UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One) | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
or | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Commission File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
The |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ | Accelerated filer ☐ | Emerging growth company |
Smaller reporting company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 9, 2021, there were
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | ||
41 | |||
42 | |||
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43 |
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Revenues |
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Casino | $ | | $ | | $ | | $ | | ||||
Food and beverage |
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Hotel |
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Other operations, including online/mobile sports |
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Operating costs and expenses |
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Casino |
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Food and beverage |
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Hotel |
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Other operations |
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Selling, general and administrative |
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Project development costs |
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Depreciation and amortization |
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Loss on disposal of assets, net |
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Operating income (loss) |
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Other (expense) income |
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Interest expense, net of $ | ( | ( | ( | ( | ||||||||
Gain (loss) on extinguishment of debt | | — | ( | — | ||||||||
Adjustment to fair value of warrants |
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Income (loss) before income taxes |
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Income tax provision (benefit) | | ( | | | ||||||||
Net income (loss) | $ | | $ | ( | $ | | $ | ( | ||||
Basic earnings (loss) per share | $ | | $ | ( | $ | | $ | ( | ||||
Diluted earnings (loss) per share | $ | | $ | ( | $ | | $ | ( |
See condensed notes to consolidated financial statements.
3
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
June 30, | December 31, | |||||
| 2021 |
| 2020 | |||
ASSETS | ||||||
Current assets |
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Cash and equivalents | $ | | $ | | ||
Restricted cash | | — | ||||
Accounts receivable, net of allowance of $ |
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Inventories |
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Prepaid expenses and other |
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Property and equipment, net |
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Operating lease right-of-use assets, net | | | ||||
Goodwill |
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Other intangible assets, net |
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Deposits and other |
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$ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable | $ | | $ | | ||
Accrued payroll and related |
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Accrued interest | | | ||||
Other accrued liabilities |
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Current portion of operating lease obligations | | | ||||
Current portion of finance lease obligation | | | ||||
Current portion of long-term debt |
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Common stock warrant liability | — | | ||||
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Operating lease obligations, net of current portion |
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Finance lease obligation, net of current portion | | | ||||
Long-term debt, net |
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Deferred income taxes, net |
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Contract liabilities, net of current portion | | | ||||
Other long-term liabilities | | | ||||
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Commitments and contingencies (Note 8) |
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Stockholders’ equity |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock, |
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Accumulated deficit |
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$ | | $ | |
See condensed notes to consolidated financial statements.
4
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands)
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Treasury Stock | Accumulated | Stockholders’ | |||||||||||||||
| Shares |
| Dollars |
| Capital |
| Shares |
| Dollars |
| Deficit |
| Equity | ||||||
Balance, January 1, 2021 |
| | $ | | $ | |
| | $ | ( | $ | ( | $ | | |||||
Equity offering, net | | | | — | — | — | | ||||||||||||
Exercise of stock options | — | — | | ( | | — | | ||||||||||||
Stock-based compensation |
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Net loss |
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Balance, March 31, 2021 |
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Exercise of stock options | — | — | | ( | | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance, June 30, 2021 | | $ | | $ | | | $ | ( | $ | ( | $ | |
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Treasury Stock | Accumulated | Stockholders’ | |||||||||||||||
| Shares |
| Dollars |
| Capital |
| Shares |
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| Deficit |
| Equity | ||||||
Balance, January 1, 2020 |
| | $ | | $ | |
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Stock-based compensation |
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Net loss |
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Balance, March 31, 2020 |
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Stock grants | | — | | — | — | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance, June 30, 2020 | | $ | | $ | | | $ | ( | $ | ( | $ | |
See condensed notes to consolidated financial statements.
5
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended | ||||||
June 30, | ||||||
| 2021 |
| 2020 | |||
Cash flows from operating activities: |
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Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Amortization of debt issuance and warrant costs and other |
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Stock-based compensation |
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Change in fair value of stock warrants |
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Loss on disposal of assets |
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Proceeds from insurance related to property damage | | | ||||
Loss on extinguishment of debt | | | ||||
Increases and decreases in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses, inventories and other |
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Deferred taxes |
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Common stock warrant liability | ( | | ||||
Contract liabilities | | ( | ||||
Accounts payable and accrued expenses |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Other |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from Senior Secured Notes due 2028 borrowings |
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Proceeds from equity offering, net of issuance costs | | | ||||
Proceeds from CARES Act unsecured loans |
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Payment of debt discount and issuance costs |
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Repayment of Senior Secured Notes due 2024 | ( | ( | ||||
Prepayment premiums of Senior Secured Notes due 2024 |
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Repayment of finance lease obligation | ( | ( | ||||
Proceeds from exercise of stock options |
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Other | | | ||||
Net cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental Cash Flow Information: |
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Cash paid for interest, net of amounts capitalized | $ | | $ | | ||
Non-Cash Investing Activities: |
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Accounts payable related capital expenditures | $ | | $ | |
See condensed notes to consolidated financial statements.
