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 ☐ | Emerging growth company | |
Non-accelerated filer ☐ | 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 2, 2024, there were
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Revenues |
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Casino | $ | | $ | | $ | | $ | | ||||
Food and beverage |
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Hotel |
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Other operations, including contracted sports wagering |
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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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Preopening costs | | | | | ||||||||
Depreciation and amortization |
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Loss on disposal of assets |
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Operating income (loss) |
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Other (expense) income |
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Interest expense, net | ( | ( | ( | ( | ||||||||
Gain on insurance settlement | — | — | — | | ||||||||
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Loss before income taxes |
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Income tax (benefit) provision | ( | | | | ||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic loss per share | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Diluted loss per share | $ | ( | $ | ( | $ | ( | $ | ( |
See notes to condensed consolidated financial statements.
3
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
ASSETS | ||||||
Current assets | ||||||
Cash and equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Accounts receivable, net of provision for credit losses 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 | | | ||||
Finance lease right-of-use assets, net | | | ||||
Goodwill |
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Other intangible assets, net of accumulated amortization of $ |
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Deposits and other |
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$ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable | $ | | $ | | ||
Income taxes payable | — | | ||||
Construction payable | | | ||||
Accrued payroll and related |
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Accrued interest | | | ||||
Other accrued expenses and current liabilities |
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Current portion of operating lease obligations | | | ||||
Current portion of finance lease obligations | | | ||||
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Operating lease obligations, net of current portion |
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Finance lease obligations, net of current portion | | | ||||
Other long-term liabilities, 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 | | | ||||
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Commitments and contingencies (Note 6) |
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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 notes to condensed consolidated financial statements.
4
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONDENSED 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, 2024 | | $ | | $ | | | $ | ( | $ | ( | $ | | |||||||
Stock-based compensation | — | — | | — | — | — |
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Net loss | — | — | — | — | — | ( |
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Balance, March 31, 2024 | | | | | ( | ( | | ||||||||||||
Options exercised and | — | — | ( | ( | | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance, June 30, 2024 | | $ | | $ | | | $ | ( | $ | ( | $ | |
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Treasury Stock | Accumulated | Stockholders’ | |||||||||||||||
Shares | Dollars | Capital | Shares | Dollars | Deficit | Equity | |||||||||||||
Balance, January 1, 2023 | | $ | | $ | | | $ | ( | $ | ( | $ | | |||||||
Options exercised | — | — | | ( | | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance, March 31, 2023 | | | | | ( | ( | | ||||||||||||
Options exercised and | — | — | ( | ( | | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Net loss | — | — | — | — | — | ( | ( | ||||||||||||
Balance, June 30, 2023 | | $ | | $ | | | $ | ( | $ | ( | $ | |
See notes to condensed consolidated financial statements.
5
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Six Months Ended | ||||||
June 30, | ||||||
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Cash flows from operating activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of debt issuance costs, discounts and premiums |
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Non-cash change in ROU operating lease assets | | | ||||
Stock-based compensation |
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Loss on disposal of assets |
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Provision for (recovery of) credit losses | | ( | ||||
Gain on insurance settlement | | ( | ||||
Other operating activities | | | ||||
Deferred income taxes |
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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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Income taxes payable | ( | | ||||
Operating lease liabilities | ( | ( | ||||
Contract liabilities | ( | | ||||
Accounts payable and other liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Capital expenditures |
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Proceeds from insurance settlement related to property damage | | | ||||
Acquisition of intangible assets | ( | ( | ||||
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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Payment of debt discount and issuance costs |
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Borrowings under revolving credit facility | | | ||||
Repayment of revolving credit facility borrowings | ( | ( | ||||
Repayment of finance lease obligations | ( | ( | ||||
Proceeds from exercise of stock options |
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Other | ( | | ||||
Net cash (used in) provided by financing activities |
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Net 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 | $ | | $ | |
See notes to condensed consolidated financial statements.
