UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20222023
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission File Number: 000-24993
GOLDEN ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
| | | | | |
Minnesota | 41-1913991 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
6595 S Jones Boulevard | |
Las Vegas, Nevada | 89118 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (702) 893-7777
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, $0.01 par value | GDEN | 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, 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.
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Large accelerated filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
Emerging growth company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 2, 2022,1, 2023, the registrant had 28,980,48828,837,173 shares of common stock, $0.01 par value per share, outstanding.
GOLDEN ENTERTAINMENT, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN ENTERTAINMENT, INC.
Consolidated Balance Sheets
(In thousands, except per share data)
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | (unaudited) | | | | (unaudited) | | |
ASSETS | ASSETS | | ASSETS | |
Current assets | Current assets | | Current assets | |
Cash and cash equivalents | Cash and cash equivalents | $ | 202,283 | | | $ | 220,540 | | Cash and cash equivalents | | $ | 110,474 | | | $ | 136,889 | |
Accounts receivable, net of allowance for credit losses of $659 and $481 at March 31, 2022 and December 31, 2021, respectively | 20,535 | | | 18,720 | | |
Accounts receivable, net of allowance for credit losses of $931 and $775 at March 31, 2023 and December 31, 2022, respectively | | Accounts receivable, net of allowance for credit losses of $931 and $775 at March 31, 2023 and December 31, 2022, respectively | | 15,097 | | | 20,495 | |
Prepaid expenses | Prepaid expenses | 24,244 | | | 15,108 | | Prepaid expenses | | 21,257 | | | 25,900 | |
Inventories | Inventories | 7,427 | | | 6,637 | | Inventories | | 7,239 | | | 8,117 | |
Other | Other | 3,184 | | | 2,933 | | Other | | 8,234 | | | 13,610 | |
Assets held for sale | | Assets held for sale | | 293,365 | | | 39,562 | |
Total current assets | Total current assets | 257,673 | | | 263,938 | | Total current assets | | 455,666 | | | 244,573 | |
Property and equipment, net | Property and equipment, net | 890,625 | | | 904,220 | | Property and equipment, net | | 812,308 | | | 840,731 | |
Operating lease right-of-use assets, net | Operating lease right-of-use assets, net | 170,775 | | | 179,251 | | Operating lease right-of-use assets, net | | 80,619 | | | 147,893 | |
Goodwill | Goodwill | 158,396 | | | 158,396 | | Goodwill | | 80,751 | | | 158,396 | |
Intangible assets, net | Intangible assets, net | 96,169 | | | 98,058 | | Intangible assets, net | | 49,718 | | | 89,552 | |
Deferred income tax assets | Deferred income tax assets | 18,698 | | | — | | Deferred income tax assets | | 11,822 | | | 11,822 | |
Other assets | Other assets | 11,803 | | | 11,701 | | Other assets | | 9,000 | | | 15,703 | |
Total assets | Total assets | $ | 1,604,139 | | | $ | 1,615,564 | | Total assets | | $ | 1,499,884 | | | $ | 1,508,670 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
Current liabilities | Current liabilities | | Current liabilities | |
Current portion of long-term debt and finance leases | Current portion of long-term debt and finance leases | $ | 655 | | | $ | 1,057 | | Current portion of long-term debt and finance leases | | $ | 477 | | | $ | 555 | |
Current portion of operating leases | Current portion of operating leases | 38,770 | | | 40,151 | | Current portion of operating leases | | 12,989 | | | 42,200 | |
Accounts payable | Accounts payable | 23,880 | | | 19,102 | | Accounts payable | | 17,722 | | | 25,168 | |
Accrued payroll and related | Accrued payroll and related | 24,188 | | | 31,309 | | Accrued payroll and related | | 19,556 | | | 21,227 | |
Accrued liabilities | Accrued liabilities | 47,212 | | | 35,347 | | Accrued liabilities | | 36,680 | | | 33,365 | |
Liabilities related to assets held for sale | | Liabilities related to assets held for sale | | 74,472 | | | 10,187 | |
Total current liabilities | Total current liabilities | 134,705 | | | 126,966 | | Total current liabilities | | 161,896 | | | 132,702 | |
Long-term debt, net and non-current finance leases | Long-term debt, net and non-current finance leases | 986,542 | | | 1,010,469 | | Long-term debt, net and non-current finance leases | | 901,405 | | | 900,464 | |
Non-current operating leases | Non-current operating leases | 148,131 | | | 155,098 | | Non-current operating leases | | 83,609 | | | 121,979 | |
Deferred income tax liabilities | Deferred income tax liabilities | — | | | 1,861 | | Deferred income tax liabilities | | 53 | | | 53 | |
Other long-term obligations | Other long-term obligations | 1,503 | | | 1,629 | | Other long-term obligations | | 448 | | | 552 | |
Total liabilities | Total liabilities | 1,270,881 | | | 1,296,023 | | Total liabilities | | 1,147,411 | | | 1,155,750 | |
Commitments and contingencies (Note 9) | — | | | — | | |
Commitments and contingencies (Note 10) | | Commitments and contingencies (Note 10) | | | | |
Shareholders’ equity | Shareholders’ equity | | Shareholders’ equity | |
Common stock, $.01 par value; authorized 100,000 shares; 28,980 and 28,830 common shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 290 | | | 288 | | |
Common stock, $.01 par value; authorized 100,000 shares; 28,837 and 28,179 common shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | Common stock, $.01 par value; authorized 100,000 shares; 28,837 and 28,179 common shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | 288 | | | 282 | |
Additional paid-in capital | Additional paid-in capital | 470,672 | | | 477,829 | | Additional paid-in capital | | 467,977 | | | 480,060 | |
Accumulated deficit | Accumulated deficit | (137,704) | | | (158,576) | | Accumulated deficit | | (115,792) | | | (127,422) | |
Total shareholders’ equity | Total shareholders’ equity | 333,258 | | | 319,541 | | Total shareholders’ equity | | 352,473 | | | 352,920 | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 1,604,139 | | | $ | 1,615,564 | | Total liabilities and shareholders’ equity | | $ | 1,499,884 | | | $ | 1,508,670 | |
The accompanying condensed notes are an integral part of these consolidated financial statements.
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Revenues | Revenues | | | | Revenues | | | |
Gaming | Gaming | $ | 190,787 | | | $ | 177,000 | | Gaming | $ | 188,087 | | | $ | 190,787 | |
Food and beverage | Food and beverage | 42,456 | | | 33,804 | | Food and beverage | 46,271 | | | 42,456 | |
Rooms | Rooms | 25,746 | | | 18,398 | | Rooms | 30,577 | | | 25,746 | |
Other | Other | 14,655 | | | 10,494 | | Other | 13,116 | | | 14,655 | |
Total revenues | Total revenues | 273,644 | | | 239,696 | | Total revenues | 278,051 | | | 273,644 | |
Expenses | Expenses | | | | Expenses | | | |
Gaming | Gaming | 105,651 | | | 96,372 | | Gaming | 106,926 | | | 105,651 | |
Food and beverage | Food and beverage | 31,457 | | | 23,541 | | Food and beverage | 34,022 | | | 31,457 | |
Rooms | Rooms | 12,474 | | | 9,610 | | Rooms | 14,781 | | | 12,474 | |
Other operating | Other operating | 3,976 | | | 2,696 | | Other operating | 3,830 | | | 3,976 | |
Selling, general and administrative | Selling, general and administrative | 60,910 | | | 53,591 | | Selling, general and administrative | 62,036 | | | 60,910 | |
Depreciation and amortization | Depreciation and amortization | 26,276 | | | 27,186 | | Depreciation and amortization | 23,508 | | | 26,276 | |
(Gain) loss on disposal of assets | (41) | | | 209 | | |
Gain on disposal of assets | | Gain on disposal of assets | (86) | | | (41) | |
Preopening expenses | Preopening expenses | 55 | | | 120 | | Preopening expenses | 384 | | | 55 | |
Total expenses | Total expenses | 240,758 | | | 213,325 | | Total expenses | 245,401 | | | 240,758 | |
Operating income | Operating income | 32,886 | | | 26,371 | | Operating income | 32,650 | | | 32,886 | |
Non-operating expense | Non-operating expense | | | | Non-operating expense | | | |
Interest expense, net | Interest expense, net | (15,118) | | | (16,048) | | Interest expense, net | (18,236) | | | (15,118) | |
Loss on debt extinguishment and modification | (181) | | | — | | |
Loss on debt extinguishment | | Loss on debt extinguishment | — | | | (181) | |
Total non-operating expense, net | Total non-operating expense, net | (15,299) | | | (16,048) | | Total non-operating expense, net | (18,236) | | | (15,299) | |
Income before income tax benefit | 17,587 | | | 10,323 | | |
Income tax benefit | 18,479 | | | 297 | | |
Income before income tax (provision) benefit | | Income before income tax (provision) benefit | 14,414 | | | 17,587 | |
Income tax (provision) benefit | | Income tax (provision) benefit | (2,784) | | | 18,479 | |
Net income | Net income | $ | 36,066 | | | $ | 10,620 | | Net income | $ | 11,630 | | | $ | 36,066 | |
| Weighted-average common shares outstanding | Weighted-average common shares outstanding | | Weighted-average common shares outstanding | |
Basic | Basic | 28,894 | | | 28,219 | | Basic | 28,308 | | | 28,894 | |
Diluted | Diluted | 32,149 | | | 30,414 | | Diluted | 30,904 | | | 32,149 | |
Net income per share | Net income per share | | | | Net income per share | | | |
Basic | Basic | $ | 1.25 | | | $ | 0.38 | | Basic | $ | 0.41 | | | $ | 1.25 | |
Diluted | Diluted | $ | 1.12 | | | $ | 0.35 | | Diluted | $ | 0.38 | | | $ | 1.12 | |
The accompanying notes are an integral part of these consolidated financial statements.
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Shareholders’ Equity
(In thousands)
(Unaudited)
| | | Common stock | | Additional Paid-In Capital | | Accumulated Deficit | | Total Shareholders’ Equity | | Common stock | | Additional Paid-In Capital | | Accumulated Deficit | | Total Shareholders’ Equity |
| | Shares | | Amount | | | Shares | | Amount | |
Balance, January 1, 2021 | 28,159 | | | $ | 282 | | | $ | 470,719 | | | $ | (309,739) | | | $ | 161,262 | | |
Balance, January 1, 2022 | | Balance, January 1, 2022 | 28,830 | | | $ | 288 | | | $ | 477,829 | | | $ | (158,576) | | | $ | 319,541 | |
Issuance of stock on options exercised and restricted stock units vested | Issuance of stock on options exercised and restricted stock units vested | 303 | | | 3 | | | 98 | | | — | | | 101 | | Issuance of stock on options exercised and restricted stock units vested | 419 | | | 4 | | | — | | | — | | | 4 | |
Repurchase of common stock | | Repurchase of common stock | (269) | | | (2) | | | — | | | (15,194) | | | (15,196) | |
Share-based compensation | Share-based compensation | — | | | — | | | 2,669 | | | — | | | 2,669 | | Share-based compensation | — | | | — | | | 3,141 | | | — | | | 3,141 | |
Tax benefit from share-based compensation | Tax benefit from share-based compensation | — | | | — | | | (3,439) | | | — | | | (3,439) | | Tax benefit from share-based compensation | — | | | — | | | (10,298) | | | — | | | (10,298) | |
Net income | Net income | — | | | — | | | — | | | 10,620 | | | 10,620 | | Net income | — | | | — | | | — | | | 36,066 | | | 36,066 | |
Balance, March 31, 2021 | 28,462 | | | $ | 285 | | | $ | 470,047 | | | $ | (299,119) | | | $ | 171,213 | | |
Balance, March 31, 2022 | | Balance, March 31, 2022 | 28,980 | | | $ | 290 | | | $ | 470,672 | | | $ | (137,704) | | | $ | 333,258 | |
| | | Common stock | | Additional Paid-In Capital | | Accumulated Deficit | | Total Shareholders’ Equity | | Common stock | | Additional Paid-In Capital | | Accumulated Deficit | | Total Shareholders’ Equity |
| | Shares | | Amount | | | Shares | | Amount | |
Balance, January 1, 2022 | 28,830 | | | $ | 288 | | | $ | 477,829 | | | $ | (158,576) | | | $ | 319,541 | | |
Balance, January 1, 2023 | | Balance, January 1, 2023 | 28,179 | | | $ | 282 | | | $ | 480,060 | | | $ | (127,422) | | | $ | 352,920 | |
Issuance of stock on options exercised and restricted stock units vested | Issuance of stock on options exercised and restricted stock units vested | 419 | | | 4 | | | — | | | — | | | 4 | | Issuance of stock on options exercised and restricted stock units vested | 658 | | | 6 | | | — | | | — | | | 6 | |
Repurchases of common stock | (269) | | | (2) | | | — | | | (15,194) | | | (15,196) | | |
Share-based compensation | Share-based compensation | — | | | — | | | 3,141 | | | — | | | 3,141 | | Share-based compensation | — | | | — | | | 3,290 | | | — | | | 3,290 | |
Tax benefit from share-based compensation | Tax benefit from share-based compensation | — | | | — | | | (10,298) | | | — | | | (10,298) | | Tax benefit from share-based compensation | — | | | — | | | (15,373) | | | — | | | (15,373) | |
Net income | Net income | — | | | — | | | — | | | 36,066 | | | 36,066 | | Net income | — | | | — | | | — | | | 11,630 | | | 11,630 | |
Balance, March 31, 2022 | 28,980 | | | $ | 290 | | | $ | 470,672 | | | $ | (137,704) | | | $ | 333,258 | | |
Balance, March 31, 2023 | | Balance, March 31, 2023 | 28,837 | | | $ | 288 | | | $ | 467,977 | | | $ | (115,792) | | | $ | 352,473 | |
The accompanying notes are an integral part of these consolidated financial statements.
