UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| |
(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. 1-32583
FULL HOUSE RESORTS, INC.
(Exact name of registrant as specified in its charter)
| | |
Delaware (State or other jurisdiction of incorporation or organization) |
| 13-3391527 (I.R.S. Employer Identification No.) |
| | |
One Summerlin, 1980 Festival Plaza Drive, Suite 680 Las Vegas, Nevada (Address of principal executive offices) | | 89135 (Zip Code) |
(702) 221-7800
(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 |
Common Stock, $0.0001 par value per share | | FLL | | The Nasdaq Stock Market LLC |
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. Yes ☑ No ☐
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). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ | Accelerated filer ☑ | Emerging growth company ☐ |
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 November 3, 2022,May 5, 2023, there were 34,399,08434,445,312 shares of Common Stock, $0.0001 par value per share, outstanding.
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
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| | Page |
3 | ||
| 3 | |
| Consolidated Balance Sheets at | 4 |
| 5 | |
| 6 | |
| 8 | |
| 8 | |
| Note 2 ⸺ Basis of Presentation and Significant Accounting Policies | 8 |
| 12 | |
| 15 | |
| 17 | |
| Note 6 ⸺ Commitments and Contingencies and Subsequent Events | 18 |
| 19 | |
| 19 | |
| 20 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
| ||
| ||
| | |
| ||
| ||
| ||
| | |
| | |
|
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 | | Nine Months Ended | | Three Months Ended | ||||||||||||
| | September 30, | | September 30, | | March 31, | ||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||||
Revenues |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Casino | | $ | 29,721 | | $ | 32,506 | | $ | 88,293 | | $ | 99,217 | | $ | 35,987 | | $ | 29,084 |
Food and beverage | |
| 6,811 | |
| 7,092 | |
| 20,255 | |
| 20,633 | |
| 7,660 | |
| 6,511 |
Hotel | |
| 2,490 | |
| 2,469 | |
| 7,076 | |
| 7,190 | |
| 2,144 | |
| 2,179 |
Other operations, including contracted sports wagering | |
| 2,371 | |
| 5,171 | |
| 11,575 | |
| 9,848 | |
| 4,315 | |
| 3,649 |
| |
| 41,393 | |
| 47,238 | |
| 127,199 | |
| 136,888 | |
| 50,106 | |
| 41,423 |
Operating costs and expenses | |
|
| |
|
| |
|
| |
|
| |
| | |
| |
Casino | |
| 10,292 | |
| 11,261 | |
| 30,273 | |
| 32,687 | |
| 13,344 | |
| 9,875 |
Food and beverage | |
| 6,814 | |
| 6,199 | |
| 20,134 | |
| 17,487 | |
| 7,455 | |
| 6,568 |
Hotel | |
| 1,256 | |
| 1,136 | |
| 3,524 | |
| 3,332 | |
| 1,219 | |
| 1,071 |
Other operations | |
| 587 | |
| 576 | |
| 1,594 | |
| 1,522 | |
| 482 | |
| 462 |
Selling, general and administrative | |
| 15,218 | |
| 14,791 | |
| 44,795 | |
| 43,211 | |
| 18,229 | |
| 15,393 |
Project development costs, net | |
| (149) | |
| 318 | |
| 33 | |
| 491 | ||||||
Project development costs | |
| 7 | |
| 165 | ||||||||||||
Preopening costs | | | 2,594 | | | 17 | | | 4,914 | | | 17 | | | 10,497 | | | 786 |
Depreciation and amortization | |
| 2,386 | |
| 1,819 | |
| 6,012 | |
| 5,448 | |
| 5,859 | |
| 1,792 |
Loss on disposal of assets, net | |
| — | |
| 2 | | | 3 | |
| 674 | ||||||
Loss on disposal of assets | | | — | |
| 8 | ||||||||||||
| |
| 38,998 | |
| 36,119 | |
| 111,282 | |
| 104,869 | |
| 57,092 | |
| 36,120 |
Operating income | |
| 2,395 | |
| 11,119 | |
| 15,917 | |
| 32,019 | ||||||
Other expense | |
|
| |
|
| |
|
| |
|
| ||||||
Operating (loss) income | |
| (6,986) | |
| 5,303 | ||||||||||||
Other (expense) income | | | | | | | ||||||||||||
Interest expense, net | | | (5,838) | | | (6,405) | | | (19,225) | | | (17,531) | | | (4,819) | | | (6,399) |
Loss on modification and extinguishment of debt, net | | | (105) | | | — | | | (4,530) | | | (6,104) | ||||||
Adjustment to fair value of warrants | |
| — | |
| — | |
| — | |
| (1,347) | ||||||
Loss on modification of debt | | | — | | | (4,406) | ||||||||||||
Gain on insurance settlement | | | 355 | | | — | ||||||||||||
| |
| (5,943) | |
| (6,405) | |
| (23,755) | |
| (24,982) | | | (4,464) | | | (10,805) |
(Loss) income before income taxes | |
| (3,548) | |
| 4,714 | |
| (7,838) | |
| 7,037 | ||||||
Income tax provision (benefit) | | | 29 | | | 95 | | | (16) | | | 379 | ||||||
Loss before income taxes | |
| (11,450) | |
| (5,502) | ||||||||||||
Income tax benefit | | | (35) | | | (5,612) | ||||||||||||
Net (loss) income | | $ | (3,577) | | $ | 4,619 | | $ | (7,822) | | $ | 6,658 | | $ | (11,415) | | $ | 110 |
| | | | | | | | | | | | | | | | | | |
Basic (loss) earnings per share | | $ | (0.10) | | $ | 0.13 | | $ | (0.23) | | $ | 0.21 | ||||||
Diluted (loss) earnings per share | | $ | (0.10) | | $ | 0.13 | | $ | (0.23) | | $ | 0.19 | ||||||
Basic loss per share | | $ | (0.33) | | $ | — | ||||||||||||
Diluted loss per share | | $ | (0.33) | | $ | — |
See condensed notes to consolidated financial statements.
3
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
| | | | | | |
| | September 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
ASSETS | | | | | | |
Current assets |
| |
|
| |
|
Cash and equivalents | | $ | 85,712 | | $ | 88,721 |
Restricted cash | | | 156,117 | | | 176,572 |
Accounts receivable, net of reserves of $254 and $257 | |
| 2,806 | |
| 4,693 |
Inventories | |
| 1,658 | |
| 1,660 |
Prepaid expenses and other | |
| 6,512 | |
| 3,726 |
| |
| 252,805 | |
| 275,372 |
| | | | | | |
Property and equipment, net | |
| 272,097 | |
| 149,540 |
Operating lease right-of-use assets, net | | | 15,556 | | | 15,814 |
Goodwill | |
| 21,286 | |
| 21,286 |
Other intangible assets, net | |
| 10,877 | |
| 10,896 |
Deposits and other | |
| 2,130 | |
| 934 |
| | $ | 574,751 | | $ | 473,842 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
Current liabilities | | | | | | |
Accounts payable | | $ | 4,701 | | $ | 3,874 |
Construction payable | | | 16,425 | | | 4,537 |
Accrued payroll and related | |
| 4,223 | |
| 5,473 |
Accrued interest | | | 4,322 | | | 9,861 |
Other accrued liabilities | |
| 9,256 | |
| 10,252 |
Current portion of operating lease obligations | | | 3,103 | | | 3,542 |
Current portion of finance lease obligation | | | 530 | | | 514 |
| |
| 42,560 | | | 38,053 |
| | | | | | |
Operating lease obligations, net of current portion | |
| 12,962 | |
| 12,903 |
Finance lease obligation, net of current portion | | | 2,384 | | | 2,783 |
Long-term debt, net | |
| 401,429 | |
| 301,619 |
Deferred income taxes, net | |
| 1,039 | |
| 1,055 |
Contract liabilities, net of current portion | | | 7,956 | | | 4,714 |
| |
| 468,330 | |
| 361,127 |
Commitments and contingencies (Note 7) | |
|
| |
|
|
Stockholders’ equity | |
|
| |
|
|
Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 35,302,549 shares issued and 34,399,084 and 34,242,581 shares outstanding | |
| 4 | |
| 4 |
Additional paid-in capital | |
| 110,249 | |
| 108,911 |
Treasury stock, 903,465 and 1,059,968 common shares | |
| (1,102) | |
| (1,292) |
(Accumulated deficit) retained earnings | |
| (2,730) | |
| 5,092 |
| |
| 106,421 | |
| 112,715 |
| | $ | 574,751 | | $ | 473,842 |
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2023 |
| 2022 | ||
ASSETS | | | | | | |
Current assets |
| |
|
| |
|
Cash and equivalents | | $ | 40,813 | | $ | 56,589 |
Restricted cash | | | 101,583 | | | 134,587 |
Accounts receivable, net of reserves of $199 and $249 | |
| 5,652 | |
| 4,082 |
Inventories | |
| 1,505 | |
| 1,479 |
Prepaid expenses and other | |
| 6,140 | |
| 6,184 |
| |
| 155,693 | |
| 202,921 |
| | | | | | |
Property and equipment, net | |
| 385,256 | |
| 339,057 |
Operating lease right-of-use assets, net | | | 46,323 | | | 15,771 |
Finance lease right-of-use assets, net | | | 3,287 | | | 3,808 |
Goodwill | |
| 21,286 | |
| 21,286 |
Other intangible assets, net | |
| 61,111 | |
| 10,869 |
Deposits and other | |
| 1,541 | |
| 1,617 |
| | $ | 674,497 | | $ | 595,329 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
Current liabilities | | | | | | |
Accounts payable | | $ | 7,162 | | $ | 4,602 |
Construction payable | | | 31,298 | | | 30,279 |
Accrued payroll and related | |
| 6,278 | |
| 3,784 |
Accrued interest | | | 4,483 | | | 12,966 |
Other accrued liabilities | |
| 11,290 | |
| 9,964 |
Current portion of operating lease obligations | | | 3,242 | | | 2,485 |
Current portion of finance lease obligation | | | 1,572 | | | 1,581 |
| |
| 65,325 | | | 65,661 |
| | | | | | |
Operating lease obligations, net of current portion | |
| 43,242 | |
| 13,418 |
Finance lease obligations, net of current portion | | | 4,171 | | | 4,727 |
Long-term debt, net | |
| 462,980 | |
| 401,852 |
Deferred income taxes, net | |
| 989 | |
| 1,024 |
Contract liabilities, net of current portion | | | 8,649 | | | 8,856 |
| |
| 585,356 | |
| 495,538 |
Commitments and contingencies (Note 6) | |
|
| |
|
|
Stockholders’ equity | |
|
| |
|
|
Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 35,302,549 shares issued and 34,411,616 and 34,407,654 shares outstanding | |
| 4 | |
| 4 |
Additional paid-in capital | |
| 111,350 | |
| 110,590 |
Treasury stock, 890,933 and 894,895 common shares | |
| (1,086) | |
| (1,091) |
Accumulated deficit | |
| (21,127) | |
| (9,712) |
| |
| 89,141 | |
| 99,791 |
| | $ | 674,497 | | $ | 595,329 |
See condensed notes to consolidated financial statements.
4
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | Retained | | | | | | | | | | Additional | | | | | | | | | | Total | |||
| | | | | | | Additional | | | | | | | Earnings | | Total | | Common Stock | | Paid-in | | Treasury Stock | | Accumulated | | Stockholders’ | ||||||||||||
| | Common Stock | | Paid-in | | Treasury Stock | | (Accumulated | | Stockholders’ | | Shares | | Dollars | | Capital | | Shares | | Dollars | | Deficit | | Equity | ||||||||||||||
| | Shares | | Dollars | | Capital | | Shares | | Dollars | | Deficit) | | Equity | ||||||||||||||||||||||||
Balance, January 1, 2022 | | 35,302 | | $ | 4 | | $ | 108,911 | | 1,060 | | $ | (1,292) | | $ | 5,092 | | $ | 112,715 | |||||||||||||||||||
Options exercised and | | — | | | — | | | 14 | | (103) | | | 125 | | | — | | | 139 | |||||||||||||||||||
Stock-based compensation | | — | |
| — | |
| 343 | | — | |
| — | | | — | |
| 343 | |||||||||||||||||||
Net income | | — | |
| — | |
| — | | — | |
| — | | | 110 | |
| 110 | |||||||||||||||||||
Balance, March 31, 2022 | | 35,302 | | | 4 | | | 109,268 | | 957 | | | (1,167) | | | 5,202 | | | 113,307 | |||||||||||||||||||
Restricted stocks vested | | — | | | — | | | (47) | | (39) | | | 47 | | | — | | | — | |||||||||||||||||||
Stock-based compensation | | — | | | — | | | 487 | | — | | | — | | | — | | | 487 | |||||||||||||||||||
Net loss | | — | | | — | | | — | | — | | | — | | | (4,355) | | | (4,355) | |||||||||||||||||||
Balance, June 30, 2022 | | 35,302 | | | 4 | | | 109,708 | | 918 | | | (1,120) | | | 847 | | | 109,439 | |||||||||||||||||||
Balance, January 1, 2023 | | 35,302 | | $ | 4 | | $ | 110,590 | | 895 | | $ | (1,091) | | $ | (9,712) | | $ | 99,791 | |||||||||||||||||||
Options exercised | | — | | | — | | | 9 | | (15) | | | 18 | | | — | | | 27 | | — | | | — | | | 12 | | (4) | | | 5 | | | — | | | 17 |
Stock-based compensation | | — | | | — | | | 532 | | — | | | — | | | — | | | 532 | | — | | | — | | | 748 | | — | | | — | | | — | |
| 748 |
Net loss | | — | | | — | | | — | | — | | | — | | | (3,577) | | | (3,577) | | — | | | — | | | — | | — | | | — | | | (11,415) | |
| (11,415) |
Balance, September 30, 2022 | | 35,302 | | $ | 4 | | $ | 110,249 | | 903 | | $ | (1,102) | | $ | (2,730) | | $ | 106,421 | |||||||||||||||||||
Balance, March 31, 2023 | | 35,302 | | $ | 4 | | $ | 111,350 | | 891 | | $ | (1,086) | | $ | (21,127) | | $ | 89,141 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | (Accumulated | | | | | | | | | Additional | | | | | | | | | | Total | |||||
| | | | | | | Additional | | | | | | | Deficit) | | Total | | Common Stock | | Paid-in | | Treasury Stock | | Retained | | Stockholders’ | ||||||||||||
| | Common Stock | | Paid-in | | Treasury Stock | | Retained | | Stockholders’ | | Shares | | Dollars | | Capital | | Shares | | Dollars | | Earnings | | Equity | ||||||||||||||
| | Shares | | Dollars | | Capital | | Shares | | Dollars | | Earnings | | Equity | ||||||||||||||||||||||||
Balance, January 1, 2021 | | 28,385 | | $ | 3 | | $ | 64,826 | | 1,261 | | $ | (1,538) | | $ | (6,614) | | $ | 56,677 | |||||||||||||||||||
Equity offering, net | | 6,917 | |
| 1 | |
| 42,973 | | — | |
| — | | | — | |
| 42,974 | |||||||||||||||||||
Options exercised | | — | | | — | | | 36 | | (34) | | | 42 | | | — | | | 78 | |||||||||||||||||||
Stock-based compensation | | — | | | — | | | 124 | | — | | | — | | | — | | | 124 | |||||||||||||||||||
Net loss | | — | |
| — | |
| — | | — | |
| — | | | (3,445) | |
| (3,445) | |||||||||||||||||||
Balance, March 31, 2021 | | 35,302 | | | 4 | | | 107,959 | | 1,227 | | | (1,496) | | | (10,059) | | | 96,408 | |||||||||||||||||||
Options exercised | | — | | | — | | | 104 | | (152) | | | 185 | | | — | | | 289 | |||||||||||||||||||
Balance, January 1, 2022 | | 35,302 | | $ | 4 | | $ | 108,911 | | 1,060 | | $ | (1,292) | | $ | 5,092 | | $ | 112,715 | |||||||||||||||||||
Options exercised and | | — | | | — | | | 14 | | (103) | | | 125 | | | — | | | 139 | |||||||||||||||||||
Stock-based compensation | | — | | | — | | | 199 | | — | | | — | | | — | | | 199 | | — | | | — | | | 343 | | — | | | — | | | — | | | 343 |
Net income | | — | | | — | | | — | | — | | | — | | | 5,484 | | | 5,484 | | — | | | — | | | — | | — | | | — | | | 110 | | | 110 |
Balance, June 30, 2021 | | 35,302 | | | 4 | | | 108,262 | | 1,075 | | | (1,311) | | | (4,575) | | | 102,380 | |||||||||||||||||||
Stock-based compensation | | — | | | — | | | 324 | | — | | | — | | | — | | | 324 | |||||||||||||||||||
Net income | | — | | | — | | | — | | — | | | — | | | 4,619 | | | 4,619 | |||||||||||||||||||
Balance, September 30, 2021 | | 35,302 | | $ | 4 | | $ | 108,586 | | 1,075 | | $ | (1,311) | | $ | 44 | | $ | 107,323 | |||||||||||||||||||
Balance, March 31, 2022 | | 35,302 | | $ | 4 | | $ | 109,268 | | 957 | | $ | (1,167) | | $ | 5,202 | | $ | 113,307 |
See condensed notes to consolidated financial statements.
