UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017March 31, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period                 to                 

Commission File No. 001‑36629

ELDORADO RESORTS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

46‑3657681

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

100 West Liberty Street, Suite 1150, Reno, Nevada 89501

(Address and zip code of principal executive offices)

(775) 328‑0100

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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.

 

Large accelerated filer

 

Accelerated filer

Non‑accelerated filer

(Do not check if a smaller reporting company)

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  ☒

The number of shares of the Registrant’s Common Stock, $0.00001 par value per share, outstanding as of August 4, 2017May 03, 2018 was 76,676,607.77,241,115.

 

 

 

 


 

ELDORADO RESORTS, INC.

QUARTERLY REPORT FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2017MARCH 31, 2018

TABLE OF CONTENTS

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

Item 1.

FINANCIAL STATEMENTS

 

 

 

Consolidated Balance Sheets at June 30, 2017March 31, 2018 (unaudited) and December 31, 20162017

 

2

 

Consolidated Statements of OperationsIncome for the Three and Six Months Ended June 30,March 31, 2018 and 2017 and 2016 (unaudited)

 

3

 

Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30,March 31, 2018 and 2017 and 2016 (unaudited)

 

4

 

Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2018 and 2017 and 2016 (unaudited)

 

5

 

Condensed Notes to Unaudited Consolidated Financial Statements

 

6

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

3236

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

5352

Item 4.

CONTROLS AND PROCEDURES

 

5352

PART II. OTHER INFORMATION

 

 

Item 1.

LEGAL PROCEEDINGS

 

5554

Item 1A.

RISK FACTORS

 

5554

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

5657

Item 3.

DEFAULTS UPON SENIOR SECURITIES

 

5657

Item 4.

MINE SAFETY DISCLOSURES

 

5657

Item 5.

OTHER INFORMATION

 

5657

Item 6.

EXHIBITS

 

5758

SIGNATURES

 

6059

 


PART I-FINANCIAL INFORMATION

Item 1.  Financial Statements.

ELDORADO RESORTS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2018

 

 

2017

 

 

(unaudited)

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

103,624

 

 

$

 

61,029

 

 

$

 

183,138

 

 

$

 

134,596

 

Restricted cash

 

 

22,566

 

 

 

2,414

 

 

 

 

3,659

 

 

 

 

3,267

 

Marketable securities

 

 

17,437

 

 

 

 

 

 

 

17,236

 

 

 

 

17,631

 

Accounts receivable, net

 

 

21,862

 

 

 

14,694

 

 

 

 

33,738

 

 

 

 

45,797

 

Due from affiliates

 

 

 

62

 

 

 

 

243

 

Inventories

 

 

17,067

 

 

 

11,055

 

 

 

 

15,210

 

 

 

 

16,870

 

Prepaid income taxes

 

 

5,304

 

 

 

69

 

 

 

 

606

 

 

 

 

4,805

 

Prepaid expenses and other

 

 

31,117

 

 

 

12,492

 

 

 

 

22,626

 

 

 

 

27,823

 

Assets held for sale

 

 

 

143,592

 

 

 

 

 

 

 

 

199,034

 

 

 

 

 

Total current assets

 

 

 

362,569

 

 

 

 

101,753

 

 

 

 

475,309

 

 

 

 

251,032

 

INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

 

 

1,005

 

 

 

1,286

 

PROPERTY AND EQUIPMENT, NET

 

 

1,455,811

 

 

 

612,342

 

 

 

 

1,396,286

 

 

 

 

1,502,817

 

GAMING LICENSES AND OTHER INTANGIBLES, NET

 

 

956,690

 

 

 

487,498

 

 

 

 

917,110

 

 

 

 

996,816

 

GOODWILL

 

 

746,482

 

 

 

66,826

 

 

 

 

719,255

 

 

 

 

747,106

 

NON-OPERATING REAL PROPERTY

 

 

18,069

 

 

 

14,219

 

 

 

 

14,030

 

 

 

 

18,069

 

OTHER ASSETS, NET

 

 

 

17,314

 

 

 

 

10,120

 

 

 

 

30,230

 

 

 

 

30,632

 

Total assets

 

$

 

3,557,940

 

 

$

 

1,294,044

 

 

$

 

3,552,220

 

 

$

 

3,546,472

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

15,568

 

 

$

 

4,545

 

 

$

 

553

 

 

$

 

615

 

Accounts payable

 

 

30,547

 

 

 

21,576

 

 

 

 

28,354

 

 

 

 

34,778

 

Due to affiliates

 

 

 

 

 

259

 

 

 

 

10

 

 

 

 

 

Accrued property, gaming and other taxes

 

 

32,793

 

 

 

18,790

 

 

 

 

36,107

 

 

 

 

43,212

 

Accrued payroll and related

 

 

62,859

 

 

 

14,588

 

 

 

 

49,944

 

 

 

 

53,330

 

Accrued interest

 

 

22,944

 

 

 

14,634

 

 

 

 

33,312

 

 

 

 

25,607

 

Deferred proceeds for assets held for sale

 

 

20,000

 

 

 

 

Income taxes payable

 

 

 

6

 

 

 

 

171

 

Accrued other liabilities

 

 

62,200

 

 

 

27,648

 

 

 

 

63,606

 

 

 

 

66,037

 

Liabilities related to assets held for sale

 

 

 

5,449

 

 

 

 

 

 

 

 

5,398

 

 

 

 

 

Total current liabilities

 

 

 

252,360

 

 

 

 

102,040

 

 

 

 

217,290

 

 

 

 

223,750

 

LONG-TERM DEBT, LESS CURRENT PORTION

 

 

2,211,023

 

 

 

795,881

 

 

 

 

2,190,110

 

 

 

 

2,189,578

 

DEFERRED INCOME TAXES

 

 

239,510

 

 

 

90,385

 

 

 

 

167,595

 

 

 

 

162,967

 

OTHER LONG-TERM LIABILITIES

 

 

 

30,123

 

 

 

 

7,287

 

 

 

 

18,594

 

 

 

 

28,579

 

 

 

 

2,733,016

 

 

 

 

995,593

 

COMMITMENTS AND CONTINGENCIES (Notes 1 and 11)

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

2,593,589

 

 

 

 

2,604,874

 

COMMITMENTS AND CONTINGENCIES (Note 11)

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, 100,000,000 shares authorized, 76,625,525 and 47,105,744 issued and

outstanding, par value $0.00001 as of June 30, 2017 and December 31, 2016,

respectively

 

 

 

 

 

 

Common stock, 100,000,000 shares authorized, 77,241,115 and 76,825,966

issued and outstanding, par value $0.00001 as of March 31, 2018 and

December 31, 2017, respectively

 

 

 

1

 

 

 

 

 

Paid-in capital

 

 

745,659

 

 

 

173,879

 

 

 

 

742,724

 

 

 

 

746,547

 

Retained earnings

 

 

79,253

 

 

 

124,560

 

 

 

 

215,827

 

 

 

 

194,972

 

Accumulated other comprehensive income

 

 

 

12

 

 

 

 

12

 

 

 

 

79

 

 

 

 

79

 

Total stockholders’ equity

 

 

 

824,924

 

 

 

 

298,451

 

 

 

 

958,631

 

 

 

 

941,598

 

Total liabilities and stockholders’ equity

 

$

 

3,557,940

 

 

$

 

1,294,044

 

 

$

 

3,552,220

 

 

$

 

3,546,472

 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.


ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONSINCOME

(dollars in thousands, except per share data)

(unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2018

 

 

2017

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casino

 

$

 

298,182

 

 

$

 

178,459

 

 

$

 

460,966

 

 

$

 

347,537

 

 

$

 

339,458

 

 

$

 

141,554

 

Pari-mutuel commissions

 

 

4,143

 

 

 

2,893

 

 

 

4,784

 

 

 

3,577

 

 

 

 

4,070

 

 

 

 

636

 

Food and beverage

 

 

46,438

 

 

 

36,967

 

 

 

75,951

 

 

 

70,706

 

 

 

 

52,198

 

 

 

 

32,421

 

Hotel

 

 

28,924

 

 

 

25,677

 

 

 

46,937

 

 

 

45,842

 

 

 

 

30,741

 

 

 

 

19,305

 

Other

 

 

 

11,550

 

 

 

 

11,014

 

 

 

 

20,145

 

 

 

 

21,899

 

 

 

 

13,725

 

 

 

 

8,477

 

 

 

 

389,237

 

 

 

 

255,010

 

 

 

 

608,783

 

 

 

 

489,561

 

Less-promotional allowances

 

 

 

(34,057

)

 

 

 

(23,695

)

 

 

 

(52,678

)

 

 

 

(44,680

)

Net operating revenues

 

 

 

355,180

 

 

 

 

231,315

 

 

 

 

556,105

 

 

 

 

444,881

 

Net revenues

 

 

 

440,192

 

 

 

 

202,393

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Casino

 

 

152,417

 

 

 

100,374

 

 

 

242,870

 

 

 

196,636

 

 

 

 

165,850

 

 

 

 

79,981

 

Pari-mutuel commissions

 

 

4,874

 

 

 

2,931

 

 

 

6,081

 

 

 

4,255

 

 

 

 

3,701

 

 

 

 

1,207

 

Food and beverage

 

 

22,834

 

 

 

20,783

 

 

 

40,255

 

 

 

40,511

 

 

 

 

44,776

 

 

 

 

26,018

 

Hotel

 

 

8,026

 

 

 

7,979

 

 

 

14,629

 

 

 

15,108

 

 

 

 

12,506

 

 

 

 

9,079

 

Other

 

 

5,644

 

 

 

6,618

 

 

 

10,923

 

 

 

12,692

 

 

 

 

7,405

 

 

 

 

6,169

 

Marketing and promotions

 

 

20,158

 

 

 

9,766

 

 

 

30,214

 

 

 

19,341

 

 

 

 

21,301

 

 

 

 

10,129

 

General and administrative

 

 

55,379

 

 

 

32,380

 

 

 

87,154

 

 

 

64,035

 

 

 

 

74,202

 

 

 

 

31,800

 

Corporate

 

 

7,442

 

 

 

4,354

 

 

 

14,016

 

 

 

11,258

 

 

 

 

11,569

 

 

 

 

6,574

 

Impairment charges

 

 

 

9,815

 

 

 

 

 

Depreciation and amortization

 

 

 

24,909

 

 

 

 

15,583

 

 

 

 

40,513

 

 

 

 

31,787

 

 

 

 

31,534

 

 

 

 

15,604

 

Total operating expenses

 

 

 

301,683

 

 

 

 

200,768

 

 

 

 

486,655

 

 

 

 

395,623

 

 

 

 

382,659

 

 

 

 

186,561

 

LOSS ON SALE OF ASSET OR DISPOSAL OF PROPERTY

 

 

(89

)

 

 

(836

)

 

 

(57

)

 

 

(765

)

ACQUISITION CHARGES

 

 

(85,464

)

 

 

(56

)

 

 

(87,078

)

 

 

(576

)

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATE

 

 

 

(60

)

 

 

 

 

 

 

 

(282

)

 

 

 

 

OPERATING (LOSS) INCOME

 

 

 

(32,116

)

 

 

 

29,655

 

 

 

 

(17,967

)

 

 

 

47,917

 

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) GAIN ON SALE OR DISPOSAL OF PROPERTY AND EQUIPMENT

 

 

 

(706

)

 

 

 

32

 

TRANSACTION EXPENSES

 

 

 

(2,548

)

 

 

 

(1,614

)

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES

 

 

 

(85

)

 

 

 

(222

)

OPERATING INCOME

 

 

 

54,194

 

 

 

 

14,028

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(27,527

)

 

 

(12,795

)

 

 

(40,197

)

 

 

(25,786

)

 

 

 

(31,251

)

 

 

 

(12,670

)

Loss on early retirement of debt, net

 

 

(27,317

)

 

 

(89

)

 

 

(27,317

)

 

 

(155

)

Total other expense

 

 

 

(54,844

)

 

 

 

(12,884

)

 

 

 

(67,514

)

 

 

 

(25,941

)

 

 

 

(31,251

)

 

 

 

(12,670

)

NET (LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME

TAXES

 

 

 

(86,960

)

 

 

 

16,771

 

 

 

 

(85,481

)

 

 

 

21,976

 

BENEFIT (PROVISION) FOR INCOME TAXES

 

 

 

39,677

 

 

 

 

(5,980

)

 

 

 

39,219

 

 

 

 

(7,816

)

NET (LOSS) INCOME FROM CONTINUING OPERATIONS

 

 

 

(47,283

)

 

 

 

10,791

 

 

 

 

(46,262

)

 

 

 

14,160

 

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES

 

 

 

955

 

 

 

 

 

 

 

 

955

 

 

 

 

 

NET (LOSS) INCOME

 

$

 

(46,328

)

 

$

 

10,791

 

 

$

 

(45,307

)

 

$

 

14,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share attributable to common stockholders - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

 

(0.70

)

 

$

 

0.23

 

 

$

 

(0.81

)

 

$

 

0.30

 

Income from discontinued operations, net of income taxes

 

 

 

0.01

 

 

 

 

 

 

 

 

0.02

 

 

 

 

 

Net (loss) income attributable to common stockholders

 

$

 

(0.69

)

 

$

 

0.23

 

 

$

 

(0.79

)

 

$

 

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share attributable to common stockholders - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

 

(0.70

)

 

$

 

0.23

 

 

$

 

(0.81

)

 

$

 

0.30

 

Income from discontinued operations, net of income taxes

 

 

 

0.01

 

 

 

 

 

 

 

 

0.02

 

 

 

 

 

Net (loss) income attributable to common stockholders

 

$

 

(0.69

)

 

$

 

0.23

 

 

$

 

(0.79

)

 

$

 

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME BEFORE INCOME TAXES

 

 

 

22,943

 

 

 

 

1,358

 

PROVISION FOR INCOME TAXES

 

 

 

(2,088

)

 

 

 

(413

)

NET INCOME

 

$

 

20,855

 

 

$

 

945

 

Net Income per share of Common Stock:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 

0.27

 

 

$

 

0.02

 

Diluted

 

$

 

0.27

 

 

$

 

0.02

 

Weighted Average Basic Shares Outstanding

 

 

 

67,453,095

 

 

 

 

47,071,608

 

 

 

 

57,405,834

 

 

 

 

46,966,391

 

 

 

 

77,353,730

 

 

 

 

47,120,751

 

Weighted Average Diluted Shares Outstanding

 

 

 

68,469,191

 

 

 

 

47,721,075

 

 

��

 

58,339,438

 

 

 

 

47,591,958

 

 

 

 

78,080,049

 

 

 

 

48,081,281

 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.


ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(dollars in thousands)

(unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2018

 

 

2017

 

NET (LOSS) INCOME

 

$

 

(46,328

)

 

$

 

10,791

 

 

$

 

(45,307

)

 

$

 

14,160

 

NET INCOME

 

$

 

20,855

 

 

$

 

945

 

Other Comprehensive Income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (Loss) Income, net of tax

 

$

 

(46,328

)

 

$

 

10,791

 

 

$

 

(45,307

)

 

$

 

14,160

 

Comprehensive Income, net of tax

 

$

 

20,855

 

 

$

 

945

 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.


ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

 

(45,307

)

 

$

 

14,160

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

40,513

 

 

 

 

31,787

 

Amortization of deferred financing costs

 

 

 

3,034

 

 

 

 

1,754

 

Equity in loss of unconsolidated affiliate

 

 

 

282

 

 

 

 

 

Loss on early extinguishment of debt

 

 

 

27,317

 

 

 

 

155

 

Change in fair value of acquisition related contingencies

 

 

 

37

 

 

 

 

1

 

Stock compensation expense

 

 

 

3,062

 

 

 

 

2,033

 

Loss on disposal of assets

 

 

 

57

 

 

 

 

765

 

Provision for bad debts

 

 

 

756

 

 

 

 

329

 

(Benefit) provision for income taxes

 

 

 

(38,001

)

 

 

 

7,052

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Restricted cash

 

 

 

481

 

 

 

 

1,401

 

Sale of trading securities

 

 

 

295

 

 

 

 

 

Accounts receivable

 

 

 

4,037

 

 

 

 

(4,872

)

Inventory

 

 

 

(630

)

 

 

 

46

 

Prepaid expenses and other assets

 

 

 

1,605

 

 

 

 

(2,835

)

Interest payable

 

 

 

8,310

 

 

 

 

(748

)

Income taxes receivable/payable

 

 

 

(197

)

 

 

 

 

Accounts payable and accrued liabilities

 

 

 

(2,126

)

 

 

 

(2,372

)

Net cash provided by operating activities

 

 

 

3,525

 

 

 

 

48,656

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(29,824

)

 

 

 

(20,345

)

Restricted cash

 

 

 

100

 

 

 

 

 

Proceeds from sale of property and equipment

 

 

 

 

 

 

 

1,551

 

Net cash used in business combinations

 

 

 

(1,343,659

)

 

 

 

(491

)

Reimbursement of capital expenditures from West Virginia regulatory authorities

 

 

 

 

 

 

 

3,676

 

Decrease in other assets, net

 

 

 

 

 

 

 

177

 

Net cash used in investing activities

 

 

 

(1,373,383

)

 

 

 

(15,432

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of New Term Loan

 

 

 

1,450,000

 

 

 

 

 

Proceeds from issuance of 6% Senior Notes

 

 

 

375,000

 

 

 

 

 

Payments under Term Loan

 

 

 

(1,062

)

 

 

 

(2,125

)

Payments under New Term Loan

 

 

 

(3,625

)

 

 

 

 

Borrowings under New Revolving Credit Facility

 

 

 

148,953

 

 

 

 

 

Payments under New Revolving Credit Facility

 

 

 

(58,953

)

 

 

 

 

Borrowings under Revolving Credit Facility

 

 

 

41,000

 

 

 

 

(71,500

)

Payments under Revolving Credit Facility

 

 

 

(29,000

)

 

 

 

 

Retirement of Term Loan

 

 

 

(417,563

)

 

 

 

 

Retirement of Revolving Credit Facility

 

 

 

(41,000

)

 

 

 

 

Payments on capital leases

 

 

 

(210

)

 

 

 

(136

)

Debt issuance costs

 

 

 

(44,992

)

 

 

 

(463

)

Taxes paid related to net share settlement of equity awards

 

 

 

(8,993

)

 

 

 

(1,178

)

Proceeds from exercise of stock options

 

 

 

2,898

 

 

 

 

1,005

 

Net cash provided by (used in) financing activities

 

 

 

1,412,453

 

 

 

 

(74,397

)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

 

42,595

 

 

 

 

(41,173

)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

 

 

 

61,029

 

 

 

 

78,278

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

 

103,624

 

 

$

 

37,105

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

 

30,742

 

 

$

 

24,760

 

Cash paid during period for income taxes

 

 

 

589

 

 

 

 

1,054

 

NON-CASH FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Payables for capital expenditures

 

 

 

(1,156

)

 

 

 

3,612

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 

20,855

 

 

$

 

945

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

31,534

 

 

 

 

15,604

 

Amortization of deferred financing costs, discount and debt premium

 

 

 

1,446

 

 

 

 

877

 

Equity in loss of unconsolidated affiliates

 

 

 

85

 

 

 

 

222

 

Stock compensation expense

 

 

 

3,679

 

 

 

 

1,733

 

Loss (Gain) on sale or disposal of property and equipment

 

 

 

706

 

 

 

 

(32

)

Provision for bad debt

 

 

 

375

 

 

 

 

218

 

Impairment charges

 

 

 

9,815

 

 

 

 

 

Provision for deferred income taxes

 

 

 

1,450

 

 

 

 

369

 

Other

 

 

 

23

 

 

 

 

16

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Sale of trading securities

 

 

 

395

 

 

 

 

 

Accounts receivable

 

 

 

9,491

 

 

 

 

5,647

 

Inventory

 

 

 

(154

)

 

 

 

(251

)

Prepaid expenses and other assets

 

 

 

1,801

 

 

 

 

(1,423

)

Interest payable

 

 

 

7,539

 

 

 

 

(10,006

)

Income taxes payable

 

 

 

4,199

 

 

 

 

67

 

Accounts payable and accrued liabilities

 

 

 

(15,232

)

 

 

 

(8,803

)

Net cash provided by operating activities

 

 

 

78,007

 

 

 

 

5,183

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(21,271

)

 

 

 

(6,206

)

Proceeds from sale of property and equipment

 

 

 

150

 

 

 

 

32

 

Cash escrow related to acquisition

 

 

 

 

 

 

 

(376,750

)

Decrease in other assets, net

 

 

 

 

 

 

 

(148

)

Net cash used in investing activities

 

 

 

(21,121

)

 

 

 

(383,072

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of 6% Senior Notes

 

 

 

 

 

 

 

375,000

 

Payments under Term Loan

 

 

 

 

 

 

 

(1,063

)

Borrowings under Prior Revolving Credit Facility

 

 

 

 

 

 

 

23,000

 

Payments under Prior Revolving Credit Facility

 

 

 

 

 

 

 

(29,000

)

Payments on capital leases

 

 

 

(148

)

 

 

 

(94

)

Debt issuance costs

 

 

 

(304

)

 

 

 

(7,016

)

Taxes paid related to net share settlement of equity awards

 

 

 

(7,502

)

 

 

 

(179

)

Proceeds from exercise of stock options

 

 

 

 

 

 

 

434

 

Other

 

 

 

(22

)

 

 

 

 

Net cash (used in) provided by financing activities

 

 

 

(7,976

)

 

 

 

361,082

 

 

 

 

 

 

 

 

 

 

 

 

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

 

48,910

 

 

 

 

(16,807

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR

 

 

 

147,749

 

 

 

 

63,443

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$

 

196,659

 

 

$

 

46,636

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO

   AMOUNTS REPORTED WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

183,138

 

 

$

 

44,574

 

Restricted cash

 

 

 

3,659

 

 

 

 

2,062

 

Restricted cash included in other noncurrent assets

 

 

 

9,862

 

 

 

 

 

TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

$

 

196,659

 

 

$

 

46,636

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

 

21,814

 

 

$

 

23,546

 

Local income taxes paid (refunded)

 

 

 

186

 

 

 

 

(20

)

NON-CASH FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Net change in payables for capital expenditures

 

 

 

2,366

 

 

 

 

2,312

 

 

The accompanying condensed notes are an integral part of these consolidated financial statements.


ELDORADO RESORTS, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

Organization

The accompanying unaudited consolidated financial statements include the accounts of Eldorado Resorts, Inc. (“ERI” or the “Company”), a Nevada corporation formed in September 2013, and its consolidated subsidiaries. The Company acquired Mountaineer, Presque Isle Downs and Scioto Downs in September 2014 pursuant to a merger (the “MTR Merger”) with MTR Gaming Group, Inc. (“MTR Gaming”) and in November 2015 it acquired Circus Reno and the interests in the Silver Legacy that it did not own prior to such date (the “Reno Acquisition”).

Throughout the three and six months ended June 30, 2017, ERI owned and operated the following properties:

Eldorado Resort Casino Reno (Eldorado Reno)A 814-room hotel, casino and entertainment facility connected via an enclosed skywalk to Silver Legacy and Circus Reno located in downtown Reno, Nevada that includes 1,142 slot machines, 46 table games and an 11 table poker room;

Silver Legacy Resort Casino (Silver Legacy)A 1,711-room themed hotel and casino connected via an enclosed skywalk to Eldorado Reno and Circus Reno that includes 1,212 slot machines and 63 table games;

Circus Circus Reno (Circus Reno)A 1,571-room hotel-casino and entertainment complex connected via an enclosed skywalk to Eldorado Reno and Silver Legacy that includes 695 slot machines and 27 table games;

Eldorado Resort Casino Shreveport (Eldorado Shreveport)A 403-room, all suite art deco-style hotel and tri-level riverboat dockside casino situated on the Red River in Shreveport, Louisiana that includes 1,387 slot machines, 52 table games and an eight table poker room;

Mountaineer Casino, Racetrack & Resort (Mountaineer)A 354-room hotel, casino and entertainment facility and live thoroughbred horse racing located on the Ohio River at the northern tip of West Virginias northwestern panhandle that includes 1,510 slot machines, 36 table games and a 10 table poker room;

Presque Isle Downs & Casino (Presque Isle Downs)A casino and live thoroughbred horse racing facility with 1,594 slot machines, 32 table games and a seven table poker room located in Erie, Pennsylvania; and

Eldorado Gaming Scioto Downs (Scioto Downs)A modern racino offering 2,206 video lottery terminals (VLT), harness racing and a 118-room third party hotel connected to Scioto Downs located 15 minutes from downtown Columbus, Ohio.

In addition, on May 1, 2017, the Company consummated its acquisition of Isle of Capri Casinos, Inc. and acquired the following properties:

Isle Casino HotelBlack Hawk (“Isle Black Hawk”)A land-based casino on an approximately 10-acre site in Black Hawk, Colorado that includes 1,086 slot machines, 25 table games, a nine table poker room and a 238-room hotel;

Lady Luck CasinoBlack Hawk (“Lady Luck Black Hawk”)A land-based casino across the intersection from Isle Casino Hotel in Black Hawk, Colorado, that includes 455 slot machines, 10 table games, five poker tables and a 164-room hotel with a parking structure connecting Isle Casino Hotel-Black Hawk and Lady Luck Casino-Black Hawk;

Isle Casino Racing Pompano Park (“Pompano”)A casino and harness racing track on an approximately 223-acre owned site in Pompano Beach, Florida, that includes 1,446 slot machines and a 42 table poker room;

Isle Casino Bettendorf (“Bettendorf”)A land-based single-level casino located off of Interstate 74 in Bettendorf, Iowa that includes 969 slot machines and 19 table games with two hotel towers with 509 hotel rooms;

Isle Casino Waterloo (“Waterloo”)A single-level land-based casino in Waterloo, Iowa that includes 948 slot machines, 25 table games, four poker tables and a 195-room hotel;

Isle of Capri Casino Hotel Lake Charles (“Lake Charles”)A gaming vessel on an approximately 19 acre site in Lake Charles, Louisiana, with 1,157 slot machines, 49 table games, including 13 poker tables and two hotels offering 493 rooms;

Isle of Capri Casino Lula (“Lula”)Two dockside casinos in Lula, Mississippi with 885 slot machines and 21 table games, two on-site hotels with a total of 451 rooms and a 28-space RV Park;

Lady Luck Casino Vicksburg (“Vicksburg”)A dockside casino in Vicksburg, Mississippi that includes 613 slot machines, 7 table games and a hotel with a total of 89 rooms;


Isle of Capri Casino Boonville (“Boonville”)A single-level dockside casino in Boonville, Missouri that includes 914 slot machines, 20 table games and a 140-room hotel;

Isle Casino Cape Girardeau (“Cape Girardeau”)A dockside casino and pavilion and entertainment center in Cape Girardeau, Missouri that includes 930 slot machines, 22 table games and 4 poker tables;

Lady Luck Casino Caruthersville (“Caruthersville”)—A riverboat casino located along the Mississippi River in Caruthersville, Missouri that includes 557 slot machines and nine table games;

Isle of Capri Casino Kansas City (“Kansas City”)A dockside casino located close to downtown Kansas City, Missouri offering 977 slot machines and 18 table games; and

Lady Luck Casino Nemacolin (“Nemacolin”)A casino property located on the 2,000-acre Nemacolin Woodlands Resort in Western Pennsylvania that includes 597 slot machines and 29 table games.

On August 22, 2016, Isle entered into an agreement to sell Lake Charles for aggregate consideration of $134.5 million, subject to certain adjustments. The transaction (the “Lake Charles Disposition”) is expected to be completed in 2017, subject to Louisiana Gaming Control Board approval and other customary closing conditions.

Acquisition of Isle of Capri Casinos, Inc.

On May 1, 2017 (the “Isle Acquisition Date”), the Company completed its acquisition of Isle of Capri Casinos, Inc. pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated as of September 19, 2016 with Isle of Capri Casinos, Inc., a Delaware corporation (“Isle” or “Isle of Capri”), Eagle I Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary of the Company, and Eagle II Acquisition Company LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (the “Isle Acquisition” or the “Isle Merger”). As a result of the Isle Merger, Isle became a wholly-owned subsidiary of ERI.

ERI owns and operates the following properties:

Eldorado Resort Casino Reno (Eldorado Reno)A 814-room hotel, casino and entertainment facility connected via an enclosed skywalk to Silver Legacy and Circus Reno located in downtown Reno, Nevada that includes 1,125 slot machines and 46 table games;

Silver Legacy Resort Casino (Silver Legacy)A 1,711-room themed hotel and casino connected via an enclosed skywalk to Eldorado Reno and Circus Reno that includes 1,187 slot machines, 63 table games and a 13 table poker room;

Circus Circus Reno (Circus Reno)A 1,571-room hotel-casino and entertainment complex connected via an enclosed skywalk to Eldorado Reno and Silver Legacy that includes 712 slot machines and 24 table games;

Eldorado Resort Casino Shreveport (Eldorado Shreveport)A 403-room, all suite art deco-style hotel and tri-level riverboat dockside casino situated on the Red River in Shreveport, Louisiana that includes 1,397 slot machines, 52 table games and an eight table poker room;

Mountaineer Casino, Racetrack & Resort (Mountaineer)A 357-room hotel, casino, entertainment and live thoroughbred horse racing facility located on the Ohio River at the effective timenorthern tip of West Virginias northwestern panhandle that includes 1,508 slot machines and 36 table games, including a 10 table poker room;

Presque Isle Downs & Casino (Presque Isle Downs)A casino and live thoroughbred horse racing facility with 1,593 slot machines, 33 table games and a seven table poker room located in Erie, Pennsylvania;

Eldorado Gaming Scioto Downs (Scioto Downs)A modern racino offering 2,245 video lottery terminals (“VLTs”), harness racing and a 118-room third party hotel connected to Scioto Downs located 15 minutes from downtown Columbus, Ohio;

Isle Casino HotelBlack Hawk (“Isle Black Hawk”)A land-based casino on an approximately 10-acre site in Black Hawk, Colorado that includes 1,026 slot machines, 27 table games, a nine table poker room and a 238-room hotel;

Lady Luck CasinoBlack Hawk (“Lady Luck Black Hawk”)A land-based casino across the intersection from Isle Merger, Casino Hotel in Black Hawk Colorado, that includes 452 slot machines, 10 table games, five poker tables and a 164-room hotel with a parking structure connecting Isle Casino Hotel-Black Hawk and Lady Luck Casino-Black Hawk;each outstanding share

Isle Casino Racing Pompano Park (“Pompano”)A casino and harness racing track on an approximately 223-acre owned site in Pompano Beach, Florida that includes 1,455 slot machines and a 45 table poker room. In April 2018, the Company announced the formation of Isle’s stock converted into the right to receive $23.00 in cash or 1.638 shares of ERI common stock (the “Stock Consideration”), at the election of the applicable Isle shareholder and subject to proration such that the outstanding shares of Isle common stock were exchanged for aggregate consideration comprised of 58% cash, or $552.0 million, and 42% ERI common stock, or 28.5 million newly issued shares of ERI common stock. The total purchase consideration was $1.93 billion (See Note 2).

In connectiona joint venture with the Cordish Companies to master plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack;


Isle Casino Bettendorf (“Bettendorf”)A land-based single-level casino located off Interstate 74 in Bettendorf, Iowa that includes 978 slot machines and 20 table games with two hotel towers with 509 hotel rooms;

Isle Acquisition, the Company completedCasino Waterloo (“Waterloo”)A single-level land-based casino in Waterloo, Iowa that includes 940 slot machines, 25 table games, and a debt financing transaction comprised of: (a) a senior secured credit facility194-room hotel;

Isle of Capri Casino Hotel Lake Charles (“Lake Charles”)A gaming vessel on an approximately 19 acre site in an aggregate principal amountLake Charles, Louisiana, with 1,173 slot machines, 47 table games, including 13 poker tables, and two hotels offering 493 rooms;

Isle of $1.75 billionCapri Casino Lula (“Lula”)Two dockside casinos in Lula, Mississippi with 875 slot machines and 20 table games, two on-site hotels with a (i) term loan facilitytotal of $1.45 billion486 rooms and (ii) revolving credit facilitya 28-space RV Park;

Lady Luck Casino Vicksburg (“Vicksburg”)A dockside casino in Vicksburg, Mississippi that includes 616 slot machines, nine table games and a hotel with a total of $300.0 million89 rooms;

Isle of Capri Casino Boonville (“Boonville”)A single-level dockside casino in Boonville, Missouri that includes 893 slot machines, 20 table games and (b) $375.0 milliona 140-room hotel;

Isle Casino Cape Girardeau (“Cape Girardeau”)A dockside casino and pavilion and entertainment center in Cape Girardeau, Missouri that includes 872 slot machines and 24 table games, including four poker tables;

Lady Luck Casino Caruthersville (“Caruthersville”)—A riverboat casino located along the Mississippi River in Caruthersville, Missouri that includes 516 slot machines and nine table games;

Isle of senior unsecured notes. The proceedsCapri Casino Kansas City (“Kansas City”)A dockside casino located close to downtown Kansas City, Missouri offering 966 slot machines and 18 table games; and

Lady Luck Casino Nemacolin (“Nemacolin”)A casino property located on the 2,000-acre Nemacolin Woodlands Resort in Western Pennsylvania that includes 600 slot machines and 28 table games.  

In addition, Scioto Downs, through its subsidiary RacelineBet, Inc., also operates Racelinebet.com, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of such borrowings were used (v)TwinSpires.com, an affiliate of Churchill Downs Incorporated.

Reclassifications

Certain reclassifications of prior year presentations have been made to pay the cash portion of the consideration payable in the Isle Merger, (w) refinance all of Isle’s existing credit facilities, (x) redeem or otherwise repurchase all of Isle’s senior and senior subordinated notes, (y) refinance the Company’s existing credit facility and (z) pay transaction fees and expenses relatedconform to the foregoing (See Note 8 for further discussion of the refinancing transaction and terms of such indebtedness).current period presentation.

Acquisition charges attributed to the Isle Acquisition are reported on the accompanying income statement related to legal, accounting, financial advisory services, severance, stock awards and other costs totaling $85.5 million and $87.1 million during the three and six months ended June 30, 2017, respectively, and $0.1 million and $0.6 million for the three and six months ended June 30, 2016. As of June 30, 2017, $0.7 million of accrued costs and expenses related to the Isle Acquisition are included in accrued other liabilities. Additionally, we recognized a loss of $26.6 million related to the extinguishment of Isle debt and the payment of interest and call premiums in conjunction with the Isle Acquisition.

The accompanying unaudited consolidated financial statements for periods prior to the Isle Acquisition Date are those of ERI and its subsidiaries. The presentation of information herein for periods prior to the Isle Acquisition Date and after the Isle Acquisition Date are not fully comparable because the results of operations for Isle are not included for periods prior to the Isle Acquisition Date. Summary financial results of Isle for the three and nine months ended January 22, 2017 are included in Isle’s Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission (“SEC”). In conjunction with the Isle Acquisition, Isle is no longer required to file quarterly and annual reports with the SEC, and terminated its registration on May 11, 2017.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial


statements contain all adjustments, all of which are normal and recurring, considered necessary for a fair presentation and have been included herein. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full year or any future period.

The executive decision makerfinancial information included for periods prior to our acquisition of Isle are those of ERI and its subsidiaries. The presentation of information herein for periods prior to our Company reviews operatingacquisition of Isle and after our acquisition of Isle are not fully comparable because the results assess performance and make decisions on a “significant market” basis. The Company’s management views each of its properties as an operating segment. Operating segmentsoperations for Isle are aggregated based on their similar economic characteristics, typesnot included for periods prior to our acquisition of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure. Prior to the Isle Acquisition, the Company’s principal operating activities occurred in three geographic regions: Nevada, Louisiana and parts of the eastern United States. The Company aggregated its operations into three reportable segments based on the similar characteristics of the operating segments within the regions in which they operated. Following the Isle Acquisition, the Company’s principal operating activities occur in four geographic regions and reportable segments based on the similar characteristics of the operating segments within the regions in which the Company operates: West, Midwest, South, and East (See Note 13 for the list of properties included in each segment for the three and six months ended June 30, 2017 and 2016).Isle.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Summary of Significant Accounting Policies - Updates

Marketable securities consist primarily of trading securities held by the Company’s captive insurance subsidiary. The trading securities are primarily debt and equity securities that are purchased with the intention to resell in the near term. The trading securities are carried at fair value with changes in fair value recognized in current period income in the accompanying statements of operations. This accounting policy was implemented as of the Isle Acquisition Date.2017.

Recently Issued Accounting Pronouncements – New Developments and Adoptions of New Accounting Standards

In May 2017,2014 (amended January 2017), the Financial Accounting Standards Board (“FASB”) issued Accounting StandardsStandard Update (“ASU”) No. 2017-09, which amends the scope of modification accounting for share-based payment arrangements. An entity should account for the effects of a modification unless the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The standard is effective for the financial statements issued for annual periods and interim periods within those annual periods, beginning after December 15, 2017, and early adoption is permitted. We anticipate adopting this accounting standard during the first quarter of 2018, and are evaluating the impact on our consolidated financial statements.

