9.8% and 4.2%, respectively, from prior year. Las Vegas Strip gaming revenues have grown as Las Vegas visitations and hotel room counts have grown. Between 1998 and 2008, gaming revenues on the Las Vegas Strip experienced a compound annual growth of 4.4%. Gaming revenues for 2008 totaled approximately $9.8 billion, a 9.9% decrease from 2007, due to combined economic factors of the housing crisis, frozen credit markets, volatile gas prices and increased unemployment translated to reduced consumer confidence and travel spending in Las Vegas and in much of the country. The trend continues into 2009. According to the LVCVA, Las Vegas has been the United States top-ranked destination for trade shows for the last ten years. The number of trade show and convention attendees in Las Vegas increased from approximately 3.3 million in 1998 to 5.9 million in 2008, representing a compound annual growth rate of 6.0%. Trade show and convention attendees spent approximately $8.5 billion in 2008. We believe that the growth in the Las Vegas tourist market has been enhanced by a dedicated program of the LVCVA and major Las Vegas hotels to promote Las Vegas as an exciting vacation and convention site, the increased capacity of McCarran International Airport and the introduction of large, themed destination resorts in Las Vegas. Nevada has enjoyed a strong economy and demographics that include an increasing number of retirees and other active gaming patrons. A majority of Nevadas growth has occurred in Las Vegas, which is located in Clark Country. The population of Clark County has grown from 1,192,200 in 1997 to 1,996,542 in 2007, a compound annual growth rate of 5.3%. In comparison, the United States population increased at a compound annual growth rate of 1.0% during this period. In 2007, median household income in Clark County was $54,299, compared with the national median income of $50,007. From 2007 to 2008, Las Vegas experienced a 0.5% decrease in population. Likely the result of the combined economic factors of the local housing crisis and increased foreclosures. Frozen credit markets, volatile gas prices and increased unemployment contributed to a reduction of consumer confidence and spending in Las Vegas.
 5    TABLE OF CONTENTS The Laughlin area economy is primarily dependent on the gaming and tourism industry. Visitor volume and occupancy rates have declined on an annual basis over the past several years while the number of hotel rooms has remained fairly constant. The declining trend in these primary indicators began in 1994 after nearly 10 years of economic growth in the areas primary industry. The Laughlin gaming market consists of approximately 10,700 rooms and its gaming revenue for 2008 was $571 million, down 9.5% from 2007. Patron Gaming Volume The information contained in the following table relates to Clark County, Nevada and was obtained from the Las Vegas Convention and Visitors Authority and the Nevada Gaming Control Board.  Years Ending December 31,2008

          

          2007

          

          2006Total gaming revenue

          

          $

          9,796,723,000

          

          

          $

          10,868,554,000

          

          

          $

          10,643,824,000Number of slot machines

          

          

          126,789

          

          

          

          128,904

          

          

          

          131,430Number of table games

          

          

          4,454

          

          

          

          4,458

          

          

          

          4,511Number of visitors

          

          

          37,481,552

          

          

          

          39,196,761

          

          

          

          38,914,889
 We use certain key measurements to evaluate operating revenue. Casino revenue measurements include table games drop and slot coin-in, which are measures of the total amounts wagered by patrons. Win or hold percentage represents the percentage of table games drop or slot coin-in that is won by the casino and recorded as casino revenue. Hotel revenue measurements include hotel occupancy rate, which is the average percentage of available hotel rooms occupied during a period, and average daily room rate, which is the average price of occupied rooms per day. Food and beverage revenue measurements include number of covers, which is
the number of guests served, and the average amount per guest.
 6    TABLE OF CONTENTS Results of Operations The following table sets forth the results of our operations for the periods indicated.  Successor

          

          Predecessor

          

          PredecessorPeriod from February 21, 2008 through December 31, 2008

          

          Period from January 1, 2008 through February 20, 2008

          

          2007

          

          2006

          

          2008 to 2007 % Change

          

          2007 to 2006 % Change(In Millions)Income Statement Data:Revenues:Casino

          

          $

          220.0

          

          

          $

          36.5

          

          

          $

          265.1

          

          

          $

          220.8

          

          

          

          -3.2

          %

          

          

          20.1

          %Hotel

          

          

          69.5

          

          

          

          11.7

          

          

          

          88.2

          

          

          

          75.6

          

          

          

          -7.9

          %

          

          

          16.7

          %Food and beverage

          

          

          77.2

          

          

          

          12.4

          

          

          

          91.2

          

          

          

          83.7

          

          

          

          -1.8

          %

          

          

          9.0

          %Tower, retail and other

          

          

          34.2

          

          

          

          4.7

          

          

          

          40.1

          

          

          

          35.9

          

          

          

          -3.0

          %

          

          

          11.7

          %Gross revenues

          

          

          400.9

          

          

          

          65.3

          

          

          

          484.6

          

          

          

          416.0

          

          

          

          -3.8

          %

          

          

          16.5

          %Less promotional allowances

          

          

          36.1

          

          

          

          5.6

          

          

          

          40.4

          

          

          

          30.3

          

          

          

          3.2

          %

          

          

          33.3

          %Net revenues

          

          

          364.8

          

          

          

          59.7

          

          

          

          444.2

          

          

          

          385.7

          

          

          

          -4.4

          %

          

          

          15.2

          %Costs and expenses:Casino

          

          

          72.5

          

          

          

          12.4

          

          

          

          88.0

          

          

          

          80.1

          

          

          

          -3.5

          %

          

          

          9.9

          %Hotel

          

          

          29.4

          

          

          

          4.7

          

          

          

          35.4

          

          

          

          33.4

          

          

          

          -3.7

          %

          

          

          6.0

          %Food and beverage

          

          

          56.8

          

          

          

          9.2

          

          

          

          68.4

          

          

          

          60.1

          

          

          

          -3.5

          %

          

          

          13.8

          %Other operating expenses

          

          

          15.3

          

          

          

          2.3

          

          

          

          18.0

          

          

          

          16.9

          

          

          

          -2.2

          %

          

          

          6.5

          %Selling, general and administrative

          

          

          117.2

          

          

          

          18.5

          

          

          

          126.0

          

          

          

          107.2

          

          

          

          7.7

          %

          

          

          17.5

          %Pre-opening costs

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          1.9

          

          

          

          NA

          

          

          

          0.0

          %Depreciation and amortization

          

          

          31.3

          

          

          

          5.1

          

          

          

          36.0

          

          

          

          28.6

          

          

          

          1.1

          %

          

          

          25.9

          %Impairment of assets

          

          

          11.9

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          NATotal costs and expenses

          

          

          334.4

          

          

          

          52.2

          

          

          

          371.8

          

          

          

          328.2

          

          

          

          4.0

          %

          

          

          13.3

          %Income from operations

          

          $

          30.4

          

          

          $

          7.5

          

          

          $

          72.4

          

          

          $

          57.5

          

          

          

          -47.7

          %

          

          

          25.9

          %EBITDA Reconciliation:Net income (loss)

          

          $

          (31.4

          )

          

          $

          (5.4

          )

          

          $

          38.6

          

          

          $

          25.6

          

          

          

          -195.3

          %

          

          

          50.8

          %Provision (benefit) for income taxes

          

          

          

          

          

          

          (2.9

          )

          

          

          15.6

          

          

          

          12.8

          

          

          

          -118.6

          %

          

          

          21.9

          %Interest income

          

          

          (0.8

          )

          

          

          (0.3

          )

          

          

          (2.4

          )

          

          

          (2.2

          )

          

          

          -54.2

          %

          

          

          9.1

          %Interest expense

          

          

          62.5

          

          

          

          2.6

          

          

          

          20.6

          

          

          

          21.3

          

          

          

          216.0

          %

          

          

          -3.3

          %Depreciation and amortization

          

          

          31.3

          

          

          

          5.1

          

          

          

          36.0

          

          

          

          28.6

          

          

          

          1.1

          %

          

          

          25.9

          %EBITDA

          

          $

          61.6

          

          

          $

          (0.9

          )

          

          $

          108.4

          

          

          $

          86.1

          

          

          

          -44.0

          %

          

          