5
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
| | | | | | | | | | | | |
| | Nine Months Ended | | Three Months Ended | ||||||||
| | September 30, | | March 31, | ||||||||
|
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||
Cash flows from operating activities: |
| |
|
| |
|
| |
|
| |
|
Net (loss) income | | $ | (7,822) | | $ | 6,658 | | $ | (11,415) | | $ | 110 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |
|
| |
|
| ||||||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | |
| | | | | ||||||
Depreciation and amortization | |
| 6,012 | |
| 5,448 | |
| 5,859 | |
| 1,792 |
Amortization of debt issuance costs, discounts and premiums | |
| 1,227 | |
| 991 | |
| 547 | |
| 386 |
Non-cash change in ROU operating lease assets | | | 1,026 | | | 816 | ||||||
Stock-based compensation | |
| 1,362 | |
| 647 | |
| 748 | |
| 343 |
Change in fair value of stock warrants | |
| — | |
| 1,347 | ||||||
Loss on disposal of assets, net | |
| 3 | |
| 674 | ||||||
Proceeds from insurance related to property damage | | | — | | | 1,334 | ||||||
Loss on modification and extinguishment of debt, net | | | 4,530 | | | 6,104 | ||||||
Loss on disposal of assets | |
| — | |
| 8 | ||||||
Gain on insurance settlement | | | (355) | | | — | ||||||
Loss on modification of debt | | | — | | | 4,406 | ||||||
Other operating activities | | | 390 | | | — | ||||||
Deferred income taxes | |
| (35) | |
| (5,611) | ||||||
Increases and decreases in operating assets and liabilities: | |
|
| |
|
| |
| | | | |
Accounts receivable | |
| 1,887 | |
| 360 | |
| (1,570) | |
| (657) |
Prepaid expenses, inventories and other | |
| (2,784) | |
| (3,229) | |
| 18 | |
| 277 |
Deferred taxes | |
| (16) | |
| 379 | ||||||
Common stock warrant liability | | | — | | | (4,000) | ||||||
Operating lease liabilities | | | (997) | | | (872) | ||||||
Contract liabilities | | | 2,635 | | | (600) | | | 643 | | | (1,555) |
Accounts payable and accrued expenses | |
| (6,994) | |
| 3,188 | ||||||
Net cash provided by operating activities | |
| 40 | |
| 19,301 | ||||||
Accounts payable and other liabilities | |
| (2,151) | |
| (7,411) | ||||||
Net cash used in operating activities | |
| (7,292) | |
| (7,968) | ||||||
Cash flows from investing activities: | |
|
| |
|
| |
| | | | |
Capital expenditures | |
| (116,148) | |
| (17,828) | |
| (51,832) | |
| (31,203) |
Proceeds from insurance settlement related to property damage | | | 355 | | | — | ||||||
Acquisition of intangible assets | | | (50,250) | | | — | ||||||
Other | |
| (1,086) | |
| (164) | |
| — | |
| (671) |
Net cash used in investing activities | |
| (117,234) | |
| (17,992) | |
| (101,727) | |
| (31,874) |
Cash flows from financing activities: | |
|
| |
|
| |
| | | | |
Proceeds from Senior Secured Notes due 2028 borrowings | |
| 100,000 | |
| 310,000 | |
| 40,000 | |
| 100,000 |
Proceeds from premium on Senior Secured Notes due 2028 borrowings | | | 2,000 | | | — | | | — | | | 2,000 |
Proceeds from equity offering, net of issuance costs | | | — | | | 42,974 | ||||||
Payment of debt discount and issuance costs | |
| (7,945) | |
| (9,421) | |
| (6,420) | |
| (7,821) |
Repayment of Senior Secured Notes due 2024 | | | — | | | (106,825) | ||||||
Prepayment premiums of Senior Secured Notes due 2024 | |
| — | |
| (1,261) | ||||||
Repayment of finance lease obligation | | | (383) | | | (367) | ||||||
Borrowings under revolving credit facility | | | 36,000 | | | — | ||||||
Repayment of revolving credit facility borrowings | | | (9,000) | | | — | ||||||
Repayment of finance lease obligations | | | (358) | | | (126) | ||||||
Proceeds from exercise of stock options | |
| 166 | |
| 367 | |
| 17 | |
| 139 |
Other | | | (108) | | | 24 | | | — | | | (108) |
Net cash provided by financing activities | |
| 93,730 | |
| 235,491 | |
| 60,239 | |
| 94,084 |
| | | | | | | | | | | | |
Net (decrease) increase in cash, cash equivalents and restricted cash | |
| (23,464) | |
| 236,800 | |
| (48,780) | |
| 54,242 |
Cash, cash equivalents and restricted cash, beginning of period | |
| 265,293 | |
| 37,698 | |
| 191,176 | |
| 265,293 |
Cash, cash equivalents and restricted cash, end of period | | $ | 241,829 | | $ | 274,498 | | $ | 142,396 | | $ | 319,535 |
| | | | | | | ||||||
Supplemental Cash Flow Information: | |
|
| |
|
| ||||||
Cash paid for interest, net of amounts capitalized | | $ | 27,726 | | $ | 13,180 | ||||||
Non-Cash Investing Activities: | |
|
| |
|
| ||||||
Accounts payable related capital expenditures | | $ | 17,312 | | $ | 7,031 |
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 | | $ | 14,048 | | $ | 15,699 |
| | | | | | |
Supplemental Schedule of Non-Cash Investing and Financing Activities: | |
|
| |
|
|
Accounts payable related capital expenditures | | $ | 31,375 | | $ | 7,001 |
Right-of-use assets obtained in exchange for operating lease liabilities | | | 29,238 | | | — |
Right-of-use asset and liability remeasurements: | | | | | | |
Operating leases | | | 2,341 | | | — |
Financing leases | | | (207) | | | — |
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 fivesix casinos: fourfive on real estate that we own or lease and one located within a hotel owned by a third party. We are currently constructing two additional properties:our seventh property, Chamonix Casino Hotel (“Chamonix”), adjacent to the Company’sour existing Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado; andColorado. We are also designing our permanent American Place casino destination, which will be built adjacent to a temporary facility that we opened in February 2023, named The Temporary by American Place (“The Temporary”) in Waukegan, Illinois.. We alsointend to operate The Temporary until the opening of the permanent American Place facility. Additionally, we benefit from seven permitted sports wagering “skins,”“skins” – three in Colorado, three in Indiana, and one in Illinois that we expect to receive shortly after the opening of The Temporary. As of September 30, 2022, five of our seven online skins are contracted with otherIllinois. Other companies and four of which are currently in operation. These contracts allow the counterparties to operate or will operate these online sports wagering siteswebsites under their brands, paying us a percentage of revenues, as defined, in each respective agreement, subject to annual minimum amounts.
In December 2021, Full House was selected by the Illinois Gaming Board (“IGB”) to develop its American Place project in Waukegan, Illinois, a northern suburb of Chicago. During the period thatfirst quarter of 2023, the permanent American Place facility is under construction, we intendCompany updated its reportable segments to operateMidwest & South, West, and Contracted Sports Wagering. This change reflects a temporary casino facility named The Temporary. In May 2022, we commenced construction of The Temporary, which is expected to openrealignment within the next three months, subject to customary regulatory approvals.Company as a result of our continued growth. See Note 9 for additional information about the Company’s segments.
The following table identifiespresents selected information concerning our segments, along with properties and their locations:segments:
| | |
Segments and Properties | | Locations |
| | |
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) |
|
|
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|
|
|
|
|
| |
|
|
|
|
| |
|
|
|
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”) | | Illinois |
The Company manages its casinos based primarily on geographic regions within the United States and type of income. See Note 10 for further information.
7
COVID-19 Pandemic Update. The COVID-19 pandemic continues to evolve. Governmental authorities continue to update their precautionary measures and promote vaccination programs to manage the spread of the virus as different variants of the virus surface and subside. The Company has generally benefited from the gradual relaxation of pandemic-related business restrictions since 2021.
However, the COVID-19 pandemic and certain precautionary measures, as well as other factors, have created economic uncertainty both in the United States and globally, as well as significant volatility in, and disruption to, financial markets, labor markets and supply chains. Global supply chain disruptions and other world events have resulted in shipping delays, increased shipping costs, supply shortages, and inflationary pressures, including increases in prices for fuel, food, building materials, and other items. These increased costs, labor shortages, and supply shortages continued to put additional constraints on our operating business and our construction projects for the nine months ended September 30, 2022. We do not know when, or if, these cost, labor and supply chain issues will materially alleviate and, accordingly, they may continue to impact our existing business and our construction projects.
We believe that as the COVID-19 pandemic evolves, the direct and indirect impacts on global macro-economic conditions, as well as conditions specific to us, are becoming more difficult to isolate or quantify. In addition, these direct and indirect factors can make it difficult to isolate and quantify the portion of our costs that are a direct result of the pandemic versus costs arising from factors that may have been influenced by the pandemic, including supply chain constraints, increased prices and inflationary pressures, labor shortages, and changes in the spending patterns of customers. These factors and their effects on our operations may persist for a longer period, even after the COVID-19 pandemic has subsided.
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 20212022 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
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. |
8
The Company utilizes Level 1 inputs when measuringMethods and assumptions used to estimate the fair value of its 2028 Notes (see Note 5).
The Company utilizes Level 2 inputs when measuring the fair value of its asset purchases and acquisitions (see Note 4).
The Company utilizes Level 3 inputs when measuring the fair value of net assets acquired in business combination transactions, subsequent assessments for impairment, and most financial instruments including but not limitedare affected by the duration of the instruments and other factors used by market participants to theestimate value. The carrying amounts for cash and equivalents, restricted cash, accounts receivable, and accounts payable approximate their estimated fair value because of common stock warrants at issuancethe short durations of the instruments and for recurring changes in the related warrant liability.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 forto fund the completion of the Chamonix construction project.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 May 2022,March 2023, Rising Star sold its available “free play” for $2.1 million. We receivedexpect to receive all of such amount during the third quarter of 2022.by July 2023. Because Indiana has a progressive gaming tax system and Rising Star is one of the smaller casinos in the state, the property has consistently sold its ability to deduct “free play” in computing gaming taxes to operators in higher tax tiers. It sold such “free play” in the second quarter of 2022 for a similar amount.
Other Intangible Assets. In March 2023, the Company paid $50.3 million to the Illinois Gaming Board (“IGB”) for required gaming license fees to operate The Temporary, and upon its opening, American Place. Management believes that,has deemed the gaming license in Illinois as having an indefinite economic life, as such license is eligible for renewal every four years upon payment of September 30, 2022, no significant concentrationsthe applicable fee if all regulatory requirements are met. There may be an additional one-time reconciliation fee, depending on interim gaming revenues, which is calculated three years after commencing operations and can be paid over a six-year period. See Note 6 for details.
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.
Gaming revenueThe transaction price for a casino wager is the difference between gaming wins and losses, not the total amount wagered. TheAs such wagers have similar characteristics, the Company accounts for its gaming transactions on a portfolio basis as such wagers have similar characteristics and it would not be practical to view each wagerby 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 gamingcasino 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 $0.8 million for each of September 30, 2022March 31, 2023 and $0.7 million for December 31, 2021,2022, and these amounts are included in “other accrued liabilities” on the consolidated balance sheets.
9
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 Rising Star Casino Resort, Bronco Billy’s Casino and Hotel, and The Temporary/American Place (the “Sports Agreements”). As part of these long-term Sports Agreements, the Company received one-time market access“market access” fees, totaling $6 million in prior years, 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. In May 2022, the Company received an additional $5 million of non-refundable, one-time market access fees for its executed Illinois Sports Agreement. As with the prior Sports Agreements, such market access fee was capitalized and will be amortized over the initial term of the agreement, beginning with the commencement of operations. The market access fees are not refundable under ordinary circumstances.
Indiana. The Company’s three Sports Agreements commenced operations in December 2019, April 2021 and December 2021. As noted below, oneOne of these Sports Agreements ceased operations in May 2022. Under the Company’s two active Sports Agreements in Indiana, we receive a percentage of revenues (as defined), subject to annual minimums totaling $2.0 million. For its idle skin, the Company continues to evaluate whether to utilize the remaining skin itself or utilize a replacement operator for such skin. There is no certainty that the Company will be able to enter into an agreement with a replacement operator or successfully operate the skin itself.
Colorado. The Company’s three Sports Agreements commenced operations in June 2020, December 2020 and April 2021. As noted below, oneOne of these Sports Agreements ceased operations in May 2022.
Illinois. The In December 2022, the Company signed a Sports Agreement with a new third party for this available skin, which upfront fee was capitalized and is being amortized over the 10-year term of the agreement that contractually commenced in May 2022 for Illinois. Such operations are expected to commence shortly afterMarch 2023, even though the opening of The Temporary,operator is still pending the receipt of customary gamingregulatory approvals. Under the Company’s three active Sports Agreements in Colorado, we receive a percentage of revenues (as defined), subject to annual minimums totaling $3.0 million.
10
Illinois. In May 2022, the Company signed a Sports Agreement for its sole Illinois sports skin and received an upfront fee of $5.0 million, which was capitalized and will be amortized over the eight-year term of the agreement that is expected to commence by August 2023, pending the receipt of customary regulatory approvals. The Company will also receive a percentage of revenues (as defined), subject to a minimum of $5.0 million per year.
In addition to the market access“market access” fees, deferred revenue includes thequarterly and annual prepaymentprepayments of contracted revenue, as required in twothree of the Sports Agreements. As of September 30, 2022, $1.5March 31, 2023, $0.7 million of such deferred revenue has been recognized during the year.
Deferred revenues consisted of the following, as discussed above:
| | | | | | | | | | | | | | | | |
(In thousands) | | | | September 30, | | December 31, | | | | March 31, | | December 31, | ||||
|
| Balance Sheet Location | | 2022 |
| 2021 |
| Balance Sheet Location | | 2023 |
| 2022 | ||||
Deferred revenue, current | | Other accrued liabilities | | $ | 1,215 | | $ | 1,822 | | Other accrued liabilities | | $ | 2,500 | | $ | 1,651 |
Deferred revenue, net of current portion | | Contract liabilities, net of current portion | | | 7,956 | | | 4,714 | | Contract liabilities, net of current portion | | | 8,649 | | | 8,856 |
| | | | $ | 9,171 | | $ | 6,536 | | | | $ | 11,149 | | $ | 10,507 |
On May 15, 2022, one of the Company’s contracted parties for sports wagering ceased operations, which created one available skin in each of Colorado and Indiana. Accordingly, this accelerated the recognition of $1.6 million of deferred revenue, which was recognized through the May 2022 termination date, as opposed to the remaining eight years of the original 10-year term. The Company is currently evaluating whether to utilize these two remaining skins itself or to find replacement operators for such skins. There is no certainty that the Company will be able to enter into agreements with third-parties related to these skins or operate these skins itself on better terms than the Company’s prior agreements.
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 10.
10
Income Taxes. For interim income tax reporting for the three and nine months ended September 30, 2022,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, and warrants, using the treasury stock method.
Leases. The Company determines if a contract is, or contains, a lease at inception or modification of the agreement. A contract is, or contains, a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means that the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
For material leases with terms greater than a year, the Company records right-of-use (“ROU”) assets and lease liabilities on the balance sheet, as measured on a discounted basis. For finance leases, the Company recognizes interest expense associated with the lease liability, andas well as depreciation (or amortization) expense associated with the ROU asset; forasset, 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 single lease component 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.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 depreciatesdepreciates/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 new or start-up operations.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.
Recently Issued Accounting Pronouncements Not Yet Adopted. 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.
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3. LEASES
The Company has no material leases in which it is the lessor. As lessee, the Company has onesome finance lease for a hotelleases and various operating leases for land, casino and office space, equipment, buildings, and signage.buildings. The Company’s remaining lease terms, including extensions, range from one month to approximately 3699 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land leaseleases at Silver Slipper doesand The Temporary/American Place do include contingent rent, as further discussed below.
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 99-year ground lease (the “Ground Lease”) for approximately 32 acres of land (the “City-Owned Parcel”) with the City of Waukegan in Illinois (the “City”). The ground lease commenced concurrently with the opening of The Temporary on February 17, 2023. The City-Owned Parcel and an adjacent 10-acre parcel owned by the Company comprise the location of American Place, including The Temporary. Annual rent under the Ground Lease is the greater of (i) $3.0 million (the “Annual Guaranteed Minimum Rent”), or (ii) 2.5% of gross gaming revenue (as defined in the lease) generated by either the Temporary or American Place.
The Company has the right to purchase the City-Owned Parcel at any time during the term of the Ground Lease for $30 million. If it does so prior to the opening of the permanent American Place facility, then it must continue to pay rent due to the City under the Ground Lease until the permanent casino is open.
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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 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. The landAnnual minimum rent is $0.9 million throughout the lease includes fixed, base monthly payments of $77,500term until 2058, plus contingent rents of 3% of monthly gross gaming revenue (as defined in the lease) in excess of $3.65 million with no scheduled base rent increases through the remaining lease term ending in 2058.per month.
Through October 1, 2027, the Company may buy out the lease for $15.5 million, plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date.
Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. The Bronco Billy’s subsidiary leases certain parking lots and buildings,parcels, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. The Company exercised its third renewal option to extend the lease term through January 2026, with current annual lease payments of $0.4 million. Annual minimum rent will increase to $0.5 million starting in February 2026 with adjustments on each anniversary thereafter, based on the consumer price index. The lease contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property.
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. This buildingIt is currently used as office space for Chamonix’s construction personnel, obviating the need for construction trailers. The lease had an initial three-year term with annual lease payments of $0.2 million. This was subsequently extended to August 13, 2023, with current annual lease payments of $0.3 million. The Company has the right to purchase the building at any time during the extended lease term for $2.8 million.
Grand Lodge Casino Lease through August 2023.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 5)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 monthlyannual rent of $166,667$2.0 million is applicable through the remaining lease term. In February 2023, the lease was amended to extend the current term through December 31, 2024 (with no changes to rent). Accordingly, the Company remeasured this lease’s related ROU asset and liability balances on its balance sheet upon the effective date of the amendment.