In May 2014 (amended January 2017), FASB issued ASU No. 2014‑09,2014-09, “Revenue from Contracts with Customers,” (ASC Topic 606) which provides guidance for revenue recognition. The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and eliminates existing industry guidance, including revenue recognition guidance specific to the gaming industry. The FASB has also recently issued several amendments to the standard, including narrow-scope improvements and practical expedients (ASU 2016-12) and clarification on accounting for and identifying performance obligations (ASU 2016-10). The core principle of the revenue model indicates that an entity should recognize revenue to depict the transfer of promised goods or


services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The

We adopted this standard is designedeffective January 1, 2018, and elected to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The guidance is effective for interim and annual periods beginning after December 15, 2017, and should be applied usingapply the full retrospective method or retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application. While early adoption is permitted for interim and annual periods beginning after December 15, 2016, we anticipate adopting this standard on January 1, 2018. We are currently in the process of evaluating the full impact adoption of ASU 2014‑09 (as amended) will have on our consolidated financial statements including any new considerations with respect to the Isle Acquisition. We anticipate this new standard will likely have a material impact on our consolidated financial statements.

We expect themethod. The most significant effect uponimpacts of the adoption of ASU 2014-09 (as amended) will likely be related to 1) the accounting for our customer loyalty program (no longer be recorded at cost, and a deferred revenue model will likely be used to account for the classification and timing of revenue recognized as well as the classification of related expenses for loyalty point redemptions) and 2) the elimination of promotional allowances (the presentation of goods and services provided to our customers without charge, includedare summarized below in gross revenue with a corresponding reduction in promotional allowances, will no longer be reported as revenue and will be recognized based on relative standalone selling prices for transactions with more than one performance obligation). As a result, we expect that gaming revenues will be reduced with a corresponding increase, in total, to food and beverage, hotel, and other revenues. Given our evaluation process is ongoing, the quantitative effects of these changes have not yet been fully determined and are still being analyzed.Note 2.


In February 2016, the FASB issued ASU No. 2016-02 which addresses the recognition and measurement of leases. Under the new guidance, for all leases (with the exception of short-term leases), at the commencement date, lessees will be required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Further, the new lease guidance simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and liabilities, which no longer provides a source for off balance sheet financing. The effective date for this update is for the annual and interim periods beginning after December 15, 2018 with early adoption permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements.

Currently, we do not have any material capital leases nor any material operating leases where we are the lessor. Our operating leases, primarily relating to certain ground leases and slot machines or video lottery terminals (VLTs),VLTs, will be recorded on the balance sheet as an ROU asset with a corresponding lease liability, which will be amortized using the effective interest rate method as payments are made. The ROU asset will be depreciated on a straight-line basis and recognized as lease expense. The qualitative and quantitative effects of adoption of ASU 2016-02 are still being analyzed, and we are in the process of evaluating the full effect the new guidance will have on our consolidated financial statements includingand any new considerations with respect to any pending acquisitions.

In November 2016, ASU No. 2016-18 was issued related to the Isle Acquisition.inclusion of restricted cash in the statement of cash flows. This new guidance requires that a statement of cash flows present the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalent. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017. The Company retrospectively adopted this guidance as of December 31, 2017. Upon adoption, the Company included a reconciliation of Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total shown in the Consolidated Statements of Cash Flows. Adoptions of this guidance had no other impact on the Consolidated Financial Statements or disclosures.

Certain amounts have been retrospectively reclassified for the three months ended March 31, 2017 to conform to the current period presentation and reflect the change in the Company’s Consolidated Statements of Cash Flows required with the adoption of ASU No. 2016-15 as of January 1, 2018 related to the classification of certain items on the statement of cash flows and ASU No 2016-18 as of December 31, 2017 related to the inclusion of restricted cash in the statement of cash flows as further described above.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations – Clarifying the Definition of a Business.” This amendment is intended to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business and to provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments are effective for interim and annual periods beginning after December 15, 2017, with early adoption allowed as follows: (1) transactions for which acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (2) transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. We adopted this accounting standard during the first quarter of 2018, which did not have an impact on our consolidated financial statements, and will result in future acquisitions which do not involve substantive processes being accounted for as asset acquisitions.

Note 2. Revenue Recognition

The Company’s revenue contracts with customers consists primarily of casino wagers, pari-mutuel commissions, food and beverage transactions, hotel sales, retail and entertainment contracts.


Casino Revenue and Pari-mutuel Commissions

The Company recognizes as casino revenue (transaction price) the net win from gaming activities, which is the difference between gaming wins and losses, not the total amount wagered. Progressive jackpots are accrued and charged to revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives. Pari-mutuel commissions consist of commissions earned from thoroughbred and harness racing and importing of simulcast signals from other race tracks and are recognized at the time wagers are made. Such commissions are a designated portion of the wagering handle as determined by state racing commissions, and are shown net of the taxes assessed by state and local agencies, as well as purses and other contractual amounts paid to horsemen associations. The Company recognizes revenues from fees earned through the exporting of simulcast signals to other race tracks at the time wagers are made. Such fees are based upon a predetermined percentage of handle as contracted with the other race tracks.

Gaming wager contracts involve two performance obligations for those customers earning points under the Company’s loyalty program and a single performance obligation for customers who don’t participate in the program. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract.

Loyalty Programs and Other Contract Obligations

The Company offers programs at its properties whereby our participating customers can accumulate points for wagering that can be redeemed for credits for free play on slot machines, lodging, food and beverage, merchandise and in limited situations, cash. The incentives earned by customers under these programs are based on previous revenue transactions and represent separate performance obligations. Points earned, less breakage, are recorded as a reduction of casino revenues at the retail value of such benefits owed to the customer and recognized as departmental revenue based on where such points are redeemed, upon fulfillment of the performance obligation. The loyalty program liability represents a deferral of revenue until redemption occurs, which is typically less than one year.

For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point contract liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for a non-gaming good or service. An amount is allocated to the gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately. The loyalty point contract liability amount is deferred and recognized as revenue when the customer redeems the points for the non-gaming good or service at the time such goods or services are delivered to the customer.

The Company’s liability for its loyalty point performance obligations totaled $11.5 million and $11.8 million at March 31, 2018 and December 31, 2017, respectively. Historically, the Company’s loyalty points earned and redeemed are substantially constant over time, which results in the loyalty point performance obligation balance remaining fairly consistent across our reporting periods.

Non-gaming Revenue

Hotel, food and beverage, and other operating revenues are recognized as services are performed. The transaction price for hotel, food and beverage contracts is the net amount collected from the customer for such goods and services. Hotel, food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred to the customer over the customer’s stay at the hotel or when the delivery is made for the food and beverage. Advance deposits for future hotel occupancy, convention space or food and beverage services contracts are recorded as deferred income until the revenue recognition criteria has been met.

The Company also provides goods and services that may include multiple performance obligations, such as for packages, for which revenues are allocated on a pro rata basis based on each service's stand-alone selling price.

Complimentaries

The Company offers discretionary coupons and other discretionary complimentaries to customers outside of the loyalty program. The retail value of complimentary food, beverage, hotel rooms and other services provided to customers, including


loyalty point redemptions, is recognized in revenues when the goods or services are transferred to the customer. Complimentaries provided by third parties at the discretion and under the control of the Company is recorded as an expense when incurred. The Company’s revenues included complimentaries and loyalty point redemptions of $47.2 million and $23.7 million for the three months ended March 31, 2018 and 2017, respectively.

Adoption of ASC Topic 606

The adoption of ASC Topic 606 on January 1, 2018 principally affected the presentation of promotional allowances and how the Company measured the liability associated with our customer loyalty programs. The presentation of gross revenues for complimentary goods and services provided to guests with a corresponding offsetting amount included in promotional allowances was eliminated. This adjustment in presentation of promotional allowances did not have an impact on the Company’s historically reported net operating revenues. The majority of such amounts previously included in promotional allowances now offset casino revenues based on an allocation of revenues to performance obligations using stand-alone selling price. Food, beverage, lodging and other services furnished to our guests on a complimentary basis are measured at the respective estimated standalone selling prices and included as revenues within food and beverage, lodging, and retail, entertainment and other, which generally resulted in a corresponding decrease in gaming revenues. The costs of providing such complimentary goods and services are included as expenses within food and beverage, lodging, and retail, entertainment and other.

Additionally, as a result of the adoption of the new standard, certain adjustments and other reclassifications to and between revenue categories and to and between expense categories were required; however, the amounts associated with such adjustments did not have a significant impact on the Company’s previously reported operating income or net income.  

Liabilities associated with our customer loyalty programs are no longer valued at cost; rather a deferred revenue model is used to account for the classification and timing of revenue to be recognized related to the redemption of loyalty program liabilities by our customers. Points earned under the Company’s loyalty programs are deemed to be separate performance obligations, and recorded as a reduction of casino revenues when earned at the retail value of such benefits owed to the customer and recognized as departmental revenue based on where such points are redeemed, upon fulfillment of the performance obligation.

The Company elected to adopt the full retrospective method to apply the new guidance to each prior reporting period presented as if it had been in effect since January 1, 2015, with a pre-tax cumulative effect adjustment to our retained earnings upon adoption of $4.7 million. Net of tax, the cumulative effect adjustment to our retained earnings upon adoption was $3.5 million. This was primarily related to our loyalty program point liability, which increased from an estimated incremental cost model to a deferred revenue model at retail value.

Adoption of the new standard did not have a significant impact on our previously reported net revenue, expenses, operating income, and net income. The impact of adoption of the new standard to previously reported selected financial statement information was as follows (in thousands):

 

 

Three Months Ended March 31, 2017

 

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

Gross revenues

 

$

 

219,546

 

 

$

 

(17,153

)

 

$

 

202,393

 

Promotional allowances

 

 

 

(18,621

)

 

 

 

18,621

 

 

 

 

 

Net revenues

 

$

 

200,925

 

 

$

 

1,468

 

 

$

 

202,393

 

Operating income (loss)

 

$

 

14,149

 

 

$

 

(121

)

 

$

 

14,028

 

Net income (loss)

 

$

 

1,021

 

 

$

 

(76

)

 

$

 

945

 

The Company’s consolidated statement of income presents net revenue disaggregated by type or nature of the good or service (i.e., casino, pari-mutuel, food and beverage, hotel and other). A summary of net revenues disaggregated by type of revenue and reportable segment is presented below (amounts in thousands). Refer to Note 13 for a discussion of the Company’s reportable segments.


 

 

Three Months Ended March 31, 2018

 

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Corporate

and Other

 

 

Total

 

Casino

 

$

 

49,734

 

 

$

 

88,359

 

 

$

 

97,509

 

 

$

 

103,856

 

 

$

 

 

 

$

 

339,458

 

Pari-mutuel commissions

 

 

 

 

 

 

 

 

 

 

 

3,409

 

 

 

 

661

 

 

 

 

 

 

 

 

4,070

 

Food and beverage

 

 

 

23,211

 

 

 

 

6,916

 

 

 

 

13,860

 

 

 

 

8,211

 

 

 

 

 

 

 

 

52,198

 

Hotel

 

 

 

19,430

 

 

 

 

3,637

 

 

 

 

5,992

 

 

 

 

1,682

 

 

 

 

 

 

 

 

30,741

 

Other

 

 

 

7,204

 

 

 

 

1,883

 

 

 

 

2,030

 

 

 

 

2,481

 

 

 

 

127

 

 

 

 

13,725

 

Net revenues

 

$

 

99,579

 

 

$

 

100,795

 

 

$

 

122,800

 

 

$

 

116,891

 

 

$

 

127

 

 

$

 

440,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2017

 

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Corporate

and Other

 

 

Total

 

Casino

 

$

 

23,833

 

 

$

 

 

 

$

 

23,169

 

 

$

 

94,552

 

 

$

 

 

 

$

 

141,554

 

Pari-mutuel commissions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

636

 

 

 

 

 

 

 

 

636

 

Food and beverage

 

 

 

19,492

 

 

 

 

 

 

 

 

5,734

 

 

 

 

7,195

 

 

 

 

 

 

 

 

32,421

 

Hotel

 

 

 

14,651

 

 

 

 

 

 

 

 

2,924

 

 

 

 

1,730

 

 

 

 

 

 

 

 

19,305

 

Other

 

 

 

5,512

 

 

 

 

 

 

 

 

733

 

 

 

 

2,174

 

 

 

 

58

 

 

 

 

8,477

 

Net revenues

 

$

 

63,488

 

 

$

 

 

 

$

 

32,560

 

 

$

 

106,287

 

 

$

 

58

 

 

$

 

202,393

 

 

Note 2.3. Isle Acquisition and PreliminaryFinal Purchase Price Accounting

Final Purchase Price Accounting – Isle of Capri

On May 1, 2017, the Company completed its acquisition of Isle. As of March 31, 2018, the Company finalized its purchase price accounting related to the Isle Acquisition. The total purchase consideration in the Isle MergerAcquisition was determined with reference to the fair value on the date of the Merger Agreement as follows:

 

Purchase consideration calculation (dollars in thousands, except shares and stock price)

 

Shares

 

 

Per share

 

 

 

 

Cash paid for outstanding Isle common stock (1)

 

 

 

 

 

 

 

 

 

 

 

$

 

552,050

 

Shares of ERI common stock issued for Isle common stock (2)

 

 

 

28,468,182

 

 

$

 

19.12

 

 

 

 

544,312

 

Cash paid by ERI to retire Isle's long-term debt (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

828,000

 

Shares of ERI common stock for Isle equity awards (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

10,383

 

Purchase consideration

 

 

 

 

 

 

 

 

 

 

 

$

 

1,934,745

 

 

(1)

The cash component of the consideration represents 58% of the aggregate consideration paid in the Isle Merger.Acquisition. The Merger Agreement provided that Isle stockholders could elect to exchange each share of Isle common stock for either $23.00 in cash or 1.638 shares of ERI common stock, subject to proration such that the outstanding shares of Isle common stock will be exchanged for aggregate consideration comprised of 58% cash and 42% ERI common stock. See discussion of Stock Consideration component in note (2) below.

(2)

The Stock Consideration component of the consideration represents 42% of the aggregate consideration paid in the Isle Merger.Acquisition. The Merger Agreement provided that 58% of the aggregate consideration would be paid by ERI in cash, as described in note (1) above. The remaining 42% of the aggregate consideration was paid in shares of ERI common stock. The total Stock Consideration and per share consideration above were based on the ERI stock price on April 28, 2017 (the last business day prior to Isle Acquisition Date) which was $19.12 per share.

(3)

In addition to the cash paid to retire the principal amounts outstanding of Isle’s long-term debt, ERI paid $26.6 million in premiums and interest.

(4)

This amount represents consideration paid for the replacement of Isle’s outstanding equity awards. As discussed in Note 1, Isle’s outstanding equity awards were replaced by ERI equity awards with similar terms. A portion of the fair value of ERI awards issued represents consideration transferred, while a portion represents compensation expense based on the vesting terms of the equity awards.


Preliminary Purchase Price Accounting

The following table summarizes the preliminaryfinal purchase accounting of the estimated purchase consideration to the identifiable assets acquired and liabilities assumed in the Isle Acquisition as of the Isle Acquisition Date, with the excess recorded as goodwill. The fair values were based on management’s analysis, including preliminary work performed by third-party valuation specialists. The following table summarizes the preliminaryour final purchase price accounting of the acquired assets and liabilities as of June 30, 2017March 31, 2018 (dollars in thousands):

 

Current and other assets, net

 

$

 

134,143135,925

 

Property and equipment

 

 

 

853,331908,816

 

Goodwill

 

 

 

679,656709,087

 

Intangible assets (i)

 

 

 

470,811517,470

 

Other noncurrent assets

 

 

 

11,025

Assets held for sale

143,59215,082

 

Total assets

 

 

 

2,292,5582,286,380

 

Current liabilities

 

 

 

(138,475144,306

)

Deferred income taxes (ii)

 

 

 

(187,127189,952

)

Other noncurrent liabilities

 

 

 

(26,762

)

Liabilities related to assets held for sale

(5,44917,377

)

Total liabilities

 

 

 

(357,813351,635

)

Net assets acquired

 

$

 

1,934,745

 

 

(i)

Intangible assets consist of gaming licenses, trade names, and player relationships.

(ii)

Deferred tax liabilities were derived based on fair value adjustments for property and equipment and identified intangibles.

During the three months ended March 31, 2018, the Company finalized its valuation procedures and adjusted the Isle of Capri preliminary purchase price accounting, as disclosed in the Annual Report on Form 10-K for the year ended December 31, 2017, to their updated values. Except for other long-term liabilities related to Bettendorf and Nemacolin (see Note 8) and a corresponding goodwill adjustment totaling $6.1 million (net of tax), the finalization of our purchase price accounting resulted in minimal changes and refinements by management as of, and for the three months ended March 31, 2018.

Valuation methodologies under both a market and income approach used for the identifiable net assets acquired in the Isle Acquisition make use of Level 1 and Level 3 inputs including quoted prices in active markets and discounted cash flows using current interest rates and are provisional pending development of a final valuation.

Trade receivables and payables, inventory and other current and noncurrent assets and liabilities were valued at the existing carrying values as they represented the estimated fair value of those items at the Isle Acquisition Date, based on management’s judgementjudgment and estimates.

The fair value of land was determined using the market approach, which arrives at an indication of value by comparing the site being valued to sites that have been recently acquired in arm’s-length transactions. The market data is then adjusted for any significant differences, to the extent known, between the identified comparable sites and the site being valued. Building and site improvements were valued using the cost approach using a direct cost model built on estimates of replacement cost. With respect to personal property components of the assets, personal property assets with an active and identifiable secondary market such as riverboats, gaming equipment, computer equipment and vehicles were valued using the market approach. Other personal property assets such as furniture, fixtures, computer software, and restaurant equipment were valued using the cost approach which is based on replacement or reproduction costs of the asset.

The cost approach is an estimation of fair value developed by computing the current cost of replacing a property and subtracting any depreciation resulting from one or more of the following factors: physical deterioration, functional obsolescence, and/or economic obsolescence. The income approach incorporates all tangible and intangible property and served as a ceiling for the fair values of the acquired assets of the ongoing business enterprise, while still taking into account the premise of highest and best use. In the instance where the business enterprise value developed via the income approach was exceeded by the initial fair values of the underlying assets, an adjustment to reflect economic obsolescence was made to the tangible assets on a pro rata basis to reflect the contributory value of each individual asset to the enterprise as a whole.

The fair value of the gaming licenses was determined using the excess earnings or replacement cost methodology based on the respective states’ legislation. The excess earnings methodology, which is an income approach methodology that allocates the projected cash flows of the business to the gaming license intangible assets less charges for the use of other identifiable assets of Isle including working capital, fixed assets and other intangible assets. This methodology was considered appropriate as the gaming licenses are the primary asset of Isle and the licenses are linked to each respective facility. Under the respective state’s gaming legislation, the property specific licenses can only be acquired if a theoretical


buyer were to acquire each existing facility. The existing licenses could not be acquired and used for a different facility. The properties’ estimated future cash flows were the primary assumption in the respective valuations. Cash flow estimates included net gaming revenue, gaming operating expenses, general and administrative expenses, and tax expense. The replacement cost methodology is a cost approach methodology based on replacement or reproduction cost of the gaming license as an indicator of fair value. The acquired Isle properties currently have licenses in Pennsylvania, Iowa, Missouri, Mississippi, Florida and Colorado. The renewal of each state’s gaming license depends on a number of factors, including payment of certain fees and taxes, providing certain information to the state’s gaming regulator, and meeting certain inspection requirements. However, ERI’s historical experience has not indicated, nor does ERI expect, any limitations regarding its ability to continue to renew each license. No other competitive, contractual, or economic factor limits the useful lives of these assets. Accordingly, ERI has concluded that the useful lives of these licenses are indefinite.


Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademarks, ERI would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, ERI avoids any such payments and record the related intangible value of ERI’s ownership of the brand name. The primary assumptions in the valuation included revenue, pre-tax royalty rate, and tax expense.

ERITrade names were valued using the relief‑from‑royalty method. The loyalty program was valued using a comparative business valuation method. Management has preliminarily assigned trade names an indefinite useful life, to the gaming licenses, in accordance with its review of the applicable guidance of ASC Topic No. 350, “Intangibles-Goodwill and Other” (“ASC 350”). The standard required ERI to consider, among other things, the expected use of the asset, the expected useful life of other related asset or asset group, any legal, regulatory, or contractual provisions that may limit the useful life, ERI’s own historical experience in renewing similar arrangements, the effects of obsolescence, demand and other economic factors, and the maintenance expenditures required to obtain the expected cash flows. In that analysis, ERI determined that no legal, regulatory, contractual, competitive, economic or other factors limit the useful lives of these intangible assets. The acquired

Isle properties currently have licenses in Pennsylvania, Iowa, Missouri, Mississippi, FloridaOperating Results and Colorado. The renewal of each state’s gaming license depends on a number of factors, including payment of certain fees and taxes, providing certain information to the state’s gaming regulator, and meeting certain inspection requirements. However, ERI’s historical experience has not indicated, nor does ERI expect, any limitations regarding its ability to continue to renew each license. No other competitive, contractual, or economic factor limits the useful lives of these assets. Accordingly, ERI has preliminarily concluded that the useful lives of these licenses are indefinite.Transaction Expenses

For the period from the Isle Acquisition Date through June 30, 2017,three months ended March 31, 2018, Isle generated net revenue of $134.3$231.9 million and net income of $5.3$30.4 million.

Transaction expenses attributed to the Isle Acquisition are reported on the accompanying statements of income related to legal, accounting, financial advisory services, severance, stock awards and other costs and totaled $1.0 million and $1.6 million for the three months ended March 31, 2018 and 2017, respectively.

Unaudited Pro Forma Information

The following unaudited pro forma information presents the results of operations of the Company for the sixthree months ended June 30, 2017 and 2016, which give effect to the Isle Acquisition, the Lake Charles Disposition, and Isle’s sale of the Lady Luck Casino Marquette, which closed on March 13,31, 2017, as if each of such transactionsthe Isle Acquisition had occurred on January 1, 20162017 (in thousands):.

 

 

 

Six Months Ended

 

 

 

June 30, 2017

 

 

June 30, 2016

 

Net revenues

 

$

 

847,124

 

 

$

 

877,058

 

Net income (loss) from continuing operations

 

 

 

48,018

 

 

 

 

(14,084

)

Net income (loss)

 

 

 

52,972

 

 

 

 

(8,854

)

Three Months Ended

March 31, 2017

Net operating revenues

$

448,469

Net loss

(30,303

)

These pro forma results do not necessarily represent the results of operations that would have been achieved if the Isle Acquisitionacquisition had taken place on January 1, 2016,2017, nor are they indicative of the results of operations for future periods. The pro forma amounts include the historical operating results of the Company and Isle prior to the Isle Acquisition with adjustments factually supportable and directly attributable to the Isle Acquisition.

 

 

Note 3. Discontinued Operations4. Assets Held for Sale

On August 22, 2016, Isle February 28, 2018, the Company entered into a definitive agreementagreements to sell its casinosubstantially all of the assets and hotel propertyliabilities of Presque Isle Downs and Vicksburg to Churchill Downs Incorporated (“CDI”). Under the terms of the agreements, CDI will purchase Presque Isle Downs for cash consideration of approximately $178.9 million and Vicksburg for cash consideration of approximately $50.6 million, in Lake Charles, Louisiana, for $134.5 million,each case subject to a customary purchase priceworking capital adjustment (the “Dispositions”). Additionally, an impairment charge was recorded related to an affiliate of Laguna Development Corporation, a Pueblo of a Laguna-owned business based in Albuquerque, New Mexico. Vicksburg during the three months ended March 31, 2018 (see Note 6).

The transaction is expected to be completed in 2017,Dispositions are subject to Louisiana Gaming Board approvalreceipt of required regulatory approvals, termination of the waiting period under the Hart-Scott-Rodino Act (the “HSR Act”) and other customary closing conditions.conditions, including, in the case of Presque Isle


Downs, the prior closing of the sale of Vicksburg or the entry into an agreement to acquire another asset of the Company. On May 7, 2018, the Company and CDI each received a $20.0 million deposit relatedRequest for Additional Information and Documentary Materials, often referred to this transaction, whichas a “Second Request,” from the Federal Trade Commission (“FTC”) in connection with the FTC’s review of the Vicksburg acquisition. The Second Request was issued under the HSR Act. Issuance of the Second Request extends the waiting period under the HSR Act until 30 days after the Company and CDI have substantially complied with the Second Request, unless the waiting period is reflectedextended voluntarily by the parties or terminated earlier by the FTC. The Company and CDI continue to cooperate fully with the FTC in restricted cash within current assetsits review. The Dispositions are expected to close in the consolidated balance sheet asthird or fourth quarter of June 30, 2017.

As2018 subject to satisfaction of closing conditions (including termination of the waiting period under the HSR Act and, in the case of Presque Isle Acquisition Date, Lake CharlesDowns, the prior closing of the sale of Vicksburg or the entry into an agreement to acquire another asset of the Company.

The Dispositions met the requirements for presentation as assets held for sale and discontinued operation under generally accepted accounting principles. Accordingly, the operationsprinciples as of Lake Charles has been classified as discontinued operations and as assets held for sale for all periods presented.


The results of Isle’s discontinued operations are summarized as follows (in thousands):

Discontinued Operations

May 1 - June 30,

2017

Net revenues

$

18,434

Pretax income from discontinued operations

$

1,540

Income tax provision from discontinued operations

(585

)

Income from discontinued operations

$

955

March 31, 2018.

The assets and liabilities held for sale were as follows (in thousands):

 

June 30,

2017

Assets:

Accounts receivable

$

544

Inventory

538

Prepaid expenses and other assets

932

Property and equipment, net

59,346

Goodwill

36,353

Other intangible assets, net

45,659

Prepaid deposits and other

220

Total assets held for sale

$

143,592

Liabilities:

Accounts payable

$

1,369

Payroll and related

1,335

Property and other taxes

788

Progressive jackpots and slot club awards

1,663

Other

294

Total liabilities assets held for sale

$

5,449

 

 

March 31, 2018

 

 

 

Vicksburg

 

 

Presque Isle

Downs

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

 

110

 

 

$

 

2,083

 

 

$

 

2,193

 

Inventories

 

 

 

283

 

 

 

 

1,530

 

 

 

 

1,813

 

Prepaid expenses and other

 

 

 

232

 

 

 

 

1,072

 

 

 

 

1,304

 

Property and equipment, net

 

 

 

35,615

 

 

 

 

68,039

 

 

 

 

103,654

 

Goodwill

 

 

 

8,806

 

 

 

 

3,122

 

 

 

 

11,928

 

Other intangibles, net

 

 

 

2,720

 

 

 

 

75,422

 

 

 

 

78,142

 

Assets held for sale

 

$

 

47,766

 

 

$

 

151,268

 

 

$

 

199,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

 

181

 

 

$

 

688

 

 

$

 

869

 

Accrued payroll and related

 

 

 

183

 

 

 

 

537

 

 

 

 

720

 

Accrued property and other taxes

 

 

 

 

 

 

 

61

 

 

 

 

61

 

Accrued other liabilities

 

 

 

367

 

 

 

 

3,381

 

 

 

 

3,748

 

Liabilities related to assets held for sale

 

$

 

731

 

 

$

 

4,667

 

 

$

 

5,398

 

Note 4. Investment in Unconsolidated Affiliates

Hotel Partnership.  The Company holds a 42.1% variable interest in a partnership with other investors that developed a new 118-room Hampton Inn & Suites hotel at Scioto Downs that opened in March 2017. Pursuant to the terms of the partnership agreement, the Company contributed $1.0 million of cash and 2.4 acres of a leasehold immediately adjacent to The Brew Brothers microbrewery and restaurant at Scioto Downs. The partnership constructed the hotel at a cost of $16.0 million and other investor members operate the hotel. The Company is not the primary beneficiary, and therefore, the entity is accounted for under the equity method of accounting. As of June 30, 2017, the Company’s investment in the partnership was $1.0 million, classified as “Investment in and advances to unconsolidated affiliates” in the consolidated balance sheets, representing the Company’s maximum exposure to loss.

 

Note 5. Stock-Based Compensation

Common Stock and Stock‑Based Awards

The Company has authorized common stock of 100,000,000 shares, par value $0.00001 per share. In February 2018, the Board of Directors approved and adopted an amendment (the “Common Stock Amendment”) to the Company’s Restated Certificate of Incorporation, subject to approval by the Company’s stockholders that would increase the total number of authorized shares of common stock from 100,000,000 shares to 200,000,000 shares.

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Total stock-based compensation expense in the accompanying consolidated statements of income totaled $3.7 million and $1.7 million during the three months ended March 31, 2018 and 2017, respectively.

The Board of Directors (“BOD”) adopted the Eldorado Resorts, Inc. 2015 Equity Incentive Plan (“2015 Plan”) on January 23, 2015 and our shareholders subsequently approved the adoption of the 2015 Plan on June 23, 2015. The Plan permits the granting of stock options, including incentive stock options (“ERI Stock Options”), stock appreciation rights, restricted stock or restricted stock units (“RSUs”), performance awards, and other stock-based awards and dividend equivalents. ERI Stock Options primarily vest ratably over three years and RSUs granted to employees and executive officers primarily vest and become non-forfeitable upon the third anniversary of the date of grant. RSUs granted toThe stock ownership guidelines require our non-employee directors to hold shares of our common stock with a minimum value equal to five times the director’s annual cash base retainer fee. Prior to achievement of the minimum stock ownership guideline, RSU grants will vest immediately and are delivered upon the date that is the earlier ofimmediately; however, settlement will be mandatorily deferred until termination of service onBoard service. After minimum stock ownership is achieved, unless the BOD or the consummation of a change of controldirector voluntarily elects to defer settlement of the Company.RSUs, the RSUs will vest and be


settled immediately at the time of grant. The performance awards relate to the achievement of defined levels of performance and are generally measured over a one or two-year performance period depending upon the award agreement. If the performance award levels are achieved, the awards earned will vest and become payable at the end of the vesting period, defined as either a one or two calendar year period following the performance period. Payout ranges are from 0% up to 200% of the award target.


Pursuant to the Merger Agreement, the outstanding equity awards of Isle were converted into comparable equity awards of ERI stock as follows:

Isle stock options. Each option or other right to acquire Isle common stock (each an “Isle Stock Option”) that was outstanding immediately prior to the Isle Acquisition Date (whether vested or unvested), as of the Isle Acquisition Date, (i) continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle Stock Option was granted and, if applicable, any other relevant agreements (such as an employment agreement), (ii) ceased to represent an option or right to acquire shares of Isle common stock, and (iii) was converted into an option or right to purchase that number of shares ERI common stock equal to the number of shares of Isle common stock subject to the Isle Stock Option multiplied by the Stock Consideration at an exercise price equal to the exercise price of the Isle Stock Option divided by the Stock Consideration, subject to the same restrictions and other terms as are set forth in the Isle equity incentive plan, the award agreement pursuant to which such Isle Stock Option was granted and, if applicable, any other relevant agreements (such as an employment agreement).

Isle restricted stock awards. Each share of Isle common stock subject to vesting, repurchase or lapse restrictions (each an “Isle Restricted Share”) that was outstanding under any Isle equity plan or otherwise immediately prior to the Isle Acquisition Date, as of the Isle Acquisition Date, continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle Restricted Share was granted, and, if applicable, any other relevant agreements (such as an employment agreement) and was exchanged for shares of ERI common stock (in an amount equal to the Stock Consideration, with aggregated fractional shares rounded to the nearest whole share) and remain subject to the same restrictions and other terms as are set forth in the Isle stock plan, the award agreement pursuant to which such Isle Restricted Share was granted, and, if applicable, any other relevant agreements (such as an employment agreement).

Isle performance stock units. Each performance stock unit (each, an “Isle PSU”) that was outstanding immediately prior to the Isle Acquisition Date, as of the Isle Acquisition Date, (i) continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle PSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement), (ii) was converted into a number of performance stock units in respect of shares of ERI common stock, in an amount equal to the Stock Consideration (with aggregated fractional shares rounded to the nearest whole share) at the target level of performance, and (iii) remain subject to the same restrictions and other terms as are set forth in the Isle stock plan, the award agreement pursuant to which such Isle PSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement).


Isle restricted stock units. Each restricted stock unit, deferred stock unit or phantom unit in respect of a share of Isle common stock granted under the applicable Isle stock plan or otherwise, including any such units held in participant accounts under any employee benefit or compensation plan or arrangement of Isle, other than an Isle PSU (each an “Isle RSU”) that was outstanding immediately prior to the Isle Acquisition Date, as of the Isle Acquisition Date, (i) continued to vest or accelerate (if unvested), as the case may be, in accordance with the applicable Isle stock plan, the award agreement pursuant to which such Isle RSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement or applicable employee benefit plan), (ii) was converted into a number of restricted stock units, deferred stock units or phantom units, as applicable, in respect of shares of ERI common stock, in an amount equal to the Stock Consideration (with aggregated fractional shares rounded to the nearest whole share), and (iii) remain subject to the same restrictions and other terms as are set forth in the Isle stock plan, the award agreement pursuant to which such Isle RSU was granted, and, if applicable, any other relevant agreements (such as an employment agreement or applicable employee benefit plan).

The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation—Stock Compensation” (“ASC 718”). Total stock-based compensation expense recognized was $1.3 million and $0.6 million for the three months ended June 30, 2017 and 2016, respectively, and $3.0 million and $2.0 million for the six months ended June 30, 2017 and 2016, respectively. In the first quarter of 2016, the Company’s chief operating officer terminated employment and the chief financial officer retired. In conjunction with the termination and retirement, unvested RSUs totaling 167,511, which were outstanding as of December 31, 2015, immediately vested representing an additional $0.5 million included in stock compensation expense during the first quarter of 2016. Additionally, severance costs totaling $1.4 million were recognized in the first quarter of 2016.

These amounts are included in corporate expenses and, in the case of certain property positions, general and administrative expenses in the Company’s consolidated statements of operations. We recognized a reduction in income tax expense of $0.5 million and $0.3 million for the three months ended June 30, 2017 and 2016, respectively, and $0.6 million and $0.7 million for the six months ended June 30, 2017 and 2016, respectively, for excess tax benefits related to stock-based compensation.

On January 27, 2017, the Company granted 298,761 RSUs (time-based awards and performance awards with a two-year performance period) to executive officers and key employees, and 46,282 RSUs (time-based awards) to non-employee members of the BOD under the 2015 Plan. The performance awards granted in 2017 are subject to a two-year performance period (2017 and 2018), with a one‑year additional vesting requirement, resulting in a total vesting period of three years from the grant date. Performance achievement over the two-year performance period is measured by averaging the level of achievement attained during each of 2017 and 2018. PSUs are earned as follows: 50% of the target number of PSUs will be earned at threshold performance, 100% of the target number of PSUs will be earned at target performance, and up to 200% of the target number of PSUs will be earned at maximum performance. No award is earned if performance falls below the threshold level. Following the end of the two-year performance period, the vesting of earned PSUs are subject to an additional one-year service condition. The January 27, 2017, RSUs had a fair value of $15.50 per unit which was the NASDAQ closing price on that date. An additional 39,661246,755 RSUs were also granted to key employees during the six monthsyear ended June 30,December 31, 2017.


On January 26, 2018, the Company granted 242,939 RSUs (time-based awards and performance awards with a two-year performance period) to executive officers, key employees, and 32,284 RSUs (time-based awards) to non-employee members of the BOD under the 2015 Plan. The RSUs had a fair value of $33.05 per unit which was the NASDAQ closing price on that date. An additional 7,415 RSUs were granted at 116% of target following the finalization of actual results of the first year of the two-year 2017 performance period.