6
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) – (Continued)
(In thousands)
Six Months Ended | ||||||
June 30, | ||||||
2024 |
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Supplemental Cash Flow Disclosure: | ||||||
Cash paid for interest, net of amounts capitalized | $ | | $ | | ||
Cash paid for income taxes | | — | ||||
Supplemental Schedule of Non-Cash Investing and Financing Activities: |
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Payables and accruals incurred for capital expenditures | $ | | $ | | ||
Accrued liability related to asset acquisition | | — | ||||
Right-of-use assets obtained in exchange for lease liabilities: | ||||||
Operating leases | — | | ||||
Right-of-use asset and liability remeasurements: | ||||||
Operating leases | — | | ||||
Financing leases | — | ( |
See notes to condensed consolidated financial statements.
7
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED 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
For additional information about the Company’s segments, see Note 8.
The following table presents selected information concerning our segments:
Segments and Properties | Locations | |
Midwest & South | ||
American Place* | Waukegan, IL (northern suburb of Chicago) | |
Silver Slipper Casino and Hotel |
| Hancock County, MS (near New Orleans) |
Rising Star Casino Resort |
| Rising Sun, IN (near Cincinnati) |
West | ||
Bronco Billy’s Casino and Chamonix Casino Hotel* |
| Cripple Creek, CO (near Colorado Springs) |
Grand Lodge Casino |
| Incline Village, NV |
Stockman’s Casino |
| Fallon, NV (one hour east of Reno) |
Contracted Sports Wagering | ||
One active sports wagering website (“skins”), plus two others that are currently idle | Colorado | |
One active sports wagering website (“skins”), plus two others that are currently idle | Indiana | |
One active sports wagering website (“skin”), commenced in August 2023 | Illinois |
__________
* | The temporary American Place facility and Chamonix opened on February 17 and December 27, 2023, respectively. |
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 condensed consolidated financial statements should be read in conjunction with the Company’s 2023 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The interim condensed 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.
8
The condensed 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. |
Methods and assumptions used to estimate the fair value of financial instruments are affected by the duration of the instruments and other factors used by market participants to estimate value. The carrying amounts for cash and equivalents, restricted cash, accounts receivable, and accounts payable approximate their estimated fair value because of the short durations of the instruments and inconsequential rates of interest.
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 placed into an interest-bearing account to fund the completion of the Chamonix construction project, in accordance with the Company’s debt covenants.
Accounts Receivable and Credit Risk. Accounts receivable consist primarily of casino, hotel, certain sports wagering contracts that pay us in arrears, and other receivables. Accounts receivable are typically non-interest bearing, recorded initially at cost, and are carried net of an appropriate reserve to approximate fair value. Loss reserves are estimated based on specific review of customer accounts including the customers’ willingness and ability to pay and nature of collateral, if any, as well as historical collection experience and current and expected economic and business conditions. Accounts are written off when management deems the account to be uncollectible and recoveries of accounts previously written off are recorded when received.
(In thousands) | June 30, | December 31, | ||||
2024 |
| 2023 | ||||
Casino | $ | | $ | | ||
Trade Accounts | | | ||||
Other Operations, excluding Contracted Sports Wagering | | | ||||
Contracted Sports Wagering | | | ||||
Other | | | ||||
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Less: Provision for credit losses | ( | ( | ||||
$ | | $ | |
9
The following table shows the movement in the provision for credit losses recognized for accounts receivable that occurred during the period:
(In thousands) | ||||||
2024 |
| 2023 | ||||
Balance at January 1 | $ | | $ | | ||
Current period provision for (recovery of) credit losses | | ( | ||||
Write-offs | ( | — | ||||
Balance at June 30 | $ | | $ | |
At June 30, 2024, estimated loss reserves for the current year include an additional provision of $
Management regularly evaluates the adequacy of the Company’s recorded reserves. As of June 30, 2024, we believe that no significant concentrations of credit risk existed for which a reserve had not already been recorded.