Corporate Office Lease through January 2025. The Company leases 4,479 square feet of office space in Las Vegas, Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires in January 2025.
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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 104-guestroom hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel, and approximately 3.01 acres of land on which it resides, at a price based upon the hotel’s original cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At September 30, 2022,March 31, 2023, such potential purchase price was $2.9$2.7 million. Upon expiration of the lease term in October 2027, (i) the landlord has the right to sell the hotel to the Company, and (ii) the Company has the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs.
The components of lease expenses are as follows:
| | | | | | | | | | | | | | |
(In thousands) |
| |
| Three Months Ended |
| Nine Months Ended | ||||||||
| | Classification within | | September 30, | | September 30, | ||||||||
Lease Costs | | Statement of Operations | | 2022 |
| 2021 | | 2022 |
| 2021 | ||||
Operating leases: |
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|
Fixed/base rent |
| Selling, General and Administrative Expenses | | $ | 1,206 | | $ | 1,112 | | $ | 3,549 | | $ | 3,357 |
Short-term payments | | Selling, General and Administrative Expenses | | | 33 | | | 29 | | | 103 | | | 29 |
Variable payments |
| Selling, General and Administrative Expenses | |
| 314 | |
| 385 | |
| 1,069 | |
| 1,254 |
Finance lease: |
| | |
|
| |
| | |
|
| |
|
|
Amortization of leased assets |
| Depreciation and Amortization | |
| 39 | |
| 39 | |
| 118 | |
| 118 |
Interest on lease liabilities |
| Interest Expense, Net | |
| 34 | |
| 38 | |
| 106 | |
| 122 |
Total lease costs | | | | $ | 1,626 | | $ | 1,603 | | $ | 4,945 | | $ | 4,880 |
Leases recorded on the balance sheet consist of the following:
| | | | | | | | |
(In thousands) | | | | | | | | |
| | | | September 30, | | December 31, | ||
Leases |
| Balance Sheet Classification |
| 2022 | | 2021 | ||
Assets |
|
|
| | | | |
|
Operating lease assets |
| Operating Lease Right-of-Use Assets, Net |
| $ | 15,556 | | $ | 15,814 |
Finance lease assets |
| Property and Equipment, Net(1) | |
| 4,605 | |
| 4,722 |
Total lease assets |
|
| | $ | 20,161 | | $ | 20,536 |
| | | | | | | | |
Liabilities |
|
| |
|
| |
|
|
Current |
|
| |
|
| |
|
|
Operating |
| Current Portion of Operating Lease Obligations | | $ | 3,103 | | $ | 3,542 |
Finance |
| Current Portion of Finance Lease Obligation | |
| 530 | |
| 514 |
Noncurrent |
|
| |
| | |
| |
Operating |
| Operating Lease Obligations, Net of Current Portion | |
| 12,962 | |
| 12,903 |
Finance |
| Finance Lease Obligation, Net of Current Portion | |
| 2,384 | |
| 2,783 |
Total lease liabilities |
|
| | $ | 18,979 | | $ | 19,742 |
__________
|
|
13
MaturitiesThe components of lease liabilities as of September 30, 2022expenses are summarized as follows:
| | | | | | |
(In thousands) | | | | | | |
|
| Operating |
| Financing | ||
Years Ending December 31, | | Leases | | Lease(1) | ||
2022 (excluding the nine months ended September 30, 2022) | | $ | 1,262 | | $ | 109 |
2023 | |
| 3,694 | |
| 652 |
2024 | |
| 1,819 | |
| 652 |
2025 | |
| 1,543 | |
| 652 |
2026 | |
| 1,403 | |
| 652 |
Thereafter | |
| 33,019 | |
| 543 |
Total future minimum lease payments | |
| 42,740 | |
| 3,260 |
Less: Amount representing interest | |
| (26,675) | |
| (346) |
Present value of lease liabilities | |
| 16,065 | |
| 2,914 |
Less: Current lease obligations | |
| (3,103) | |
| (530) |
Long-term lease obligations | | $ | 12,962 | | $ | 2,384 |
__________
(1)The Company’s only material finance lease is at Rising Star Casino Resort for a 104-room hotel.
Other information related to lease term and discount rate is as follows:
| | | | | | |
Lease Term and Discount Rate | | September 30, 2022 | | December 31, 2021 | ||
Weighted-average remaining lease term |
|
| | |
| |
Operating leases |
| 23.2 | years | | 21.5 | years |
Finance lease |
| 5.0 | years | | 5.8 | years |
Weighted-average discount rate |
|
| | |
| |
Operating leases |
| 9.70 | % | | 9.32 | % |
Finance lease |
| 4.50 | % | | 4.50 | % |
Supplemental cash flow information related to leases is as follows:
| | | | | | |
(In thousands) |
| Nine Months Ended | ||||
| | September 30, | ||||
Cash paid for amounts included in the measurement of lease liabilities: | | 2022 | | 2021 | ||
Operating cash flows for operating leases | | $ | 3,670 | | $ | 3,652 |
Operating cash flows for finance lease | | $ | 106 | | $ | 122 |
Financing cash flows for finance lease | | $ | 383 | | $ | 367 |
| | | | | | | | |
(In thousands) |
| |
| Three Months Ended | ||||
| | Classification within | | March 31, | ||||
Lease Costs | | Statement of Operations | | 2023 |
| 2022 | ||
Operating leases: |
|
|
| |
| | |
|
Fixed/base rent |
| Selling, General and Administrative Expenses | | $ | 1,792 | | $ | 1,165 |
Short-term payments | | Selling, General and Administrative Expenses | | | 22 | | | 27 |
Variable payments |
| Selling, General and Administrative Expenses | |
| 305 | |
| 384 |
Finance leases: |
| | | | | | | |
Amortization of leased assets |
| Depreciation and Amortization | |
| 353 | |
| 39 |
Interest on lease liabilities |
| Interest Expense, Net | |
| 111 | |
| 37 |
Total lease costs | | | | $ | 2,583 | | $ | 1,652 |
Leases recorded on the balance sheet consist of the following:
| | | | | | | | |
(In thousands) | | | | | | | | |
| | | | March 31, | | December 31, | ||
Leases |
| Balance Sheet Classification |
| 2023 | | 2022 | ||
Assets |
|
|
| | | | |
|
Operating lease assets |
| Operating Lease Right-of-Use Assets, Net |
| $ | 46,323 | | $ | 15,771 |
Finance lease assets |
| Property and Equipment, Net(1) | |
| 4,527 | |
| 4,566 |
Finance lease assets | | Finance Lease Right-of-Use Assets, Net(2) | | | 3,287 | | | 3,808 |
Total lease assets |
|
| | $ | 54,137 | | $ | 24,145 |
| | | | | | | | |
Liabilities |
|
| | | | | | |
Current |
|
| | | | | | |
Operating |
| Current Portion of Operating Lease Obligations | | $ | 3,242 | | $ | 2,485 |
Finance |
| Current Portion of Finance Lease Obligation | |
| 1,572 | |
| 1,581 |
Noncurrent |
|
| | | | | | |
Operating |
| Operating Lease Obligations, Net of Current Portion | |
| 43,242 | |
| 13,418 |
Finance |
| Finance Lease Obligation, Net of Current Portion | |
| 4,171 | |
| 4,727 |
Total lease liabilities |
|
| | $ | 52,227 | | $ | 22,211 |
4. ACQUISITIONS__________
Fountain Square Land Purchase. In connection with the development of its American Place project in Waukegan, Illinois, the Company entered into an agreement in January 2022 to purchase approximately 10 acres of land adjoining the approximately 30-acre casino site to be leased from the City, providing space for additional parking and access to the casino site from a major road. The land was acquired on March 17, 2022 for total consideration of $7.5 million.
(1) | Finance lease assets are recorded net of accumulated amortization of $3.2 million for each of March 31, 2023 and December 31, 2022. |
(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:
5.
| | | | | | |
(In thousands) | | | | | | |
|
| Operating |
| Financing | ||
Years Ending December 31, | | Leases | | Leases | ||
2023 (excluding the three months ended March 31, 2023) | | $ | 5,954 | | $ | 1,468 |
2024 | |
| 7,620 | |
| 1,957 |
2025 | |
| 5,616 | |
| 1,939 |
2026 | |
| 4,758 | |
| 652 |
2027 | |
| 4,410 | |
| 489 |
Thereafter | |
| 314,002 | |
| — |
Total future minimum lease payments | |
| 342,360 | |
| 6,505 |
Less: Amount representing interest | |
| (295,876) | |
| (762) |
Present value of lease liabilities | |
| 46,484 | |
| 5,743 |
Less: Current lease obligations | |
| (3,242) | |
| (1,572) |
Long-term lease obligations | | $ | 43,242 | | $ | 4,171 |
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 |
|
| | |
| |
Operating leases |
| 66.0 | years | | 23.2 | years |
Finance lease |
| 3.5 | years | | 3.7 | years |
Weighted-average discount rate |
| | | | | |
Operating leases |
| 10.90 | % | | 9.73 | % |
Finance leases |
| 7.80 | % | | 7.08 | % |
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 | | $ | 1,763 | | $ | 1,221 |
Operating cash flows for finance leases | | $ | 111 | | $ | 37 |
Financing cash flows for finance leases | | $ | 378 | | $ | 126 |
4. LONG-TERM DEBT
Long-term debt consists of the following:
| | | | | | |
(In thousands) | | September 30, | | December 31, | ||
| | 2022 | | 2021 | ||
Revolving Credit Facility due 2026 | | $ | — | | $ | — |
Senior Secured Notes due 2028(1) | | | 410,000 | | | 310,000 |
Less: Unamortized debt issuance costs, discounts and premiums, net | |
| (8,571) | |
| (8,381) |
| | $ | 401,429 | | $ | 301,619 |
__________
| | | | | | |
(In thousands) | | March 31, | | December 31, | ||
| | 2023 | | 2022 | ||
Revolving Credit Facility due 2026 | | $ | 27,000 | | $ | — |
8.25% Senior Secured Notes due 2028 | | | 450,000 | | | 410,000 |
Less: Unamortized debt issuance costs and discounts/premiums, net | |
| (14,020) | |
| (8,148) |
| | $ | 462,980 | | $ | 401,852 |
15
Senior Secured Notes due 2028. On February 12, 2021, the Company refinanced all $106.8 million of its outstanding Senior Secured Notes due 2024 (the “Prior Notes”) with the issuance of $310issued $310.0 million aggregate principal amount of 8.25% Senior Secured Notes due 2028 (the “2028 Notes”). The net proceeds from the sale of the 2028 Notes were used to redeemrefinance all of the Prior Notes (including a 0.90% prepayment premium)its prior notes and to repurchase all of its outstanding warrants. Additionally, $180 million of bond proceeds were initially placed into a construction reserve account to fund construction of Chamonix.Chamonix, which was later increased to $221 million in January 2022 to reflect an expansion of the project.
On February 7, 2022, the Company closed a private offering of $100for an additional $100.0 million aggregate principal amount of additional 8.25% Senior Secured Notes due 2028, (the “Additional Notes”), which sold at a price of 102.0% of such principal amount. Proceeds from thethis sale of the Additional Notes are beingwere used: (i) to develop, equip and open The Temporary, which the Company intends to operate while it designs and constructs its permanent American Place facility, (ii) to pay the transaction fees and expenses of thesuch offer and sale, of the Additional Notes and (iii) for general corporate purposes. The Additional Notesadditional notes from this sale were issued pursuant to the indenture, dated as of February 12, 2021 (the “Indenture”“Original Indenture”), to which the Company issued the $310$310.0 million of 2028 Notes noted above (collectively, the “Notes”).above. In connection with the issuance of the Additional Notes,additional notes in February 2022, the Company and the subsidiary guarantors party to the Original Indenture also entered into twothree Supplemental Indentures with Wilmington Trust, National Association, as trustee, datedtrustee.
On February 1, 2022 and February 7, 2022, respectively. On March 3, 2022,21, 2023, the Company entered into a third Supplemental Indentureissued an additional $40.0 million of senior secured notes (the “Additional Notes”), thereby increasing the outstanding borrowing under the 2028 Notes to establish a special record date for$450.0 million (collectively, the initial interest payment for“Notes”). Related to the issuance of the Additional Notes.
Notes, the Company further amended the indenture governing the Notes (collectively, the “Amended Indenture”) and amended its revolving credit facility. Proceeds from the offering of Additional Notes, net of related expenses and discounts, were approximately $34 million and were used: (i) to open The Temporary, including the payment of related Illinois gaming license fees in March 2023, and (ii) for general corporate purposes. The Additional Notes are essentially identical to the 2028 Notes, as they are treated as a single series of senior secured debt securities with the 2028 Notes and also as a single class for all purposes under the Amended Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.
The Notes bear interest at a fixed rate of 8.25% per year and mature on February 15, 2028. There is no mandatory debt amortization prior to the maturity date. Interest on the Notes is payable on February 15 and August 15 of each year, with the next interest payment due on February 15, 2023.
year.
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, financial 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 35% of the original principal amount of the Notes with proceeds of certain equity offerings at a redemption price of 108.25%, plus accrued and unpaid interest to the redemption date. In addition, the Company may redeem some or all of the Notes prior to February 15, 2024 at a redemption price of 100% of the principal amount of the Notes, plus accrued and unpaid interest to the redemption date and a “make-whole” premium.
15
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 |
| 104.125 | % |
February 15, 2025 to February 14, 2026 |
| 102.063 | % |
February 15, 2026 and Thereafter | | 100.000 | % |
16
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 $15.0 million to $40.0 million (the “Credit Facility”).million. The amended $40.0 million senior secured revolving credit facility matures on March 31, 2026 and includes a letter of credit sub-facility. The Credit Facilitysenior secured revolving credit facility may be used for working capital and other ongoing general purposes.
UnderOn February 21, 2023, the FirstCompany 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 $25.0 million to $40.0 million (collectively, the “Credit Facility”). Such amendment permitted the issuance of the Additional Notes, as noted above.
The interest rate per annum applicable to loans under the Credit Facility was amended to be,is currently, at the Company’s option, either (i) the Secured Overnight Financing Rate (“SOFR”) plus a margin equal to 3.50% and a Term SOFR adjustment of 0.15%, or (ii) a base rate plus a margin equal to 2.50%. Upon completion of Chamonix (as defined in the agreement), the interest rate per annum applicable to loans under the Credit Facility will be reduced to, at the Company’s option, either (i) SOFR plus a margin equal to 3.00% and a Term SOFR adjustment of 0.15%, or (ii) a base rate plus a margin equal to 2.00%. Terms regarding
In anticipation of paying the annual commitment fee, customary lettergaming license fees necessary to open The Temporary – and prior to the completion of credit fees, and repayment datethe Additional Notes offering – the Company borrowed $36.0 million under the Credit Agreement. As of March 31, 2026,2023, $27.0 million of borrowings remain unchanged from the original Credit Agreement, dated as of March 31, 2021. As of this report date, there were no drawn amountsoutstanding under the Credit Facility or on the outstanding standby letter of credit of $1 million related to the American Place project.Facility.
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 September 30, 2022.March 31, 2023.
Fair Value of Long-Term Debt. The estimated fair value of the Notes was approximately $409.5 million for March 31, 2023 and $360.6 million for December 31, 2022, which values were estimated using quoted market prices (Level 1 inputs). The fair value of the Credit Facility approximates its carrying amount as it is revolving, variable rate debt, and is classified as a Level 2 measurement.
6.
5. INCOME TAXES
The Company’s effective income tax ratesrate for the three and nine months ended September 30,March 31, 2023 and 2022 were (0.8%)was 0.3% and 0.2%102.0%, respectively, compared to effective income tax rates of 2.0% and 5.4% for the corresponding prior-year periods.respectively. The change in the effective income tax ratesrate was primarily due to the Company’s projections for pre-tax book income in 2023, the effects of tax amortization on indefinite livedindefinite-lived intangibles in 2022,2023, valuation allowances, and certain permanent differences between tax and financial reporting purposes. The Company’s income tax expenseprovision or benefit for interim periods has been determined using an estimate of its annual effective tax rate (“AETR”), adjusted for discrete items. The Company notes this differs fromexpects that it may reverse the methodology used in the second quarter of 2022, as the factorstax benefit that existedwas booked, as of June 30, 2022 are no longer applicable.March 31, 2023, in future interim periods, as pre-tax book income in future periods may offset the year-to-date, pre-tax loss.
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 September 30, 2022,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. The valuation allowance against DTAs has no effect on the actual taxes paid or owed by the Company.
In the future, if it is determined that we meet the “more likely than not” threshold of utilizing our deferred tax assets, as required under ASC 740, then we may reverse some or all of our valuation allowance. Such valuation allowance and its potential reversal have no impact on the actual income taxes paid.
1617
7.6. COMMITMENTS AND CONTINGENCIES AND SUBSEQUENT EVENTEVENTS
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.
Options to Lease Land
Option Agreement for Public Trust Tidelands Lease in Mississippi.Mississippi
The Company has been evaluating the potential construction of an additional hotel tower and related amenities at Silver Slipper, a portion of which would extend out over the adjoining Gulf of Mexico. In contemplation for such potential future expansion, the Company paid $5,000 for an option agreement – entered into bya lease agreement in the Company on June 8, 2021 and approved bysecond quarter of 2023 with the GovernorState of Mississippi on July 13, 2021 – for a 30-year lease of approximately a half-acre of tidelands, with aterm extension available for another 30 years, if exercised.years.
The lease commences on June 1, 2023, and initial rent is due in advance for each six-month period of $10,000 (the “Construction Rent”). This initial six-month option could be renewed for three additional six-month periods, with the payment of $5,000 for each extension. In October 2022, the Company subsequently paid $5,000 to exercise its third and final six-month option extension through the end of May 2023.