A summary of the RSU activity for the sixthree months ended June 30, 2017March 31, 2018 is as follows:presented in the following table:

 

 

 

 

 

 

 

Weighted-

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

 

Equity

 

 

Grant Date

 

 

Remaining

 

 

Aggregate

 

 

 

Awards

 

 

Fair Value

 

 

Contractual Life

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in millions)

 

Unvested outstanding as of December 31, 2016

 

 

982,370

 

 

$

6.45

 

 

 

1.41

 

 

$

6.3

 

Granted (1)

 

 

384,704

 

 

 

15.89

 

 

 

 

 

 

 

 

 

Exchanged (2)

 

 

860,557

 

 

 

18.94

 

 

 

 

 

 

 

 

 

Canceled

 

 

(8,150

)

 

 

14.20

 

 

 

 

 

 

 

 

 

Vested

 

 

(673,425

)

 

 

18.14

 

 

 

 

 

 

 

 

 

Unvested outstanding as of June 30, 2017

 

 

1,546,056

 

 

$

10.62

 

 

 

1.17

 

 

$

16.4

 

 

 

 

Equity

Awards

 

 

 

Weighted-

Average Grant

Date

Fair Value

 

 

 

Weighted-

Average

Remaining

Contractual

Life

 

 

 

Aggregate Fair

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

 

(in millions)

 

Unvested outstanding as of December 31, 2017

 

 

 

1,579,499

 

 

$

 

12.25

 

 

 

 

0.92

 

 

$

 

19.35

 

Granted (1)

 

 

 

282,638

 

 

 

 

32.59

 

 

 

 

 

 

 

 

 

 

 

Vested (2)

 

 

 

(665,704

)

 

 

 

5.91

 

 

 

 

 

 

 

 

 

 

 

Unvested outstanding as of March 31, 2018

 

 

 

1,196,433

 

 

$

 

20.59

 

 

 

 

1.58

 

 

$

 

24.63

 


(1)

Includes 100,82978,674 of performance awards at 100% of target, and 283,875196,549 time-based awards at 100% of target and 7,415 of the first year of the two-year 2017 performance awards at 116% of target.

(2)

Represents exchanged357,565 performance awards and 255,511 time-based awards granted in January 2015 which vested in January 2018, 9,786 Isle RSUs, as10,558 time-based awards granted to a result of the Isle Acquisition based on the average of the ERI share price on the grant dates.key employee in May 2017 and 32,284 awards granted to non-employee board members in January 2018 which vested immediately.

As of June 30, 2017, the Company had approximately $7.7 million of unrecognized compensation expense related to unvested RSUs that is expected to be recognized over a weighted-average period of approximately 1.17 years.

A summary of the ERI Stock Option activity for the sixthree months ended June 30, 2017March 31, 2018 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

Range of

 

 

Weighted-

Average

 

 

Average

Remaining

 

 

Aggregate

 

 

 

Options

 

 

Exercise Prices

 

 

Exercise Price

 

 

Contractual Life

 

 

Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in millions)

 

Outstanding as of December 31, 2016

 

 

169,300

 

 

$

2.44

 

 

$

16.27

 

 

$

9.94

 

 

 

0.86

 

 

$

1.2

 

Exchanged (1)

 

 

1,351,168

 

 

 

6.87

 

 

 

15.60

 

 

 

10.12

 

 

 

 

 

 

 

 

 

Expired

 

 

(51,700

)

 

 

2.44

 

 

 

3.94

 

 

 

2.97

 

 

 

 

 

 

 

 

 

Exercised

 

 

(975,174

)

 

 

6.87

 

 

 

16.27

 

 

 

9.34

 

 

 

 

 

 

 

 

 

Outstanding as of June 30, 2017

 

 

493,594

 

 

$

3.94

 

 

$

15.60

 

 

$

12.24

 

 

 

1.21

 

 

$

3.7

 

(1)

Represents exchanged Isle Stock Options as a result of the Isle Acquisition.

During the six months ended June 30, 2017, we exchanged 1,351,168 non-qualified stock options, which have a maximum term of ten years from the grant date and are exercisable in yearly installments of 20% commencing one year after the grant date. The options have a weighted average per share Isle Acquisition Date fair value of $9.90 utilizing the Black-Scholes-Merton option pricing model with the range of assumptions disclosedpresented in the following table:

 

Six Months Ended

June 30, 2017

Weighted average expected volatility

40.0

%

Expected dividend yield

0.0

%

Weighted average expected term (in years)

0.66

Weighted average risk-free interest rate

1.08

%

Weighted average volatility is calculated using the historical volatility of our stock price over a range of dates equal to the expected term of the grant’s options. The weighted average expected term is calculated using historical data that is representative of the option for which the fair value is to be determined. The expected term represents the period of time that options granted are expected to be outstanding. The weighted average risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the approximate period of time equivalent to the grant’s expected term. The Company’s unrecognized compensation cost for unvested options was $0.3 million as of June 30, 2017.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

 

 

 

 

Range of

 

 

Exercise

 

 

Remaining

 

 

Aggregate

 

 

 

Options

 

 

Exercise Prices

 

 

Price

 

 

Contractual Life

 

 

Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in millions)

 

Outstanding and Exercisable as of

   December 31, 2017

 

 

271,852

 

 

$

3.94

 

 

$

15.60

 

 

$

 

9.63

 

 

 

 

5.22

 

 

$

 

6.4

 

Exchanged

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding and Exercisable as of

   March 31, 2018

 

 

271,852

 

 

$

3.94

 

 

$

15.60

 

 

$

 

9.63

 

 

 

 

4.97

 

 

$

 

6.2

 

 

A summary of the ERI Restricted Stock Awards activity for the sixthree months ended June 30, 2017March 31, 2018 is as follows:presented in the following table:

 

 

 

 

 

 

 

Weighted-

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

Grant Date

 

 

Remaining

 

 

Aggregate

 

 

 

Restricted Stock

 

 

Fair Value

 

 

Contractual Life

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

(in millions)

 

Outstanding as of December 31, 2016

 

 

 

 

$

 

 

 

 

 

$

 

Exchanged (1)

 

 

180,374

 

 

 

19.23

 

 

 

 

 

 

 

 

 

Vested

 

 

(155,548

)

 

 

19.25

 

 

 

 

 

 

 

 

 

Outstanding as of June 30, 2017

 

 

24,826

 

 

$

19.13

 

 

 

0.52

 

 

$

0.5

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Grant Date

 

 

 

Restricted Stock

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

 

10,809

 

 

$

19.13

 

Vested

 

 

(2,403

)

 

 

19.13

 

Outstanding as of March 31, 2018

 

 

8,406

 

 

$

19.13

 

 

(1)

Represents exchanged Isle Restricted Stock Awards as a result of the Isle Acquisition.

There were no options exercised or expired during the three months ended March 31, 2018.

The Company’s unrecognized compensation cost for unvested restricted stock awards was $0.2 million$18,000 as of June 30, 2017March 31, 2018.

 


Note 6. Other and Intangible Assets, net

Other and intangible assets, net, include the following amounts (in thousands):

 

 

June 30,

 

 

December 31,

 

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

2017

 

 

2016

 

 

Useful Life

 

2018

 

 

2017

 

 

 

Useful Life

 

(unaudited)

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Goodwill

 

$

 

746,482

 

 

$

 

66,826

 

 

Indefinite

 

$

 

719,255

 

 

$

 

747,106

 

 

 

Indefinite

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming license

 

$

 

846,374

 

 

$

 

482,074

 

 

Indefinite

Gaming licenses

 

$

 

801,774

 

 

$

 

877,174

 

 

 

Indefinite

Trade names

 

 

95,850

 

 

 

3,100

 

 

Indefinite

 

 

 

105,550

 

 

 

 

108,250

 

 

 

Indefinite

Trade names

 

 

6,700

 

 

 

6,700

 

 

1 - 3.5 years

 

 

 

5,100

 

 

 

 

6,700

 

 

 

1 - 3.5 years

Loyalty programs

 

 

 

21,461

 

 

 

 

7,700

 

 

1 - 3 years

 

 

 

20,193

 

 

 

 

21,820

 

 

 

1 - 3 years

Subtotal

 

 

 

970,385

 

 

 

 

499,574

 

 

 

 

 

 

932,617

 

 

 

 

1,013,944

 

 

 

 

Accumulated amortization trade names

 

 

(5,332

)

 

 

(4,376

)

 

 

 

 

 

(5,100

)

 

 

 

(6,290

)

 

 

 

Accumulated amortization loyalty programs

 

 

 

(8,363

)

 

 

 

(7,700

)

 

 

 

 

 

(10,407

)

 

 

 

(10,838

)

 

 

 

Total gaming licenses and other intangible assets

 

$

 

956,690

 

 

$

 

487,498

 

 

 

 

$

 

917,110

 

 

$

 

996,816

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating real property

 

$

 

18,069

 

 

$

 

14,219

 

 

 

 

$

 

14,030

 

 

$

 

18,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land held for development

 

$

 

906

 

 

$

 

906

 

 

 

Unamortized debt issuance costs - New Revolving

Credit Facility

 

$

 

8,115

 

 

$

 

8,616

 

 

 

 

Restricted cash

 

 

 

9,862

 

 

 

 

9,886

 

 

 

 

Other

 

 

 

16,408

 

 

 

 

9,214

 

 

 

 

 

 

12,253

 

 

 

 

12,130

 

 

 

 

Total other assets, net

 

$

 

17,314

 

 

$

 

10,120

 

 

 

 

$

 

30,230

 

 

$

 

30,632

 

 

 

 

 

Goodwill represents the excess of the purchase prices of acquiring MTR Gaming and Isle over the fair market value of the net assets acquired. In conjunction with the classification of Vicksburg’s operations as assets held for sale (see Note 4) as a result of the announced sale to Churchill Downs Incorporated, an impairment charge totaling $9.8 million was recorded for the three months ended March 31, 2018 due to the carrying value exceeding the estimated net sales proceeds.

Gaming licenses represent intangible assets acquired from the purchase of a gaming entity located in a gaming jurisdiction where competition is limited, such as when only a limited number of gaming operators are allowed to operate in the jurisdiction. These gaming license rights are not subject to amortization as the Company has determined that they have an indefinite useful lives.

Amortization expense with respectrelated to trade names and the loyalty programprograms for the three and six months ended June 30,March 31, 2018 and 2017 amounted to $1.1totaled $1.6 million and $1.6$0.5 million, respectively, and $1.2 million and $2.4 million for the three and six months ended June 30, 2016, respectively, which is included in depreciation and amortization expense in the consolidated statements of operations.income. Such amortization expense is expected to be $3.4$3.5 million for the remainder of December 31, 20172018 and $5.0 million, $4.6$4.7 million and $1.5$1.6 million for the years ended December 31, 2018, 2019 and 2020, respectively.

Note 7. Income Taxes

The SEC staff issued Staff Accounting Bulletin (“SAB”) 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

While we have not yet completed all of the computations necessary or completed an inventory of our 2017 expenditures that qualify for immediate deductions, we have recorded a provisional benefit based on our current intent to fully deduct all qualifying expenditures. This did not result in any significant change to our current income tax payable due to our federal and state net operating loss carry forwards.


Note 7. Income TaxesThe Company estimates an annual effective income tax rate based on projected results for the year and applies this rate to income before taxes to calculate income tax expense. Any refinements made due to subsequent information that affects the estimated annual effective income tax rate are reflected as adjustments in the current period.

For the three months ended March 31, 2018 and 2017, the Company’s tax expense was $2.1 million and $0.4 million, respectively. For the three months ended March 31, 2018 and 2017, the difference between the effective rate and the statutory rate is attributed primarily to state and local income taxes less excess tax benefits associated with stock compensation. As of March 31, 2018 and 2017, there were no unrecognized tax benefits and the Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits within the next twelve months.

The Company and its subsidiaries file US federal income tax returns and various state and local income tax returns. The Company does not have tax sharing agreements with the other members within the consolidated ERI group. With few exceptions, the Company is no longer subject to US federal or state and local tax examinations by tax authorities for years before 2009.

The Company estimates an annual effective income tax rate based on projected results for the year and applies this rate to income before taxes to calculate income tax expense. Any refinements made due to subsequent information that affects the estimated annual effective income tax rate are reflected as adjustments in the current period.

For the three and six months ended June 30, 2017, the difference between the effective rate and the statutory rate is attributed primarily to non-deductible transaction costs incurred and changes in the effective state tax rate associated with the Isle Acquisition.

For the three and six months ended June 30, 2016, the difference between the effective rate and the statutory rate is attributed primarily to state and local income taxes less excess tax benefits associated with stock compensation.

For income tax purposes the Company amortizes or depreciates certain assets that have been assigned an indefinite life for book purposes. The incremental amortization or depreciation deductions for income tax purposes result in an increase in certain deferred tax liabilities that cannot be used as a source of future taxable income for purposes of measuring the Company’s need for a valuation allowance against the net deferred tax assets. Therefore, we expect to record non cash deferred tax expense as we amortize these assets for tax purposes.

For the three and six months ended June 30, 2017, the Company’s tax benefit from continuing operations was $39.7 million and $39.2 million, respectively. For the three and six months ended June 30, 2016, the Company’s tax expense from continuing operations was $6.0 million and $7.8 million, respectively. As of June 30, 2017 and 2016, there were no unrecognized tax benefits and the Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits within the next twelve months.2012.

The Company was notified by the Internal Revenue Service in October of 2016 that its federal tax return for the year ended December 31, 2014 had been selected for examination. As of June 30,In September 2017, there have been no proposed adjustments. Management believes that its tax positions are appropriate and that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, we would be required to adjust our provision for income taxes in the period such resolution occurs. WhileIRS informed the Company believes its reported results are materially accurate, any significant adjustments could have a material adverse effect onthat they completed the Company’s results of operations, cash flowsexamination of the tax return and financial position if not resolved within expectations.made no changes.

 


Note 8. Long-Term Debt and Other Long-Term Liabilities

Long‑term debt consisted of the following (in thousands):

 

 

June 30,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2018

 

 

2017

 

 

(unaudited)

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

New Term Loan

 

$

 

1,446,375

 

 

$

 

 

 

$

 

956,750

 

 

$

 

956,750

 

Less: Unamortized discount and debt issuance costs

 

 

 

(30,828

)

 

 

 

 

 

 

 

(18,149

)

 

 

 

(18,748

)

Net

 

 

 

1,415,547

 

 

 

 

 

 

 

 

938,601

 

 

 

 

938,002

 

6% Senior Notes

 

 

 

375,000

 

 

 

 

 

 

 

 

875,000

 

 

 

 

875,000

 

Plus: Unamortized debt premium

 

 

 

25,841

 

 

 

 

26,605

 

Less: Unamortized debt issuance costs

 

 

 

(15,855

)

 

 

 

 

 

 

 

(20,152

)

 

 

 

(20,716

)

Net

 

 

 

359,145

 

 

 

 

 

 

 

 

880,689

 

 

 

 

880,889

 

7% Senior Notes

 

 

 

375,000

 

 

 

 

375,000

 

 

 

 

375,000

 

 

 

 

375,000

 

Less: Unamortized discount and debt issuance costs

 

 

 

(7,652

)

 

 

 

(8,141

)

 

 

 

(6,905

)

 

 

 

(7,146

)

Net

 

 

 

367,348

 

 

 

 

366,859

 

 

 

 

368,095

 

 

 

 

367,854

 

New Revolving Credit Facility

 

 

 

90,000

 

 

 

 

 

Less: Unamortized debt issuance costs

 

 

 

(9,620

)

 

 

 

 

Net

 

 

 

80,380

 

 

 

 

 

Term Loan

 

 

 

 

 

 

 

418,625

 

Less: Unamortized discount and debt issuance costs

 

 

 

 

 

 

 

(12,578

)

Net

 

 

 

 

 

 

 

406,047

 

Revolving Credit Facility

 

 

 

 

 

 

 

29,000

 

Less: Unamortized debt issuance costs

 

 

 

 

 

 

 

(2,023

)

Net

 

 

 

 

 

 

 

26,977

 

Capital leases

 

 

 

1,198

 

 

 

 

543

 

 

 

 

769

 

 

 

 

917

 

Long-term notes payable

 

 

 

2,973

 

 

 

 

 

 

 

 

2,509

 

 

 

 

2,531

 

Less: Current portion

 

 

 

(15,568

)

 

 

 

(4,545

)

 

 

 

(553

)

 

 

 

(615

)

Total long-term debt

 

$

 

2,211,023

 

 

$

 

795,881

 

 

$

 

2,190,110

 

 

$

 

2,189,578

 

 

In connection with the Isle Acquisition, the Company completed a debt financing transaction comprised of: (a) a senior secured credit facility in an aggregate principal amount of $1.75 billion with a (i) term loan facility of $1.45 billion and (ii) revolving credit facility of $300.0 million and (b) $375.0 million of 6% senior unsecured notes. The proceeds of such borrowings were used (v) to pay the cash portion of the consideration payable in the Isle Merger, (w) refinance all of Isle’s existing credit facilities, (x) redeem or otherwise repurchase all of Isle’s and senior and senior subordinated notes, (y) refinance the Company’s existing credit facility and (z) pay transaction fees and expenses related to the foregoing. Scheduled maturities of long‑term debt are $90.0

On September 13, 2017, the Company issued an additional $500.0 million in 2022,aggregate principal amount of its 6% Senior Notes (as defined below) at an issue price equal to 105.5% of the principal amount. The 6% Senior Notes were issued as additional notes under the 6% Senior Notes Indenture dated March 29, 2017 (as defined below), as supplemented by the supplemental indenture dated as of May 1, 2017 between the Company, the guarantors party thereto and U.S. Bank National Association, pursuant to which the Company previously issued $375.0 million in 2023, $1.35 billion in 2024,aggregate principal amount of 6% Senior Notes. The additional 6% Senior Notes formed part of a single class of securities together with the initial 6% Senior Notes for all purposes under the 6% Senior Notes Indenture, including waivers, amendments, redemptions and $375.0offers to purchase.


The Company used the proceeds of the offering to repay all of the outstanding borrowings under the New Revolving Credit Facility (as defined below) totaling $78.0 million in 2025.and used the remainder to repay outstanding borrowings totaling $444.5 million under the New Term Loan plus related accrued interest.

Amortization of the debt issuance costs and the discount and premium associated with the 7% Senior Notes, Term Loan and Revolving Credit Facilityour indebtedness totaled $0.5$1.3 million and $1.4$0.9 million for the three and six months ended June 30,March 31, 2018 and 2017, respectively, and $0.9 million and $1.8 million for the three and six months ended June 30, 2016, respectively. In accordance with ASC Topic 470-50, “Debt Modifications and Extinguishments” (“ASC 470-50”), the Company recognized a loss totaling $0.7 million during the three and six months ended June 30, 2017 as a result of the refinance of the Credit Facility in May 2017.

Amortization of the debt issuance costs associated with the 6% Senior Notes and New Credit Facility totaled $1.7 million for the three and six months ended June 30, 2017. Amortization of debt issuance costs is computed using the effective interest method and is included in interest expense.

Scheduled maturities of long‑term debt are $375.0 million in 2023, $956.8 million in 2024, and $875.0 million in 2025.

The Company is a holding company with no independent assets or operations. Our 6% Senior Notes and 7% Senior Notes (each as defined below) are fully and unconditionally guaranteed, on a joint and several basis, by substantially all of our subsidiaries. Any subsidiaries which have not guaranteed such notes are “minor” (as defined in Rule 3-10(h) of Regulation S-X).the subsidiary guarantors. As of June 30, 2017,March 31, 2018, there were no significant restrictions on the ability of our subsidiaries to distribute cash to us or our guarantor subsidiaries.


Other Long-Term Liabilities

In conjunction with the Isle Acquisition, the Company acquired the existing lease and management agreements at its Nemacolin location. Under the terms of the agreements, Nemacolin Woodland Resort (“Resort”) provided land, land improvements and a building for the casino property. In accordance with ASC 840, the Company was deemed, for accounting purposes only, to be the owner of these assets provided by the Resort during the construction and casino operating periods due to the Company’s continuing involvement. Therefore, the transaction was accounted for using the direct financing method. As of March 31, 2018 and December 31, 2017, the Company recorded property and equipment, net of accumulated depreciation, of $4.2 million in both periods and a liability of $2.4 million and $4.5 million, respectively, in other long-term liabilities related to the agreement. The decrease in the liability was primarily due to the Company finalizing its purchase price accounting related to the Isle Acquisition as of March 31, 2018.

In conjunction with the Isle Acquisition, the Company acquired the existing lease and management agreements at its Bettendorf location. Under the terms of the agreements with the City of Bettendorf, Iowa, the Company leases, manages, and provides financial and operating support for the convention center (Quad-Cities Waterfront Convention Center). In accordance with ASC 840, the Company was deemed, for accounting purposes only, to be the owner of the convention center due to the Company’s continuing involvement. Therefore, the transaction was accounted for using the direct financing method. As of March 31, 2018 and December 31, 2017, the Company recorded property and equipment, net of accumulated depreciation, of $11.8 million and $11.9 million, respectively, and a liability of $5.5 million and $12.5 million, respectively, in other long-term liabilities related to the agreement. The decrease in the liability was primarily due to the Company finalizing its purchase price accounting related to the Isle Acquisition as of March 31, 2018.  

Senior Notes

7.0% Senior Notes

On July 23, 2015, the Company issued at par $375.0 million in aggregate principal amount of 7.0% senior notes due 2023 (“7% Senior Notes”) pursuant to the indenture,Indenture, dated as of July 23, 2015 (the “Indenture”), between the Company and U.S. Bank, National Association, as Trustee. The 7% Senior Notes are guaranteed by all of the Company’s direct and indirect restricted subsidiaries. CC-Reno, LLC and the Circus and Eldorado Joint Venture, LLC became guarantors in June 2016 upon receipt of the required gaming regulatory approval which occurred in May 2016. The 7% Senior Notes will mature on August 1, 2023, with interest payable semi-annually in arrears on February 1 and August 1 of each year.

On or after August 1, 2018, the Company may redeem all or a portion of the 7% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest, if any, on the 7% Senior Notes redeemed, to the applicable redemption date, if redeemed during the twelve month period beginning on August 1 of the years indicated below:

 

Year

 

Percentage

 

 

2018

 

 

105.250

 

%

2019

 

 

103.500

 

%

2020

 

 

101.750

 

%

2021 and thereafter

 

 

100.000

 

%


 

Prior to August 1, 2018, the Company may redeem all or a portion of the 7% Senior Notes at a price equal to 100% of the 7% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole“make-whole” premium. At any time prior to August 1, 2018, the Company is also entitled to redeem up to 35% of the original aggregate principal amount of the 7% Senior Notes with proceeds of certain equity financings at a redemption price equal to 107% of the principal amount of the 7% Senior Notes redeemed, plus accrued and unpaid interest. If the Company experiences certain change of control events (as defined in the 7% Senior Notes Indenture), it must offer to repurchase the 7% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company must offer to repurchase the 7% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date.dates.

The 7% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The 7% Senior Notes Indenture contains certain covenants limiting, among other things, the Company’s ability and the ability of its subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 7% Senior Notes or the guarantees of the 7% Senior Notes;

create liens;

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’s assets;

enter into certain transactions with affiliates;

engage in lines of business other than the Company’s core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.

These covenants are subject to a number of exceptions and qualifications as set forth in the 7% Senior Notes Indenture. The 7% Senior Notes Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 7% Senior Notes to be declared due and payable. As of June 30, 2017,March 31, 2018, the Company was in compliance with all of the covenants under the indenture7% Senior Notes Indenture relating to the 7% Senior Notes.


6.0% Senior Notes

On March 29, 2017, Eagle II Acquisition Company LLC (“Eagle II”), a wholly-owned subsidiary of the Company, issued $375.0 million aggregate principal amount of 6% Senior Notes due 2025 (the “6% Senior Notes”) pursuant to an indenture, dated as of March 29, 2017 (the “New“6% Senior Notes Indenture”), between Eagle II and U.S. Bank, National Association, as Trustee. The 6% Senior Notes will mature on April 1, 2025, with interest payable semi-annually in arrears on April 1 and October 1, commencing October 1, 2017. The proceeds of the offering, and additional funds in the amount of $1.9 million in respect of interest expected to be accrued on the 6% Senior Notes, were placed in escrow pending satisfaction of certain conditions, including consummation of the Isle Acquisition. In connection with the consummation of the Isle Acquisition on May 1, 2017, the escrowed funds were released and ERIthe Company assumed Eagle II’s obligations under the 6% Senior Notes and the New6% Senior Notes Indenture and certain of ERI’sthe Company’s subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of ERI’sthe Company’s obligations under the 6% Senior Notes.

On September 13, 2017, the Company issued an additional $500.0 million principal amount of its 6% Senior Notes at an issue price equal to 105.5% of the principal amount of the 6% Senior Notes. The additional notes were issued pursuant to the 6% Senior Notes Indenture that governs the 6% Senior Notes. The Company used the proceeds of the offering to repay $78.0 million of outstanding borrowings under the revolving credit facility and used the remainder to repay $444.5 million outstanding borrowings under the term loan facility and related accrued interest.

On or after April 1, 2020, the Company may redeem all or a portion of the 6% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus


accrued and unpaid interest and additional interest, if any, on the 6% Senior Notes redeemed, to the applicable redemption date, if redeemed during the 12-month period beginning on April 1 of the years indicated below:

 

Year

 

Percentage

 

 

2020

 

 

104.500

 

%

2021

 

 

103.000

 

%

2022

 

 

101.500

 

%

2023 and thereafter

 

 

100.000

 

%

 

Prior to April 1, 2020, the Company may redeem all or a portion of the 6% Senior Notes at a price equal to 100% of the 6% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole premium. At any time prior to AugustApril 1, 2018,2020, the Company is also entitled to redeem up to 35% of the original aggregate principal amount of the 6% Senior Notes with proceeds of certain equity financings at a redemption price equal to 106% of the principal amount of the 6% Senior Notes redeemed, plus accrued and unpaid interest. If the Company experiences certain change of control events (as defined in the 6% Senior Notes Indenture), it must offer to repurchase the 6% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If the Company sells assets under certain circumstances and does not use the proceeds for specified purposes, the Company must offer to repurchase the 6% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date.

The 6% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The New6% Senior Notes Indenture contains certain covenants limiting, among other things, the Company’s ability and the ability of its subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 6% Senior Notes or the guarantees of the 6% Senior Notes;Notes;

create liens;

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’s assets;

enter into certain transactions with affiliates;

engage in lines of business other than the Company’s core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.

These covenants are subject to a number of exceptions and qualifications as set forth in the 6% Senior Notes Indenture. The New6% Senior Notes Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 6% Senior Notes to be declared due and payable. As of June 30, 2017,March 31, 2018, the Company was in compliance with all of the covenants under the indenture6% Senior Notes Indenture relating to the 6% Senior Notes.


Refinancing of the Term Loan and Revolving Credit Facility

Credit Facility

On July 23, 2015, the Company entered into a new $425.0 million seven year term loan (the “Term Loan”) and a $150.0 million five year revolving credit facility (the “Revolving“Prior Revolving Credit Facility” and, together with the Term Loan, the “Credit“Prior Credit Facility”).

The Term Loan bore interest at a rate per annum of, at the Company’s option, either (x) LIBOR plus 3.25%, with a LIBOR floor of 1.0%, or (y) a base rate plus 2.25%. Borrowings under the Prior Revolving Credit Facility bore interest at a rate per annum of, at the Company’s option, either (x) LIBOR plus a spread ranging from 2.5% to 3.25% or (y) a base rate plus a spread ranging from 1.5% to 2.25%, in each case with the spread determined based on the Company’s total leverage ratio. Additionally, the Company paid a commitment fee on the unused portion of the Prior Revolving Credit Facility not being utilized in the amount of 0.50% per annum.


On May 1, 2017, all of the outstanding amounts under the Prior Credit Facility were repaid with proceeds of borrowings under the New Credit Facility (as defined below) and the Prior Credit Facility was terminated.

New Credit Facility

On April 17, 2017, Eagle II entered into a new credit agreement by and among Eagle II, as initial borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto dated as of April 17, 2017 (the “New Credit Facility”), consisting of a $1.45 billion term loan facility (the “New Term Loan Facility” or “New Term Loan”) and a $300.0 million revolving credit facility (the “New Revolving Credit Facility”), which was undrawn at closing. The proceeds of the New Term Loan Facility, and additional funds in the amount of $4.5 million in respect of interest expected to be accrued on the New Term Loan Facility, were placed in escrow pending satisfaction of certain conditions, including consummation of the Isle Acquisition. In connection with the consummation of the Isle Acquisition on May 1, 2017, the escrowed funds were released and ERI assumed Eagle II’s obligations under the New Credit Facility and certain of ERI’s subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of ERI’s obligations under the New Credit Facility.

As of June 30, 2017,March 31, 2018, the Company had $1.45 billion$956.8 million outstanding on the New Term Loan and $90.0 million inLoan. There were no borrowings outstanding under the New Revolving Credit Facility.Facility as of March 31, 2018. The Company had $201.3$291.5 million of available borrowing capacity, after consideration of $8.7$8.5 million in outstanding letters of credit, under its New Revolving Credit Facility as of June 30, 2017.March 31, 2018. We have obtained commitments to increase our revolving credit facility from $300 million to $500 million effective at the time of the consummation of the Tropicana Acquisition. At June 30, 2017,March 31, 2018, the weighted average interest rate on the New Term Loan was 3.375%, and the weighted average interest rate on the New Revolving Credit Facility was 3.75%3.9% based upon the weighted average interest rate of borrowings outstanding on our New Revolving Credit Facility as of June 30, 2017.during the three months ended March 31, 2018.

The Company applied the net proceeds of the New Term Loan Facility and borrowings under the New Revolving Credit Facility, together with the proceeds of the 6% Senior Notes and cash on hand, to (i) pay the cash portion of the consideration payable in the Isle Merger, (ii) refinance all of the debt outstanding under Isle’s existing credit facility, (iii) redeem or otherwise repurchase all of Isle’s outstanding senior and senior subordinated notes, (iv) refinance the Company’s Prior Credit Facility and (v) pay fees and costs associated with the foregoing.

The Companys obligations underWe have obtained commitments to increase our revolving credit facility from $300 million to $500 million effective at the New Revolving Credit Facility will mature on April 17, 2022.time of the consummation of the Tropicana Acquisition. The Companys obligations under the New Term Loan Facility will mature on April 17, 2024. The Company is bewas required to make quarterly principal payments in an amount equal to $3,625,000$3.6 million on the New Term Loan Facility on the last day of each fiscal quarter beginning on June 30, 2017.2017 but satisfied this requirement as a result of the principal prepayment of $444.5 million on September 13, 2017 in conjunction with the issuance of the additional 6% Senior Notes. In addition, the Company is required to make mandatory payments of amounts outstanding under the New Credit Facility with the proceeds of certain casualty events, debt issuances, and asset sales and, depending on its consolidated total leverage ratio, the Company may be required to apply a portion of its excess cash flow to repay amounts outstanding under the New Credit Facility.

The interest rate per annum applicable to loans under the New Revolving Credit Facility are, at our option, either (i) LIBOR plus a margin ranging from 1.75% to 2.50% or (ii) a base rate plus a margin ranging from 0.75% to 1.50%, which margin is based on our total leverage ratio. The interest rate per annum applicable to the loans under the New Term Loan Facility is, at our option, either (i) LIBOR plus 2.25%, or (ii) a base rate plus 1.25%; provided, however, that in no event will LIBOR be less than zero or the base rate be less than 1.00% over the term of the New Term Loan Facility or the New Revolving Credit Facility. Additionally, the Company pays a commitment fee on the unused portion of the New Revolving Credit Facility not being utilized in the amount of 0.50% per annum.

The New Credit Facility contains a number of customary covenants that, among other things, restrict, subject to certain exceptions, the Companys ability and the ability of the subsidiary guarantors to incur debt; create liens on collateral; engage in mergers, consolidations or asset dispositions; pay dividends or make distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries; or modify their lines of business.


The New Credit Facility is secured by substantially all of the Company’s personal property assets and substantially all personal property assets of each subsidiary that guaranties the New Credit Facility (other than certain subsidiary guarantors designated as immaterial) (the “New Credit Facility Guarantors”), whether owned on the closing date of the New Credit Facility or thereafter acquired, and mortgages on thecertain real property and improvements owned or leased by us or the New Credit Facility Guarantors. The New Credit Facility is also secured by a pledge of all of the equity owned by the Company and the New Credit Facility Guarantors (subject to certain gaming law restrictions). The credit agreement governing the New Credit Facility contains a number of customary covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability and the ability of the New Credit Facility Guarantors to incur additional indebtedness, create liens, on collateral, engage in mergers, consolidations or asset dispositions, make distributions, make investments, loans or advances, engage in certain transactions with affiliates or subsidiaries or make capital expenditures.modify their lines of business.


The New Credit Facility also includes certain financial covenants, including the requirements that we maintain throughout the term of the New Credit Facility and measured as of the end of each fiscal quarter, and solely with respect to loans under the New Revolving Credit Facility, a maximum consolidated total leverage ratio of not more than 6.50 to 1.00 for the period beginning on the closing date and ending with the fiscal quarter ending December 31, 2018, 6.00 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 5.50 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2020 and thereafter. The Company will also be required to maintain an interest coverage ratio in an amount not less than 2.00 to 1.00 measured on the last day of each fiscal quarter beginning on the closing date, and ending with the fiscal quarter ending December 31, 2018, 2.50 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 2.75 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2020 and thereafter.

The New Credit Facility contains a number of customary events of default, including, among others, for the non-payment of principal, interest or other amounts, the inaccuracy of certain representations and warranties, the failure to perform or observe certain covenants, a cross default to our other indebtedness, including the Notes, certain events of bankruptcy or insolvency;insolvency, certain ERISA events, the invalidity of certain loan documents, certain changes of control and the loss of certain classes of licenses to conduct gaming. If any event of default occurs, the lenders under the New Credit Facility would be entitled to take various actions, including accelerating amounts outstanding thereunder and taking all actions permitted to be taken by a secured creditor. As of June 30, 2017,March 31, 2018, the Company was in compliance with the covenants under the New Credit Facility.

Note 9. Fair Value of Financial InstrumentsMeasurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there is a three‑tier fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

Level 1 Inputs: Quoted market prices in active markets for identical assets or liabilities.

Level 2 Inputs: Observable market‑based inputs or unobservable inputs that are corroborated by market data.

Level 3 Inputs: Unobservable inputs that are not corroborated by market data.

Items Measured at Fair Value on a Recurring Basis: The following table sets forth the assets measured at fair value on a recurring basis, by input level, in the consolidated balance sheets at March 31, 2018 and December 31, 2017 (amounts in thousands):

 

 

March 31, 2018

 

Assets:

 

Level 1

 

 

Level 2

 

 

Total

 

Restricted cash and investments

 

$

 

9,449

 

 

$

 

4,072

 

 

$

 

13,521

 

Marketable securities

 

 

 

8,284

 

 

 

 

8,952

 

 

 

 

17,236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

Assets:

 

Level 1

 

 

Level 2

 

 

Total

 

Restricted cash and investments

 

$

 

9,055

 

 

$

 

4,098

 

 

$

 

13,153

 

Marketable securities

 

 

 

7,906

 

 

 

 

9,725

 

 

 

 

17,631

 

The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practical to estimate fair value:

Cash and Cash Equivalents:Equivalents: Cash equivalents include investments in money market funds. Investments in this category can be redeemed immediately at the current net asset value per share. A money market fund is a mutual fund whose investments are primarily in short‑term debt securities designed to maximize current income with liquidity and capital preservation, usually maintaining per share net asset value at a constant amount, such as one dollar. Cash and cash equivalents also includes cash maintained for gaming operations. The carrying amounts approximate the fair value because of the short maturity of those instruments (Level 1).


Restricted Cash and Investments:: Restricted cash includes cash reserved for unredeemed winning tickets from the Company’s racing operations, funds related to horsemen’s fines and certain simulcasting funds that are restricted to payments for improving horsemen’s facilities and racing purses, cash deposits that serve as collateral for letters of credit, surety bonds and short-term certificates of deposit that serve as collateral for certain bonding requirements. The estimated fair values of our restricted cash and investments are based upon quoted prices available in active markets (Level 1), or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts we would expect to receive if we sold our restricted cash and investments.Restricted investments, included in Other Assets, net, relate to trading securities pledged as collateral by our captive insurance company.


Accounts Receivable and Credit Risk. RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues markers to approved casino customers following background checks and assessments of creditworthiness. Trade receivables, including casino and hotel receivables, are typically non‑interest bearing. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is maintained to reduce the Company’s receivables to their carrying amount, which approximates fair value.: The allowance is estimated based on specific review of customer accounts as well as historical collection experience and current economic and business conditions. Management believes that no significant concentrations of credit risk related to receivables existed.exists.

There were no transfers between Level 1 and Level 2 investments.

Marketable Securities:  Marketable securities consist primarily of trading securities held the Company’s captive insurance subsidiary. The estimated fair values of the Company’s marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1), quoted prices of identical assets in inactive markets, or quoted prices for similar assets in active and inactive markets (Level 2), and represent the amounts we would expect to receive if we sold these marketable securities.

Long‑term Debt: The fair value of our long-term debt or other long-term obligations is estimated based on the quoted market price of the underlying debt issue (Level 1) or, when a quoted market price is not available, the discounted cash flow of future payments utilizing current rates available to us for the debt of similar remaining maturities (Level 2). Debt obligations with a short remaining maturity have a carrying amount that approximates fair value.

Acquisition-Related Contingent Consideration:  Contingent consideration related to the July 2003 acquisition of Scioto Downs represents the estimate of amounts to be paid to former stockholders of Scioto Downs under certain earn-out provisions. The Company considers the acquisition related contingency’s fair value measurement, which includes forecast assumptions, to beThere were no transfers between Level 3 within the fair value hierarchy.1 and Level 2 investments.