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Cash flows from operating activities | Cash flows from operating activities | | | | Cash flows from operating activities | | | |
Net income | Net income | $ | 36,066 | | | $ | 10,620 | | Net income | $ | 11,630 | | | $ | 36,066 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | 26,276 | | | 27,186 | | Depreciation and amortization | 23,508 | | | 26,276 | |
Change in non-cash lease expense | 181 | | | 439 | | |
Non-cash lease expense | | Non-cash lease expense | 33 | | | 181 | |
Share-based compensation | Share-based compensation | 3,141 | | | 2,669 | | Share-based compensation | 3,290 | | | 3,141 | |
Amortization of debt issuance costs and discounts on debt | Amortization of debt issuance costs and discounts on debt | 1,117 | | | 1,155 | | Amortization of debt issuance costs and discounts on debt | 1,079 | | | 1,117 | |
(Gain) loss on disposal of assets | (41) | | | 209 | | |
Provision (benefit) for credit losses | 188 | | | (27) | | |
Gain on disposal of assets | | Gain on disposal of assets | (86) | | | (41) | |
Provision for credit losses | | Provision for credit losses | 232 | | | 188 | |
Deferred income taxes | Deferred income taxes | (20,559) | | | (297) | | Deferred income taxes | — | | | (20,559) | |
Loss on debt extinguishment and modification | 181 | | | — | | |
Loss on debt extinguishment | | Loss on debt extinguishment | — | | | 181 | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Accounts receivable | Accounts receivable | (2,003) | | | (1,352) | | Accounts receivable | 2,691 | | | (2,003) | |
Prepaid expenses, inventories and other current assets | Prepaid expenses, inventories and other current assets | (10,177) | | | (6,012) | | Prepaid expenses, inventories and other current assets | 6,690 | | | (10,177) | |
Other assets | Other assets | (167) | | | 9,472 | | Other assets | 144 | | | (167) | |
Accounts payable and other accrued expenses | Accounts payable and other accrued expenses | 9,492 | | | 17,791 | | Accounts payable and other accrued expenses | 5,434 | | | 9,492 | |
Other liabilities | Other liabilities | (177) | | | (9,659) | | Other liabilities | (99) | | | (177) | |
Net cash provided by operating activities | Net cash provided by operating activities | 43,518 | | | 52,194 | | Net cash provided by operating activities | 54,546 | | | 43,518 | |
Cash flows from investing activities | Cash flows from investing activities | | | | Cash flows from investing activities | | | |
Purchase of property and equipment, net of change in construction payables | Purchase of property and equipment, net of change in construction payables | (10,813) | | | (4,873) | | Purchase of property and equipment, net of change in construction payables | (25,072) | | | (10,813) | |
Proceeds from disposal of property and equipment | Proceeds from disposal of property and equipment | 90 | | | 223 | | Proceeds from disposal of property and equipment | 211 | | | 90 | |
Net cash used in investing activities | Net cash used in investing activities | (10,723) | | | (4,650) | | Net cash used in investing activities | (24,861) | | | (10,723) | |
Cash flows from financing activities | Cash flows from financing activities | | | | Cash flows from financing activities | | | |
Repayments of term loan | Repayments of term loan | (25,000) | | | — | | Repayments of term loan | — | | | (25,000) | |
Repayments of notes payable | Repayments of notes payable | (433) | | | (1,483) | | Repayments of notes payable | (24) | | | (433) | |
Principal payments under finance leases | Principal payments under finance leases | (117) | | | (839) | | Principal payments under finance leases | (125) | | | (117) | |
Payment for debt extinguishment and modification costs | Payment for debt extinguishment and modification costs | (12) | | | — | | Payment for debt extinguishment and modification costs | — | | | (12) | |
Tax withholding on share-based payments | Tax withholding on share-based payments | (10,298) | | | (3,439) | | Tax withholding on share-based payments | (15,373) | | | (10,298) | |
Proceeds from issuance of common stock, net of costs | Proceeds from issuance of common stock, net of costs | 4 | | | 3 | | Proceeds from issuance of common stock, net of costs | 6 | | | 4 | |
Proceeds from exercise of stock options | — | | | 98 | | |
Repurchases of common stock | Repurchases of common stock | (15,196) | | | — | | Repurchases of common stock | — | | | (15,196) | |
Net cash used in financing activities | Net cash used in financing activities | (51,052) | | | (5,660) | | Net cash used in financing activities | (15,516) | | | (51,052) | |
Cash and cash equivalents | | | | |
Change in cash and cash equivalents | Change in cash and cash equivalents | (18,257) | | | 41,884 | | Change in cash and cash equivalents | 14,169 | | | (18,257) | |
Balance, beginning of period | Balance, beginning of period | 220,540 | | | 103,558 | | Balance, beginning of period | 142,034 | | | 220,540 | |
Balance, end of period | Balance, end of period | $ | 202,283 | | | $ | 145,442 | | Balance, end of period | $ | 156,203 | | | $ | 202,283 | |
Cash and cash equivalents | | Cash and cash equivalents | | | |
Cash and cash equivalents | | Cash and cash equivalents | $ | 110,474 | | | $ | 202,283 | |
Cash and cash equivalents included in assets held for sale | | Cash and cash equivalents included in assets held for sale | 45,729 | | | — | |
Balance, end of period | | Balance, end of period | $ | 156,203 | | | $ | 202,283 | |
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Supplemental cash flow disclosures | Supplemental cash flow disclosures | | | | Supplemental cash flow disclosures | | | |
Cash paid for interest | Cash paid for interest | $ | 6,435 | | | $ | 7,630 | | Cash paid for interest | $ | 11,109 | | | $ | 6,435 | |
Non-cash investing and financing activities | Non-cash investing and financing activities | | Non-cash investing and financing activities | |
Payables incurred for capital expenditures | Payables incurred for capital expenditures | $ | 2,790 | | | $ | 561 | | Payables incurred for capital expenditures | $ | 2,342 | | | $ | 2,790 | |
Loss on debt extinguishment and modification | 181 | | | — | | |
Loss on debt extinguishment | | Loss on debt extinguishment | — | | | 181 | |
Operating lease right-of-use assets obtained in exchange for lease obligations | Operating lease right-of-use assets obtained in exchange for lease obligations | 4,352 | | | 28,681 | | Operating lease right-of-use assets obtained in exchange for lease obligations | 110 | | | 4,352 | |
The accompanying notes are an integral part of these consolidated financial statements.
GOLDEN ENTERTAINMENT, INC.
Condensed Notes to Consolidated Financial Statements (Unaudited)
Note 1 — Nature of Business and Basis of Presentation
Overview
Golden Entertainment, Inc. and its wholly-owned subsidiaries own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on casino and distributed gaming operations (including gaming in the Company’s branded taverns). The Company’s portfolio includes 10ten casino properties located in Nevada and Maryland. The Company’s Nevada Taverns segment is comprised of the operation of its branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area. The Company’s distributed gaming operations involve the installation, maintenance and operation of slot machines and amusement devices in third-party non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana, as well as the operation of branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area.Montana. Unless otherwise indicated, the terms “Golden” and the “Company,” refer to Golden Entertainment, Inc. together with its subsidiaries.
The Company conducts its business through 4five reportable segments: Nevada Casino Resorts, Nevada Locals Casinos, Maryland Casino Resort, Nevada Taverns, and Distributed Gaming. Each reportable segment is comprised of the following properties and operations: | | | | | | | | |
Reportable Segment | | Location |
Nevada Casino Resorts | | |
The STRAT Hotel, Casino & SkyPod (“The STRAT”) | | Las Vegas, Nevada |
Aquarius Casino Resort (“Aquarius”) | | Laughlin, Nevada |
Edgewater Hotel & Casino Resort (“Edgewater”) | | Laughlin, Nevada |
Colorado Belle Hotel & Casino Resort (“Colorado Belle”) (1) | | Laughlin, Nevada |
| | |
Nevada Locals Casinos | | |
Arizona Charlie’s Boulder | | Las Vegas, Nevada |
Arizona Charlie’s Decatur | | Las Vegas, Nevada |
Gold Town Casino | | Pahrump, Nevada |
Lakeside Casino & RV Park | | Pahrump, Nevada |
Pahrump Nugget Hotel Casino (“Pahrump Nugget”) | | Pahrump, Nevada |
| | |
Maryland Casino Resort | | |
Rocky Gap Casino Resort (“Rocky Gap”) | | Flintstone, Maryland |
Nevada Taverns | | |
64 branded tavern locations | | Nevada |
Distributed Gaming | | |
Nevada distributed gaming | | Nevada |
Nevada taverns | | Nevada |
Montana distributed gaming | | Montana |
(1)As a result of the impact of the 2019 novel coronavirus (“COVID-19”) pandemic, theThe operations of the Colorado Belle remain suspended.
ImpactOn August 24, 2022, the Company entered into definitive agreements to sell Rocky Gap to Century Casinos, Inc. (“Century”) and VICI Properties, L.P. (“VICI”), an affiliate of COVID-19
In responseVICI Properties Inc., for aggregate consideration of $260.0 million (the “Rocky Gap Transactions”). Specifically, Century agreed to acquire the operations of Rocky Gap from Golden for $56.1 million in cash (subject to adjustment based on Rocky Gap’s working capital and cage cash at closing), subject to the COVID-19 pandemic,conditions and terms set forth therein, and VICI agreed to acquire the real estate assets relating to Rocky Gap from Golden for $203.9 million in cash, subject to the conditions and terms set forth therein. The Rocky Gap Transactions are required by their terms to close concurrently and the Company expects the Rocky Gap Transactions to close during the weeksecond quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions. Refer to discussion in “Note 2 — Assets Held for Sale” for further information.On March 16, 20203, 2023, the Governors of Nevada, Maryland and Montana issued emergency executive orders mandating temporary closures of all of the Company’s properties and suspension of the distributed gaming operations at third-party locations. The Company re-opened its casino properties and resumedentered into definitive agreements to sell its distributed gaming operations during the secondin Nevada and third quartersMontana (the “Distributed Gaming Operations”) to J&J Ventures Gaming, LLC (“J&J Gaming”), for aggregate consideration of 2020. However, the implementation of protocols intended to protect team members, gaming patrons and guests from potential COVID-19 exposure continued to limit$322.5 million. Specifically, J&J Gaming will acquire the Company’s Distributed Gaming Operations in Nevada for $213.5 million in cash plus purchased cash, comprised of cash and cash equivalents related to such operations post re-opening. While someat the time of these restrictions were eased during 2021,closing (subject to adjustment based on working capital and purchased cash at closing), and the Company’s propertiesDistributed Gaming operations in Montana for $109 million in cash plus purchased cash, comprised of cash and distributed gamingcash equivalents related to such operations may beat the time of closing (subject to adjustment based on working capital and purchased cash at closing), subject to temporary, complete or partial closures in the future and it is unknown how the uncertainties associated with the pandemic will continue to impact the Company’s operations. Further, as a result of the impact of the pandemic, the operations of the Colorado Belle property remain suspended.
Temporary closures of the Company’s operations due to the COVID-19 pandemic resulted in lease concessions for certain of the Company’s taverns and route locations in 2020, some of which continued in 2021. Such concessions provided for deferral and, in some instances, forgiveness of rent payments with no substantive amendments to the consideration due per the terms of theeach
original contractcase to the conditions and did not result in substantial changes interms set forth therein (the “Distributed Gaming Transactions”). The sale of the Company’s obligations under such leases.Nevada Distributed Gaming Operations is contingent upon the closing of the sale of the Montana Distributed Gaming Operations. The Company electedexpects the Distributed Gaming Transactions to account forclose during the deferred rent as variable lease payments, which resulted in a reductionfourth quarter of the rent expense of $1.7 million for the three months ended March 31, 2021. Rent expense that was not forgiven was recorded in future periods as those deferred payments were paid2023, subject to the Company’s lessors.satisfaction or waiver of customary regulatory approvals and closing conditions. Refer to discussion in “Note 2 — Assets Held for Sale” for further information.Basis of Presentation
The unaudited consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial information. Accordingly, certain information normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) has been condensed and/or omitted. For further information, refer to the audited consolidated financial statements of the Company for the year ended December 31, 20212022 and the notes thereto included in the Company’s Annual Report on Form 10-K (the “Annual Report”) previously filed with the SEC. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, which included only normal recurring adjustments, necessary to present fairly the Company’s results for the periods presented. Results for interim periods should not be considered indicative of the results to be expected for the full year and should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report. The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Reclassifications were made to the Company’s prior period consolidated financial statements to conform to the current period presentation, where applicable. These reclassifications had no effect on previously reported net income.
Significant Accounting Policies
There have been no changes to the significant accounting policies disclosed in the Company’s Annual Report.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and highly liquid investments with original maturities of three months or less. As of March 31, 2023, the Company had $156.2 million in cash and cash equivalents, which included $45.7 million of cash and cash equivalents related to assets held for sale. Although cash and cash equivalents balances may at times exceed the federal insured deposit limit, the Company believes such risk is mitigated by the quality of the institutions holding such deposits.
Net Income Per Share
Basic net income per share is calculated by dividing net income by the weighted-average common shares outstanding. Diluted net income per share in profitable periods reflects the effect of all potentially dilutive common shares outstanding by dividing net income by the weighted-average of all common and potentially dilutive shares outstanding. In the event of a net loss, diluted shares are not considered because of their anti-dilutive effect. For the three months ended March 31, 2023, diluted net income per share excluded the weighted average effect of 51,819 shares of common stock, related to time-based and performance-based restricted stock units due to such shares being anti-dilutive. No shares of common stock related to time-based and performance-based restricted stock units were anti-dilutive for the three months ended March 31, 2022.
Recent Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.Codification (“ASC”). The Company considers the applicability and impact of all ASUs. While management continues to assess the possible impact of the adoption of new accounting standards and the future adoption of the new accounting standards that are not yet effective on the Company’s financial statements, management currently believes that the following new standards have or may have an impact on the Company’s consolidated financial statements and disclosures:
Accounting Standards Issued and Adopted
In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors — Certain Leases with Variable Lease Payments. The ASU addresses an issue related to a lessor’s accounting for lease contracts that have variable lease payments that do not depend on a reference index or a rate and would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. The amendment allows the lessor to classify and account for such lease contracts as operating. The Company adopted the standard effective January 1, 2022, and the adoption did not have a material impact on the Company’s financial statements or disclosures.
Accounting Standards Issued but Not Yet Adopted
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU improves the accounting for revenue contracts with customers acquired in a business combination by addressing diversity in practice and inconsistency related to recognition of contract assets and liabilities acquired in a business combination. The provisions of this ASU require that an acquiring entity account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts. The Company adopted the standard is effective for fiscal years beginning after December 15, 2022January 1, 2023, and interim periods within those fiscal years with early adoption permitted. The Company does not expect the impact of the adoption of this ASU to bedid not have a material to itsimpact on the Company’s financial statements or disclosures.
Management does not believe that any other recently issued accounting standards that are not yet effective are likely to have a
material impact on the Company’s financial statements.
Note 2 — Assets Held for Sale
The Company classifies assets as held for sale when a sale is probable, is expected to be completed within one year, and the asset group meets all of the accounting criteria to be classified as held for sale.
As discussed in “Note 1 — Nature of Business and Basis of Presentation,” on August 24, 2022, the Company entered into definitive agreements to sell Rocky Gap. The Rocky Gap Transactions are expected to close in the second quarter of 2023, subject to satisfaction or waiver of customary regulatory approvals and closing conditions. As a result, the assets related to the Rocky Gap property were classified as held for sale as of September 30, 2022 and the Company ceased recording depreciation and amortization of the long-lived assets included in the sale from the date of execution of the definitive agreements. Operations of Rocky Gap have historically been presented in the Company’s Maryland Casino Resort reportable segment. As discussed in “Note 1 — Nature of Business and Basis of Presentation,” on March 3, 2023, the Company entered into definitive agreements to sell its Distributed Gaming Operations. The Distributed Gaming Transactions are expected to close during the fourth quarter of 2023, subject to satisfaction or waiver of customary regulatory approvals and closing conditions. As a result, the assets related to the Distributed Gaming Operations were classified as held for sale as of March 31, 2023 and the Company ceased recording depreciation and amortization of the long-lived assets included in the sale from the date of execution of the definitive agreements. Distributed Gaming Operations have historically been presented in the Company’s Distributed Gaming reportable segment. The carrying amounts of the assets and liabilities held for sale in the Rocky Gap Transactions and Distributed Gaming Transactions consisted of the following:
| | | | | | | | | | | | | | | | | |
| March 31, 2023 |
(In thousands) | Maryland Casino Resort | | Distributed Gaming | | Total |
ASSETS | | | | | |
Current assets | | | | | |
Cash and cash equivalents | $ | 6,389 | | | $ | 39,340 | | | $ | 45,729 | |
Accounts receivables, net | 1,929 | | | 2,900 | | | 4,829 | |
Prepaid expenses | 431 | | | 1,480 | | | 1,911 | |
Inventories | 642 | | | 3 | | | 645 | |
Other | 169 | | | 2,615 | | | 2,784 | |
Total current assets held for sale | 9,560 | | | 46,338 | | | 55,898 | |
Property and equipment, net | 23,877 | | | 28,087 | | | 51,964 | |
Operating lease right-of-use assets, net | 5,980 | | | 55,815 | | | 61,795 | |
Goodwill | — | | | 77,645 | | | 77,645 | |
Intangible assets, net | 1,064 | | | 38,506 | | | 39,570 | |
Other assets | 5 | | | 6,488 | | | 6,493 | |
Total assets held for sale | $ | 40,486 | | | $ | 252,879 | | | $ | 293,365 | |
LIABILITIES | | | | | |
Current liabilities | | | | | |
Current portion of finance leases | $ | 104 | | | $ | — | | | $ | 104 | |
Current portion of operating leases | 436 | | | 27,203 | | | 27,639 | |
Accounts payable | 1,291 | | | 992 | | | 2,283 | |
Accrued payroll and related | 1,092 | | | 1,231 | | | 2,323 | |
Other accrued liabilities | 2,413 | | | 5,353 | | | 7,766 | |
Total current liabilities related to assets held for sale | 5,336 | | | 34,779 | | | 40,115 | |
Non-current finance leases | 193 | | | — | | | 193 | |
Non-current operating leases | 5,206 | | | 28,892 | | | 34,098 | |
Other long-term obligations | — | | | 66 | | | 66 | |
Total liabilities related to assets held for sale | $ | 10,735 | | | $ | 63,737 | | | $ | 74,472 | |
Revenues and pretax income generated by the assets held for sale were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
(In thousands) | Maryland Casino Resort | | Distributed Gaming | | Maryland Casino Resort | | Distributed Gaming |
Revenues | $ | 18,128 | | | $ | 90,401 | | | $ | 17,892 | | | $ | 90,768 | |
Pretax income | 5,117 | | | 7,543 | | | 4,488 | | | 8,364 | |
Note 3 — Property and Equipment
Property and equipment, net, consisted of the following:
| (In thousands) | (In thousands) | March 31, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
Land | Land | $ | 125,240 | | | $ | 125,240 | | Land | $ | 125,240 | | | $ | 125,240 | |
Building and improvements | Building and improvements | 940,370 | | | 937,759 | | Building and improvements | 924,670 | | | 923,157 | |
Furniture and equipment | Furniture and equipment | 251,101 | | | 246,323 | | Furniture and equipment | 174,239 | | | 244,735 | |
Construction in process | Construction in process | 19,640 | | | 16,347 | | Construction in process | 32,292 | | | 23,224 | |
Property and equipment | Property and equipment | 1,336,351 | | | 1,325,669 | | Property and equipment | 1,256,441 | | | 1,316,356 | |
Accumulated depreciation | Accumulated depreciation | (445,726) | | | (421,449) | | Accumulated depreciation | (444,133) | | | (475,625) | |
Property and equipment, net | Property and equipment, net | $ | 890,625 | | | $ | 904,220 | | Property and equipment, net | $ | 812,308 | | | $ | 840,731 | |
Depreciation expense for property and equipment, including finance leases, was $24.4$22.2 million and $25.0$24.4 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
The Company reviews the carrying amounts of its long-lived assets, other than goodwill and indefinite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Due to the significant impact of the COVID-19 pandemic on the Company’s operations, the Company decided to keep operations of its Colorado Belle property suspended. Based on the results of its interim impairment assessments conducted during the three months ended March 31, 20222023 and 2021,2022, the Company concluded that there was no impairment of the Company’s long-lived assets.