Other Intangible Assets. In March 2023, the Company paid $
The long-term obligation for the Company’s gaming license in Illinois consisted of the following, as discussed above:
(In thousands) | June 30, | December 31, | ||||
| 2024 |
| 2023 | |||
IGB Reconciliation Fee* | $ | | $ | | ||
Less: Amount representing interest | ( | ( | ||||
Present value of IGB Reconciliation Fee | $ | | $ | |
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* | Calculated based upon gaming revenues generated through June 2024. This one-time fee will be paid in six annual installments beginning in February 2026. |
Additionally, during the second quarter of 2024, the Company retired $
Revenue Recognition:
Accrued Club Points and Customer Loyalty Programs: 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.
The transaction price for a casino wager is the difference between gaming wins and losses, not the total amount wagered. As such wagers have similar characteristics, the Company accounts for its gaming transactions on a portfolio basis by recognizing net win per gaming day versus on an individual basis.
10
The Company sometimes provides discretionary complimentary goods and services (“discretionary comps”). 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.
Many of the Company’s casino customers choose to earn points under its customer loyalty programs. As points are accrued, the Company defers a portion of its casino 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 for various loyalty program benefits, primarily for “free casino play,” complimentary dining, or hotel stays, among others, depending on each property’s specific offers. Upon redemption, the related revenue is recognized at retail value within the department providing the goods or services. Unredeemed points are forfeited if the customer becomes and remains inactive for a specified period of time. Such liabilities were approximately $
Revenue for food and beverage, hotel, and other revenue transactions, as described in “Other Revenues” below, includes the retail value of (i) discretionary comps and (ii) comps provided in return for redemption of loyalty points. Additionally, the Company may collect deposits in advance for future hotel reservations or entertainment, among other services, which represent obligations of the Company until the service is provided to the customer.
Deferred Revenues: Market Access Fees from Sports Wagering Agreements. The Company entered into several agreements with various unaffiliated companies allowing for online sports wagering within Indiana, Colorado and Illinois, as well as on-site sports wagering at American Place (the “Sports Agreements”). As part of these long-term Sports Agreements, the Company received one-time “market access” fees, which are recorded as long-term liabilities and then recognized as revenue ratably over the initial contract terms (or as accelerated due to early termination), beginning with the earlier of operations commencement or contractual commencement. In the third quarter of 2023, a contracted party ceased online operations in Indiana and Colorado, thus creating one available skin in each state. Another contracted party ceased online operations in Colorado during the second quarter of 2024, resulting in $
Indiana. Under the Company’s one active Sports Agreement in Indiana that commenced in December 2021, we receive a percentage of revenues (as defined), subject to an annualized minimum amount. Additionally, a $
Colorado. Similarly in Colorado, under the Company’s one active Sports Agreement that commenced in June 2020, we receive a percentage of revenues (as defined), subject to an annualized minimum amount. Additionally, a $
Illinois. Under the Company’s Sports Agreement in Illinois, we receive a percentage of revenues (as defined), subject to a minimum of $
In addition to the market access fees, deferred revenue includes annual prepayments of contracted revenue. With the July 2024 amendment of two Sports Agreements, the prepayment of contracted revenue is now required in all of the Company’s active Sports Agreements.
11
Deferred revenues consisted of the following, as discussed above:
(In thousands) | June 30, | December 31, | ||||||
| Balance Sheet Location | 2024 |
| 2023 | ||||
Deferred revenue, current | Other accrued expenses and current liabilities | $ | | $ | | |||
Deferred revenue, net of current portion | Contract liabilities, net of current portion | | | |||||
$ | | $ | |
Other Revenues. The transaction price of rooms, food and beverage, and retail contracts is the net amount collected from the customer for such goods and services. The transaction price for such contracts is recorded as revenue when the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food, beverage, retail and other contracts. Sales and usage-based taxes are excluded from revenues.
Revenue by Source. The Company presents earned revenue as disaggregated by the type or nature of the good or service (casino, food and beverage, hotel, and other operations comprised mainly of retail, golf, entertainment, and contracted sports wagering) and by relevant geographic region within Note 8.
Income Taxes. For interim income tax reporting for the three and six months ended June 30, 2024, 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.