          25.9

          %
  The results for the twelve months ended December 31, 2008, which we refer to as Combined, represents the period January 1, 2008 through February 20, 2008 (Predecessor) and the period February 21, 2008 through December 31, 2008 (Successor). The use of Predecessor and Successor periods was necessitated by the acquisition of ACEP on February 20, 2008. The acquisition of ACEP did not materially effect the companys operations with the exception of interest and depreciation and amortization expenses. The presentation of financial information for Combined herein may yield results that are not fully comparable on a period-by-period basis,
particularly related to depreciation and amortization, primarily due to the impact of the Acquisition on February 20, 2008. Combined does not comply with Generally Accepted Accounting Principles, GAAP, or with the SECs rules for pro forma presentation; however, it is presented because we believe that it provides the most meaningful comparison of our results for 2008 to our results for prior periods.
 7    TABLE OF CONTENTS Year Ended December 31, 2008 Compared to Year Ended December 31, 2007 Gross revenues decreased 3.8% for the Combined year ended December 31, 2008 from $484.6 million for the year ended December 31, 2007. The decrease in gross revenues for the period was due primarily to an overall decrease in gaming and hotel revenues across the majority of our properties as the result of the weakening Las Vegas and U.S. economies. Declining real estate values, volatile oil prices, increased unemployment, difficult consumer credit markets, and declining consumer confidence have all precipitated an economic slowdown which has negatively impacted our operations. Income from operations declined 47.7% for the Combined year ended December 31, 2008 as compared to the year ended December 31, 2007. The decrease is due to declining revenue due to the weakening economic conditions as discussed above. In addition, during the Combined year ended December 31, 2008, we recognized non-cash charges of approximately $13.6 million for a loss on the early extinguishment of debt in the Predecessor period, $11.9 million for impairment of assets (see Impairment of Assets section), and $875,000 for a loss on the disposal of assets. We also expensed approximately $1.5 million for services related to the Acquisition and
$2.6 million for management fees to Highgate. As a result, our consolidated net operating margin decreased to 8.9% for the Combined year ended December 31, 2008 compared to 16.3% for the year ended December 31, 2007 and EBITDA decreased 44.0% for the Combined year ended December 31, 2008 compared to the year ended December 31, 2007. Casino Casino revenues consist of revenues from slot machines, table games, poker, race and sports book, bingo and keno. Casino revenues decreased 3.2% and generated 55.0% of gross revenue for the Combined year ended December 31, 2008 from $265.1 million, or 54.7% of gross revenues, for the year ended December 31, 2007. This decrease was primarily due to a decrease in slot revenue, due to a 4.7% decrease in slot coin-in, a decrease in table games revenues, due to a 10.9% decrease in table drop, slightly offset by increased poker, bingo and race and sports revenues. For the Combined year ended December 31, 2008, slot machine revenues were 84.1% of casino
revenues, and table game revenues were 12.6% of casino revenues, compared to $221.3 million and $35.7 million, respectively, for the year ended December 31, 2007. Other casino revenues, consisting of race and sports book, poker, bingo and keno, increased 6.2% for the Combined year ended December 31, 2008 from $8.1 million for the year ended December 31, 2007. Casino operating expenses decreased 3.5% to 33.1% of casino revenues, for the Combined year ended December 31, 2008, from $88.0 million, or 33.2% of casino revenues, for the year ended December 31, 2007. This decrease was primarily due to decreased participation expenses and revenue tax expenses. Participation expense consists of fees paid to game owners for use of their games. Hotel Hotel revenues decreased 7.9% to 17.4% of gross revenues, for the Combined year ended December 31, 2008 from $88.2 million, or 18.2% of gross revenues, for the year ended December 31, 2007. This decrease was primarily due to a 4.3% decrease in occupancy and a 3.0% decrease in average daily room rate. Hotel operating expenses decreased 3.7%, to 42.0% of hotel revenues, for the Combined year ended December 31, 2008, from $35.4 million, or 40.1% of hotel revenues, for the year ended December 31, 2007. This decrease was primarily due to lower labor costs and other costs associated with a decrease in the hotel occupancy rate. Food & Beverage Food and beverage revenues decreased 1.8% to 19.2% of gross revenues, for the Combined year ended December 31, 2008, from $91.2 million, or 18.8% of gross revenues, for the year ended December 31, 2007. This decrease was due to a decrease in the number of covers which was partially offset by an increase in the average check amount. Food and beverage operating expenses decreased 3.5% to 73.7% of food and beverage revenues, for the Combined year ended December 31, 2008, from $68.4 million, or 75.0% of food and beverage revenues, for the year ended December 31, 2007. This decrease was primarily due to a decrease in cost of goods sold and labor costs.
 8    TABLE OF CONTENTS Tower, Retail and Other Tower, retail and other revenues decreased 3.0% to 8.3% of gross revenues, for the Combined year ended December 31, 2008 compared to $40.1 million, or 8.3% of gross revenues, for the year ended December 31, 2007. Higher entertainment and tower revenues were offset by lower retail revenues and other income. Other operating expenses decreased 2.2% to 45.2% of tower, retail and other revenues, for the Combined year ended December 31, 2008, compared to $18.0 million, or 44.9% of tower, retail and other revenues, for the year ended December 31, 2007. This decrease was primarily due to a decrease in labor costs. Promotional Allowances Promotional allowances are comprised of the retail value of goods and services provided to casino patrons under various marketing programs. As a percentage of casino revenues, promotional allowances increased to 16.3% for the Combined year ended December 31, 2008 from 15.2% for the year ended December 31, 2007. This increase was primarily due to increased marketing promotions, especially at the Aquarius, Arizona Charlies Decatur and the Stratosphere. Selling, General and Administrative (SG&A) Selling, general and administrative expenses were primarily comprised of payroll, marketing, advertising, utilities and other administrative expenses. These expenses increased 7.7% to 29.1% of gross revenues, for the Combined year ended December 31, 2008, from $126.0 million, or 26.0% of gross revenues, for the year ended December 31, 2007. This increase was primarily due to an increase in asset management fees, insurance expenses and consulting and other costs related to the sale of the company. Impairment of Assets We have significant amounts of finite-lived and indefinite-lived intangible assets on our consolidated balance sheet as of December 31, 2008. In accordance with SFAS 142, Goodwill and Other Intangible Assets, we perform an annual impairment test of these assets in the fourth quarter of each year. As of November 1, 2008, we performed impairment tests that resulted in non-cash write-downs of our goodwill and trade names of approximately $8.2 million at the Stratosphere, approximately $2.4 million at Arizona Charlies Decatur, $1.2 million at Arizona Charlies Boulder and approximately $182,000 at the Aquarius. As of December 31, 2008,
we wrote off 100% of our goodwill. The impairment of these assets was due primarily to our decrease in revenues and resulting decrease in income from our properties, which was an indication that these assets may not be recoverable. We believe the declines in our revenue and income are related to the on-going economic recession in the U.S. and Southern Nevada economies, which has caused us to reduce our estimates for projected cash flows, has reduced overall industry valuations, and has caused an increase in discount rates in the credit and equity markets. In addition, we tested our assets for recovery pursuant to SFAS 144. The asset recoverability test required the estimation of undiscounted future cash flows from our properties and the comparison of the aggregate total to the property carrying value. The test resulted in no impairment; however, we will continue to monitor the performance of each of our properties and, if necessary, continue to update our asset recoverability test under SFAS 144. If future asset recoverability tests indicate our assets are impaired, we will be subject to a non-cash write-down of our assets, which could have a material adverse impact on our consolidated statements of
operations. We did not incur any impairment charges under SFAS 142 or SFAS 144 for the periods ending December 31, 2007 and December 31, 2006. Interest Expense Interest expense increased 216.0% for the Combined year ended December 31, 2008, from $20.6 million for the year ended December 31, 2007. The increase was primarily due to the $1.1 billion Goldman Term Loans issued February 20, 2008. Year Ended December 31, 2007 Compared to Year Ended December 31, 2006 Gross revenues increased 16.5% to $484.6 million for the year ended December 31, 2007 from $416.0 million for the year ended December 31, 2006. This increase was primarily due to an increase in slot and hotel revenues, as discussed below and a full year of results for Aquarius.
 9    TABLE OF CONTENTS Casino Casino revenues consist of revenues from slot machines, table games, poker, race and sports book, bingo and keno. Casino revenues increased 20.1% to $265.1 million, or 54.7% of gross revenues, for the year ended December 31, 2007 from $220.8 million, or 53.1% of gross revenues, for the year ended December 31, 2006. This increase was primarily due to increases in slot revenue, due to an 18.9% increase in coin-in and a 1.6% increase in hold percentage, and table games revenue due to an increase of 11.8% in drop. The increases were primarily related to the acquisition of the Aquarius in May 2006 and improved results at our existing properties. For the
year ended December 31, 2007, slot machine revenues were $221.3 million, or 83.5% of casino revenues, and table game revenues were $35.7 million, or 13.5% of casino revenues, compared to $178.7 million and $32.0 million, respectively, for the year ended December 31, 2006. Other casino revenues, consisting of race and sports book, poker, bingo and keno, were $8.1 million and $10.1 million for the years ended December 31, 2007 and 2006, respectively. Casino operating expenses increased 9.9% to $88.0 million, or 33.2% of casino revenues, for the year ended December 31, 2007, from $80.1 million, or 36.3% of casino revenues, for the year ended December 31, 2006. This increase was primarily due to the acquisition of the Aquarius in May 2006 and was offset by decreased participation expenses at our existing properties. Participation expense consists of fees paid to game owners for use of their games. Hotel Hotel revenues increased 16.7% to $88.2 million, or 18.2% of gross revenues, for the year ended December 31, 2007 from $75.6 million, or 18.2% of gross revenues, for the year ended December 31, 2006. This increase was primarily due to the acquisition of the Aquarius in May 2006 and a 7.8% increase in average daily room rate at our existing properties. Hotel operating expenses increased 6.0% to $35.4 million, or 40.1% of hotel revenues, for the year ended December 31, 2007, from $33.4 million, or 44.2% of hotel revenues, for the year ended December 31, 2006. This increase was primarily due to the acquisition of the Aquarius in May 2006 and was offset
by decreased commissions and broker fees at our existing properties due to a decrease in the hotel occupancy rate. Food & Beverage Food and beverage revenues increased 9.0% to $91.2 million, or 18.8% of gross revenues, for the year ended December 31, 2007, from $83.7 million, or 20.1% of gross revenues, for the year ended December 31, 2006. This increase was due to an increase in the average check amount partially offset by an increase in the number of covers, primarily related to the acquisition of the Aquarius in May 2006. Food and beverage operating expenses increased 13.8% to $68.4 million, or 75.0% of food and beverage revenues, for the year ended December 31, 2007, from $60.1 million, or 71.8% of food and beverage revenues, for the year ended December 31, 2006. This
increase was primarily due to an increase in labor and food costs, primarily related to the acquisition of the Aquarius in May 2006. Tower, Retail and Other Tower, retail and other revenues increased 11.7% to $40.1 million, or 8.3% of gross revenues, for the year ended December 31, 2007 from $35.9 million, or 8.6% of gross revenues, for the year ended December 31, 2006. This increase was primarily due to the acquisition of the Aquarius in May 2006 and to increased retail and leasing rental revenue at our existing properties. Other operating expenses increased 6.5% to $18.0 million, or 44.9% of tower, retail and other revenues, for the year ended December 31, 2007, from $16.9 million, or 47.1% of tower, retail and other revenues, for the year ended December 31, 2006. This increase was primarily due to the
acquisition of the Aquarius in May 2006 offset by decreases at our existing properties primarily due to a decrease in labor costs and entertainer fees, due to the cancellation of the afternoon show, Viva Las Vegas, at the Stratosphere, in mid-2006. Promotional Allowances Promotional allowances are comprised of the retail value of goods and services provided to casino patrons under various marketing programs. As a percentage of casino revenues, promotional allowances increased to 15.2% for the year ended December 31, 2007 from 13.7% for the year ended December 31, 2006. This increase was primarily due the acquisition of the Aquarius in May 2006 and to increased marketing promotions, especially at the Stratosphere and Arizona Charlies Boulder.
 10    TABLE OF CONTENTS Selling, General and Administrative Selling, general and administrative expenses were primarily comprised of payroll, marketing, advertising, utilities and other administrative expenses. These expenses increased 17.5% to $126.0 million, or 26.0% of gross revenues, for the year ended December 31, 2007, from $107.2 million, or 25.8% of gross revenues, for the year ended December 31, 2006. This increase was primarily due to an increase in labor costs and pre-opening costs related to the acquisition of the Aquarius. Interest Expense Interest expense decreased 3.3% to $20.6 million for the year ended December 31, 2007, from $21.3 million for the year ended December 31, 2006. The decrease of $0.7 million was primarily due to a reduction in the outstanding borrowings under the senior secured revolving credit facility during 2006 and the reversal of a portion of the accrued interest related to the decrease in the unrecognized tax benefit. Financial Condition Liquidity and Capital Resources The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, renovation projects and our subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, financial market risks, the ability to maintain existing management, competition within the gaming industry, the cyclical nature of the hotel business and gaming business,
economic conditions, regulatory matters and litigation and other risks described in our filings with the Securities and Exchange Commission. In addition, renovation projects entail significant risks, including shortages of materials or skilled labor, unforeseen regulatory problems, work stoppages, weather interference, floods, unanticipated cost increases, and disruption to business. The anticipated costs and construction periods are based on budgets, conceptual design documents and construction schedule estimates. There can be no assurance that the budgeted costs or construction period will be met. All forward-looking statements are based on our current expectations and projections about future events. Our primary sources of cash are from the operations of our properties and cash escrowed upon funding the Goldman Term Loans (see discussion below on the Goldman Term Loans) and restricted for various projects. During the Combined twelve months period ended December 31, 2008, our Net Cash Provided by Operating Activities declined 71.9% compared to approximately $73.4 million during the twelve months ended December 31, 2007. The primary reasons for the decrease were an approximate $19.8 million decrease in Net Revenues and an approximate $43.8 million increase in interest expense due to the Goldman Term Loans. At December 31, 2008, we had total
restricted cash and letters of credit available to us for capital expenditures of approximately $41.0 million. We had approximately $30.4 million in cash and cash equivalents as of December 31, 2008, virtually all of which is used for day-to-day operations of our casinos. During the Combined twelve month period ended December 31, 2008, of our total capital expenditure amount, we spent approximately $4.7 million for the period January 1, 2008 to February 20, 2008 (Predecessor) and approximately $13.7 million during the period February 21, 2008 through December 31, 2008 (Successor) to complete the renovation of the Aquarius. In addition, we spent $0 for the period January 1, 2008 to February 20, 2008 (Predecessor) and approximately $3.7 million during the period February 21, 2008 through December 31, 2008 (Successor) for the renovation of the Stratosphere Hotel Casino and approximately $600,000 for the period January 1,
2008 to February 20, 2008 (Predecessor), and approximately $17.5 million during the period February 21, 2008 through December 31, 2008 (Successor) for new equipment, replacement of existing equipment, and various other projects throughout the Company. For the twelve months ended December 31, 2007, capital expenditures totaled $22.5 million, of which $11.4 million was used to purchase new and convert existing slot machines, $2.4 million was spent on the Aquarius renovation and approximately $8.7 million was for new equipment, replacement of existing equipment, and various other projects throughout the Company. During the period February 21, 2008 through December 31, 2008 (Successor), $22.6 million of our capital expenditures were paid from cash escrowed upon funding the Goldman Term Loans and restricted for various projects and $9.9 million was paid from our FF&E Reserve as
 11    TABLE OF CONTENTS defined in the Goldman Term Loans (essentially a reserve for capital expenditures on furniture, fixtures and equipment) that is funded monthly with 3% of net revenues. Our primary cash requirements for 2009 are expected to include (i) expenses associated with ongoing day-to-day operations, (ii) interest payments on indebtedness, (iii) regular maintenance and other capital expenditures of approximately $13.9 million, which will be evaluated throughout the year, and (iv) payments for design and development costs of future projects. In addition to our regular capital spending plan, our lender required us to place $54.0 million in cash and a letter of credit in reserve for capital projects upon funding of the Goldman Term Loans. These projects include approximately $19.0 million for the Aquarius hotel renovation, which is now complete, approximately $25.0 million for renovations at the Stratosphere, and approximately $10.0 million at Arizona Charlies Decatur for an event room and other projects. As of December 31, 2008 we had $39.5 million remaining in reserve for the above capital projects, including the letter of credit. These funds are required to be spent over the next
12 to 15 months. We are continually evaluating our financing needs and we are currently in discussions with our lender to restructure the Goldman Term Loans. Whether or not we are able to restructure the Goldman Term Loans, we believe that cash flows from operations, restricted cash and letters of credit available to us, and existing cash balances will be adequate to satisfy our anticipated uses of capital during the remainder of 2009. However, our forecasts of operations and estimates of our reasonably anticipated liquidity needs may change and further deterioration in the Las Vegas, Nevada and U.S. economies, or other unforeseen events could occur, resulting in the
need to raise additional funds from outside sources. Additional financing, if needed, may not be available to us, or if available, the financing may not be on terms favorable to us. On February 20, 2008, in connection with the closing of the Acquisition, certain of our wholly owned indirect subsidiaries obtained the Goldman Term Loans in an aggregate amount of approximately $1.1 billion from Goldman Sachs Mortgage Company pursuant to certain mortgage and mezzanine loan agreements. The Goldman Term Loans have an initial term of two years with two one-year extension options and a blended annual interest rate of LIBOR (0.4% at December 31, 2008) plus 3.00% during the initial term and LIBOR plus 3.25% during any extension term. Approximately $56.5 million of the Goldman Term Loans is held for a capital expenditure reserve, a deferred maintenance reserve and an environmental reserve. In addition, the Goldman Term Loans contain important affirmative and negative financial covenants which may restrict our ability to conduct our gaming operations or pursue development opportunities if desired; we were in compliance with all covenants
at December 31, 2008. Certain of our assets, including the Stratosphere, Arizona Charlies Decatur, Arizona Charlies Boulder, and the Aquarius, secure the Goldman Term Loans. In connection with the Goldman Term Loans, an interest rate cap agreement was purchased to cap LIBOR at 4.75%. The value of the interest rate cap is not material at December 31, 2008. Prior to the closing of the Acquisition, AEP required us to repay from funds provided by AEP, the principal, interest, any prepayment penalty or premium and any other obligation due under the terms of our 7.85% senior secured notes due 2012 and our senior secured credit facility. On February 15, 2008, in connection with the closing of the Acquisition, ACEP repaid all of its outstanding 7.85% senior secured notes due 2012, which were tendered pursuant to ACEPs previously announced tender offer and consent solicitation. In addition, ACEP has repaid in full all amounts outstanding, and terminated all commitments, under its senior secured revolving
credit facility with Bear Stearns Corporate Lending Inc., as administrative agent, and the other lenders thereunder. Off Balance Sheet Arrangements As of December 31, 2008, we have certain contractual obligations which affect our financial condition, liquidity and results of operations, which include operating leases, employment contracts, and slot conversion purchases. In addition, we entered into an Interest Rate Cap agreement with a notional amount of $1.1 billion. The interest rate cap agreement caps LIBOR for the Goldman Term Loans at 4.75%. The value of the interest rate cap is not material at December 31, 2008.
 12    TABLE OF CONTENTS Contractual Obligations The following table sets forth, contractual obligations of ACEP at December 31, 2008.  Payments Due by PeriodContractual Obligations