To the extent the Company becomes aware of new facts and circumstances that would result in a triggering event, the Company will revise its cash flow projections accordingly, as its estimates of future cash flows are highly dependent upon certain assumptions, including, but not limited to, the nature, timing, and extent of elimination or change of the restrictions on the Company’s operations and the extent and timing of the economic recovery globally, nationally, and specifically within the gaming industry. If such assumptions are not accurate, the Company may be required to record impairment charges in future periods, whether in connection with its regular review procedures, or earlier, if an indicator of an impairment is present prior to such evaluation.
Note 34 — Goodwill and Intangible Assets
The Company tests goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter of each year, and whenever events or circumstances indicate that it is more likely than not that the carrying value of a reporting unit exceeds its fair value. Finite-lived intangible assets are evaluated for potential impairment whenever there is an indicator that the carrying value of an asset group may not be recoverable. Based on the results of its interim impairment assessments conducted during the three months ended March 31, 20222023 and 2021,2022, the Company concluded that there was no impairment of the Company’s goodwill and intangible assets.
The following table summarizes goodwill activitybalances by reportable segment:
| (In thousands) | (In thousands) | Nevada Casino Resorts | | Nevada Locals Casinos | | Maryland Casino Resort | | Distributed Gaming | | Total Goodwill | (In thousands) | | Nevada Casino Resorts | | Nevada Locals Casinos | | Maryland Casino Resort | | Nevada Taverns | | Distributed Gaming | | Total Goodwill |
Balance, December 31, 2021 and March 31, 2022 | $ | 22,105 | | | $ | 38,187 | | | $ | — | | | $ | 98,104 | | | $ | 158,396 | | |
Balance, December 31, 2022 | | Balance, December 31, 2022 | | $ | 22,105 | | | $ | 38,187 | | | $ | — | | | $ | 20,459 | | | $ | 77,645 | | | $ | 158,396 | |
Balance, March 31, 2023 | | Balance, March 31, 2023 | | $ | 22,105 | | | $ | 38,187 | | | $ | — | | | $ | 20,459 | | | $ | — | | | $ | 80,751 | |
Intangible assets, net, consisted of the following:
| | | March 31, 2022 | | March 31, 2023 |
(In thousands) | (In thousands) | Useful Life (Years) | | Gross Carrying Value | | Cumulative Amortization | | Cumulative Impairment | | Intangible Assets, Net | (In thousands) | Useful Life (Years) | | Gross Carrying Value | | Cumulative Amortization | | Cumulative Impairment | | Intangible Assets, Net |
Indefinite-lived intangible assets | Indefinite-lived intangible assets | | | | | | | | | | Indefinite-lived intangible assets | | | | | | | | | |
Trade names | Trade names | Indefinite | | $ | 53,690 | | | $ | — | | | $ | (6,890) | | | $ | 46,800 | | Trade names | Indefinite | | $ | 53,690 | | | $ | — | | | $ | (6,890) | | | $ | 46,800 | |
| | 53,690 | | | — | | | (6,890) | | | 46,800 | | | 53,690 | | | — | | | (6,890) | | | 46,800 | |
Amortizing intangible assets | Amortizing intangible assets | | | | | | | | | Amortizing intangible assets | | | | | | | | |
Customer relationships | 4-16 | | 81,105 | | | (37,346) | | | — | | | 43,759 | | |
Player relationships | Player relationships | 2-14 | | 42,990 | | | (39,973) | | | — | | | 3,017 | | Player relationships | 2-14 | | 42,990 | | | (40,616) | | | — | | | 2,374 | |
Non-compete agreements | Non-compete agreements | 2-5 | | 9,840 | | | (8,543) | | | — | | | 1,297 | | Non-compete agreements | 2-5 | | 3,957 | | | (3,413) | | | — | | | 544 | |
Gaming license (1) | 15 | | 2,100 | | | (1,245) | | | — | | | 855 | | |
In-place lease value | In-place lease value | 4 | | 1,170 | | | (1,170) | | | — | | | — | | In-place lease value | 4 | | 1,170 | | | (1,170) | | | — | | | — | |
Leasehold interest | Leasehold interest | 4 | | 570 | | | (570) | | | — | | | — | | Leasehold interest | 4 | | 570 | | | (570) | | | — | | | — | |
Other | Other | 4-25 | | 1,814 | | | (1,373) | | | — | | | 441 | | Other | 4-25 | | 45 | | | (45) | | | — | | | — | |
| | 139,589 | | | (90,220) | | | — | | | 49,369 | | | 48,732 | | | (45,814) | | | — | | | 2,918 | |
Balance, March 31, 2022 | | | $ | 193,279 | | | $ | (90,220) | | | $ | (6,890) | | | $ | 96,169 | | |
Balance, March 31, 2023 | | Balance, March 31, 2023 | | $ | 102,422 | | | $ | (45,814) | | | $ | (6,890) | | | $ | 49,718 | |
(1)Relates to Rocky Gap.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
(In thousands) | Useful Life (Years) | | Gross Carrying Value | | Cumulative Amortization | | Cumulative Impairment | | Intangible Assets, Net |
Indefinite-lived intangible assets | | | | | | | | | |
Trade names | Indefinite | | $ | 53,690 | | | $ | — | | | $ | (6,890) | | | $ | 46,800 | |
| | | 53,690 | | | — | | | (6,890) | | | 46,800 | |
Amortizing intangible assets | | | | | | | | | |
Customer relationships | 4-16 | | 81,105 | | | (35,879) | | | — | | | 45,226 | |
Player relationships | 2-14 | | 42,990 | | | (39,812) | | | — | | | 3,178 | |
Non-compete agreements | 2-5 | | 9,840 | | | (8,349) | | | — | | | 1,491 | |
Gaming license (1) | 15 | | 2,100 | | | (1,210) | | | — | | | 890 | |
In-place lease value | 4 | | 1,170 | | | (1,155) | | | — | | | 15 | |
Leasehold interest | 4 | | 570 | | | (570) | | | — | | | — | |
Other | 4-25 | | 1,814 | | | (1,356) | | | — | | | 458 | |
| | | 139,589 | | | (88,331) | | | — | | | 51,258 | |
Balance, December 31, 2021 | | | $ | 193,279 | | | $ | (88,331) | | | $ | (6,890) | | | $ | 98,058 | |
(1)Relates to Rocky Gap. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
(In thousands) | Useful Life (Years) | | Gross Carrying Value | | Cumulative Amortization | | Cumulative Impairment | | Intangible Assets, Net |
Indefinite-lived intangible assets | | | | | | | | | |
Trade names | Indefinite | | $ | 53,690 | | | $ | — | | | $ | (6,890) | | | $ | 46,800 | |
| | | 53,690 | | | — | | | (6,890) | | | 46,800 | |
Amortizing intangible assets | | | | | | | | | |
Customer relationships | 4-16 | | 81,105 | | | (41,743) | | | — | | | 39,362 | |
Player relationships | 2-14 | | 42,990 | | | (40,455) | | | — | | | 2,535 | |
Non-compete agreements | 2-5 | | 9,840 | | | (9,114) | | | — | | | 726 | |
In-place lease value | 4 | | 1,170 | | | (1,170) | | | — | | | — | |
Leasehold interest | 4 | | 570 | | | (570) | | | — | | | — | |
Other | 4-25 | | 1,366 | | | (1,237) | | | — | | | 129 | |
| | | 137,041 | | | (94,289) | | | — | | | 42,752 | |
Balance, December 31, 2022 | | | $ | 190,731 | | | $ | (94,289) | | | $ | (6,890) | | | $ | 89,552 | |
Total amortization expense related to intangible assets was $1.91.3 million and $2.2$1.9 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
To the extent the Company becomes aware of new facts and circumstances that would result in a triggering event, the Company will revise its cash flow projections accordingly, as its estimates of future cash flows are highly dependent upon certain assumptions, including, but not limited to, the nature, timing, and extent of elimination or change
Note 5 — Accrued Liabilities
Accrued liabilities consisted of the restrictions on the Company’s operations and the extent and timing of the economic recovery globally, nationally, and specifically within the gaming industry. If such assumptions are not accurate, the Company may be required to record impairment charges in future periods, whether in connection with its regular review procedures, or earlier, if an indicator of an impairment is present prior to such evaluation.following:
| | | | | | | | | | | |
(In thousands) | March 31, 2023 | | December 31, 2022 |
Interest | $ | 12,089 | | | $ | 6,036 | |
Gaming liabilities | 10,632 | | | 10,952 | |
Other accrued liabilities | 5,833 | | | 5,027 | |
Accrued taxes, other than income taxes | 5,738 | | | 9,291 | |
Deposits | 2,388 | | | 2,059 | |
Total current accrued liabilities | $ | 36,680 | | | $ | 33,365 | |
Note 4 — Accrued Liabilities
Accrued liabilities consisted of the following:
| | | | | | | | | | | |
(In thousands) | March 31, 2022 | | December 31, 2021 |
Interest | $ | 13,173 | | | $ | 6,168 | |
Gaming liabilities | 11,232 | | | 12,311 | |
Accrued taxes, other than income taxes | 9,609 | | | 9,035 | |
Other accrued liabilities | 8,706 | | | 5,549 | |
Deposits | 4,492 | | | 2,284 | |
Total current accrued liabilities | $ | 47,212 | | | $ | 35,347 | |
Note 56 — Long-Term Debt
Long-term debt, net, consisted of the following:
| (In thousands) | (In thousands) | March 31, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
Term Loan | Term Loan | $ | 625,000 | | | $ | 650,000 | | Term Loan | $ | 575,000 | | | $ | 575,000 | |
2026 Unsecured Notes | 2026 Unsecured Notes | 375,000 | | | 375,000 | | 2026 Unsecured Notes | 335,461 | | | 335,461 | |
Finance lease liabilities | Finance lease liabilities | 2,887 | | | 3,005 | | Finance lease liabilities | 2,041 | | | 2,157 | |
Notes payable | Notes payable | 168 | | | 602 | | Notes payable | 66 | | | 90 | |
Total long-term debt and finance leases | Total long-term debt and finance leases | 1,003,055 | | | 1,028,607 | | Total long-term debt and finance leases | 912,568 | | | 912,708 | |
Unamortized discount | Unamortized discount | (10,778) | | | (11,689) | | Unamortized discount | (7,176) | | | (7,899) | |
Unamortized debt issuance costs | Unamortized debt issuance costs | (5,080) | | | (5,392) | | Unamortized debt issuance costs | (3,510) | | | (3,790) | |
Total long-term debt and finance leases after debt issuance costs and discount | Total long-term debt and finance leases after debt issuance costs and discount | 987,197 | | | 1,011,526 | | Total long-term debt and finance leases after debt issuance costs and discount | 901,882 | | | 901,019 | |
Current portion of long-term debt and finance leases | Current portion of long-term debt and finance leases | (655) | | | (1,057) | | Current portion of long-term debt and finance leases | (477) | | | (555) | |
Long-term debt, net and finance leases | Long-term debt, net and finance leases | $ | 986,542 | | | $ | 1,010,469 | | Long-term debt, net and finance leases | $ | 901,405 | | | $ | 900,464 | |
Senior Secured Credit Facility
In October 2017, the Company entered into a senior secured credit facility consisting of a $900 million senior secured first lien credit facility (consisting of an $800 million term loan (the “Term Loan”) maturing on October 20, 2024 and a $100 million revolving credit facility (the “Revolving Credit Facility”)) with JPMorgan Chase Bank, N.A. (as administrative agent and collateral agent), the lenders party thereto and the other entities party thereto (the “Credit Facility”). The Revolving Credit Facility was subsequently increased from $100 million to $200 million in 2018, increasing the total Credit Facility capacity to $1.0$1 billion. On October 12, 2021, the Company further modified the terms of the Revolving Credit Facility by increasing its size to $240 million and extending the maturity date from October 20, 2022 to April 20, 2024. The Company incurred $0.7 million in debt modification costs and fees related to this modification of the Revolving Credit Facility that have been deferred and are being amortized over the term of the Revolving Credit Facility using the straight-line method.
As of March 31, 2022,2023, the Company had $625$575 million in principal amount of outstanding Term Loan borrowings under its Credit Facility, no outstanding letters of credit and no borrowings under the Revolving Credit Facility, such that the full borrowing availability of $240 million under the Revolving Credit Facility was available to the Company. The weighted-average effective interest rate on the Company’s outstanding borrowings under the Credit Facility was approximately 3.75%7.53% for the three months ended March 31, 2022.2023.
The Company made multiple prepayments of the principal under the Term Loan during the years ended December 31, 2022 and 2021, thereby eliminating the requirement to make any further quarterly installment payments prior to maturity. During the three months ended As of March 31, 2022, the Company prepaid an additional $25 million of 2023, tprincipal under the Term Loan, which reduced thehe final installment payment due at the maturity date of October 20, 2024 to $625 million. During the three months ended March 31, 2022, theis $575 million. The Company recorded a non-cash charge in the amount of $0.2 million for the accelerated amortization of the debt issuance costs and discount related to the prepayment of the Term Loan.Loan for the three months ended March 31, 2022.
The Company was in compliance with its financial and other covenants under the Credit Facility as of March 31, 2022.2023.
Senior Unsecured Notes
On April 15, 2019, the Company issued $375 million in principal amount of 7.625% Senior Notes due 2026 (“2026 Unsecured
Notes”) in a private placement to institutional buyers at face value. The 2026 Unsecured Notes bear interest at 7.625%, payable semi-annually on April 15th and October 15th of each year.
During the year ended December 31, 2022, the Company repurchased $39.5 million in principal amount of 2026 Unsecured Notes in open market transactions, thereby reducing the final principal payment due at maturity to $335.5 million.
Note 67 — Shareholders’ Equity and Stock Incentive Plans
Share Repurchase Program
On March 12, 2019,August 3, 2021, the Company’s Board of Directors authorized thea share repurchase program of up$50 million, which was re-authorized on May 3, 2022 and subsequently increased to $25$75 million worth of shares of common stock, subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors.on November 1, 2022. Share repurchases may be made from time to time in open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements, including compliance with the Company’s finance agreements. There is no minimum number of shares that the Company is required to repurchase and the repurchase program may be suspended or
discontinued at any time without prior notice.
On August 3, 2021, the Company’s Board of Directors increased this authorization to $50 million. In December 2021, the Company repurchased 226,485 shares of its common stock pursuant to its share repurchase program in open market transactions at an average price of $46.87 per share, resulting in a charge to accumulated deficit of $10.6 million. In March 2022, the Company repurchased 268,791 shares of its common stock pursuant to its share repurchase program in open market transactions at an average price of $56.54 per share, resulting in a charge to accumulated deficit of $15.2 million. As of March 31, 2022,2023, the Company had $24.2$61.5 million of remaining share repurchase availability under its August 3, 2021November 1, 2022 authorization.
The Company did not repurchase any of its shares during the three months ended March 31, 2023. The following table includes the Company’s share repurchase authorization. On May 3, 2022,activity for the Company’s Board of Directors re-authorized its $50 millionthree months ended March 31, 2022:
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2022 |
(In thousands, except per share data) | | |
Shares repurchased (1) | | 269 | |
Total cost, including brokerage fees | | $ | 15,196 | |
Average repurchase price per share (2) | | $ | 56.54 | |
(1)All repurchased shares were retired and constitute authorized but unissued shares.