The estimated fair values of the Company’s financial instruments are as follows (amounts in thousands):

 

 

 

June 30, 2017

 

 

December 31, 2016

 

 

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Amount

 

 

Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

103,624

 

 

$

 

103,624

 

 

$

 

61,029

 

 

$

 

61,029

 

Restricted cash

 

 

 

22,566

 

 

 

 

32,516

 

 

 

 

2,414

 

 

 

 

2,414

 

Marketable securities

 

 

 

17,437

 

 

 

 

17,437

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7% Senior Notes

 

$

 

367,348

 

 

$

 

405,000

 

 

$

 

366,859

 

 

$

 

397,500

 

6% Senior Notes

 

 

 

359,145

 

 

 

 

397,500

 

 

 

 

 

 

 

 

 

New Term Loan

 

 

 

1,415,547

 

 

 

 

1,433,792

 

 

 

 

 

 

 

 

 

New Revolving Credit Facility

 

 

 

80,380

 

 

 

 

90,000

 

 

 

 

 

 

 

 

 

Other long-term debt

 

 

 

2,973

 

 

 

 

2,973

 

 

 

 

 

 

 

 

 

Term Loan

 

 

 

 

 

 

 

 

 

 

 

406,047

 

 

 

 

423,858

 

Revolving Credit Facility

 

 

 

 

 

 

 

 

 

 

 

26,977

 

 

 

 

29,000

 

Acquisition-related contingent considerations

 

 

 

533

 

 

 

 

533

 

 

 

 

496

 

 

 

 

496

 

 

 

March 31, 2018

 

 

December 31, 2017

 

 

 

Carrying

 

 

Fair

 

 

Carrying

 

 

Fair

 

 

 

Amount

 

 

Value

 

 

Amount

 

 

Value

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7% Senior Notes

 

$

 

368,095

 

 

$

 

394,687

 

 

$

 

367,854

 

 

$

 

400,800

 

6% Senior Notes

 

 

 

880,689

 

 

 

 

881,563

 

 

 

 

880,889

 

 

 

 

914,375

 

New Term Loan

 

 

 

938,601

 

 

 

 

959,142

 

 

 

 

938,002

 

 

 

 

956,750

 

Other long-term debt

 

 

 

2,509

 

 

 

 

2,509

 

 

 

 

2,531

 

 

 

 

2,531

 

Capital leases

 

 

 

769

 

 

 

 

769

 

 

 

 

917

 

 

 

 

917

 

 

The following table represents the change in acquisition-related contingent consideration liabilities for the period December 31, 2016 to June 30, 2017:

Balance as of December 31, 2016

$

496

Amortization of present value discount(1)

34

Fair value adjustment for change in consideration expected to

   be paid(2)

3

Balance as of June 30, 2017

$

533

(1)

Changes in present value are included as a component of interest expense in the consolidated statements of operations.

(2)

Fair value adjustments for changes in earn-out estimates are included in general and administrative expense in the consolidated statements of operations.


Note 10. Earnings per Share

The following table illustrates the reconciliation of the numerators and denominators of the basic and diluted net income per share computations for the three and six months ended June 30,March 31, 2018 and 2017 and 2016 (dollars in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

 

(unaudited)

 

 

(unaudited)

 

Net (loss) income from continuing operations

 

$

 

(47,283

)

 

$

 

10,791

 

 

$

 

(46,262

)

 

$

 

14,160

 

Income from discontinued operations, net of income taxes

 

 

 

955

 

 

 

 

 

 

 

 

955

 

 

 

 

 

Net (loss) income available to common stockholders

 

$

 

(46,328

)

 

$

 

10,791

 

 

$

 

(45,307

)

 

$

 

14,160

 

Shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

 

67,453,095

 

 

 

 

47,071,608

 

 

 

 

57,405,834

 

 

 

 

46,966,391

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

78,435

 

 

 

 

111,456

 

 

 

 

64,617

 

 

 

 

130,107

 

RSUs

 

 

 

937,661

 

 

 

 

538,011

 

 

 

 

868,987

 

 

 

 

495,460

 

Weighted average shares outstanding - diluted

 

 

 

68,469,191

 

 

 

 

47,721,075

 

 

 

 

58,339,438

 

 

 

 

47,591,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share attributable to common

   stockholders - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

 

(0.70

)

 

$

 

0.23

 

 

$

 

(0.81

)

 

$

 

0.30

 

Income from discontinued operations, net of income taxes

 

 

 

0.01

 

 

 

 

 

 

 

 

0.02

 

 

 

 

 

Net (loss) income attributable to common stockholders

 

$

 

(0.69

)

 

$

 

0.23

 

 

$

 

(0.79

)

 

$

 

0.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share attributable to common

   stockholders - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations

 

$

 

(0.70

)

 

$

 

0.23

 

 

$

 

(0.81

)

 

$

 

0.30

 

Income from discontinued operations, net of income taxes

 

 

 

0.01

 

 

 

 

 

 

 

 

0.02

 

 

 

 

 

Net (loss) income attributable to common stockholders

 

$

 

(0.69

)

 

$

 

0.23

 

 

$

 

(0.79

)

 

$

 

0.30

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

(unaudited)

 

Net income available to common stockholders

 

$

 

20,855

 

 

$

 

945

 

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding:

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding – basic

 

 

 

77,353,730

 

 

 

 

47,120,751

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

152,906

 

 

 

 

50,799

 

RSUs

 

 

 

573,413

 

 

 

 

909,731

 

Weighted average shares outstanding – diluted

 

 

 

78,080,049

 

 

 

 

48,081,281

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share attributable to common

   stockholders – basic:

 

$

 

0.27

 

 

$

 

0.02

 

Net income per common share attributable to common

   stockholders – diluted:

 

$

 

0.27

 

 

$

 

0.02

 

 

Note 11. Commitments and Contingencies

Litigation.  The Company is a party to various lawsuits, which have arisen in the normal course of business. Estimated losses are accrued for these lawsuits and claims when the loss is probable and can be estimated. The current liability for the estimated losses associated with those lawsuits is not material to the consolidated financial condition and those estimated losses are not expected to have a material impact on the results of operations.

In connection with the Isle Merger, a class action lawsuit was filed by a purported stockholder of the Company alleging breach of fiduciary duty by the Company board of directors in connection with the Isle Merger. The case was filed on November 8, 2016 in the Second Judicial District Court of the State of Nevada and is captioned Assad v. Eldorado Resorts, Inc., et. al, case no. CV 16-02312. The lawsuit, which purported to be a class action on behalf of all of the stockholders of the Company, alleged, among other things, breach of fiduciary duty in failing to disclose all material information to stockholders in seeking approval of the issuance of shares of Company Common Stock in the Isle Merger and requested injunctive relief.  In the suit, the Plaintiff sought to enjoin the shareholder meeting to approve the sale.  The request to enjoin the shareholder meeting lawsuit has since been withdrawn and, on May 31, 2017, the Court denied plaintiff’s application for an award of attorneys’ fees and expenses.  The Company expects this matter to be dismissed.

Agreements with Horsemen and Pari-mutuel Clerks.Clerks.  The Federal Interstate Horse Racing Act and the state racing laws in West Virginia, Ohio and Pennsylvania require that, in order to simulcast races, we have written agreements with the horse owners and trainers at those racetracks. In addition, in order to operate slot machines in West Virginia, we are required to enter into written agreements regarding the proceeds of the slot machines (a “proceeds agreement”) with a representative of a majority of the horse owners and trainers and with a representative of a majority of the pari‑mutuel clerks. In Pennsylvania and Ohio, we must have an agreement with the representative of the horse owners. We have the requisite agreements in place with the horsemen at Mountaineer until December 31, 2018. With respect to the Mountaineer pari‑mutuel clerks, we have a labor agreement in force until November 30, 2017,2018, which will automatically renew for an additional one-year period, and a proceeds agreement until April 14, 2018.2019. We are required to have a proceeds agreement in effect on July 1 of each year with the horsemen and the pari‑mutuel clerks as a condition to renewal of our video lottery license for such year. If the requisite proceeds agreement is not in place as of July 1 of a particular year, Mountaineer’s application for renewal of its video lottery license could be denied, in which case Mountaineer would not be permitted to operate either its slot machines or table games. Scioto Downs has the requisite agreement in place with the OHHA until December 31, 2023, with automatic two-year renewals unless either party requests re‑negotiation pursuant to its terms. Presque Isle Downs has the requisite agreement in place with the Pennsylvania Horsemen’s Benevolent and Protective Association until May 1,


2019. 2021. With the exception of the respective Mountaineer, Presque Isle Downs and Scioto Downs horsemen’s agreements and the agreement between Mountaineer and the pari‑mutuel clerks’ union described above, each of the agreements referred to in this paragraph may be terminated upon written notice by either party.

Note 12. Due to AffiliateRelated Affiliates

The accompanying balance sheets include the Company’s payable toCompany has a lease agreement with C.S. &Y. Associates a general partnership(“CS&Y”) which is an entity partially owned by Recreational Enterprises, Inc. (“REI”), which is owned by members of the Carano family, including Gary L. Carano, and various trusts of which Donaldmembers of the Carano family are beneficiaries. In addition, each of Gary L. Carano is a general partner (“CS&Y”). Mr. Carano is also a major shareholder inand Thomas R. Reeg serve as members of the Company.board of directors of REI. The Company owns the entire parcel on which Eldorado Reno is located, except for approximately 30,000 square feet which is leased from CS&Y. For the period ended March 31, 2018, the


amount paid to CS&Y was $150,000. No amounts were due to or due from CS&Y as of June 30,March 31, 2018 and December 31, 2017.

The Company holds a 42.1% variable interest in a partnership with other investors that developed a new 118-room Hampton Inn & Suites hotel at Scioto Downs that opened in March 2017. Pursuant to the terms of the partnership agreement, the Company contributed $1.0 million of cash and 2.4 acres of a leasehold immediately adjacent to The Brew Brothers microbrewery and restaurant at Scioto Downs. The partnership constructed the hotel at a cost of $16.0 million and other investor members operate the hotel. As of DecemberMarch 31, 2016,2018, the Company’s receivable from the partnership totaled $62,000 and the Company’s payable to CS&Ythe partnership totaled $0.3 million and is$10,000. These amounts are reflected on the accompanying balance sheet under “due from affiliates” and “due to affiliates.”

Note 13. Segment Information

We viewThe following table sets forth, for the period indicated, certain operating data for our reportable segments. The executive decision maker of our Company reviews operating results, assesses performance and makes decisions on a “significant market” basis. Management views each of our propertiescasinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, and their management and reporting structure. Prior to the Isle Acquisition, the Company’s principal operating activities occurred in three geographic regions: Nevada, Louisiana and parts of the eastern United States. The Company aggregated its operations into three reportable segments based on the similar characteristics of the operating segments within the regions in which they operated as follows:

Segment

Property

State

Nevada

Eldorado Reno

Nevada

Silver Legacy

Nevada

Circus Reno

Nevada

Louisiana

Eldorado Shreveport

Louisiana

Eastern

Presque Isle Downs

Pennsylvania

Scioto Downs

Ohio

Mountaineer

West Virginia

Following the Isle Acquisition, the Company’s principal operating activities expanded and now occur in four geographic regions and reportable segments based on the similar characteristics of the operating segments within the regions in which they operate. The following table summarizes our current segments:previously reported segments, Nevada, Louisiana, and Eastern, are now included in the West, South, and East segments, respectively, which are summarized as follows, along with the Midwest segment.

 

Segment

 

Property

 

State

West

 

Eldorado Reno

 

Nevada

 

 

Silver Legacy

 

Nevada

 

 

Circus Reno

 

Nevada

 

 

Isle Black Hawk

 

Colorado

 

 

Lady Luck Black Hawk

 

Colorado

 

 

 

 

 

Midwest

 

Waterloo

 

Iowa

 

 

Bettendorf

 

Iowa

 

 

Boonville

 

Missouri

 

 

Cape Girardeau

 

Missouri

 

 

Caruthersville

 

Missouri

 

 

Kansas City

 

Missouri

 

 

 

 

 

South

 

Pompano

 

Florida

 

 

Eldorado Shreveport

 

Louisiana

 

 

Lake Charles

Louisiana

Lula

 

Mississippi

 

 

Vicksburg

 

Mississippi

 

 

 

 

 

East

 

Presque Isle Downs

 

Pennsylvania

 

 

Nemacolin

 

Pennsylvania

 

 

Scioto Downs

 

Ohio

 

 

Mountaineer

 

West Virginia


The following table sets forth, for the periods indicated, certain operating data for our four reportable segments. Amounts related to pre-acquisition periods (prior to May 1, 2017) conform to prior presentation as the additional operating segments associated with the Isle Acquisition are incremental to the previously disclosed reportable segments.

 

 

Three months ended

 

 

Six months ended

 

 

Three Months Ended

 

 

June 30,

 

 

June 30,

 

 

Ended March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2018

 

 

2017

 

 

(in thousands, unaudited)

 

 

(in thousands, unaudited)

 

Revenues and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

98,360

 

 

$

 

84,161

 

 

$

 

161,061

 

 

$

 

156,932

 

 

$

 

99,579

 

 

$

 

63,488

 

Operating income

 

 

16,468

 

 

 

13,655

 

 

 

17,994

 

 

 

19,219

 

Operating income—West

 

 

10,139

 

 

 

1,355

 

Midwest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

67,503

 

 

$

 

 

 

$

 

67,503

 

 

$

 

 

 

$

 

100,795

 

 

$

 

 

Operating income

 

 

15,408

 

 

 

 

 

 

15,408

 

 

 

 

Operating income—Midwest

 

 

 

26,676

 

 

 

 

 

South:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

69,617

 

 

$

 

32,088

 

 

$

 

101,528

 

 

$

 

66,530

 

 

$

 

122,800

 

 

$

 

32,560

 

Operating income

 

 

11,069

 

 

 

5,541

 

 

 

16,987

 

 

 

12,043

 

Operating income—South

 

 

 

13,359

 

 

 

 

5,918

 

East:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

119,564

 

 

$

 

115,066

 

 

$

 

225,877

 

 

$

 

221,419

 

 

$

 

116,891

 

 

$

 

106,287

 

Operating income

 

 

18,153

 

 

 

14,934

 

 

 

33,195

 

 

 

28,665

 

Operating income—East

 

 

 

19,131

 

 

 

 

15,034

 

Corporate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

 

136

 

 

$

 

 

 

$

 

136

 

 

$

 

 

Operating loss

 

 

(93,214

)

 

 

(4,475

)

 

 

(101,551

)

 

 

(12,010

)

Net operating revenues

 

$

 

127

 

 

$

 

58

 

Operating loss—Corporate

 

 

 

(15,111

)

 

 

 

(8,279

)

Total Reportable Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

 

355,180

 

 

$

 

231,315

 

 

$

 

556,105

 

 

$

 

444,881

 

 

$

 

440,192

 

 

$

 

202,393

 

Operating (loss) income—Total Reportable Segments

 

 

(32,116

)

 

 

 

29,655

 

 

 

(17,967

)

 

 

 

47,917

 

Reconciliations to Consolidated Net (Loss) Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (Loss) Income—Total Reportable Segments

 

$

 

(32,116

)

 

$

 

29,655

 

 

$

 

(17,967

)

 

$

 

47,917

 

Operating income – Total Reportable Segments

 

 

54,194

 

 

 

14,028

 

Reconciliations to Consolidated Net Income:

 

 

 

 

 

 

 

 

 

Operating Income — Total Reportable Segments

 

$

 

54,194

 

 

$

 

14,028

 

Unallocated income and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(27,527

)

 

 

 

(12,795

)

 

 

(40,197

)

 

 

 

(25,786

)

Loss on early retirement of debt

 

 

(27,317

)

 

 

 

(89

)

 

 

(27,317

)

 

 

 

(155

)

(Benefit) Provision for income taxes

 

 

 

39,677

 

 

 

 

(5,980

)

 

 

 

39,219

 

 

 

 

(7,816

)

Net (loss) income from continuing operations

 

$

 

(47,283

)

 

$

 

10,791

 

 

$

 

(46,262

)

 

$

 

14,160

 

Interest expense, net

 

 

(31,251

)

 

 

 

(12,670

)

Provision for income taxes

 

 

 

(2,088

)

 

 

 

(413

)

Net income

 

$

 

20,855

 

 

$

 

945

 

 

 

Six Months Ended June 30,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

2018

 

 

2017

 

 

(in thousands, unaudited)

 

 

(in thousands, unaudited)

 

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

18,632

 

 

$

 

5,717

 

 

$

 

10,181

 

 

$

 

4,154

 

Midwest

 

 

 

1,763

 

 

 

 

 

 

 

 

2,741

 

 

 

 

 

South

 

 

 

1,646

 

 

 

 

2,664

 

 

 

 

2,883

 

 

 

 

547

 

East (1)

 

 

 

4,048

 

 

 

 

11,683

 

 

 

 

2,874

 

 

 

 

1,430

 

Corporate

 

 

 

3,735

 

 

 

 

281

 

 

 

 

2,592

 

 

 

 

75

 

Total

 

$

 

29,824

 

 

$

 

20,345

 

 

$

 

21,271

 

 

$

 

6,206

 

 

(1)

Amounts are before any West Virginia capital expenditure reimbursements.


 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Corporate,

Other &

Eliminations

 

 

Total

 

Balance sheet as of March 31, 2018 (unaudited)

(in thousands)

 

Total assets

 

$

 

1,285,898

 

 

$

 

1,199,909

 

 

$

 

804,736

 

 

$

 

1,189,210

 

 

$

 

(927,533

)

 

$

 

3,552,220

 

Goodwill

 

 

 

152,762

 

 

 

 

322,745

 

 

 

 

180,044

 

 

 

 

63,704

 

 

 

 

 

 

 

 

719,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet as of December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

 

1,278,062

 

 

$

 

1,188,758

 

 

$

 

804,318

 

 

$

 

1,185,806

 

 

$

 

(910,472

)

 

$

 

3,546,472

 

Goodwill

 

 

 

152,775

 

 

 

 

327,088

 

 

 

 

200,417

 

 

 

 

66,826

 

 

 

 

 

 

 

 

747,106

 

 

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Corporate, Other & Eliminations

 

 

Total

 

Balance sheet as of June 30, 2017 (unaudited)

(in thousands)

 

Total assets

 

$

 

1,256,586

 

 

$

 

1,173,121

 

 

$

 

680,560

 

 

$

 

1,187,841

 

 

$

 

(740,168

)

 

$

 

3,557,940

 

Investment in and advances to unconsolidated affiliates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,005

 

 

 

 

 

 

 

 

1,005

 

Goodwill

 

 

 

154,467

 

 

 

 

334,276

 

 

 

 

190,913

 

 

 

 

66,826

 

 

 

 

 

 

 

 

746,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet as of December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

 

377,688

 

 

$

 

 

 

$

 

128,427

 

 

$

 

850,904

 

 

$

 

(62,975

)

 

$

 

1,294,044

 

Investment in and advances to unconsolidated affiliates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,286

 

 

 

 

 

 

 

 

1,286

 

Goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66,826

 

 

 

 

 

 

 

 

66,826

 


 

Note 14. Consolidating Condensed Financial Information

Certain of our wholly-owned subsidiaries have fully and unconditionally guaranteed on a joint and several basis, the payment of all obligations under our 7% Senior Notes, 6% Senior Notes and New Credit Facility.

The following wholly-owned subsidiaries of the Company are guarantors, on a joint and several basis, under the 7% Senior Notes, 6% Senior Notes and New Credit Facility: Isle of Capri Casinos LLC; Eldorado Holdco LLC; Eldorado Resorts LLC; Eldorado Shreveport 1 LLC; Eldorado Shreveport 2 LLC; Eldorado Casino Shreveport Joint Venture; MTR Gaming Group Inc.; Mountaineer Park Inc.; Presque Isle Downs Inc.; Scioto Downs Inc.; Eldorado Limited Liability Company; Circus and Eldorado Joint Venture, LLC; CC Reno LLC; CCR Newco LLC; Black Hawk Holdings, L.L.C.; IC Holdings Colorado, Inc.; CCSC/Blackhawk, Inc.; IOC-Black Hawk Distribution Company, LLC; IOC-Black Hawk County, Inc.; Isle of Capri Bettendorf, L.C;L.C.; PPI, Inc.; Pompano Park Holdings LLC; IOC-Lula, Inc.; IOC-Kansas City, Inc.; IOC-Boonville, Inc.; IOC-Caruthersville, LLC; IOC Cape Girardeau, LLC; IOC-Vicksburg, Inc.; IOC-Vicksburg, L.L.C.; Rainbow Casino-Vicksburg Partnership, L.P.; IOC Holdings L.L.C. and St. Charles Gaming Company, L.L.C. Each of the subsidiaries’ guarantees is joint and several with the guarantees of the other subsidiaries.

 

The consolidating condensed balance sheet as of June 30, 2017March 31, 2018 is as follows:

 

Balance Sheet

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

(in thousands, unaudited)

 

Current assets

 

$

 

19,229

 

 

$

 

329,135

 

 

$

 

20,225

 

 

$

 

(6,020

)

 

$

 

362,569

 

 

$

 

68,033

 

 

$

 

380,583

 

 

$

 

26,693

 

 

$

 

 

 

$

 

475,309

 

Intercompany receivables

 

 

 

332,988

 

 

 

 

 

 

 

 

40,104

 

 

 

 

(373,092

)

 

 

 

 

 

 

 

211,587

 

 

 

 

 

 

 

 

29,049

 

 

 

 

(240,636

)

 

 

 

 

Investment in and advances to

unconsolidated affiliates

 

 

 

 

 

 

 

1,005

 

 

 

 

 

 

 

 

 

 

 

 

1,005

 

Investments in subsidiaries

 

 

 

2,260,202

 

 

 

 

2,576,314

 

 

 

 

 

 

 

 

(4,836,516

)

 

 

 

 

 

 

 

2,480,728

 

 

 

 

 

 

 

 

 

 

 

 

(2,480,728

)

 

 

 

 

Property and equipment, net

 

 

 

5,004

 

 

 

 

1,440,962

 

 

 

 

9,845

 

 

 

 

 

 

 

 

1,455,811

 

 

 

 

12,444

 

 

 

 

1,375,675

 

 

 

 

8,167

 

 

 

 

 

 

 

 

1,396,286

 

Other assets

 

 

 

85,975

 

 

 

 

2,110,838

 

 

 

 

34,267

 

 

 

 

(492,525

)

 

 

 

1,738,555

 

 

 

 

47,511

 

 

 

 

1,656,163

 

 

 

 

22,925

 

 

 

 

(45,974

)

 

 

 

1,680,625

 

Total assets

 

$

 

2,703,398

 

 

$

 

6,458,254

 

 

$

 

104,441

 

 

$

 

(5,708,153

)

 

$

 

3,557,940

 

 

$

 

2,820,303

 

 

$

 

3,412,421

 

 

$

 

86,834

 

 

$

 

(2,767,338

)

 

$

 

3,552,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

 

45,626

 

 

$

 

184,159

 

 

$

 

28,595

 

 

$

 

(6,020

)

 

$

 

252,360

 

 

$

 

43,159

 

 

$

 

151,378

 

 

$

 

22,753

 

 

$

 

 

 

$

 

217,290

 

Intercompany payables

 

 

 

 

 

 

 

373,368

 

 

 

 

 

 

 

 

(373,368

)

 

 

 

 

 

 

 

 

 

 

 

215,636

 

 

 

 

25,000

 

 

 

 

(240,636

)

 

 

 

 

Long-term debt, less current maturities

 

 

 

1,832,920

 

 

 

 

698,192

 

 

 

 

25,550

 

 

 

 

(345,639

)

 

 

 

2,211,023

 

 

 

 

1,814,801

 

 

 

 

375,000

 

 

 

 

309

 

 

 

 

 

 

 

 

2,190,110

 

Deferred income tax liabilities

 

 

 

 

 

 

 

381,693

 

 

 

 

4,702

 

 

 

 

(146,885

)

 

 

 

239,510

 

 

 

 

 

 

 

 

213,569

 

 

 

 

 

 

 

 

(45,974

)

 

 

 

167,595

 

Other accrued liabilities

 

 

 

 

 

 

 

24,783

 

 

 

 

5,340

 

 

 

 

 

 

 

 

30,123

 

 

 

 

3,791

 

 

 

 

12,019

 

 

 

 

2,784

 

 

 

 

 

 

 

 

18,594

 

Stockholders’ equity

 

 

 

824,852

 

 

 

 

4,796,059

 

 

 

 

40,254

 

 

 

 

(4,836,241

)

 

 

 

824,924

 

 

 

 

958,552

 

 

 

 

2,444,819

 

 

 

 

35,988

 

 

 

 

(2,480,728

)

 

 

 

958,631

 

Total liabilities and stockholders’ equity

 

$

 

2,703,398

 

 

$

 

6,458,254

 

 

$

 

104,441

 

 

$

 

(5,708,153

)

 

$

 

3,557,940

 

 

$

 

2,820,303

 

 

$

 

3,412,421

 

 

$

 

86,834

 

 

$

 

(2,767,338

)

 

$

 

3,552,220

 

 



The consolidating condensed balance sheet as of December 31, 20162017 is as follows:

 

Balance Sheet

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

(in thousands)

 

Current assets

 

$

 

1,800

 

 

$

 

99,554

 

 

$

 

399

 

 

$

 

 

 

$

 

101,753

 

 

$

 

27,572

 

 

$

 

201,321

 

 

$

 

22,139

 

 

$

 

 

 

$

 

251,032

 

Intercompany receivables

 

 

 

388,050

 

 

 

 

 

 

 

 

1,186

 

 

 

 

(389,236

)

 

 

 

 

 

 

 

274,148

 

 

 

 

 

 

 

 

34,492

 

 

 

 

(308,640

)

 

 

 

 

Investment in and advances to

unconsolidated affiliates

 

 

 

 

 

 

 

1,286

 

 

 

 

 

 

 

 

 

 

 

 

1,286

 

Investments in subsidiaries

 

 

 

299,437

 

 

 

 

808,923

 

 

 

 

 

 

 

 

(1,108,360

)

 

 

 

 

 

 

 

2,437,287

 

 

 

 

 

 

 

 

 

 

 

 

(2,437,287

)

 

 

 

 

Property and equipment, net

 

 

 

1,965

 

 

 

 

610,377

 

 

 

 

 

 

 

 

 

 

 

 

612,342

 

 

 

 

12,042

 

 

 

 

1,483,473

 

 

 

 

7,302

 

 

 

 

 

 

 

 

1,502,817

 

Other assets

 

 

 

50,591

 

 

 

 

584,606

 

 

 

 

11

 

 

 

 

(56,545

)

 

 

 

578,663

 

 

 

 

37,458

 

 

 

 

1,764,291

 

 

 

 

27,283

 

 

 

 

(36,409

)

 

 

 

1,792,623

 

Total assets

 

$

 

741,843

 

 

$

 

2,104,746

 

 

$

 

1,596

 

 

$

 

(1,554,141

)

 

$

 

1,294,044

 

 

$

 

2,788,507

 

 

$

 

3,449,085

 

 

$

 

91,216

 

 

$

 

(2,782,336

)

 

$

 

3,546,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

 

22,759

 

 

$

 

79,265

 

 

$

 

16

 

 

$

 

 

 

$

 

102,040

 

 

$

 

28,676

 

 

$

 

169,348

 

 

$

 

25,726

 

 

$

 

 

 

$

 

223,750

 

Intercompany payables

 

 

 

 

 

 

 

389,236

 

 

 

 

 

 

 

 

(389,236

)

 

 

 

 

 

 

 

 

 

 

 

283,640

 

 

 

 

25,000

 

 

 

 

(308,640

)

 

 

 

 

Long-term debt, less current maturities

 

 

 

420,633

 

 

 

 

375,248

 

 

 

 

 

 

 

 

 

 

 

 

795,881

 

 

 

 

1,814,185

 

 

 

 

375,000

 

 

 

 

393

 

 

 

 

 

 

 

 

2,189,578

 

Deferred income tax liabilities

 

 

 

 

 

 

 

146,930

 

 

 

 

 

 

 

 

(56,545

)

 

 

 

90,385

 

 

 

 

 

 

 

 

199,376

 

 

 

 

 

 

 

 

(36,409

)

 

 

 

162,967

 

Other accrued liabilities

 

 

 

12

 

 

 

 

7,275

 

 

 

 

 

 

 

 

 

 

 

 

7,287

 

 

 

 

4,127

 

 

 

 

19,624

 

 

 

 

4,828

 

 

 

 

 

 

 

 

28,579

 

Stockholders’ equity

 

 

 

298,439

 

 

 

 

1,106,792

 

 

 

 

1,580

 

 

 

 

(1,108,360

)

 

 

 

298,451

 

 

 

 

941,519

 

 

 

 

2,402,097

 

 

 

 

35,269

 

 

 

 

(2,437,287

)

 

 

 

941,598

 

Total liabilities and stockholders’ equity

 

$

 

741,843

 

 

$

 

2,104,746

 

 

$

 

1,596

 

 

$

 

(1,554,141

)

 

$

 

1,294,044

 

 

$

 

2,788,507

 

 

$

 

3,449,085

 

 

$

 

91,216

 

 

$

 

(2,782,336

)

 

$

 

3,546,472

 

 



The consolidating condensed statement of operations for the sixthree months ended June 30, 2017March 31, 2018 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

(in thousands, unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

commissions

 

$

 

 

 

$

 

459,653

 

 

$

 

6,097

 

 

$

 

 

 

$

 

465,750

 

 

$

 

 

 

$

 

335,793

 

 

$

 

7,735

 

 

$

 

 

 

$

 

343,528

 

Non-gaming

 

 

 

 

 

 

 

142,237

 

 

 

 

2,000

 

 

 

 

(1,204

)

 

 

 

143,033

 

 

 

 

 

 

 

 

94,023

 

 

 

 

2,641

 

 

 

 

 

 

 

 

96,664

 

Gross revenues

 

 

 

 

 

 

 

601,890

 

 

 

 

8,097

 

 

 

 

(1,204

)

 

 

 

608,783

 

Less promotional allowances

 

 

 

 

 

 

 

(52,223

)

 

 

 

(455

)

 

 

 

 

 

 

 

(52,678

)

Net revenues

 

 

 

 

 

 

 

549,667

 

 

 

 

7,642

 

 

 

 

(1,204

)

 

 

 

556,105

 

 

 

 

 

 

 

 

429,816

 

 

 

 

10,376

 

 

 

 

 

 

 

 

440,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

commissions

 

 

 

 

 

 

 

244,710

 

 

 

 

4,241

 

 

 

 

 

 

 

 

248,951

 

 

 

 

 

 

164,303

 

 

 

5,248

 

 

 

 

 

 

169,551

 

Non-gaming

 

 

 

 

 

 

 

65,547

 

 

 

 

260

 

 

 

 

 

 

 

 

65,807

 

 

 

 

 

 

 

 

63,975

 

 

 

 

712

 

 

 

 

 

 

 

 

64,687

 

Marketing and promotions

 

 

 

 

 

 

 

29,579

 

 

 

 

635

 

 

 

 

 

 

 

 

30,214

 

 

 

 

 

 

 

 

20,835

 

 

 

 

466

 

 

 

 

 

 

 

 

21,301

 

General and administrative

 

 

 

 

 

 

 

85,904

 

 

 

 

1,250

 

 

 

 

 

 

 

 

87,154

 

 

 

 

 

 

 

 

72,427

 

 

 

 

1,775

 

 

 

 

 

 

 

 

74,202

 

Corporate

 

 

 

13,548

 

 

 

 

876

 

 

 

 

796

 

 

 

 

(1,204

)

 

 

 

14,016

 

 

 

 

10,294

 

 

 

 

322

 

 

 

 

953

 

 

 

 

 

 

 

 

11,569

 

Impairment charges

 

 

 

 

 

 

 

9,815

 

 

 

 

 

 

 

 

 

 

 

 

9,815

 

Management fee

 

 

 

(13,068

)

 

 

 

12,868

 

 

 

 

200

 

 

 

 

 

 

 

 

 

 

 

 

(5,137

)

 

 

 

5,137

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

332

 

 

 

 

40,092

 

 

 

 

89

 

 

 

 

 

 

 

 

40,513

 

 

 

 

772

 

 

 

 

30,601

 

 

 

 

161

 

 

 

 

 

 

 

 

31,534

 

Total operating expenses

 

 

 

812

 

 

 

 

479,576

 

 

 

 

7,471

 

 

 

 

(1,204

)

 

 

 

486,655

 

 

 

 

5,929

 

 

 

 

367,415

 

 

 

 

9,315

 

 

 

 

 

 

 

 

382,659

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of asset or disposal of property

 

 

 

(21

)

 

 

 

(36

)

 

 

 

 

 

 

 

 

 

 

 

(57

)

Acquisition charges

 

 

 

(69,173

)

 

 

 

(17,905

)

 

 

 

 

 

 

 

 

 

 

 

(87,078

)

Equity in income of unconsolidated

affiliates

 

 

 

 

 

 

 

(282

)

 

 

 

 

 

 

 

 

 

 

 

(282

)

Loss on sale of asset or disposal of

property and equipment

 

 

 

 

 

 

(706

)

 

 

 

 

 

 

 

 

 

 

 

(706

)

Transaction expenses

 

 

(2,118

)

 

 

 

(430

)

 

 

 

 

 

 

 

 

 

 

 

(2,548

)

Equity in loss of unconsolidated

affiliate

 

 

 

 

 

 

 

(85

)

 

 

 

 

 

 

 

 

 

 

 

(85

)

Operating (loss) income

 

 

 

(70,006

)

 

 

 

51,868

 

 

 

 

171

 

 

 

 

 

 

 

 

(17,967

)

 

 

 

(8,047

)

 

 

 

61,180

 

 

 

 

1,061

 

 

 

 

 

 

 

 

54,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(26,993

)

 

 

 

(12,926

)

 

 

 

(278

)

 

 

 

 

 

 

 

(40,197

)

 

 

(24,432

)

 

 

 

(6,286

)

 

 

 

(533

)

 

 

 

 

 

 

 

(31,251

)

Loss on early retirement of debt, net

 

 

 

(27,317

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,317

)

Subsidiary income (loss)

 

 

 

25,117

 

 

 

 

368

 

 

 

 

 

 

 

 

(25,485

)

 

 

 

 

 

 

 

43,305

 

 

 

 

 

 

 

 

 

 

 

 

(43,305

)

 

 

 

 

(Loss) income before income

taxes

 

 

 

(99,199

)

 

 

 

39,310

 

 

 

 

(107

)

 

 

 

(25,485

)

 

 

 

(85,481

)

Income (loss) before income

taxes

 

 

 

10,826

 

 

 

 

54,894

 

 

 

 

528

 

 

 

 

(43,305

)

 

 

 

22,943

 

Income tax benefit (provision)

 

 

 

52,937

 

 

 

 

(13,809

)

 

 

 

91

 

 

 

 

 

 

 

 

39,219

 

 

 

 

10,029

 

 

 

 

(12,303

)

 

 

 

186

 

 

 

 

 

 

 

 

(2,088

)

Income (loss) from continuing

operations

 

 

 

(46,262

)

 

 

 

25,501

 

 

 

 

(16

)

 

 

 

(25,485

)

 

 

 

(46,262

)

Income from discontinued operations, net

of taxes

 

 

 

955

 

 

 

 

955

 

 

 

 

 

 

 

 

(955

)

 

 

 

955

 

Net (loss) income

 

$

 

(45,307

)

 

$

 

26,456

 

 

$

 

(16

)

 

$

 

(26,440

)

 

$

 

(45,307

)

Net income (loss)

 

$

 

20,855

 

 

$

 

42,591

 

 

$

 

714

 

 

$

 

(43,305

)

 

$

 

20,855

 


The consolidating condensed statement of operations for the sixthree months ended June 30, 2016March 31, 2017 is as follows:

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

(in thousands, unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

commissions

 

$

 

 

 

$

 

351,006

 

 

$

 

108

 

 

$

 

 

 

$

 

351,114

 

 

$

 

 

 

$

 

142,185

 

 

$

 

5

 

 

$

 

 

 

$

 

142,190

 

Non-gaming

 

 

 

 

 

 

 

138,447

 

 

 

 

 

 

 

 

 

 

 

 

138,447

 

 

 

 

 

 

 

 

60,145

 

 

 

 

58

 

 

 

 

 

 

 

 

60,203

 

Gross revenues

 

 

 

 

 

 

 

489,453

 

 

 

 

108

 

 

 

 

 

 

 

 

489,561

 

Less promotional allowances

 

 

 

 

 

 

 

(44,680

)

 

 

 

 

 

 

 

 

 

 

 

(44,680

)

Net revenues

 