          

          Total

          

          Less than 1 Year

          

          1  3 Years

          

          4  5 Years

          

          After 5 Years(In Thousands)Debt

          

          $

          1,108,000

          

          

          $

          

          

          

          $

          1,108,000

          

          

          $

          

          

          

          $

          Interest on debt

          

          

          45,800

          

          

          

          38,600

          

          

          

          7,200

          

          

          

          

          

          

          

          Capital leases, including interest

          

          

          8,365

          

          

          

          961

          

          

          

          170

          

          

          

          170

          

          

          

          7,064Operating leases

          

          

          378

          

          

          

          217

          

          

          

          126

          

          

          

          35

          

          

          

          Purchase Obligations

          

          

          2,898

          

          

          

          2,898

          

          

          

          

          

          

          

          

          

          

          

          Employment agreements

          

          

          2,998

          

          

          

          1,075

          

          

          

          1,923

          

          

          

          

          

          

          

          Total

          

          $

          1,168,439

          

          

          $

          43,751

          

          

          $

          1,117,419

          

          

          $

          205

          

          

          $

          7,064
 Critical Accounting Policies Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. As such, we are required to make estimates and assumptions about the effects of matters that are inherently uncertain. Those estimates and assumptions are derived and continually evaluated based on historical experiences, current facts and circumstances, and changes in the business environment. However, actual results may sometimes differ materially from estimates under different conditions. We have summarized our significant accounting policies in Note 1 to our consolidated financial statements. Of the
accounting policies, we believe the following may involve a higher degree of judgment and complexity. Revenue Recognition Casino revenue is recorded as the net win from gaming activities (the difference between gaming wins and losses). Casino revenues are net of accruals for anticipated payouts of progressive and certain other slot machine jackpots. All other revenues are recognized as the services are provided. Gross revenues include the retail value of rooms, food and beverage and other items that are provided to customers on a complimentary basis. Such amounts are then deducted as promotional allowances. Promotional allowances also include incentives for goods and services earned in our slot club and other gaming programs. The company collects taxes from customers at the point of sale on transactions subject to sales and other taxes. Revenues are recorded net of any taxes collected. We also reward customers, through the use of loyalty programs, with points based on amounts wagered, that can be redeemed for a specified period of time for cash or non-cash awards. We deduct the cash incentive amounts from casino revenue. Slot Club Liability We offer programs, named Ultimate Rewards and A.C.E. Rewards, whereby participants can accumulate points for casino wagering that can currently be redeemed for cash, lodging, food and beverages, and merchandise. A liability is recorded for the estimate of unredeemed points based upon redemption history at our casinos. Changes in the program, increases in membership and changes in the redemption patterns of the participants can impact this liability. Points expire after twelve months. Slot club liability is included in accrued expenses on the consolidated balance sheet. Self-Insurance We retain the obligation for certain losses related to customers claims of personal injuries incurred while on our properties, for the first $100,000 per claim, as well as workers compensation claims and dental claims for non-union employees. We accrue for outstanding reported claims, claims that have been incurred but not reported and projected claims based upon managements estimates of the aggregate liability for uninsured claims using historical experience, and adjusting companys estimates and the estimated trends in claim values. Although management believes it has the ability to adequately project and record estimated
claim payments, it is possible that actual results could differ significantly from the recorded liabilities.
 13    TABLE OF CONTENTS Income Taxes Prior to the closing of the Acquisition, for federal income tax purposes, our taxable income or loss was included in the consolidated income tax return of AEP. We entered into a tax allocation agreement with AEP, which provided for payments of tax liabilities to AEP, calculated as if we filed a consolidated income tax return separate from AEP. Additionally, the agreement provided for payments from AEP to us for any previously paid tax liabilities that were reduced as a result of subsequent determinations by any governmental authority or as a result of any tax losses or credits that were allowed to be carried back to prior years. The tax allocation
agreement was terminated on February 20, 2008, in accordance with the terms of the Agreement. Effective February 21, 2008, our taxable income or loss is included in the Holdings partnership tax return (Holdings is a limited liability company and treated as a partnership for tax purposes). As a limited liability company, Holdings taxable income or loss is allocated to members in accordance with their respective percentage ownership. Therefore, we are no longer a taxable entity for federal or state income tax purposes and the tax on our income is borne by our members. Hence, no provision or liability for income taxes has been included in the financial statements subsequent to February 20, 2008. Earnings and losses after that date
will be included in the income tax returns of the members of Holdings and taxed depending on their tax strategies. As a result, we will not incur any additional income tax obligations, and future financial statements will not include a provision for income taxes. Holdings members are responsible for income taxes on their allocated share of taxable income which may differ from income for financial statement purposes due to differences in the tax basis and financial reporting basis of assets and liabilities. The net tax basis of Holdings assets and liabilities exceeded the reported amounts by $20.2 million at December 31, 2008. Prior to the closing of the Acquisition, we accounted for income tax assets and liabilities in accordance with Statement of Financial Accounting Standards, or SFAS, 109, Accounting for Income Taxes. SFAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Our deferred tax assets and liabilities were measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences were expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates was recognized in the period that included the enactment date. We maintained valuation allowances where it was determined more likely than not that all or a portion of a deferred tax asset would not be realized. Changes in valuation allowances from period to period were included in our tax provision in the period of change. In determining whether a valuation allowance was warranted, we took into account such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax planning strategies. As of December 31, 2007, based on the factors above, we expected to realize full tax benefit from our deferred tax assets and had determined that no valuation allowance was warranted. In June 2006, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109, or FIN 48. FIN 48 is an interpretation of SFAS 109. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements uncertain tax positions taken or expected to be taken. We adopted FIN 48 effective January 1, 2007, the adoption of which did not have a material impact on our consolidated financial statements. Intangible Assets and Long-Lived Assets Our finite-lived intangible assets consist of advance reservations and player loyalty plan, and our indefinite-lived intangible assets consist of goodwill and trade names. Acquired assets are recorded at fair value on the date of acquisition, as determined by independent appraisal. Finite-lived intangible assets are amortized over the estimated period to be benefited. Indefinite-lived intangible assets are not amortized, but are reviewed annually for impairment, during the fourth quarter. We evaluate our goodwill, intangible assets and other long-lived assets in accordance with the applications of SFAS No. 142, Goodwill and Other Intangible Assets, and SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. For goodwill and indefinite-lived intangible assets, we perform
 14    TABLE OF CONTENTS an annual impairment test of these assets in the fourth quarter of each year and between annual dates in certain circumstances. For assets to be disposed of we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For long-lived assets to be held and used, we review for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired
if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting property discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. If an asset is under development, future cash flows include remaining construction costs. All recognized impairment charges are recorded as operating expenses. Management must make various assumptions and estimates in performing its impairment testing. For instance, management must first determine the usage of the asset. To the extent management decides that an asset will be sold or abandoned, it is more likely that impairment may be recognized. Assets must be tested at the lowest level for which identifiable cash flows exist, which means that some assets must be grouped, and management has some discretion in the grouping of assets. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. If our ongoing estimates of future cash flows are not
met, we may have to record additional impairment charges in future accounting periods. Our estimates of cash flows are based on the current regulatory, social and economic climates, recent operating information and budgets of the various properties where we conduct operations. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to our properties. See Results of Operationsabove for a discussion of write-downs and impairment charges recorded during the years ended December 31, 2008, 2007 and 2006. The majority of the impairment charges recorded for the year ended December 31, 2008 are primarily related to the ongoing recession, which has caused us to reduce our estimates for projected cash flows, has reduced overall industry valuations, and has caused an increase in discount rates in the credit and equity markets. Commitments and Contingencies On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of such actions, the Company uses its best judgment to determine if it is probable that it will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation, it is possible
that certain matters may be resolved for amounts materially different from any provisions or disclosures that we previously made. Recently Issued Accounting Pronouncements In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement 115. SFAS 159, which amends SFAS 115, allows certain financial assets and liabilities to be recognized, at our election, at fair market value, with any gains or losses for the period recorded in the statement of operations. SFAS 159 included available-for-sales securities in the assets eligible for this treatment. SFAS 159 is effective for fiscal years beginning after November 15, 2007 and interim periods in those fiscal years. The adoption of SFAS 159 did not have a material
impact on our consolidated financial statements. In December 2007, the FASB issued SFAS 141R, Business Combinations, which replaces SFAS 141, Business Combinations. SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business combination, including non-controlling interests, contingent consideration, and certain acquired contingencies. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R will be applicable prospectively to
 15    TABLE OF CONTENTS business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R would only have an impact on accounting for any businesses acquired after the effective date of this pronouncement. In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS 160s objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect the implementation of SFAS 160 to have a material impact on our
consolidated financial statements. In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement 133. SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flow. The guidance in
SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We do not expect the implementation of SFAS 161 to have a material impact on our consolidated financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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. The fair value of our debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. As such, the estimated fair value of the Goldman Term Loans was approximately $571.0 million as of December 31, 2008. The Goldman Term Loans have an initial term of two years with two one-year extension options and a blended annual interest rate of LIBOR (0.4% at December 31, 2008) plus 3.00% during the initial term and LIBOR plus 3.25% during any extension term. At December 31, 2008, approximately $41.0 million of the Goldman Term Loans is held for a capital expenditure reserve, furniture, fixtures and equipment reserve, a deferred maintenance reserve, an environmental reserve and an interest reserve. In addition, the Goldman Term Loans contain important affirmative and negative financial covenants which may restrict our ability to conduct our gaming operations or
pursue development opportunities if desired; we were in compliance with all covenants at December 31, 2008. Certain of our assets, including the Stratosphere Casino Hotel & Tower, Arizona Charlies Decatur and Arizona Charlies Boulder, and the Aquarius Casino Resort, secure the Goldman Term Loans. In connection with the Goldman Term Loans, an interest rate cap agreement was purchased to cap LIBOR at 4.75%. The value of the interest rate cap is not material at December 31, 2008. Certain amounts of our outstanding indebtedness for the year were based upon a variable, LIBOR rate plus a premium. A 1% increase in the LIBOR would have increased our interest cost for 2008 by approximately $11.3 million. Other than the interest rate cap agreements we are required to maintain under the terms of the Goldman Term Loans, we do not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. As of December 31, 2007, there were $40.0 million of borrowings outstanding under our senior secured revolving credit facility. On February 15, 2008, we repaid in full all amounts outstanding, and terminated all commitments, under our senior secured revolving credit facility with Bear Stearns Corporate Lending Inc., as administrative agent, and the other lenders thereunder.
 16    TABLE OF CONTENTS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  PageReport of Independent Registered Public Accounting Firm





18Consolidated Balance Sheets as of December 31, 2008 (Successor) and 2007 (Predecessor)





19Consolidated Statements of Operations for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor)





20Consolidated Statements of Cash Flows for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor)





21Consolidated Statements of Members Equity for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor)