(2)Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share repurchase program.is calculated based on unrounded numbers.
Stock Options
The following table summarizes the Company’s stock option activity:
| | | Stock Options | | Stock Options |
| | Shares | | Weighted-Average Exercise Price | | Shares | | Weighted-Average Exercise Price |
Outstanding at January 1, 2022 | 2,141,494 | | | $ | 11.31 | | |
Outstanding at January 1, 2023 | | Outstanding at January 1, 2023 | 2,071,994 | | | $ | 11.35 | |
Granted | Granted | — | | | $ | — | | Granted | — | | | $ | — | |
Exercised | Exercised | (36,000) | | | $ | 9.80 | | Exercised | (41,140) | | | $ | 16.37 | |
Cancelled | Cancelled | — | | | $ | — | | Cancelled | — | | | $ | — | |
Expired | Expired | — | | | $ | — | | Expired | — | | | $ | — | |
Outstanding at March 31, 2022 | 2,105,494 | | | $ | 11.33 | | |
Exercisable at March 31, 2022 | 2,105,494 | | | $ | 11.33 | | |
Outstanding at March 31, 2023 | | Outstanding at March 31, 2023 | 2,030,854 | | | $ | 11.25 | |
Exercisable at March 31, 2023 | | Exercisable at March 31, 2023 | 2,030,854 | | | $ | 11.25 | |
There was no share-based compensation expense related to stock options for the three months ended March 31, 20222023 and the Company recorded share-based compensation expense of $0.2 million for the three months ended March 31, 2021.2022. The Company did not have any remaining unrecognized share-based compensation expense related to stock options as of March 31, 20222023 and 2021.2022.
Restricted Stock Units
The following table summarizes the Company’s activity related to time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”):
| | | RSUs | | PSUs | | RSUs | | PSUs |
| | Shares | | Weighted-Average Grant Date Fair Value | | Shares (1) | | Weighted-Average Grant Date Fair Value | | Shares | | Weighted-Average Grant Date Fair Value | | Shares (1) | | Weighted-Average Grant Date Fair Value |
Outstanding at January 1, 2022 | | 815,420 | | | $ | 18.17 | | | 705,577 | | (2) | $ | 13.84 | | |
Outstanding at January 1, 2023 | | Outstanding at January 1, 2023 | | 547,671 | | | $ | 26.09 | | | 1,076,159 | | (2) | $ | 17.17 | |
Granted | Granted | | 97,447 | | | $ | 53.51 | | | 83,579 | | | $ | 53.51 | | Granted | | 137,126 | | | $ | 41.92 | | | 114,898 | | (1) | $ | 41.92 | |
Performance adjustment | | — | | | $ | — | | | 534,383 | | (3) | $ | — | | |
Vested | Vested | | (338,644) | | | $ | 15.79 | | | (247,380) | | (4) | $ | 12.51 | | Vested | | (265,689) | | | $ | 20.98 | | | (733,574) | | (3) | $ | 8.86 | |
Cancelled | Cancelled | | (18,693) | | | $ | 14.95 | | | — | | | $ | — | | Cancelled | | — | | | $ | — | | | (8,699) | | (4) | $ | 53.51 | |
Outstanding at March 31, 2022 | | 555,530 | | | $ | 25.93 | | | 1,076,159 | | | $ | 19.79 | | |
Outstanding at March 31, 2023 | | Outstanding at March 31, 2023 | | 419,108 | | | $ | 34.50 | | | 448,784 | | | $ | 36.40 | |
(1) The number of shares for the PSUs listed as granted represents the “target” number of PSUs granted to each recipient eligible to vest if the Company meets its “target” performance goals for the applicable period. The actual number of
PSUs eligible to vest for those PSUs will vary depending on whether or not the Company meets or exceeds the applicable threshold, target, or maximum performance goals for the PSUs, with 200% of the “target” number of PSUs eligible to vest at “maximum” performance levels.
(2) Includes 171,194 shares of PSUs granted in March 2019 that were certified below target during the three months ended March 31, 2021 and vested during the three months ended March 31, 2022. Also includes PSUs granted in March 2020 and March 2021 at “target.”200% of the target and PSUs granted in March 2022 at target.
(3) Represents PSUs granted in March 2020 that vested in March 2023 at 200% of the target PSUs.
(4) The Company’s financial results for the applicable performance goals were certified during the three months ended March 31, 20222023 and 200%89.6% of the target PSUs granted in March 2020 and March 20212022 were deemed “earned” and will be eligible to vest on March 14, 2023 and 2024, respectively.
(4) Includes 171,194 shares“earned.” This resulted in the reduction of the PSUs granted in March 2019 and 76,186 shares2022 to the number of PSUs granted in March 2020 that vested during the three months ended March 31, 2022.eligible to vest from 83,579 to 74,880.
Share-based compensation expense related to RSUs was $1.6$1.8 million and $1.3$1.6 million for the three months ended March 31, 20222023 and 2021,2022, respectively. Share-based compensation expense related to PSUs was $1.5 million and $1.2 million for each of the three months ended March 31, 20222023 and 2021, respectively.2022.
As of March 31, 2022,2023, there was $12.5$12.2 million and $11.3$9.7 million of unamortizedunrecognized share-based compensation expense related to RSUs and PSUs, respectively, which is expected to be recognized over a weighted-average period of 2.21.8 years foand 1.6 years forr both RSUs and PSUs.PSUs, respectively. As of March 31, 2021,2022, there was $12.5 million and $11.3 million and $6.2 million of unamortizedunrecognized share-based compensation expense related to RSUs and PSUs, respectively, which is expected to be recognized over a weighted-average period of 2.42.2 years for both RSUs and PSUs.
As of March 31, 2022,2023, a total of 3,152,4164,010,605 shares of the Company’s common stock remained available for grants of awards under the Golden Entertainment, Inc. 2015 Incentive Award Plan, which includes the annual increase in the number of shares available for grant on January 1, 20222023 of 1,153,2101,127,160 shares.
Note 78 — Income Tax
The Company’s effective income tax rates were (105.1)%19.3% and (2.9)(105.1)% for the three months ended March 31, 2023 and 2022, and 2021, respectively. IncomeThe Company recorded income tax benefitexpense of $18.5 million and $0.3$2.8 million for the three months ended March 31, 20222023 and 2021, respectively, primarily related toincome tax benefit of $18.5 million for the change in valuation allowance against the Company’s deferred tax assets during the periods.three months ended March 31, 2022.
The Company performs a continuing evaluation of its deferred tax asset valuation allowance on a quarterly basis. The Company has concluded that, as ofDuring the three months ended March 31, 2022, the Company concluded that it iswas more likely than not that the Company willwould generate sufficient taxable income within the applicable net operating loss carry-forward periods to realize a portion of its deferred tax assets. This conclusion, and the resultingassets, which resulted in a partial reversal of the deferred tax asset valuation allowance is based upon considerationin that period. The partial reversal of several factors, including the Company’s three-year cumulative pre-tax bookdeferred tax asset valuation allowance during the three months ended March 31, 2022 resulted in the negative effective income positiontax rate and its forecastincome tax benefit for that period. The effective income tax rate and the income tax expense for the three months ended March 31, 2023 differed from the federal tax rate of future profitability.21% primarily due to the limitation on tax deductions for executive compensation in excess of $1 million under Section 162(m) of the Internal Revenue Code.
As of March 31, 2022,2023, the Company’s 2017 and 2018 federal tax returns were under audit by the IRS.
As of March 31, 20222023 and December 31, 2021,2022, the Company had no material uncertain tax positions.
Note 89 — Financial Instruments and Fair Value Measurements
Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Management’s assessment of the significance of a particular input to the fair value measurement
requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.
Financial Instruments
The carrying values of the Company’s cash and cash equivalents, accounts receivable, other current assets and accounts payable
approximate fair value because of the short duration of these financial instruments.
The following table summarizes the fair value measurement of the Company’s long-term debt:
| | | March 31, 2022 | | March 31, 2023 |
(In thousands) | (In thousands) | Carrying Amount | | Fair Value | | Fair Value Hierarchy | (In thousands) | Carrying Amount | | Fair Value | | Fair Value Hierarchy |
Term Loan | Term Loan | $ | 625,000 | | | $ | 621,094 | | | Level 2 | Term Loan | $ | 575,000 | | | $ | 575,000 | | | Level 2 |
2026 Unsecured Notes | 2026 Unsecured Notes | 375,000 | | | 390,450 | | | Level 2 | 2026 Unsecured Notes | 335,461 | | | 338,312 | | | Level 2 |
Finance lease liabilities | Finance lease liabilities | 2,887 | | | 2,887 | | | Level 3 | Finance lease liabilities | 2,041 | | | 2,041 | | | Level 3 |
Notes payable | Notes payable | 168 | | | 168 | | | Level 3 | Notes payable | 66 | | | 66 | | | Level 3 |
Total debt | Total debt | $ | 1,003,055 | | | $ | 1,014,599 | | | Total debt | $ | 912,568 | | | $ | 915,419 | | |
| | | December 31, 2021 | | December 31, 2022 |
(In thousands) | (In thousands) | Carrying Amount | | Fair Value | | Fair Value Hierarchy | (In thousands) | Carrying Amount | | Fair Value | | Fair Value Hierarchy |
Term Loan | Term Loan | $ | 650,000 | | | $ | 650,813 | | | Level 2 | Term Loan | $ | 575,000 | | | $ | 575,000 | | | Level 2 |
2026 Unsecured Notes | 2026 Unsecured Notes | 375,000 | | | 390,938 | | | Level 2 | 2026 Unsecured Notes | 335,461 | | | 330,630 | | | Level 2 |
Finance lease liabilities | Finance lease liabilities | 3,005 | | | 3,005 | | | Level 3 | Finance lease liabilities | 2,157 | | | 2,157 | | | Level 3 |
Notes payable | Notes payable | 602 | | | 602 | | | Level 3 | Notes payable | 90 | | | 90 | | | Level 3 |
Total debt | Total debt | $ | 1,028,607 | | | $ | 1,045,358 | | | Total debt | $ | 912,708 | | | $ | 907,877 | | |
The estimated fair value of the Company’s Term Loan and 2026 Unsecured Notes is based on a relative value analysis performed as of March 31, 20222023 and December 31, 2021.2022. The finance lease liabilities and notes payable are fixed-rate debt, are not traded and do not have observable market inputs, and therefore, their fair value is estimated to be equal to the carrying value.
Note 910 — Commitments and Contingencies
Participation Agreements
The Company enters into certain slot placement contracts in the form of participation agreements. Under participation agreements, the Company and the business location each hold a state issued gaming license in order to be able to receive a percentage of gaming revenue earned on the Company’s slot machines. The business location retains a percentage of the gaming revenue generated from the Company’s slot machines. The Company is considered to be the principal in these arrangements and therefore, records its share of revenue generated under participation agreements on a gross basis with the business location’s share of revenue recorded as gaming expenses.
The aggregate contingent payments recognized by the Company as gaming expenses under participation agreements were $52.8$53.3 million and $54.1$52.8 million for the three months ended March 31, 20222023 and 2021,2022, respectively.
Legal Matters and Other
From time to time, the Company is involved in a variety of lawsuits, claims, investigations and other legal proceedings arising in the ordinary course of business, including proceedings concerning labor and employment matters, personal injury claims, breach of contract claims, commercial disputes, business practices, intellectual property, tax and other matters for which the Company records reserves. Although lawsuits, claims, investigations and other legal proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of its currently pending matters should not have a material adverse effect on its business, financial condition, results of operations or liquidity. Regardless of the outcome, legal proceedings can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors. In addition, it is possible that an unfavorable resolution of one or more such proceedings could in the future materially and adversely affect the Company’s business, financial condition, results of operations or liquidity in a particular period.
In January 2021, the Company was affected by a ransomware cyber-attack that temporarily disrupted the Company’s access to certain information located on the Company’s network and incurred expenses relating thereto. The Company’s financial information and business operations were not materially affected. The Company implemented a variety of measures to further
enhance its cybersecurity protections and minimize the impact of any future cyber incidents. The Company has insurance related to this event and has recovered a portion of the costs it incurred to remediate this matter, which amounts were received and recorded during 2021 and the three months ended March 31, 2022.
In September 2018, the Company entered into an agreement with American Wagering, Inc. and William Hill U.S. HoldCo, Inc. (collectively, “William Hill”), which contemplated that William Hill would be obligated to make a one-time payment to the Company in the event of a change of control transaction with respect to William Hill. Under this agreement, as amended, the April 22, 2021 acquisition of William Hill PLC by Caesars Entertainment, Inc. (“Caesars”) constituted the change of control event triggering this payment. On May 26, 2021, the Company, William Hill and Caesars executed an amendment to the agreement requiring William Hill and Caesars, as the acquiring party, to make an initial payment in the amount of $60 million by July 15, 2021 and to provide for a second contingent payment in the event of a sale of the William Hill business in the United Kingdom, as discussed below. The Company received this initial payment in July 2021 and recognized $60 million in non-operating income for the year ended December 31, 2021.
The May 26, 2021 amendment also provides for a contingent payment to be paid by Caesars to the Company of up to $15 million in the event Caesars completes a sale of the William Hill business in the United Kingdom. Under the amendment, the amount of this contingent payment is calculated in accordance with the terms set forth in the amendment and will depend on the amount of proceeds Caesars would receive from the sale, if any. In September 2021, Caesars announced that it executed an agreement to sell the non-US assets of William Hill to 888 Holdings Plc. In April 2022, Caesars announced that it lowered the sales price initially released in September 2021. Based upon the revised sales price announced by Caesars, as of March 31, 2022, the Company does not expect to receive any additional payments related to the contingency.
Note 1011 — Segment Information
The Company conducts its business through 4five reportable segments: Nevada Casino Resorts, Nevada Locals Casinos, Maryland Casino Resort, Nevada Taverns, and Distributed Gaming.
The Nevada Casino Resorts segment is comprised of destination casino resort properties offering a variety of food and beverage outlets, entertainment venues and other amenities. The casino resort properties in this segment cater primarily to a regional drive-in customer base seeking a value-oriented vacation experience, with guests typically traveling from Southern California or
Arizona. The Company’s casino resort properties in Nevada have a significantly larger number of hotel rooms compared to the other casino properties in its portfolio. While hotel stays at these casino resorts are typically longer, the overall frequency of visitation from guests is lower when compared to the Nevada Locals Casinos.
The Nevada Locals Casinos segment is comprised of casino properties that cater to local customers who generally live within a five-mile radius. The Company’s locals casino properties typically experience a higher frequency of customer visits compared to its casino resort properties in Nevada and Maryland, with many of the customers visiting the Company’s Nevada Locals Casinos on a weekly basis. The casino properties within this reportable segment have no or a limited number of hotel rooms and offer fewer food and beverage outlets or other amenities, with revenues primarily generated from slot machine play.
The Maryland Casino Resort segment is comprised of the Rocky Gap casino resort, which is geographically disparate from the Company’s Nevada properties, operates in a separate regulatory jurisdiction and has only a limited number of hotel rooms compared to the Nevada Casino Resorts. Rocky Gap caters to a regional drive-in customer base traveling from mid-Atlantic areas (Maryland, Virginia, Washington DC, Pennsylvania, West Virginia) and offers a full range of amenities, including various food and beverage outlets, signature golf course, spa and pool. As discussed in “Note 1 — Nature of Business and Basis of Presentation” and “Note 2 — Assets Held for Sale,” on August 24, 2022, the Company entered into definitive agreements to sell Rocky Gap. The Rocky Gap Transactions are required by their terms to close concurrently and the Company expects the Rocky Gap Transactions to close during the second quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions. The Nevada Taverns segment is comprised of branded tavern locations, where the Company controls the food and beverage operations as well as the slot machines located within the tavern. The Company’s branded taverns offer a casual, upscale environment catering to local patrons offering superior food, craft beer and other alcoholic beverages, and are typically limited to 15 slot machines.