 

 

 

 

 

 

444,773

 

 

 

 

108

 

 

 

 

 

 

 

 

444,881

 

 

 

 

 

 

 

 

202,330

 

 

 

 

63

 

 

 

 

 

 

 

 

202,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and pari-mutuel

commissions

 

 

 

 

 

 

 

200,891

 

 

 

 

 

 

 

 

 

 

 

 

200,891

 

 

 

 

 

 

81,188

 

 

 

 

 

 

 

 

 

81,188

 

Non-gaming

 

 

 

 

 

 

 

68,311

 

 

 

 

 

 

 

 

 

 

 

 

68,311

 

 

 

 

 

 

 

 

41,266

 

 

 

 

 

 

 

 

 

 

 

 

41,266

 

Marketing and promotions

 

 

 

 

 

 

 

19,339

 

 

 

 

2

 

 

 

 

 

 

 

 

19,341

 

 

 

 

 

 

 

 

10,125

 

 

 

 

4

 

 

 

 

 

 

 

 

10,129

 

General and administrative

 

 

 

 

 

 

 

64,035

 

 

 

 

 

 

 

 

 

 

 

 

64,035

 

 

 

 

 

 

 

 

31,800

 

 

 

 

 

 

 

 

 

 

 

 

31,800

 

Corporate

 

 

 

10,959

 

 

 

 

299

 

 

 

 

 

 

 

 

 

 

 

 

11,258

 

 

 

 

6,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,574

 

Management fee

 

 

 

(11,285

)

 

 

 

11,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,574

)

 

 

 

6,574

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

211

 

 

 

 

31,576

 

 

 

 

 

 

 

 

 

 

 

 

31,787

 

 

 

 

149

 

 

 

 

15,455

 

 

 

 

 

 

 

 

 

 

 

 

15,604

 

Total operating expenses

 

 

 

(115

)

 

 

 

395,736

 

 

 

 

2

 

 

 

 

 

 

 

 

395,623

 

 

 

 

149

 

 

 

 

186,408

 

 

 

 

4

 

 

 

 

 

 

 

 

186,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of asset or disposal of

property

 

 

 

 

 

 

 

(765

)

 

 

 

 

 

 

 

 

 

 

 

(765

)

Acquisition charges

 

 

 

(576

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(576

)

Loss on sale of asset or disposal of

property and equipment

 

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

 

 

 

32

 

Transaction expenses

 

 

(1,614

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,614

)

Equity in loss of unconsolidated

affiliate

 

 

 

 

 

 

 

(222

)

 

 

 

 

 

 

 

 

 

 

 

(222

)

Operating (loss) income

 

 

 

(461

)

 

 

 

48,272

 

 

 

 

106

 

 

 

 

 

 

 

 

47,917

 

 

 

 

(1,763

)

 

 

 

15,732

 

 

 

 

59

 

 

 

 

 

 

 

 

14,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(12,606

)

 

 

 

(13,180

)

 

 

 

 

 

 

 

 

 

 

 

(25,786

)

 

 

(6,089

)

 

 

 

(6,581

)

 

 

 

 

 

 

 

 

 

 

 

(12,670

)

Loss on early retirement of debt

 

 

 

(155

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(155

)

Subsidiary income (loss)

 

 

 

35,180

 

 

 

 

106

 

 

 

 

 

 

 

 

(35,286

)

 

 

 

 

 

 

 

9,255

 

 

 

 

 

 

 

 

 

 

 

 

(9,255

)

 

 

 

 

Income (loss) before income

taxes

 

 

 

21,958

 

 

 

 

35,198

 

 

 

 

106

 

 

 

 

(35,286

)

 

 

 

21,976

 

 

 

 

1,403

 

 

 

 

9,151

 

 

 

 

59

 

 

 

 

(9,255

)

 

 

 

1,358

 

Income tax (provision) benefit

 

 

 

(7,798

)

 

 

 

(18

)

 

 

 

 

 

 

 

 

 

 

 

(7,816

)

 

 

 

(458

)

 

 

 

45

 

 

 

 

 

 

 

 

 

 

 

 

(413

)

Net income (loss)

 

$

 

14,160

 

 

$

 

35,180

 

 

$

 

106

 

 

$

 

(35,286

)

 

$

 

14,160

 

 

$

 

945

 

 

$

 

9,196

 

 

$

 

59

 

 

$

 

(9,255

)

 

$

 

945

 

 


The consolidating condensed statement of cash flows for the sixthree months ended June 30, 2017March 31, 2018 is as follows:

 

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Net cash (used in) provided by

   operating activities

 

$

 

(82,703

)

 

$

 

79,645

 

 

$

 

6,583

 

 

$

 

 

 

$

 

3,525

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(3,273

)

 

 

 

(26,536

)

 

 

 

(15

)

 

 

 

 

 

 

 

(29,824

)

Restricted cash

 

 

 

 

 

 

 

109

 

 

 

 

(9

)

 

 

 

 

 

 

 

100

 

Net cash used in business combinations

 

 

 

(1,343,659

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,343,659

)

Net cash used in investing activities

 

 

 

(1,346,932

)

 

 

 

(26,427

)

 

 

 

(24

)

 

 

 

 

 

 

 

(1,373,383

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments on Term Loan

 

 

 

(1,062

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,062

)

Principal payments on New Term Loan

 

 

 

(3,625

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,625

)

Borrowings under Revolving Credit Facility

 

 

 

41,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,000

 

Payments under Revolving Credit Facility

 

 

 

(29,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,000

)

Retirement of Term Loan

 

 

 

(417,563

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(417,563

)

Retirement of Revolving Credit Facility

 

 

 

(41,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(41,000

)

Borrowings under New Revolving Credit

   Facility

 

 

 

148,953

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

148,953

 

Payments under New Revolving Credit Facility

 

 

 

(58,953

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(58,953

)

Proceeds from issuance of New Term Loan

 

 

 

1,450,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,450,000

 

Proceeds from issuance of 6% Senior Notes

 

 

 

375,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

375,000

 

Debt issuance costs

 

 

 

(44,992

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,992

)

Net proceeds from (payments to) related parties

 

 

 

26,440

 

 

 

 

(24,495

)

 

 

 

(1,945

)

 

 

 

 

 

 

 

 

Principal payments on capital leases

 

 

 

 

 

 

 

(169

)

 

 

 

(41

)

 

 

 

 

 

 

 

(210

)

Proceeds from exercise of stock options

 

 

 

2,898

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,898

 

Taxes paid related to net share settlement of

   equity awards

 

 

 

(8,993

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,993

)

Net cash provided by (used in)

   financing activities

 

 

 

1,439,103

 

 

 

 

(24,664

)

 

 

 

(1,986

)

 

 

 

 

 

 

 

1,412,453

 

INCREASE IN CASH AND CASH

  EQUIVALENTS

 

 

 

9,468

 

 

 

 

28,554

 

 

 

 

4,573

 

 

 

 

 

 

 

 

42,595

 

CASH AND CASH EQUIVALENTS,

   BEGINNING OF YEAR

 

 

 

812

 

 

 

 

59,885

 

 

 

 

332

 

 

 

 

 

 

 

 

61,029

 

CASH AND CASH EQUIVALENTS,

   END OF YEAR

 

$

 

10,280

 

 

$

 

88,439

 

 

$

 

4,905

 

 

$

 

 

 

$

 

103,624

 

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands, unaudited)

 

Net cash (used in) provided by

   operating activities

 

$

 

(7,128

)

 

$

 

87,253

 

 

$

 

(2,118

)

 

$

 

 

 

$

 

78,007

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(1,233

)

 

 

 

(19,011

)

 

 

 

(1,027

)

 

 

 

 

 

 

 

(21,271

)

Proceeds from sale of property and equipment

 

 

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

 

 

 

150

 

Net cash provided by (used in) investing

  activities

 

 

 

(1,233

)

 

 

 

(18,861

)

 

 

 

(1,027

)

 

 

 

 

 

 

 

(21,121

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from (payments to) related

  parties

 

 

 

62,560

 

 

 

 

(66,660

)

 

 

 

4,100

 

 

 

 

 

 

 

 

 

Payment of other long-term obligation

 

 

 

(22

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22

)

Payments on capital leases

 

 

 

 

 

 

 

(78

)

 

 

 

(70

)

 

 

 

 

 

 

 

(148

)

Debt issuance costs

 

 

 

(304

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(304

)

Taxes paid related to net share settlement

   of equity awards

 

 

 

(7,502

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,502

)

Net cash provided by (used in)

   financing activities

 

 

 

54,732

 

 

 

 

(66,738

)

 

 

 

4,030

 

 

 

 

 

 

 

 

(7,976

)

INCREASE IN CASH, CASH

   EQUIVALENTS AND

   RESTRICTED CASH

 

 

 

46,371

 

 

 

 

1,654

 

 

 

 

885

 

 

 

 

 

 

 

 

48,910

 

CASH, CASH EQUIVALENTS AND

   RESTRICTED CASH, BEGINNING OF

   YEAR

 

 

 

13,836

 

 

 

 

118,483

 

 

 

 

15,430

 

 

 

 

 

 

 

 

147,749

 

CASH, CASH EQUIVALENTS AND

   RESTRICTED CASH, END OF PERIOD

 

$

 

60,207

 

 

$

 

120,137

 

 

$

 

16,315

 

 

$

 

 

 

$

 

196,659

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONDENSED

   CONSOLIDATED BALANCE SHEETS:

 

Cash and cash equivalents

 

$

 

59,490

 

 

$

 

116,394

 

 

$

 

7,254

 

 

$

 

 

 

$

 

183,138

 

Restricted cash

 

 

 

717

 

 

 

 

2,743

 

 

 

 

199

 

 

 

 

 

 

 

 

3,659

 

Restricted cash included in other noncurrent

   assets

 

 

 

 

 

 

 

1,000

 

 

 

 

8,862

 

 

 

 

 

 

 

 

9,862

 

TOTAL CASH, CASH EQUIVALENTS

   AND RESTRICTED CASH

 

$

 

60,207

 

 

$

 

120,137

 

 

$

 

16,315

 

 

$

 

 

 

$

 

196,659

 

 


The consolidating condensed statement of cash flows for the sixthree months ended June 30, 2016March 31, 2017 is as follows:

 

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

Net cash (used in) provided by

   operating activities

 

$

 

(10,006

)

 

$

 

64,029

 

 

$

 

 

 

$

 

(5,367

)

 

$

 

48,656

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

138

 

 

 

 

(20,483

)

 

 

 

 

 

 

 

 

 

 

 

(20,345

)

Reimbursement of capital expenditures from

   West Virginia regulatory authorities

 

 

 

 

 

 

 

3,676

 

 

 

 

 

 

 

 

 

 

 

 

3,676

 

Net cash used in business combinations

 

 

 

(491

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(491

)

Proceeds from sale of property and equipment

 

 

 

 

 

 

 

1,551

 

 

 

 

 

 

 

 

 

 

 

 

1,551

 

(Decrease) increase in other assets

 

 

 

(81

)

 

 

 

258

 

 

 

 

 

 

 

 

 

 

 

 

177

 

Advances from (to) subsidiaries

 

 

 

87,495

 

 

 

 

 

 

 

 

 

 

 

 

(87,495

)

 

 

 

 

Net cash provided by (used in)

   investing activities

 

 

 

87,061

 

 

 

 

(14,998

)

 

 

 

 

 

 

 

(87,495

)

 

 

 

(15,432

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under Revolving Credit Facility

 

 

 

24,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,000

 

Principal payments under Revolving

   Credit Facility

 

 

 

(95,500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(95,500

)

Payments under Term Loan

 

 

 

(2,125

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,125

)

Principal payments on long-term debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments on capital leases

 

 

 

 

 

 

 

(136

)

 

 

 

 

 

 

 

 

 

 

 

(136

)

Debt issuance costs

 

 

 

(463

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(463

)

Proceeds from exercise of stock options

 

 

 

1,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,005

 

Taxes paid related to net share settlement of

   equity awards

 

 

 

(1,178

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,178

)

Net payments to related parties

 

 

 

 

 

 

 

(92,862

)

 

 

 

 

 

 

 

92,862

 

 

 

 

 

Net cash (used in) provided by

   financing activities

 

 

 

(74,261

)

 

 

 

(92,998

)

 

 

 

 

 

 

 

92,862

 

 

 

 

(74,397

)

INCREASE (DECREASE) IN CASH

   AND CASH EQUIVALENTS

 

 

 

2,794

 

 

 

 

(43,967

)

 

 

 

 

 

 

 

 

 

 

 

(41,173

)

CASH AND CASH EQUIVALENTS,

   BEGINNING OF YEAR

 

 

 

657

 

 

 

 

77,621

 

 

 

 

 

 

 

 

 

 

 

 

78,278

 

CASH AND CASH EQUIVALENTS,

   END OF YEAR

 

$

 

3,451

 

 

$

 

33,654

 

 

$

 

 

 

$

 

 

 

$

 

37,105

 

 

 

Eldorado

Resorts, Inc.

(Parent Obligor)

 

 

Guarantor

Subsidiaries

 

 

Non-Guarantor

Subsidiaries

 

 

Consolidating

and Eliminating

Entries

 

 

Eldorado

Resorts, Inc.

Consolidated

 

 

 

(in thousands, unaudited)

 

Net cash (used in) provided by

   operating activities

 

$

 

(2,768

)

 

$

 

7,862

 

 

$

 

89

 

 

$

 

 

 

$

 

5,183

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(151

)

 

 

 

(6,055

)

 

 

 

 

 

 

 

 

 

 

 

(6,206

)

Proceeds from sale of property and

   equipment

 

 

 

 

 

 

 

32

 

 

 

 

 

 

 

 

 

 

 

 

32

 

(Decrease) increase in other assets, net

 

 

 

(565

)

 

 

 

417

 

 

 

 

 

 

 

 

 

 

 

 

(148

)

Cash escrow related to acquisition

 

 

 

(376,750

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(376,750

)

Net cash used in investing activities

 

 

 

(377,466

)

 

 

 

(5,606

)

 

 

 

 

 

 

 

 

 

 

 

(383,072

)

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of 6% Senior Notes

 

 

 

375,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

375,000

 

Payments under Term Loan

 

 

 

(1,063

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,063

)

Borrowings under Prior Revolving Credit

   Facility

 

 

 

23,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,000

 

Payments under Prior Revolving Credit

   Facility

 

 

 

(29,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,000

)

Principal payments on capital leases

 

 

 

 

 

 

 

(94

)

 

 

 

 

 

 

 

 

 

 

 

(94

)

Debt issuance costs

 

 

 

(7,016

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,016

)

Net proceeds from (payments to)

   related parties

 

 

 

18,746

 

 

 

 

(18,634

)

 

 

 

(112

)

 

 

 

 

 

 

 

 

Taxes paid related to net share settlement

   of equity awards

 

 

 

(179

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(179

)

Proceeds from exercise of stock options

 

 

 

434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

434

 

Net cash provided by (used in)

   financing activities

 

 

 

379,922

 

 

 

 

(18,728

)

 

 

 

(112

)

 

 

 

 

 

 

 

361,082

 

INCREASE IN CASH, CASH

   EQUIVALENTS AND

   RESTRICTED CASH

 

 

 

(312

)

 

 

 

(16,472

)

 

 

 

(23

)

 

 

 

 

 

 

 

(16,807

)

CASH, CASH EQUIVALENTS AND

   RESTRICTED CASH, BEGINNING OF

   YEAR

 

 

 

1,409

 

 

 

 

61,702

 

 

 

 

332

 

 

 

 

 

 

 

 

63,443

 

CASH, CASH EQUIVALENTS AND

   RESTRICTED CASH, END OF PERIOD

 

$

 

1,097

 

 

$

 

45,230

 

 

$

 

309

 

 

$

 

 

 

$

 

46,636

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONDENSED

   CONSOLIDATED BALANCE SHEETS:

 

Cash and cash equivalents

 

$

 

419

 

 

$

 

43,846

 

 

$

 

309

 

 

$

 

 

 

$

 

44,574

 

Restricted cash

 

 

 

678

 

 

 

 

1,384

 

 

 

 

 

 

 

 

 

 

 

 

2,062

 

TOTAL CASH, CASH EQUIVALENTS

   AND RESTRICTED CASH

 

$

 

1,097

 

 

$

 

45,230

 

 

$

 

309

 

 

$

 

 

 

$

 

46,636

 

 

Note 15. Pending Acquisitions

On April 16, 2018, the Company announced that it entered into a definitive agreement to acquire the Grand Victoria Casino in Elgin, Illinois for $327.5 million in cash, subject to a customary working capital adjustment (the “Grand Victoria Acquisition”). The Company intends to fund the consideration payable in the Grand Victoria Acquisition using cash from currently pending asset sales, cash from ongoing operations and borrowings under its revolving credit facility.


Also on April 16, 2018, the Company announced that it entered into a definitive agreement to acquire Tropicana Entertainment Inc. (“Tropicana”) in a cash transaction that is valued at $1.85 billion. The definitive agreement provides that Gaming and Leisure Properties (“GLPI”) will pay $1.21 billion, excluding taxes and expenses, for substantially all of Tropicana’s real estate, will enter into a master lease with the Company for the acquired real estate, and the Company will fund the remaining $640 million of cash consideration payable in the acquisition (the “Tropicana Acquisition” and, together with the Elgin Acquisition, the “Acquisitions”). Pursuant to the transaction, GLPI is expected to acquire the real estate associated with the Tropicana property portfolio, except the MontBleu Casino Resort & Spa in South Lake Tahoe and the Tropicana Aruba Resort and Casino. Following the acquisition of the real estate portfolio by GLPI, the Company will enter into a triple net master lease for the acquired properties with an initial term of 15 years, with renewals of up to 20 years at the Company’s option. The initial annual rent under the terms of the lease is expected to be approximately $110 million. Tropicana intends to dispose of Tropicana Aruba Resort and Casino prior to closing.

The Company intends to fund the consideration of approximately $640 million payable by the Company in the Tropicana Acquisition and repay debt outstanding under Tropicana’s credit facility with cash generated from our current operations, proceeds from pending asset sales, Tropicana’s cash on hand, cash flow generated from Tropicana operations through closing and $600 million of committed debt financing. In addition, the Company has obtained commitments to increase its revolving credit facility from $300 million to $500 million effective at the time of the consummation of the Tropicana Acquisition and expects to extend the maturity of the revolving credit facility to five years following the consummation of the Tropicana Acquisition.

The Acquisitions are expected to close in the fourth quarter of 2018, subject to satisfaction of customary closing conditions including receipt of required regulatory approvals and termination of the waiting period under the Hart-Scott-Rodino Act.

Transaction expenses attributed to the Grand Victoria Acquisition and the Tropicana Acquisition totaled $0.6 million and $1.0 million, respectively, for the three months ended March 31, 2018. As of March 31, 2018, $0.4 million and $0.8 million of accrued costs and expenses related to the Grand Victoria Acquisition and Tropicana Acquisition, respectively, are included in accrued other liabilities.


ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GeneralYou should read the following discussion together with the financial statements, including the related notes and the other financial information, contained in this Quarterly Report on Form 10-Q.

Eldorado Resorts, Inc. (“ERI” or the “Company”), a Nevada corporation, was formed in September 2013. ERIis referred to as the “Company,” “ERI,” or the “Registrant,” and together with its subsidiaries are collectivelymay also be referred to as “we,” “us,” “our”“us” or “our.”

Overview

We are a geographically diversified gaming and hospitality company owning and operating 20 gaming facilities in 10 states. Our properties, which are located in Ohio, Louisiana, Nevada, Pennsylvania, West Virginia, Colorado, Florida, Iowa, Mississippi and Missouri, feature approximately 21,000 slot machines and video lottery terminals, approximately 600 table games and over 7,000 hotel rooms. Our primary source of revenue is generated by gaming operations and we utilize our hotels, restaurants, bars, entertainment, racing, retail shops and other services to attract customers to our properties.

We were founded in 1973 by the “Company.” The CompanyCarano Family with the opening of the Eldorado Hotel Casino in Reno, Nevada. In 1993, we partnered with MGM Resorts International on the Silver Legacy Resort Casino, the first mega-themed resort in Reno. In 2005, we acquired Mountaineer, Presque Isle Downs and Scioto Downsour first property outside of Reno when we acquired a casino in Shreveport, Louisiana, now known as Eldorado Shreveport. In September 2014, pursuant to a merger (the “MTR Merger”)we merged with MTR Gaming Group, Inc. (“MTR Gaming”) and acquired its three gaming and racing facilities in Ohio, Pennsylvania and West Virginia. The following year, in November 2015, we acquired Circus Circus Reno and the interests50% membership interest in the Silver Legacy that was owned by MGM Resorts International. On May 1, 2017, we did notcompleted our most recent – and largest – acquisition to date when we acquired Isle of Capri Casinos, Inc. (“Isle” or “Isle of Capri”), adding another 13 gaming properties to our portfolio.

We own prior to such date (the “Reno Acquisition”).

Throughout the three and six months ended June 30, 2017, ERI owned and operatedoperate the following properties:

Eldorado Resort Casino Reno (Eldorado Reno)A 814-room hotel, casino and entertainment facility connected via an enclosed skywalk to Silver Legacy and Circus Reno located in downtown Reno, Nevada that includes 1,1421,125 slot machines and 46 table games and an 11 table poker room;games;

Silver Legacy Resort Casino (Silver Legacy)A 1,711-room themed hotel and casino connected via an enclosed skywalk to Eldorado Reno and Circus Reno that includes 1,2121,187 slot machines, and 63 table games;games and a 13 table poker room;

Circus Circus Reno (Circus Reno)A 1,571-room hotel-casino and entertainment complex connected via an enclosed skywalk to Eldorado Reno and Silver Legacy that includes 695712 slot machines and 2724 table games;

Eldorado Resort Casino Shreveport (Eldorado Shreveport)A 403-room, all suite art deco-style hotel and tri-level riverboat dockside casino situated on the Red River in Shreveport, Louisiana that includes 1,3871,397 slot machines, 52 table games and an eight table poker room;

Mountaineer Casino, Racetrack & Resort (Mountaineer)A 354-room357-room hotel, casino, and entertainment facility and live thoroughbred horse racing facility located on the Ohio River at the northern tip of West Virginias northwestern panhandle that includes 1,5101,508 slot machines, 36 table games, andincluding a 10 table poker room;

Presque Isle Downs & Casino (Presque Isle Downs)A casino and live thoroughbred horse racing facility with 1,5941,593 slot machines, 3233 table games and a seven table poker room located in Erie, Pennsylvania; and

Eldorado Gaming Scioto Downs (Scioto Downs)A modern racino offering 2,2062,245 video lottery terminals, (VLT) (VLT), harness racing and a 118-room third party hotel connected to Scioto Downs.Downs located 15 minutes from downtown Columbus, Ohio;

In addition, on May 1, 2017, the Company consummated its acquisition of Isle of Capri Casinos, Inc. and acquired the following properties:

Isle Casino HotelBlack Hawk (“Isle Black Hawk”)A land-based casino on an approximately 10-acre site in Black Hawk, Colorado that includes 1,0861,026 slot machines, 2527 table games, a nine table poker room and a 238-room hotel;

Lady Luck CasinoBlack Hawk (“Lady Luck Black Hawk”)A land-based casino across the intersection from Isle Casino Hotel in Black Hawk, Colorado, that includes 455452 slot machines, 10 table games, five poker tables and a 164-room hotel with a parking structure connecting Isle Casino Hotel-Black Hawk and Lady Luck Casino-Black Hawk;


Isle Casino Racing Pompano Park (“Pompano”)A casino and harness racing track on an approximately 223-acre owned site in Pompano Beach, Florida, that includes 1,446 slot machines and a 42 table poker room;

Isle Casino Racing Pompano Park (“Pompano”)A casino and harness racing track on an approximately 223-acre owned site in Pompano Beach, Florida, that includes 1,455 slot machines and a 45 table poker room. In April 2018, we announced the formation of a joint venture with the Cordish Companies to master plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack;

Isle Casino Bettendorf (“Bettendorf”)A land-based single-level casino located off of Interstate 74 in Bettendorf, Iowa that includes 969978 slot machines and 1920 table games with two hotel towers with 509 hotel rooms;

Isle Casino Waterloo (“Waterloo”)A single-level land-based casino in Waterloo, Iowa that includes 948940 slot machines, 25 table games, four poker tables and a 195-room194-room hotel;

Isle of Capri Casino Hotel Lake Charles (“Lake Charles”)A gaming vessel on an approximately 19 acre site in Lake Charles, Louisiana, with 1,1571,173 slot machines, 4947 table games, including 13 poker tables and two hotels offering 493 rooms;

Isle of Capri Casino Lula (“Lula”)Two dockside casinos in Lula, Mississippi with 885875 slot machines and 2120 table games, two on-site hotels with a total of 451486 rooms and a 28-space RV Park;

Lady Luck Casino Vicksburg (“Vicksburg”)A dockside casino in Vicksburg, Mississippi that includes 613616 slot machines, 7nine table games and a hotel with a total of 89 rooms;


Isle of Capri Casino Boonville (“Boonville”)A single-level dockside casino in Boonville, Missouri that includes 893 slot machines, 20 table games and a 140-room hotel;

Isle of Capri Casino Boonville (“Boonville”)A single-level dockside casino in Boonville, Missouri that includes 914 slot machines, 20 table games and a 140-room hotel;

Isle Casino Cape Girardeau (“Cape Girardeau”)A dockside casino and pavilion and entertainment center in Cape Girardeau, Missouri that includes 930872 slot machines, 22and 24 table games, and 4including four poker tables;

Lady Luck Casino Caruthersville (“Caruthersville”)—A riverboat casino located along the Mississippi River in Caruthersville, Missouri that includes 557516 slot machines and nine table games;

Isle of Capri Casino Kansas City (“Kansas City”)A dockside casino located close to downtown Kansas City, Missouri offering 977966 slot machines and 18 table games; and

Lady Luck Casino Nemacolin (“Nemacolin”)A casino property located on the 2,000-acre Nemacolin Woodlands Resort in Western Pennsylvania that includes 597600 slot machines and 2928 table games.

In addition, Scioto Downs, through its subsidiary RacelineBet, Inc., also operates Racelinebet.com, a national account wagering service that offers online and telephone wagering on horse races as a marketing affiliate of TwinSpires.com, an affiliate of Churchill Downs Incorporated.


Pending Acquisitions

On August 22, 2016, IsleApril 16, 2018, we announced that we entered aninto a definitive agreement to sell Isle of Capriacquire the Grand Victoria Casino Hotel Lake Charlesin Elgin, Illinois for aggregate consideration of $134.5$327.5 million subjectin cash. We intend to certain adjustments.fund the proposed transaction using cash from pending asset sales, cash from ongoing operations and borrowings under our revolving credit facility. The transaction is expected to be completedclose in 2017,the fourth quarter of 2018, subject to Louisiana Gaming Control Board approvalregulatory approvals and other customary closing conditions.conditions and is subject to a customary working capital adjustment.

AcquisitionAlso on April 16, 2018, we announced that we entered into a definitive agreement to acquire Tropicana Entertainment Inc. in a cash transaction that is valued at $1.85 billion. The definitive agreement provides that Gaming and Leisure Properties will pay $1.21 billion, excluding taxes and expenses, for substantially all of IsleTropicana’s real estate and enter into a master lease with us for the acquired real estate and that we will fund the remaining $640 million of Capri Casinos, Inc.cash consideration payable in the acquisition. Pursuant to the transaction, Gaming and Leisure Properties is expected to acquire the real estate associated with the Tropicana property portfolio, except the MontBleu Casino Resort & Spa in South Lake Tahoe and the Tropicana Aruba Resort and Casino. Following the acquisition of the real estate portfolio by Gaming and Leisure Properties, we will enter into a triple net master lease for the acquired properties with an initial term of 15 years, with renewals of up to 20 years at our option. The initial annual rent under the terms of the lease is expected to be approximately $110 million. Tropicana intends to dispose of Tropicana Aruba Resort and Casino prior to closing.

We intend to fund the consideration of approximately $640 million payable by us in the Tropicana transaction and repay debt outstanding under Tropicana’s credit facility with cash generated from our current operations, proceeds from pending asset sales, Tropicana’s cash on hand, cash flow generated from Tropicana operations through closing and $600 million of committed debt financing. In addition, the Company has obtained commitments to increase its revolving credit facility from $300 million to $500 million effective at the time of the consummation of the Tropicana transaction and expects to extend the maturity of the revolving credit facility to five years following the consummation of the Tropicana transaction.

Pending Dispositions

On February 28, 2018, we entered into definitive agreements to sell substantially all of the assets and liabilities of Presque Isle Downs and Vicksburg to Churchill Downs Incorporated. Under the terms of the agreements, Churchill Downs Incorporated. will purchase Presque Isle Downs for cash consideration of approximately $178.9 million and Vicksburg for cash consideration of approximately $50.6 million, in each case subject to a customary working capital adjustment. Additionally, an impairment charge was recorded related to Vicksburg.

Both transactions are subject to receipt of required regulatory approvals, termination of the waiting period under the Hart-Scott-Rodino Act and other customary closing conditions, including, in the case of Presque Isle Downs, the prior closing of the sale of Vicksburg or the entry into an agreement to acquire another asset of the Company. On May 1, 2017 (the “Isle Acquisition Date”), the Company completed its acquisition of Isle of Capri Casinos, Inc. pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) dated as of September 19, 2016 with Isle of Capri Casinos, Inc., a Delaware corporation (“Isle” or “Isle of Capri”), Eagle I Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary of7, 2018, the Company and Eagle II Acquisition Company LLC,CDI each received a Delaware limited liability companyRequest for Additional Information and Documentary Materials, often referred to as a direct wholly-owned subsidiary of“Second Request,” from the Company (the “Isle Acquisition” or the “Isle Merger”Federal Trade Commission (“FTC”). As a result of the Isle Merger, Isle became a wholly-owned subsidiary of ERI and, at the effective time of the Isle Merger, each outstanding share of Isle’s stock converted into the right to receive $23.00 in cash or 1.638 shares of ERI common stock (the “Stock Consideration”), at the election of the applicable Isle shareholder and subject to proration such that the outstanding shares of Isle common stock were exchanged for aggregate consideration comprised of 58% cash, or $552.0 million, and 42% ERI common stock, or 28.5 million newly issued shares of ERI common stock. The total purchase consideration was $1.93 billion.

In connection with the Isle Acquisition,FTC’s review of the Vicksburg acquisition. The Second Request was issued under the Hart-Scott-Rodino Act. Issuance of the Second Request extends the waiting period under the Hart-Scott-Rodino Act until 30 days after the Company completed a debt financing transaction comprised of: (a) a senior secured credit facilityand CDI have substantially complied with the Second Request, unless the waiting period is extended voluntarily by the parties or terminated earlier by the FTC. The Company and CDI continue to cooperate fully with the FTC in an aggregate principal amountits review. The Dispositions are expected to close in the third or fourth quarter of $1.75 billion with a (i) term loan facility2018 subject to satisfaction of $1.45 billion and (ii) revolving credit facility of $300.0 million and (b) $375.0 million of senior unsecured notes. The proceeds of such borrowings were used (v) to pay the cash portionclosing conditions (including termination of the consideration payable waiting period under the Hart-Scott-Rodino Act and, in the case of Presque Isle Merger, (w) refinance allDowns, the prior closing of Isle’s existing credit facilities, (x) redeemthe sale of Vicksburg or otherwise repurchase allthe entry into an agreement to acquire another asset of Isle’s senior and senior subordinated notes, (y) refinance the Company’s existing credit facility and (z) pay transaction fees and expenses related to the foregoing.Company.

Reportable Segments

The financial information included in this Item 2 for periods prior to the Isle Merger are those of ERI and its subsidiaries. The presentation of information herein for periods prior to the Isle Merger and after the Isle Merger are not fully comparable because the results of operations for Isle are not included for periods prior to the Isle Merger. Summary financial results of Islefollowing table sets forth, for the three and nine months ended January 22, 2017 are included in Isle’s Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission (‘‘SEC’’). In conjunction with the Isle Acquisition, Isle is no longer required to file quarterly and annual reports with the SEC, and terminated its registration on May 11, 2017.


Reportable Segments

period indicated, certain operating data for our reportable segments. The executive decision maker of our Company reviews operating results, assessassesses performance and makemakes decisions on a “significant market” basis. The Company’s managementManagement views each of its propertiesour casinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure. Prior to the Isle Acquisition, the Company’s principal operating activities occurred in three geographic regions: Nevada, Louisiana and parts of the eastern United States. The Company aggregated its operations into three reportable segments based on the similar characteristics of the operating segments within the regions in which they operated as follows:

Segment

Property

State

Nevada

Eldorado Reno

Nevada

Silver Legacy

Nevada

Circus Reno

Nevada

Louisiana

Eldorado Shreveport

Louisiana

Eastern

Presque Isle Downs

Pennsylvania

Scioto Downs

Ohio

Mountaineer

West Virginia

Following the Isle Acquisition, the Company’s principal operating activities expanded and now occur in four geographic regions and reportable segments based on the similar characteristics of the operating segments within the regions in which they operate. The following table summarizes our current segments:previously reported segments, Nevada, Louisiana, and Eastern, are now included in the West, South, and East segments, respectively, which are summarized as follows, along with the Midwest segment.


 

Segment

 

Property

 

State

West

 

Eldorado Reno

 

Nevada

 

 

Silver Legacy

 

Nevada

 

 

Circus Reno

 

Nevada

 

 

Isle Black Hawk

 

Colorado

 

 

Lady Luck Black Hawk

 

Colorado

 

 

 

 

 

Midwest

 

Waterloo

 

Iowa

 

 

Bettendorf

 

Iowa

 

 

Boonville

 

Missouri

 

 

Cape Girardeau

 

Missouri

 

 

Caruthersville

 

Missouri

 

 

Kansas City

 

Missouri

 

 

 

 

 

South

 

Pompano

 

Florida

 

 

Eldorado Shreveport

 

Louisiana

 

 

Lake Charles

Louisiana

Lula

 

Mississippi

 

 

Vicksburg

 

Mississippi

 

 

 

 

 

East

 

Presque Isle Downs

 

Pennsylvania

 

 

Nemacolin

 

Pennsylvania

 

 

Scioto Downs

 

Ohio

 

 

Mountaineer

 

West Virginia

 

Presentation of Financial Information

The financial information included in this Item 2 for periods prior to our acquisition of Isle are those of ERI and its subsidiaries. The presentation of information herein for periods prior to our acquisition of Isle and after our acquisition of Isle are not fully comparable because the results of operations for Isle are not included for periods prior to our acquisition of Isle.

Key Performance Metrics

Our primary source of revenue is generated by our gaming operations, but we use our hotels, restaurants, bars, entertainment, retail shops, racing and other services to attract customers to our properties. Our operating results are highly dependent on the volume of customers visiting and staying at our properties. Key performance metrics include volume indicators such as table games drop and slot handle, which refer to amounts wagered by our customers. The amount of volume we retain, which is not fully controllable by us, is recognized as casino revenues and is referred to as our win or hold. In addition, hotel occupancy and price per room designated by average daily rate (“ADR”) are key indicators for our hotel business. Our calculation of ADR consists of the average price of occupied


rooms per day including the impact of resort fees and complimentary rooms. Complimentary room rates are determined based on an analysis of retail or cash rates for each customer segment and each type of room product to estimate complimentary rates which are consistent with retail rates. Complimentary rates are reviewed at least annually and on an interim basis if there are significant changes in market conditions. Complimentary rooms are treated as occupied rooms in our calculation of hotel occupancy.

Significant Factors Impacting Financial Results

The following summary highlights the significant factors impacting our financial results for the three and six months ended June 30, 2017March 31, 2018 and 2016.2017.

Isle Acquisition Our results of continuing operations for the three and six months ended June 20, 2017March 31, 2018 include incremental revenues and expenses for two months (May and June 2017) attributable to the twelvethirteen properties we acquired in the Isle Acquisition.our acquisition of Isle.


Acquisition charges attributedTransaction expenses related to theour acquisition of Isle Acquisition related tofor legal, accounting, financial advisory services, severance, stock awards and other costs totaling $85.6totaled $1.0 million and $87.1 million during the three and six months ended June 30, 2017, respectively, and $0.1 million and $0.6$1.6 million for the three and six months ended June 30, 2016.March 31, 2018 and 2017, respectively.

Additionally,Pending AcquisitionsTransaction expenses related to our pending acquisitions of Grand Victoria Casino and Tropicana Entertainment Inc. totaled $0.6 million and $1.0 million, respectively, for the three months ended March 31, 2018.

Pending Dispositions – The sales ofPresque Isle Downs and Vicksburg met the requirements for presentation as assets held for sale under generally accepted accounting principles. However, they did not meet the requirements for presentation as discontinued operations and are included in income from continuing operations for the three months ended March 31, 2018. Based on the triggering event, we recognized a loss of $26.6recorded an impairment charge for the three months ended March 31, 2018 totaling $9.8 million related to our Vicksburg property.

