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 May 5, 2023, 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
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
Three Months Ended | ||||||
March 31, | ||||||
| 2023 |
| 2022 | |||
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 (loss) income |
| ( |
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Other (expense) income | ||||||
Interest expense, net | ( | ( | ||||
Loss on modification of debt | — | ( | ||||
Gain on insurance settlement | | — | ||||
( | ( | |||||
Loss before income taxes |
| ( |
| ( | ||
Income tax benefit | ( | ( | ||||
Net (loss) income | $ | ( | $ | | ||
Basic loss per share | $ | ( | $ | — | ||
Diluted 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)
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
ASSETS | ||||||
Current assets |
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Cash and equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Accounts receivable, net of reserves 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 |
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Deposits and other |
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$ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable | $ | | $ | | ||
Construction 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 | | | ||||
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Operating lease obligations, net of current portion |
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Finance lease obligations, 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 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, 2023 | | $ | | $ | | | $ | ( | $ | ( | $ | | |||||||
Options exercised | — | — | | ( | | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — |
| | |||||||||||
Net loss | — | — | — | — | — | ( |
| ( | |||||||||||
Balance, March 31, 2023 | | $ | | $ | | | $ | ( | $ | ( | $ | |
Additional | Total | ||||||||||||||||||
Common Stock | Paid-in | Treasury Stock | Retained | Stockholders’ | |||||||||||||||
Shares | Dollars | Capital | Shares | Dollars | Earnings | Equity | |||||||||||||
Balance, January 1, 2022 | | $ | | $ | | | $ | ( | $ | | $ | | |||||||
Options exercised and | — | — | | ( | | — | | ||||||||||||
Stock-based compensation | — | — | | — | — | — | | ||||||||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance, March 31, 2022 | | $ | | $ | | | $ | ( | $ | | $ | |
See condensed notes to consolidated financial statements.
5
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended | ||||||
March 31, | ||||||
| 2023 |
| 2022 | |||
Cash flows from operating activities: |
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Net (loss) income | $ | ( | $ | | ||
Adjustments to reconcile net (loss) income to net cash used in 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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Gain on insurance settlement | ( | | ||||
Loss on modification of debt | | | ||||
Other operating activities | | | ||||
Deferred income taxes |
| ( |
| ( | ||
Increases and decreases in operating assets and liabilities: |
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Accounts receivable |
| ( |
| ( | ||
Prepaid expenses, inventories and other |
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Operating lease liabilities | ( | ( | ||||
Contract liabilities | | ( | ||||
Accounts payable and other liabilities |
| ( |
| ( | ||
Net cash used in operating activities |
| ( |
| ( | ||
Cash flows from investing activities: |
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Capital expenditures |
| ( |
| ( | ||
Proceeds from insurance settlement related to property damage | | | ||||
Acquisition of intangible assets | ( | | ||||
Other |
| |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
Cash flows from financing activities: |
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Proceeds from Senior Secured Notes due 2028 borrowings |
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Proceeds from premium on Senior Secured Notes due 2028 borrowings | | | ||||
Payment of debt discount and issuance costs |
| ( |
| ( | ||
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 provided by financing activities |
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Net (decrease) increase 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 condensed notes to consolidated financial statements.
6
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) – (Continued)
(In thousands)
Three Months Ended | ||||||
March 31, | ||||||
2023 |
| 2022 | ||||
Supplemental Cash Flow Disclosure: | ||||||
Cash paid for interest, net of amounts capitalized | $ | | $ | | ||
Supplemental Schedule of Non-Cash Investing and Financing Activities: |
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Accounts payable related capital expenditures | $ | | $ | | ||
Right-of-use assets obtained in exchange for operating lease liabilities | | — | ||||
Right-of-use asset and liability remeasurements: | ||||||
Operating leases | | — | ||||
Financing leases | ( | — |
See condensed notes to consolidated financial statements.
7
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
During the first quarter of 2023, the Company updated its reportable segments to Midwest & South, West, and Contracted Sports Wagering. This change reflects a realignment within the Company as a result of our continued growth. See Note 9 for additional information about the Company’s segments.