The Distributed Gaming segment is comprised of the operation of slot machines and amusement devices in approximately 1,100nearly 1,000 third party non-casino locations, such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores, across Nevada and Montana with a limited number of slot machines in each location. Distributed Gaming operations cater to local residents with high frequency visitation to these locations. The Company places its slot machines and amusement devices in locations where it believes they will receive maximum customer traffic. As partdiscussed in “Note 1 — Nature of Business and Basis of Presentation” and “Note 2 — Assets Held for Sale,” on March 3, 2023, the Company entered into definitive agreements to sell the Distributed Gaming segment,Operations and classified the assets related to Distributed Gaming as held for sale as of March 31, 2023. The sale of the Nevada Distributed Gaming Operations is contingent upon the closing of the sale of the Montana Distributed Gaming Operations. The Company ownsexpects the Distributed Gaming Transactions to close during the fourth quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and operates a limited number of branded tavern locations, where it controls the food and beverage operations as well as the slot machines located within the tavern. The Company’s branded taverns offer a casual, upscale environment catering to local patrons offering superior food, craft beer and other alcoholic beverages, and are typically limited to 15 slot machines.closing conditions. The Corporate and Other segment includes the Company’s cash and cash equivalents, miscellaneous receivables and corporate overhead. Costs recorded in the Corporate and Other segment have not been allocated to the Company’s reportable segments because these costs are not easily allocable and to do so would not be practical.
The Company presents Adjusted EBITDA in its segment disclosures because it is the primary metric used by the Company’s chief operating decision makers in measuring both the Company’s past and future expectations of performance. Further, the Company’s
annual performance plan used to determine compensation of its executive officers and employees is tied to the Adjusted EBITDA metric. Adjusted EBITDA represents each segment’s earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, impairment of goodwill and intangible assets, acquisition and severance expenses, preopening and related expenses, gain or loss on disposal of assets, share-based compensation expenses, non-cash lease expense, and other non-cash charges that are deemed to be not indicative of the Company’s core operating results, calculated before corporate overhead (which is not allocated to each reportable segment).
Due to the Company’s use of Adjusted EBITDA as its measure of profit for its reportable segments, the Company includes a reconciliation of the total of the Company’s consolidated Adjusted EBITDA to the Company’s consolidated net income determined in accordance with GAAP. The Company also discloses Adjusted EBITDA at the reportable segment level, as set forth in the table below:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(In thousands) | | 2022 | | 2021 |
Revenues | | | | |
Nevada Casino Resorts | | | | |
Gaming | | $ | 44,230 | | | $ | 38,826 | |
Food and beverage | | 21,384 | | | 14,965 | |
Rooms | | 22,029 | | | 15,628 | |
Other | | 8,792 | | | 5,386 | |
Nevada Casino Resorts revenues | | $ | 96,435 | | | $ | 74,805 | |
Nevada Locals Casinos | | | | |
Gaming | | $ | 29,381 | | | $ | 29,536 | |
Food and beverage | | 6,179 | | | 5,513 | |
Rooms | | 2,244 | | | 1,478 | |
Other | | 2,085 | | | 2,018 | |
Nevada Locals Casinos revenues | | $ | 39,889 | | | $ | 38,545 | |
Maryland Casino Resort | | | | |
Gaming | | $ | 14,457 | | | $ | 13,032 | |
Food and beverage | | 1,648 | | | 1,442 | |
Rooms | | 1,473 | | | 1,292 | |
Other | | 314 | | | 334 | |
Maryland Casino Resort revenues | | $ | 17,892 | | | $ | 16,100 | |
Distributed Gaming | | | | |
Gaming | | $ | 102,719 | | | $ | 95,606 | |
Food and beverage | | 13,245 | | | 11,884 | |
Other | | 3,258 | | | 2,419 | |
Distributed gaming revenues | | $ | 119,222 | | | $ | 109,909 | |
Corporate and Other | | 206 | | | 337 | |
Total revenues | | $ | 273,644 | | | $ | 239,696 | |
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(In thousands) | | 2022 | | 2021 |
Adjusted EBITDA | | | | |
Nevada Casino Resorts | | $ | 33,575 | | | $ | 26,655 | |
Nevada Locals Casinos | | 20,038 | | | 19,552 | |
Maryland Casino Resort | | 5,572 | | | 4,873 | |
Distributed Gaming | | 22,053 | | | 20,880 | |
Corporate and Other | | (13,913) | | | (12,462) | |
Total Adjusted EBITDA | | 67,325 | | | 59,498 | |
Adjustments | | | | |
Depreciation and amortization | | (26,276) | | | (27,186) | |
Change in non-cash lease expense | | (181) | | | (439) | |
Share-based compensation | | (3,672) | | | (3,005) | |
Gain (loss) on disposal of assets | | 41 | | | (209) | |
Loss on debt extinguishment and modification | | (181) | | | — | |
Preopening and related expenses (1) | | (55) | | | (120) | |
Other, net | | (4,296) | | | (2,168) | |
Interest expense, net | | (15,118) | | | (16,048) | |
Income tax benefit | | 18,479 | | | 297 | |
Net Income | | $ | 36,066 | | | $ | 10,620 | |
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(In thousands) | | 2023 | | 2022 |
Revenues | | | | |
Nevada Casino Resorts | | | | |
Gaming | | $ | 42,293 | | | $ | 44,230 | |
Food and beverage | | 24,231 | | | 21,384 | |
Rooms | | 26,210 | | | 22,029 | |
Other | | 7,442 | | | 8,792 | |
Nevada Casino Resorts revenues | | $ | 100,176 | | | $ | 96,435 | |
Nevada Locals Casinos | | | | |
Gaming | | $ | 29,649 | | | $ | 29,381 | |
Food and beverage | | 6,691 | | | 6,179 | |
Rooms | | 2,822 | | | 2,244 | |
Other | | 2,076 | | | 2,085 | |
Nevada Locals Casinos revenues | | $ | 41,238 | | | $ | 39,889 | |
Maryland Casino Resort | | | | |
Gaming | | $ | 14,514 | | | $ | 14,457 | |
Food and beverage | | 1,866 | | | 1,648 | |
Rooms | | 1,545 | | | 1,473 | |
Other | | 203 | | | 314 | |
Maryland Casino Resort revenues | | $ | 18,128 | | | $ | 17,892 | |
Nevada Taverns | | | | |
Gaming | | $ | 13,025 | | | $ | 14,322 | |
Food and beverage | | 13,305 | | | 13,053 | |
Other | | 1,263 | | | 1,079 | |
Nevada Taverns revenue | | $ | 27,593 | | | $ | 28,454 | |
Distributed Gaming | | | | |
Gaming | | $ | 88,606 | | | $ | 88,397 | |
Food and beverage | | 178 | | | 192 | |
Other | | 1,617 | | | 2,179 | |
Distributed Gaming revenues | | $ | 90,401 | | | $ | 90,768 | |
Corporate and other | | 515 | | | 206 | |
Total revenues | | $ | 278,051 | | | $ | 273,644 | |
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(In thousands) | | 2023 | | 2022 |
Adjusted EBITDA | | | | |
Nevada Casino Resorts | | $ | 31,711 | | | $ | 33,575 | |
Nevada Locals Casinos | | 20,160 | | | 20,038 | |
Maryland Casino Resort | | 5,128 | | | 5,572 | |
Nevada Taverns | | 8,538 | | | 10,778 | |
Distributed Gaming | | 9,784 | | | 11,275 | |
Corporate and other | | (13,154) | | | (13,913) | |
Total Adjusted EBITDA | | 62,167 | | | 67,325 | |
Adjustments | | | | |
Depreciation and amortization | | (23,508) | | | (26,276) | |
Non-cash lease expense | | (33) | | | (181) | |
Share-based compensation | | (3,893) | | | (3,672) | |
Gain on disposal of assets | | 86 | | | 41 | |
Loss on debt extinguishment | | — | | | (181) | |
Preopening and related expenses (1) | | (384) | | | (55) | |
Other, net | | (1,785) | | | (4,296) | |
Interest expense, net | | (18,236) | | | (15,118) | |
Income tax (provision) benefit | | (2,784) | | | 18,479 | |
Net Income | | $ | 11,630 | | | $ | 36,066 | |
(1) Preopening and related expenses consist of labor, food, utilities, training, initial licensing, rent and organizational costs incurred in connection with the opening of branded tavern and casino locations as well as food and beverage and other venues within the casino locations.
Assets
The Company’s assets by reportable segment consisted of the following amounts: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Nevada Casino Resorts | | Nevada Locals Casinos | | Maryland Casino Resort | | Distributed Gaming | | Corporate and Other | | Consolidated |
Balance at March 31, 2022 | $ | 808,374 | | | $ | 166,486 | | | $ | 41,600 | | | $ | 403,218 | | | $ | 184,461 | | | $ | 1,604,139 | |
| | | | | | | | | | | |
Balance at December 31, 2021 | $ | 811,016 | | | $ | 165,362 | | | $ | 41,403 | | | $ | 411,342 | | | $ | 186,441 | | | $ | 1,615,564 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Nevada Casino Resorts | | Nevada Locals Casinos | | Maryland Casino Resort | | Nevada Taverns | | Distributed Gaming | | Corporate and Other | | Consolidated |
Balance at March 31, 2023 | $ | 782,939 | | | $ | 160,393 | | | $ | 40,486 | | | $ | 137,853 | | | $ | 252,879 | | | $ | 125,334 | | | $ | 1,499,884 | |
| | | | | | | | | | | | | |
Balance at December 31, 2022 | $ | 784,242 | | | $ | 164,580 | | | $ | 39,562 | | | $ | 145,065 | | | $ | 258,260 | | | $ | 116,961 | | | $ | 1,508,670 | |
Note 1112 — Related Party Transactions
The Company historically leased its A portion of the Company’s office headquarters building from a company 33% beneficially owned by Blake L. Sartini, 5% owned by a trust for the benefit of Mr. Sartini’s immediate family members (including Blake L. Sartini II) for which Mr. Sartini serves as trustee, and 3% beneficially owned by Stephen A. Arcana. On May 24, 2021 the building was sold to an independent third party, and therefore this lease is no longer with a related party. The rent expense for the office headquarters building prior to the sale of the building to an independent third party was $0.3 million for the three months ended March 31, 2021. Additionally, a portion of the office headquarters building was sublet to Sartini Enterprises, Inc., a company controlled by Mr. Sartini. Rental income for each of the three months ended March 31, 20222023 and 20212022 for the sublet portion of the office headquarters building was insignificant.less than $0.1 million. No amount was owed to the Company under such sublease as of March 31, 20222023 and December 31, 2021.2022. In addition, Goldenthe Company and Sartini Enterprises, Inc. participate in certain cost-sharing arrangements. TheNo amount was due and payable by the Company or to the Company under such arrangements was insignificant as of March 31, 20222023 and December 31, 2021.2022. Mr. Sartini serves as the Chairman of the Board and Chief Executive Officer of the Company and is co-trustee of The Blake L. Sartini and Delise F. Sartini Family Trust, which is a significant shareholder of the Company. Mr. Arcana serves as the Executive Vice President and Chief Operating Officer of the Company.
In November 2018, the Company entered into a lease agreement for additional office space in a building adjacent to the Company’s office headquarters building to be constructed and owned by a company 33% beneficially owned by Mr. Sartini, 5%3% beneficially owned by a trust for the benefitMr. Arcana, and 1.67% beneficially owned by each of Mr. Sartini’s immediate family membersthree children (including Blake L. Sartini II) for which Mr. Sartini serves as trustee, and 3% beneficially owned by Mr. Arcana.. The lease commenced in August 2020 and expires on December 31, 2030. The rent expense for the space was $0.1 million for each of the three months ended March 31, 20222023 and 2021.2022. Additionally, the lease agreement includes a right of first refusal for additional space on the second floor of the building.
From time to time, the Company’s executive officers and employees use a private aircraft leased to Sartini Enterprises, Inc. for
Company business purposes pursuant to aircraft time-sharing, co-user and cost-sharing agreements between the Company and Sartini Enterprises, Inc., all of which have been approved by the Audit Committee of the Board of Directors. The aircraft time-sharing, co-user and cost-sharing agreements specify the maximum expense reimbursement that Sartini Enterprises, Inc. can charge the Company under the applicable regulations of the Federal Aviation Administration for the use of the aircraft and the flight crew. Such costs include fuel, landing fees, hangar and tie-down costs away from the aircraft’s operating base, flight planning and weather contract services, crew costs and other related expenses. The Company’s compliance department regularly reviews these reimbursements. The Company did not use the aircraft and did not incur any costs incurred $0.1 million under the aircraft time-sharing, co-user and cost-sharing agreements with Sartini Enterprises, Inc. duringfor the three months ended March 31, 2023 and the Company did not incur any costs under the aircraft time-sharing, co-user and cost-sharing agreements with Sartini Enterprises, Inc. for the three months ended March 31, 2022. The Company paid $0.2 million under such agreements for the three months ended March 31, 2021. The Company wasis owed less than $0.1 million under such agreements as of March 31, 2022 2023 and tand no amount washe Company owed to or due from the Company$0.1 million under such agreements as of December 31, 2021.
Note 12 — Subsequent Events
The Company’s management evaluates subsequent events through the date of issuance of the consolidated financial statements. Other than the re-authorization of the Company’s share repurchase program discussed in “Note 6 — Shareholders’ Equity and Stock Incentive Plans,” there have been no subsequent events that occurred during such period that would require adjustment to or disclosure in the consolidated financial statements as of and for the three months ended March 31, 2022.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As used in this Quarterly Report on Form 10-Q, unless the context suggests otherwise, the terms “Golden,” “we,” “us” and “our” refer to Golden Entertainment, Inc. together with its subsidiaries.
The following information should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 20212022 (the “Annual Report”) previously filed with the Securities and Exchange Commission (“SEC”). Forward-Looking Statements
This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can generally be identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “potential,” “seek,” “should,” “think,” “will,” “would” and similar expressions, or they may use future dates. In addition, forward-looking statements include statements regarding the impactRocky Gap Transactions and Distributed Gaming Transactions (defined below), including the anticipated timing of the 2019 novel coronavirus (“COVID-19”) pandemic on our business; closing of the transactions and satisfaction of regulatory and other conditions; our strategies, objectives, business opportunities and plans for future expansion, developments or acquisitions; anticipated future growth and trends in our business or key markets; projections of future financial condition, operating results, income, capital expenditures, costs or other financial items; anticipated regulatory and legislative changes; and other characterizations of future events or circumstances as well as other statements that are not statements of historical fact. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. These forward-looking statements are subject to assumptions, risks and uncertainties that may change at any time, and readers are therefore cautioned that actual results could differ materially from those expressed in any forward-looking statements. Factors that could cause our actual results to differ materially include: risks and uncertainties related to the uncertaintyRocky Gap Transactions and Distributed Gaming Transactions, including the failure to obtain, or delays in obtaining, required regulatory approvals or clearances; the failure to satisfy any of the extent, durationclosing conditions to the Rocky Gap Transactions and effects of the COVID-19 pandemic and the response of governments; Distributed Gaming Transactions on a timely basis or at all; changes in national, regional and local economic and market conditions; legislative and regulatory matters (including the cost of compliance or failure to comply with applicable laws and regulations); increases in gaming taxes and fees in the jurisdictions in which we operate; our ability to realize the anticipated cost savings, synergies and other benefits of our casino and other acquisitions; litigation; increased competition; our ability to renew our distributed gaming contracts; reliance on key personnel (including our Chief Executive Officer, President and Chief Financial Officer, and Chief Operating Officer); the level of our indebtedness and our ability to comply with covenants in our debt instruments; the uncertainty of the extent, duration and effects of the COVID-19 pandemic and the response of governments; terrorist incidents; natural disasters; severe weather conditions (including weather or road conditions that limit access to our properties); the effects of environmental and structural building conditions; the effects of disruptions to our information technology and other systems and infrastructure; factors affecting the gaming, entertainment and hospitality industries generally; and other factors identified under the heading “Risk Factors” in our Annual Report and in Part II, Item 1A of this report, or appearing elsewhere in this report and in our other filings with the SEC. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the filing date of this report. We undertake no obligation to revise or update any forward-looking statements for any reason. Overview
We own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on casino and distributed gaming operations (including gaming in our branded taverns). Our portfolio includes ten casino properties located in Nevada and Maryland. The Nevada Taverns segment is comprised of the operation of our branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area. Our distributed gaming operations involve the installation, maintenance and operation of slot machines and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana, as well asMontana.
Rocky Gap Sale
On August 24, 2022, we entered into definitive agreements to sell Rocky Gap Casino Resort (“Rocky Gap”) to Century Casinos, Inc. (“Century”) and VICI Properties, L.P. (“VICI”), an affiliate of VICI Properties Inc., for aggregate consideration of $260.0 million (the “Rocky Gap Transactions”). Specifically, Century agreed to acquire the operationoperations of branded taverns targeting local patrons located primarilyRocky Gap from us for $56.1 million in the greater Las Vegas, Nevada metropolitan area.