22Notes to Consolidated Financial Statements





23
 17    TABLE OF CONTENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Members American Casino & Entertainment Properties LLC We have audited the accompanying consolidated balance sheets of American Casino & Entertainment Properties LLC (the Company) as of December 31, 2008 (Successor) and December 31, 2007 (Predecessor), and the related consolidated statements of operations, members equity and cash flows for the period January 1, 2008 through February 20, 2008 (Predecessor), the period February 21, 2008 through December 31, 2008 (Successor) and for each of the two years in the period ended December 31, 2007 (Predecessor). These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Casino & Entertainment Properties LLC as of December 31, 2008 (Successor) and December 31, 2007 (Predecessor), and the consolidated results of its operations and its cash flows for the period January 1, 2008 through February 20, 2008 (Predecessor), the period February 21, 2008 through December 31, 2008 (Successor) and for each of the two years in the period ended December 31, 2007 (Predecessor), in conformity with accounting principles generally accepted in the United States of
America. As discussed in Note 2, the consolidated financial statements referred to above have been revised. /s/ GRANT THORNTON LLP Reno, NevadaMarch 27, 2009 (except for Note 2, as to which the date is December 11, 2009)
 18    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC CONSOLIDATED BALANCE SHEETS  Successor

          

          PredecessorAs of December 31, 2008 As Revised, See Note 2

          

          As of December 31, 2007(In Thousands)ASSETSCurrent Assets:Cash and cash equivalents

          

          $

          30,366

          

          

          $

          107,265Restricted cash

          

          

          30,353

          

          

          

          Investments  restricted

          

          

          1,857

          

          

          

          2,858Accounts receivable, net

          

          

          3,841

          

          

          

          5,615Accounts receivable, net  related party

          

          

          653

          

          

          

          Deferred income taxes

          

          

          

          

          

          

          4,309Other current assets

          

          

          12,857

          

          

          

          11,999Total Current Assets

          

          

          79,927

          

          

          

          132,046Property and equipment, net

          

          

          1,172,690

          

          

          

          431,970Debt issuance and deferred financing costs, net

          

          

          3,800

          

          

          

          4,555Debt issuance and deferred financing costs, net  related party

          

          

          5,100

          

          

          

          Deferred income taxes

          

          

          

          

          

          

          34,503Restricted cash

          

          

          10,649

          

          

          

          Intangible and other assets

          

          

          31,144

          

          

          

          2,024Total Other Assets

          

          

          50,693

          

          

          

          41,082TOTAL ASSETS

          

          $

          1,303,310

          

          

          $

          605,098LIABILITIES AND MEMBERS EQUITYCurrent Liabilities:Accounts payable

          

          $

          6,701

          

          

          $

          4,730Accrued expenses

          

          

          21,783

          

          

          

          27,347Accounts payable and accrued expenses  related party

          

          

          3,657

          

          

          

          Accrued payroll and related expenses

          

          

          10,061

          

          

          

          16,936Current portion of capital lease obligations

          

          

          861

          

          

          

          520Total Current Liabilities

          

          

          43,063

          

          

          

          49,533Long-Term Liabilities:Long-term debt

          

          

          

          

          

          

          255,000Long-term debt  related party

          

          

          1,108,000

          

          

          

          Capital lease obligations, less current portion

          

          

          949

          

          

          

          1,810Other

          

          

          

          

          

          

          2,386Total Long-Term Liabilities

          

          

          1,108,949

          

          

          

          259,196Total Liabilities

          

          

          1,152,012

          

          

          

          308,729Commitments and Contingencies Members Equity:Members Equity

          

          

          151,298

          

          

          

          296,369Total Members Equity

          

          

          151,298

          

          

          

          296,369TOTAL LIABILITIES AND MEMBERS EQUITY

          

          $

          1,303,310

          

          

          $

          605,098
 See notes to consolidated financial statements.
 19    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC CONSOLIDATED STATEMENTS OF OPERATIONS  Successor

          

          PredecessorPeriod from February 21, 2008 through December 31, 2008 As Revised, See Note 2

          

          Period from January 1, 2008 through February 20, 2008

          

          Years Ended December 31,2007

          

          2006(In Thousands)REVENUES:Casino

          

          $

          219,956

          

          

          $

          36,539

          

          

          $

          265,138

          

          

          $

          220,814Hotel

          

          

          69,483

          

          

          

          11,683

          

          

          

          88,242

          

          

          

          75,587Food and beverage

          

          

          77,230

          

          

          

          12,354

          

          

          

          91,160

          

          

          

          83,667Tower, retail and other

          

          

          34,179

          

          

          

          4,651

          

          

          

          40,074

          

          

          

          35,912Gross revenues

          

          

          400,848

          

          

          

          65,227

          

          

          

          484,614

          

          

          

          415,980Less promotional allowances

          

          

          36,097

          

          

          

          5,608

          

          

          

          40,406

          

          

          

          30,281Net revenues

          

          

          364,751

          

          

          

          59,619

          

          

          

          444,208

          

          

          

          385,699COSTS AND EXPENSES:Casino

          

          

          72,498

          

          

          

          12,363

          

          

          

          87,984

          

          

          

          80,060Hotel

          

          

          29,406

          

          

          

          4,682

          

          

          

          35,396

          

          

          

          33,419Food and beverage

          

          

          56,770

          

          

          

          9,183

          

          

          

          68,398

          

          

          

          60,052Other operating expenses

          

          

          15,337

          

          

          

          2,341

          

          

          

          17,943

          

          

          

          16,856Selling, general and administrative

          

          

          113,786

          

          

          

          18,511

          

          

          

          126,008

          

          

          

          107,073Depreciation and amortization

          

          

          31,288

          

          

          

          5,062

          

          

          

          36,034

          

          

          

          28,620Pre-opening costs

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          1,904Loss on sale of assets

          

          

          875

          

          

          

          

          

          

          

          8

          

          

          

          239Management fee  related party

          

          

          2,578

          

          

          

          

          

          

          

          

          

          

          

          Impairment of assets

          

          

          11,894

          

          

          

          

          

          

          

          

          

          

          

          Total costs and expenses

          

          

          334,432

          

          

          

          52,142

          

          

          

          371,771

          

          

          

          328,223INCOME FROM OPERATIONS

          

          

          30,319

          

          

          

          7,477

          

          

          

          72,437

          

          

          

          57,476OTHER INCOME (EXPENSE):Loss on early extinguishment of debt

          

          

          

          

          

          

          (13,580

          )

          

          

          

          

          

          

          Interest income

          

          

          813

          

          

          

          322

          

          

          

          2,367

          

          

          

          2,239Interest expense

          

          

          (2,601

          )

          

          

          (2,564

          )

          

          

          (20,574

          )

          

          

          (21,314

          )Interest expense  related party

          

          

          (59,946

          )

          

          

          

          

          

          

          

          

          

          

          Total other expense, net

          

          

          (61,734

          )

          

          

          (15,822

          )

          

          

          (18,207

          )

          

          

          (19,075

          )INCOME (LOSS) BEFORE INCOME TAXES

          

          

          (31,415

          )

          

          

          (8,345

          )

          

          

          54,230

          

          

          

          38,401Provision (benefit) for income taxes

          

          

          

          

          

          

          (2,920

          )

          

          

          15,602

          

          

          

          12,758NET INCOME (LOSS)

          

          $

          (31,415

          )

          

          $

          (5,425

          )

          

          $

          38,628

          

          

          $

          25,643
 See notes to consolidated financial statements.
 20    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC CONSOLIDATED STATEMENTS OF CASH FLOWS  Successor

          

          PredecessorPeriod fromFebruary 21, 2008 throughDecember 31, 2008 As Revised, See Note 2

          

          Period fromJanuary 1, 2008 throughFebruary 20, 2008

          

          Years Ended December 31,2007

          

          2006(In Thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

          

          $

          (31,415

          )

          

          $

          (5,425

          )

          

          $

          38,628

          

          

          $

          25,643Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation and amortization

          

          

          31,288

          

          

          

          5,062

          

          

          

          36,034

          

          

          

          28,620Provision (benefit) for deferred income taxes

          

          

          

          

          

          

          (2,920

          )

          

          

          348

          

          

          

          317Write-off of deferred financing costs

          

          

          

          

          

          

          4,405

          

          

          

          

          

          

          

          Loss on sale of assets

          

          

          875

          

          

          

          

          

          

          

          8

          

          

          

          239Impairment of assets

          

          

          11,894

          

          

          

          

          

          

          

          

          

          

          

          Changes in operating assets and liabilities:Restricted cash

          

          

          558

          

          

          

          

          

          

          

          269

          

          

          

          235Accounts receivable, net

          

          

          1,679

          

          

          

          95

          

          

          

          1,137

          

          

          

          (686

          )Other assets

          

          

          8,772

          

          

          

          55

          

          

          

          5,863

          

          

          

          (2,459

          )Accounts payable and accrued expenses

          

          

          (3,794

          )

          

          

          (9,543

          )

          

          

          (5,254

          )

          

          

          11,452Related party activity, net

          

          

          8,984

          

          

          

          

          

          

          

          

          

          

          

          Other

          

          

          

          

          

          

          

          

          

          

          (3,607

          )

          

          

          108Net Cash Provided By (Used In) Operating Activities

          

          

          28,841

          

          

          

          (8,271

          )

          

          

          73,426

          

          

          

          63,469CASH FLOWS FROM INVESTING ACTIVITIES:Decrease (increase) in investments  restricted

          

          

          1,001

          

          

          

          

          

          

          

          599

          

          

          

          (629

          )Acquisition of property and equipment

          

          

          (32,547

          )

          

          

          (5,265

          )

          

          

          (22,465

          )

          

          

          (46,851

          )Acquisition of Flamingo Laughlin, net of cash acquired

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          (109,439

          )Acquisition of ACEP LLC

          

          

          (1,299,066

          )

          

          

          

          

          

          

          

          

          

          

          Decrease in related party receivables

          

          

          

          

          

          

          

          

          

          

          472

          

          

          

          499Proceeds from sale of property and equipment

          

          

          81

          

          

          

          

          

          

          

          816

          

          

          

          468Net Cash Used In Investing Activities

          

          

          (1,330,531

          )

          

          

          (5,265

          )

          

          

          (20,578

          )

          

          

          (155,952

          )CASH FLOWS FROM FINANCING ACTIVITIES:Debt issuance and deferred financing costs

          

          

          (5,353

          )

          

          

          

          

          

          

          

          

          

          

          (448

          )Debt issuance and deferred financing costs  related party

          

          

          (11,080

          )

          

          

          

          

          

          

          

          

          

          

          Proceeds from line of credit

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          60,000Payments on line of credit

          

          

          

          

          

          

          (40,000

          )

          

          

          

          

          

          

          (20,000

          )Capital distribution

          

          

          

          

          

          

          (15,439

          )

          

          

          

          

          

          

          Equity contribution

          

          

          202,719

          

          

          

          

          

          

          

          

          

          

          

          Proceeds from notes payable  related party

          

          

          1,108,000

          

          

          

          

          

          

          

          

          

          

          

          Payments on capital lease obligation

          

          

          (435

          )

          

          

          (85

          )

          

          

          (495

          )

          

          

          (473

          )Net Cash Provided By (Used In) Financing Activities

          

          

          1,293,851

          

          

          

          (55,524

          )

          

          

          (495

          )

          

          

          39,079Net increase (decrease) in cash and cash equivalents

          

          

          (7,839

          )

          

          

          (69,060

          )

          

          

          52,353

          

          

          

          (53,404

          )Cash and cash equivalents  beginning of period

          

          

          38,205

          

          

          

          107,265

          

          

          

          54,912

          

          

          

          108,316Cash And Cash Equivalents  end of period

          

          $

          30,366

          

          

          $

          38,205

          

          

          $

          107,265

          

          

          $

          54,912SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for interest, net of amounts capitalized

          

          $

          114

          

          

          $

          9,455

          

          

          $

          19,922

          

          

          $

          19,248Cash paid during the period for interest, net of amounts capitalized  related party

          

          $

          52,367

          

          

          $

          

          

          

          $

          

          

          

          $

          Cash paid for income taxes, net of refunds

          

          $

          

          

          

          $

          

          

          

          $

          17,984

          

          

          $

          14,750SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS:Long-term debt paid by parent

          

          $

          

          

          

          $

          215,000

          

          

          $

          

          

          

          $

          Accrued capital expenditures

          

          $

          2,387

          

          

          $

          

          

          

          $

          

          

          

          $

          
 See notes to consolidated financial statements.
 21    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC CONSOLIDATED STATEMENTS OF MEMBERS EQUITY (In Thousands)  Class A Equity

          

          Class B Equity

          

          Total EquityPredecessor:Balances at December 31, 2005

          

          $

          

          

          

          $

          

          

          

          $

          232,098Net Income

          

          

          

          

          

          

          

          

          

          

          25,643Balances at December 31, 2006

          

          $

          

          

          

          $

          

          

          

          $

          257,741Net Income

          

          