Upon commencement of the lease, and for the first 18 months or untilConstruction Rent terminates at the beginning of the next six-month period after the opening of commercial operations on the leased premises, whichever occurs sooner, rent would be $10,000 for each six-month period (“Construction Rent”). Construction Rent would terminatebut no later than 18 months after the commencement of the lease. Thereafter, annual rent would beincreases to $105,300, with adjustments based on the consumer price index on each anniversary. Before construction can commence, additional entitlements are necessary, including certain environmental approvals. The Company recently reached an agreement with the U.S. Army Corps of Engineers, facilitating satisfaction of such environmental approvals. There can be no certainty that the tidelands lease option will be exercised or that the contemplated Silver Slipper expansion will be built.
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. Circa Sports currently operates at Circa Resort & Casino in Las Vegas, and offers online sports wagering in several states. 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 $5 million in May 2022.2022, which was recorded as a long-term liability under deferred revenues. The Company will also receive a percentage of revenues (as defined), subject to a minimum of $5 million per year, once Circa Sports launches operations in Illinois. Such launch is anticipated in Springby August 2023, contingent upon receipt of customary regulatory approvals. The term of the agreement is for eight years, followed by two four-year extension opportunities at the option of Circa Sports.
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 75% of the adjusted gross receipts for the most lucrative trailing 12-month period of operations, offset by certain licensing fees already paid by the Company in the first quarter of 2023. If such calculation of the Reconciliation Payment results in a negative amount, the Company is not entitled to reimbursement of any licensing fees previously paid. The Reconciliation Payment, if any, is due in annual installments over a period of six years, beginning in the fourth year of gaming operations.
1718
8.7. EARNINGS (LOSS) PER SHARE
The table below reconciles basic and diluted (loss) earningsloss per share of common stock:
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended | | Nine Months Ended | | Three Months Ended | ||||||||||||
| | September 30, | | September 30, | | March 31, | ||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||||
Numerator: |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Net (loss) income ─ basic | | $ | (3,577) | | $ | 4,619 | | $ | (7,822) | | $ | 6,658 | | $ | (11,415) | | $ | 110 |
Net (loss) income ─ diluted | | $ | (3,577) | | $ | 4,619 | | $ | (7,822) | | $ | 6,658 | | $ | (11,415) | | $ | 110 |
| | | | | | | | | | | | | | | | | | |
Denominator: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Weighted-average common and common share equivalents ─ basic | |
| 34,390 | |
| 34,227 | |
| 34,339 | |
| 31,939 | ||||||
Weighted-average common shares ─ basic | |
| 34,410 | |
| 34,262 | ||||||||||||
Potential dilution from share-based awards | | | 89 | | | 2,409 | | | 60 | | | 2,400 | | | — | | | 2,361 |
Weighted-average common and common share equivalents ─ diluted | |
| 34,479 | |
| 36,636 | |
| 34,399 | |
| 34,339 | |
| 34,410 | |
| 36,623 |
Anti-dilutive share-based awards excluded from the calculation of diluted loss per share | |
| 3,512 | |
| 177 | |
| 2,466 | |
| 177 | ||||||
Anti-dilutive share-based awards excluded from the calculation of | |
| 3,846 | |
| 411 |
9.8. SHARE-BASED COMPENSATION
Performance-Based Shares. TheIn 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 75,796 shares will vest upon the later of (a) such approval by the Compensation Committee or (b) the anniversary date of their grant.
In January 2023, the Company issued a total of 36,84940,541 performance-based shares to three of the Company’s executives duringCEO under the first quarterterms of 2022, of which 5,734 performance-based shares were canceled in April 2022. In the second and third quarters of 2022, an additional 70,834 and 28,986 performance-based shares, respectively, were issued to other Company executives.his employment agreement. The vesting for these performance-based shares is based on the compounded annual growth rate of the Company’s Adjusted EBITDA and Free Cash Flow Per Share, as defined, for the three-year periods ending December 31, 2022,2023, December 31, 2023,2024, and December 31, 2024.2025. For the 20222023 period, one-sixth of such performance-based shares will vest on the anniversary date of the award if the Company’s annual Adjusted EBITDA for 20222023 reflects at least 10% per annum growth since 2019,2020, and one-sixth of such performance-based shares will vest on the anniversary date if the Company’s annual Free Cash Flow Per Share for 20222023 reflects at least 12% per annum growth since 2019.2020. Vesting of the performance-based shares is similar for the 20232024 and 20242025 periods.
On March 14, 2022, as the Company exceeded certain growth metrics in 2021, 23,325 previously-issued performance shares vested, resulting in the issuance of a similar number of shares of stock. Similarly, on May 15, 2022, an additional 6,917 performance shares vested.
Restricted Stock Awards. On May 19, 2022, the Company issued to non-executive members of its Board of Directors, as compensation for their annual service, a total of 51,849 restricted shares under the 2015 Plan, with a one-year vesting period.
As of September 30, 2022,March 31, 2023, the Company had 1,173,0961,069,977 share-based awards authorized by shareholders and available for grant from the Company’s 2015 Equity Incentive Plan.
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 |
| 3,503,235 | | $ | 2.80 |
Granted |
| 62,578 | |
| 7.40 |
Exercised |
| (3,962) | |
| 1.51 |
Canceled/Forfeited |
| — | |
| — |
Expired |
| — | |
| — |
Options outstanding at March 31, 2023 |
| 3,561,851 | | $ | 2.88 |
Options exercisable at March 31, 2023 |
| 2,884,615 | | $ | 1.99 |
1819
The following table summarizes information related to the Company’s common stock options as of September 30, 2022:
| | | | | |
|
| |
| Weighted | |
| | Number | | Average | |
| | of Stock | | Exercise | |
| | Options | | Price | |
Options outstanding at January 1, 2022 |
| 3,221,956 | | $ | 2.19 |
Granted |
| 434,598 | |
| 7.71 |
Exercised |
| (94,749) | |
| 1.76 |
Canceled/Forfeited |
| (50,000) | |
| 8.72 |
Expired |
| — | |
| — |
Options outstanding at September 30, 2022 |
| 3,511,805 | | $ | 2.80 |
Options exercisable at September 30, 2022 |
| 2,825,128 | | $ | 1.87 |
Components of compensation expense are as follows:
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended | | Nine Months Ended | | Three Months Ended | ||||||||||||
| | September 30, | | September 30, | | March 31, | ||||||||||||
Compensation Expense | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | ||||||
Stock options | | $ | 325 | | $ | 209 | | $ | 846 | | $ | 445 | | $ | 330 | | $ | 218 |
Restricted and performance-based shares | |
| 207 | |
| 115 | |
| 516 | |
| 202 | |
| 418 | |
| 125 |
| | $ | 532 | | $ | 324 | | $ | 1,362 | | $ | 647 | | $ | 748 | | $ | 343 |
As of September 30, 2022,March 31, 2023, there was approximately $2.3$2.0 million of unrecognized compensation cost related to unvested stock options previously granted that is expected to be recognized over a weighted-average period of approximately 2.11.8 years. As of such date, there was also $1.3$1.2 million of unrecognized compensation cost related to unvested restricted and performance shares, which is expected to be recognized over a weighted-average period of 1.5 years.
10.9. SEGMENT REPORTING AND DISAGGREGATED REVENUE
The Company manages its reporting segments based on geographic regions within the United States and type of income. Its operatingDuring the first quarter of 2023, the Company changed its reportable segments as of 2022, are: Mississippi, Indiana, Colorado, Nevada,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 statesregions where each of its casino resorts are located as operatingreportable segments, in addition to its contracted sports wagering segment. OperatingReportable 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.
19
The following tables present the Company’s segment information:
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended September 30, 2022 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 13,167 | | $ | 6,986 | | $ | 3,613 | | $ | 5,955 | | $ | — | | $ | 29,721 |
Food and beverage | |
| 5,042 | |
| 1,036 | |
| 497 | |
| 236 | |
| — | |
| 6,811 |
Hotel | |
| 1,292 | |
| 975 | |
| 223 | |
| — | |
| — | |
| 2,490 |
Other operations, including | |
| 480 | |
| 642 | |
| 52 | |
| 99 | |
| 1,098 | |
| 2,371 |
| | $ | 19,981 | | $ | 9,639 | | $ | 4,385 | | $ | 6,290 | | $ | 1,098 | | $ | 41,393 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 4,235 | | $ | 1,343 | | $ | 36 | | $ | 2,280 | | $ | 1,083 | | $ | 8,977 |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (2,386) |
Corporate expenses | | | | | | | | | | | | | | | | |
| (1,219) |
Project development costs | | | | | | | | | | | | | | | | |
| 149 |
Preopening costs | | | | | | | | | | | | | | | | | | (2,594) |
Stock-based compensation | | | | | | | | | | | | | | | | | | (532) |
Operating income | | | | | | | | | | | | | | | | |
| 2,395 |
Other expenses: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (5,838) |
Loss on modification of debt | | | | | | | | | | | | | | | | |
| (105) |
| | | | | | | | | | | | | | | | | | (5,943) |
Loss before income taxes | | | | | | | | | | | | | | | | | | (3,548) |
Income tax provision | | | | | | | | | | | | | | | | |
| 29 |
Net loss | | | | | | | | | | | | | | | | | $ | (3,577) |
20
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended September 30, 2021 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 14,578 | | $ | 7,906 | | $ | 5,288 | | $ | 4,734 | | $ | — | | $ | 32,506 |
Food and beverage | |
| 5,156 | |
| 891 | |
| 740 | |
| 305 | |
| — | |
| 7,092 |
Hotel | |
| 1,248 | |
| 990 | |
| 231 | |
| — | |
| — | |
| 2,469 |
Other operations, | |
| 556 | |
| 2,799 | |
| 81 | |
| 93 | |
| 1,642 | |
| 5,171 |
| | $ | 21,538 | | $ | 12,586 | | $ | 6,340 | | $ | 5,132 | | $ | 1,642 | | $ | 47,238 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 6,485 | | $ | 3,816 | | $ | 1,543 | | $ | 1,537 | | $ | 1,645 | | $ | 15,026 |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (1,819) |
Corporate expenses | | | | | | | | | | | | | | | | | | (1,427) |
Project development costs | | | | | | | | | | | | | | | | |
| (318) |
Preopening costs | | | | | | | | | | | | | | | | | | (17) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (2) |
Stock-based compensation | | | | | | | | | | | | | | | | |
| (324) |
Operating income | | | | | | | | | | | | | | | | |
| 11,119 |
Other expense: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (6,405) |
Income before income taxes | | | | | | | | | | | | | | | | | | 4,714 |
Income tax provision | | | | | | | | | | | | | | | | |
| 95 |
Net income | | | | | | | | | | | | | | | | | $ | 4,619 |
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 | | $ | 28,852 | | $ | 7,135 | | $ | — | | $ | 35,987 |
Food and beverage | |
| 6,897 | |
| 763 | |
| — | |
| 7,660 |
Hotel | |
| 2,040 | |
| 104 | |
| — | |
| 2,144 |
Other operations, including | |
| 3,013 | |
| 122 | |
| 1,180 | |
| 4,315 |
| | $ | 40,802 | | $ | 8,124 | | $ | 1,180 | | $ | 50,106 |
| | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 10,687 | | $ | 56 | | $ | 1,161 | | $ | 11,904 |
Other operating costs and expenses: | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | |
| (5,859) |
Corporate expenses | | | | | | | | | | |
| (1,779) |
Project development costs | | | | | | | | | | |
| (7) |
Preopening costs | | | | | | | | | | | | (10,497) |
Stock-based compensation | | | | | | | | | | | | (748) |
Operating loss | | | | | | | | | | |
| (6,986) |
Other (expense) income: | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | |
| (4,819) |
Gain on insurance settlement | | | | | | | | | | | | 355 |
| | | | | | | | | | | | (4,464) |
Loss before income taxes | | | | | | | | | | | | (11,450) |
Income tax benefit | | | | | | | | | | |
| (35) |
Net loss | | | | | | | | | | | $ | (11,415) |
21
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Nine Months Ended September 30, 2022 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 41,930 | | $ | 20,817 | | $ | 10,736 | | $ | 14,810 | | $ | — | | $ | 88,293 |
Food and beverage | |
| 15,233 | |
| 2,893 | |
| 1,345 | |
| 784 | |
| — | |
| 20,255 |
Hotel | |
| 3,802 | |
| 2,771 | |
| 503 | |
| — | |
| — | |
| 7,076 |
Other operations, | |
| 1,467 | |
| 3,588 | |
| 148 | |
| 274 | |
| 6,098 | |
| 11,575 |
| | $ | 62,432 | | $ | 30,069 | | $ | 12,732 | | $ | 15,868 | | $ | 6,098 | | $ | 127,199 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 15,442 | | $ | 6,374 | | $ | (49) | | $ | 4,557 | | $ | 6,047 | | $ | 32,371 |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (6,012) |
Corporate expenses | | | | | | | | | | | | | | | | | | (4,130) |
Project development costs, net | | | | | | | | | | | | | | | | |
| (33) |
Preopening costs | | | | | | | | | | | | | | | | | | (4,914) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (3) |
Stock-based compensation | | | | | | | | | | | | | | | | |
| (1,362) |
Operating income | | | | | | | | | | | | | | | | |
| 15,917 |
Other expenses: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (19,225) |
Loss on modification of debt | | | | | | | | | | | | | | | | |
| (4,530) |
| | | | | | | | | | | | | | | | | | (23,755) |
Loss before income taxes | | | | | | | | | | | | | | | | | | (7,838) |
Income tax benefit | | | | | | | | | | | | | | | | |
| (16) |
Net loss | | | | | | | | | | | | | | | | | $ | (7,822) |
| | | | | | | | | | | | |
(In thousands) | | Three Months Ended March 31, 2022 | ||||||||||
| | | | | | Contracted | | | ||||
| | | | | | Sports | | | ||||
| | Midwest & South | | West | | Wagering | | Total | ||||
Revenues | | | | | | | | | | | | |
Casino | | $ | 21,399 | | $ | 7,685 | | $ | — | | $ | 29,084 |
Food and beverage | |
| 5,812 | |
| 699 | |
| — | |
| 6,511 |
Hotel | |
| 2,044 | |
| 135 | |
| — | |
| 2,179 |
Other operations, | |
| 694 | |
| 125 | |
| 2,830 | |
| 3,649 |
| | $ | 29,949 | | $ | 8,644 | | $ | 2,830 | | $ | 41,423 |
| | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 7,088 | | $ | 509 | | $ | 2,767 | | $ | 10,364 |
Other operating costs and expenses: | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | |
| (1,792) |
Corporate expenses | | | | | | | | | | | | (1,967) |
Project development costs | | | | | | | | | | |
| (165) |
Preopening costs | | | | | | | | | | | | (786) |
Loss on disposal of assets | | | | | | | | | | | | (8) |
Stock-based compensation | | | | | | | | | | |
| (343) |
Operating income | | | | | | | | | | |
| 5,303 |
Other expenses: | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | |
| (6,399) |
Loss on modification of debt | | | | | | | | | | | | (4,406) |
Loss before income taxes | | | | | | | | | | | | (5,502) |
Income tax benefit | | | | | | | | | | |
| (5,612) |
Net income | | | | | | | | | | | $ | 110 |
| | | | | | |
(In thousands) | | March 31, | | December 31, | ||
|
| 2023 |
| 2022 | ||
Total Assets | | | | | | |
Midwest & South | | $ | 300,213 | | $ | 194,033 |
West | |
| 347,917 | |
| 351,069 |
Contracted Sports Wagering | | | 1,408 | | | 1,658 |
Corporate and Other | |
| 24,959 | |
| 48,569 |
| | $ | 674,497 | | $ | 595,329 |
22
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Nine Months Ended September 30, 2021 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 47,489 | | $ | 22,507 | | $ | 16,127 | | $ | 13,094 | | $ | — | | $ | 99,217 |
Food and beverage | |
| 15,411 | |
| 2,577 | |
| 1,777 | |
| 868 | |
| — | |
| 20,633 |
Hotel | |
| 3,687 | |
| 3,040 | |
| 463 | |
| — | |
| — | |
| 7,190 |
Other operations, | |
| 1,546 | |
| 3,629 | |
| 259 | |
| 254 | |
| 4,160 | |
| 9,848 |
| | $ | 68,133 | | $ | 31,753 | | $ | 18,626 | | $ | 14,216 | | $ | 4,160 | | $ | 136,888 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 23,097 | | $ | 7,615 | | $ | 5,092 | | $ | 4,173 | | $ | 4,122 | | $ | 44,099 |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | | | (5,448) |
Corporate expenses | | | | | | | | | | | | | | | | | | (4,803) |
Project development costs | | | | | | | | | | | | | | | | |
| (491) |
Preopening costs | | | | | | | | | | | | | | | | | | (17) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (674) |
Stock-based compensation | | | | | | | | | | | | | | | | |
| (647) |
Operating income | | | | | | | | | | | | | | | | |
| 32,019 |
Other expenses: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (17,531) |
Loss on extinguishment of debt | | | | | | | | | | | | | | | | |
| (6,104) |
Adjustment to fair value of warrants | | | | | | | | | | | | | | | | | | (1,347) |
| | | | | | | | | | | | | | | | | | (24,982) |
Income before income taxes | | | | | | | | | | | | | | | | | | 7,037 |
Income tax provision | | | | | | | | | | | | | | | | |
| 379 |
Net income | | | | | | | | | | | | | | | | | $ | 6,658 |
| | | | | | |
(In thousands) | | September 30, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Total Assets | | | | | | |
Mississippi | | $ | 83,529 | | $ | 85,838 |
Indiana | |
| 34,017 | |
| 34,857 |
Colorado | |
| 322,261 | |
| 258,436 |
Nevada | |
| 11,701 | |
| 13,091 |
Contracted Sports Wagering | | | 1,158 | | | 2,168 |
Corporate and Other(1) | |
| 122,085 | |
| 79,452 |
| | $ | 574,751 | | $ | 473,842 |
__________
(1)Includes $44.8 million related to American Place in 2022, which is expected to open within the next three months.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking“Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes for the fiscal year ended December 31, 2021,2022, which were included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 15, 2022.16, 2023. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. Full House Resorts, Inc., together with its subsidiaries, may be referred to as “Full House,” the “Company,” “we,” “our” or “us,” except where stated or the context otherwise indicates.