Lake Charles Terminated Sale On August 22, 2016, Isle entered into an agreement to sell its casino and hotel property in Lake Charles, Louisiana, for $134.5 million, subject to a customary purchase price adjustment, to an affiliate of Laguna Development Corporation, a Pueblo of Laguna-owned business based in Albuquerque, New Mexico. On November 21, 2017, we terminated the extinguishmentagreement. The closing of Isle debtthe transaction was subject to certain closing conditions, including obtaining certain gaming approvals, and was to occur on or before the termination date, which had been extended by the parties to November 20, 2017. The buyer did not obtain the required gaming approvals prior to the termination date, and pursuant to the terms of the agreement, and the payment$20.0 million deposit was forfeited upon termination of interestthe agreement.

In previous periods, the operations of Lake Charles have been classified as discontinued operations and call premiumsas an asset held for sale. As a result of the termination of the sale, Lake Charles is no longer classified as an asset held for sale and as discontinued operations, and is included in conjunction withour results of operations for the Isle Acquisition.three months ended March 31, 2018.

Debt Refinancing – In connection with the Isle Acquisition, we completed a debt financing transaction comprised of: (a) a senior secured credit facility in an aggregate principal amount of $1.75 billion with a (i) term loan facility of $1.45 billion and (ii) revolving credit facility of $300.0 million and (b) $375.0 million of senior unsecured notes. The proceeds of such borrowings were used (v) to pay the cash portion of the consideration payable in the Isle Merger, (w) refinance all of Isle’s existing credit facilities, (x) redeem or otherwise repurchase all of Isle’s senior and senior subordinated notes, (y) refinance our existing credit facility and (z) pay transaction fees and expenses related to the foregoing. We recognized a loss totaling $0.7 million for the three and six months ended June 30, 2017 as a result of the debt refinancing transaction (See “Liquidity and Capital Resources” for more information related to the debt refinancing).

Income Taxes – On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21% and has a positive impact on net income.

Severe Reno Weather – Our West segment’s operations are subject to seasonal variation, with our lowest business volume generally occurring during the winter months. The northern Nevada region experienced record snowfall and severe weather conditions, including major snow storms during eleven of the fourteen weekends in the 2017 first quarter, making travel to Reno from northern California, our main feeder market, difficult or impossible due to road closures. As a result, there was a significant adverse effect on business levels, especially hotel occupancy and gaming volume, and our operating performance during the sixthree months ended June 30, 2017 compared to the same prior year period.March 31, 2017.

Additionally, our operations were impacted system wide by challenging weather in January and February of 2018 as well as our Reno operations in March of 2018.

Execution of Cost Savings Program – We continue to identify areas to improve property level and consolidated margins through operating and cost efficiencies and exercising financial discipline throughout the Companycompany without impacting the guest experience. In addition to cost savings relating to duplicative executive compensation, legal and accounting fees and other corporate expenses that have been eliminated as a result of the MTR Merger, Reno Acquisition and Isle Acquisition,our acquisitions, we have achieved savings in marketing, food and beverage costs, selling, general and administrative expenses, and other operating departments as a result of operating efficiencies and purchasing power of the combined Eldorado organization.

Property Enhancement Capital Expenditures – Property enhancement initiatives and targeted investments that improve our guests’ experiences and elevate our properties’ overall competitiveness in their markets continued throughout 20162017 and into 2017. At Presque2018. As part of the continuing evolution of the Reno tri-properties, we are building a new spa at Silver Legacy. We will have substantially renovated every room at Circus Reno by July and will start the first phase of 300 rooms at Silver Legacy and 42 high-end suites at Eldorado after the busy summer season. In Black Hawk we expect to renovate all 402 hotel rooms this winter. In addition, recently we announced a joint venture with the Cordish Companies for the development of a new world-class, mixed-use entertainment and hospitality destination anchored by our Isle Downs, we opened Casino Racing Pompano Park.The Brew Brothers in May 2016 and an escalator in July to improve traffic flow to the restaurant. In June 2016, we opened a second smoking patio

A 118-room Hampton Inn Hotel at Scioto Downs which featuresdeveloped by a casino barthird party opened in March 2017 and 119 new VLTs. In Shreveport, we completedsince opening has driven visitation and spend at the remodel of the second floor of the casino in December 2016 and added approximately 20 new slot machines. We improved the offerings at Mountaineer with a goal of maintaining a positive customer experience while right sizing the property to maximize free cash flow and operational efficiencies.

In September 2016, the Company announced that it plans to invest more than $50 million in facility enhancements to Eldorado Reno, Silver Legacy and Circus Reno. Eldorado’s master plan for the three connected properties, which span eight city blocks in downtown Reno, will be phased over three years, and commenced in the fourth quarter of 2016. In addition to the renovation of our guest rooms across the Tri-Properties, each of the three resorts will introduce new restaurant concepts, reinvigorated nightlife and resort amenities. In September 2016, Silver Legacy opened a new $2.0 million 8,500 square foot sports book. Also, in the fourth quarter of 2016, we completed the renovation of the Carnival Midway and opened El Jefe’s Cantina Mexican restaurant and bar at Circus Reno. We also opened Hidden Pizza, a New York style pizza restaurant, at Eldorado Reno.property.  


Throughout the first half of 2017, capital improvements continued at the Tri-Properties including the renovation of approximately 300 guest rooms at Circus Reno. Property enhancements that are either already completed or that are expected to come online prior to the end of 2017 include a new poker room and Canter’s Delicatessen at Silver Legacy, new food court with Habit Burger®, Piezzetta Pizza Kitchen® and Panda Express®, 6,700 square foot video arcade, party rooms and bar, renovation of approximately 648 guest rooms, Kanpai Sushi and a new Madame Butterworks Curious Café at Circus Reno, renovation of approximately 153 guest rooms and the showroom at Eldorado Reno and new public spaces across all three properties.

With the completion of the Isle Acquisition, we continue to evaluate capital improvement plans across the newly acquired properties.

New Regulation – Effective January 1, 2016, the Ohio Lottery Commission enacted new regulation which resulted in the establishment of a $1.0 million progressive slot liability and a corresponding decrease in net slot win for the six months ended June 30, 2016. The changes are non-cash and related to jackpots established in prior years. The net non-cash impact to Scioto Down’s operating income was $0.6 million for the six months ended June 30, 2016.

Results of Operations

The following table highlights the results of our operations (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

% Change

 

 

 

2017

 

 

2016

 

 

% Change

 

 

Net revenues

 

$

 

355,180

 

 

$

 

231,315

 

 

 

53.5

 

%

 

$

 

556,105

 

 

$

 

444,881

 

 

 

25.0

 

%

Operating (loss) income

 

 

 

(32,116

)

 

 

 

29,655

 

 

 

(208.3

)

%

 

 

 

(17,967

)

 

 

 

47,917

 

 

 

(137.5

)

%

Net (loss) income

 

 

 

(46,328

)

 

 

 

10,791

 

 

 

(529.3

)

%

 

 

 

(45,307

)

 

 

 

14,160

 

 

 

(420.0

)

%

 

 

Three Months Ended

 

 

 

 

 

 

 

 

March 31,

 

 

Percent

 

 

 

 

2018

 

 

2017

 

 

Change

 

 

Net revenues

 

$

 

440,192

 

 

$

 

202,393

 

 

 

117.5

 

%

Operating income

 

 

 

54,194

 

 

 

 

14,028

 

 

 

286.3

 

%

Net income

 

 

 

20,855

 

 

 

 

945

 

 

 

2,106.9

 

%

 

Operating Results.  Isle contributed $134.2$231.9 million of net operating revenues forduring the period from the Isle Acquisition Date through June 30, 2017three months ended March 31, 2018 consisting primarily of gaming revenues. Including the incremental Isle net operating revenues, net operating revenues increased 53.5% and 25.0%, respectively,117.5% for the three and six months ended June 30, 2017March 31, 2018 compared to the same prior year periods.three months ended March 31, 2017. Excluding incremental Isle net revenues, net revenues increased 2.9% for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 primarily due to growth in the West region.

Operating income decreased 208.3% and 137.5%, respectively,increased 286.3% for the three and six months ended June 30, 2017March 31, 2018 compared to the same prior year periods.three months ended March 31, 2017. This decreaseincrease was primarily due to acquisition charges related to the Isle Acquisition totaling $85.5$39.2 million and $87.1 million, respectively, for the three and six months ended June 30, 2017. This decrease was partially offset by $22.1 million of incremental operating income contributed by Isle for the period from the Isle Acquisition Date through June 30, 2017.three months ended March 31, 2018.

Net income decreased 529.3% and 420.0%, respectively,increased $19.9 million for the three and six months ended June 30, 2017March 31, 2018 compared to the same prior year periodsthree months ended March 31, 2017 primarily due to incremental operating income contributed by Isle for the same factors impacting operating income.three months ended March 31, 2018 partially offset by higher interest expense attributable to additional debt incurred associated with the Isle Acquisition.


Net Revenues and Operating Income (Loss)

The following table highlights our net revenues and operating income (loss) by reportable segment (dollars in thousands):

 

 

Net Revenues for the Three Months Ended June 30,

 

 

Net Revenues for the Six Months Ended June 30,

 

 

Net Revenues for the Three Months Ended March 31,

 

 

Operating Income for the

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

West

 

$

 

98,360

 

 

$

 

84,161

 

 

$

 

161,061

 

 

$

 

156,932

 

 

$

 

99,579

 

 

$

 

63,488

 

 

$

 

10,139

 

 

$

 

1,355

 

Midwest

 

 

 

67,503

 

 

 

 

 

 

 

 

67,503

 

 

 

 

 

 

 

 

100,795

 

 

 

 

 

 

 

 

26,676

 

 

 

 

 

South

 

 

 

69,617

 

 

 

 

32,088

 

 

 

 

101,528

 

 

 

 

66,530

 

 

 

122,800

 

 

 

32,560

 

 

 

 

13,359

 

 

 

 

5,918

 

East

 

 

 

119,564

 

 

 

 

115,066

 

 

 

 

225,877

 

 

 

 

221,419

 

 

 

116,891

 

 

 

106,287

 

 

 

 

19,131

 

 

 

 

15,034

 

Corporate

 

 

 

136

 

 

 

 

 

 

 

 

136

 

 

 

 

 

 

 

 

127

 

 

 

 

58

 

 

 

 

(15,111

)

 

 

 

(8,279

)

Total

 

$

 

355,180

 

 

$

 

231,315

 

 

$

 

556,105

 

 

$

 

444,881

 

 

$

 

440,192

 

 

$

 

202,393

 

 

$

 

54,194

 

 

$

 

14,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income (Loss) for the Three Months Ended June 30,

 

 

Operating Income (Loss) for the Six Months Ended June 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

West

 

$

 

16,468

 

 

$

 

13,655

 

 

$

 

17,994

 

 

$

 

19,219

 

Midwest

 

 

 

15,408

 

 

 

 

 

 

 

 

15,408

 

 

 

 

 

South

 

 

 

11,069

 

 

 

 

5,541

 

 

 

 

16,987

 

 

 

 

12,043

 

East

 

 

 

18,153

 

 

 

 

14,934

 

 

 

 

33,195

 

 

 

 

28,665

 

Corporate

 

 

 

(93,214

)

 

 

 

(4,475

)

 

 

 

(101,551

)

 

 

 

(12,010

)

Total

 

$

 

(32,116

)

 

$

 

29,655

 

 

$

 

(17,967

)

 

$

 

47,917

 


Three Months Ended June 30, 2017March 31, 2018 Compared to the Three Months Ended June 30, 2016March 31, 2017

Net revenues and operating expenses were as follows (dollars in thousands):

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

 

 

 

 

 

Percent

 

 

 

2017

 

 

2016

 

 

Variance

 

 

Percent

 

 

 

2018

 

 

2017

 

 

Variance

 

 

Change

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

61,153

 

 

$

 

45,511

 

 

$

 

15,642

 

 

 

34.4

 

%

 

$

 

49,734

 

 

$

 

23,833

 

 

$

 

25,901

 

 

 

108.7

 

%

Midwest

 

 

 

65,489

 

 

 

 

 

 

 

 

65,489

 

 

 

100.0

 

%

 

 

 

88,359

 

 

 

 

 

 

 

 

88,359

 

 

 

100.0

 

%

South

 

 

 

65,091

 

 

 

 

29,550

 

 

 

 

35,541

 

 

 

120.3

 

%

 

 

 

100,918

 

 

 

 

23,169

 

 

 

 

77,749

 

 

 

335.6

 

%

East

 

 

 

110,592

 

 

 

 

106,291

 

 

 

 

4,301

 

 

 

4.0

 

%

 

 

 

104,517

 

 

 

 

95,188

 

 

 

 

9,329

 

 

 

9.8

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

302,325

 

 

 

 

181,352

 

 

 

 

120,973

 

 

 

66.7

 

%

 

 

 

343,528

 

 

 

 

142,190

 

 

 

 

201,338

 

 

 

141.6

 

%

Non-gaming:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

51,341

 

 

 

 

50,429

 

 

 

 

912

 

 

 

1.8

 

%

 

 

 

49,845

 

 

 

 

39,655

 

 

 

 

10,190

 

 

 

25.7

 

%

Midwest

 

 

 

9,530

 

 

 

 

 

 

 

 

9,530

 

 

 

100.0

 

%

 

 

 

12,436

 

 

 

 

 

 

 

 

12,436

 

 

 

100.0

 

%

South

 

 

 

12,863

 

 

 

 

9,598

 

 

 

 

3,265

 

 

 

34.0

 

%

 

 

 

21,882

 

 

 

 

9,391

 

 

 

 

12,491

 

 

 

133.0

 

%

East

 

 

 

13,042

 

 

 

 

13,631

 

 

 

 

(589

)

 

 

(4.3

)

%

 

 

 

12,374

 

 

 

 

11,099

 

 

 

 

1,275

 

 

 

11.5

 

%

Corporate

 

 

 

136

 

 

 

 

 

 

 

 

136

 

 

 

100.0

 

%

 

 

 

127

 

 

 

 

58

 

 

 

 

69

 

 

 

119.0

 

%

Total Non-gaming

 

 

 

86,912

 

 

 

 

73,658

 

 

 

 

13,254

 

 

 

18.0

 

%

 

 

 

96,664

 

 

 

 

60,203

 

 

 

 

36,461

 

 

 

60.6

 

%

Total Gross Revenues

 

 

 

389,237

 

 

 

 

255,010

 

 

 

 

134,227

 

 

 

52.6

 

%

Promotional allowances:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

(14,134

)

 

 

 

(11,779

)

 

 

 

2,355

 

 

 

(20.0

)

%

Midwest

 

 

 

(7,516

)

 

 

 

 

 

 

 

(7,516

)

 

 

(100.0

)

%

South

 

 

 

(8,337

)

 

 

 

(7,060

)

 

 

 

1,277

 

 

 

18.1

 

%

East

 

 

 

(4,070

)

 

 

 

(4,856

)

 

 

 

(786

)

 

 

16.2

 

%

Total Promotional Allowances

 

 

 

(34,057

)

 

 

 

(23,695

)

 

 

 

10,362

 

 

 

(43.7

)

%

Total Net Revenues

 

 

 

355,180

 

 

 

 

231,315

 

 

 

 

123,865

 

 

 

53.5

 

%

 

 

 

440,192

 

 

 

 

202,393

 

 

 

 

237,799

 

 

 

117.5

 

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

26,151

 

 

 

20,742

 

 

 

 

5,409

 

 

 

26.1

 

%

 

 

20,398

 

 

 

10,653

 

 

 

 

9,745

 

 

 

91.5

 

%

Midwest

 

 

 

27,885

 

 

 

 

 

 

 

 

27,885

 

 

 

100.0

 

%

 

 

 

35,944

 

 

 

 

 

 

 

 

35,944

 

 

 

100.0

 

%

South

 

 

 

33,759

 

 

 

 

16,313

 

 

 

 

17,446

 

 

 

106.9

 

%

 

 

 

48,356

 

 

 

 

12,228

 

 

 

 

36,128

 

 

 

295.5

 

%

East

 

 

 

69,496

 

 

 

 

66,250

 

 

 

 

3,246

 

 

 

4.9

 

%

 

 

 

64,853

 

 

 

 

58,307

 

 

 

 

6,546

 

 

 

11.2

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

157,291

 

 

 

 

103,305

 

 

 

 

53,986

 

 

 

52.3

 

%

 

 

 

169,551

 

 

 

 

81,188

 

 

 

 

88,363

 

 

 

108.8

 

%

Non-gaming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

23,988

 

 

 

 

25,657

 

 

 

 

(1,669

)

 

 

(6.5

)

%

 

 

 

33,743

 

 

 

 

27,921

 

 

 

 

5,822

 

 

 

20.9

 

%

Midwest

 

 

 

3,112

 

 

 

 

 

 

 

 

3,112

 

 

 

100.0

 

%

 

 

 

8,153

 

 

 

 

 

 

 

 

8,153

 

 

 

100.0

 

%

South

 

 

 

3,859

 

 

 

 

1,787

 

 

 

 

2,072

 

 

 

115.9

 

%

 

 

 

14,557

 

 

 

 

5,617

 

 

 

 

8,940

 

 

 

159.2

 

%

East

 

 

 

5,545

 

 

 

 

7,936

 

 

 

 

(2,391

)

 

 

(30.1

)

%

 

 

 

8,234

 

 

 

 

7,728

 

 

 

 

506

 

 

 

6.5

 

%

Total Non-gaming

 

 

 

36,504

 

 

 

 

35,380

 

 

 

 

1,124

 

 

 

3.2

 

%

 

 

 

64,687

 

 

 

 

41,266

 

 

 

 

23,421

 

 

 

56.8

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing and promotions

 

 

 

20,158

 

 

 

 

9,766

 

 

 

 

10,392

 

 

 

106.4

 

%

 

 

 

21,301

 

 

 

 

10,129

 

 

 

 

11,172

 

 

 

110.3

 

%

General and administrative

 

 

 

55,379

 

 

 

 

32,380

 

 

 

 

22,999

 

 

 

71.0

 

%

 

 

 

74,202

 

 

 

 

31,800

 

 

 

 

42,402

 

 

 

133.3

 

%

Corporate

 

 

 

7,442

 

 

 

 

4,354

 

 

 

 

3,088

 

 

 

70.9

 

%

 

 

 

11,569

 

 

 

 

6,574

 

 

 

 

4,995

 

 

 

76.0

 

%

Impairment charges

 

 

 

9,815

 

 

 

 

 

 

 

 

9,815

 

 

 

100.0

 

%

Depreciation and amortization

 

 

 

24,909

 

 

 

 

15,583

 

 

 

 

9,326

 

 

 

59.8

 

%

 

 

 

31,534

 

 

 

 

15,604

 

 

 

 

15,930

 

 

 

102.1

 

%

Total Operating Expenses

 

$

 

301,683

 

 

$

 

200,768

 

 

$

 

100,915

 

 

 

50.3

 

%

 

$

 

382,659

 

 

$

 

186,561

 

 

$

 

196,098

 

 

 

105.1

 

%

 

Gaming Revenues and Pari-Mutuel CommissionsCommissions..  Isle contributed $128.9$198.0 million of gaming revenues and pari-mutuel commissions for the period fromthree months ended March 31, 2018 resulting in an increase of 141.6% compared to the three months ended March 31, 2017.

Excluding incremental Isle Acquisition Date through June 30, 2017 consisting primarily of slotgaming revenues and table games revenues. As a result,pari-mutuel commissions, gaming revenues and pari-mutuel commissions increased 66.7%2.3% for the three months ended June 30,March 31, 2018 compared to the three months ended March 31, 2017 comparedmainly due to higher gaming revenues in the West region driven by increased visitor traffic and milder weather.

Non-gaming Revenues.  Isle contributed $33.8 million of non-gaming revenues for the three months ended March 31, 2018 resulting in an increase of 60.6% in non-gaming revenues over the same prior year period.

Excluding incremental Isle gamingnon-gaming revenues, and pari-mutuel commissions of $128.9 million, gamingnon-gaming revenues and pari-mutuel commissions declinedincreased 4.4% for the three months ended June 30, 2017 compared to the same prior year period primarily due to a decrease in gaming revenues in the West segment and, to a lesser extent, lower gaming revenues in the South and East segments. The decline in the West segment was mainly attributable to decreases in visitor traffic associated with the absence of a major bowling


tournament in the Reno market during the current quarterMarch 31, 2018 compared to the same prior year period. Additionally, reductions in gaming volume driven by decreased high-end play and the continued weaknessNon-gaming revenues in the energy sector negatively impacted the Shreveport market and South segment. Efforts to eliminate unprofitable gaming play via reductions in marketing promotions and incentives across all segments also contributed to the declines in casino volume and positively impacted operating marginsWest segment increased for the three months ended June 30, 2017 compared to the same prior year period.

Non-gaming Revenues.  Isle contributed $19.8 million of non-gaming revenues for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 18.0% in non-gaming revenues over the same prior year period.

Excluding incremental Isle non-gaming revenues of $19.8 million, non-gaming revenues decreased 9.1% for the three months ended June 30, 2017 compared to the same prior year period. The West segment declined for the three months ended June 30, 2017March 31, 2018 compared to the same prior year period principally due to lowerhigher hotel and food and beverage revenues resulting from reduced customer traffic due to fewer convention room nights and the absence of a major bowling tournament during the current quarter. The South segment decreased in non-gaming revenues for the three months ended June 30, 2017 compared to the same prior year period primarily due to decreased food and beverage revenues


associated with revisions to complimentaryincreased visitor traffic, milder weather and also benefitted from the Reno properties’ capital improvements including renovated hotel rooms and new food, offers. The East segment decreased for the three months ended June 30, 2017 compared to the same prior year period in non-gaming revenues primarily due to decreased foodbeverage and beverage revenues resulting from reductions in complimentary food offerings and the consolidation of restaurants in an effort to maximize capacity utilization.

Promotional Allowances.  Promotional allowances, expressed as a percentage of gaming revenues and pari-mutuel commissions, decreased to 11.3% for the three months ended June 30, 2017 compared to 13.1% for the same prior year period. This decline was primarily due to strategic revisions to promotional offers across all segments.entertainment offerings.

Gaming Expenses and Pari-Mutuel Commissions.  Isle contributed $59.8$87.8 million of gaming expenses and pari-mutuel commissions for the period from the Isle Acquisition Date through June 30, 2017three months ended March 31, 2018 resulting in an increase of 52.3%108.8% in gaming expenses and pari-mutuel commissions over the same prior year period.

Excluding incremental Isle gaming expenses and pari-mutuel commissions, gaming expenses and pari-mutuel commissions decreased 5.6%remained flat for the three months ended June 30, 2017March 31, 2018 compared to the same prior year period primarilydespite the increase in gaming revenues due to declines in gaming volume combined with savings initiatives targeted at reducing variable expenses along with continued synergies related to the integration of the Tri-Properties in the West segment.synergies. Additionally, successful efforts to control costs and maximize departmental profit across all segments also drove the decline in expensesimproved departmental profit margin during the currentthree months ended March 31, 2018 compared to the same prior year period.

Non-gaming Expenses.  Isle contributed $6.6$23.2 million of non-gaming expenses for the period from the Isle Acquisition Date through June 30, 2017three months ended March 31, 2018 resulting in an increase of 3.2%56.8% over the same prior year period.

Excluding incremental Isle non-gaming expenses, non-gaming expenses decreased 15.5%remained flat for the three months ended June 30, 2017March 31, 2018 compared to the same prior year periodperiod. Increased expenses associated with higher non-gaming revenues and hotel occupancy in conjunction withthe West segment were offset by lower non-gaming expenses across allin the South and East segments. Additionally, the growth in hotel ADR in the West segment contributed to improved non-gaming margins three months ended March 31, 2018 compared to the same prior year period.

Marketing and Promotions Expenses.  Isle contributed $8.4$11.2 million of marketing and promotions expense for the period from the Isle Acquisition Date through June 30, 2017three months ended March 31, 2018 resulting in an increase of 106.4%110.3% over the same prior year period.  

Excluding incremental Isle marketing and promotions expenses, consolidated marketing and promotions expense increased 20.0%remained flat for the three months ended June 30, 2017March 31, 2018 compared to the same prior year period. This increase was primarily attributable to increased expenses resulting from higher internet advertising spend, new television media production promoting new product offerings in the Reno market and a shift in marketing spend to targeted direct mail and promotional offers across all segments. Additionally, marketing promotional costs associated with casino initiatives are charged to this category to provide consistency among properties following the Isle Acquisition.

General and Administrative Expenses.  Isle contributed $24.3$41.4 million of general and administrative expense for the period from the Isle Acquisition Date through June 30, 2017three months ended March 31, 2018 resulting in an increase of 71.0%133.3% over the same prior year period.  

Excluding incremental Isle general and administrative expenses, consolidated general and administrative expenses decreased 3.9%increased 3.1% for the three months ended June 30, 2017March 31, 2018 compared to the same 2016 primarily2017 period mainly due to savings in propertythe centralization of expenses attributable to corporate services provided to our properties that is charged to general and general liability insurances costs, payroll and related benefit costs savings and decreased legal fees offset by higher expenses associated with information systems maintenance contracts and professional services. These incremental costs resulted from information technology infrastructure projects targeted at consolidating systems for future savings and efficiencies.administrative expenses.


Corporate Expenses.  Isle contributed $2.5 million of corporate expense for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 70.9% over the same prior year period.  

Excluding incremental Isle corporate expenses, corporate totaled $4.9 million forFor the three months ended June 30, 2017March 31, 2018 compared to $4.4 million for the same prior year period, andcorporate expenses increased primarily due to payroll and other expenses associated with additional corporate costs, including stock comp expense, driven by growth related to the recent acquisition. Additionally, corporate costs increased as a result of higher stock compensation expense for the three months ended June 30, 2017 compared to the same prior year period due to the three year vesting schedule associated with our long-term incentive plan established in 2015 resulting in three years of grants and related expense in the current period versus two years of grants and related expense in the same prior year period.Isle Acquisition.

Depreciation and Amortization Expense.  Isle contributed $9.8$17.4 million of depreciation expense for the period from the Isle Acquisition Date through June 30, 2017three months ended March 31, 2018 resulting in an increase of 59.8%102.1% over the same prior year period.  

Excluding incremental Isle depreciation and amortization expense, depreciation and amortization expense decreased 2.8%9.7% for the three months ended June 30, 2017March 31, 2018 compared to the same prior year period mainly due to lower depreciation in all segments due to assets becoming fully depreciated.


Six Months Ended June 30, 2017 Compared to the Six Months Ended June 30, 2016

Net revenues and operating expenses were as follows (dollars in thousands):

 

 

Six Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Variance

 

 

Percent

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

95,899

 

 

$

 

84,413

 

 

$

 

11,486

 

 

 

13.6

 

%

Midwest

 

 

 

65,489

 

 

 

 

 

 

 

 

65,489

 

 

 

100.0

 

%

South

 

 

 

94,378

 

 

 

 

61,197

 

 

 

 

33,181

 

 

 

54.2

 

%

East

 

 

 

209,984

 

 

 

 

205,504

 

 

 

 

4,480

 

 

 

2.2

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

465,750

 

 

 

 

351,114

 

 

 

 

114,636

 

 

 

32.6

 

%

Non-gaming:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

88,260

 

 

 

 

94,349

 

 

 

 

(6,089

)

 

 

(6.5

)

%

Midwest

 

 

 

9,530

 

 

 

 

 

 

 

 

9,530

 

 

 

100.0

 

%

South

 

 

 

21,498

 

 

 

 

18,991

 

 

 

 

2,507

 

 

 

13.2

 

%

East

 

 

 

23,609

 

 

 

 

25,107

 

 

 

 

(1,498

)

 

 

(6.0

)

%

Corporate

 

 

 

136

 

 

 

 

 

 

 

 

136

 

 

 

100.0

 

%

Total Non-gaming

 

 

 

143,033

 

 

 

 

138,447

 

 

 

 

4,586

 

 

 

3.3

 

%

Total Gross Revenues

 

 

 

608,783

 

 

 

 

489,561

 

 

 

 

119,222

 

 

 

24.4

 

%

Promotional allowances:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

(23,098

)

 

 

 

(21,830

)

 

 

 

1,268

 

 

 

(5.8

)

%

Midwest

 

 

 

(7,516

)

 

 

 

 

 

 

 

(7,516

)

 

 

(100.0

)

%

South

 

 

 

(14,348

)

 

 

 

(13,658

)

 

 

 

690

 

 

 

(5.1

)

%

East

 

 

 

(7,716

)

 

 

 

(9,192

)

 

 

 

(1,476

)

 

 

16.1

 

%

Total Promotional Allowances

 

 

 

(52,678

)

 

 

 

(44,680

)

 

 

 

7,998

 

 

 

(17.9

)

%

Total Net Revenues

 

 

 

556,105

 

 

 

 

444,881

 

 

 

 

111,224

 

 

 

25.0

 

%

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming and Pari-Mutuel Commissions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

42,138

 

 

 

 

39,660

 

 

 

 

2,478

 

 

 

6.2

 

%

Midwest

 

 

 

27,885

 

 

 

 

 

 

 

 

27,885

 

 

 

100.0

 

%

South

 

 

 

49,282

 

 

 

 

33,442

 

 

 

 

15,840

 

 

 

47.4

 

%

East

 

 

 

129,646

 

 

 

 

127,789

 

 

 

 

1,857

 

 

 

1.5

 

%

Total Gaming and Pari-Mutuel Commissions

 

 

 

248,951

 

 

 

 

200,891

 

 

 

 

48,060

 

 

 

23.9

 

%

Non-gaming

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

 

 

45,294

 

 

 

 

49,898

 

 

 

 

(4,604

)

 

 

(9.2

)

%

Midwest

 

 

 

3,112

 

 

 

 

 

 

 

 

3,112

 

 

 

100.0

 

%

South

 

 

 

5,684

 

 

 

 

3,720

 

 

 

 

1,964

 

 

 

52.8

 

%

East

 

 

 

11,717

 

 

 

 

14,693

 

 

 

 

(2,976

)

 

 

(20.3

)

%

Total Non-gaming

 

 

 

65,807

 

 

 

 

68,311

 

 

 

 

(2,504

)

 

 

(3.7

)

%

Marketing and promotions

 

 

 

30,214

 

 

 

 

19,341

 

 

 

 

10,873

 

 

 

56.2

 

%

General and administrative

 

 

 

87,154

 

 

 

 

64,035

 

 

 

 

23,119

 

 

 

36.1

 

%

Corporate

 

 

 

14,016

 

 

 

 

11,258

 

 

 

 

2,758

 

 

 

24.5

 

%

Depreciation and amortization

 

 

 

40,513

 

 

 

 

31,787

 

 

 

 

8,726

 

 

 

27.5

 

%

Total Operating Expenses

 

$

 

486,655

 

 

$

 

395,623

 

 

$

 

91,032

 

 

 

23.0

 

%

Gaming Revenues and Pari-Mutuel Commissions.  Isle contributed $128.8 million of gaming revenues and pari-mutuel commissions for the period from the Isle Acquisition Date through June 30, 2017 consisting primarily of slot and table games revenues. As a result, gaming revenues and pari-mutuel commissions increased 32.6% for the six months ended June 30, 2017 compared to the same prior year period.

Excluding incremental Isle gaming revenues and pari-mutuel commissions of $128.8 million, gaming revenues declined 4.1% for the six months ended June 30, 2017 compared to the same prior year period primarily due to a decrease in gaming revenues in the West segment and, to a lesser extent, lower gaming revenues in the South segment. The decline in the West segment was mainly attributable to decreases in visitor traffic due to severe weather the northern Nevada region experienced throughout the first quarter of


2017 that resulted in limited access from our main feeder markets combined with the absence of a major bowling tournament in the Reno market. Additionally, reductions in gaming volume driven by decreased high-end play and the continued weakness in the energy sector negatively impacted the Shreveport market and South segment. Efforts to eliminate unprofitable gaming play via reductions in marketing promotions and incentives across the properties also contributed to the declines in casino volume and positively impacted marginsdepreciated across all segments.

Non-gaming Revenues.  Isle contributed $19.8 million of non-gaming revenues for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 3.3% over the same prior year period.

Excluding incremental Isle non-gaming revenues of $19.8 million, non-gaming revenues decreased 11.3% for the six months ended June 30, 2017 compared to the same prior year period. The West segment declined for the six months ended June 30, 2017 compared to the same prior year period principally due to lower hotel, food and beverage revenues resulting from reduced customer traffic due to fewer convention room nights and the absence of a major bowling tournament during the current year. The South segment decreased in non-gaming revenues for the six months ended June 30, 2017 compared to the same prior year period primarily due to decreased food and beverage revenues associated with revisions to marketing strategies resulting in fewer complimentary food offers. Non-gaming revenues in the East segment decreased for the six months ended June 30, 2017 compared to the same prior year period primarily due to decreased food and beverage revenues resulting from reductions in complimentary food offers and the consolidation of restaurants in an effort to maximize capacity utilization.

Promotional Allowances.  Promotional allowances, expressed as a percentage of gaming revenues and pari-mutuel commissions, decreased to 11.3% for the six months ended June 30, 2017 compared to 12.7% for the same prior year period. This decline was primarily due to strategic revisions to promotional offers across all segments.

Gaming Expenses and Pari-Mutuel Commissions.  Isle contributed $59.8 million of gaming expenses and pari-mutuel commissions for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 23.9% over the same prior year period.

Excluding incremental Isle gaming expenses and pari-mutuel commissions, gaming expenses and pari-mutuel commissions decreased 5.7% for the six months ended June 30, 2017 compared to the same prior year period primarily due to decreases in gaming volume combined with savings initiatives targeted at reducing variable expenses along with continued synergies related to the integration of the Tri-Properties in the West segment. Additionally, successful efforts to control costs and maximize departmental profit across all segments also drove the decline in expenses during the current period.  

Non-gaming Expenses.  Isle contributed $6.6 million of non-gaming expenses for the period from the Isle Acquisition Date through June 30, 2017. Despite this incremental increase, non-gaming expenses decreased 3.7% over the same prior year period.

Excluding incremental Isle non-gaming expenses, non-gaming expenses decreased 14.7% for the six months ended June 30, 2017 compared to the same prior year period in conjunction with to lower non-gaming expenses across all segments in conjunction with non-gaming revenue declines.

Marketing and Promotions Expenses.  Isle contributed $8.4 million of marketing and promotions expense for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 56.2% over the same prior year period. Additionally, marketing promotional costs associated with casino initiatives are charged to this category to provide consistency among properties following the Isle Acquisition

Excluding incremental Isle marketing and promotions expenses, consolidated marketing and promotions expense increased 17.5% for the six months ended June 30, 2017 compared to the same prior year period. This increase was primarily attributable to increased expenses resulting from higher internet advertising spend, new television media production promoting new product offerings and a shift in marketing spend to targeted direct mail and promotional offers across all segments.

General and Administrative Expenses.  Isle contributed $24.3 million of marketing and promotions expense for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 36.1% over the same prior year period.  

Excluding incremental Isle general and administrative expenses, consolidated general and administrative expenses decreased 1.9% for the six months ended June 30, 2017 compared to the same 2016. Savings associated with lower property and general liability insurance costs were partially offset by higher expenses associated with information systems maintenance contracts and professional services. These incremental costs resulted from information technology infrastructure projects targeted at consolidating systems for future savings and efficiencies.


Corporate Expenses.  Isle contributed $2.5 million of corporate expense for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 24.5% over the same prior year period.  

Excluding incremental Isle corporate expenses, corporate totaled $11.5 million for the six months ended June 30, 2017 compared to $11.3 million for the same prior year period. Corporate costs increased slightly as a result of higher stock compensation expense for the six months ended June 30, 2017 compared to the same prior year period due to the three year vesting schedule associated with our long-term incentive plan established in 2015 resulting in three years of grants and related expense in the current period versus two years of grants and related expense in the same prior year period.

Depreciation and Amortization Expense.  Isle contributed $9.8 million of depreciation expense for the period from the Isle Acquisition Date through June 30, 2017 resulting in an increase of 27.5% over the same prior year period.  

Excluding incremental Isle depreciation and amortization expense, depreciation and amortization expense decreased 3.3% for the six months ended June 30, 2017 compared to the same prior year period mainly due to lower depreciation in all segments due to assets becoming fully depreciated.