          

          

          

          

          

          

          

          

          38,628Balances at December 31, 2007

          

          $

          

          

          

          $

          

          

          

          $

          296,369Equity contribution

          

          

          

          

          

          

          

          

          

          

          215,000Equity distribution

          

          

          

          

          

          

          

          

          

          

          (15,439

          )Write-off tax assets and liabilities

          

          

          

          

          

          

          

          

          

          

          (39,828

          )Net Loss

          

          

          

          

          

          

          

          

          

          

          (5,425

          )Balances at February 20, 2008

          

          $

          

          

          

          $

          

          

          

          $

          450,677Successor:Balances at February 21, 2008

          

          $

          

          

          

          $

          

          

          

          $

          Equity contributions

          

          

          

          

          

          

          202,719

          

          

          

          202,719Acquisition cost paid by parent

          

          

          

          

          

          

          (20,006

          )

          

          

          (20,006

          )Net Loss

          

          

          

          

          

          

          (31,415

          )

          

          

          (31,415

          )Balances at December 31, 2008

          

          $

          

          

          

          $

          151,298

          

          

          $

          151,298
 See notes to consolidated financial statements.
 22    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies The Company American Casino & Entertainment Properties LLC (ACEP or the Company) was formed in Delaware on December 29, 2003. The Company is a holding company that was formed for the purpose of acquiring the entities that own and operate the Stratosphere Casino Hotel & Tower, or the Stratosphere, Arizona Charlies Decatur and Arizona Charlies Boulder in Las Vegas, Nevada. Stratosphere had been owned by a subsidiary of our former indirect parent, Icahn Enterprises Holdings L.P., or IEH. Arizona Charlies Decatur and Arizona Charlies Boulder were owned by Carl C. Icahn and one of his affiliated entities. We purchased the Aquarius
Casino Resort, or the Aquarius, on May 19, 2006, from Harrahs Operating Company, Inc. The Aquarius Casino Resort operates in Laughlin, Nevada. Until February 20, 2008, ACEP was a subsidiary of American Entertainment Properties Corp., or AEP, and its ultimate parent was Icahn Enterprises L.P., or IELP, a Delaware master limited partnership the units of which are traded on the New York Stock Exchange. Mr. Icahn is the Chairman of the Board of Directors of Icahn Enterprises G.P. Inc., or IEGP, IELPs general partner. On April 22, 2007, AEP, our former direct parent, entered into a Membership Interest Purchase Agreement, or the Agreement, with W2007/ACEP Holdings, LLC, or Holdings, an affiliate of Whitehall Street Real Estate Funds, or Whitehall, a series of real estate investment funds affiliated with Goldman, Sachs & Co., to sell all of our issued and outstanding membership interests to Holdings, for $1.3 billion plus or minus certain adjustments such as working capital, more fully described in the Agreement. Pursuant to the Assignment and Assumption Agreement, dated December 4, 2007, between Holdings and W2007/ACEP Managers Voteco, LLC, or Voteco, Holdings
assigned all of its rights, obligations and interests under the Agreement to Voteco. The acquisition, or the Acquisition, closed at a purchase price of $1.2 billion on February 20, 2008. On February 20, 2008, upon the consummation of the closing of the Acquisition, ACEP, Voteco and Holdings entered into an Amended and Restated Limited Liability Company Agreement of ACEP, or the Amended Operating Agreement. On February 20, 2008, in connection with the closing of the Acquisition, each member of Voteco (Stuart Rothenberg, Brahm Cramer and Jonathan Langer), Holdings and Voteco entered into a Transfer Restriction Agreement. On February 20, 2008, in connection with the closing of the Acquisition, certain of our wholly owned indirect subsidiaries obtained term loans in an aggregate amount of approximately $1.1 billion from Goldman Sachs Mortgage Company, or the Goldman Term Loans, pursuant to certain mortgage and mezzanine loan agreements. The Goldman Term Loans have an initial term of two years with two one-year extension options and a blended annual interest rate of LIBOR plus 3.00% during the initial term and LIBOR plus 3.25% during any extension term. As a condition of the Goldman Term Loans, we are required to maintain a cash management account where we deposit all cash revenues and approximately $41.0 million was held in reserve for capital expenditures, deferred maintenance, environmental, structural demolition, taxes and insurance, as of December 31, 2008. Once minimum reserve balance requirements have been met, excess funds are returned to our operating accounts. In addition,
the Goldman Term Loans contain important affirmative and negative financial covenants customary for loans of this nature, which may restrict our ability to conduct our gaming operations or pursue development opportunities if desired. Certain of our assets, including the Stratosphere Casino Hotel & Tower, Arizona Charlies Decatur, Arizona Charlies Boulder and the Aquarius Casino Resort, secure the Goldman Term Loans. On February 20, 2008, upon consummation of the Acquisition, we issued and sold 100% of our Class B membership interests, or Class B Interests, to Holdings for approximately $200.1 million. Except as otherwise
 23    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies   (continued) expressly required by law, holders of our Class B Interests have no voting rights. We issued the Class B Interests to Holdings in reliance on the exemption from registration under the Securities Act pursuant to Section 4(2) thereof. On January 24, 2008, the Nevada Gaming Commission issued an order of registration of ACEP as constituted after the consummation of the Acquisition. The order (1) prohibits Voteco or Holdings, or their respective affiliates, from selling, assigning, transferring, pledging or otherwise disposing of our membership interests or any other security convertible into or exchangeable for our class A membership interests, or Class A Interests, or Class B Interests, without the prior approval of the Nevada Gaming Commission, (2) prohibits the direct or indirect members of Voteco from selling, assigning, transferring, pledging or otherwise disposing of any
direct or indirect membership interest in Voteco without the prior administrative approval of the Chairman of the Nevada State Gaming Control Board or his designee, and (3) prohibits ACEP from declaring cash dividends or distributions on any class of membership interest of ACEP beneficially owned in whole or in part by Holdings or Voteco, or their respective affiliates, without the prior approval of the Nevada Gaming Commission. On February 20, 2008, in connection with the closing of the Acquisition, each member of Voteco (Stuart Rothenberg, Brahm Cramer and Jonathan Langer), Holdings and Voteco entered into a Transfer Restriction Agreement. The Transfer Restriction Agreements provides, among other things, that: 

          Holdings has the right to acquire Class A Interests from Voteco on each occasion that Class B Interests held by Holdings would be transferred to a proposed purchaser who, in connection with such proposed sale, has obtained all licenses, permits, registrations, authorizations, consents, waivers, orders, findings of suitability or other approvals required to be obtained from, and has made all findings, notices or declarations required to be made with, all gaming authorities under all applicable gaming laws, 

          A specific purchase price, as determined in accordance with the Transfer Restriction Agreement, will be paid to acquire the Class A Interests from Voteco, and 

          Voteco will not transfer ownership of Class A Interests owned by it except pursuant to such option of Holdings. On February 20, 2008, upon consummation of the Acquisition, Voteco acquired control of ACEP from our previous direct parent, AEP. AEP sold all the issued and outstanding membership interests of ACEP to Voteco pursuant to the Agreement. The membership interests of ACEP acquired by Voteco were redeemed and canceled pursuant to the terms of the Amended Operating Agreement entered into by ACEP, Voteco and Holdings upon the consummation of the Acquisition. Voteco acquired 100% of our voting securities by purchasing 100% of our newly issued Class A Interest in exchange for consideration in the amount of $30. The source of funds used by Voteco to purchase
the Class A Interest were contributions of capital made to Voteco by each of its three members. Throughout this document we refer to Successor and Predecessor. The term Successor refers to the Company following the Acquisition on February 20, 2008 and the term Predecessor refers to the Company prior to the Acquisition. The following table reconciles the effects of the Acquisition, accounted for as a purchase business combination, on our February 20, 2008 (Predecessor) balance sheet to the February 21, 2008 (Successor) balance sheet.
 24    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies   (continued)  PredecessorBalance Sheet

          

          Fair ValueAdjustments

          

          SuccessorBalance SheetTotal current assets

          

          $

          58,762

          

          

          $

          49,484

          

          

          $

          108,246Property and equipment, net

          

          

          432,254

          

          

          

          735,886

          

          

          

          1,168,140Intangible assets, net

          

          

          1,858

          

          

          

          43,015

          

          

          

          44,873Total other assets

          

          

          

          

          

          

          16,366

          

          

          

          16,366Total Assets

          

          $

          492,874

          

          

          $

          844,751

          

          

          $

          1,337,625Total current liabilities

          

          $

          40,477

          

          

          $

          7,372

          

          

          $

          47,849Long-term debt and capital leases

          

          

          1,720

          

          

          

          1,108,000

          

          

          

          1,109,720Total members' equity

          

          

          450,677

          

          

          

          (270,621

          )

          

          

          180,056Total Liabilities and Members' Equity

          

          $

          492,874

          

          

          $

          844,751

          

          

          $

          1,337,625
 Prior to the consummation of the Acquisition, we were managed by our sole member, AEP, and did not have a board of directors. On February 20, 2008, upon consummation of the Acquisition, Stuart Rothenberg, Brahm Cramer and Jonathan Langer, each a member of Voteco, were appointed as initial members of our Board. Each of the members of Voteco is party to the Transfer Restriction Agreement. Mr. Rothenberg subsequently resigned from our Board on March 9, 2009. On February 20, 2008, upon the consummation of the Acquisition, ACEP, Voteco and Holdings entered into the Amended Operating Agreement. Pursuant to the Amended Operating Agreement, holders of Class A Interests will be entitled to one vote per interest in all matters to be voted on by our voting members. Except as otherwise expressly required by law, holders of Class B Interests will have no right to vote on any matters to be voted on by our members. Holders of Class A Interests and Class B Interests will have no preemptive rights, no other rights to subscribe for additional interests, no conversion rights and no redemption rights, will not benefit
from any sinking fund, and will not have any preferential rights upon a liquidation. The Amended Operating Agreement contains provisions for indemnification of the members of our Board and our officers and their respective affiliates. On February 21, 2008, IELP and ACEP issued a press release announcing the closing of the Acquisition and, in connection with the closing of the Acquisition that ACEP had accepted for payment and has repaid all of its outstanding 7.85% senior secured notes due 2012, which were tendered pursuant to ACEPs previously announced tender offer and consent solicitation. In addition, ACEP has repaid in full all amounts outstanding, and terminated all commitments, under its senior secured revolving credit facility with Bear Stearns Corporate Lending Inc., as administrative agent, and the other lenders there under. On November 28, 2005, AREP Laughlin Corporation entered into an agreement to purchase the Flamingo Laughlin Hotel and Casino, now known as the Aquarius Casino Resort, or the Aquarius, in Laughlin, Nevada from Harrahs Operating Company, Inc. AREP Laughlin Corporation was formed by our former indirect parent, IEH, to acquire, own and operate the Aquarius, and IEH contributed 100% of the stock of AREP Laughlin to ACEP on April 4, 2006. The transaction was approved by the Nevada Gaming Commission upon recommendation of the Nevada Gaming Control Board and closed on May 19, 2006. The purchase price was $114.0 million, including working capital
amounts. Principles of Consolidation The consolidated financial statements include the accounts of ACEP and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. All statements are presented on a consolidated basis.
 25    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies   (continued) The accompanying consolidated statements of operations, cash flows and members equity for 2008 are presented for two periods: January 1, 2008 through February 20, 2008, or the Predecessor Period, and February 21, 2008 through December 31, 2008, or the Successor Period. The Predecessor Period presented on the accompanying consolidated balance sheets reflects the historical accounting basis in our assets and liabilities, while the Successor Period reflects the push down of the new basis to our consolidated financial statements. Revenue Recognition and Promotional Allowances Casino revenue is recorded as the net win from gaming activities (the difference between gaming wins and losses). Casino revenues are net of accruals for anticipated payouts of progressive and certain other slot machine jackpots. All other revenues are recognized as the services are provided. Gross revenues include the retail value of rooms, food and beverage and other items that are provided to customers on a complimentary basis. Such amounts are then deducted as promotional allowances. Promotional allowances also include incentives for goods and services earned in our slot club and other gaming programs. The company collects taxes from customers at the point of sale on transactions subject to sales and other taxes. Revenues are recorded net of any taxes collected. We also reward customers, through the use of loyalty programs, with points based on amounts wagered, that can be redeemed for a specified period of time for cash. We deduct the cash incentive amounts from casino revenue. The estimated costs of providing complimentaries, included as casino expenses, are as follows:  Successor

          

          PredecessorPeriod fromFebruary 21,2008 throughDecember 31,2008

          

          Period fromJanuary 1,2008 throughFebruary 20,2008

          

          DECEMBER 31,2007

          

          2006(in thousands)Food and Beverage

          

          $

          7,942

          

          

          $

          1,370

          

          

          $

          9,463

          

          

          $

          8,723Rooms

          

          

          38

          

          

          

          8

          

          

