Annual report pursuant to Section 13 and 15(d)

GOODWILL AND INTANGIBLES

v3.3.1.900
GOODWILL AND INTANGIBLES
 12 Months Ended
Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL & INTANGIBLES
GOODWILL AND INTANGIBLES

Goodwill represents the excess of the purchase price over fair value of net tangible and other intangible assets acquired in connection with Silver Slipper Casino & Hotel, Rising Star Casino Resort and Stockman’s Casino business combinations, net of subsequent impairments as summarized below.

There were no impairments to goodwill for the year ended December 31, 2015. During 2014, we performed interim impairment assessments of goodwill and other indefinite-lived intangible assets during the second quarter for all relevant properties and recognized a $1.6 million and $9.9 million impairment of Rising Star Casino Resort’s goodwill and gaming license, respectively, due to various factors, including declines in operating results, weak economic conditions, lower than anticipated discretionary consumer spending, and increased competition in our regional market. We evaluated the fair value of these assets using the income (discounted cash flow) approach which use Level 3 inputs as defined by GAAP. Key assumptions included in the analysis were estimates of future cash flows including outflows for capital expenditures, a long-term growth rate of 1% and a discount rate of 11.2%.  
 
Goodwill:

The following tables set forth changes in the carrying value of goodwill by segment:
 
December 31, 2015
(in thousands)
 
Gross Carrying Value
 
Accumulated Impairments
 
Balance at
end of the
year
Northern Nevada
$
5,809

 
$
(4,000
)
 
$
1,809

Rising Star Casino Resort
1,647

 
(1,647
)
 
—

Silver Slipper Casino & Hotel
14,671

 
—

 
14,671

Goodwill, net of accumulated impairment losses
$
22,127

 
$
(5,647
)
 
$
16,480


 
December 31, 2014
(in thousands)
 
Gross Carrying Value
 
Accumulated Impairments
 
Balance at
end of the
year
Northern Nevada
$
5,809

 
$
(4,000
)
 
$
1,809

Rising Star Casino Resort
1,647

 
(1,647
)
 
—

Silver Slipper Casino & Hotel
14,671

 
—

 
14,671

Goodwill, net of accumulated impairment losses
$
22,127

 
$
(5,647
)
 
$
16,480


 
Intangible Assets:

The following tables set forth changes in the carrying value of intangible assets:
 
December 31, 2015
(in thousands)
 
Estimated
Life
(Years)
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Accumulated Impairments /
Write-offs, Net
 
Intangible
Assets, Net
Amortizing Intangible Assets:
 
 
 
 
 
 
 
 
 
Customer Loyalty Program - Rising Star
3
 
$
1,700

 
$
(1,700
)
 
$
—

 
$
—

Customer Loyalty Program - Silver Slipper
3
 
5,900

 
(5,900
)
 
—

 
—

Land Lease and Water Rights - Silver Slipper
46
 
1,420

 
(101
)
 
—

 
1,319

Non-amortizing Intangible Assets:
 
 
 

 
 

 
 

 


Gaming License - Rising Star
Indefinite
 
10,034

 
—

 
(9,900
)
 
134

Gaming License – Silver Slipper
Indefinite
 
127

 
—

 
—

 
127

Gaming License – Northern Nevada
Indefinite
 
384

 
—

 
(104
)
 
280

Gaming License - Colorado
Indefinite
 
199

 
—

 
—

 
199

Trademarks
Indefinite
 
68

 
—

 
—

 
68

 
 
 
$
19,832

 
$
(7,701
)
 
$
(10,004
)
 
$
2,127

 

 
December 31, 2014
(in thousands)
 
Estimated
Life
(Years)
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Accumulated Impairments/ Write-offs, Net
 
Intangible
Assets, Net
Amortizing Intangible Assets:
 
 
 
 
 
 
 
 
 
Customer Loyalty Program - Rising Star
3
 
$
1,700

 
$
(1,700
)
 
$
—

 
$
—

Customer Loyalty Program - Silver Slipper
3
 
5,900

 
(4,425
)
 
—

 
1,475

Land Lease and Water Rights - Silver Slipper
46
 
1,420

 
(70
)
 
—

 
1,350

Non-amortizing Intangible Assets:
 
 
 

 
 

 
 

 


Gaming License - Rising Star
Indefinite
 
9,900

 
—

 
(9,900
)
 
—

Gaming License – Silver Slipper
Indefinite
 
105

 
—

 
(44
)
 
61

Gaming License – Northern Nevada
Indefinite
 
523

 
—

 
(67
)
 
456

Trademarks
Indefinite
 
40

 
—

 
—

 
40

 
 
 
$
19,588

 
$
(6,195
)
 
$
(10,011
)
 
$
3,382


 
Customer Loyalty Programs. The customer loyalty programs represent the value of repeat business associated with Silver Slipper Casino & Hotel’s and Rising Star Casino Resort’s loyalty programs.  The value of $5.9 million and $1.7 million of the Silver Slipper Casino & Hotel’s and Rising Star Casino Resort’s customer loyalty programs, respectively, were determined using a multi-period excess earning method of the income approach, which examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return, which is attributable to the asset being valued, based on cash flows attributable to the customer loyalty program.  The valuation analyses for the active rated players were based on projected revenues and attrition rates.  Silver Slipper Casino & Hotel and Rising Star Casino Resort maintain historical information for the proportion of revenues attributable to the rated players for gross gaming revenue.  The value of the customer loyalty programs are amortized over a life of three years.

Land Lease and Water Rights.  In November 2004, our subsidiary, Silver Slipper Casino Venture, LLC, entered into a lease agreement with Cure Land Company, LLC for approximately 38 acres of land (“Land Lease”), which includes approximately 31 acres of protected marshland and the seven-acre casino parcel on which the Silver Slipper Casino was subsequently built. The $1 million Land Lease represents the excess fair value of the land over the estimated net present value of the Land Lease payments.  The $0.4 million of water rights represented the fair value of the water rights based upon market rates in Hancock County, Mississippi.  The term of the land lease matures in April 2058.
 
Gaming Licenses.  Gaming licenses represent the value of the license to conduct gaming in certain jurisdictions, which are subject to highly extensive regulatory oversight and, in some cases, a limitation on the number of licenses available for issuance.  The value of the $9.9 million Rising Star Casino Resort gaming license was estimated using a multi-period excess earning method of the income approach, which examines the economic returns contributed by the identified tangible and intangible assets of a company, and then isolates the excess return, which is attributable to the asset being valued, based on cash flows attributable to the gaming license. The other gaming license values are based on actual costs. Gaming licenses are not amortized as they have indefinite useful lives and are evaluated for potential impairment on an annual basis unless events or changes in circumstances indicate the carrying amount of the gaming licenses may not be recoverable.  We reviewed existing gaming licenses and recognized an expense of $0.1 million during 2015, and $10.2 million, including a $9.9 million impairment of the gaming license at Rising Star Casino Resort, during 2014.

Current and Future Amortization.   Intangible asset amortization expense was $1.5 million and $2.1 million for the years ended December 31, 2015 and December 31, 2014, respectively.

Total amortization expense for intangible assets is expected to be $31,000 for each of the years ending 2016 through 2020 and $1.3 million thereafter.