Supplemental Unaudited Presentation of Consolidated Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA for the Three and Six Months Ended June 30,March 31, 2018 and 2017 and 2016

Adjusted EBITDA (defined below), a non GAAPnon-GAAP financial measure, has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry and we believe that this non GAAPnon-GAAP supplemental information will be helpful in understanding the Company’s ongoing operating results. Adjusted EBITDA represents operating income (loss) before depreciation and amortization, stock based compensation, transaction expenses, severance expense, costs associated with the Vicksburg and Presque sales, impairment charges, equity in income of unconsolidated affiliates, (gain) loss on the sale or disposal of property and equipment, and other expenses.regulatory gaming assessments, including the impact of the change in regulatory reporting requirements, to the extent that such items existed in the periods presented. Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance


with accounting principles generally accepted in the United States (“US GAAP,GAAP”), is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes, debt principal repayments and certain regulatory gaming assessments, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide EBITDA information may calculate EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.


The following table summarizes our Adjusted EBITDA for our operating segments for the three and six months ended June 30,March 31, 2018 and 2017, and 2016, in addition to reconciling Adjusted EBITDA to operating income (loss) in accordance with US GAAP (unaudited, in thousands):

 

 

 

Three Months Ended June 30, 2017

 

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses

 

 

Severance

Expense

 

 

Other (6)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

16,468

 

 

$

 

6,576

 

 

$

 

52

 

 

$

 

 

 

$

 

36

 

 

$

 

(27

)

 

$

 

23,105

 

Midwest

 

 

 

15,408

 

 

 

 

4,966

 

 

 

 

86

 

 

 

 

 

 

 

 

1

 

 

 

 

7

 

 

 

 

20,468

 

South

 

 

 

11,069

 

 

 

 

4,662

 

 

 

 

40

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

15,774

 

East

 

 

 

18,153

 

 

 

 

8,273

 

 

 

 

4

 

 

 

 

 

 

 

 

22

 

 

 

 

89

 

 

 

 

26,541

 

Corporate

 

 

 

(93,214

)

 

 

 

432

 

 

 

 

1,123

 

 

 

 

85,464

 

 

 

 

300

 

 

 

 

(22

)

 

 

 

(5,917

)

Total Excluding Pre-Acquisition

 

$

 

(32,116

)

 

$

 

24,909

 

 

$

 

1,305

 

 

$

 

85,464

 

 

$

 

362

 

 

$

 

47

 

 

$

 

79,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

2,709

 

 

$

 

925

 

 

$

 

2

 

 

$

 

 

 

$

 

 

 

$

 

4

 

 

$

 

3,640

 

Midwest

 

 

 

10,637

 

 

 

 

2,001

 

 

 

 

14

 

 

 

 

 

 

 

 

5

 

 

 

 

29

 

 

 

 

12,686

 

South

 

 

 

3,943

 

 

 

 

1,442

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

33

 

 

 

 

5,425

 

East

 

 

 

(197

)

 

 

 

239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

42

 

Corporate

 

 

 

(2,550

)

 

 

 

96

 

 

 

 

461

 

 

 

 

286

 

 

 

 

 

 

 

 

(22

)

 

 

 

(1,729

)

Total Pre-Acquisition

 

$

 

14,542

 

 

$

 

4,703

 

 

$

 

484

 

 

$

 

286

 

 

$

 

5

 

 

$

 

44

 

 

$

 

20,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

19,177

 

 

$

 

7,501

 

 

$

 

54

 

 

$

 

 

 

$

 

36

 

 

$

 

(23

)

 

$

 

26,745

 

Midwest

 

 

 

26,045

 

 

 

 

6,967

 

 

 

 

100

 

 

 

 

 

 

 

 

6

 

 

 

 

36

 

 

 

 

33,154

 

South

 

 

 

15,012

 

 

 

 

6,104

 

 

 

 

47

 

 

 

 

 

 

 

 

3

 

 

 

 

33

 

 

 

 

21,199

 

East

 

 

 

17,956

 

 

 

 

8,512

 

 

 

 

4

 

 

 

 

 

 

 

 

22

 

 

 

 

89

 

 

 

 

26,583

 

Corporate

 

 

 

(95,764

)

 

 

 

528

 

 

 

 

1,584

 

 

 

 

85,750

 

 

 

 

300

 

 

 

 

(44

)

 

 

 

(7,646

)

Total Including Pre-Acquisition (2)

 

$

 

(17,574

)

 

$

 

29,612

 

 

$

 

1,789

 

 

$

 

85,750

 

 

$

 

367

 

 

$

 

91

 

 

$

 

100,035

 


 

 

Three Months Ended June 30, 2016

 

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses

 

 

Severance

Expense

 

 

Other (6)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

13,655

 

 

$

 

5,046

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

214

 

 

$

 

18,915

 

Midwest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South

 

 

 

5,541

 

 

 

 

1,964

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(49

)

 

 

 

7,456

 

East

 

 

 

14,934

 

 

 

 

8,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

646

 

 

 

 

24,039

 

Corporate

 

 

 

(4,475

)

 

 

 

114

 

 

 

 

579

 

 

 

 

56

 

 

 

 

17

 

 

 

 

(49

)

 

 

 

(3,758

)

Total Excluding Pre-Acquisition

 

$

 

29,655

 

 

$

 

15,583

 

 

$

 

579

 

 

$

 

56

 

 

$

 

17

 

 

$

 

762

 

 

$

 

46,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

6,163

 

 

$

 

2,122

 

 

$

 

12

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

8,297

 

Midwest

 

 

 

20,387

 

 

 

 

9,236

 

 

 

 

45

 

 

 

 

 

 

 

 

 

 

 

 

556

 

 

 

 

30,224

 

South

 

 

 

10,131

 

 

 

 

4,188

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,343

 

East

 

 

 

(1,215

)

 

 

 

1,091

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(124

)

Corporate

 

 

 

(8,464

)

 

 

 

344

 

 

 

 

1,307

 

 

 

 

 

 

 

 

 

 

 

 

190

 

 

 

 

(6,623

)

Total Pre-Acquisition

 

$

 

27,002

 

 

$

 

16,981

 

 

$

 

1,388

 

 

$

 

 

 

$

 

 

 

$

 

746

 

 

$

 

46,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

19,818

 

 

$

 

7,168

 

 

$

 

12

 

 

$

 

 

 

$

 

 

 

$

 

214

 

 

$

 

27,212

 

Midwest

 

 

 

20,387

 

 

 

 

9,236

 

 

 

 

45

 

 

 

 

 

 

 

 

 

 

 

 

556

 

 

 

 

30,224

 

South

 

 

 

15,672

 

 

 

 

6,152

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

(49

)

 

 

 

21,799

 

East

 

 

 

13,719

 

 

 

 

9,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

646

 

 

 

 

23,915

 

Corporate

 

 

 

(12,939

)

 

 

 

458

 

 

 

 

1,886

 

 

 

 

56

 

 

 

 

17

 

 

 

 

141

 

 

 

 

(10,381

)

Total Including Pre-Acquisition (2)

 

$

 

56,657

 

 

$

 

32,564

 

 

$

 

1,967

 

 

$

 

56

 

 

$

 

17

 

 

$

 

1,508

 

 

$

 

92,769

 

 

 

Six Months Ended June 30, 2017

 

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses

 

 

Severance

Expense

 

 

Other (6)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

17,994

 

 

$

 

11,219

 

 

$

 

52

 

 

$

 

 

 

$

 

196

 

 

$

 

(27

)

 

$

 

29,434

 

Midwest

 

 

 

15,408

 

 

 

 

4,966

 

 

 

 

86

 

 

 

 

 

 

 

 

1

 

 

 

 

7

 

 

 

 

20,468

 

South

 

 

 

16,987

 

 

 

 

6,594

 

 

 

 

40

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

23,624

 

East

 

 

 

33,195

 

 

 

 

17,153

 

 

 

 

4

 

 

 

 

 

 

 

 

22

 

 

 

 

245

 

 

 

 

50,619

 

Corporate

 

 

 

(101,551

)

 

 

 

581

 

 

 

 

2,856

 

 

 

 

87,078

 

 

 

 

289

 

 

 

 

(22

)

 

 

 

(10,769

)

Total Excluding Pre-Acquisition

 

$

 

(17,967

)

 

$

 

40,513

 

 

$

 

3,038

 

 

$

 

87,078

 

 

$

 

511

 

 

$

 

203

 

 

$

 

113,376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

9,525

 

 

$

 

3,694

 

 

$

 

8

 

 

$

 

 

 

$

 

 

 

$

 

4

 

 

$

 

13,231

 

Midwest

 

 

 

34,819

 

 

 

 

11,952

 

 

 

 

51

 

 

 

 

 

 

 

 

5

 

 

 

 

29

 

 

 

 

46,856

 

South

 

 

 

19,165

 

 

 

 

5,694

 

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

33

 

 

 

 

24,918

 

East

 

 

 

(1,072

)

 

 

 

952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(120

)

Corporate

 

 

 

(8,811

)

 

 

 

371

 

 

 

 

1,631

 

 

 

 

286

 

 

 

 

549

 

 

 

 

(22

)

 

 

 

(5,996

)

Total Pre-Acquisition

 

$

 

53,626

 

 

$

 

22,663

 

 

$

 

1,716

 

 

$

 

286

 

 

$

 

554

 

 

$

 

44

 

 

$

 

78,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

27,519

 

 

$

 

14,913

 

 

$

 

60

 

 

$

 

 

 

$

 

196

 

 

$

 

(23

)

 

$

 

42,665

 

Midwest

 

 

 

50,227

 

 

 

 

16,918

 

 

 

 

137

 

 

 

 

 

 

 

 

6

 

 

 

 

36

 

 

 

 

67,324

 

South

 

 

 

36,152

 

 

 

 

12,288

 

 

 

 

66

 

 

 

 

 

 

 

 

3

 

 

 

 

33

 

 

 

 

48,542

 

East

 

 

 

32,123

 

 

 

 

18,105

 

 

 

 

4

 

 

 

 

 

 

 

 

22

 

 

 

 

245

 

 

 

 

50,499

 

Corporate

 

 

 

(110,362

)

 

 

 

952

 

 

 

 

4,487

 

 

 

 

87,364

 

 

 

 

838

 

 

 

 

(44

)

 

 

 

(16,765

)

Total Including Pre-Acquisition (2)

 

$

 

35,659

 

 

$

 

63,176

 

 

$

 

4,754

 

 

$

 

87,364

 

 

$

 

1,065

 

 

$

 

247

 

 

$

 

192,265

 


 

Three Months Ended March 31, 2018

 

 

Operating

Income (Loss)

 

 

Depreciation and Amortization

 

 

Stock-Based Compensation

 

 

Transaction Expenses (3)

 

 

Other (4)

 

 

Adjusted

EBITDA

 

West

 

$

 

10,139

 

 

$

 

8,189

 

 

$

 

63

 

 

$

 

 

 

$

 

33

 

 

$

 

18,424

 

Midwest

 

 

26,676

 

 

 

7,645

 

 

 

44

 

 

 

 

 

 

150

 

 

 

34,515

 

South

 

 

 

13,359

 

 

 

8,531

 

 

 

25

 

 

 

 

 

 

10,302

 

 

 

32,217

 

East

 

 

 

19,131

 

 

 

6,049

 

 

 

5

 

 

 

 

 

 

995

 

 

 

26,180

 

Corporate and Other

 

 

 

(15,111

)

 

 

 

1,120

 

 

 

 

3,542

 

 

 

 

2,548

 

 

 

 

109

 

 

 

 

(7,792

)

Total

 

$

 

54,194

 

 

$

 

31,534

 

 

$

 

3,679

 

 

$

 

2,548

 

 

$

 

11,589

 

 

$

 

103,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2016

 

 

Three Months Ended March 31, 2017 (5)

 

 

Operating

Income

(Loss)

 

 

Depreciation

and

Amortization

 

 

Stock-Based

Compensation

 

 

Transaction

Expenses (5)

 

 

Severance

Expense

 

 

Other (4)(6)

 

 

Adjusted

EBITDA

 

 

Operating

Income (Loss)

 

 

Depreciation and Amortization

 

 

Stock-Based Compensation

 

 

Transaction Expenses (3)

 

 

Other (4)

 

 

Adjusted

EBITDA

 

Excluding Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

19,219

 

 

$

 

10,509

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

180

 

 

$

 

29,908

 

 

$

 

1,355

 

 

$

 

4,643

 

 

$

 

 

 

$

 

 

 

$

 

160

 

 

$

 

6,158

 

Midwest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South

 

 

 

12,043

 

 

 

3,910

 

 

 

 

 

 

 

 

 

 

 

 

(50

)

 

 

15,903

 

 

 

 

5,918

 

 

 

1,932

 

 

 

 

 

 

 

 

 

 

 

 

7,850

 

East (3)

 

 

 

28,665

 

 

 

17,143

 

 

 

 

 

 

 

 

 

 

 

 

1,136

 

 

 

46,944

 

Corporate

 

 

 

(12,010

)

 

 

 

225

 

 

 

 

2,033

 

 

 

 

574

 

 

 

 

1,461

 

 

 

 

(49

)

 

 

 

(7,766

)

East

 

 

 

15,034

 

 

 

8,880

 

 

 

 

 

 

 

 

 

156

 

 

 

24,070

 

Corporate and Other

 

 

 

(8,279

)

 

 

 

149

 

 

 

 

1,733

 

 

 

 

1,614

 

 

 

 

(11

)

 

 

 

(4,794

)

Total Excluding Pre-Acquisition

 

$

 

47,917

 

 

$

 

31,787

 

 

$

 

2,033

 

 

$

 

574

 

 

$

 

1,461

 

 

$

 

1,217

 

 

$

 

84,989

 

 

$

 

14,028

 

 

$

 

15,604

 

 

$

 

1,733

 

 

$

 

1,614

 

 

$

 

305

 

 

$

 

33,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (3):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Acquisition (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

13,109

 

 

$

 

4,292

 

 

$

 

26

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

17,427

 

 

$

 

6,816

 

 

$

 

2,769

 

 

$

 

6

 

 

$

 

 

 

$

 

 

 

$

 

9,591

 

Midwest

 

 

42,867

 

 

 

18,976

 

 

 

88

 

 

 

 

 

 

 

 

 

705

 

 

 

62,636

 

 

 

24,182

 

 

 

9,951

 

 

 

37

 

 

 

 

 

 

 

 

 

34,170

 

South

 

 

 

26,179

 

 

 

8,256

 

 

 

48

 

 

 

 

 

 

 

 

 

 

 

 

34,483

 

 

 

 

19,347

 

 

 

4,252

 

 

 

26

 

 

 

74

 

 

 

 

 

 

23,699

 

East

 

 

 

(2,543

)

 

 

2,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(376

)

 

 

 

(875

)

 

 

713

 

 

 

 

 

 

 

 

 

 

 

 

(162

)

Corporate

 

 

 

(15,520

)

 

 

 

796

 

 

 

 

1,858

 

 

 

 

 

 

 

 

 

 

 

 

870

 

 

 

 

(11,996

)

Corporate and Other

 

 

 

(6,261

)

 

 

 

275

 

 

 

 

1,170

 

 

 

 

 

 

 

 

549

 

 

 

 

(4,267

)

Total Pre-Acquisition

 

$

 

64,092

 

 

$

 

34,487

 

 

$

 

2,020

 

 

$

 

 

 

$

 

 

 

$

 

1,575

 

 

$

 

102,174

 

 

$

 

43,209

 

 

$

 

17,960

 

 

$

 

1,239

 

 

$

 

74

 

 

$

 

549

 

 

$

 

63,031

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Including Pre-Acquisition:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

West

 

$

 

32,328

 

 

$

 

14,801

 

 

$

 

26

 

 

$

 

 

 

$

 

 

 

$

 

180

 

 

$

 

47,335

 

 

$

 

8,171

 

 

$

 

7,412

 

 

$

 

6

 

 

$

 

 

 

$

 

160

 

 

$

 

15,749

 

Midwest

 

 

42,867

 

 

 

18,976

 

 

 

88

 

 

 

 

 

 

 

 

 

705

 

 

 

62,636

 

 

 

24,182

 

 

 

9,951

 

 

 

37

 

 

 

 

 

 

 

 

 

34,170

 

South

 

 

 

38,222

 

 

 

12,166

 

 

 

48

 

 

 

 

 

 

 

 

 

(50

)

 

 

50,386

 

 

 

 

25,265

 

 

 

6,184

 

 

 

26

 

 

 

74

 

 

 

 

 

 

31,549

 

East (3)

 

 

 

26,122

 

 

 

19,310

 

 

 

 

 

 

 

 

 

 

 

 

1,136

 

 

 

46,568

 

Corporate

 

 

 

(27,530

)

 

 

 

1,021

 

 

 

 

3,891

 

 

 

 

574

 

 

 

 

1,461

 

 

 

 

821

 

 

 

 

(19,762

)

East

 

 

 

14,159

 

 

 

9,593

 

 

 

 

 

 

 

 

 

156

 

 

 

23,908

 

Corporate and Other

 

 

 

(14,540

)

 

 

 

424

 

 

 

 

2,903

 

 

 

 

1,614

 

 

 

 

538

 

 

 

 

(9,061

)

Total Including Pre-Acquisition (2)

 

$

 

112,009

 

 

$

 

66,274

 

 

$

 

4,053

 

 

$

 

574

 

 

$

 

1,461

 

 

$

 

2,792

 

 

$

 

187,163

 

 

$

 

57,237

 

 

$

 

33,564

 

 

$

 

2,972

 

 

$

 

1,688

 

 

$

 

854

 

 

$

 

96,315

 

 

(1)

Figures are for Isle for the one and fourthree months ended April 30, 2017, the day before the Company acquired Isle on May 1,March 31, 2017. The Company reports its financial results on a calendar fiscal year. Prior to the Company’s acquisition of Isle, Isle’s fiscal year typically ended on the last Sunday in April. Isle’s fiscal 2017 and 2016 were 52-week years, which commenced on April 25, 2016 and April 27, 2015, respectively. Such figures were prepared by the Company to reflect Isle’s unaudited consolidated historical netoperating revenues, operating income and Adjusted EBITDA for periods corresponding to the Company’s fiscal quarterly calendar. Such figures are based on the unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP.

(2)

Total figures for 2016 and 2017 include combined results of operations for Isle and the Company for periods preceding the date that the Company acquired Isle. Such presentation does not conform with GAAP or the Securities and Exchange Commission rules for proforma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be


considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to the results of operations reported by the Company.

(3)

Figures are forTransaction expenses represent costs related to the acquisition of Isle for the three and six months ended June 30, 2016. Such figures were prepared by the Company to reflect Isle’s unaudited consolidated historical net revenues, operating incomeMarch 31, 2018 and Adjusted EBITDA for periods corresponding to the Company’s fiscal quarterly calendar. Such figures are based on the unaudited internal financial statements2017 and have not been reviewed by the Company’s auditors and do not conform to GAAP.

(4)

Effective January 1, 2016, the Ohio Lottery Commission enacted a regulatory change which resulted in the establishment of a $1.0 million progressive slot liability and a corresponding decrease in net slot win during the first quarter of 2016. The changes are non-cash and related primarily to prior years. The net non-cash impact to Adjusted EBITDA was $0.6 million for the six months ended June 30, 2016.

(5)

Transaction expenses for the three and six months ended June 30, 2017 represent acquisition costs related to the Isle Acquisition. Transaction expensesacquisitions of Grand Victoria Casino and Tropicana Entertainment Inc. for the three and six months ended June 30, 2016 represent acquisition costs related to the Reno Acquisition and includes a credit of $2.0 thousand related to S-1 offering costs.March 31, 2018.

(6)(4)

Other is comprised of severance expense, $9.8 million in impairment charges, (gain) loss on the sale or disposal of property and equipment, equity in lossincome of unconsolidated affiliate, and other regulatory gaming assessments includingfor the item listed in footnote (4) above.three months ended March 31, 2018 and 2017 and costs associated with the sales of Vicksburg and Presque Isle Downs for the three months ended March 31, 2018.


(5)

The prior period presentation has been adjusted for the adoption of Accounting Standards Codification (ASC) No. 606 “Revenue from Contracts with Customers” effective January 1, 2018 utilizing the full retrospective transition method. See Note 2 to our Condensed Notes to Unaudited Consolidated Financial Statements for additional information.

Liquidity and Capital Resources

We are a holding company and our only significant assets are ownership interests in our subsidiaries. Our ability to fund our obligations depends on the cash flow of our subsidiaries and the ability of our subsidiaries to distribute or otherwise make funds available to us.

Our primary sources of liquidity and capital resources have been existing cash, cash flow from operations, borrowings under our revolving credit facility and proceeds from the issuance of debt securities. We closed

Our cash requirements can fluctuate significantly depending on our decisions with respect to business acquisitions or dispositions and strategic capital investments to maintain the Isle Acquisition on May 1, 2017 and paid $552.0 million in cash consideration in the Isle Acquisition, refinanced the outstanding Isle indebtedness and paid expenses related to the Isle Acquisition with proceeds from borrowings under the financing described below.

quality of our properties. We expect that our primary capital requirements going forward will relate to the operation and maintenance of our properties, and servicing our outstanding indebtedness.indebtedness and funding the recently announced acquisitions. During the remainder of 2017,2018, we plan to spend $50.2$128.4 million on capital expenditures $52.3and $96.4 million to pay interest on our outstanding indebtedness and $7.3 millionindebtedness. However, we expect that our capital requirements for principal paymentsinterests on our term loan.outstanding debt will increase significantly following the consummation of the acquisition of Tropicana Entertainment and the Grand Victoria Casino and the related incurrence of debt and obligation to pay annual rent in an initial amount of approximately $110 million under the master lease with respect to certain of the Tropicana properties. We also expect that our capital expenditures will increase significantly following the acquisition of Tropicana Entertainment and the Grand Victoria Casino and the related increase in the number of properties in our portfolio.  We expect to fund the $327.5 million of cash consideration for the acquisition of the Grand Victoria Casino using cash from pending asset sales, cash from ongoing operations and borrowings under our revolving credit facility and we intend to fund cash consideration of approximately $640 million payable by us in the Tropicana transaction and repay debt outstanding under Tropicana’s credit facility with cash generated from our current operations, proceeds from pending asset sales, Tropicana’s cash on hand, cash flow generated from Tropicana operations through closing and $600 million of committed debt financing. In addition, the Company has obtained commitments to increase its revolving credit facility from $300 million to $500 million effective at the time of the consummation of the Tropicana Acquisition and expects to extend the maturity of the revolving credit facility to five years following the consummation of the Tropicana Acquisition. We expect that cash generated from operations will be sufficient to fund our operations and capital requirements, and service our outstanding indebtedness for the foreseeable future.next twelve months.

ERI is a holding companyAt March 31, 2018, we had consolidated cash and its only significant assets are ownership interests in its subsidiaries. ERI’s ability to fund its obligations depends on the cash flowequivalents of its subsidiaries and the ability of its subsidiaries to distribute or otherwise make funds available to ERI.

As of June 30,$183.1 million. At March 31, 2017, we had consolidated cash and cash equivalents of $126.2 million, including restricted$44.6 million. This increase in cash was primarily related to cash acquired in our acquisition of $22.6 million.Isle combined with cash flow generated by our operations.

Operating Cash FlowFlow..  For the sixthree months ended June 30, 2017,March 31, 2018, cash flows provided by operating activities totaled $3.5$78.0 million compared to $48.7$5.2 million during the same prior year period. The decreaseincrease in operating cash was primarily due to transaction costs associated withincremental operating cash generated by the acquired Isle Acquisitionproperties combined with changes in the balance sheet accounts in the normal course of business.

Investing Cash Flow and Capital Expenditures.  Net cash flows used in investing activities totaled $1.4 billion$21.1 million for the sixthree months ended June 30, 2017March 31, 2018 compared to $15.4$383.1 million for the same prior year period. Net cash flows used in investing activities forin the sixthree months ended June 30, 2017 was primarilyMarch 31, 2018 were due to cash paid to acquire Isle in addition to $29.8$21.3 million in capital expenditures for various property enhancement and maintenance projects and equipment purchases. Net cash flows used in investing activities for the


three months ended March 31, 2017 primarily consisted of $376.8 million related to escrowed funds associated with the Isle of Capri acquisition which closed on May 1, 2017, and $6.2 million in capital expenditures for various property enhancement and maintenance projects and equipment purchases.

Financing Cash Flow.  Net cash flowsused for financing activities for the three months ended March 31, 2018 totaled $8.0 million compared to $361.1 million net cash provided by financing activities forin the six months ended June 30, 2017 totaled $1.4 billion compared to $74.4 millionsame prior year period. The cash used infor financing activities for the sixthree months ended June 30, 2016. This increaseMarch 31, 2018 was primarilyprincipally due to $7.5 million of net taxes paid related to net share settlement of equity awards. During the three months ended March 31, 2017, cash provided by financing activities consisted primarily of $375 million of proceeds from the issuance of debt associated with the Isle Acquisition and the refinancing of our Term Loan and Revolving Credit Facility. This increase was6% Senior Notes partially offset by net payments made on our credit facilities throughoutunder the six months ended June 30, 2017.Prior Credit Facility and debt issuance costs.

Debt Obligations

7% Senior Notes

On July 23, 2015, the Companywe issued at par $375.0 million in aggregate principal amount of 7.0% senior notes due 2023 (“7% Senior Notes”) pursuant to the indenture, dated as of July 23, 2015 (the “Indenture”“7% Senior Notes Indenture”), between the Companyus and U.S. Bank, National Association, as Trustee. The 7% Senior Notes are guaranteed by all of the Company’s direct and indirect restricted subsidiaries. CC-Reno, LLC and the Circus and Eldorado Joint Venture, LLC became guarantors in June 2016 upon receipt of the required gaming regulatory approval which occurred in May 2016. The 7% Senior Notes will mature on August 1, 2023, with interest payable semi-annually in arrears on February 1 and August 1 of each year.

On or after August 1, 2018, the Companywe may redeem all or a portion of the 7% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest, if any, on the 7% Senior Notes redeemed, to the applicable redemption date, if redeemed during the twelve month period beginning on August 1 of the years indicated below:

 

Year

 

Percentage

 

 

2018

 

 

105.250

 

%

2019

 

 

103.500

 

%

2020

 

 

101.750

 

%

2021 and thereafter

 

 

100.000

 

%

 

Prior to August 1, 2018, the Companywe may redeem all or a portion of the 7% Senior Notes at a price equal to 100% of the 7% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole premium. At any time prior to


August 1, 2018, the Company iswe are also entitled to redeem up to 35% of the original aggregate principal amount of the 7% Senior Notes with proceeds of certain equity financings at a redemption price equal to 107% of the principal amount of the 7% Senior Notes redeemed, plus accrued and unpaid interest. If the Company experienceswe experience certain change of control events (as defined in the 7% Senior Notes Indenture), itwe must offer to repurchase the 7% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If the Company sells assetswe sell asset under certain circumstances and does not use the proceeds for specified purposes, the Companywe must offer to repurchase the 7% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. The 7% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The 7% Senior Notes Indenture contains certain covenants limiting, among other things, the Company’sour ability and the ability of itsour subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 7% Senior Notes or the guarantees of the 7% Senior Notes;

create liens;

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’sour assets;

enter into certain transactions with affiliates;

engage in lines of business other than the Company’sour core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.


These covenants are subject to a number of exceptions and qualifications as set forth in the 7% Senior Notes Indenture. The 7% Senior Notes Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 7% Senior Notes to be declared due and payable. As of June 30, 2017, the Company wasMarch 31, 2018, we were in compliance with all of the covenants under the indenture7% Senior Notes Indenture relating to the 7% Senior Notes.

6% Senior Notes

On March 29, 2017, Eagle II Acquisition Company LLC (“Eagle II”), aour wholly-owned subsidiary, of the Company, issued $375.0 million aggregate principal amount of 6% Senior Notes due 2025 (the “6% Senior Notes”) pursuant to an indenture, dated as of March 29, 2017 (the “New“6% Senior Notes Indenture”), between Eagle II and U.S. Bank, National Association, as Trustee. The 6% Senior Notes will mature on April 1, 2025, with interest payable semi-annually in arrears on April 1 and October 1, commencing October 1, 2017. The proceeds of the offering, and additional funds in the amount of $1.9 million in respect of interest expected to be accrued on the 6% Senior Notes, were placed in escrowescrow pending satisfaction of certain conditions,conditions, including consummation of the Isle Acquisition.our acquisition of Isle. In connection with the consummation of theour acquisition of Isle Acquisition on May 1, 2017, the escrowed funds were released and ERIwe assumed Eagle II’s obligations under the 6% Senior Notes and the New6% Senior Notes Indenture and certain of ERI’sour subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of ERI’sour obligations under the 6% Senior Notes.

On September 13, 2017, we issued an additional $500.0 million principal amount of the 6% Senior Notes at an issue price equal to 105.5% of the principal amount of the 6% Senior Notes. The additional notes were issued pursuant to the 6% Senior Notes Indenture that governs the 6% Senior Notes. We used the proceeds of the offering to repay $78.0 million of outstanding borrowings under the revolving credit facility and used the remainder to repay $444.5 million outstanding borrowings under the term loan facility and related accrued interest.

On or after April 1, 2020, the Companywe may redeem all or a portion of the 6% Senior Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount) set forth below plus accrued and unpaid interest and additional interest, if any, on the 6% Senior Notes redeemed, to the applicable redemption date, if redeemed during the 12-month period beginning on April 1 of the years indicated below:

 

Year

 

Percentage

 

 

2020

 

 

104.500

 

%

2021

 

 

103.000

 

%

2022

 

 

101.500

 

%

2023 and thereafter

 

 

100.000

 

%

 

Prior to April 1, 2020, the Companywe may redeem all or a portion of the 6% Senior Notes at a price equal to 100% of the 6% Senior Notes redeemed plus accrued and unpaid interest to the redemption date, plus a make-whole premium. At any time prior to AugustApril 1, 2018, the Company is2020, we are also entitled to redeem up to 35% of the original aggregate principal amount of the 6% Senior Notes with proceeds of certain equity financings at a redemption price equal to 106% of the principal amount of the 6% Senior Notes redeemed, plus accrued and unpaid interest. If the Company experienceswe experience certain change of control events (as defined in the 6% Senior Notes Indenture), itwe must offer to repurchase the 6% Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date. If the Company sellswe sell assets under certain circumstances and doesdo not use the proceeds for specified purposes, the


Companywe must offer to repurchase the 6% Senior Notes at 100% of their principal amount, plus accrued and unpaid interest to the applicable repurchase date.

The 6% Senior Notes are subject to redemption imposed by gaming laws and regulations of applicable gaming regulatory authorities.

The New6% Senior Notes Indenture contains certain covenants limiting, among other things, the Company’sour ability and the ability of itsour subsidiaries (other than its unrestricted subsidiaries) to:

pay dividends or distributions or make certain other restricted payments or investments;

incur or guarantee additional indebtedness or issue disqualified stock or create subordinated indebtedness that is not subordinated to the 6% Senior Notes or the guarantees of the 6% Senior Notes;

create liens;

transfer and sell assets;

merge, consolidate, or sell, transfer or otherwise dispose of all or substantially all of the Company’sour assets;


enter into certain transactions with affiliates;

enter into certain transactions with affiliates;

engage in lines of business other than the Company’sour core business and related businesses; and

create restrictions on dividends or other payments by restricted subsidiaries.

These covenants are subject to a number of exceptions and qualifications as set forth in the 6% Senior Notes Indenture. The New6% Senior Notes Indenture also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on such 6% Senior Notes to be declared due and payable. As of June 30, 2017, the Company wasMarch 31, 2018, we were in compliance with all of the covenants under the indenture6% Senior Notes Indenture relating to the 6% Senior Notes.

Credit Facility

On July 23, 2015, the Companywe entered into a new $425.0 million seven year term loan (the “Term Loan”) and a $150.0 million five year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facility”).facility.

The Term Loanterm loan bore interest at a rate per annum of, at the Company’sour option, either (x) LIBOR plus 3.25%, with a LIBOR floor of 1.0%, or (y) a base rate plus 2.25%. Borrowings under the Revolving Credit Facility2015 revolving credit facility bore interest at a rate per annum of, at the Company’sour option, either (x) LIBOR plus a spread ranging from 2.5% to 3.25% or (y) a base rate plus a spread ranging from 1.5% to 2.25%, in each case with the spread determined based on the Company’sour total leverage ratio. Additionally, the Companywe paid a commitment fee on the unused portion of the Revolving Credit Facility2015 revolving credit facility not being utilized in the amount of 0.50% per annum.

The Credit Facility was secured by substantially all of the Company’s personal property assets and substantially all personal property assets of each subsidiary that guarantied the Credit Facility (other than certain subsidiary guarantors designated as immaterial) (the “Credit Facility Guarantors”), whether owned on the closing date of the Credit Facility or thereafter acquired, and mortgages on the real property and improvements owned or leased us or the Credit Facility Guarantors. The Credit Facility was also secured by a pledge of all of the equity owned by us and the Credit Facility Guarantors (subject to certain gaming law restrictions). The credit agreement governing the Credit Facility contained a number of customary covenants that, among other things, restricted, subject to certain exceptions, the Company’s ability and the ability of the Credit Facility Guarantors to incur additional indebtedness, create liens on collateral, engage in mergers, consolidations or asset dispositions, make distributions, make investments, loans or advances, engage in certain transactions with affiliates or subsidiaries or make capital expenditures.

The credit agreement governing the Credit Facility included requirements the Company maintain a maximum total leverage ratio and a minimum interest coverage ratio (adjusting over time). The Company was required to maintain a maximum total leverage ratio of 6.00 to 1.00 from January 1, 2016 to December 31, 2017 and 5.00 to 1.00 thereafter. In addition, the Company was required to maintain a minimum interest coverage ratio of 2.75 to 1.00 from January 1, 2016 through December 31, 2016 and 3.00 to 1.00 thereafter. A default of the financial ratio covenants only became an event of default under the Term Loan if the lenders providing the Revolving Credit Facility made certain affirmative actions after the occurrence of a default of such financial ratio covenants.

The credit agreement governing the Credit Facility contained a number of customary events of default, including, among others, for the non-payment of principal, interest or other amounts, the inaccuracy of certain representations and warranties, the failure to perform or observe certain covenants, a cross default to other indebtedness including the 7% Senior Notes, certain events of


bankruptcy or insolvency, certain ERISA events, the invalidity of certain loan documents, certain changes of control and the loss of certain classes of licenses to conduct gaming. If any event of default occurs, the lenders under the Credit Facility would be entitled to take various actions, including accelerating amounts due thereunder and taking all actions permitted to be taken by a secured creditor.

On May 1, 2017, all of the outstanding amounts under the Credit Facilityour 2015 credit facility were repaid with proceeds of borrowings under the New Credit Facilitynew credit facility and the Credit Facility2015 credit facility was terminated.In accordance with ASC Topic 470-50, “Debt Modifications and Extinguishments” (“ASC 470-50”), we recognized a loss totaling $27.3 million for the three and six months ended June 30, 2017 as a result of the debt refinancing transaction.

New Credit Facility

On April 17, 2017, Eagle II entered into a new credit agreement by and among Eagle II, as initial borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto dated as of April 17, 2017, (the “New Credit Facility”), consisting of a $1.45 billion term loan facility (the “New Term Loan Facility” or the “New Term Loan”) and a $300.0 million revolving credit facility, (the “New Revolving Credit Facility”), which was undrawn at closing. The proceeds of the New Term Loan Facility,new term loan facility, and additional funds in the amount of $4.5 million in respect of interest expected to be accrued on the New Term Loan Facility,new term loan facility, were placed in escrow pending satisfaction of certain conditions, including consummation of the Isle Acquisition.our acquisition of Isle. In connection with the consummation of theour acquisition of Isle Acquisition on May 1, 2017, the escrowed funds were released and ERIwe assumed Eagle II’s obligations under the New Credit Facilitynew credit facility and certain of ERI’sour subsidiaries (including Isle and certain of its subsidiaries) executed guarantees of ERI’sour obligations under the New Credit Facility.new credit facility.

As of June 30, 2017, the CompanyMarch 31, 2018, we had $1.45 billion$956.8 million outstanding on the New Term Loan and $90.0 million innew term loan. There were no borrowings outstanding under the New Revolving Credit Facility. The Companynew revolving credit facility as of March 31, 2018. We had $201.3$291.5 million of available borrowing capacity, after consideration of $8.7$8.5 million in outstanding letters of credit, under its New Revolving Credit Facilityour new revolving credit facility as of June 30, 2017.March 31, 2018. We have obtained commitments to increase our revolving credit facility from $300 million to $500 million effective at the time of the consummation of the Tropicana Acquisition. At June 30, 2017, the interest rate on the New Term Loan was 3.375%, andMarch 31, 2018, the weighted average interest rate on the New Revolving Credit Facilitynew term loan was 3.75%3.9% based upon the weighted average interest rate of borrowings outstanding on our New Revolving Credit Facility as of June 30, 2017.during the three months ended March 31, 2018.