          

          76

          

          

          

          157Other

          

          

          32

          

          

          

          6

          

          

          

          28

          

          

          

          36Total

          

          $

          8,012

          

          

          $

          1,384

          

          

          $

          9,567

          

          

          $

          8,916
 Cash and Cash Equivalents Cash and cash equivalents include cash on hand and in banks, interest-bearing deposits, money market funds and debt instruments purchased with an original maturity of 90 days or less. Restricted Cash The balance in current restricted cash at December 31, 2008 (Successor) and 2007 (Predecessor) was approximately $30.4 million and $0, respectively, which consists of reserves required under the Goldman Term Loans (as defined in note 9), including a reserve for payment of property taxes and insurance, legal fees, property maintenance and a reserve for interest. Long-term restricted cash consist of approximately $10.6 million and $0 million at December 31, 2008 (Successor) and 2007 (Predecessor), respectively, which represents the remaining reserves for capital expenditures and furniture, fixtures and equipment which will be released in accordance
with the terms of the Goldman Term Loans.
 26    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies   (continued) Investments Restricted Investments-restricted consist primarily of funds pledged for Nevada sales and use tax, unpaid sports book tickets, workers compensation benefits and general liability claims. These investments are certificates of deposit and approximate their fair value. Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents. Cash equivalents consist of interest-bearing deposits, money market funds and debt instruments in financial institutions. Cash and cash equivalents are in excess of Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses in such accounts. Property and Equipment Property and equipment purchased are stated at cost. Assets held under capital leases are stated at the lower of the present value of the future minimum lease payments or fair value at the inception of the lease. Expenditures for additions, renewals and improvements are capitalized and depreciated over their useful lives. Costs of repairs and maintenance are expensed when incurred. Leasehold acquisition costs are amortized over the shorter of their estimated useful lives or the term of the respective leases once the assets are placed in service. Depreciation and amortization of property and equipment are computed using the straight-line method over the following useful lives:  Buildings and improvements

          

          

          36  39 yearsFurniture, fixtures and equipment

          

          

          3  15 yearsLand improvements

          

          

          15 years
 The Company capitalizes interest incurred on debt during the course of qualifying construction projects. Such costs are added to the asset base and amortized over the related assets estimated useful lives. For the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor), we capitalized interest of $0, $0, $21,000 and $110,000, respectively. Unamortized Debt Issue Costs Debt issuance costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense using the effective interest method. For the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor), amortization of debt issue costs totaled $7.9 million, $0.1 million, $1.2 million and $1.1 million, respectively, and are included in interest expense on the accompanying consolidated statements of operations. Slot Club Liability We offer programs, named Ultimate Rewards and A.C.E. Rewards, whereby participants can accumulate points for casino wagering that can currently be redeemed for cash, lodging, food and beverages, and merchandise. A liability is recorded for the estimate of unredeemed points based upon redemption history at our casinos. Changes in the program, increases in membership and changes in the redemption patterns of the participants can impact this liability. Points expire after twelve months. Slot club liability is included in accrued expenses on the consolidated balance sheet.
 27    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies   (continued) Sales, Advertising and Promotion Sales, advertising and promotion costs are expensed as incurred and were approximately $15.5 million, $2.4 million, $18.9 million and $13.8 million for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor), respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. Income Taxes Prior to the closing of the Acquisition, for federal income tax purposes, our taxable income or loss was included in the consolidated income tax return of AEP. We entered into a tax allocation agreement with AEP, which provided for payments of tax liabilities to AEP, calculated as if we filed a consolidated income tax return separate from AEP. Additionally, the agreement provided for payments from AEP to us for any previously paid tax liabilities that were reduced as a result of subsequent determinations by any governmental authority, or as a result of any tax losses or credits that were allowed to be carried back to prior years. The tax allocation
agreement was terminated on February 20, 2008, in accordance with the terms of the Agreement. Effective February 21, 2008, our taxable income or loss is included in Holdings partnership tax return (Holdings is a limited liability company and treated as a partnership for tax purposes). As a limited liability company, Holdings taxable income or loss is allocated to members in accordance with their respective percentage ownership. Therefore, we are no longer a taxable entity for federal or state income tax purposes and the tax on our income is borne by our members. Hence, no provision or liability for income taxes has been included in the financial statements subsequent to February 20, 2008. Earnings and losses after that date will
be included in the income tax returns of the members of Holdings and taxed depending on their tax strategies. As a result, we will not incur any additional income tax obligations, and future financial statements will not include a provision for income taxes. Holdings members are responsible for income taxes on their allocated share of taxable income which may differ from income for financial statement purposes due to differences in the tax basis and financial reporting basis of assets and liabilities. The net tax basis of Holdings assets and liabilities exceeded the reported amounts by $20.2 million at December 31, 2008. Prior to the closing of the Acquisition, we accounted for income tax assets and liabilities in accordance with Statement of Financial Accounting Standards, or SFAS, 109, Accounting for Income Taxes. SFAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Our deferred tax assets and liabilities were measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences were expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates was recognized in the period that included the enactment date. We maintained valuation allowances where it was determined more likely than not that all or a portion of a deferred tax asset would not be realized. Changes in valuation allowances from period to period were included in our tax provision in the period of change. In determining whether a valuation allowance was warranted, we took into account such factors as prior earnings history, expected future earnings, carryback and carryforward periods, and tax planning strategies. As of December 31, 2007, based on the factors above, we expected to realize full tax benefit from our deferred tax assets and had determined that no valuation allowance was warranted.
 28    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies   (continued) In June 2006, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109, or FIN 48. FIN 48, is an interpretation of SFAS 109. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements uncertain tax positions taken or expected to be taken. We adopted FIN 48 effective January 1, 2007, the adoption of which did not have an impact on our consolidated financial statements. Intangible Assets and Long-Lived Assets Our finite-lived intangible assets consist of advance reservations and player loyalty plan, and our indefinite-lived intangible assets consist of goodwill and trade names. Acquired assets are recorded at fair value on the date of acquisition, as determined by independent appraisal. Finite-lived intangible assets are amortized over the estimated period to be benefited. Indefinite-lived intangible assets are not amortized, but are reviewed annually for impairment, during the fourth quarter. We evaluate our goodwill, intangible assets and other long-lived assets in accordance with the applications of SFAS 142, Goodwill and Other Intangible Assets, and SFAS 144, Accounting for Impairment or Disposal of Long-Lived Assets. For goodwill and indefinite-lived intangible assets, we perform an annual impairment test of these assets in the fourth quarter of each year and between annual dates in certain circumstances. For assets to be disposed of we recognize the asset at the lower of carrying value or fair market value, less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow
model. For long-lived assets to be held and used, we review for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We then compare the estimated undiscounted future cash flows of the asset to the carrying value of the asset. The asset is not impaired if the undiscounted future cash flows exceed its carrying value. If the carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically measured using a discounted cash flow model, which is based on the estimated future results of the relevant reporting property discounted using our weighted-average cost of capital and market indicators of terminal year free cash flow multiples. If an asset is under development, future cash flows include remaining construction costs. All recognized impairment charges are recorded as operating expenses. Management must make various assumptions and estimates in performing its impairment testing. For instance, management must first determine the usage of the asset. To the extent management decides that an asset will be sold or abandoned, it is more likely that impairment may be recognized. Assets must be tested at the lowest level for which identifiable cash flows exist, which means that some assets must be grouped, and management has some discretion in the grouping of assets. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from our estimates. If our ongoing estimates of future cash flows are not
met, we may have to record additional impairment charges in future accounting periods. Our estimates of cash flows are based on the current regulatory, social and economic climates, recent operating information and budgets of the various properties where we conduct operations. These estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or other events affecting various forms of travel and access to our properties. Fair Value of Financial Instruments The carrying value of our cash and cash equivalents, restricted cash, receivables and accounts payable approximates fair value primarily because of the short maturities of these instruments. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions that affect
 29    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 1. Description of Business and Summary of Significant Accounting Policies   (continued) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes its estimates and assumptions are reasonable under the circumstances; however, actual results may differ from these estimates. Recently Issued Accounting Pronouncements In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement 115. SFAS 159, which amends SFAS 115, allows certain financial assets and liabilities to be recognized, at our election, at fair market value, with any gains or losses for the period recorded in the statement of operations. SFAS 159 included available-for-sales securities in the assets eligible for this treatment. SFAS 159 is effective for fiscal years beginning after November 15, 2007 and interim periods in those fiscal years. The adoption of SFAS 159 did not have a material impact on
our consolidated financial statements. In December 2007, the FASB issued SFAS 141R, Business Combinations, which replaces SFAS 141, Business Combinations. SFAS 141R establishes principles and requirements for determining how an enterprise recognizes and measures the fair value of certain assets and liabilities acquired in a business combination, including non-controlling interests, contingent consideration, and certain acquired contingencies. SFAS 141R also requires acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized as a component of the business combination. SFAS 141R will be applicable prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS 141R would only have an impact on accounting for any businesses acquired after the effective date of this pronouncement. In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS 160s objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect the implementation of SFAS 160 to have a material impact on our
consolidated financial statements. In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement 133. SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flow. The guidance in
SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We do not expect the implementation of SFAS 161 to have a material impact on our consolidated financial statements.
 30    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 2. Revisions We revised certain items included in our consolidated financial statements based upon comments received from the Securities and Exchange Commission, or the SEC. The revisions include: 

          Showing separately on the face of the financial statements material related party transactions, 

          Including in Note 1 the effect of the fair value adjustments related to the Acquisition on the Successor balance sheet, 

          Updating Note 6 to reflect the material related party changes made to the financial statements, 

          Enhancing disclosure in Note 11 related to the write-off of goodwill acquired in the Acquisition, and 

          Eliminating the reference to an independent third-party valuation firm which was previously included in Note 11. Note 3. Accounts Receivable Accounts receivable consists of the following:  Successor

          

          PredecessorDecember 31,2008

          

          2007(in thousands)Hotel and related

          

          $

          3,241

          

          

          $

          3,503Gaming

          

          

          873

          

          

          

          1,266Other

          

          

          1,337

          

          

          

          1,3535,451

          

          

          

          6,122Less allowance for doubtful accounts

          

          

          (957

          )

          

          

          (507

          )$

          4,494

          

          

          $

          5,615
 The Company recorded bad debt expense and allowance for doubtful accounts for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor) as follows:  Successor

          

          PredecessorPeriod fromFebruary 21,2008 throughDecember 31,2008

          

          Period fromJanuary 1,2008 throughFebruary 20,2008

          

          December 31,2007

          

          2006(in thousands)Balance at beginning of period

          

          $

          636

          

          

          $

          507

          

          

          $

          319

          

          

          $

          135Bad debt expense

          

          

          881

          

          

          

          127

          

          

          

          507

          

          

          

          359Deductions and write-offs

          

          

          (560

          )

          

          

          2

          

          

          

          (319

          )

          

          

          (175

          )Balance at end of period

          

          $

          957

          

          

          $

          636

          

          

          $

          507

          

          

          $

          319
 31    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 4. Other Current Assets Other current assets consist of the following:  Successor

          

          PredecessorDecember 31,2008

          

          2007(in thousands)Inventories

          

          $

          2,632

          

          

          $

          2,644Prepaid expenses

          

          

          9,463

          

          

          

          8,977Other

          

          

          762

          

          

          

          378$

          12,857

          

          

          $

          11,999
 Note 5. Property and Equipment, Net Property and equipment consist of the following:  Successor

          

          PredecessorDecember 31,2008

          

          2007(in thousands)Land and improvements

          

          $

          723,797

          

          

          $

          75,100Buildings and improvements

          

          

          374,406

          

          

          

          339,607Furniture, fixtures and equipment

          

          

          100,884

          

          

          

          186,112Construction in progress

          

          

          3,001

          

          

          

          2,6551,202,088

          

          

          

          603,474Less accumulated depreciation and amortization

          

          

          29,398

          

          

          

          171,504$

          1,172,690

          

          

          $

          431,970
 Assets recorded under capital leases were approximately $4.0 million at December 31, 2008 (Successor) and 2007 (Predecessor). Accumulated depreciation and amortization at December 31, 2008 (Successor) and 2007 (Predecessor) includes amounts recorded for capital leases of $1.7 million and $1.4 million, respectively.
 32    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 6. Accrued Expenses Accrued expenses consist of the following:  Successor

          

          PredecessorDecember 31,2008As Revised, See Note 2

          

          2007(in thousands)Accrued interest

          

          $

          

          

          

          $

          7,040Accrued liabilities

          

          

          7,572

          

          

          

          5,291Accrued taxes

          

          

          2,469

          

          

          

          2,764Accrued gaming liabilities

          

          

          6,098

          

          

          

          6,834Other

          

          

          5,644

          

          

          

          5,418$

          21,783

          

          