Impact of COVID-19
In responsecash (subject to adjustment based on Rocky Gap’s working capital and cage cash at closing), subject to the COVID-19 pandemic, duringconditions and terms set forth therein, and VICI agreed to acquire the week of March 16, 2020 the Governors of Nevada, Maryland and Montana issued emergency executive orders mandating temporary closures of all of our properties and suspension of our distributed gaming operations at third-party locations. We re-opened our casino properties and resumed our distributed gaming operations during the second and third quarters of 2020. However, the implementation of protocols intendedreal estate assets relating to protect team members, gaming patrons and guestsRocky Gap from potential COVID-19 exposure continued to limit our operations post re-opening. While some of these restrictions were eased during 2021, our properties and distributed gaming operations may be subject to temporary, complete or partial closuresus for $203.9 million in the future and it is unknown how the uncertainties associated with the pandemic will continue to
impactcash, subject to the conditions and terms set forth therein. The Rocky Gap Transactions are required by their terms to close concurrently and we expect the Rocky Gap Transactions to close during the second quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions.
Distributed Gaming Operations Sale
On March 3, 2023, we entered into definitive agreements to sell our operations. Further, as a resultdistributed gaming operations in Nevada and Montana (the “Distributed Gaming Operations”) to J&J Ventures Gaming, LLC (“J&J Gaming”), for aggregate consideration of $322.5 million. Specifically, J&J Gaming will acquire our Distributed Gaming Operations in Nevada for $213.5 million in cash plus purchased cash, comprised of cash and cash equivalents related to such operations at the time of closing (subject to adjustment based on working capital and purchased cash at closing) and our Distributed Gaming Operations in Montana for $109 million in cash plus purchased cash, comprised of cash and cash equivalents related to such operations at the time of closing (subject to adjustment based on working capital and purchased cash at closing), subject to the conditions and terms set forth therein (the “Distributed Gaming Transactions”). The sale of the impactNevada Distributed Gaming Operations is contingent upon the closing of the pandemic, the operationssale of the Colorado Belle property remain suspended.Montana Distributed Gaming Operations. We expect the Distributed Gaming Transactions to close during the fourth quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions.
We anticipate being able to fund our operations over the next 12 months with the cash provided by our operating activities and, if needed, supplemented by the cash we currently have available and the borrowing capacity available under our $240 million revolving credit facility (the “Revolving Credit Facility”). To further enhance our liquidity position or to finance any future acquisition or other business investment initiatives, we may obtain additional financing, which could consist of debt, convertible debt or equity financing from public or private credit and capital markets.
Operations
We conduct our business through fourfive reportable segments: Nevada Casino Resorts, Nevada Locals Casinos, Maryland Casino Resort, Nevada Taverns, and Distributed Gaming.
The following table sets forth certain information regarding our operations by reportable segment as of March 31, 20222023 (certain amenities at our casino properties may remain closed or operate inas a limited capacity).result of the impact of the COVID-19 pandemic):
| | | Location | | Casino Space (Sq. ft.) | | Slot Machines | | Table Games | | Hotel Rooms | | Location | | Casino Space (Sq. ft.) | | Slot Machines | | Table Games | | Hotel Rooms |
Nevada Casino Resorts | Nevada Casino Resorts | | | | | | | | | | | Nevada Casino Resorts | | | | | | | | | | |
The STRAT Hotel, Casino & SkyPod (“The STRAT”) | The STRAT Hotel, Casino & SkyPod (“The STRAT”) | | Las Vegas, NV | | 80,000 | | 711 | | 45 | | | 2,429 | | The STRAT Hotel, Casino & SkyPod (“The STRAT”) | | Las Vegas, NV | | 80,000 | | 743 | | 39 | | | 2,429 | |
Aquarius Casino Resort (“Aquarius”) | Aquarius Casino Resort (“Aquarius”) | | Laughlin, NV | | 57,000 | | 1,095 | | 29 | | | 1,906 | | Aquarius Casino Resort (“Aquarius”) | | Laughlin, NV | | 69,750 | | 1,095 | | 29 | | | 1,906 | |
Edgewater Hotel & Casino Resort (“Edgewater”) | | Laughlin, NV | | 52,864 | | 643 | | 20 | | | 1,052 | | |
Colorado Belle Hotel & Casino Resort (“Colorado Belle”) (1) | | Laughlin, NV | | — | | | — | | | — | | | — | | |
| Edgewater Casino Resort (“Edgewater”) | | Edgewater Casino Resort (“Edgewater”) | | Laughlin, NV | | 57,457 | | 630 | | 13 | | | 1,037 | |
Colorado Belle Casino Resort (“Colorado Belle”) (1) | | Colorado Belle Casino Resort (“Colorado Belle”) (1) | | Laughlin, NV | | — | | | — | | | — | | | — | |
Nevada Locals Casinos | Nevada Locals Casinos | | Nevada Locals Casinos | |
Arizona Charlie’s Boulder | Arizona Charlie’s Boulder | | Las Vegas, NV | | 55,200 | | 648 | | — | | | 303 | | Arizona Charlie’s Boulder | | Las Vegas, NV | | 41,969 | | 606 | | — | | | 303 | |
Arizona Charlie’s Decatur | Arizona Charlie’s Decatur | | Las Vegas, NV | | 47,500 | | 713 | | 10 | | | 259 | | Arizona Charlie’s Decatur | | Las Vegas, NV | | 67,360 | | 710 | | 10 | | | 259 | |
Gold Town Casino | Gold Town Casino | | Pahrump, NV | | 10,000 | | 188 | | — | | | — | | Gold Town Casino | | Pahrump, NV | | 10,000 | | 185 | | — | | | — | |
Lakeside Casino & RV Park | Lakeside Casino & RV Park | | Pahrump, NV | | 10,000 | | 156 | | — | | | — | | Lakeside Casino & RV Park | | Pahrump, NV | | 11,009 | | 176 | | — | | | — | |
Pahrump Nugget Hotel Casino (“Pahrump Nugget”) | Pahrump Nugget Hotel Casino (“Pahrump Nugget”) | | Pahrump, NV | | 19,875 | | 326 | | 9 | | | 69 | | Pahrump Nugget Hotel Casino (“Pahrump Nugget”) | | Pahrump, NV | | 22,528 | | 342 | | 9 | | | 69 | |
| Maryland Casino Resort | Maryland Casino Resort | | Maryland Casino Resort | |
Rocky Gap Casino Resort (“Rocky Gap”) | | Flintstone, MD | | 25,447 | | 630 | | 16 | | | 198 | | |
| Rocky Gap | | Rocky Gap | | Flintstone, MD | | 25,447 | | 630 | | 16 | | | 198 | |
Nevada Taverns | | Nevada Taverns | |
64 branded tavern locations | | 64 branded tavern locations | | Nevada | | — | | | 1,018 | | | — | | | — | |
Distributed Gaming | Distributed Gaming | | Distributed Gaming | |
Nevada distributed gaming | Nevada distributed gaming | | Nevada | | — | | | 7,291 | | | — | | | — | | Nevada distributed gaming | | Nevada | | — | | | 6,928 | | | — | | | — | |
Nevada taverns | | Nevada | | — | | | 1,033 | | | — | | | — | | |
Montana distributed gaming | Montana distributed gaming | | Montana | | — | | | 3,527 | | | — | | | — | | Montana distributed gaming | | Montana | | — | | | 3,678 | | | — | | | — | |
Totals | Totals | | | 357,886 | | 16,961 | | 129 | | 6,216 | Totals | | | 385,520 | | 16,741 | | 116 | | 6,201 |
(1)The operations of the Colorado Belle remain suspended.
Nevada Casino Resorts
Our Nevada Casino Resorts segment is comprised of destination casino resort properties offering a variety of food and beverage
outlets, entertainment venues and other amenities. The casino resort properties in this segment cater primarily to a regional drive-in customer base seeking a value-oriented vacation experience, with guests typically traveling from Southern California or Arizona. Our casino resort properties in Nevada have a significantly larger number of hotel rooms compared to the other casino properties in our portfolio. While hotel stays at these casino resorts are typically longer, the overall frequency of visitation from guests is lower when compared to our Nevada Locals Casinos.
The STRAT: The STRAT is our premier casino resort property, located on Las Vegas Boulevard on the north end of the Las Vegas Strip. The STRAT comprises a casino, a hotel a retail center and the iconic SkyPod, which includes indoor and outdoor observation decks, thrill rides and the SkyJump attraction. In addition to hotel rooms, gaming and sportsbook facilities in an 80,000 square foot casino, The STRAT offers nineten restaurants, two rooftop pools, a fitness center, retail shops and entertainment facilities.
Laughlin casinos: We own and operate three casino resorts in Laughlin, Nevada, which is located approximately 90 miles from Las Vegas on the western bank of the Colorado River. In addition to hotel rooms, gaming and sportsbook facilities, the Aquarius has nine restaurants and the Edgewater offers sixfive restaurants. The Edgewater also offers dedicated entertainment venues, including the Edge Pavilion and the Laughlin Event Center. As noted above, the operations of the Colorado Belle remain suspended.
Nevada Locals Casinos
Our Nevada Locals Casinos segment is comprised of casino properties that cater to local customers who generally live within a five-mile radius. Our locals casino properties typically experience a higher frequency of customer visits compared to our casino resort properties in Nevada and Maryland, with many of our customers visiting our Nevada Locals Casinos on a weekly basis. The casino properties within this reportable segment have no or a limited number of hotel rooms and offer fewer food and beverage outlets or other amenities, with revenues primarily generated from slot machine play.
Arizona Charlie’s casinos: Our Arizona Charlie’s Boulder and Arizona Charlie’s Decatur casino properties primarily serve local Las Vegas gaming patrons, and provide an alternative experience to the Las Vegas Strip. In addition to hotel rooms, gaming, sportsbook and bingo facilities, Arizona Charlie’s Boulder offers five restaurants and an RV park with 221 RV hook-up sites and Arizona Charlie’s Decatur offers five restaurants.
Pahrump casinos: We own and operate three casino properties in Pahrump, Nevada, which is located approximately 60 miles from Las Vegas and is a gateway to Death Valley National Park. In addition to gaming, sportsbook and bingo facilities at our Pahrump casino properties, Pahrump Nugget offers 69 hotel rooms, a bowling center and a 5,200 square foot banquet and event center, and Lakeside Casino & RV Park offers 159 RV hook-up sites.
Maryland Casino Resort
Our Maryland Casino Resort segment is comprised of our AAA Four Diamond Award® winning Rocky Gap casino resort, which is geographically disparate from our Nevada properties, operates in a separate regulatory jurisdiction and has only a limited number of hotel rooms compared to our Nevada Casino Resorts. Rocky Gap caters to a regional drive-in customer base traveling from mid-Atlantic areas (i.e., Maryland, Virginia, Washington DC, Pennsylvania and West Virginia). Rocky Gap is situated on approximately 270 acres in the Rocky Gap State Park in Maryland, which we lease from the Maryland Department of Natural Resources (the “Maryland DNR”) under a 40-year ground lease expiring in 2052 (plus a 20-year renewal option). In addition to hotel rooms and gaming, Rocky Gap offers a full range of amenities, including three restaurants,various food and beverage outlets, a Jack Nicklaus signature golf course, spa and pool.pool and an event and conference center.
On August 24, 2022, we entered into definitive agreements to sell Rocky Gap for aggregate consideration of $260.0 million. The Rocky Gap Transactions are required by their terms to close concurrently and we expect the Rocky Gap Transactions to close during the second quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions.
Nevada Taverns
Our Nevada Taverns segment is comprised of branded tavern locations, where we control the food and beverage operations as well as the slot machines located within the tavern. Our branded taverns offer a casual, upscale environment catering to local patrons offering superior food, craft beer and other alcoholic beverages, and are typically limited to 15 slot machines. Most of our branded taverns are located in the greater Las Vegas, Nevada metropolitan area and cater to local patrons seeking more convenient entertainment establishments than traditional casino properties. Our tavern patrons are typically younger than traditional casino customers, which diversifies our customer demographic. Our tavern brands include PT’s Pub, PT’s Gold, PT’s Ranch, PT’s Place, Sean Patrick’s, SG Bar, Sierra Gold, and Sierra Junction. As of March 31, 2023, we owned and operated 64 branded taverns, which offered a total of over 1,000 onsite slot machines. We continue to look for opportunities to pursue additional tavern openings and acquisitions.
Distributed Gaming
Our Distributed Gaming segment is comprised of the operation of slot machines and amusement devices in approximately 1,100nearly 1,000 third-party non-casino locations, such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores, across Nevada and Montana, with a limited number of slot machines in each location. We own and operate over 11,80010,600 slot machines and amusement devices as part of our Distributed Gaming segment, with the majority of gaming devices offered at these locations being video poker machines. Distributed Gaming operations cater to local residents with high frequency visitation to these locations. We place our slot machines and amusement devices in locations where we believe they will receive maximum customer traffic.
As partIn August 2017, we became licensed as a video gaming terminal operator in Illinois. In October 2022, we surrendered our video gaming terminal operator license in Illinois due to inactivity. In October 2018, we received a conditional license to operate in Pennsylvania, providing for potential expansion.
Nevada law limits distributed gaming operations (also known as “restricted gaming” operations) to certain types of our Distributed Gaming segment, we ownnon-casino locations, including grocery stores, drug stores, convenience stores, restaurants, bars, taverns and operate a limited number of branded tavern locations,liquor stores, where we controlgaming is incidental to the foodprimary business being conducted at the location and beverage operations as well as the slot machines located within the tavern. Our branded taverns offer a casual, upscale environment catering to local patrons offering superior food, craft beer and other alcoholic beverages, andgames are typicallygenerally limited to 15 or fewer slot machines and no other forms of gaming activity. The gaming area in these business locations is typically small, and in many instances, segregated from the primary business area, including the use of alcoves in grocery stores and drug stores and installation of slot machines into the physical bar (also known as “bar top” slot machines) in bars and taverns. Such segregation provides greater oversight and supervision of the slot machines. MostUnder Montana law, distributed gaming operations are limited to business locations licensed to sell alcoholic beverages for on-premises consumption only, with such locations generally restricted to offering a maximum of our taverns are located in the greater Las Vegas, Nevada metropolitan area and cater to local patrons seeking more convenient entertainment establishments than traditional casino properties. Our tavern brands include PT’s Pub, PT’s Gold, PT’s Place, PT’s Ranch, Sean Patrick’s, Sierra Gold and SG Bar. As of March 31, 2022, we owned and operated 65 branded taverns, which offered a total of over 1,000 onsite20 slot machines. We continue to look for opportunistic and accretive opportunities to pursue additional tavern openings and acquisitions.
In Nevada, we generally enter into two types of slot placement contracts as part of our Distributed Gamingdistributed gaming business: space lease agreements and participation agreements. Under space lease agreements, we pay a fixed monthly rental fee for the right to install, maintain and operate our slot machines at a business location and we are the sole holder of the applicable gaming license that allows us to operate such slot machines. Under participation agreements, the business location retains a percentage of the gaming revenue generated from our slot machines, and as a result both the business location and Golden are required to hold a state-issued gaming license. In Montana, our slot and amusement device placement contracts are all participation agreements.
On March 3, 2023, we entered into definitive agreements to sell our Distributed Gaming Operations for aggregate consideration of $322.5 million. The sale of the Nevada Distributed Gaming Operations is contingent upon the closing of the sale of the Montana Distributed Gaming Operations. We expect the Distributed Gaming Transactions to close during the fourth quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions.
Results of Operations
The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the three months ended March 31, 20222023 and 2021.2022.