6
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. ORGANIZATION
Organization. Formed as a Delaware corporation in 1987, Full House Resorts, Inc. owns, leases, operates, develops, manages, and/or invests in casinos and related hospitality and entertainment facilities. References in this document to “Full House,” the “Company,” “we,” “our,” or “us” refer to Full House Resorts, Inc. and its subsidiaries, except where stated or the context otherwise indicates.
The Company currently operates
Segments and Properties | Locations | |
Colorado | ||
Bronco Billy’s Casino and Hotel |
| Cripple Creek, CO (near Colorado Springs) |
Chamonix Casino Hotel (under construction) | Cripple Creek, CO (near Colorado Springs) | |
Indiana | ||
Rising Star Casino Resort |
| Rising Sun, IN (near Cincinnati) |
Mississippi | ||
Silver Slipper Casino and Hotel |
| Hancock County, MS (near New Orleans) |
Nevada | ||
Grand Lodge Casino |
| Incline Village, NV |
Stockman’s Casino |
| Fallon, NV (one hour east of Reno) |
Contracted Sports Wagering | ||
Three sports wagering websites (“skins”) | Colorado | |
Three sports wagering websites (“skins”) | Indiana |
The Company manages its casinos based primarily on geographic regions within the United States. Our 2021 results reflect a change in our operating segments. We now break out our on-site and online sports wagering skins in Colorado and Indiana as a standalone segment, Contracted Sports Wagering. Certain reclassifications were made to 2020 amounts to conform to current-period presentation for enhanced comparability. Such reclassifications had no effect on the previously reported results of operations or financial position.
COVID-19 Pandemic Update. In March 2020, the World Health Organization declared the outbreak of the novel coronavirus as a pandemic (“COVID-19”). Although COVID-19 continues to spread throughout the U.S. and the world, vaccines designed to inhibit the severity and the spread of COVID-19 are now being distributed. As a result, the number of newly reported cases has declined in the U.S. from levels seen in late 2020 and early 2021, though new variants have resulted in a reversal of these trends in recent weeks. The new Delta variant of COVID-19, which appears to be the most transmissible variant to date, has begun to spread globally. COVID-19 has resulted in the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions, business restrictions, closing of borders, “shelter-in-place” orders and business closures. In March 2020, pursuant to state government orders, the Company temporarily closed all of its casino properties.
7
As a result, the Company experienced a material decline in its revenues until its properties began reopening when permitted by local authorities. The reopening dates were:
● | Silver Slipper Casino and Hotel ― May 21, 2020 |
● | Grand Lodge Casino and Stockman’s Casino ― June 4, 2020 |
● | Bronco Billy’s Casino and Hotel ― June 15, 2020 |
● | Rising Star Casino Resort ― June 15, 2020. |
During the shutdown period, the Company evaluated labor, marketing and other costs at its businesses so that, upon reopening, its properties could reopen with significantly lower operating costs. As a result, the Company’s operating performance since reopening in mid-2020 has been stronger than pre-pandemic levels, despite business restrictions throughout its properties and certain pandemic-related additional costs. The extent to which the Company’s financial and operating results in future periods may be affected by COVID-19, including the new Delta variant, will largely depend on future developments, which are highly uncertain and cannot be accurately predicted at this time. Significant uncertainties include the ability to operate; new information which may emerge concerning new strains of COVID-19 and their severity; vaccination rates among the population; the effectiveness of COVID-19 vaccines against the Delta variant; any additional actions imposed by governmental authorities to contain COVID-19 and the Delta variant or minimize its impact; increased operating costs and constraints to implement sanitation and social distancing requirements; increased costs for materials due to supply chain constraints; and general economic conditions, among others.