The following table presents selected information concerning our segments:
Segments and Properties | Locations | |
Midwest & South | ||
The Temporary by American Place (opened on February 17, 2023) | Waukegan, IL | |
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 Hotel |
| Cripple Creek, CO (near Colorado Springs) |
Chamonix Casino Hotel (under construction) | 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 | ||
Three sports wagering websites (“skins”) | Colorado | |
Three sports wagering websites (“skins”), one of which is currently idle | Indiana | |
One sports wagering website (“skin”), expected to commence by August 2023 | Illinois |
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 2022 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
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. |
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 a construction reserve, interest-bearing account to fund the completion of the Chamonix construction project, in accordance with the Company’s debt covenants.
Accounts Receivable. Accounts receivable consist primarily of casino, hotel and other receivables, are typically non-interest bearing, and are carried net of an appropriate reserve to approximate fair value. 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 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. Management believes that, as of March 31, 2023, no significant concentrations of credit risk existed for which a reserve had not already been recorded.
In March 2023, Rising Star sold its available “free play” for $
Other Intangible Assets. In March 2023, the Company paid $
9
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.
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 under loyalty programs by property for various 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 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 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 The Temporary/American Place (the “Sports Agreements”). As part of these long-term Sports Agreements, the Company received one-time “market access” fees, which were recorded as long-term liabilities and are being recognized as revenue ratably over the initial contract terms (or as accelerated due to early termination), beginning with the commencement of operations.
Indiana. The Company’s
Colorado. The Company’s
10
Illinois. In May 2022, the Company signed a Sports Agreement for its sole Illinois sports skin and received an upfront fee of $
In addition to the “market access” fees, deferred revenue includes quarterly and annual prepayments of contracted revenue, as required in three of the Sports Agreements. As of March 31, 2023, $
Deferred revenues consisted of the following, as discussed above:
(In thousands) | March 31, | December 31, | ||||||
| Balance Sheet Location | 2023 |
| 2022 | ||||
Deferred revenue, current | Other accrued 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 9.
Income Taxes. For interim income tax reporting for the three months ended March 31, 2023, 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.
11
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, 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 The Temporary 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 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 such costs to interest expense using the effective interest method over the terms of the modified debt agreement.
3. LEASES
The Company has no material leases in which it is the lessor. As lessee, the Company has some finance leases and various operating leases for land, casino and office space, equipment, and buildings. The Company’s remaining lease terms, including extensions, range from
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 $
12
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
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 Bronco Billy’s subsidiary leases certain parcels, including a portion of the hotel and casino, under a long-term lease. The lease term includes
In September 2022, the Company remeasured this lease’s related ROU asset and liability balances on its balance sheet, by factoring in all renewal terms through January 2035 to reflect the partial overlap of Chamonix’s construction on leased land. As a result of that overlap, the Company is deemed likely to exercise each renewal until and unless it exercises its purchase buyout right.
Third Street Corner Building through August 2023 and Option to Purchase. The Company began leasing this building in August 2018. It is currently used as office space for Chamonix’s construction personnel, obviating the need for construction trailers. The lease had an initial
Grand Lodge Casino Lease through December 2024. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a 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, 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 12-month period preceding the acquisition (or pro-rated if less than 12 months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property.