The CompanyWe applied the net proceeds of the New Term Loan Facilitynew term loan facility and borrowings under the New Revolving Credit Facilitynew revolving credit facility totaling $135 million, together with the proceeds of the 6% Senior Notes and cash on hand, to (i) pay the cash portion of the consideration payable in theour acquisition of Isle, Acquisition, (ii) refinance all of the debt outstanding under Isle’s existing credit facility, (iii) redeem or otherwise repurchase all of Isle’s outstanding 5.875% Senior Notes due 2021 and 8.875% Senior Subordinated Notes due 2020, (iv) repay all amounts outstanding under the Company’s Credit Facilityour 2015 credit facility and (v) pay fees and costs associated with theour acquisition of Isle Acquisition and such financing transactions.

The CompanysOur obligations under the New Revolving Credit Facility willnew revolving credit facility currently mature on April 17, 2022. The CompanysHowever, we expect that, in connection with the consummation of the Tropicana Acquisition, the maturity of the revolving credit facility will be extended to the date that is five years following the consummation of the Tropicana Acquisition. Our obligations under the New Term Loan Facilitynew term loan facility will mature on April 17, 2024. The Company isWe were required to make quarterly principal payments in an amount equal to $3,625,000$3.6 million on the New Term Loan Facilitynew term loan facility on the last day of each fiscal quarter beginning on June 30, 2017. We satisfied this requirement as a result of the principal prepayment of $444.5 million on September 13, 2017 in conjunction with the issuance of the additional 6% Senior Notes. In addition, the Company iswe are required to make mandatory payments of amounts outstanding under the New Credit Facilitynew credit facility with the proceeds of certain casualty events, debt issuances, and asset sales and, depending on its consolidated total leverage ratio, the Company iswe are required to apply a portion of its excess cash flow to repay amounts outstanding under the New Credit Facility.new credit facility.


The interest rate per annum applicable to loans under the New Revolving Credit Facility are,new revolving credit facility is, at our option, either (i) LIBOR plus a margin ranging from 1.75% to 2.50% or (ii) a base rate plus a margin ranging from 0.75% to 1.50%, which margin is based on our total leverage ratio. The interest rate per annum applicable to the loans under the New Term Loan Facilitynew term loan facility is, at our option, either (i) LIBOR plus 2.25%, or (ii) a base rate plus 1.25%; provided, however, that in no event will LIBOR be less than zero or the base rate be less than 1.00% over the term of the New Term Loan Facilitynew term loan facility or the New Revolving Credit Facility.new revolving credit facility. Additionally, the Company payswe pay a commitment fee on the unused portion of the Revolving Credit Facility not being utilizednew revolving credit facility in the amount of 0.50% per annum.

The New Credit Facilitynew credit facility is secured by substantially all of the Company’sour personal property assets and substantially all personal property assets of each subsidiary that guaranties the New Credit Facilitynew credit facility (other than certain subsidiary guarantors designated as immaterial) (the “New Credit Facility Guarantors”), whether owned on the closing date of the New Credit Facilitynew credit facility or thereafter acquired, and mortgages on thecertain real property and improvements owned or leased by us or the New Credit Facility Guarantors.new credit facility guarantors. The New Credit Facilitynew credit facility is also secured by a pledge of all of the equity owned by us and the New Credit Facility Guarantorsnew credit facility guarantors (subject to certain gaming law restrictions).

The new credit agreement governing the New Credit Facilityfacility contains a number of customary covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability and the ability of the New Credit Facility Guarantors to incur additional indebtedness, create liens on collateral, engage in mergers, consolidations or asset dispositions, make distributions, make investments, loans or advances, engage in certain transactions with affiliates or subsidiaries or make capital expenditures.


The New Credit Facility contains a number of customary covenants that, among other things, restrict, subject to certain exceptions, the Companysour ability and the ability of the subsidiary guarantors to incur debt; create liens on collateral;liens; engage in mergers, consolidations or asset dispositions; pay dividends or make distributions; make investments, loans or advances; engage in certain transactions with affiliates or subsidiaries; or modify theirour lines of business.

The New Credit Facilitynew credit facility also includes certain financial covenants, including the requirements that we maintain throughout the term of the New Credit Facilitynew credit facility and measured as of the end of each fiscal quarter, and solely with respect to loans under the New Revolving Credit Facility,new revolving credit facility, a maximum consolidated total leverage ratio of not more than 6.50 to 1.00 for the period beginning on the closing date and ending with the fiscal quarter ending December 31, 2018, 6.00 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 5.50 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2020 and thereafter. The CompanyWe will also be required to maintain an interest coverage ratio in an amount not less than 2.00 to 1.00 measured on the last day of each fiscal quarter beginning on the closing date, and ending with the fiscal quarter ending December 31, 2018, 2.50 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2019 and ending with the fiscal quarter ending December 31, 2019, and 2.75 to 1.00 for the period beginning with the fiscal quarter endingbeginning January 1, 2020 and thereafter.

The New Credit Facilitynew credit facility contains a number of customary events of default, including, among others, for the non-payment of principal, interest or other amounts, the inaccuracy of certain representations and warranties, the failure to perform or observe certain covenants, a cross default to our other indebtedness, including the 6% Senior Notes and 7% Senior Notes, certain events of bankruptcy or insolvency;insolvency, certain ERISA events, the invalidity of certain loan documents, certain changes of control and the loss of certain classes of licenses to conduct gaming. If any event of default occurs, the lenders under the New Credit Facilitynew credit facility would be entitled to take various actions, including accelerating amounts outstanding thereunder and taking all actions permitted to be taken by a secured creditor. As of June 30, 2017, the Company wasMarch 31, 2018, we were in compliance with the covenants under the New Credit Facility.new credit facility.

Contractual Obligations

Other than the previously discussed 6% Senior Notes, New Credit Facility and Isle leases for real estate and various equipment, thereThere have been no material changes duringfor the three and six months ended June 30, 2017March 31, 2018 to our contractual obligations as disclosed in our Annual Report on Form 10‑K for the year ended December 31, 2016.2017.

Other Liquidity Matters

We are faced with certain contingencies involving litigation and environmental remediation and compliance. These commitments and contingencies are discussed in “Part II, Item 1. Legal Proceedings” and Note 1110 to our unaudited consolidated financial statements, both of which are included elsewhere in this report. In addition, new competition may have a material adverse effect on our revenues, and could have a similar adverse effect on our liquidity. See “Part I, Item 1A. Risk Factors—Risks Related to Our Business” which is included in our Annual Report on Form 10-K for the year ended December 31, 20162017 and “Part II, Item IA. Risk Factors” which is included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.March 31, 2018.


Critical Accounting Policies

Our critical accounting policies disclosures are included in our Annual Report on Form 10‑K for the year ended December 31, 2016. We2017. Except as described in footnotes 2 and 3 to the accompanying condensed notes of these consolidated financial statements, we believe there have been no material changes since December 31, 2016.2017. We have not substantively changed the application of our policies and there have been no material changes in assumptions or estimation techniques used as compared to prior periods.

Off‑Balance Sheet Arrangements

We are not party to any off‑balance sheet arrangements.


Cautionary Statement Regarding Forward‑Looking Information

This report includes “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward‑looking statements include statements regarding our strategies, objectives and plans for future development or acquisitions of properties or operations, as well as expectations, future operating results and other information that is not historical information. When used in this report, the terms or phrases such as “anticipates,” “believes,” “projects,” “plans,” “intends,” “expects,” “might,” “may,” “estimates,” “could,” “should,” “would,” “will likely continue,” and variations of such words or similar expressions are intended to identify forward‑looking statements. Forward‑lookingSpecifically, forward-looking statements in this reportmay include, among other things,others, statements concerning:

projections of future results of operations or financial condition;

expectations regarding our business and results of operations of our existing casino properties and prospects for future development;

expenses and our ability to operate efficiently and our ability to achieve benefits and synergies associated with the Isle Acquisition;

expectations regarding trends that will affect our market and the gaming industry generally and the impact of those trends on our business and results of operations;

our ability to comply with the covenants in the agreements governing our outstanding indebtedness;

our ability to meet our projected debt service obligations, operating expenses, and maintenance capital expenditures;

expectations regarding availability of capital resources;

our ability to consummate the acquisition of Tropicana Entertainment and the Grand Victoria Casino and the disposition of Presque Isle Downs and Vicksburg on the timeline and terms described herein or at all;

our intention to pursue development opportunities, including the development of a mixed-use entertainment and acquisitionshospitality destination expected to be located on unused land adjacent to the Pompano casino and racetrack, and additional acquisition;

our ability to ability to obtain financing for, and realize the anticipated benefits, of such development and acquisitions;acquisitions, including the acquisition of Tropicana Entertainment and the Grand Victoria Casino and the development of Pompano; and

the impact of regulation on our business and our ability to receive and maintain necessary approvals for our existing properties and future projects.


Any forward‑looking statement isstatements are based upon a number of estimates and assumptions that, while considered reasonable by us, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control, and are subject to change. Actual results of operations may vary materially from any forward‑looking statementstatements made herein. Forward‑looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. Forward-looking statements should not be regarded as a representation by us or any other person that the forward‑looking statements will be achieved. Undue reliance should not be placed on any forward‑looking statements. Some of the contingencies and uncertainties to which any forward‑looking statement contained herein is subject include, but are not limited to, the following:

our substantial indebtedness including indebtedness incurred in connection with the Isle Acquisition, and significant financial commitments could adversely affect our results of operations and our ability to service such obligations;

restrictions and limitations in agreements governing our debt could significantly affect our ability to operate our business and our liquidity;

our facilities operate in very competitive environments and we face increasing competition;

the ability to successfully integrate ERI’sidentify suitable acquisition opportunities and Isle’s operations, technologies and employees;

the ability to realize growth opportunities and cost synergies from the Isle Merger, and any future acquisitions, in a timely manner or at all;acquisitions;

our operations are particularly sensitive to reductions in discretionary consumer spending and are affected by changes in general economic and market conditions;

our gaming operations are highly regulated by governmental authorities and the cost of complying or the impact of failing to comply with such regulations;

changes in gaming taxes and fees in jurisdictions in which we operate;

risks relating to pending claims or future claims that may be brought against us;

changes in interest rates and capital and credit markets;

our ability to comply with certain covenants in our debt documents;

the effect of disruptions to our information technology and other systems and infrastructure;

construction factors relating to development, maintenance and expansion of operations;


our ability to attract and retain customers;

our ability to attract and retain customers;

weather or road conditions limiting access to our properties;

the effect of war, terrorist activity, natural disasters and other catastrophic events;

the intense competition to attract and retain management and key employees in the gaming industry; and

the other factors set forth in Part I, Item 1A. “Risk Factors” included in our Annual Report on Form 10‑K for the year ended December 31, 2016.2017.

In addition, the acquisition of Tropicana Entertainment and the Grand Victoria Casino, the dispositions of Presque Isle Downs and Vicksburg and the provisions of the related acquisition agreements create additional risks, uncertainties and other important factors, including but not limited to:

our ability to obtain required regulatory approvals (including approval from gaming regulators and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976) and satisfy or waive other closing conditions to consummate such transactions on a timely basis;

the possibility that the one or more of such transactions do not close on the terms described herein or that we are required to modify aspects of one or more of such transactions to obtain regulatory approval;

our ability to promptly and effectively implement our operating strategies at the acquired properties and integrate our business and the business of the acquired companies to realize the synergies contemplated by the proposed acquisition;

our ability to obtain debt financing on the terms expected, or at all, and timely receive proceeds from the sale of Presque Isle Downs and Vicksburg to fund the acquisitions;

the possibility that the business of Tropicana or the Grand Victoria Casino may suffer as a result of the announcement of the acquisition;


the ability to retain key employees of the acquired companies;

the outcome of legal proceedings that may be instituted as a result of the proposed transactions; and

other risks and uncertainties described in Part II, Item 1A. “Risk Factors” contained herein and our reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.

In light of these and other risks, uncertainties and assumptions, the forward‑looking events discussed in this report might not occur. AnyThese forward‑looking statement speaksstatements speak only as of the date on which thatthis statement is made. Wemade, even if subsequently made available on our website or otherwise, and we do not intend to update publicly any forward‑looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as may be required by law.

You should also be aware that while we from time to time communicate with securities analysts, we do not disclose to them any material non‑public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not hold any market risk sensitive instruments for trading purposes. Our primaryare exposed to changes in interest rates primarily from variable rate long‑term debt arrangements. At March 31, 2018, interest on borrowings under our New Credit Facility was subject to fluctuation based on changes in short-term interest rates.

As of March 31, 2018, our long‑term variable‑rate borrowings totaled $956.8 million under the New Term Loan and represented approximately 43% of our long‑term debt compared to 37% of our long‑term debt as of March 31, 2017. During the three months ended March 31, 2018, the weighted average interest rates on our variable and fixed rate debt were 3.9% and 6.3%, respectively.

The Company evaluates its exposure to market risk isby monitoring interest rate risk, specifically long‑term U.S. treasury rates and the applicable spreads in the high‑yield investment risk, short‑termmarketplace and long‑term LIBOR rates, and short‑term Eurodollar rates, and their potential impacthas, on our long‑term debt. We attemptoccasion, utilized derivative financial instruments to limit our exposure to interest rate risk by managing the mix of our long‑term fixed‑rate borrowings and short‑term borrowings under the Credit Facility. We dohelp manage this risk. The Company does not currently utilize derivative financial instruments for trading or speculative purposes. (See also “Liquidity and Capital Resources” above for additional information related to the refinancing of our long‑term debt.)

As of June 30, 2017, our long‑term variable‑rate borrowings totaled $1.5 billion comprised of $1.45 billion under the New Term Loan and $90.0 million under the New Revolving Credit Facility and represented approximately 67% of our long‑term debt.

There waswere no material changequantitative changes in interest rateour market risk exposure, or how such risks are managed, for the sixthree months ended June 30, 2017 other than as previously discussed in Liquidity and Capital Resources section in Item 2.March 31, 2018.

ITEM 4.

CONTROLS AND PROCEDURES.

 

(a)

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, evaluated and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) as of the end of the period covered by this Quarterly Report on Form 10‑Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10‑Q are effective to ensure that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized, evaluated and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.disclosure

 

(b)

Changes in Internal Controls

Except as noted below, there were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10‑Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On May 1, 2017, we completed the acquisition of Isle. See Part I, Item 1, Condensed Notes to Unaudited Consolidated Financial Statements, Note 2:3: Isle Acquisition and PreliminaryFinal Purchase Price Accounting, for a discussion of the acquisition and related financial data. The Company isWe are in the process of integrating Isle and our internal controls over financial reporting. As a result of these


integration activities, certain controls will be evaluated and may be changed. Excluding the Isle Acquisition, there were no changes in our internal control over financial reporting that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.


PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are a party to various lawsuits, which have arisen in the normal course of our business. Estimated losses are accrued for these lawsuits and claims when the loss is probable and can be estimated. The current liability for the estimated losses associated with those lawsuits is not material to our consolidated financial condition and those estimated losses are not expected to have a material impact on our results of operations.

Legal matters are discussed in greater detail in “Part I, Item 3. Legal Proceedings” and Note 1615 to our Consolidated Financial statements included in our Annual Report on Form 10‑K for the year ended December 31, 2016.2017.

ITEM 1A.

RISK FACTORS

A description of our risk factors can be found in “Part I, Item 1A. Risk Factors” included in our Annual Report on Form 10‑K for the year ended December 31, 2016.2017. There have been no material changes to those risk factors during the sixthree months ended June 30, 2017,March 31, 2018, except for the following additional risk factors related to the Isle Acquisition.certain acquisitions and dispositions.

Our operations in certain jurisdictions depend on agreements with third parties.

Our operations in several jurisdictions depend on agreements with third parties. If we are unable to renew these agreements on satisfactory terms as they expire, our business may be disrupted and, in the event of disruptions in multiple jurisdictions, could have a material adverse effect on our financial condition and results of operations. For example, Iowa law requires that each gambling venue in Iowa must have a licensed “Qualified Sponsoring Organization,” or QSO, which is a tax-exempt non-profit organization. The QSO must donate the profits it receives from casino operations to educational, civic, public, charitable, patriotic or religious uses. Each of our three Iowa properties has an agreement with a local QSO. We have the right to renew our agreements for Bettendorf and Waterloo when they expire in 2025 and 2018, respectively.

We have a management agreement with Nemacolin Woodlands Resort, the owner of the gaming license issued by the Pennsylvania Gaming Control Board allowing operation of a casino at the resort. Under the terms of this agreement, we constructed and currently operate a casino at the resort. Our management agreement is subject to a buy-out provision on or after December 31, 2021, as well as other terms and conditions which could result in termination of the management agreement. The base term of the agreement is ten years, with four, five-year renewal options. Additionally, each partyFactors Relating to the management agreement has certain termination rights. If the management agreement is terminated, we will no longer have the right to manage our casino at Nemacolin Woodlands Resort.

Our information technologyAcquisitions and other systems are subject to cyber security risk including misappropriation of customer information or other breaches of information security.

We collect information relating to our guests and employees for various business purposes, including marketing and promotional purposes. The collection and use of personal data are governed by privacy laws and regulations enacted in the United States. We rely on information technology and other systems to maintain and transmit this personal and financial information, credit card settlements, credit card funds transmissions, mailing lists and reservations information. Our information and processes are subject to the ever-changing threat of compromised security, in the form of a risk of potential breach, system failure, computer virus, or unauthorized or fraudulent use by customers, company employees, or employees of third party vendors. The steps we take to deter and mitigate these risks may not be successful, and any resulting compromise or loss of data or systems could adversely impact, operations or regulatory compliance and could result in remedial expenses, fines, litigation, and loss of reputation, potentially impacting our financial results.

In addition, third party service providers and other business partners process and maintain proprietary business information and data related to our guests, suppliers and other business partners. Our information technology and other systems that maintain and transmit this information, or those of service providers or business partners, may also be compromised by a malicious third party penetration of our network security or that of a third party service provider or business partner, or impacted by intentional or unintentional actions or inactions by our employees or those of a third party service provider or business partner. As a result, our business information, guest, supplier, and other business partner data may be lost, disclosed, accessed or taken without their consent.


Any such loss, disclosure or misappropriation of, or access to, guests’ or business partners’ information or other breach of our information security can result in legal claims or legal proceedings, including regulatory investigations and actions, may have a serious impact on our reputation and may adversely affect our businesses, operating results and financial condition. Furthermore, the loss, disclosure or misappropriation of our business information may adversely affect our reputation, businesses, operating results and financial condition.Dispositions

Some of our casinos are located on leased property.property and we expect to enter into a master lease with respect to certain properties that we expect to acquire in the Tropicana Acquisition. If we default on one or more leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected casino.  

We currently lease certain parcels of land on which several of our properties are located.located and we expect to enter into a master lease with respect to six of the properties that we will acquire in the Tropicana Acquisition (the “Master Lease”). As a ground lessee, we have the right to use the leased land; however, we do not hold fee ownership inof the underlying land. Accordingly, with respect to the leased land, we will have no interest in the land or improvements thereon at the expiration of the ground leases. Moreover, since we do not completely control the land underlying the property, a landowner could take certain actions to disrupt our rights in the land leased under the long-term leases which are beyond our control.  If the entity owning any leased land chose to disrupt our use either permanently or for a significant period of time, then the value of our assets could be impaired and our business and operations could be adversely affected. Our leases provide that they may be terminated for a number of reasons, including failure to pay rent, taxes or other payment obligations or the breach of other covenants contained in the leases. In particular, the Master Lease is expected to require initial annual rent payments of $110 million and obligate us to make specified minimum capital expenditures with respect to the leased properties. If we were to default on any one or more of these leases, the applicable lessors could terminate the affected leases and we could lose possession of the affected land and any improvements on the land, including the hotels and casinos. This wouldA termination of our ground leases or the master lease could result in a default under our debt agreements and could have a significantmaterial adverse effect on our business, financial condition and results of operations. Further, in the event that any lessor with respect to our leased properties, including properties that will be subject to the Master Lease, encounters financial, operational, regulatory or other challenges, there can be no assurance that such lessor will be able to comply with its obligations under the applicable lease.

The Master Lease is expected to be a triple-net lease. Accordingly, in addition to rent, we will be required to pay, among other things, the following: (1) all facility maintenance, (2) all insurance required in connection with the leased properties and the business conducted on the leased properties, (3) taxes levied on or with respect to the leased properties (other than taxes on the income of the lessor) and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. We will be responsible for incurring the costs described in the preceding sentence notwithstanding the fact that many of the benefits received in exchange for such costs shall in part accrue to the lessor as the owner of the associated facilities. In addition, we expect that we will remain obligated for lease payments and other obligations under the Master Lease even if one or more of such leased facilities is unprofitable or if we decide to withdraw from those locations. We could incur special charges relating to the closing of such facilities including lease termination costs, impairment charges and other special charges that would reduce our net income and could have a material adverse effect on our business, financial condition and results of operations.


Delay or failure to complete the Acquisitions or Dispositions would prevent the Company from realizing the anticipated benefits of the transactions.

Any delay in completing the Acquisitions or Dispositions may reduce the synergies, use of proceeds and other benefits that we anticipate if we successfully complete the transactions within the expected timeframe and integrate our business and the businesses, Tropicana and the Grand Victoria Casino. In addition, the market price of our common stock may reflect various market assumptions as to whether and when the Acquisitions and Dispositions will be completed. Consequently, the completion of, the failure to complete, or any delay in the completion of the Acquisitions or Dispositions could result in significant changes in the market price of our common stock.

The acquisition of Tropicana and the Grand Victoria and the sale of Presque Isle Downs and Vicksburg are subject to the receipt of approvals and clearances that may impose conditions that could have an adverse effect on us or, if not obtained, could prevent completion of the transactions. We may be required to pay significant reverse termination fee if we are unable to obtain regulatory approvals for the Acquisitions.

Completion of each of the Acquisitions and Dispositions is conditioned upon the receipt of certain governmental approvals, including, without limitation, antitrust and gaming regulatory approvals. There can be no assurance that these approvals will be obtained and that the other conditions to completing the Acquisitions and Dispositions will be satisfied in a timely fashion, or at all. In addition, the governmental authorities from which the regulatory approvals are required may impose conditions on the completion of the transactions or require changes to the terms of the agreements governing the transactions. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying or impeding consummation of the Acquisitions and Dispositions or of imposing additional costs or limitations on us following completion of the transactions, any of which might have an adverse effect on us.  

In addition, if we fail to obtain required regulatory approvals for the Tropicana Acquisition, we may be required to pay a reverse termination fee of $92.5 million and could be liable for additional damages. If we fail to obtain required regulatory approvals for the Elgin Acquisition, we may lose our $15 million deposit. Further, we have incurred and will continue to incur significant costs, such as legal, accounting, and similar costs, relating to the Acquisitions. We will be required to pay such costs whether or not the Acquisitions are consummated.

Our obligation to consummate the Acquisitions is not subject to a financing condition.

Our obligation to consummate the Acquisitions is not subject to a financing condition. As a result, if we are unable to obtain financing to pay the consideration for such transaction we may be subject to liability for a breach of the agreements governing the acquisitions.

We intend to finance a portion of the cash consideration that we are required to pay in connection with the Tropicana Acquisition with debt financing expected to be obtained pursuant to a $600.0 million commitment provided by J.P. Morgan (the “Commitment Letter”). We expected to issue at least $600.0 million of senior unsecured notes to finance such portion of the cash consideration, but if the notes are not issued and sold on or prior to the date of the consummation of Tropicana, the Commitment Letter contemplates that the lenders thereunder will make available at least $600.0 million in senior unsecured bridge loans under a senior unsecured credit facility. As a result, if financing cannot be obtained and the Tropicana Acquisition is not completed, we may be required to pay Tropicana damages, including a reverse termination fee of $92.5 million, or we may be compelled to specifically perform our obligation to consummate the transaction.

We intend to fund the consideration payable in the Elgin Acquisition using cash from the Dispositions, cash from ongoing operations and borrowings under our revolving credit facility. We may be subject to a claim for damages or specific performance if we are unable to obtain the necessary funds to consummate the acquisition, including as a result of a failure to consummate the Dispositions.  

The pending Acquisitions and Dispositions may be disruptive to our business.

Whether or not the Acquisitions or Dispositions are completed, the pendency of the transactions could cause disruptions in our business and the businesses of Tropicana and Elgin, which could have an adverse effect on our businesses and financial results. These disruptions could include the following:

our current and prospective employees may experience uncertainty about their future roles with the combined company or consider other employment alternatives, which might adversely affect our ability to retain or attract key managers and other employees and the ability of Tropicana and the Grand Victoria to retain employees that we wouldconsider key to our future combined operations;


current and prospective customers may anticipate changes in how they are served or the benefits offered our loyalty reward program and may, as a result, choose to discontinue their patronage; and

the attention of our management may be diverted from the operation of our business.

Litigation challenging the Tropicana Acquisition could delay or prevent the completion of the transaction.

One of the conditions to the Tropicana Acquisition is that no temporary restraining order, preliminary or permanent injunction, or other judgment, order or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the merger will be in effect; nor will there be any law, statute, ordinance, rule, regulation, order, policy, guideline or agency requirement enacted, entered, promulgated, enforced or deemed applicable by any governmental entity that prohibits or makes illegal the consummation of the merger. While we are not aware of any lawsuit that has been filed seeking the enjoin the Tropicana Acquisition, there can be no assurance that such a claim will not be filed by seeking damages relating to, or otherwise challenging, the acquisition. If the plaintiffs in any such action secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability or Tropicana’s ability to consummate the Tropicana Acquisition, then such injunctive or other relief may prevent the merger from becoming effective within the expected time frame or at all. If consummation of the Tropicana Acquisition is prevented or delayed, it could result in substantial costs to us or Tropicana. In addition, we and Tropicana could incur significant costs in connection with such lawsuits, including costs associated with the indemnification of directors and officers.

The integration of our operations with Tropicana and the Grand Victoria following the Acquisitions may present significant challenges and impair our ability to realize the anticipated benefits of the Acquisitions in the anticipated time frame or at all.

Our ability to realize the anticipated benefits of the Acquisitions will depend, to a large extent, on our ability to integrate the business of Tropicana and the Grand Victoria into our operations in the anticipated time frame or at all. We may face significant challenges in combining the operations of the acquired companies into our operations in a timely and efficient manner. The combination of independent businesses is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating the business practices and operations of the acquired companies into our operations. The integration process may disrupt the business and, if implemented ineffectively or inefficiently, could preclude realization of the full benefits that we expect. The failure to successfully integrate the acquired properties and to manage the challenges presented by the integration process successfully may result in an interruption of, or loss of momentum in, the combined business, which may have the effect of depressing the market price of our common stock following the closing of the transactions.

In addition, while we expect to realize cost synergies from combining the sales and general and administrative functions of the acquired businesses with ours, we will be required to incur costs, including severance and related expenses, to realize the anticipated cost savings. While we believe that the combined entity will benefit from cost synergies, we may be unable to operaterealize all of these cost synergies within the time frame expected or portionsat all. In addition, we may incur additional or unexpected costs in order to realize these cost synergies.

The Acquisitions may not be accretive and may cause dilution to our earnings per share, which may negatively affect the price of our common stock.

We currently anticipate that the Acquisitions will be accretive to the earnings per share of the affected facilitiescombined company in 2019. This expectation is based on preliminary estimates and may resultassumes certain synergies expected to be realized by the combined company over a 12-month period following the completion of the Acquisitions. Such estimates and assumptions could materially change due to additional transaction-related costs, delays in regulatory approvals, the failure to realize any or all of the benefits expected in the defaultAcquisitions or other factors beyond our control. All of these factors could delay, decrease or eliminate the expected accretive effect of the Acquisitions and cause resulting dilution to our earnings per share or to the price of our common stock.


We will have a substantial amount of debt outstanding following the Acquisitions and we may incur additional indebtedness.

We expect that we will have approximately $2.8 billion of debt and an additional $110 million of other annual obligations relating to the Master Lease following the completion of the Acquisitions and Dispositions. In addition, we expect that we will have the ability to incur additional debt under our amendedrevolving credit facility which we expect will be increased from $300 million to $500 million effective at the time of the consummation of the Tropicana Acquisition. We may be required to incur additional indebtedness to finance the consideration payable under the Acquisitions and restated credit facility.to pay costs associated with the development of a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the Pompano casino and racetrack. In particular, we will be required to incur additional debt to consummate the Elgin Acquisition, if we are not able to consummate the Dispositions prior to the consummation of such Acquisition. As a result of the increased levels of outstanding indebtedness following the Acquisitions and rent payments under the Master Lease, future interest expense, rent and debt service obligations will be significantly higher than historic interest expense.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.

OTHER INFORMATION.

None.



ITEM 6.

EXHIBITS.

 

Exhibit

Number

 

Description of Exhibit

 

Method of Filing

 

 

 

 

 

    2.1

Stock Purchase Agreement, dated October 13, 2016, by and among CQ Holding Company, Inc., Isle of Capri Casinos, Inc., and Isle of Capri Marquette, Inc.

Previously filed on Form 8-K of Isle of Capri Casinos, Inc. filed on October 13, 2016

    4.1

Third Supplemental Indenture, dated March 16, 2017 among Eldorado Resorts, Inc., the guarantors party thereto and U.S. Bank National Association

Previously filed on Form 8-K filed on March 22, 2017

    4.2

Indenture dated as of March 29, 2017, by and between Eagle II Acquisition Company LLC and U.S. Bank, National Association.

Previously filed on Form 8-K filed on March 29, 2017

  10.1

Amendment No. 1 to Credit Agreement, dated as of March 28, 2017, by and among Eldorado Resorts, Inc., a Nevada corporation, the Guarantors party thereto, certain Lenders that executed and delivered a Consent to the Amendment, and JPMorgan Chase Bank, N.A., as administrative agent.

Previously filed on Form 8-K filed on March 29, 2017

  10.2

Isle of Capri Casinos, Inc. Second Amended and Restated 2009 Long-Term Stock Incentive Plan.

Previously filed on Form 8-K of Isle of Capri Casinos, Inc. filed on October 9, 2015

  10.6

Isle of Capri Casino, Inc. Form Stock Option Award Agreement.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.7

Isle of Capri Casino, Inc. Form of Restricted Stock Award Agreement.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 25, 2009

  10.8

Isle of Capri Casino, Inc. Form of Performance Based Restricted Stock Unit Agreement.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 14, 2012

  10.9

Isle of Capri Casino, Inc. Form of Non-Qualified Stock Option Agreement.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 17, 2015

  10.10

Isle of Capri Casino, Inc. Form of Performance Stock Unit Agreement.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 17, 2015

  10.11

Isle of Capri Casino, Inc. Form of Restricted Stock Unit Agreement.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 17, 2015

  10.12

Amended and Restated Lease, dated as of April 19, 1999, among Port Resources, Inc. and CRU, Inc., as landlords and St. Charles Gaming Company, Inc., as tenant (St. Charles).

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 2, 1999

  10.13

Lease of property in Coahoma, Mississippi dated as of November 16, 1993 by and among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.

Previously filed on Form S-4/A of Isle of Capri Casinos, Inc. filed on June 19, 2002

  10.14

Addendum to Lease dated as of June 22, 1994 by and among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 28, 2000

  10.15

Second addendum to Lease dated as of October 17, 1995 by and among Roger Allen Johnson, Jr., Charles Bryant Johnson and Magnolia Lady, Inc.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 28, 2000


Exhibit

Number

Description of Exhibit

Method of Filing

  10.16

Master Lease between The City of Boonville, Missouri and IOC-Boonville, Inc. formally known as Davis Gaming Boonville, Inc. dated as of July 18, 1997.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.17

Amendment to Master Lease between The City of Boonville, Missouri and IOC-Boonville, Inc. formally known as Davis Gaming Boonville, Inc. dated as of April 19, 1999.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.18

Second Amendment to Master Lease between The City of Boonville, Missouri and IOC-Boonville, Inc. formerly known as Davis Gaming Boonville, Inc. dated as of September 17, 2001.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.19

Third Amendment to Master Lease between The City of Boonville, Missouri and IOC-Boonville, Inc. formerly known as Gold River's Boonville Resort, Inc. and Davis Gaming Boonville, Inc. dated as of November 19, 2001.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.20

Amended and Restated Lease Agreement by and between the Port Authority of Kansas City, Missouri and Tenant dated as of August 21, 1995.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 25, 2009

  10.21

First Amendment to Amended and Restated Lease Agreement by and between the Port Authority of Kansas City, Missouri and Tenant dated as of October 31, 1995.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 25, 2009

  10.22

Second Amendment to Amended and Restated Lease Agreement by and between the Port Authority of Kansas City, Missouri and Tenant dated as of June 10, 1996.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 25, 2009

  10.23

Assignment and Assumption Agreement (Lease Agreement) between Flamingo Hilton Riverboat Casino, LP, Isle of Capri Casinos, Inc. and IOC-Kansas City, Inc. dated as of June 6, 2000.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.24

Lease and Agreement-Spring 1995 between Andrianakos Limited Liability Company and Isle of Capri Black Hawk, L.L.C. dated as of August 15, 1995.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.25

Addendum to the Lease and Agreement-Spring 1995 between Andrianakos Limited Liability Company and Isle of Capri Black Hawk, L.L.C. dated as of April 4, 1996.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.26

Second Addendum to the Lease and Agreement-Spring 1995 between Andrianakos Limited Liability Company and Isle of Capri Black Hawk, L.L.C. dated as of March 21, 2003.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.27

Third Addendum to the Lease and Agreement-Spring 1995 between Andrianakos Limited Liability Company and Isle of Capri Black Hawk, L.L.C. dated as of April 22, 2003.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on July 11, 2008

  10.28

Fourth Addendum to the Lease and Agreement-Spring 1995 between Andrianakos Limited Liability Company and Isle of Capri Black Hawk, L.L.C. dated as of December 11, 2013.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 23, 2014

  10.29

Development Agreement by and between IOC-Cape Girardeau, LLC and the City of Cape Girardeau, Missouri dated as of October 4, 2010.

Previously filed on Form 10-Q of Isle of Capri Casinos, Inc. filed on December 3, 2010

  10.30

Amended and Restated Operator's Contract by and between Black Hawk County Gaming Association and IOC Black Hawk County, Inc. dated as of November 9, 2004.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 23, 2014

  10.31

Operator's Contract by and between the Riverbend Regional Authority, Green Bridge Company, Bettendorf Riverfront Development Company, L.C., Lady Luck Gaming Corporation and Lady Luck Bettendorf, L.C., dated as of August 11, 1994.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 23, 2014


Exhibit

Number

Description of Exhibit

Method of Filing

  10.32

Amendment to Operator's Contract by and among Green Bridge Company, Bettendorf Riverfront Development Company, L.C., Lady Luck Gaming Corporation, Lady Luck Bettendorf, L.C. and Riverbend Regional Authority, dated as of August 27, 1998.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 23, 2014

  10.33

Second Amendment to Operator's Contract by and between Isle of Capri Bettendorf, L.C. and Scott County Regional Authority dated as of June 30, 2004.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 23, 2014

  10.34

Third Amendment to Operator's Contract by and between Isle of Capri Bettendorf, L.C. and Scott County Regional Authority dated as of October 30, 2007.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 23, 2014

  10.35

Fourth Amendment to Operator's Contract by and between Isle of Capri Bettendorf, L.C. and Scott County Regional Authority dated as of March 11, 2015.

Previously filed on Form 10-K of Isle of Capri Casinos, Inc. filed on June 17, 2015

 

 

 

 

 

  31.1

 

Certification of Gary L. Carano pursuant to Rule 13a‑14a and Rule 15d‑14(a)

 

Filed herewith.

 

 

 

 

 

  31.2

 

Certification of Thomas R. Reeg pursuant to Rule 13a‑14a and Rule 15d‑14(a)

 

Filed herewith.

 

 

 

 

 

  32.1

 

Certification of Gary L. Carano in accordance with 18 U.S.C. Section 1350

 

Filed herewith.

 

 

 

 

 

  32.2

 

Certification of Thomas R. Reeg in accordance with 18 U.S.C. Section 1350

 

Filed herewith.

 

 

 

 

 

101.1

 

XBRL Instance Document

 

Filed herewith.

 

 

 

 

 

101.2

 

XBRL Taxonomy Extension Schema Document

 

Filed herewith.

 

 

 

 

 

101.3

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

Filed herewith.

 

 

 

 

 

101.4

 

XBRL Taxonomy Extension Definition Linkbase Document

 

Filed herewith.

 

 

 

 

 

101.5

 

XBRL Taxonomy Extension Label Linkbase Document

 

Filed herewith.

 

 

 

 

 

101.6

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

Filed herewith.

 

 


SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

ELDORADO RESORTS, INC.

 

 

 

Date: August 11, 2017May 8, 2018

 

/s/ Gary L. Carano

 

 

Gary L. Carano

 

 

Chief Executive Officer and Chairman of the Board

 

 

 

Date: August 11, 2017May 8, 2018

 

/s/ Thomas R. Reeg

 

 

Thomas R. Reeg

 

 

President and Chief Financial Officer

 

 

(Principal Financial Officer)

 

6059