Executive Overview
Our primary business is the ownership and/or operation of casino and related hospitality and entertainment facilities, which includes offering casino gambling, hotel accommodations, dining, golf, RV camping, sports betting, entertainment, and retail outlets, among other amenities. We currently operate fivesix casinos: fourfive on real estate that we own or lease and one located within a hotel owned by a third party. We are currently constructing two additional properties:Construction continues for a seventh property, Chamonix Casino Hotel (“Chamonix”), adjacent to our existing Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado; andColorado. We are also designing our permanent American Place casino destination, which will be built adjacent to a temporary facility that we opened in February 2023 named The Temporary by American Place. We intend to operate The Temporary until the opening of the permanent American Place (“The Temporary”) in Waukegan, Illinois. We alsofacility. Additionally, we benefit from seven permitted sports wagering “skins”: – three in Colorado, three in Indiana, and one in Illinois that we expect to receive shortly after the opening of The Temporary, pending customary regulatory approvals. As of September 30, 2022, five of our seven online skins are contracted with otherIllinois. Other companies and four of which are currently in operation. These contracts allow the counterparties to operate or will operate these online sports wagering siteswebsites under their own brands, paying us a percentage of revenues, as defined, and subject to annual minimum amounts.
In December 2021, we were selected by the Illinois Gaming Board (“IGB”) to develop our American Place project in Waukegan, Illinois, a northern suburb of Chicago. While the permanent American Place facility is under construction, we intend to operate a temporary casino facility named The Temporary. In May 2022, we commenced construction of The Temporary, which is expected to open within the next three months, subject to customary regulatory approvals.
The following table identifies our segments, along with properties and their locations:
| | |
Segments and Properties | | Locations |
| | |
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”) | | Illinois |
We manage our casinos based primarily on geographic regions within the United States and type of income. During the first quarter of 2023, we updated our reportable segments to Midwest & South, West, and Contracted Sports Wagering, reflecting a realignment within the Company as a result of our continued growth.
2423
Our financial results are dependent upon the number of patrons that we attract to our properties and the amounts those guests spend per visit. While we provide credit at some of our casinos where permitted by local gaming regulations, most of our customers wager with cash or pay for non-gaming services with cash or credit cards. Our gaming revenues are primarily derived from slot machines, but also include table games, keno, and sports betting. In addition, we receive a significant amount of revenue from our hotels and our food and beverage outlets. We also derive revenues from our golf course at Rising Star, our recreational vehicle parks (“RV parks”) as owned at Rising Star and managed at Silver Slipper, our ferry service at Rising Star, and retail outlets and entertainment. We often provide hotel rooms, food and beverages, entertainment, ferry usage, and golf privileges to casino customers on a complimentary basis; the value of such services is included as revenue in those categories, offset by contra-revenue in the casino revenue category. As a result, the casino revenues in our financial statements reflect patron gaming wins and losses, reduced by the retail value of complimentary services, the value of free play provided to customers, the value of points earned by casino customers that can be redeemed for services or free play, and adjustments for certain progressive jackpots offered by the Company.
We may experience significant fluctuations in our quarterly operating results due to seasonality, variations in gaming hold percentages, and other factors. Consequently, our operating results for any quarter, or yearespecially contrasted with different seasonal quarters, are not necessarily comparable andcomparable. Results for any particular quarter or year may not be indicative of future periods’ results.
Our market environment is highly competitive and capital-intensive. Nevertheless, there are significant restrictions and barriers to entry vis-à-vis opening new casinos in most of the markets in which we operate. We rely on the ability of our properties to generate operating cash flow to pay interest, repay debt, and fund maintenance and certain growth-related capital expenditures. We continuously focus on improving the operating margins of our existing properties through a combination of revenue growth and expense management. We also assess growth and development opportunities, which include capital investments at our existing properties, the development of new properties, and the acquisition of existing properties.
Recent Developments
COVID-19 Pandemic Update.The Temporary/American Place. In February 2023, we opened The COVID-19 pandemic continuesTemporary by American Place, a temporary facility in Waukegan, Illinois, that we will operate while we design and construct the larger, permanent American Place facility. When all amenities are open later this year, The Temporary will include approximately 1,000 slot machines, 50 table games, a fine-dining restaurant, two additional restaurants, a sportsbook and a center bar. The permanent American Place facility is expected to evolve. Governmental authorities continue to update their precautionary measuresinclude a world-class casino with a state-of-the-art sportsbook; a premium boutique hotel comprised of 20 luxurious villas; a 1,500-seat live entertainment venue; and promote vaccination programs to manage the spreadvarious food and beverage outlets. To accommodate operations for The Temporary, as well as construction of the virus as different variantspermanent American Place facility, we entered into a 99-year ground lease with the City of the virus surface and subside. We have generally benefited from the relaxation of pandemic-related business restrictions since 2021.Waukegan. For more information, see Note 3.
However,Sports Wagering in Colorado. In December 2022, we entered into a contract with a third party to operate mobile sports wagering under our permitted third skin in Colorado. The 10-year agreement began its contractual term in March 2023. Such agreement replaces an unrelated operator that ceased operations in May 2022. In total, we have three sports wagering agreements in Colorado, for which we receive a percentage of revenues (as defined), subject to annual minimums totaling $3 million. For more information, see Note 2.
Sports Wagering in Illinois. In May 2022, we signed a retail and mobile sports wagering contract for Illinois. Such operations are expected to commence by August 2023, pending the COVID-19 pandemicreceipt of customary regulatory approvals. Upon signing the agreement, we received an upfront fee of $5 million, which was capitalized and certain precautionary and stimulus measures, as well as other factors, have created economic uncertainty both inwill be amortized over the United States and globally, as well as significant volatility in, and disruption to, financial markets, labor markets and supply chains. Global supply chain disruptions and other world events have resulted in shipping delays, increased shipping costs, supply shortages, and inflationary pressures, including increases in prices for fuel, food, building materials, and other items. These increased costs, labor shortages, and supply shortages continued to put additional constraints on our operating business and our construction projects for the nine months ended September 30, 2022. We do not know when, or if, these cost, labor, and supply chain issues will materially alleviate and, accordingly, they may continue to impact our existing business and our construction projects.
At the same time, government stimulus checks and infrastructure packages can positively affect our businesses. The timing and scale of such packages, however, is inconsistent amongst periods and such government programs are uncertain to continue into the future at the same levels that they have in the past, if at all.
We believe that as the COVID-19 pandemic evolves, the direct and indirect impacts on global macro-economic conditions, as well as conditions specific to us, are becoming more difficult to isolate or quantify. In addition, these direct and indirect factors can make it difficult to isolate and quantify the portion of our costs that are a direct resulteight-year term of the pandemic versus costs arising from factors that may have been influenced by the pandemic, including supply chain constraints, inflationary pressures, labor shortages, and changes in the spending patternagreement upon commencement of customers. These factors and their effects on our operations may persist foroperations. We will receive a longer period, even after the COVID-19 pandemic has subsided.
percentage of revenues (as defined), subject to an annual minimum of $5 million. For more information, see Note 6.
2524
Debt Financing.On In February 7, 2022,2023, we closedissued an additional $40 million of senior secured notes (the “Additional Notes”) and further amended the indenture governing the 2028 Notes (collectively, the “Amended Indenture”). The Additional Notes are treated as a private offeringsingle series of $100senior secured debt securities with the existing $410 million aggregate principal amount of additional 8.25% Senior Secured Notes due 2028 (the “Additional“2028 Notes”), which sold at and as a price of 102.0% of such principal amount.single class for all purposes under the Amended Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. Proceeds from the saleoffering of theour Additional Notes, are beingnet of related expenses and discounts, were approximately $34 million and were used: (i) to develop, equip and open The Temporary, which we intend to operate while we designincluding the payment of related Illinois gaming license fees in March 2023, and construct the permanent American Place facility, (ii) to pay the transaction fees and expenses of the offer and sale of the Additional Notes and (iii) for general corporate purposes.
Also in February 2022,2023, we amendedentered into a Second Amendment to our senior secured revolving credit facility agreement to,Credit Agreement with Capital One (the “Credit Facility”), which, among other things, increase its size from $15.0 million to $40.0 million. Asincreased the amount of this report date, there were no drawn amountsadditional indebtedness permitted under the Credit Facility, or onpermitting the outstanding standby letter of credit of $1 million related to the American Place project.
Sports Wagering in Illinois. In May 2022, we 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. Circa Sports currently operates at Circa Resort & Casino in Las Vegas, and offers online sports wagering in several states. In addition to the on-site sportsbook, Circa Sports will utilize our expected mobile sports skin in Illinois to conduct Internet sports wagering throughout the state upon the openingissuance of the Temporary (anticipated in Spring 2023), subject to customary regulatory approvals. In exchange for such rights, we received a non-refundable market access fee of $5 million in May 2022 and will also receive a percentage of revenues (as defined) totaling at least $5 million, on an annualized basis, once Circa Sports commences operations in Illinois. The term of the agreement is for eight years, followed by two four-year extension opportunities at the option of Circa Sports.
Additional Notes. For more information, see Note 4.
Key Performance Indicators
We use several key performance indicators to evaluate the operations of our properties. These key operating measures are presented as supplemental disclosures because management uses these measures to better understand period-over-period fluctuations in our casino and hotel operating revenues. These key performance indicators include the following and are disclosed in our discussions, where applicable, for certain jurisdictions on segment performance:
Gaming revenue indicators:
Slot coin-in is the gross dollar amount wagered in slot machines and table game drop is the total amount of cash or credit exchanged into chips at table games for use by our customers. Slot coin-in and table game drop are indicators of volume, and are monitored on a consolidated basis in relation to slot and table game win. Such metrics can be influenced by marketing activity and since reopening our properties, haveare not necessarily been indicative of profitability trends.
Slot win is the difference between customer wagers and customer winnings on slot machines. Table game hold is the difference between the amount of money or markers exchanged into chips and customer winnings paid. Slot win and table game hold percentages represent the relationship between slot win and coin-in and table game win and drop. Both the win/holdslot win and win/table game hold percentages are monitored on a consolidated basis in our evaluation of Company performance.
Room revenue indicators:
Hotel occupancy rate is an indicator of the utilization of our available rooms. Complimentary room sales, or the retail value of accommodations gratuitously furnished to customers, are included in the calculation of the hotel occupancy rate.
Adjusted EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA Margin:
Management uses Adjusted EBITDA as a measure of our performance. For a description of Adjusted EBITDA, see “Non-GAAP Financial Measure.” We utilize Adjusted Segment EBITDA, a financial measure in accordance with generally accepted accounting principles in the United States of America (“GAAP”), as the measure of segment profitability in assessing performance and allocating resources at the reportable segment level. For information regarding our operating segments, see Note 10 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report.9. In addition, we use Adjusted Segment EBITDA Margin, which is calculated by dividing Adjusted Segment EBITDA by the segment’s total revenues.
Same-store Adjusted Segment EBITDA is Adjusted Segment EBITDA further adjusted to exclude the Adjusted Property EBITDA of properties that have not been in operation for a full year. Adjusted Property 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 property.
2625
Results of Operations
Consolidated operating results
The following tables summarize our consolidated operating results for the threethree-month periods ended March 31, 2023 and nine months ended September 30, 2022 and 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | ||
| Three Months Ended | | | | | Nine Months Ended | | | | | Three Months Ended | | | | ||||||||||||
(In thousands) | September 30, | | Increase / | | September 30, | | Increase / | | March 31, | | Increase / | |||||||||||||||
| 2022 |
| 2021 |
| (Decrease) |
| 2022 |
| 2021 |
| (Decrease) |
| 2023 |
| 2022 |
| (Decrease) | |||||||||
Revenues | $ | 41,393 | | $ | 47,238 |
| (12.4) | % | | $ | 127,199 | | $ | 136,888 |
| (7.1) | % | | $ | 50,106 | | $ | 41,423 |
| 21.0 | % |
Operating expenses |
| 38,998 | |
| 36,119 |
| 8.0 | % | |
| 111,282 | |
| 104,869 |
| 6.1 | % | |
| 57,092 | |
| 36,120 |
| 58.1 | % |
Operating income |
| 2,395 | |
| 11,119 |
| (78.5) | % | |
| 15,917 | |
| 32,019 |
| (50.3) | % | |||||||||
Operating (loss) income | |
| (6,986) | |
| 5,303 |
| (231.7) | % | |||||||||||||||||
Interest and other non-operating expenses, net |
| 5,943 | |
| 6,405 |
| (7.2) | % | |
| 23,755 | |
| 24,982 |
| (4.9) | % | |
| 4,464 | |
| 10,805 |
| (58.7) | % |
Income tax provision (benefit) |
| 29 | |
| 95 |
| (69.5) | % | |
| (16) | |
| 379 |
| (104.2) | % | |||||||||
Income tax benefit | |
| (35) | |
| (5,612) |
| 99.4 | % | |||||||||||||||||
Net (loss) income | $ | (3,577) | | $ | 4,619 |
| (177.4) | % | | $ | (7,822) | | $ | 6,658 |
| (217.5) | % | | $ | (11,415) | | $ | 110 |
| (10,477.3) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | Nine Months Ended | | | | | Three Months Ended | | | | ||||||||||||
(In thousands) | | September 30, | | Increase / | | September 30, | | Increase / | | March 31, | | Increase / | |||||||||||||||
|
| 2022 |
| 2021 |
| (Decrease) |
| 2022 |
| 2021 |
| (Decrease) |
| 2023 |
| 2022 |
| (Decrease) | |||||||||
Casino revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Slots | | $ | 25,788 | | $ | 28,627 |
| (9.9) | % | | $ | 77,151 | | $ | 86,243 |
| (10.5) | % | | $ | 31,528 | | $ | 25,527 |
| 23.5 | % |
Table games | |
| 3,712 | |
| 3,336 |
| 11.3 | % | |
| 10,524 | |
| 10,717 |
| (1.8) | % | |
| 4,351 | |
| 3,275 |
| 32.9 | % |
Other | |
| 221 | |
| 543 |
| (59.3) | % | |
| 618 | |
| 2,257 |
| (72.6) | % | |
| 108 | |
| 282 |
| (61.7) | % |
| |
| 29,721 | |
| 32,506 |
| (8.6) | % | |
| 88,293 | |
| 99,217 |
| (11.0) | % | |
| 35,987 | |
| 29,084 |
| 23.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-casino revenues, net | |
|
| |
|
|
|
| | |
|
| |
|
|
|
| | | | | | | | | | |
Food and beverage | |
| 6,811 | |
| 7,092 |
| (4.0) | % | |
| 20,255 | |
| 20,633 |
| (1.8) | % | |
| 7,660 | |
| 6,511 |
| 17.6 | % |
Hotel | |
| 2,490 | |
| 2,469 |
| 0.9 | % | |
| 7,076 | |
| 7,190 |
| (1.6) | % | |
| 2,144 | |
| 2,179 |
| (1.6) | % |
Other | |
| 2,371 | |
| 5,171 |
| (54.1) | % | |
| 11,575 | |
| 9,848 |
| 17.5 | % | |
| 4,315 | |
| 3,649 |
| 18.3 | % |
| |
| 11,672 | |
| 14,732 |
| (20.8) | % | |
| 38,906 | |
| 37,671 |
| 3.3 | % | |
| 14,119 | |
| 12,339 |
| 14.4 | % |
Total revenues | | $ | 41,393 | | $ | 47,238 |
| (12.4) | % | | $ | 127,199 | | $ | 136,888 |
| (7.1) | % | | $ | 50,106 | | $ | 41,423 |
| 21.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | |
| | Nine Months Ended | | |
| Three Months Ended | | |
| ||||||||||||||||||
| September 30, | | Increase / | | September 30, | | Increase / | March 31, | | | |||||||||||||||||||||
(In thousands) | 2022 | | 2021 | | (Decrease) |
| 2022 | | 2021(3) | | (Decrease) | 2023 | | 2022 | | Increase | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Slot coin-in | $ | 485,970 | | | $ | 505,673 | | | (3.9) | % | | $ | 1,418,874 | | | $ | 1,470,067 | | | (3.5) | % | $ | 540,228 | | | $ | 462,173 | | | 16.9 | % |
Slot win(1) | $ | 35,542 | | | $ | 37,770 | | | (5.9) | % | | $ | 105,018 | | | $ | 111,633 | | | (5.9) | % | $ | 41,165 | | | $ | 34,234 | | | 20.2 | % |
Slot hold percentage(2) | | 7.3 | % | | | 7.5 | % | | (0.2) | pts | | | 7.4 | % | | | 7.6 | % | | (0.2) | pts | | 7.6 | % | | | 7.4 | % | | 0.2 | pts |
Table game drop | $ | 21,657 | | | $ | 21,422 | | | 1.1 | % | | $ | 55,746 | | | $ | 58,512 | | | (4.7) | % | $ | 25,955 | | | $ | 19,817 | | | 31.0 | % |
Table game win(1) | $ | 3,791 | | | $ | 3,397 | | | 11.6 | % | | $ | 10,668 | | | $ | 10,798 | | | (1.2) | % | $ | 4,417 | | | $ | 3,303 | | | 33.7 | % |
Table game hold percentage(2) | | 17.5 | % | | | 15.9 | % | | 1.6 | pts | | | 19.1 | % | | | 18.5 | % | | 0.6 | pts | | 17.0 | % | | | 16.7 | % | | 0.3 | pts |
__________
(1) | Does not reflect reductions in casino revenues from “discretionary comps” (see Note 2 |
(2) | The three-year averages for slot hold percentage and table game hold percentage were 7.5% and 18.1%, respectively. As a significant portion of our results in the recent and prospective quarters reflect a new property, and the win percentages at that new property may be different from the other casinos in our portfolio, consolidated win percentages in the future may differ from those in the past. |
2726
The following discussion is based on our consolidated financial statements for the threethree-month periods ended March 31, 2023 and nine months ended September 30, 2022 and 2021.2022.