The current annual rent of $
Corporate Office Lease through January 2025. The Company leases
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
13
The components of lease expenses are as follows:
(In thousands) |
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| Three Months Ended | |||||
Classification within | March 31, | |||||||
Lease Costs | Statement of Operations | 2023 |
| 2022 | ||||
Operating leases: |
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Fixed/base rent |
| Selling, General and Administrative Expenses | $ | | $ | | ||
Short-term payments | Selling, General and Administrative Expenses | | | |||||
Variable payments |
| Selling, General and Administrative Expenses |
| |
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Finance leases: |
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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 | $ | | $ | |
Leases recorded on the balance sheet consist of the following:
(In thousands) | ||||||||
March 31, | December 31, | |||||||
Leases |
| Balance Sheet Classification |
| 2023 | 2022 | |||
Assets |
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Operating lease assets |
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| $ | | $ | | ||
Finance lease assets |
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Finance lease assets | | | ||||||
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 $ |
(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. |
14
Maturities of lease liabilities as of March 31, 2023 are summarized as follows:
(In thousands) | ||||||
| Operating |
| Financing | |||
Years Ending December 31, | Leases | Leases | ||||
2023 (excluding the three months ended March 31, 2023) | $ | | $ | | ||
2024 |
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2025 |
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2026 |
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2027 |
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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 |
| |
| | ||
Less: Current lease obligations |
| ( |
| ( | ||
Long-term lease obligations | $ | | $ | |
Other information related to lease term and discount rate is as follows:
March 31, | December 31, | |||||
Lease Term and Discount Rate | 2023 | 2022 | ||||
Weighted-average remaining lease term |
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| |||
Operating leases |
| years | years | |||
Finance lease |
| years | years | |||
Weighted-average discount rate |
| |||||
Operating leases |
| % | % | |||
Finance leases |
| % | % |
Supplemental cash flow information related to leases is as follows:
(In thousands) |
| Three Months Ended | ||||
March 31, | ||||||
Cash paid for amounts included in the measurement of lease liabilities: | 2023 | 2022 | ||||
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) | March 31, | December 31, | ||||
2023 | 2022 | |||||
Revolving Credit Facility due 2026 | $ | | $ | — | ||
| | |||||
Less: Unamortized debt issuance costs and discounts/premiums, net |
| ( |
| ( | ||
$ | | $ | |
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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, 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 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 | | % |
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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 $
On February 21, 2023, the Company entered into a Second Amendment to Credit Agreement with Capital One, which, among other things, increased the amount of additional indebtedness permitted under the Company’s Credit Agreement from $
The interest rate per annum applicable to loans under the Credit Facility is currently, at the Company’s option, either (i) the Secured Overnight Financing Rate (“SOFR”) plus a margin equal to
In anticipation of paying the gaming license fees necessary to open The Temporary – and prior to the completion of the Additional Notes offering – the Company borrowed $
The Credit Facility is equally and ratably secured by the same assets and guarantees securing the 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.
The Credit Facility contains a number of negative covenants that, subject to certain exceptions, are substantially similar to the covenants contained in the Notes. The Credit Facility also requires compliance with a financial covenant as of the last day of each fiscal quarter, such that Adjusted EBITDA (as defined) for the trailing 12-month period must equal or exceed the utilized portion of the Credit Facility, if drawn. The Company was in compliance with this financial covenant as of March 31, 2023.
Fair Value of Long-Term Debt. The estimated fair value of the Notes was approximately $
5. INCOME TAXES
The Company’s effective income tax rate for the three months ended March 31, 2023 and 2022 was
The Company continues to assess the realizability of deferred tax assets (“DTAs”) and concluded that it has not met the “more likely than not” threshold. As of March 31, 2023, the Company continues to provide a valuation allowance against its DTAs that cannot be offset by existing deferred tax liabilities. In accordance with Accounting Standards Codification 740 (“ASC 740”), this assessment has taken into consideration the jurisdictions in which these DTAs reside.
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6. COMMITMENTS AND CONTINGENCIES AND SUBSEQUENT EVENTS
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.