The disruptions arising from COVID-19 continued to impact the Company during the three- and six-months ended June 30, 2021. The duration and intensity of this global health emergency and related disruptions are uncertain. While each of the Company’s properties are currently open and operating restrictions eased during the second quarter of 2021, the current economic and regulatory environment in each of the Company’s jurisdictions continues to evolve. For example, mask mandates for all employees and guests were re-introduced at our Nevada properties in July 2021 in compliance with recent orders from Nevada state government officials. The manner in which governments will react as the global and regional impact of the COVID-19 pandemic changes over time is uncertain, and such actions could significantly alter the Company’s current operations.
During the first half of 2021, the Company completed several transactions, which include:
● | The February 2021 refinancing of its Senior Secured Notes due 2024 with $ |
● | The creation of a restricted cash account, initially funded with $ |
● | The March 2021 completion of an underwritten public offering of |
● | An agreement entered into in March 2021 providing for a $ |
As of June 30, 2021, the Company had total cash and cash equivalents of $
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s 2020 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
8
The interim consolidated financial statements of the Company included herein reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of annualized results for an entire year.
The consolidated financial statements include the accounts of Full House and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Fair Value and the Fair Value Input Hierarchy. Fair value measurements affect the Company’s accounting for net assets acquired in acquisition transactions and certain financial assets and liabilities. Fair value measurements are also used in the Company’s periodic assessments of long-lived tangible and intangible assets for possible impairment, including for property and equipment, goodwill, and other intangible assets. Fair value is defined as the expected price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
GAAP categorizes the inputs used for fair value into a three-level hierarchy:
● | Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities; |
● | Level 2: Comparable inputs other than quoted prices that are observable for similar assets or liabilities in less active markets; and |
● | Level 3: Unobservable inputs which may include metrics that market participants would use to estimate values, such as revenue and earnings multiples and relative rates of return. |
The Company utilizes Level 1 inputs when measuring the fair value of its 2028 Notes (see Note 5).
The Company utilizes Level 2 inputs when measuring the fair value of its asset purchases and acquisitions (see Note 4).
The Company utilizes Level 3 inputs when measuring the fair value of net assets acquired in business combination transactions, subsequent assessments for impairment, and most financial instruments, including but not limited to the estimated fair value of common stock warrants at issuance and for recurring changes in the related warrant liability (see Note 6).
Cash Equivalents and Restricted Cash. Cash equivalents include cash involved in operations and cash in excess of daily requirements that is invested in highly liquid, short-term investments with initial maturities of three months or less when purchased.
Restricted cash balances consist of funds initially totaling $
Revenue Recognition of Accrued Club Points and Deferred Revenues
Accrued Club Points: Operating Revenues and Related Costs and Expenses. The Company’s revenues consist primarily of casino gaming, food and beverage, hotel, and other revenues (such as sports wagering, golf, RV park operations, and entertainment). The majority of the Company’s revenues are derived from casino gaming, principally slot machines.
Gaming revenue is the difference between gaming wins and losses, not the total amount wagered. The Company accounts for its gaming transactions on a portfolio basis as such wagers have similar characteristics and it would not be practical to view each wager on an individual basis.
The Company sometimes provides discretionary complimentary goods and services (“discretionary comps”), primarily to casino customers. For these types of transactions, the Company allocates revenue to the department providing the complimentary goods or services based upon its estimated standalone selling price, offset by a reduction in casino revenues.
9
Many of the Company’s customers choose to earn points under its customer loyalty programs. As points are accrued, the Company defers a portion of its gaming revenue based on the estimated standalone value of loyalty points being earned by the customer. The standalone value of loyalty points is derived from the retail value of food, beverages, hotel rooms, and other goods or services for which such points may be redeemed. A liability related to these customer loyalty points is recorded, net of estimated breakage and other factors, until the customer redeems these points, primarily for “free casino play,” complimentary dining, or hotel stays. Such liabilities were approximately $
Revenue for food and beverage, hotel, and other revenue transactions is typically the net amount collected from customers for such goods and services, plus the retail value of (i) discretionary comps and (ii) comps provided in return for redemption of loyalty points. The Company records such revenue as the good or service is transferred to the customer. Additionally, the Company may collect deposits in advance for future hotel reservations or entertainment, among other services, which represent obligations to the Company until the service is provided to the customer.