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
(In thousands) | (In thousands) | 2022 | | 2021 | (In thousands) | 2023 | | 2022 |
Revenues | Revenues | | | | Revenues | | | |
Gaming | Gaming | $ | 190,787 | | | $ | 177,000 | | Gaming | $ | 188,087 | | | $ | 190,787 | |
Food and beverage | Food and beverage | 42,456 | | | 33,804 | | Food and beverage | 46,271 | | | 42,456 | |
Rooms | Rooms | 25,746 | | | 18,398 | | Rooms | 30,577 | | | 25,746 | |
Other | Other | 14,655 | | | 10,494 | | Other | 13,116 | | | 14,655 | |
Total revenues | Total revenues | 273,644 | | | 239,696 | | Total revenues | 278,051 | | | 273,644 | |
Expenses | Expenses | | | | Expenses | | | |
Gaming | Gaming | 105,651 | | | 96,372 | | Gaming | 106,926 | | | 105,651 | |
Food and beverage | Food and beverage | 31,457 | | | 23,541 | | Food and beverage | 34,022 | | | 31,457 | |
Rooms | Rooms | 12,474 | | | 9,610 | | Rooms | 14,781 | | | 12,474 | |
Other operating | Other operating | 3,976 | | | 2,696 | | Other operating | 3,830 | | | 3,976 | |
Selling, general and administrative | Selling, general and administrative | 60,910 | | | 53,591 | | Selling, general and administrative | 62,036 | | | 60,910 | |
Depreciation and amortization | Depreciation and amortization | 26,276 | | | 27,186 | | Depreciation and amortization | 23,508 | | | 26,276 | |
(Gain) loss on disposal of assets | (41) | | | 209 | | |
Gain on disposal of assets | | Gain on disposal of assets | (86) | | | (41) | |
Preopening expenses | Preopening expenses | 55 | | | 120 | | Preopening expenses | 384 | | | 55 | |
Total expenses | Total expenses | 240,758 | | | 213,325 | | Total expenses | 245,401 | | | 240,758 | |
Operating income | Operating income | 32,886 | | | 26,371 | | Operating income | 32,650 | | | 32,886 | |
Non-operating expense | Non-operating expense | | | | Non-operating expense | | | |
Interest expense, net | Interest expense, net | (15,118) | | | (16,048) | | Interest expense, net | (18,236) | | | (15,118) | |
Loss on debt extinguishment and modification | (181) | | | — | | |
Loss on debt extinguishment | | Loss on debt extinguishment | — | | | (181) | |
Total non-operating expense, net | Total non-operating expense, net | (15,299) | | | (16,048) | | Total non-operating expense, net | (18,236) | | | (15,299) | |
Income before income tax benefit | 17,587 | | | 10,323 | | |
Income tax benefit | 18,479 | | | 297 | | |
Income before income tax (provision) benefit | | Income before income tax (provision) benefit | 14,414 | | | 17,587 | |
Income tax (provision) benefit | | Income tax (provision) benefit | (2,784) | | | 18,479 | |
Net income | Net income | $ | 36,066 | | | $ | 10,620 | | Net income | $ | 11,630 | | | $ | 36,066 | |
Three Months Ended March 31, 20222023 Compared to Three Months Ended March 31, 20212022
Revenues
The $33.9$4.4 million, or 14%, increase in revenues for the three months ended March 31, 2022 compared to the prior year period resulted from increases of $13.8 million, $8.7 million, $7.3 million and $4.1 million in gaming, food and beverage, room, and other revenues, respectively. The2%, increase in revenues for the three months ended March 31, 2022 was primarily due2023 compared to anthe prior year period resulted from increases of $3.8 million and $4.8 million in food and beverage and rooms revenues, respectively, offset by decreases of $2.7 million and $1.5 million in gaming and other revenues, respectively. The increase in occupancy of our hotelfood and beverage and rooms revenues for certain resort casino properties and guest visitation along with further easing of COVID-19 mitigation measures during the three months ended March 31, 2022 as compared2023 was primarily related to the prioraddition of new food and beverage outlets and an increase in average daily rates during the current year period. The decrease in gaming and other revenues was primarily driven by a decrease in the overall visitation to our properties during the current year period.
Operating Expenses
The $21.3$6.0 million, or 16%4%,increase in operating expenses for the three months ended March 31, 20222023 compared to the prior year period resulted from increases of $9.3$1.3 million, $7.9 million, $2.8$2.6 million and $1.3$2.3 million in gaming, food and beverage, room, and rooms operating expenses, respectively, offset by a decrease of $0.2 million in other operating expenses, respectively.expenses. The increase in operating expenses forwas primarily attributable to higher labor costs and cost of goods incurred during the three months ended March 31, 2022 2023was primarily driven by an increase in occupancy of our hotel rooms and guest visitation due to the easing of COVID-19 mitigation measures..
Selling, General and Administrative Expenses
The $7.3$1.1 million, or 14%2%, increase in selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 20222023 compared to the prior year period was primarily attributable to the further easingincrease in payroll and related expenses as well as an increase in costs related to utilities and maintenance contracts. SG&A expenses are comprised of COVID-19 mitigation measures during the three months ended March 31, 2022. In the prior year period, our operations continued to be subject to mandatory capacity limitation requirementsmarketing and the other COVID-19 related protocols discussed above, which resulted in loweradvertising,
payroll and other expenses. SG&A expenses are comprised of marketing and advertising, utilities, building rent, maintenance contracts, corporate office overhead, information technology, legal, accounting, third-party service providers, executive compensation, share-based compensation, payroll expenses and payroll taxes.
Depreciation and Amortization
The decrease in depreciation and amortization expenses for the three months ended March 31, 20222023 of $0.9$2.8 million, or 3%11%, compared to the prior year period was primarily related to ceasing of depreciation and amortization for assets classified as held for sale discussed in “Note 2 — Assets Held for Sale” in Part I, Item 1: Financial Statements. In addition, long-lived assets acquired in connection with the American Casino and Entertainment Properties, LLC acquisition beingbecame fully depreciated and amortized.amortized during the current year period. The decrease in depreciation and amortization expensesfor the three months ended March 31, 2023 was offset by the acceleration of depreciation on certain of our casino resort properties and depreciation on new assets placed in service. (Gain) LossGain on Disposal of Assets
Gain on disposal of assets for the three months ended March 31, 2023 and 2022 was primarily driven by sales of used equipment in our Distributed Gaming segment. Loss of $0.2 million for the comparable prior year period primarily related to the disposals of property andgaming equipment in our Distributed Gaming segment.
Preopening Expenses
Preopening expenses consist of labor, food, utilities, training, initial licensing, rent and organizational costs incurred in connection with the opening of branded tavern and casino locations as well as food and beverage and other venues within our casino locations. Preopening expenses for the three months ended March 31, 20222023 and 20212022 primarily related to new branded tavern openings within our planned expansion into new markets for our Distributed GamingNevada Taverns segment.
Non-Operating Expense, Net
The decrease of $0.7 million, or 5%,increase in non-operating expense, net, of $2.9 million, or 19%, for the three months ended March 31, 2022 over2023 compared to the prior year period was driven primarily by the decreaserelated to a $3.1 million, or 21%, increase in interest expense net, in the amount of $0.9 million due to the prepayment of our term loan borrowings, partiallyincrease in interest rates. The increase was offset by a non-cash charge in the amount of $0.2 million fordecrease in loss on debt extinguishment, since we did not prepay debt during the accelerated amortization of the debt issuance costs and discount, as discussed in “Note 5 — Long-Term Debt” in Part I, Item 1: Financial Statements.current year period. Income Taxes
The effective income tax rates wererate was 19.3% for the three months ended March 31, 2023, which differed from the federal income tax rate of 21% primarily due to the limitation on tax deductions for executive compensation in excess of $1 million under Section 162(m) of the Internal Revenue Code. The effective income tax rate was (105.1)% and (2.9)% for the three months ended March 31, 2022, and 2021, respectively, which differed from the federal tax rate of 21% primarily due primarily to the change in valuation allowance.
Revenues and Adjusted EBITDA by Reportable Segment
To supplement our consolidated financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), we use Adjusted EBITDA because it is the primary metric used by our chief operating decision makers and investors in measuring both our past and future expectations of performance. Adjusted EBITDA provides useful information to the users of our financial statements by excluding specific expenses and gains that we believe are not indicative of our core operating results. Furthermore, our annual performance plan used to determine compensation for our executive officers and employees is tied to the Adjusted EBITDA metric. It is also a measure of operating performance widely used in the gaming industry. The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. In addition, other companies in our industry may calculate Adjusted EBITDA differently than we do.
We define “Adjusted EBITDA” as earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, impairment of goodwill and intangible assets, acquisition and severance expenses, preopening and related expenses, gain or loss on disposal of assets, share-based compensation expenses, change in non-cash lease expense, and other non-cash charges that are deemed to be not indicative of our core operating results, calculated before corporate overhead (which is not allocated to each reportable segment).
The following table presents our total revenues and Adjusted EBITDA by reportable segment and a reconciliation of net income to Adjusted EBITDA:
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
(In thousands) | (In thousands) | | 2022 | | 2021 | (In thousands) | | 2023 | | 2022 |
Revenues | Revenues | | | | | Revenues | | | | |
Nevada Casino Resorts | Nevada Casino Resorts | | $ | 96,435 | | | $ | 74,805 | | Nevada Casino Resorts | | $ | 100,176 | | | $ | 96,435 | |
Nevada Locals Casinos | Nevada Locals Casinos | | 39,889 | | | 38,545 | | Nevada Locals Casinos | | 41,238 | | | 39,889 | |
Maryland Casino Resort | Maryland Casino Resort | | 17,892 | | | 16,100 | | Maryland Casino Resort | | 18,128 | | | 17,892 | |
Nevada Taverns | | Nevada Taverns | | 27,593 | | | 28,454 | |
Distributed Gaming | Distributed Gaming | | 119,222 | | | 109,909 | | Distributed Gaming | | 90,401 | | | 90,768 | |
Corporate and Other | | 206 | | | 337 | | |
Corporate and other | | Corporate and other | | 515 | | | 206 | |
Total Revenues | Total Revenues | | $ | 273,644 | | | $ | 239,696 | | Total Revenues | | $ | 278,051 | | | $ | 273,644 | |
| Adjusted EBITDA | Adjusted EBITDA | | Adjusted EBITDA | |
Nevada Casino Resorts | Nevada Casino Resorts | | $ | 33,575 | | | $ | 26,655 | | Nevada Casino Resorts | | $ | 31,711 | | | $ | 33,575 | |
Nevada Locals Casinos | Nevada Locals Casinos | | 20,038 | | | 19,552 | | Nevada Locals Casinos | | 20,160 | | | 20,038 | |
Maryland Casino Resort | Maryland Casino Resort | | 5,572 | | | 4,873 | | Maryland Casino Resort | | 5,128 | | | 5,572 | |
Nevada Taverns | | Nevada Taverns | | 8,538 | | | 10,778 | |
Distributed Gaming | Distributed Gaming | | 22,053 | | | 20,880 | | Distributed Gaming | | 9,784 | | | 11,275 | |
Corporate and Other | | (13,913) | | | (12,462) | | |
Corporate and other | | Corporate and other | | (13,154) | | | (13,913) | |
Total Adjusted EBITDA | Total Adjusted EBITDA | | $ | 67,325 | | | $ | 59,498 | | Total Adjusted EBITDA | | $ | 62,167 | | | $ | 67,325 | |
| Net income | Net income | | $ | 36,066 | | | $ | 10,620 | | Net income | | $ | 11,630 | | | $ | 36,066 | |
Adjustments | Adjustments | | Adjustments | |
Depreciation and amortization | Depreciation and amortization | | 26,276 | | | 27,186 | | Depreciation and amortization | | 23,508 | | | 26,276 | |
Change in non-cash lease expense | | 181 | | | 439 | | |
Non-cash lease expense | | Non-cash lease expense | | 33 | | | 181 | |
Share-based compensation | Share-based compensation | | 3,672 | | | 3,005 | | Share-based compensation | | 3,893 | | | 3,672 | |
(Gain) loss on disposal of assets | | (41) | | | 209 | | |
Loss on debt extinguishment and modification | | 181 | | | — | | |
Gain on disposal of assets | | Gain on disposal of assets | | (86) | | | (41) | |
Loss on debt extinguishment | | Loss on debt extinguishment | | — | | | 181 | |
Preopening and related expenses (1) | Preopening and related expenses (1) | | 55 | | | 120 | | Preopening and related expenses (1) | | 384 | | | 55 | |
Other, net | Other, net | | 4,296 | | | 2,168 | | Other, net | | 1,785 | | | 4,296 | |
Interest expense, net | Interest expense, net | | 15,118 | | | 16,048 | | Interest expense, net | | 18,236 | | | 15,118 | |
Income tax benefit | | (18,479) | | | (297) | | |
Income tax provision (benefit) | | Income tax provision (benefit) | | 2,784 | | | (18,479) | |
Adjusted EBITDA | Adjusted EBITDA | | $ | 67,325 | | | $ | 59,498 | | Adjusted EBITDA | | $ | 62,167 | | | $ | 67,325 | |
(1)Preopening and related expenses consist of labor, food, utilities, training, initial licensing, rent and organizational costs incurred in connection with the opening of branded tavern and casino locations as well as food and beverage and other venues within our casino locations.
Nevada Casino Resorts
Revenues and Adjusted EBITDAFor the three months ended March 31, 2023, revenues increased by $21.6$3.7 million, or 29%4%, compared to the prior year period. This increase resulted from increases of $2.8 millionand $6.9$4.2 million or 26%,in food and beverage and rooms revenues, respectively, offset by decreases of $1.9 million and$1.4 million in gaming and other revenues. The increase in food and beverage and rooms revenues for the three months ended March 31, 20222023 was primarily driven by the addition of new food and beverage outlets and an increase in average daily rates. The decrease in gaming and other revenues was primarily driven by a decrease in the overall visitation to our Nevada Casino Resorts properties during the current year period.
Adjusted EBITDA decreased by $1.9 million, or 6%, for the three months ended March 31, 2023 compared to the prior year period primarily due to higher labor costs and cost of goods in the current year period.
Nevada Locals Casinos
For the three months ended March 31, 2023, revenues increased by $1.3 million, or 3%, and Adjusted EBITDA remained
relatively consistent with the prior year period with an $0.1 million, or 1%, increase. The increase in revenues for the three months ended March 31, 2023 was primarily attributable to an increase in patron visitation which resulted in higher occupancy at a higher average daily rate and increases in food and beverage revenues.
Maryland Casino Resort
For the three months ended March 31, 2023, revenues were relatively consistent with the prior year period with an $0.2 million, or 1%, increase. Adjusted EBITDA decreased $0.4 million, or 8%, for the three months ended March 31, 2023 compared to the prior year period primarily due to an increase in occupancylabor costs and cost of our hotel rooms due to the further easing of COVID-19 mitigation measures.goods.
Nevada Locals CasinosTaverns
Revenues and Adjusted EBITDA increaseddecreased by $1.3$0.9 million, or 3%, and $0.5Adjusted EBITDA decreased by $2.2 million, or 2%21%, respectively, for the three months ended March 31, 20222023 as compared to the prior year period. The decrease in revenue for the three months ended March 31, 2023, is primarily attributable to the decrease in visitation to our tavern locations during the current year period. The decrease in Adjusted EBITDA for the three months ended March 31, 2023 was attributable to higher labor costs and cost of goods compared to the prior year period.
Distributed Gaming
Revenues decreased by $0.4 million, or less than 1%, for the three months ended March 31, 2023 as compared to the prior year period primarily due to a decrease in other revenue in the amount of $0.6 million related to certain nonrecurring items recognized during the prior year period. Adjusted EBITDA decreased by $1.5 million, or 13%, for the three months ended March 31, 2023 compared to the prior year period primarily due to an increase in demand for gaminglabor costs, higher cost of goods, and guest visitation and a related increase in occupancy of our hotel rooms due to the further easing of COVID-19 mitigation measures.
Maryland Casino Resort
Revenues and Adjusted EBITDA increased by $1.8 million, or 11%, and $0.7 million, or 14%, respectively, for the three months ended March 31, 2022 compared to the prior year period primarily due to an increase in demand forcosts of providing gaming related services to third parties under our space lease and guest visitation and a related increase in occupancy of our hotel rooms due to the further easing of COVID-19 mitigation measures.
Distributed Gaming
Revenues and Adjusted EBITDA increased by $9.3 million, or 8%, and $1.2 million, or 6%, respectively, for the three months ended March 31, 2022 compared to the prior year period primarily due to an increase in demand for gaming and further easing of COVID-19 mitigation measures.participation agreements.
Adjusted EBITDA Margin
For the three months ended March 31, 2022,2023 Adjusted EBITDA as a percentage of segment revenues (or Adjusted EBITDA margin) was 35%32%, 50%49%, 28%, 31%, and 18%11% for Nevada Casino Resorts, Nevada Locals Casinos, Maryland Casino, Nevada Taverns, and Distributed Gaming, respectively, as compared to Adjusted EBITDA margins of 36%35%, 51%50%, 30%31%, 38%, and 19%12%, respectively, for the prior year period. The lower Adjusted EBITDA margins for the three months ended March 31, 2021. The2023 were primarily attributable to increases in labor costs and cost of goods. In addition, lower Adjusted EBITDA margins in our Distributed Gaming segment reflect the fixed and variable amounts paid to third parties under our space lease and participation agreements as expenses. In the event our Adjusted EBITDA margins demonstrate new trends and developments in future periods, we may be required to identify additional reportable segments in future filings.
