Quarterly report pursuant to Section 13 or 15(d)

ACQUISITION

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ACQUISITION
 9 Months Ended
Sep. 30, 2016
Business Combinations [Abstract]  
ACQUISITION
ACQUISITION

On May 13, 2016, we completed our acquisition of Bronco Billy's Casino and Hotel from Pioneer Group, Inc. for estimated consideration of $31.1 million, inclusive of an adjustment for net working capital. The acquisition included the three licensed operations in Cripple Creek, Colorado known as Bronco Billy's Casino, Buffalo Billy's Casino and Billy's Casino (collectively referred to as "Bronco Billy's"). The results of Bronco Billy's operations have been included in the consolidated financial statements since that date. The acquisition was financed primarily through a $35 million increase in our Second Lien Credit Facility (see Note 6). Bronco Billy’s has approximately 803 slot and video poker machines, 13 table games and a 24-guest-room hotel. This acquisition diversifies our operations into a new geographical market.

We are in the process of completing our valuation analysis and thus these estimates are subject to change. During the quarter ended September 30, 2016, the Company recognized a measurement period adjustment increasing the carrying amount of certain leasehold improvements within property, plant and equipment by $500,000, with a corresponding decrease to gaming licenses. The related additional amortization expense for the leasehold improvements was not material. The following table summarizes our preliminary estimates of the fair values of the assets acquired and liabilities assumed at the acquisition date:
(In thousands, unaudited)
 
 
 
 
 
Cash and equivalents
 
$
2,682

Other current assets
 
258

Property and equipment
 
16,694

Goodwill
4,799

Gaming licenses
 
7,000

Trade names
 
1,800

Total assets
 
33,233

 
 
 
Current liabilities
 
2,182

Total liabilities
 
2,182

 
 
 
Estimated net assets acquired
 
$
31,051



The $4.8 million of estimated goodwill, which represents the excess of the purchase price over the estimated fair value of the assets acquired, was primarily attributable to expected synergies and the economic benefits arising from other assets acquired that could not be individually identified and separately recognized, including the assembled workforce of Bronco Billy's. All of the goodwill is expected to be deductible for income tax purposes.

Gaming licenses and trade names are intangible assets with indefinite useful lives.

The Company incurred $0.4 million of acquisition-related costs for the nine months ended September 30, 2016 and $0.4 million for the year ended December 31, 2015. These costs are included in the consolidated statements of operations under "Project development and acquisition costs". We also incurred $1.5 million of debt issuance costs, $0.6 million of warrant issuance costs, and $0.6 million of debt modification expenses in conjunction with the refinanced credit facilities.

From May 13, 2016 through September 30, 2016, Bronco Billy's revenues were $11.1 million and net income was $1.9 million and were included in our consolidated statements of operations for the nine months ended September 30, 2016.

The following unaudited pro forma consolidated income statement for the Company includes the results of Bronco Billy's as if the acquisition and related financing transactions occurred on January 1, 2015. The pro forma financial information does not necessarily represent the results that might have actually occurred or may occur in the future. The pro forma amounts include the historical operating results of Full House and Bronco Billy's prior to the acquisition, adjusted only for matters directly attributable to the acquisition, which primarily include interest expense related to the Amended and Restated First and Second Lien Credit Facilities (see Note 6). The pro forma results also reflect adjustments for the impact of depreciation and amortization expense based on the estimated fair value of property and equipment acquired, tax expense, and the removal of non-recurring expenses directly attributable to the transaction of $58,000 and $0.8 million for the three months ended September 30, 2016 and 2015, and $1.2 million and $0.9 million for the nine months ended September 30, 2016 and 2015. The pro forma results do not include any anticipated synergies or other expected benefits from the acquisition.
Pro Forma Consolidated Statement of Operations
(In thousands, unaudited)
 
 
 
 
 
For the three months ended
 
For the nine months ended
 
September 30,
2016
 
September 30,
2015
 
September 30,
2016
 
September 30,
2015
 
 
 
 
 
 
 
 
Net revenues
$
41,756

 
$
41,889

 
$
117,822

 
$
114,063

Net income (loss)
208

 
3,144

 
(3,213
)
 
(949
)
Basic income (loss) per share
0.01

 
0.17

 
(0.17
)
 
(0.05
)
Diluted income (loss) per share
—

 
0.17

 
(0.17
)
 
(0.05
)