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, 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, as well as depreciation (or amortization) expense associated with the ROU asset, depending on whether those ROU assets are expected to transfer to the Company upon lease expiration. If ownership of a finance lease ROU asset is expected to transfer to the Company upon lease expiration, then it is included with the Company’s property and equipment; other qualifying finance lease ROU assets, based on other classifying criteria under Accounting Standards Codification 842 (“ASC 842”), are disclosed separately as “Finance Lease Right-of-Use Assets, Net.” 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.12
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, plus any qualifying initial direct costs paid prior to commencement for ROU assets. 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 or terminate 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/amortizes on a straight-line basis over the shorter of the lease term or useful life of the ROU asset as applicable, and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.
Preopening costs. Preopening costs are related to the preopening phases of new ventures, in accordance with accounting standards regarding start-up activities, and are expensed as incurred. These costs consist of payroll, advertising, outside services, organizational costs and other expenses directly related to both the Chamonix and American Place developments.
Debt Issuance Costs and Debt Discounts/Premiums. Debt issuance costs and debt discounts/premiums incurred in connection with the issuance of debt have been included as a component of the carrying amount of debt, and are amortized/accreted over the contractual term of the debt to interest expense, using the straight-line method, which approximates the effective interest method. When its existing debt agreements are determined to have been modified, the Company amortizes/accretes such costs to interest expense using the effective interest method over the terms of the modified debt agreement.
Accounting Pronouncements:
ASU 2023-09, Income Taxes, Topic 740, Improvements to Income Tax Disclosures (“Update 2023-09”). In December 2023, the FASB issued Update 2023-09 to improve income tax disclosure requirements, primarily related to rate reconciliations and income taxes paid. Update 2023-09 is effective for financial statements issued for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of the adoption of Update 2023-09 to the consolidated financial statements and related disclosures.
ASU 2023-07, Segment Reporting, Topic 280, Improvements to Reportable Segment Disclosures (“Update 2023-07”). In November 2023, the FASB issued Update 2023-07 to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Update 2023-07 is to be applied retrospectively and is effective for financial statements issued for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of the adoption of Update 2023-07 on the consolidated financial statements and related disclosures.
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
13
Operating Leases
Waukegan Ground Lease through February 2122 and Option to Purchase. In January 2023, the Company’s subsidiary, FHR-Illinois, LLC, entered into a
The Company has the right to purchase the City-Owned Parcel at any time during the term of the Ground Lease for $
Silver Slipper Casino Land Lease through April 2058 and Option to Purchase. In 2004, the Company’s subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease for approximately
Through October 1, 2027, the Company may buy out the lease for $
Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. The Company’s subsidiary, FHR-Colorado LLC, leases certain parcels, including a portion of the hotel and casino, under a long-term lease. The lease term includes
The Company’s related ROU asset and liability balances on its balance sheet factor in all renewal terms through January 2035, as the Company is deemed likely to exercise each renewal unless it exercises its purchase buyout right.
Grand Lodge Casino Lease through December 2024. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease (the “Hyatt Lease”) with Incline Hotel, LLC, the owner of the Hyatt Regency Lake Tahoe Resort (“Hyatt Lake Tahoe”), to operate the Grand Lodge Casino. It 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 Notes (see Note 4). The lessor has an option to purchase the Company’s leasehold interest and related operating assets of the Grand Lodge Casino at any time prior to lease expiration, 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 period preceding the acquisition (or pro-rated if less than
The current annual rent of $
Corporate Office Lease through January 2025. The Company leases
14
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 expenses are as follows:
(In thousands) |
|
| Three Months Ended |
| Six Months Ended | |||||||||
Classification within | June 30, | June 30, | ||||||||||||
Lease Costs | Statement of Operations | 2024 |
| 2023 | 2024 |
| 2023 | |||||||
Operating leases: |
|
|
| |||||||||||
Fixed/base rent |
| Selling, General and Administrative Expenses | $ | | $ | | $ | | $ | | ||||
Short-term payments | Selling, General and Administrative Expenses | — | — | — | | |||||||||
Variable payments |
| Selling, General and Administrative Expenses |
| |
| |
| |
| | ||||
Finance leases: |
| |||||||||||||
Amortization of leased assets |
| Depreciation and Amortization |
| |
| |
| |
| | ||||
Interest on lease liabilities |
| Interest Expense, Net |
| |
| |
| |
| | ||||
Total lease costs | $ | | $ | | $ | | $ | |
Leases recorded on the balance sheet consist of the following:
(In thousands) | ||||||||
June 30, | December 31, | |||||||
Leases |
| Balance Sheet Classification |
| 2024 | 2023 | |||
Assets |
|
|
|
| ||||
Operating lease assets |
|
| $ | | $ | | ||
Finance lease assets |
|
| |
| | |||
Finance lease assets | | | ||||||
Total lease assets |
|
| $ | | $ | | ||
Liabilities |
|
| ||||||
Current |
|
| ||||||
Operating |
| $ | | $ | | |||
Finance |
|
| |
| | |||
Noncurrent |
|
| ||||||
Operating |
|
| |
| | |||
Finance |
|
| |
| | |||
Total lease liabilities |
|
| $ | | $ | |
__________
(1) | Finance lease assets are recorded net of accumulated amortization of $ |
(2) | These finance lease assets are recorded separately from Property and Equipment due to meeting qualifying classification criteria under ASC 842, but ownership of such assets is not expected to transfer to the Company upon term expiration. Additionally, amortization of these assets are expensed over the duration of the lease term or the assets’ estimated useful lives, whichever is earlier. |
15
Maturities of lease liabilities as of June 30, 2024 are summarized as follows:
(In thousands) | ||||||
| Operating |
| Finance | |||
Years Ending December 31, | Leases | Leases | ||||
2024 (excluding the six months ended June 30, 2024) | $ | | $ | | ||
2025 |
| |
| | ||
2026 |
| |
| | ||
2027 |
| |
| | ||
2028 |
| |
| — | ||
Thereafter |
| |
| — | ||
Total future minimum lease payments |
| |
| | ||
Less: Amount representing interest |
| ( |
| ( | ||
Present value of lease liabilities |
| |
| | ||
Less: Current lease obligations |
| ( |
| ( | ||
Long-term lease obligations | $ | | $ | |
Other information related to lease term and discount rate is as follows:
June 30, | December 31, | |||||
Lease Term and Discount Rate | 2024 | 2023 | ||||
Weighted-average remaining lease term |
|
|
| |||
Operating leases |
| years | years | |||
Finance leases |
| years | years | |||
Weighted-average discount rate |
| |||||
Operating leases |
| % | % | |||
Finance leases |
| % | % |
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: | 2024 | 2023 | ||||
Operating cash flows for operating leases | $ | | $ | | ||
Operating cash flows for finance leases | $ | | $ | | ||
Financing cash flows for finance leases | $ | | $ | |
4. LONG-TERM DEBT
Long-term debt consists of the following:
(In thousands) | June 30, | December 31, | ||||
2024 | 2023 | |||||
Revolving Credit Facility due 2026 | $ | | $ | | ||
| | |||||
Less: Unamortized debt issuance costs and discounts/premiums, net | ( | ( | ||||
$ | | $ | |
16
Senior Secured Notes due 2028. On February 12, 2021, the Company issued $
On February 7, 2022, the Company closed a private offering for an additional $
On February 21, 2023, the Company issued an additional $
The Notes bear interest at a fixed rate of
The Notes are guaranteed, jointly and severally (such guarantees, the “Guarantees”), by each of the Company’s restricted subsidiaries (collectively, the “Guarantors”). The 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 Amended 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 Notes and the Guarantees, if any. The 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 Notes contain representations and warranties, covenants, and restrictions on dividends customary for notes of this type. Mandatory prepayments, in whole or in part, of the Notes will be required upon the occurrence of certain events, including sales of certain assets (unless such net proceeds are reinvested in the business), upon certain changes of control, or should the Company have certain unused funds in the construction disbursement account following the completion of Chamonix.
The Company may redeem some or all of the 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 | | % |
17
Revolving Credit Facility due 2026. On February 7, 2022, the Company entered into a First Amendment to Credit Agreement with Capital One, N.A. (“Capital One”), which, among other things, increased the borrowing capacity under the Company’s Credit Agreement, dated as of March 31, 2021, from $