Deferred Revenues: Market Access Fees from Sports Wagering Agreements. In 2019, the Company entered into several ten-year agreements with various unaffiliated companies allowing for online/mobile sports wagering within Indiana and Colorado, as well as on-site sports wagering at Rising Star and Bronco Billy’s casinos (the “Sports Agreements”). The contracts differ as to the percentages of revenues that we receive. Also, some contracts require payments in advance of the contract year, while others call for settlement in arrears. As part of these long-term Sports Agreements, the Company received $
Indiana. Two of the Company’s Sports Agreements commenced operations in December 2019 and April 2021, respectively. The remaining Sports Agreement is expected to go live in the coming months.
Colorado. The Company’s three contracted mobile sports wagering websites commenced online operations in June 2020, December 2020 and April 2021.
Deferred revenues also include a total of $
Such revenues consisted of the following, as discussed above:
(In thousands) | June 30, | December 31, | ||||||
| Balance Sheet Location | 2021 |
| 2020 | ||||
Deferred revenue, current | Other accrued liabilities | $ | | $ | | |||
Deferred revenue, net of current portion | Contract liabilities, net of current portion | | | |||||
$ | | $ | |
Income Taxes. For interim income tax reporting for the three- and six-months ended June 30, 2021, the Company estimates its annual effective tax rate and applies it to its year-to-date pretax income or loss.
Reclassifications. The Company made certain minor financial statement presentation reclassifications to prior-period amounts to conform to the current-period presentation. Such reclassifications had no effect on the previously reported results of operations or financial position.
10
Earnings (Loss) Per Share. Earnings (loss) per share is net income (loss) applicable to common stock divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional dilutive effects for all potentially-dilutive securities, including share-based awards outstanding under the Company’s stock compensation plan and warrants, using the treasury stock method.
Leases. The Company determines if a contract is or contains a lease at inception or modification of the agreement. A contract is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means that the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
For material leases with terms greater than a year, the Company records right-of-use (“ROU”) assets and lease liabilities on the balance sheet, as measured on a discounted basis. For finance leases, the Company recognizes interest expense associated with the lease liability and depreciation expense associated with the ROU asset; for operating leases, the Company recognizes straight-line rent expense.
The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less. However, costs related to short-term leases with terms greater than one month, which the Company deems material, are disclosed as a component of lease expenses when applicable. Additionally, the Company accounts for new and existing leases containing both lease and non-lease components (“embedded leases”) together as a
by asset class for gaming-related equipment; therefore, the Company does not allocate contract consideration to the separate lease and non-lease components based on their relative standalone prices.Finance and operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate as estimated by third-party valuation specialists in determining the present value of future payments based on the information available at the commencement date and/or modification date. The expected lease terms include options to extend the lease when it is reasonably certain that the Company will exercise such options. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term for operating leases. For finance leases, the ROU asset depreciates on a straight-line basis over the shorter of the lease term or useful life of the ROU asset and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.
Recent Accounting Pronouncements
Income Taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). This standard simplifies the accounting for income taxes and includes removal of certain exceptions to the general principles of ASC 740, Income Taxes, and updates and simplifies certain areas of the codification. ASU 2019-12 was effective for the Company beginning on January 1, 2021, but did not have a material impact on its financial statements upon adoption.
The Company believes that there are no other recently-issued accounting standards not yet effective that are currently likely to have a material impact on its financial statements.