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 Gulf of Mexico. In contemplation for such potential future expansion, the Company entered into a lease agreement in the second quarter of 2023 with the State of Mississippi for a
The lease commences on June 1, 2023, and initial rent is due in advance for
Contracted Sports Wagering in Illinois
In May 2022, the Company entered into an agreement with an affiliate of Circa Sports to jointly develop and manage on-site sportsbooks at both The Temporary and American Place casinos in Illinois. In addition to the on-site sportsbook, Circa Sports will utilize the Company’s expected mobile sports skin to conduct Internet sports wagering throughout Illinois. In exchange for such rights, the Company received a non-refundable market access fee of $
Contingent Gaming License Fees in Illinois
As required for its gaming licensure at The Temporary/American Place, the Company may be required to make a “Reconciliation Payment” to the State of Illinois. The Reconciliation Payment is calculated three years after the commencement of gaming operations in Illinois in an amount equal to
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7. EARNINGS (LOSS) PER SHARE
The table below reconciles basic and diluted loss per share of common stock:
(In thousands) | Three Months Ended | |||||
March 31, | ||||||
| 2023 |
| 2022 | |||
Numerator: |
|
|
|
| ||
Net (loss) income ─ basic | $ | ( | $ | | ||
Net (loss) income ─ diluted | $ | ( | $ | | ||
Denominator: |
|
|
|
| ||
Weighted-average common shares ─ basic |
| |
| | ||
Potential dilution from share-based awards | — | | ||||
Weighted-average common and common share equivalents ─ diluted |
| |
| | ||
Anti-dilutive share-based awards excluded from the calculation of |
| |
| |
8. SHARE-BASED COMPENSATION
Performance-Based Shares. In April 2023, the Compensation Committee approved the satisfaction of certain performance criteria related to our operations in 2022. Such performance measures involved multi-year growth rates for EBITDA and free cash flow per share. As a result, a total of
In January 2023, the Company issued a total of
As of March 31, 2023, the Company had
The following table summarizes information related to the Company’s common stock options as of March 31, 2023:
|
| Weighted | |||
Number | Average | ||||
of Stock | Exercise | ||||
Options | Price | ||||
Options outstanding at January 1, 2023 |
| | $ | | |
Granted |
| |
| | |
Exercised |
| ( |
| | |
Canceled/Forfeited |
| — |
| — | |
Expired |
| — |
| — | |
Options outstanding at March 31, 2023 |
| | $ | | |
Options exercisable at March 31, 2023 |
| | $ | |
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Components of compensation expense are as follows:
(In thousands) | Three Months Ended | |||||
March 31, | ||||||
Compensation Expense | 2023 | 2022 | ||||
Stock options | $ | | $ | | ||
Restricted and performance-based shares |
| |
| | ||
$ | | $ | |
As of March 31, 2023, there was approximately $
9. SEGMENT REPORTING AND DISAGGREGATED REVENUE
The Company manages its reporting segments based on geographic regions within the United States and type of income. During the first quarter of 2023, the Company changed its reportable segments to Midwest & South, West, and Contracted Sports Wagering. This change reflects a realignment within the Company as a result of its continued growth. The Company’s management views the regions where each of its casino resorts are located as reportable segments, in addition to its contracted sports wagering segment. Reportable segments are aggregated based on geography, economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure.
The Company utilizes Adjusted Segment EBITDA as the measure of segment profit in assessing performance and allocating resources at the reportable segment level. Adjusted Segment EBITDA is defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening expenses, impairment charges, asset write-offs, recoveries, gain (loss) from asset disposals, project development and acquisition costs, non-cash share-based compensation expense, and corporate-related costs and expenses that are not allocated to each segment.
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As a result of the change in reportable segments described above, we have recast previously-reported segment information to conform to the current presentation in the following tables:
(In thousands) | Three Months Ended March 31, 2023 | |||||||||||
Contracted | ||||||||||||
Sports | ||||||||||||
Midwest & South | West | Wagering | Total | |||||||||
Revenues | ||||||||||||
Casino | $ | | $ | | $ | — | $ | | ||||
Food and beverage |
| |
| |
| — |
| | ||||
Hotel |
| |
| |
| — |
| | ||||
Other operations, including |
| |
| |
| |
| | ||||
$ | | $ | | $ | | $ | | |||||
Adjusted Segment EBITDA | $ | | $ | | $ | | $ | | ||||
Other operating costs and expenses: | ||||||||||||
Depreciation and amortization |
| ( | ||||||||||
Corporate expenses |
| ( | ||||||||||
Project development costs |
| ( | ||||||||||
Preopening costs | ( | |||||||||||
Stock-based compensation | ( | |||||||||||
Operating loss |
| ( | ||||||||||
Other (expense) income: | ||||||||||||
Interest expense, net |
| ( | ||||||||||
Gain on insurance settlement | | |||||||||||
( | ||||||||||||
Loss before income taxes | ( | |||||||||||
Income tax benefit |
| ( | ||||||||||
Net loss | $ | ( |
21