Revenues. Consolidated total revenues increased by 21.0% (or $8.7 million), reflecting the February 2023 opening of The Temporary, which contributed approximately $10.4 million. This helped to offset a decline in Contracted Sports Wagering of $1.7 million, as the prior-year period included an acceleration of deferred revenue for two agreements that ceased operations in May 2022 (see Note 2). Excluding results from The Temporary, same-store consolidated total revenues decreased by $5.8 million and $9.7 million for the respective three- and nine-month periods ended September 30, 2022, primarily4.2% (or $1.7 million) due to the absence of government stimulus programs of the same scale as in the prior-year periods; the competitive launch of online sports wagering in nearby Louisiana, which adversely affected our in-house sportsbook in Mississippi; and construction disruptions at Bronco Billy’s to advance the completion of our Chamonix project. Additionally, our revenues were impacted by factors that are inherently hard to quantify, as discussed in the “Recent Developments – COVID-19 Pandemic Update” section above. These include inflationary pressures, which could affect the spending pattern of customers, as well as labor shortages for us to meet the demands of potential customers. The decline in revenue was offset, in part, by “Other Non-casino Revenues” that included $6.1 million of revenue related to our Contracted Sports Wagering segment for the nine months ended September 30, 2022, versus $4.2 million in the prior-year period.Wagering. For more information, see “Supplemental Information – Same-store Operating Results.”
Operating Expenses. Consolidated operating expenses increased by $2.9 million and $6.4 million for the respective three and nine months ended September 30, 2022,58.1% (or $21.0 million), primarily due to preopening costs forthe commencement of operations at The Temporary, (expected to open within the next three months) and for Chamonix (expected to open in mid-2023), as well as higher insurance, food and beveragewhich contributed $20.2 million of such increase, including $9.3 million of preopening costs. To a lesser extent, increases in operating expenses during 2022 were also attributed to additional professional fees and other expenses related to our growth.
See further information within our reportable segments described below.
Interest and Other Non-Operating Expenses.
Interest Expense
Interest expense, net, consists of the following:
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended | | Nine Months Ended | | Three Months Ended | ||||||||||||
| | September 30, | | September 30, | | March 31, | ||||||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 | ||||||
Interest expense (excluding bond fee amortization and premium) | | $ | 8,682 | | $ | 6,557 | | $ | 24,733 | | $ | 17,557 | ||||||
Amortization of debt issuance costs, discounts and premiums | |
| 430 | |
| 357 | |
| 1,227 | |
| 991 | ||||||
Interest expense (excluding bond fee amortization and discounts/premiums) | | $ | 9,020 | | $ | 7,339 | ||||||||||||
Amortization of debt issuance costs and discounts/premiums | |
| 547 | |
| 438 | ||||||||||||
Capitalized interest | |
| (3,039) | |
| (509) | |
| (6,500) | |
| (1,017) | |
| (3,472) | |
| (1,378) |
Interest income and other | | | (235) | | | — | | | (235) | | | — | | | (1,276) | | | — |
| | $ | 5,838 | | $ | 6,405 | | $ | 19,225 | | $ | 17,531 | | $ | 4,819 | | $ | 6,399 |
The increasesnet decrease in interest expense for the three- and nine-month periods werethree months ended March 31, 2023 was primarily due to the February 2022 issuance of the Additional Notes to fund construction of The Temporary, which were offset by increasesan increase in capitalized interest related to construction of The Temporary and Chamonix, projects.as well as income earned from our cash balances.
Other Non-Operating Expenses, Net
For the respective three- and nine-month periodsthree-month period ended September 30, 2022,March 31, 2023, we had approximately $0.1 million and $4.5$0.4 million of other non-operating expenses, primarilyincome, consisting of insurance settlement proceeds from hurricane damage at Silver Slipper in 2020. The corresponding prior-year period had $4.4 million of other non-operating expense, consisting of debt modification costs related to our Additional Notesnotes offering in February 2022. The corresponding prior-year periods had no other non-operating expense for the three-month period and $7.5 million of other non-operating expense for the nine-month period, including $6.1 million for the extinguishment of our Prior Notes and $1.3 million for the settlement of our former warrants.
28
Income Tax Expense. We recognized an income tax provision of $29,000 and an income tax benefit of $16,000$35,000 and $5.6 million for the respective three and nine months ended September 30,March 31, 2023 and 2022, which resulted in effective income tax rates of (0.8%)0.3% and 0.2%, respectively. For the three and nine months ended September 30, 2021, we recognized respective income tax provisions of $95,000 and $0.4 million, which resulted in effective income tax rates of 2.0% and 5.4%102.0%, respectively. The changeschange in the effective income tax rates wererate was primarily due to the effects of tax amortization on indefinite livedindefinite-lived intangibles in 2022, valuation allowances, and2023, as well as certain permanent differences between tax and financial reporting purposes.
We do not expect to pay any federal income taxes or receive any federal tax refunds related to our 20222023 results. As we have incurred significant losses in prior periods, we anticipate any current-year taxable income will be offset by tax loss carryforwards from prior years. We continue to evaluate the ability to realize our deferred tax assets and need for a valuation allowance on a quarterly basis. The valuation allowance, and the potential reversal of such allowance, have no bearing on the taxes actually paid by the Company.
27
Operating Results – Reportable Segments
We manage our casinos based primarily on geographic regions within the United States and type of income. For more information, please refer to our earlier discussion within “Executive Overview” above.
The following table presents detail by segment of our consolidated revenues and Adjusted EBITDA; see “Non-GAAP Financial Measure” for additional information. Additionally, management uses Adjusted Segment EBITDA as the measure of segment profitability in accordance with GAAP.
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended | | |
| | Nine Months Ended | | | | ||||||||
| | September 30, | | Increase / | | September 30, | | Increase / | ||||||||||
|
| 2022 |
| 2021 |
| (Decrease) |
| 2022 |
| 2021 |
| (Decrease) | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Mississippi |
| $ | 19,981 | | $ | 21,538 |
| (7.2) | % | | $ | 62,432 | | $ | 68,133 |
| (8.4) | % |
Indiana |
|
| 9,639 | |
| 12,586 |
| (23.4) | % | |
| 30,069 | |
| 31,753 |
| (5.3) | % |
Colorado |
|
| 4,385 | |
| 6,340 |
| (30.8) | % | |
| 12,732 | |
| 18,626 |
| (31.6) | % |
Nevada |
|
| 6,290 | |
| 5,132 |
| 22.6 | % | |
| 15,868 | |
| 14,216 |
| 11.6 | % |
Contracted Sports Wagering | | | 1,098 | | | 1,642 | | (33.1) | % | | | 6,098 | | | 4,160 | | 46.6 | % |
|
| $ | 41,393 | | $ | 47,238 |
| (12.4) | % | | $ | 127,199 | | $ | 136,888 |
| (7.1) | % |
Adjusted Segment EBITDA and Adjusted EBITDA | | | | | | | | | | | | | | | | | | |
Mississippi |
| $ | 4,235 | | $ | 6,485 |
| (34.7) | % | | $ | 15,442 | | $ | 23,097 |
| (33.1) | % |
Indiana |
|
| 1,343 | |
| 3,816 |
| (64.8) | % | |
| 6,374 | |
| 7,615 |
| (16.3) | % |
Colorado |
|
| 36 | |
| 1,543 |
| (97.7) | % | |
| (49) | |
| 5,092 |
| (101.0) | % |
Nevada |
|
| 2,280 | |
| 1,537 |
| 48.3 | % | |
| 4,557 | |
| 4,173 |
| 9.2 | % |
Contracted Sports Wagering | | | 1,083 | | | 1,645 | | (34.2) | % | | | 6,047 | | | 4,122 | | 46.7 | % |
Adjusted Segment EBITDA |
|
| 8,977 | |
| 15,026 |
| (40.3) | % | |
| 32,371 | |
| 44,099 |
| (26.6) | % |
Corporate |
|
| (1,219) | |
| (1,427) |
| (14.6) | % | |
| (4,130) | |
| (4,803) |
| (14.0) | % |
Adjusted EBITDA |
| $ | 7,758 | | $ | 13,599 |
| (43.0) | % | | $ | 28,241 | | $ | 39,296 |
| (28.1) | % |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA Margin | | | | | | | | | | | | | | | | | | |
Mississippi | | | 21.2 | % | | 30.1 | % | (8.9) | pts | | | 24.7 | % | | 33.9 | % | (9.2) | pts |
Indiana | | | 13.9 | % | | 30.3 | % | (16.4) | pts | | | 21.2 | % | | 24.0 | % | (2.8) | pts |
Colorado | | | 0.8 | % | | 24.3 | % | (23.5) | pts | | | (0.4) | % | | 27.3 | % | (27.7) | pts |
Nevada | | | 36.2 | % | | 29.9 | % | 6.3 | pts | | | 28.7 | % | | 29.4 | % | (0.7) | pts |
Contracted Sports Wagering | | | 98.6 | % | | 100.2 | % | (1.6) | pts | | | 99.2 | % | | 99.1 | % | 0.1 | pts |
| | | | | | | | | |
(In thousands) | | Three Months Ended | | | | ||||
| | March 31, | | Increase / | |||||
|
| 2023 |
| 2022 |
| (Decrease) | |||
Revenues | | | | | | | | | |
Midwest & South |
| $ | 40,802 | | $ | 29,949 |
| 36.2 | % |
West |
|
| 8,124 | |
| 8,644 |
| (6.0) | % |
Contracted Sports Wagering | | | 1,180 | | | 2,830 | | (58.3) | % |
|
| $ | 50,106 | | $ | 41,423 |
| 21.0 | % |
Adjusted Segment EBITDA and Adjusted EBITDA | | | | | | | | | |
Midwest & South |
| $ | 10,687 | | $ | 7,088 |
| 50.8 | % |
West |
|
| 56 | |
| 509 |
| (89.0) | % |
Contracted Sports Wagering | | | 1,161 | | | 2,767 | | (58.0) | % |
Adjusted Segment EBITDA |
|
| 11,904 | |
| 10,364 |
| 14.9 | % |
Corporate |
|
| (1,779) | |
| (1,967) |
| (9.6) | % |
Adjusted EBITDA |
| $ | 10,125 | | $ | 8,397 |
| 20.6 | % |
| | | | | | | | | |
Adjusted Segment EBITDA Margin | | | | | | | | | |
Midwest & South | | | 26.2 | % | | 23.7 | % | 2.5 | pts |
West | | | 0.7 | % | | 5.9 | % | (5.2) | pts |
Contracted Sports Wagering | | | 98.4 | % | | 97.8 | % | 0.6 | pts |
2928
MississippiSupplemental Information – Same-store Operating Results
The following table presents the financial results of Midwest & South Operations on a same-store basis for the three months ended March 31, 2023 and 2022 for revenues and Adjusted Segment EBITDA; see “Non-GAAP Financial Measure” for additional information.
Same-store operations exclude results of new and acquired operating segments that have not been in operations for longer than a year, starting from the date of acquisition through the end of the reporting period. Accordingly, for Midwest & South, we have excluded the results of The Temporary by American Place for periods subsequent to its commencement of operations.
| | | | | | | | |
(In thousands) | Three Months Ended | | | | ||||
| March 31, | | Increase / | |||||
| 2023 |
| 2022 |
| (Decrease) | |||
Midwest & South same-store total revenues(1) | $ | 30,382 | | $ | 29,949 | | 1.4 | % |
The Temporary by American Place |
| 10,420 | |
| — |
| nm | % |
Midwest & South total revenues | $ | 40,802 | | $ | 29,949 |
| 36.2 | % |
| | | | | | | | |
Midwest & South same-store Adjusted Segment EBITDA(1) | $ | 7,114 | | $ | 7,088 | | 0.4 | % |
The Temporary by American Place |
| 3,573 | |
| — |
| nm | % |
Midwest & South Adjusted Segment EBITDA | $ | 10,687 | | $ | 7,088 |
| 50.8 | % |
| | | | | | | | |
Midwest & South same-store Adjusted Segment EBITDA margin(1) | | 23.4 | % | | 23.7 | % | (0.3) | pts |
The Temporary by American Place | | 34.3 | % | | — | % | 34.3 | pts |
Midwest & South Adjusted Segment EBITDA margin | | 26.2 | % | | 23.7 | % | 2.5 | pts |
__________
(1) | Same-store operations exclude results from The Temporary by American Place, which opened on February 17, 2023. |
Midwest & South
Our MississippiMidwest & South segment consists of theincludes Silver Slipper Casino and Hotel.Hotel, Rising Star Casino Resort and The prior-year periods were among the bestTemporary by American Place, which opened in the property’s historyWaukegan, Illinois, in terms of casino revenue and total revenue, benefiting from the issuance of government stimulus checks to customers. Compared to the prior-year periods, totalFebruary 2023. Total revenues duringfor the three and nine months ended September 30, 2022 decreasedMarch 31, 2023 increased by 7.2% and 8.4%36.2% (or $10.9 million), respectively, primarily due to the addition of The Temporary and its casino operations. Excluding results from The Temporary, same-store revenues rose by 1.4% (or $0.4 million) from the sale of “free play” at Rising Star as further discussed below.
Casino revenue increased by 34.8% (or $7.5 million) for the three months ended March 31, 2023, also primarily due to the opening of The Temporary. Newly-opened slot and table games operations at The Temporary more than offset casino revenue declines in casino revenue. Casinoat Silver Slipper and Rising Star. Slot revenue for the three and nine months ended September 30, 2022 declinedsegment increased by 9.7%36.1% (or $1.4$6.7 million) and 11.7%table games revenue increased by 36.4% (or $5.6$0.9 million), respectively. Slot. Excluding results from The Temporary, same-store casino revenue declined by 7.5%10.6% (or $0.9$2.3 million) and 9.7% (or $3.8 million) for the respective three- and nine-month periods, primarily due to lower volumes. Tableslot and table games hold percentages at Silver Slipper versus the prior-year period. To a lesser extent, lower same-store slot revenue declinedat Rising Star was impacted by 9.7% and 2.4%, respectively,a lower hold percentage of 7.3% from 7.5% in the prior period. Rising Star also due to lower volumes. Otherhad an increase in competition, with a new racetrack casino revenues decreased by $0.3 million and $1.6 million for the respective three- and nine-month periods, primarily from our on-site sports book, which was affected by the competitive launch of online sports wagering within nearby Louisiana that startedhaving opened in January 2022.September 2022 in Northern Kentucky.
Non-casino revenue decreasedincreased by 2.1% and 0.7%39.8% (or $3.4 million) during the respective three and nine months ended September 30, 2022, primarilyquarter. Approximately $1.1 million of this increase was due to decreasesan 18.7% increase in food and beverage revenue, by 2.2% (or $0.1 million) and by 1.2% (or $0.2 million), respectively. Hotel revenues increased slightly by 3.5% (or $43,000) and 3.1% (or $0.1 million) for the respective three and nine months ended September 30, 2022, primarily due to higher average daily room rates. Hotel occupancy was 92.4% and 93.1% for the respective three and nine months ended September 30, 2022, compared to 94.0% and 94.2% for the respective prior-year periods. Other non-casino revenue decreased by 13.6% (or $0.1 million) and 5.2% (or $0.1 million) during the respective three and nine months ended September 30, 2022 from fewer ATM transactions and, as a result, reduced ATM commission income.
Adjusted Segment EBITDA for the three and nine months ended September 30, 2022 decreased by 34.7% and 33.1%, respectively, reflecting revenue declines from a lack of stimulus payments and the launch of online sports wagering in Louisiana mentioned above; increases of $0.5 million and $2.0 million, respectively, to the cost of food; and increases of $0.5 million and $1.2 million, respectively, in property insurance costs. However, we believe that such property insurance costs relative to income will be lower in future years, as the Company’s diversity improves and it becomes less reliant on theat Silver Slipper.
Indiana
Our Indiana segment consists of Rising Star Casino Resort. Similar to the Silver Slipper, total revenues for the prior-year periods benefited from customers receiving government stimulus payments. Additionally, timing differences for Rising Star’s annual sale of “free play” impacted comparisons for the third quarter, though not for the nine-month period.in March 2023, Rising Star sold $2.1 million of “free play” during the second quarter of 2022, but not until the third quarter in the prior-year period. Moreover, a nearby facility with “historical racing machines” (which are a form of slot machine) opened in September 2022. As a result, for the three and nine months ended September 30, 2022, total revenues decreased by 23.4% and 5.3%, respectively, compared to the prior-year periods.
Casino revenue for the three and nine months ended September 30, 2022 declined by 11.6% (or $0.9 million) and 7.5% (or $1.7 million), respectively. Slot revenue decreased by 11.4% (or $0.8 million) and 4.2% (or $0.8 million) for the respective three and nine months ended September 30, 2022 due to lower volumes. Similarly, table game revenue declined by 13.3% (or $0.1 million) and 31.3% (or $0.9 million) for the respective three and nine months ended September 30, 2022.