3. LEASES
The Company has no leases in which it is the lessor. As lessee, the Company has
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Operating Leases
Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, the Company’s subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately
The Company executed a fourth amendment to the original lease with the landlord, effective March 2020, which granted a waiver of base rent for April and May of 2020. Such abatement totaled $
Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. Bronco Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes
In June 2021, the Company remeasured this lease’s related ROU asset and liability balances by factoring in an additional renewal term through January 2026, with monthly rent increases to $
Third Street Corner Building through August 2023 and Option to Purchase. The Company leased a nearby closed casino in August 2018 and reopened it in November 2018. The reopened casino did not produce enough incremental revenue to offset the incremental costs, and it was closed in September 2020. The Company has the right to purchase the casino at any time during the lease term, as extended. Currently, the purchase price is $
As part of the Chamonix development project, this building is currently used as office space for construction personnel, obviating the need for construction trailers. The lease includes a minimum
Grand Lodge Casino Lease through August 2023. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Hyatt Equities, L.L.C. (“Hyatt”) to operate the Grand Lodge Casino. The lease is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the 2028 Notes (see Note 5). Hyatt currently has an option to purchase the Company’s leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the
In July 2020, the Company executed a fifth amendment to the Hyatt lease that retroactively reduced rent amounts due during the closure period, specifically a
Corporate Office Lease through January 2025. The Company leases
12
Finance Lease
Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a
The components of lease expense are as follows:
(In thousands) |
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| Three Months Ended |
| Six Months Ended | |||||||||
June 30, | June 30, | |||||||||||||
Lease Costs | Statement of Operations Classification | 2021 |
| 2020 | 2021 |
| 2020 | |||||||
Operating leases: |
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Fixed/base rent(1) |
| Selling, General and Administrative Expenses | $ | | $ | | $ | | $ | | ||||
Variable payments |
| Selling, General and Administrative Expenses |
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Finance lease: |
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Amortization of leased assets |
| Depreciation and Amortization |
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Interest on lease liabilities |
| Interest Expense, Net |
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Total lease costs | $ | | $ | | $ | | $ | |
__________
(1) | Starting in March 2021, rent expenses of approximately $ |
Leases recorded on the balance sheet consist of the following:
(In thousands) | ||||||||
Leases |
| Balance Sheet Classification |
| June 30, 2021 | December 31, 2020 | |||
Assets |
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Operating lease assets |
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| $ | | $ | | ||
Finance lease assets |
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Total lease assets |
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| $ | | $ | | ||
Liabilities |
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Current |
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Operating |
| $ | | $ | | |||
Finance |
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Noncurrent |
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Operating |
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Finance |
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Total lease liabilities |
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| $ | | $ | |
__________
(1) | Finance lease assets are recorded net of accumulated amortization of $ |
13
Maturities of lease liabilities as of June 30, 2021 are summarized as follows:
(In thousands) | ||||||
| Operating |
| Financing | |||
Years Ending December 31, | Leases | Lease(1) | ||||
2021 (excluding the six months ended June 30, 2021) | $ | | $ | | ||
2022 |
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2023 |
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2024 |
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2025 |
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Thereafter |
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Total future minimum lease payments |
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Less: Amount representing interest |
| ( |
| ( | ||
Present value of lease liabilities |
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Less: Current lease obligations |
| ( |
| ( | ||
Long-term lease obligations | $ | | $ | |
__________
(1)The Company’s only material finance lease is at Rising Star Casino Resort for a
Other information related to lease term and discount rate is as follows:
Lease Term and Discount Rate | June 30, 2021 | December 31, 2020 | ||||
Weighted-average remaining lease term |
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Operating leases |
| years | years | |||
Finance lease |
| years | years | |||
Weighted-average discount rate |
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Operating leases |
| % | % | |||
Finance lease |
| % | % |
Supplemental cash flow information related to leases is as follows:
(In thousands) |
| Six Months Ended | ||||
June 30, | ||||||
Cash paid for amounts included in the measurement of lease liabilities: | 2021 | 2020 | ||||
Operating cash flows for operating leases(1) | $ | | $ | | ||
Operating cash flows for finance lease | $ | | $ | | ||
Financing cash flows for finance lease | $ | | $ | |
__________
(1) | Starting in March 2021, cash paid for base rents of approximately $ |
14
4. ACQUISITIONS
Cripple Creek Land and Real Estate Purchase. As part of the development of Chamonix, the Company purchased Carr Manor, a boutique hotel with
Additionally, on April 16, 2021, the Company purchased a lot and building near its operations in Cripple Creek, Colorado for $
5. LONG-TERM DEBT
Long-term debt, related discounts and issuance costs consist of the following:
(In thousands) | June 30, | December 31, | ||||
2021 | 2020 | |||||
Revolving Credit Facility due 2026 | $ | — | $ | — | ||
Senior Secured Notes due 2028(1) | | — | ||||
Senior Secured Notes due 2024(2) | — | | ||||
Unsecured Loans (CARES Act)(3) | | | ||||
Less: Unamortized discounts and debt issuance costs |
| ( |
| ( | ||
| |
| | |||
Less: Current portion of long-term debt |
| ( |
| ( | ||
$ | | $ | |
__________
(1) | As of June 30, 2021, the estimated fair value of these notes was approximately $ |
(2) | The estimated fair value for this non-traded debt instrument can be approximated by its respective carrying value because management believes its terms are representative of market conditions. |
(3) | The estimated fair value for this non-traded debt instrument can be approximated by its respective carrying value because of its similar terms to other CARES Act loans. |
Debt Refinancing: Notes Issuance. On February 12, 2021, the Company refinanced its existing outstanding Senior Secured Notes due 2024 (the “Prior Notes”) with the issuance of $
The net proceeds from the sale of the 2028 Notes were used to redeem all of the Prior Notes (including a
15
The 2028 Notes are guaranteed, jointly and severally (such guarantees, the “Guarantees”), by each of the Company’s restricted subsidiaries (collectively, the “Guarantors”). The 2028 Notes and the Guarantees are the Company’s and the Guarantors’ general senior secured obligations, subject to the terms of the Collateral Trust Agreement (as defined in the Indenture), ranking senior in right of payment to all of the Company’s and the Guarantors’ existing and future debt that is expressly subordinated in right of payment to the 2028 Notes and the Guarantees, if any. The 2028 Notes and the Guarantees will rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future senior debt.