Liquidity and Capital Resources
As of March 31, 2022,2023, we had $202.3$156.2 million in cash and cash equivalents.equivalents, which included $45.7 million of cash and cash equivalents related to assets held for sale. In addition, we had $5.0 million in short-term cash investments that will convert into cash during the three months ending June 30, 2023. We currently believe that our cash and cash equivalents, cash flows from operations and borrowing availability under our $240 million revolving credit facility (the “Revolving Credit Facility”) will be sufficient to meet our capital requirements during the next 12 months. As of March 31, 2022,2023, we had borrowing availability of $240 million under our revolving credit facility (referRevolving Credit Facility. As discussed above, we have entered into definitive agreements to “Note 5 — Long-Term Debt”sell Rocky Gap for aggregate consideration of $260.0 million in Part I, Item 1: Financial Statementscash, which transactions are expected to close during the second quarter of 2023, and to sell Distributed Gaming Operations for additional information regarding our revolving credit facility).aggregate consideration of $322.5 million in cash plus purchased cash, comprised of cash and cash equivalents related to such operations at the time of closing, which transactions are expected to close during the fourth quarter of 2023, in each case subject to the satisfaction or waiver of customary regulatory approvals and closing conditions. Our operating results and performance depend significantly on national, regional and local economic conditions and their effect on consumer spending. Declines in consumer spending would cause revenues generated by our operations to be adversely affected.
To further enhance our liquidity position or to finance any future acquisition or other business investment initiatives, we may obtain additional financing, which could consist of debt, convertible debt or equity financing from public and/or private credit and capital markets.
Cash Flows
Net cash provided by operating activities was $43.5$54.5 million and $52.2$43.5 million for the three months ended March 31, 20222023 and 2021,2022, respectively. The $8.7$11.0 million, or 17%25%, decreaseincrease in operating cash flows for the three months ended March 31, 20222023 compared to the prior year period primarily related to the timing of working capital spending.
Net cash used in investing activities was $10.7$24.9 million and $4.7$10.7 million for the three months ended March 31, 2023 and 2022, and 2021, respectively.respectively. The $6.0$14.2 million, or 128%132%, increase in net cash used in investing activities for the three months ended March 31, 20222023 compared to the prior year period related to the increase in our capital expenditures.expenditures, primarily at The STRAT.
Net cash used in financing activities was $51.115.5 million and $5.7$51.1 million for the three months ended March 31, 20222023 and 2021,2022, respectively. The $45.435.6 million, or 796%70%, increasedecrease in net cash used in financing activities during the three months ended March 31, 20222023 compared to the prior year period primarily related to thethe prepayment of outstanding term loanTerm Loan borrowings with a principal amount of $25.0$25.0 million (refer to “Note 5 — Long-Term Debt” in Part I, Item 1: Financial Statements),and $15.2 million in open market repurchases of our common stock pursuant to theour share repurchase program and $10.3during the three months ended March 31, 2022. The decrease in net cash used in financing activities was partially offset by a $5.1 million increase in cash paid for tax withholding on option exercises and the vesting of RSUs.RSUs and PSUs during the current year period. Long-Term Debt
Refer to “Note 56 — Long-Term Debt” in Part I, Item 1: Financial Statements and Supplemental Data of this Quarterly Report for discussion of our debt instruments. Share Repurchase Program
On March 12, 2019, our Board of Directors authorized the repurchase of up to $25 million worth of shares of common stock, subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors. Share repurchases may be made from time to time in open market transactions, block trades or in private transactions in accordance with applicable securities laws and regulations and other legal requirements, including compliance with our finance agreements. There is no minimum number of shares that we are required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice.
On August 3, 2021, in Part I, Item 1: Financial Statements of this Quarterly Report for additional information regarding our Board of Directors increased the March 12, 2019 authorization to $50 million. In December 2021, we repurchased 226,485 shares of ourshare repurchase program and common stock purchases made pursuant to our share repurchase program in open market transactions at an average price of $46.87 per share, resulting in a charge to accumulated deficit of $10.6 million. In March 2022, we repurchased 268,791 shares of our common stock pursuant to our share repurchase program in open market transactions at an average price of $56.54 per share, resulting in a charge to accumulated deficit of $15.2 million. As of March 31, 2022, we had $24.2 million of remaining share repurchase availability under our August 3, 2021 share repurchase authorization. On May 3, 2022, our Board of Directors re-authorized our $50 million share repurchase program.
Other Items Affecting Liquidity
The outcome of the following specific matters, including our commitments and contingencies, may also affect our liquidity.
Commitments, Capital Spending and Development
We perform on-going refurbishment and maintenance at our facilities, of which certain maintenance costs are capitalized if such improvement or refurbishment extends the life of the related asset, while other maintenance costs that do not so qualify are expensed as incurred. The commitment of capital and the related timing thereof are contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate regulatory bodies. We intend to fund such capital expenditures through our operating cash flows and borrowings under our revolving credit facility.Revolving Credit Facility.
Other Opportunities
We may investigate and pursue expansion opportunities in our existing or new markets from time to time. Such expansions will be influenced and determined by a number of factors, which may include licensing availability and approval, suitable investment opportunities and availability of acceptable financing. Investigation and pursuit of such opportunities may require us to make substantial investments or incur substantial costs, which we may fund through cash flows from operations or borrowing availability under our Revolving Credit Facility. To the extent such sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or from other sources. No assurance can be given that additional financing will be available or that, if available, such financing will be obtainable on terms favorable to us. Moreover, we can provide no assurances that the investigation or pursuit of an opportunity will result in a completed transaction.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to the application of the acquisition method of accounting, long-lived assets, goodwill and indefinite-lived intangible assets, revenue recognition, income taxes and share-based compensation expenses. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. We believe that our estimates and assumptions are reasonable, based upon information presently available; however, actual results may differ from these estimates under different assumptions or conditions.
A description of our critical accounting estimates can be found under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report. For a more extensive discussion of our accounting policies, refer to “Note 2 — Summary of Significant Accounting Policies” in Part II, Item 8: Financial Statements and Supplemental Data in our Annual Report. There were no material changes to our critical accounting policies and estimates during the three months ended March 31, 2022.2023. Commitments and Contractual Obligations
Seasonality
We believe that our businesses are affected by seasonal factors, including holidays, weather and travel conditions. Our casino properties, branded taverns and distributed gaming businesses in Nevada have historically experienced lower revenues during the summer as a result of fewer tourists due to higher temperatures, as well as increased vacation activity by local residents. Rocky Gap typically experiences higher revenues during summer months and may be significantly adversely impacted by inclement weather during winter months. Our Nevada branded taverns and distributed gaming operations typically experience higher revenues during the fall which corresponds with several professional sports seasons. Our Montana distributed gaming operations typically experience higher revenues during the winter due to the inclement weather in the state and less opportunity for outdoor activities, in addition to the impact from professional sports seasons during the fall. While other factors like unemployment levels, market competition and the diversification of our business may either offset or magnify seasonal effects, some seasonality is likely to continue, which could result in significant fluctuation in our quarterly operating results.
Recently Issued Accounting Pronouncements
Regulation and Taxes
The casino and distributed gaming industries are subject to extensive regulation by state gaming authorities. Changes in applicable laws or regulations could have a material adverse effect on us.
The gaming industry represents a significant source of tax revenues to regulators. From time to time, various federal and state legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. It is not possible to determine the likelihood of possible changes in tax law or in the administration of such law. Such changes, if adopted, could have a material adverse effect on our future financial position, results of operations, cash flows and prospects.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. As of March 31, 2022,2023, our variable rate long-term debt primarily comprised our indebtedness under the Credit Facility (refer to “Note 56 — Long-Term Debt” in Part I, Item 1: Financial Statements). As of March 31, 2022,2023, we had $625$575 million in principal amount of outstanding term loanTerm Loan borrowings under the Credit Facility with no outstanding borrowings under our $240 million Revolving Credit Facility. Our primary interest rate under the Credit Facility is the Eurodollar rate plus an applicable margin. The weighted-average effective interest rate on our outstanding borrowings under the Credit Facility was approximately 3.75%7.53% for the three months ended March 31, 2022.2023. Assuming the outstanding balance under our Credit Facility remained constant over a year, a 50 basis point increase in the applicable interest rate would increase interest incurred, prior to effects of capitalized interest, by $3.1$2.9 million over a twelve-month period.
As of March 31, 2022,2023, our investment portfolio included $202.3$156.2 million in cash and cash equivalents and we did not hold any$5.0 million in short-term investments.cash investments that will convert into cash during the three months ending June 30, 2023.
We continue to evaluate the potential impact of the eventual replacement of the LIBOR benchmark interest rate, which was set to begin transitioning out at the end of 2021.rate. While some LIBOR rates willare now be extended through June 2023, or 18 months beyond the original 2021 deadline, lenders are notno longer allowed to issue new loans and other financial
instruments that are linked to LIBOR beyond 2021.LIBOR. Although we are not able to predict what will become a widely accepted benchmark in place of LIBOR, or the exact impact such a transition may have, our current expectation is that this transition will not have a material impact on our business, financial condition or results of operations.
ITEM 4. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to provide reasonable assurance of achieving the objective that information in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified and pursuant to the requirements of the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation , with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2022,2023, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022.2023.
During the quarter ended March 31, 2022,2023, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K, which factors could materially affect our business, financial condition, liquidity or future results. ThereExcept as set forth below, there have been no material changes to the risk factors described in the “Risk Factors” section in our Annual Report. The risksrisk set forth below or described in our Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity, results of operations, prospects or stock price. Inability to complete the sale of Distributed Gaming Operations could negatively impact our business, financial condition, results of operations or prospects.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer PurchaseThe closing of Equitythe Distributed Gaming Transactions is subject to a number of closing conditions and there can be no assurance that these conditions will be satisfied on the timeline we expect or at all. The Distributed Gaming Transactions may also be terminated in certain specified circumstances, including if the sale is not completed by the end of 2023 (subject to certain extensions under certain circumstances). While the sale of Distributed Gaming Operations is pending or if the sale is not completed, we may be subject to several risks including:
From time to time, we repurchase shares•the current trading price of our common stock pursuantmay reflect a market assumption that the Distributed Gaming Transactions will be completed;
•we have incurred and expect to our share repurchase program authorized by our Boardcontinue to incur significant transaction costs in connection with the sale of Directors on March 12, 2019. This authorization was increased on August 3, 2021 from $25 million to $50 million, and as of March 31, 2022, we had $24.2 million of remaining share repurchase availability Distributed Gaming Operations whether or not the sale is completed;
•under this share repurchase authorization. On May 3, 2022, our Board of Directors re-authorized our $50 million share repurchase program. There is no minimum number of shares thatthe definitive agreements for the Distributed Gaming Transactions, we are requiredsubject to repurchasecertain restrictions on the conduct of the Distributed Gaming business prior to the completion of the sale, which restrictions could adversely affect our ability to realize certain business strategies or take advantage of certain business opportunities;
•the negative perception of investors, vendors, customers, or employees if the sale is not consummated; and
Any of these risks could have a material adverse effect on our share repurchases during the first quarterbusiness, financial condition, results of 2022 were made through open market transactions. The following table presents our common stock purchases made pursuant to our share repurchase program during the three months ended March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Number of Shares Purchased | | Average Price per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Program | | Approximate Dollar Value That May Yet Be Purchased Under the Program (in millions) | |
Period | | | | | | | | | |
January 1-31, 2022 | | — | | | $ | — | | | — | | | $ | 39.4 | | |
February 1-28, 2022 | | — | | | $ | — | | | — | | | $ | 39.4 | | |
March 1-31, 2022 | | 268,791 | | | $ | 56.54 | | | 268,791 | | | $ | 24.2 | | (1) |
(1) Our Board of Directors increased the amount authorized for share repurchases to $50 million on May 3, 2022.operations and prospects.
ITEM 5. OTHER INFORMATION
On May 3, 2022, our Board of Directors approved an amendment to our Seventh Amended and Restated Bylaws to revise Article 3, Shareholders, to provide that we will have no obligation to assist or incur liability for any shareholder (other than a shareholder who is an active officer, director or employee of Golden) in any gaming application or approval relating to the shares held by such shareholder. The foregoing summary is qualified in its entirety by the full text of the Eighth Amended and Restated Bylaws, which are filed as Exhibit 3.1 hereto and are incorporated herein by reference.
On May 3, 2022,January 9, 2023, we entered into the Third Amendment to Employment Agreement by and between Golden Entertainment, Inc. and Blake L. Sartini, which provides for, among other things, (1) an increase to Mr. Sartini’s annual base salary rate from $1,000,000 to $1,050,000, or such amount as may from time to time be determined by the Compensation Committee of the Board of Directors, and (2) an increase to Mr. Sartini’s annual incentive target bonus from 125% to 150% of his annual base salary.
On May 3, 2022, we entered into the Fourth Amendment to Employment Agreement by and between Golden Entertainment, Inc. and Charles Protell, which provides for, among other things, (1) an increase to Mr. Protell’s annual base salary rate from $750,000 to $785,000, or such amount as may from time to time be determined by the Compensation Committee of the Board of Directors and (2) an increase to Mr. Protell’s annual incentive target bonus from 100% to 115% of his annual base salary.
On May 3, 2022, we entered into the Fourth Amendment to Employment Agreement by and between Golden Entertainment, Inc. and Stephen Arcana, which provides for, among other things, (1) an increase to Mr. Arcana’s annual base salary rate from $600,000 to $630,000, or such amount as may from time to time be determined by the Compensation Committee of the Board of Directors, and (2) an increase to Mr. Arcana’s annual incentive target bonus from 100% to 115% of his annual base salary.
On May 3, 2022, we entered into the Second Amendment to Amended and Restated Employment Agreement by and between Golden Entertainment, Inc. and Blake L. Sartini II, which provides for, among other things, (1) an increase to Mr. Sartini II’s annual base salary rate from $425,000$450,000 to $450,000,$475,000, or such amount as may from time to time be determined by the Compensation Committee of the Board of Directors, and (2) an increase to Mr. Sartini II’s annual incentive target bonus from 50% to 85% of his annual base salary.Directors.
CopiesA copy of the amendmentsamendment to the employment agreementsagreement with Messrs. Sartini, Arcana, Protell andMr. Sartini II areis filed as exhibitsan exhibit to this Quarterly Report on Formform 10-Q and areis incorporated herein by reference.
ITEM 6. EXHIBITS
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Exhibits | | Description |
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3.12.1 | | Eighth AmendedMembership Interest Purchase Agreement (Montana), dated as of March 3, 2023, by and Restated Bylawsamong J&J Ventures Gaming of Montana, LLC, Golden Holdings, Inc., Golden Entertainment, Inc. and J&J Ventures Gaming, LLC. (incorporated by reference to Exhibit 2.1 to Golden Entertainment, Inc.’s Form 8-K dated March 3, 2023 and filed on March 6, 2023). |
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2.2 | | Membership Interest Purchase Agreement (Nevada), dated as of March 3, 2023, by and among J&J Ventures Gaming of Nevada, LLC, Golden Gaming, LLC and Golden Entertainment, Inc. (incorporated by reference to Exhibit 2.2 to Golden Entertainment, Inc.’s Form 8-K dated March 3, 2023 and filed on March 6, 2023). |
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10.1# | | |
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10.2# | | |
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10.3# | | |
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10.4# | | |
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31.1 | | |
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31.2 | | |
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32.1 | | |
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101.INS | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document |
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101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
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101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF | | Inline XBRL Taxonomy Extension Calculation Definition Document |
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101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
# Management contract or compensatory plan or arrangement in which one or more executive officers or directors participates
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
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| GOLDEN ENTERTAINMENT, INC. |
| (Registrant) |
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Dated: May 6, 202210, 2023 | /s/ BLAKE L. SARTINI |
| Blake L. Sartini |
| Chairman of the Board and Chief Executive Officer |
| (Principal Executive Officer) |
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| /s/ CHARLES H. PROTELL |
| Charles H. Protell |
| President and Chief Financial Officer |
| (Principal Financial Officer) |
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| /s/ THOMAS E. HAAS |
| Thomas E. Haas |
| Senior Vice President of Accounting |
| (Principal Accounting Officer) |