Non-casino revenue decreased by 43.3% (or $2.0 million) and increased by 0.1% (or $8,000) during the respective three and nine months ended September 30, 2022, due to the timing of the sale ofits available “free play” for $2.1 million noted above, as well as increases in food and beverage revenue of 16.3% (see Note 2(or $0.1 million) and 12.2% (or $0.3 million)). Rising Star also sold its “free play” for $2.1 million during 2022, although not until the respective periods in 2022.second quarter. Hotel revenues declined by 1.5% (or $14,000) and 8.8% (or $0.3 million)during the respective three and nine months ended September 30, 2022, due to fewer occupied room-nights.were relatively flat, with hotel revenue improvements at Rising Star had 12,413 occupied room-nights formostly offsetting revenue declines at Silver Slipper. While The Temporary does not have hotel operations, the third quarter of 2022, comparedpermanent American Place facility is being designed to 12,808 occupied room-nights for the prior-year period. For the nine-months ended September 30, 2022, Rising Star had 35,742 occupied room-nights, compared to 39,227 occupied room-nights for the prior-year period.include a hotel.
3029
Adjusted Segment EBITDA for the three months ended March 31, 2023 increased by 50.8% (or $3.6 million) to $10.7 million from $7.1 million in the prior-year period. This increase reflects the opening of The Temporary, which generated $3.6 million of Adjusted EBITDA in its first 1.5 months of operations. Adjusted Segment EBITDA margin also improved to 26.2% during the respective three and nine months ended September 30, 2022 decreased by 64.8% and 16.3%, primarily due toquarter from 23.7% in the sale of “free play”prior-year period. The Temporary’s Adjusted EBITDA margin in an earlierits inaugural quarter was 34.3%. Excluding results from The Temporary, same-store Adjusted Segment EBITDA was flat at $7.1 million for both periods, with higher operating costs, such as property insurance costs at Silver Slipper, offsetting revenue increases.
The improvement in this segment’s results were despite The Temporary not yet operating at full capacity. Various factors, including regulatory processes, resulted in the casino operating for limited hours per day in the first quarter and lower volumes. Marketing costs duringwith lower-than-usual maximum wagers. In April, The Temporary was permitted to increase its operating hours and maximum wagers, but still within certain limitations. Additionally, the threeproperty has been steadily hiring and nine months ended September 30, 2022 increasedtraining new employees, including dealers. As new dealers are hired and trained, the Company expects to address lower volumes during 2022, asoperate all 50 of its permitted table games at peak periods, whereas it generally operated 28 table games at any given time in the 2021 periods were assisted byfirst quarter. It also operated only one of its major restaurants in the issuancefirst quarter and, even then, for limited operating hours. A second restaurant opened in April and the operating hours of government stimulus checksboth restaurants are being expanded gradually, in response to customers.customer demand and in accordance with the hiring of additional employees. A third restaurant is expected to open in the second half of the year.
ColoradoWest
Our ColoradoWest segment includes Grand Lodge Casino (located within a hotel owned by a third party), Stockman’s Casino, Bronco Billy’s Casino and Hotel and, the Chamonix project. The Colorado gaming market, including Cripple Creek, has shown significant growth since betting limits were eliminated in May 2021. Bronco Billy’s, however, has incurred significant construction disruption, including temporarily-reduced gaming and restaurant capacity and the temporary absence of all on-site hotel rooms and on-site self-parking. Total revenues during the three and nine months ended September 30, 2022 decreased by 30.8% and 31.6%, respectively, reflecting business disruptions to accommodate the construction of Chamonix.
Casino revenue decreased by 31.7% (or $1.7 million) and 33.4% (or $5.4 million) for the three and nine months ended September 30, 2022, which were largely due to the construction disruptions mentioned above. For the respective three and nine months ended September 30, 2022, slot revenue declined by 32.8% (or $1.7 million) and 35.1% (or $5.5 million). Table games revenue fell by 5.5% (or $12,000) during the quarter due to lower volumes, but rose by 30.6% (or $0.1 million) during the nine months ended September 30, 2022 due to a higher hold percentage and increased volumes. Table games operations in the prior-year period were significantly affected by pandemic-related limitations.
Non-casino revenue decreased by 26.6% (or $0.3 million) and 20.1% (or $0.5 million) for the respective three and nine months ended September 30, 2022, due to declines in food and beverage revenue after the temporary closing of the property’s steakhouse in May 2022 and, to a lesser extent, declines in ATM and related surcharge income.
Adjusted Segment EBITDA for the respective three and nine months ended September 30, 2022 decreased by 97.7% to $36,000 and 101.0% to $(49,000). The decrease during the quarter was due to significant disruptions from the construction of Chamonix as mentioned above. To alleviate the lack of on-site parking, Bronco Billy’s currently offers complimentary valet parking and a free shuttle service to an off-site parking lot, both of which have resulted in increased operating expenses. The casino has also maintained much ofupon its payroll, despite reduced activity levels, anticipating the need for the larger workforce required to open and operate Chamonix. Somewhat offsetting this, some expenses, such as gaming taxes and the cost of food and beverages, vary with activity levels.
In addition to construction disruption due to our neighboring Chamonix project, we are currently undergoing a modest refurbishment of a portion of Bronco Billy’s, expected to cost approximately $2 million. Accordingly, Bronco Billy’s contribution to earnings will likely be impacted until the completion of the casino refurbishment near year-end, the augmentation of its restaurant capacity in the first quarter of 2023, and the expected opening ofin December 2023, will include Chamonix in mid-2023. When Chamonix opens, Bronco Billy’s will share the significant on-site parking garage, valet and surface parking capacity of the new casino, and also benefit from Chamonix’s adjoining 300-guestroom hotel.
Casino Hotel. The market in Cripple Creek is seasonal, favoring the summer months.
31
Nevada
The Nevada segment consists of the Grand Lodge and Stockman’s casinos. Our Nevada operations have historically been seasonal, with the summer months accounting for a disproportionate share of annual revenues. Additionally, snowfall levels during the winter months can often affect operations, as Grand Lodge Casino is located near several major ski resorts. WeWhile we typically benefit from a “good” snow year, resulting in extended periods of operation at the nearby ski areas.areas, excessive snow levels can result in challenging driving conditions or the closure of roads leading to Grand Lodge.
Total revenues during the respective three and nine months ended September 30, 2022 increasedMarch 31, 2023 decreased by 22.6% and 11.6%6.0% (or $0.5 million), primarily due to higher casino revenue at Grand Lodge. planned business disruptions to accommodate the construction of Chamonix. These significant construction disruptions include temporarily-reduced gaming and restaurant capacity, as well as the temporary absence of all on-site hotel rooms and on-site self-parking. To alleviate the lack of on-site parking, Bronco Billy’s currently offers, and incurs the cost of offering, complimentary valet parking, as well as a free shuttle service to an off-site parking lot.
Casino revenue increaseddecreased by 25.8%7.2% (or $1.2 million) and 13.1% (or $1.7$0.5 million) for the three and nine months ended September 30, 2022.March 31, 2023, which was largely due to the construction disruptions mentioned above, while related revenues for Grand Lodge and Stockman’s remained relatively flat as compared to the prior-year period. Slot revenue improveddeclined by 12.9% (or $0.5 million) and 10.0% (or $1.1 million) for the respective three and nine months ended September 30, 2022, due to increases in slot volumes at Grand Lodge. Table games revenue increased by 152.0%10.6% (or $0.7 million), while table games revenue declined by 22.0% (or $0.2 million). Declines in gaming volumes during the quarter were also impacted by adverse weather in Nevada, especially at Grand Lodge, where extremely heavy snowfall in February and 34.3% (or $0.7 million)March 2023 created challenging driving conditions and trip cancellations.
Non-casino revenue was flat for the respective three and nine months ended September 30, 2022, due to increasesMarch 31, 2023. Food and beverage revenues increased by 9.2% (or $0.1 million), which offset declines in table games volume and higher hold percentageshotel revenues during the quarter, primarily for the reasons noted above at Grand Lodge. Grand Lodge was also adversely affected in the prior-year’s third quarter by significant wildfires in the area. Additionally, in July 2022, Stockman’s resumed table games operations, which had remained closed since March 2020.Bronco Billy’s.
Adjusted Segment EBITDA increased to $2.3 million and $4.6 million for the respective three and nine months ended September March 31, 2023 decreased to $0.1 million. The decrease during the quarter was due to disruptions from the construction of Chamonix as described above, including additional operating expenses related to the operation of our new valet and parking shuttle service. The casino has also maintained much of its payroll, despite reduced activity levels, anticipating the need for the larger workforce required to open and operate Chamonix.
30 2022, reflecting improvements
In addition to construction disruption due to our neighboring Chamonix project, we are currently undergoing a modest refurbishment of a portion of Bronco Billy’s, which began in May 2022. Accordingly, Bronco Billy’s contribution to earnings was impacted by the casino revenue. Inrefurbishment (which was completed in December 2022), and will likely continue to be impacted until restaurant work at Bronco Billy’s is completed in the corresponding prior-year periods, Adjusted Segment EBITDA was $1.5 millionthird quarter of 2023 and $4.2 million.Chamonix’s expected opening in December 2023. When Chamonix opens, Bronco Billy’s will share the on-site parking garage, valet and surface parking capacity of the new casino, and also benefit from Chamonix’s adjoining 300-guestroom hotel.
Contracted Sports Wagering
The Contracted Sports Wagering segment consists of our on-site and online sports wagering skins in Colorado, Indiana and, upon launch, Illinois.
For the three-monthsthree months ended September 30, 2022,March 31, 2023, revenues and Adjusted Segment EBITDA were both $1.1$1.2 million, a decrease from $1.6reflecting all three of our permitted skins now contractually live in Colorado and two of our three skins live in Indiana. Revenues and Adjusted EBITDA were $2.8 million in the prior-year period. For the nine-months ended September 30, 2022, revenues were $6.1 million and Adjusted Segment EBITDA was $6.0 million, an increase from $4.2 million of revenues and $4.1 million of Adjusted Segment EBITDA in the prior-year period. These results reflect an additional skin that contractually went live on December 1, 2021, as well asperiod, reflecting an acceleration of deferred revenue for two agreements that ceased operations in May 2022, when one of the Company’s contracted parties ceasedended its online and retail operations. In December 2022, we entered into a sports wagering agreement to replace such operator in Colorado, which went contractually live in March 2023. We are currently evaluating whether to utilize our two idle skins – onethe remaining skin in each of Colorado and Indiana – by ourselves or to findutilize a replacement operatorsoperator for such skins. Thereskin. However, there is no certainty that we will be able to enter into agreementsan agreement with third parties related to these skinsa replacement operator or successfully operate these skins ourselves on better terms than our prior agreements.the skin ourselves.
The results of this segment do not yet include income contribution from our agreement for a third party to operate on-site and online sports betting in Illinois. Under such agreement, we will receive a percentage of revenues, as defined in the contract, subject to an annualized minimum of $5 million, with minimal expected expenses. We anticipate the Illinois sports betting operations will begin in Springby August 2023. For details on our Illinois sports wagering agreement with Circa Sports, which is expected to commence operations shortly after the opening of The Temporary, see “Recent Developments – Sports Wagering in Illinois” as discussed above in the “Executive Overview.”Note 6.
Corporate
Corporate expenses were $1.8 million and $2.0 million for the respective threethree-month periods ended March 31, 2023 and nine months ended September 30, 2022, declinedrespectively. An increase in third-party professional services was offset by 14.6% (or $0.2 million) and 14.0% (or $0.7 million), primarily due to a decrease in accrued bonus compensation. Corporate expenses were $1.2 million and $1.4 million for the three-months ended September 30, 2022 and 2021, respectively. For the nine-months ended September 30, 2022 and 2021, corporate expenses were $4.1 million and $4.8 million, respectively.
32
Non-GAAP Financial Measure
“Adjusted EBITDA” is 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, and non-cash share-based compensation expense. Adjusted EBITDA information is presented solely as supplemental disclosure to measures reported in accordance with generally accepted accounting principles in the United States of America (“GAAP”) because management believes this measure is (i) a widely used measure of operating performance in the gaming and hospitality industries and (ii) a principal basis for valuation of gaming and hospitality companies. In addition, a version of Adjusted EBITDA (known as Consolidated Cash Flow) is utilized in the covenants within our credit facility,the Credit Facility, although not necessarily defined in the same way as above. Adjusted EBITDA is not, however, a measure of financial performance or liquidity under GAAP. Accordingly, this measure should be considered supplemental and not a substitute for net income (loss) or cash flows as an indicator of the Company’s operating performance or liquidity.
31
The following table presents a reconciliation of net (loss) income and operating (loss) income to Adjusted EBITDA:
| | | | | | | | | | | |
(In thousands) | Three Months Ended | | Nine Months Ended | ||||||||
| September 30, | | September 30, | ||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Net (loss) income | $ | (3,577) | | $ | 4,619 | | $ | (7,822) | | $ | 6,658 |
Income tax provision (benefit) | | 29 | | | 95 | | | (16) | | | 379 |
Interest expense, net | | 5,838 | | | 6,405 | | | 19,225 | | | 17,531 |
Loss on modification and extinguishment of debt, net | | 105 | | | — | | | 4,530 | | | 6,104 |
Adjustment to fair value of warrants | | — | | | — | | | — | | | 1,347 |
Operating income | | 2,395 | | | 11,119 | | | 15,917 | | | 32,019 |
Project development costs, net | | (149) | | | 318 | | | 33 | | | 491 |
Preopening costs | | 2,594 | | | 17 | | | 4,914 | | | 17 |
Depreciation and amortization | | 2,386 | | | 1,819 | | | 6,012 | | | 5,448 |
Loss on disposal of assets, net | | — | | | 2 | | | 3 | | | 674 |
Stock-based compensation | | 532 | | | 324 | | | 1,362 | | | 647 |
Adjusted EBITDA | $ | 7,758 | | $ | 13,599 | | $ | 28,241 | | $ | 39,296 |
| | | | | | |
(In thousands) | | Three Months Ended | ||||
| | March 31, | ||||
|
| 2023 |
| 2022 | ||
Net (loss) income | | $ | (11,415) | | $ | 110 |
Income tax benefit | | | (35) | | | (5,612) |
Interest expense, net | | | 4,819 | | | 6,399 |
Loss on modification of debt | | | — | | | 4,406 |
Gain on insurance settlement | | | (355) | | | — |
Operating (loss) income | | | (6,986) | | | 5,303 |
Project development costs | | | 7 | | | 165 |
Preopening costs | | | 10,497 | | | 786 |
Depreciation and amortization | | | 5,859 | | | 1,792 |
Loss on disposal of assets | | | — | | | 8 |
Stock-based compensation | | | 748 | | | 343 |
Adjusted EBITDA | | $ | 10,125 | | $ | 8,397 |
33
The following tables present reconciliations of operating income (loss) to Adjusted Segment EBITDA and Adjusted EBITDA.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2023 | Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
(In thousands) | (In thousands) | (In thousands) | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | | | Adjusted | | | | | | | | | | | | | | | | | Adjusted | ||
| | | | | | | | | | | | | | | | | Segment | | | | | | | | | | | | | | | | | Segment | ||
| | Operating | | Depreciation | | Project | | | | Stock- | | EBITDA and | | Operating | | Depreciation | | Project | | | | Stock- | | EBITDA and | ||||||||||||
| | Income | | and | | Development | | Preopening | | Based | | Adjusted | | Income | | and | | Development | | Preopening | | Based | | Adjusted | ||||||||||||
|
| (Loss) |
| Amortization |
| Costs |
| Costs |
| Compensation |
| EBITDA |
| (Loss) |
| Amortization |
| Costs |
| Costs |
| Compensation |
| EBITDA | ||||||||||||
Reporting segments | Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
| Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Mississippi | | $ | 3,546 | | $ | 689 | | $ | — | | $ | — | | $ | — | | $ | 4,235 | ||||||||||||||||||
Indiana | |
| 753 | |
| 590 | |
| — | |
| — | |
| — | |
| 1,343 | ||||||||||||||||||
Colorado | |
| (682) | |
| 361 | |
| — | |
| 357 | |
| — | |
| 36 | ||||||||||||||||||
Nevada | |
| 1,820 | |
| 460 | |
| — | |
| — | |
| — | |
| 2,280 | ||||||||||||||||||
Midwest & South | | $ | (4,666) | | $ | 5,256 | | $ | — | | $ | 10,097 | | $ | — | | $ | 10,687 | ||||||||||||||||||
West | |
| (916) | |
| 572 | |
| — | |
| 400 | |
| — | |
| 56 | ||||||||||||||||||
Contracted Sports Wagering | | | 1,083 | | | — | | | — | | | — | | | — | | | 1,083 | | | 1,161 | | | — | | | — | | | — | | | — | | | 1,161 |
| |
| 6,520 | |
| 2,100 | |
| — | |
| 357 | |
| — | |
| 8,977 | |
| (4,421) | |
| 5,828 | |
| — | |
| 10,497 | |
| — | |
| 11,904 |
Other operations | Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Corporate | |
| (4,125) | |
| 286 | |
| (149) | |
| 2,237 | |
| 532 | |
| (1,219) | |
| (2,565) | |
| 31 | |
| 7 | |
| — | |
| 748 | |
| (1,779) |
| | $ | 2,395 | | $ | 2,386 | | $ | (149) | | $ | 2,594 | | $ | 532 | | $ | 7,758 | | $ | (6,986) | | $ | 5,859 | | $ | 7 | | $ | 10,497 | | $ | 748 | | $ | 10,125 |
| | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2021 | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | Adjusted | |
| | | | | | | | | | | | | | | | | | | Segment | ||
| | Operating | | Depreciation | | Loss on | | Project | | | | Stock- | | EBITDA and | |||||||
| | Income | | and | | Disposal | | Development | | Preopening | | Based | | Adjusted | |||||||
| | (Loss) | | Amortization | | of Assets | | Costs | | Costs | | Compensation |
| EBITDA | |||||||
Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
Mississippi | | $ | 5,794 | | $ | 690 | | $ | 1 | | $ | — | | $ | — | | $ | — | | $ | 6,485 |
Indiana | |
| 3,247 | |
| 569 | |
| — | |
| — | |
| — | |
| — | |
| 3,816 |
Colorado | |
| 1,138 | |
| 387 | |
| 1 | |
| — | |
| 17 | |
| — | |
| 1,543 |
Nevada | |
| 1,402 | |
| 135 | |
| — | |
| — | |
| — | |
| — | |
| 1,537 |
Contracted Sports Wagering | | | 1,645 | | | — | | | — | | | — | | | — | | | — | | | 1,645 |
| |
| 13,226 | |
| 1,781 | |
| 2 | |
| — | |
| 17 | |
| — | |
| 15,026 |
Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Corporate | |
| (2,107) | |
| 38 | |
| — | |
| 318 | |
| — | |
| 324 | |
| (1,427) |
| | $ | 11,119 | | $ | 1,819 | | $ | 2 | | $ | 318 | | $ | 17 | | $ | 324 | | $ | 13,599 |
32
| | | | | | | | | | | | | | | | | | | | | |
Three Months Ended March 31, 2022 | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | Adjusted | |
| | | | | | | | | | | | | | | | | | | Segment | ||
| | Operating | | Depreciation | | Loss on | | Project | | | | Stock- | | EBITDA and | |||||||
| | Income | | and | | Disposal | | Development | | Preopening | | Based | | Adjusted | |||||||
| | (Loss) | | Amortization | | of Assets | | Costs | | Costs | | Compensation |
| EBITDA | |||||||
Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
Midwest & South | | $ | 5,023 | | $ | 1,272 | | $ | 7 | | $ | — | | $ | 786 | | $ | — | | $ | 7,088 |
West | |
| 21 | |
| 487 | |
| 1 | |
| — | |
| — | |
| — | |
| 509 |
Contracted Sports Wagering | | | 2,767 | | | — | | | — | | | — | | | — | | | — | | | 2,767 |
| |
| 7,811 | |
| 1,759 | |
| 8 | |
| — | |
| 786 | |
| — | |
| 10,364 |
Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Corporate | |
| (2,508) | |
| 33 | |
| — | |
| 165 | |
| — | |
| 343 | |
| (1,967) |
| | $ | 5,303 | | $ | 1,792 | | $ | 8 | | $ | 165 | | $ | 786 | | $ | 343 | | $ | 8,397 |
Operating expenses deducted to arrive at operating income (loss) in the above tables for the three-month periods ended September 30,March 31, 2023 and 2022 and 2021 included facility rents related to: (i) MississippiMidwest & South of $0.9 million in 2023 and $0.5 million in 2022, and (ii) West of $0.7 million during each of 20222023 and 2021, (ii) Nevada of $0.5 million during each of 2022 and 2021, and (iii) Colorado of $3,000 during 2022 and $0.1 million during 2021. In the third quarter of 2022, $0.2 million of qualifying rent in Colorado was reclassified to preopening costs for Chamonix’s expected opening in mid-2023.2022.