          $

          27,347
 Note 7. Leases The future minimum lease payments to be received under non-cancelable operating leases for years subsequent to December 31, 2008 are as follows:  Years ending December 31,

          

          (in thousands)2009

          

          $

          4,7332010

          

          

          4,4452011

          

          

          2,9112012

          

          

          1,5502013

          

          

          461Thereafter

          

          

          754Total

          

          $

          14,854
 The above minimum rental income does not include contingent rental income or common area maintenance costs contained within certain retail operating leases. For the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor), we recorded rental revenue of $6.6 million, $1.3 million, $9.3 million and $7.8 million, respectively.
 33    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 7. Leases   (continued) Future minimum rental payments with respect to non-cancelable operating leases with terms in excess of one year consist of the following at December 31, 2008:  Years ending December 31,

          

          (in thousands)2009

          

          $

          2172010

          

          

          872011

          

          

          392012

          

          

          352013

          

          

          Thereafter

          

          

          Total

          

          $

          378
 The Company, as a lessee, had operating lease expenses for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor).of $130,000, $19,000, $78,000 and $11,000 respectively. Future minimum lease payments under capital leases with initial or remaining terms of one year or more consist of the following at December 31, 2008:  Years ending December 31,

          

          (in thousands)2009

          

          $

          9612010

          

          

          852011

          

          

          852012

          

          

          852013

          

          

          85Thereafter

          

          

          7,064Total minimum lease payments

          

          

          8,365Less: amount representing interest ranging from 5% to 10%

          

          

          6,555Present value of net minimum lease payments

          

          

          1,810Less: current portion

          

          

          861Long-term capital lease obligation

          

          $

          949
 Note 8. Income Taxes As discussed in Note 1, subsequent to the Acquisition, the Company is no longer a taxable entity for federal or state income tax purposes, and the tax on our income is borne by the members. Hence, no provision or liability for income taxes has been included subsequent to February 20, 2008.
 34    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 8. Income Taxes   (continued) The income tax provision (benefit) attributable to income from operations for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor) is comprised of the following:  Successor

          

          PredecessorPeriod from February 21, 2008 through December 31,2008

          

          Period from January 1, 2008 through February 20,2008

          

          December 31,2007

          

          2006(in thousands)Current

          

          $

          

          

          

          $

          (2,920

          )

          

          $

          15,254

          

          

          $

          12,441Deferred

          

          

          

          

          

          

          

          

          

          

          348

          

          

          

          317$

          

          

          

          $

          (2,920

          )

          

          $

          15,602

          

          

          $

          12,758
 Deferred Tax Assets and Liabilities The tax effect of significant temporary differences and carry forwards representing deferred tax assets and liabilities (the difference between financial statement carrying values and the tax basis of assets and liabilities) for the Company is as follows at December 31, 2008 (Successor) and 2007 (Predecessor):  Successor

          

          PredecessorDecember 31,2008

          

          December 31,2007Deferred Tax AssetsProperty, plant and equipment

          

          $

          

          

          

          $

          33,927Accrued vacation and employee related

          

          

          

          

          

          

          2,110Gaming related

          

          

          

          

          

          

          2,299Other

          

          

          

          

          

          

          476Total net deferred tax assets

          

          

          

          

          

          

          38,812Less: Current portion

          

          

          

          

          

          

          (4,309

          )Net long term deferred tax assets

          

          $

          

          

          

          $

          34,503
 The provision for income taxes differs from the amount computed at the federal statutory rate as a result of the following:  Successor

          

          PredecessorPeriod from February 21, 2008 through December 31,2008

          

          Period from January 1, 2008 through February 20,2008

          

          Year Ended December 31,2007

          

          2006Federal statutory rate

          

          

          

          

          

          

          -35.0

          %

          

          

          35.0

          %

          

          

          35.0

          %Unrecognized tax benefit

          

          

          

          

          

          

          

          

          

          

          -5.7

          %

          

          

          -0.9

          %Permanent differences

          

          

          

          

          

          

          

          

          

          

          0.4

          %

          

          

          0.3

          %Federal income tax credits

          

          

          

          

          

          

          

          

          

          

          -0.9

          %

          

          

          -1.2

          %

          

          

          

          -35.0

          %

          

          

          28.8

          %

          

          

          33.2

          %
 The Company adopted the provisions of FIN 48, on January 1, 2007. There was no increase or decrease in the liability for unrecognized tax benefits as a result of the implementation of FIN 48. As of the date of adoption, the Companys unrecognized tax benefits totaled $4.9 million.
 35    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 8. Income Taxes   (continued) A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):  Successor

          

          PredecessorAs of December 31, 2008

          

          As of December 31, 2007Balance at beginning of year

          

          $

          1,844

          

          

          $

          4,900Reductions based on tax positions related to the current year

          

          

          

          

          

          

          Additions for tax positions of prior years

          

          

          

          

          

          

          Reduction as a result of lapse of the applicable statue of limitations

          

          

          

          

          

          

          (3,056

          )Settlements

          

          

          

          

          

          

          Reductions due to Acquisition

          

          

          (1,844

          )Balance at end of year

          

          $

          

          

          

          $

          1,844
 Prior to the closing of the Acquisition, all of the unrecognized tax benefits at December 31, 2007, if recognized, would have affected the annual effective tax rate. We recognized interest accrued related to unrecognized tax benefits in interest expense and penalties, if applicable, as a component of income tax expense. The amount of accrued interest and penalties was approximately $0.5 million as of December 31, 2007. The Company believed it was reasonably possible that the total amount of unrecognized tax benefits could materially change as a result of the expiration of statutes of limitation prior to December 31, 2008. Prior to the closing of the
Acquisition, the Company was included in the consolidated filing of AEP, which files income tax returns in the U.S. federal jurisdiction and has no income tax filing requirements in any state or foreign jurisdiction. As a result of the Acquisition, AEP assumed all unrecognized tax benefits associated with prior tax return filings. All deferred tax attributes, and the associated recognized and unrecognized tax benefits are no longer a part of the Company. Therefore, the Company has no uncertain tax positions as of December 31, 2008. Subsequent to February 20, 2008, we will no longer incur any income tax obligations. Therefore, there was no impact to our financial statements as a result of the continuation of FIN 48. Subsequent to February 20, 2008, we do not believe we have any tax positions taken within our consolidated financial statements that would not meet the FIN 48 threshold. Holdings has yet to file the initial U.S. federal income tax return in which our taxable income or loss will be included. Therefore, Holdings is subject to income tax examinations by major tax authorities for the initial year February 21, 2008 to December 31, 2008.
 36    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 9. Debt Long-term debt and capital lease obligations consist of the following.  Successor

          

          PredecessorAs of December 31, 2008

          

          As of December 31, 2007(in thousands)Goldman Term Loans and related mezzanine financings, due March 11, 2010, interest at a 3% margin above LIBOR (0.4% at December 31, 2008)

          

          $

          1,108,000

          

          

          $

          7.85% senior secured notes, interest payable semi-annually due February 1, 2012

          

          

          

          

          

          

          215,000Senior secured revolving credit facility, interest payable monthly, due May 12, 2010

          

          

          

          

          

          

          40,000Capital lease obligations

          

          

          1,810

          

          

          

          2,330Total long-term debt and capital lease obligations

          

          

          1,109,810

          

          

          

          257,330Current portion of capital lease obligations

          

          

          861

          

          

          

          520Total long-term debt and capital lease obligations, net

          

          $

          1,108,949

          

          

          $

          256,810
 Goldman Term Loans On February 20, 2008, in connection with the closing of the Acquisition, certain of our wholly owned indirect subsidiaries obtained term loans in an aggregate amount of approximately $1.1 billion, which were amended on June 13, 2008, from Goldman Sachs Commercial Mortgage Capital, L.P., or the Lender, pursuant to certain mortgage and mezzanine loan agreements. The Goldman Term Loans mature on March 11, 2010 with two one-year extension options. Interest is due and payable monthly at a blended annual interest rate of LIBOR (0.4% at December 31, 2008) plus 3.00% during the initial term and LIBOR plus 3.25% during any extension term. In connection with
the Goldman Term Loans, an interest rate cap agreement was purchased to cap LIBOR at 4.75%. The value of the interest rate cap is not material at December 31, 2008. The Goldman Term Loans are collateralized by substantially all fee and leasehold real property comprising the Stratosphere, the Aquarius, Arizona Charlies Decatur and Arizona Charlies Boulder. As a condition of the Goldman Term Loans, we are required to maintain a cash management account where we deposit all cash revenues and approximately $41.0 million was held in reserve for capital expenditures, deferred maintenance, environmental remediation, structural demolition, taxes and insurance as of the loan closing date. According to the Goldman Term Loans agreement, the Lender shall remit at the end of each Business Day, the amount, if any, by which amounts then contained in the Cash Management Account (as defined in the agreement) exceed the aggregate amount required to be paid to or reserved. In addition, the Goldman Term Loans contain
important affirmative and negative financial covenants which may restrict our ability to conduct our gaming operations or pursue development opportunities if desired; we were in compliance with all covenants at December 31, 2008. The Goldman Term Loans also restrict the payment of any dividends or distributions. The fair value of our debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. As such, the estimated fair value of the Goldman Term Loans was approximately $571.0 million as of December 31, 2008. Senior Secured Notes Pursuant to the terms of the Agreement, prior to the closing of the Acquisition, AEP was required to cause us to repay from funds provided by AEP, the principal, interest, any prepayment penalty or premium and any other obligation due under the terms of our 7.85% senior secured notes due 2012 and all such amounts were repaid on February 15, 2008, at a price of $1,040.75 per $1,000 principal amount, for a value of $223.8 million.
 37    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 9. Debt   (continued) In addition, ACEP has repaid in full all amounts outstanding, and terminated all commitments, under its senior secured revolving credit facility with Bear Stearns Corporate Lending Inc., as administrative agent, and the other lenders thereunder. The costs related to the early extinguishment of debt totaled $13.6 million and consisted mainly of prepayment penalties and the write-off of deferred financing costs. Note 10. Related Party Transactions As of November 29, 2007, the Stratosphere entered into a master room agreement with Consolidated Resorts, Inc., or CRI, which was effective from January 1, 2008 through December 31, 2008. Even though it has expired, the parties continue to operate under the agreement in a month-to-month arrangement. CRI is approximately 75% owned by Whitehall, Whitehall is affiliated with Holdings, the 100% holder of our Class B membership interests, and Goldman Sachs. Under the agreement, CRI will purchase a minimum number of room nights, from the Stratosphere, which varies by month. In addition, CRI will purchase promotional incentives such as show, restaurant and
gaming packages for each guest. There is also a sales incentive component whereby CRI pays us a fee for timeshare sales generated by CRI guests in excess of 2,449 timeshare sales per month. There were no sales incentives earned during 2008. During the period February 21, 2008 through December 31, 2008 (Successor), and the period January 1, 2008 to February 20, 2008, we recorded approximately $4.0 million and $559,000 for room revenues and approximately $1.1million and $151,000 respectively, for premiums under the agreement. CRI also leases space from the Stratosphere for three marketing kiosks. The lease agreement is effective from July 1, 2008 through June 30, 2011. The base rent is $125,000 per month plus common area maintenance charges. The Stratosphere receives additional rent for tours over 1,250 guests per month that originate from the Stratosphere. During the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008
(Predecessor) and the year ended December 31, 2007(Predecessor), CRI paid the Stratosphere approximately $765,000 for rent under the lease agreement, respectively. As of December 31, 2008 (Successor) and December 31, 2007 (Predecessor), CRI owed us approximately $653,000 and $0, respectively, which is recorded in accounts receivable on the balance sheet. On February 20, 2008 we entered into a consulting agreement with Highgate Hotels, L.P., or Highgate pursuant to which Highgate provides asset management consulting services to us. Highgate is affiliated with Goldman Sachs, which in turn, is affiliated with Holdings. The Agreement expires on February 21, 2010. Highgate is entitled to receive a $3.0 million per year base consulting fee, additional consulting fees based on an increase in the revenue per available room and development fees at 4% for any agreed upon development projects. During the period February 21, 2008 through December 31, 2008 (Successor), and the period January 1, 2008 to February
20, 2008 (Predecessor), we incurred Highgate fees of approximately $2.6 million and $0 for consulting fees and approximately $859,000 and $0 for development fees, respectively. We also reimbursed Highgate approximately $106,000 and $0 for travel and entertainment expenses, during the period February 21, 2008 through December 31, 2008 (Successor), and the period January 1, 2008 to February 20, 2008 (Predecessor), respectively. As of December 31, 2008 (Successor) and December 31, 2007 (Predecessor), we owed Highgate approximately $1.4 million and $0, respectively. A condition of the Goldman Term Loans prohibits us from making payment of more than $1 million per year in asset management fees to Highgate. On February 20, 2008, in connection with the closing of the Acquisition, certain of our wholly owned indirect subsidiaries obtained the Goldman Term Loans in an aggregate amount of approximately $1.1 billion from Goldman Sachs Mortgage Company. We expensed interest on the Goldman Term Loans of approximately $55.3 million and $0 for the period February 21, 2008 through December 31, 2008 (Successor) and the period January 1, 2008 to February 20, 2008 (Predecessor), respectively. We also paid Goldman Sachs $75,000 and $0 during the period February 21, 2008 through December 31, 2008 (Successor), and the period January 1, 2008 to February 20, 2008
(Predecessor), respectively, for expenses in connection with financial
 38    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 10. Related Party Transactions   (continued) advisory services. As of December 31, 2008 (Successor) and December 31, 2007 (Predecessor), we owed $1.1 billion and $0, respectively, for the Goldman Term Loans. Included in accrued expenses on the condensed consolidated balance sheets are Goldman Term Loan interest accrued of $2.2 million and $0, as of December 31, 2008 and December 31, 2007, respectively. On June 16, 2008, the Stratosphere entered into an agreement with Travel Tripper LLC, or TTL, to utilize their technology for online hotel reservations. TTL is owned by an affiliate of Goldman Sachs (9%), an affiliate of Highgate (9%) and an employee of Highgate (40%). TTL is paid 4% of room revenues booked utilizing its system. Fees expensed during the period February 21, 2008 through December 31, 2008 (Successor) were approximately $93,000. As of December 31, 2008 (Successor) and December 31, 2007 (Predecessor), we owed TTL approximately $60,000 and $0, respectively. Archon Group, LP, or Archon, is an affiliate of Goldman Sachs which provides various services to us such as construction management, cash management and insurance brokers. Fees paid during the period February 21, 2008 through December 31, 2008 (Successor), and the period January 1, 2008 to February 20, 2008 (Predecessor) were approximately $193,000 and $0, respectively. As of December 31, 2008 (Successor) and December 31, 2007(Predecessor), we owed Archon approximately $3,000 and $0, respectively. On October 3, 2008, we entered into a participation agreement with Nor1, Inc., or Nor1, to utilize their technology to help sell perishable suite and room inventories. Nor1 gives the guest who books on-line the opportunity to book a non-guaranteed suite or upgraded room at a discounted rate if such is available at check-in. If the suite or upgraded room is awarded, Nor1 is paid 25% of the upgrade fee. Goldman Sachs owns less than 5% of Nor1. No fees were expensed during the period February 21, 2008 through December 31, 2008 (Successor). As of December 31, 2008 (Successor) and December 31, 2007 (Predecessor), we owed Nor1 $0 and $0, respectively. Prior to the Acquisition, during the period January 1, 2008 to February 20, 2008 and the twelve months ended December 31, 2007, our ultimate parent was American Real Estate Partners, L.P., currently known as Icahn Enterprises L.P., and had the following related party transactions: As of May 26, 2004, we entered into an intercompany services arrangement, to provide management and consulting services, with Atlantic Coast Entertainment Holdings, Inc., the former owner of The Sands Hotel and Casino in Atlantic City, New Jersey, which was controlled by affiliates of Mr. Icahn at that date and currently is controlled by IELP. We were compensated based upon an allocation of salaries plus an overhead charge of 15% of the salary allocation plus reimbursement of reasonable out-of-pocket expenses. During the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended
December 31, 2007 and 2006 (Predecessor) we billed Atlantic Cost Entertainment Holdings, Inc. and its affiliates approximately $0, $0, $119,000, $360,000, respectively. As of the date of the Acquisition, the intercompany services arrangement was terminated. During the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor) we made payments to XO Holdings, Inc., which, since January 2003, has been controlled by affiliates of Mr. Icahn, for certain telecommunications services provided to us in an amount equal to approximately $16,000, $199,500, $213,300, respectively. The amounts paid for the provided services approximated their fair value. As of the date of the Acquisition, XO Holdings, Inc. is no longer a related party.
 39    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 11. Goodwill and Other Intangible Assets The Company accounts for goodwill and other intangible assets in accordance with SFAS No. 142, Goodwill and Intangible Assets. The Companys finite-lived acquired intangible assets include advance reservations and player loyalty plan. The Companys infinite-lived acquired intangible assets include goodwill and trade names. Acquired assets are recorded at fair value on the date of acquisition, and finite-lived assets are amortized over the estimated period to be benefited. As of December 31, 2008 (Successor) and 2007 (Predecessor), we had the following intangible assets.  (in thousands)December 31, 2008 (Successor)