The 2028 Notes contain representations and warranties, financial covenants, and restrictions on dividends customary for notes of this type. Mandatory prepayments, in whole or in part, of the 2028 Notes will be required upon the occurrence of certain events, including sales of certain assets, upon certain changes of control, or should the Company have certain unused funds in the construction disbursement account following the completion of Chamonix.
On or prior to February 15, 2024, the Company may redeem up to
At any time on or after February 15, 2024, the Company may redeem some or all of the 2028 Notes for cash at the following redemption prices:
Redemption Periods |
| Percentage Premium | |
February 15, 2024 to February 14, 2025 |
| | % |
February 15, 2025 to February 14, 2026 |
| | % |
February 15, 2026 and Thereafter | | % |
Prior Notes. On February 2, 2018, the Company sold $
The Prior Notes contained certain representations and warranties, events of default, and financial covenants that were more restrictive than the 2028 Notes. For example, the Company was required to maintain a total leverage ratio, which measured Consolidated EBITDA (as defined in the indenture) against outstanding debt. Due to the impact of the COVID-19 pandemic on the Company’s business operations in 2020, the Company executed amendments, and paid negotiated amendment fees, to delete the total leverage ratio covenant as of March 31, June 30, and September 30, among other items.
Revolving Credit Facility. On March 31, 2021, the Company entered into an agreement, which provides for a $
Until the completion of Chamonix, the interest rate per annum applicable to loans under the Credit Facility will be, at the Company’s option, either (i) LIBOR plus a margin equal to
The Credit Facility is equally and ratably secured by the same assets and guarantees securing the 2028 Notes. The Company may make prepayments of any amounts outstanding under the Credit Facility (without any reduction of the revolving commitments) in whole or in part at any time without penalty.
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The Credit Facility contains a number of negative covenants that, subject to certain exceptions, are substantially similar to the covenants contained in the 2028 Notes. The Credit Facility also includes a requirement that the Company maintain, for the quarters ending March 31, 2021 and June 30, 2021, cash and equivalents totaling at least $
Unsecured Loans Under the CARES Act. On May 8, 2020, two wholly-owned subsidiaries of the Company executed promissory notes (the “Promissory Notes”) evidencing unsecured loans in the aggregate amount of $
Legislation subsequently extended the original maturity dates to May 3, 2025 with no change to the annual interest rate. After a
6. COMMON STOCK WARRANT LIABILITY
On February 12, 2021, the Company used a portion of the proceeds from the 2028 Notes offering to redeem all of its outstanding warrants. As part of the Company’s former Second Lien Credit Facility, which was retired in 2018, the Company granted the second lien lenders
The Company previously measured the fair value of the warrants at each reporting period. However, upon redemption of the warrants on February 12, 2021, the fair value was determined based on the negotiated repurchase price of $
7. INCOME TAXES
The Company’s effective income tax rates for the three- and six-months ended June 30, 2021 were
8. COMMITMENTS AND CONTINGENCIES AND SUBSEQUENT EVENT
Litigation
The Company is party to a number of pending legal proceedings related to matters that occurred in the normal course of business. Management does not expect that the outcome of any such proceedings, either individually or in the aggregate, will have a material effect on the Company’s financial position, results of operations and cash flows.
17
Options to Lease Land
Option Agreement for Public Trust Tidelands Lease in Mississippi. The Company has been evaluating the potential construction of an additional hotel tower and related amenities at Silver Slipper, a portion of which would extend out over the adjoining Gulf of Mexico. In contemplation for such potential future expansion, the Company paid $
9. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS’ EQUITY
Earnings (Loss) Per Share
The table below reconciles basic and diluted income (loss) per share of common stock:
(In thousands) | Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Numerator: |
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