34
| | | | | | | | | | | | | | | | | | | | | |
For the Nine Months Ended September 30, 2022 | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||
| | | | | | | | Loss / | | | | | | | | | | | Adjusted | ||
| | | | | | | | (gain) | | | | | | | | | | | Segment | ||
| | Operating | | Depreciation | | on | | Project | | | | Stock- | | EBITDA and | |||||||
| | Income | | and | | Disposal | | Development | | Preopening | | Based | | Adjusted | |||||||
|
| (Loss) |
| Amortization |
| of Assets |
| Costs |
| Costs |
| Compensation |
| EBITDA | |||||||
Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
Mississippi | | $ | 13,359 | | $ | 2,075 | | $ | 8 | | $ | — | | $ | — | | $ | — | | $ | 15,442 |
Indiana | |
| 4,618 | |
| 1,756 | |
| — | |
| — | |
| — | |
| — | |
| 6,374 |
Colorado | |
| (2,126) | |
| 1,057 | |
| (5) | |
| — | |
| 1,025 | |
| — | |
| (49) |
Nevada | |
| 3,781 | |
| 776 | |
| — | |
| — | |
| — | |
| — | |
| 4,557 |
Contracted Sports Wagering | | | 6,047 | | | — | | | — | | | — | | | — | | | — | | | 6,047 |
| |
| 25,679 | |
| 5,664 | |
| 3 | |
| — | |
| 1,025 | |
| — | |
| 32,371 |
Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Corporate | |
| (9,762) | |
| 348 | |
| — | |
| 33 | |
| 3,889 | |
| 1,362 | |
| (4,130) |
| | $ | 15,917 | | $ | 6,012 | | $ | 3 | | $ | 33 | | $ | 4,914 | | $ | 1,362 | | $ | 28,241 |
| | | | | | | | | | | | | | | | | | | | | |
For the Nine Months Ended September 30, 2021 | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | Adjusted | |
| | | | | | | | | | | | | | | | | | | Segment | ||
| | Operating | | Depreciation | | Loss on | | Project | | | | Stock- | | EBITDA and | |||||||
| | Income | | and | | Disposal | | Development | | Preopening | | Based | | Adjusted | |||||||
|
| (Loss) |
| Amortization |
| of Assets |
| Costs |
| Costs |
| Compensation |
| EBITDA | |||||||
Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
Mississippi | | $ | 20,484 | | $ | 2,024 | | $ | 589 | | $ | — | | $ | — | | $ | — | | $ | 23,097 |
Indiana | |
| 5,837 | |
| 1,778 | |
| — | |
| — | |
| — | |
| — | |
| 7,615 |
Colorado | |
| 3,871 | |
| 1,119 | |
| 85 | |
| — | |
| 17 | |
| — | |
| 5,092 |
Nevada | |
| 3,761 | |
| 412 | |
| — | |
| — | |
| — | |
| — | |
| 4,173 |
Contracted Sports Wagering | | | 4,122 | | | — | | | — | | | — | | | — | | | — | | | 4,122 |
| |
| 38,075 | |
| 5,333 | |
| 674 | |
| — | |
| 17 | |
| — | |
| 44,099 |
Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Corporate | |
| (6,056) | |
| 115 | |
| — | |
| 491 | |
| — | |
| 647 | |
| (4,803) |
| | $ | 32,019 | | $ | 5,448 | | $ | 674 | | $ | 491 | | $ | 17 | | $ | 647 | | $ | 39,296 |
Operating expenses deducted to arrive at operating income (loss) in the above tables for the nine-month periods ended September 30, 2022 and 2021 included facility rents related to: (i) Mississippi of $1.5 million during 2022 and $1.7 million during 2021, (ii) Nevada of $1.4 million during each of 2022 and 2021, and (iii) Colorado of $9,000 during 2022 and $0.3 million during 2021. During the 2022 period, $0.7 million of qualifying rent in Colorado was reclassified to preopening costs for Chamonix’s expected opening in mid-2023.
35
Liquidity and Capital Resources
Cash Flows
As of September 30, 2022,March 31, 2023, we had $241.8$142.4 million of cash and equivalents, including $156.1$101.6 million of restricted cash dedicated to the completion of Chamonix’s construction. We estimate that between approximately $7 million and $9$15 million of cash is used in our current day-to-day operations, including on-site cash in our slot machines, change and redemption kiosks, and cages. We believe that current cash balances, together with the available borrowing capacity under our revolving credit facilitythe Credit Facility and cash flows from operating activities, will be sufficient to meet our liquidity and capital resource needs for the next 12 months of operations, including construction activities.
Cash flows – operating activities. On a consolidated basis, cash provided byused in operations during the nine-monthsthree months ended September 30, 2022March 31, 2023 was $40,000,$7.3 million, compared to cash provided byused in operations of $19.3$8.0 million in the prior-year period. Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but are also affected by changes in working capital. Our operating cash flows decreased in 20222023 primarily due to our decrease in revenues and income, which includes preopening expenses of $10.1 million incurred for our upcoming openings of The Temporary (opened in February 2023) and Chamonix.
Cash flows – investing activities. On a consolidated basis, cash used in investing activities during the nine-monthsthree months ended September 30, 2022March 31, 2023 was $117.2$101.7 million, which primarily relatedfor a gaming license payment of $50.3 million required to open The Temporary/American Place, as well as capital expenditures for Chamonix and The Temporary/American Place. Cash used in investing activities during the prior-year period was $18.0$31.9 million, which primarily related to the purchase of Carr Manorcapital expenditures for Chamonix and other land parcels related to our Chamonix project.The Temporary.
Cash flows – financing activities. On a consolidated basis, cash provided by financing activities during the nine-monthsthree months ended September 30, 2022March 31, 2023 was $93.7$60.2 million, compared to cash provided by financing activities of $235.5$94.1 million in the prior-year period. During 2023, net borrowings from the Credit Facility totaled $27.0 million, and we received $40.0 million of gross proceeds from the issuance of our Additional Notes to open The Temporary. In February 2022, we received $102.0 million of gross proceeds from the issuance of our Additional Notesadditional notes to constructdevelop The Temporary. In February and March 2021, respectively, we received $310.0 million
33
Other Factors Affecting Liquidity
We have significant outstanding debt and contractual obligations, in addition to planned capital expenditures related to the construction of Chamonix The Temporary, and American Place. Our principal debt matures in February 2028. Certain planned capital expenditures designed to grow the Company, such as the permanent American Place facility, and the potential future expansion of Silver Slipper, are likely to require additional financing and/or temporarily reduce the Company’s ability to repay debt.
Our operations are subject to financial, economic, competitive, regulatory and other factors, many of which are beyond our control. Such factors include the potential effects of COVID-19 and its variants. Such future developments are highly uncertain and cannot be accurately predicted at this time, as discussed under “Recent Developments.”time.
Debt
Long-term Debt. At September 30, 2022,March 31, 2023, we had $410.0$450.0 million of principal indebtedness outstanding under the Notes, no drawn amountsand $27.0 million outstanding under the Credit Facility, and an outstanding $1 million standby letter of credit related to The Temporary’s construction.Facility. We also owe $2.9$2.7 million related to our finance lease of a hotel at Rising Star. SubstantiallyWith the exception of the Credit Facility, we have fixed interest rates on substantially all of our debt has a fixed interest rate.
debt. See Note 5 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report4 for details on our debt obligations.
36
Other
Capital Investments. In addition to normal maintenance capital expenditures, we continue to make significant capital investments related to the construction of Chamonix The Temporary and American Place.
Chamonix. In January 2021, we increased the size of the Chamonix project’s hotel capacity by 67%, to approximately 300 luxury guest rooms and suites from our previously-planned 180 guest rooms. We also revised our construction budget for Chamonix in January 2022, increasing it from $180 million to approximately $250 million, reflecting supply chain issues, inflation, and a difficult construction environment. To fund Chamonix’s construction, we issued our 2028 Notes and placed a portion of such proceeds into a restricted cash account dedicated to the completion of Chamonix’s construction (see Note 54). As of December 31, 2022, approximately $134.6 million of cash was reserved under our Condensed Notesbond indentures to Consolidated Financial Statements included in this quarterly report for details on our debt obligations).complete the construction of Chamonix. We expect to invest approximately $100 million forsubstantially all of 2022 and approximately $125 millionsuch amount in 2023, with an expected opening of Chamonix in mid-2023.December 2023.
The Temporary / American Place. We were selected by the Illinois Gaming BoardIGB to develop and operate American Place in Waukegan, Illinois. While the larger permanent facility is under construction, we are allowed to operateoperating The Temporary by American Place. We planPlace, which opened in February 2023. During 2023, we expect to invest approximately $40$70 million in 2022 and approximately $60into this project, consisting largely of $50 million in 2023 to furnish, outfit and open The Temporary, including significantof upfront gaming license payments remitted in the first quarter of 2023 (see Note 2), the recent completion of The Temporary’s construction, as well as professional fees and the purchase of casino equipment that is expected to be transferredlimited sitework related to the permanent casino once opened. To fund such construction, in February 2022, we issued $100.0 million of Additional Notes and increased the size of our revolving credit facility to $40.0 million (see Note 5 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report for details on our debt obligations).American Place facility.
Other Capital Expenditures. Additionally, we may fund various other capital expenditure projects, depending on our financial resources. Our capital expenditures may fluctuate due to decisions regarding strategic capital investments in new or existing facilities, and the timing of capital investments to maintain the quality of our properties. No assurance can be given that any of our planned capital expenditure projects will be completed or that any completed projects will be successful. Our annual capital expenditures typically include some number of new slot machines and related equipment; to some extent, we can coordinate such purchases to match our resources.
We evaluate projects based on a number of factors, including profitability forecasts, length of the development period, the regulatory and political environment, and the ability to secure the funding necessary to complete the development or acquisition, among other considerations. No assurance can be given that any additional projects will be pursued or completed or that any completed projects will be successful.
Hyatt Owner’s Option to Purchase our Leasehold Interest and Related Assets. Our lease with the owner of the Hyatt Lake Tahoe to operate the Grand Lodge Casino contains an option for the lessor to purchase our leasehold interest and related casino operating assets. The lease, which has been extended several times in the past, currently expires in August 2023.was recently extended through December 31, 2024. We believe that we have an excellent and synergistic relationship with Hyattthe lessor and hope to again extend the lease before its expiration, but there is no certainty that this will be the case. See Note 3 to the accompanying consolidated financial statements for furthermore information.
34
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.
Critical Accounting Estimates and Policies
We describe our critical accounting estimates and policies in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2021.2022. We also discuss our critical accounting estimates and policies in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the year ended December 31, 2021.2022. There has been no significant change in our estimation methods since the end of 2021.2022.
37
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for which the Private Securities Litigation Reform Act of 1995 provides a safe harbor. These forward-looking statements can be identified by use of terms such as “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “future,” “possible,” “seeks,” “may,” “could,” “should,” “will,” “might,” “likely,” “enable,” or similar words or expressions, as well as statements containing phrases such as “in our view,” “we cannot assure you,” “although no assurance can be given,” or “there is no way to anticipate with certainty.” Examples of forward-looking statements include, among others, statements we make regarding our plans, beliefs or expectations regarding our growth strategies; the impact of the coronavirus (COVID-19) pandemic; our expected construction budgets, estimated commencement and completion dates, expected amenities, and our expected operational performance for Chamonix and The Temporary, and Temporary/American Place; our investments in capital improvements and other projects, including the amounts of such investments, the timing of commencement or completion of such capital improvements and projects, and the resulting impact on our financial results; our sports wagering contracts with third-party providers, including expected revenues and expenses, our expectations regarding our ability to replace our terminated sports wagering contractscontract in Colorado and Indiana, our ability to operate sports wagering contracts ourselves, and the expected commencement date of our sports wagering contract in Illinois; our ability to obtain the casino license for the Temporary and American Place; management’s expectation to exercise its buyout option on the Silver Slipper Casino and Hotel; our expectations regarding the potential construction of an additional hotel tower and related amenities at Silver Slipper Casino and Hotel; our expectations regarding our ability to extend the lease at the Grand Lodge Casino; adequacy of our financial resources to fund operating requirements and planned capital expenditures and to meet our debt and contractual obligations; expected sources of revenue; anticipated sources of funds; anticipated or potential legislative actions; beliefs in connection with our marketing efforts; factors that affect the financial performance of our properties; adequacy of our insurance; competitive outlook; outcome of legal matters; impact of recently issued accounting standards; and estimates regarding certain accounting and tax matters, among others.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those risks discussed in Part I, Item 1A—Risk Factors and throughout Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of our Annual Report on Form 10-K for the year ended December 31, 2021,2022, and in Part II, Item 1A—Risk Factors and elsewhere of this Form 10-Q. In addition, you should consult other disclosures made by us (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by us. You should read this Form 10-Q, and the documents that we reference in this Form 10-Q and have filed with the SEC, and our Annual Report on Form 10-K for the year ended December 31, 2021,2022, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
35
We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions, except as required by law. New risks emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
38
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures — As of September 30, 2022,March 31, 2023, we completed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2022,March 31, 2023, our disclosure controls and procedures are effective at a reasonable assurance level in timely alerting them to material information relating to us, which is required to be included in our periodic SEC filings.
We have established controls and procedures designed at the reasonable assurance level to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting — There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions and other matters arising in the normal course of business. We do not believe that the final outcome of these matters will have a material adverse effect on our consolidated financial position or results of operations. We maintain what we believe is adequate insurance coverage to further mitigate the risks of such proceedings.
Item 1A. Risk Factors
There were no material changes from the risk factors set forth under Part I, Item 1A “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”). The continuing COVID-19 pandemic, including the emergence of new variants, has heightened, and in some cases manifested, certain of the risks we normally face in our business, including those disclosed in the Annual Report.2022.
3936
Item 6. Exhibits
| | |
Exhibit | | Description |
31.1* | | |
31.2* | | |
32.1** | | |
32.2** | | |
101.INS* | | Inline XBRL Instance Document |
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* | | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
* Filed herewith.
** Furnished herewith.
4037
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
| FULL HOUSE RESORTS, INC. | |
| | |
Date: | By: | /s/ DANIEL R. LEE |
| | Daniel R. Lee Chief Executive Officer (on behalf of the Registrant and as principal executive officer) |
| | |
| | |
Date: | By: | /s/ LEWIS A. FANGER |
| | Lewis A. Fanger Chief Financial Officer (on behalf of the Registrant and as principal financial officer and as principal accounting officer) |
4138