          

          December 31, 2007 (Predecessor)Asset Life

          

          Gross Carrying Amount

          

          Accumulated Amortization

          

          Net Carrying Amount

          

          Gross Carrying Amount

          

          Accumulated Amortization

          

          Net Carrying AmountAmortizing intangible assets:Advance reservations

          

          

          2 Months

          

          

          

          618

          

          

          

          (618

          )

          

          

          

          

          

          

          

          

          

          

          

          

          

          

          Player Loyalty Plan

          

          

          5 Years

          

          

          

          7,450

          

          

          

          (1,242

          )

          

          

          6,208

          

          

          

          2,939

          

          

          

          (1,000

          )

          

          

          1,939$

          8,068

          

          

          $

          (1,860

          )

          

          $

          6,208

          

          

          $

          2,939

          

          

          $

          (1,000

          )

          

          $

          1,939Non-amortizing intangible assets:Trade Name

          

          

          

          

          

          

          

          

          

          

          

          

          

          $

          24,910

          

          

          

          

          

          

          

          

          

          

          $

          $

          31,118

          

          

          

          

          

          

          

          

          

          

          $

          1,939
 We completed our 2008 annual impairment tests of goodwill and indefinite-lived intangible assets. As a result of this analysis, we have recognized a non-cash impairment charge of approximately $11.9 million, approximately $7.0 million is related to goodwill and approximately $4.9 million is related to trade name, in the fourth quarter of 2008. The impairment charge relates to 100% of the goodwill and a portion of the trade name recognized in the Acquisition. The primary reason for these impairment charges relates to the ongoing recession, which has caused us to reduce our estimates for projected cash flows, has reduced overall industry valuations,
and has caused an increase in discount rates in the credit and equity markets. In connection with the Acquisition, we recorded approximately $7.0 million in goodwill. Upon completion of our 2008 annual impairment tests of goodwill and indefinite-lived intangible assets, the entire goodwill balance of $7.0 million was impaired and written off. Note 12. Employee Benefit Plans Approximately 39% of the Companys employees are members of various unions and covered by union-sponsored, collectively bargained, multi-employer health and welfare and defined benefit pension plans. The Company recorded expenses for such plans of $8.0 million, $1.2 million, $9.0 million and $8.7 million for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor), respectively. The Company has no obligation for funding the plans beyond payments made based upon hours worked. The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its non-union employees. The plan allows employees to defer, within prescribed limits, up to 75% of their income on a pre-tax basis through contributions to the plan. The Company currently matches, within prescribed limits, 50% of eligible employees contributions up to 6% of any individuals earnings. The
 40    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 12. Employee Benefit Plans   (continued) Company recorded $0.8 million, $0.2 million, $1.0 million and $0.7 million, for matching contributions for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor), respectively. On March 4, 2009, the Company announced, that as of April 5, 2009, it is suspending the 401(k) match program. Effective January 1, 2005, we established a management incentive plan, or the MIP, to provide members of our executive management, other than our Chief Executive Officer, and certain employees, with additional compensation for their contribution to the achievement of our corporate objectives. As of the date of the Acquisition, the MIP was terminated. Awards of $2.7 million and $190,000 were made under the MIP in 2007 and 2006, respectively. Note 13. Commitments & Contingencies On October 23, 2008, each of Edward W. Martin III, Phyllis A. Gilland, and Arthur Keith, each an Executive, entered into an Employment Agreement (individually, the Agreement, and, collectively, the Agreements) with the Company, effective October 23, 2008. The agreements include provisions for base salary and bonus, as well as, termination. We also adopted a Key Employee Plan in conjunction with the Acquisition, which allowed for certain key employees to be paid one years salary upon meeting certain conditions. The employee had to be employed in good standing at the closing date and must have completed the transition period, which was defined as up to 60 days after closing, if requested by Voteco. We paid approximately $4.6 million in 2008 under the Key Employee Plan. On December 19, 2007, each of Richard P. Brown and Denise Barton, each an Executive, entered into an Amended and Restated Employment Agreement (individually, the Amended Agreement, and, collectively, the Amended Agreements) with the Company, effective January 1, 2007 and April 1, 2007, respectively. The Amended Agreements amended and restated in their entirety the employment agreements. The agreements included provisions for base salary and bonus, as well as, termination and Change of Control provisions. The agreements were terminated at the closing of the Acquisition, and all amounts due and owing were paid. 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 upon our business financial conditions, results of operations or liquidity.
 41    TABLE OF CONTENTS AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   The Period February 21, 2008 Through December 31, 2008 (Successor), the Period January 1, 2008 Through February 20, 2008 and the Years Ended December 31, 2007 and 2006 (Predecessor) Note 14. Acquisitions The total amount paid for our membership interests including direct acquisition costs, reserves, prepayments and working capital amounts was approximately $1.3 billion dollars. The transaction was funded with a combination of long-term borrowings of approximately $1.1 billion and the sale of equity interests of approximately $200.1 million. The following table sets forth the allocation of the purchase price (in thousands):  Land

          

          $

          718,443Site improvements

          

          

          4,870Building and improvements

          

          

          365,590Machinery and equipment

          

          

          79,237Intangibles

          

          

          37,934Goodwill

          

          

          6,939Capital lease

          

          

          (1,720

          )Debt issuance costs

          

          

          16,366Acquistion costs

          

          

          20,006Reserves and pre-payments

          

          

          49,482Total Purchase Price

          

          $

          1,297,147Cash and cash equivalents

          

          $

          38,205Investment  restricted

          

          

          2,858Accounts receivable, net

          

          

          5,520Other current assets

          

          

          12,179Accounts payable  trade

          

          

          (5,545

          )Accrued expenses

          

          

          (21,048

          )Accrued payroll and related expenses

          

          

          (13,359

          )Current portion of capital lease obligation

          

          

          (525

          )Estimated Working Capital

          

          $

          18,285Total Amount Paid

          

          $

          1,315,432
 On May 19, 2006 we purchased the Aquarius from Harrahs Operating Company, Inc. We acquired certain assets and liabilities of the Aquarius pursuant to the purchase agreement. The total amount paid for the Aquarius, including direct acquisition costs and working capital amounts was $114.0 million. The following (unaudited) pro forma combined results of operations have been prepared as if the acquisition of the Aquarius had occurred at January 1, 2006.  Year EndedDecember 31,2006(in thousands)Net revenues

          

          $

          429,580Net income

          

          $

          29,128
 The historical financial statements for Aquarius included in the pro forma information have been prepared from the separate records maintained by the property and may not be indicative of the conditions that would have existed if the property had been operated as an unaffiliated business. The pro forma information is presented for informational purposes only and is not intended to be a projection of future results.
 42    TABLE OF CONTENTS PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) 1. and 2. Financial Statements and Schedules  PageReport of Independent Registered Public Accounting Firm





18Consolidated Balance Sheets as of December 31, 2008 (Successor) and 2007 (Predecessor)





19Consolidated Statements of Operations for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor)





20Consolidated Statements of Cash Flows for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor)





21Consolidated Statements of Members/Stockholders Equity for the period February 21, 2008 through December 31, 2008 (Successor), the period January 1, 2008 to February 20, 2008 and the years ended December 31, 2007 and 2006 (Predecessor)





22Notes to Consolidated Financial Statements





23
 3. List of Exhibits EXHIBITS INDEX  EXHIBIT NO.

          

          DESCRIPTION31.1

          

          Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.31.2

          

          Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.32.1

          

          Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

          

          Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 43    TABLE OF CONTENTS SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 CASINO & ENTERTAINMENT PROPERTIES LLCDate: December 11, 2009

          

          By:/s/ Frank V. RioloFrank V. Riolo Chief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities indicated with respect to the Board of Directors of American Casino & Entertainment Properties LLC, on behalf of the Registrant in the capacities and on the dates indicated:  /s/ Frank V. RioloFrank V. Riolo

          

          Chief Executive Officer(Principal Executive Officer)

          

          December 11, 2009/s/ Edward W. Martin IIIEdward W. Martin III

          

          Chief Financial Officer, Treasurer(Principal Financial and Accounting Officer)

          

          December 11, 2009/s/ Jonathan LangerJonathan Langer

          

          Board Member

          

          December 11, 2009/s/ Steven AngelSteven Angel

          

          Board Member

          

          December 11, 2009
 44    TABLE OF CONTENTS SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT We have not sent any annual reports to security holders covering the year ended December 31, 2008. We have not sent proxies, form of proxy or other proxy soliciting material to our security holders with respect to any annual or other meeting of security holders and will not be doing so subsequent to the filing of this Form 10-K.
 45