UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| |
(Mark One) | |
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended |
or | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File No. 1-32583
FULL HOUSE RESORTS, INC.
(Exact name of registrant as specified in its charter)
| | |
Delaware (State or other jurisdiction of incorporation or organization) |
| 13-3391527 (I.R.S. Employer Identification No.) |
| | |
One Summerlin, 1980 Festival Plaza Drive, Suite 680 Las Vegas, Nevada (Address of principal executive offices) | | 89135 (Zip Code) |
(702) 221-7800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of each Class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, $0.0001 par value per share | | FLL | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐ | Accelerated filer | Emerging growth company ☐ |
Non-accelerated filer | Smaller reporting company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of August 9, 2021,May 5, 2022, there were 34,227,49334,345,656 shares of Common Stock, $0.0001 par value per share, outstanding.
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
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| 3 | |||
| Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 |
| 3 | |
| Consolidated Balance Sheets at March 31, 2022 and December 31, 2021 |
| 4 | |
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| 5 | ||
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 |
| 6 | |
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| 7 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | March 31, | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||||
Revenues |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Casino | | $ | 34,647 | | $ | 10,955 | | $ | 66,711 | | $ | 31,706 | | $ | 29,084 | | $ | 32,064 |
Food and beverage | |
| 7,440 | |
| 1,994 | |
| 13,541 | |
| 8,984 | |
| 6,511 | |
| 6,101 |
Hotel | |
| 2,510 | |
| 719 | |
| 4,721 | |
| 2,693 | |
| 2,179 | |
| 2,211 |
Other operations, including online/mobile sports | |
| 2,845 | |
| 843 | |
| 4,677 | |
| 1,981 | ||||||
Other operations, including contracted sports wagering | |
| 3,649 | |
| 1,832 | ||||||||||||
| |
| 47,442 | |
| 14,511 | |
| 89,650 | |
| 45,364 | |
| 41,423 | |
| 42,208 |
Operating costs and expenses | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Casino | |
| 11,087 | |
| 3,470 | |
| 21,426 | |
| 13,803 | |
| 9,875 | |
| 10,339 |
Food and beverage | |
| 5,928 | |
| 2,083 | |
| 11,288 | |
| 9,219 | |
| 6,568 | |
| 5,360 |
Hotel | |
| 1,140 | |
| 377 | |
| 2,196 | |
| 1,550 | |
| 1,071 | |
| 1,056 |
Other operations | |
| 551 | |
| 273 | |
| 946 | |
| 835 | |
| 462 | |
| 395 |
Selling, general and administrative | |
| 14,007 | |
| 9,796 | |
| 28,420 | |
| 22,777 | |
| 15,393 | |
| 14,413 |
Project development costs | |
| 126 | |
| 259 | |
| 173 | |
| 315 | |
| 165 | |
| 47 |
Preopening costs | | | 786 | | | — | ||||||||||||
Depreciation and amortization | |
| 1,829 | |
| 1,980 | |
| 3,629 | |
| 4,020 | |
| 1,792 | |
| 1,800 |
Loss on disposal of assets, net | |
| 568 | |
| 439 | |
| 672 | |
| 439 | |
| 8 | |
| 104 |
| |
| 35,236 | |
| 18,677 | |
| 68,750 | |
| 52,958 | |
| 36,120 | |
| 33,514 |
Operating income (loss) | |
| 12,206 | |
| (4,166) | |
| 20,900 | |
| (7,594) | ||||||
Other (expense) income | |
|
| |
|
| |
|
| |
|
| ||||||
Interest expense, net of $249 and $211 capitalized for the three-months ended June 30, 2021 and 2020, and $508 and $431 capitalized for the six-months ended June 30, 2021 and 2020 | | | (6,670) | | | (2,447) | | | (11,126) | | | (4,938) | ||||||
Gain (loss) on extinguishment of debt | | | 30 | | | — | | | (6,104) | | | — | ||||||
Operating income | |
| 5,303 | |
| 8,694 | ||||||||||||
Other expense | |
|
| |
|
| ||||||||||||
Interest expense, net of amounts capitalized | | | (6,399) | | | (4,456) | ||||||||||||
Loss on modification and extinguishment of debt | | | (4,406) | | | (6,134) | ||||||||||||
Adjustment to fair value of warrants | |
| — | |
| (94) | |
| (1,347) | |
| 1,562 | |
| — | |
| (1,347) |
| |
| (6,640) | |
| (2,541) | |
| (18,577) | |
| (3,376) | |
| (10,805) | |
| (11,937) |
Income (loss) before income taxes | |
| 5,566 | |
| (6,707) | |
| 2,323 | |
| (10,970) | ||||||
Income tax provision (benefit) | | | 82 | | | (4) | | | 284 | | | 91 | ||||||
Loss before income taxes | |
| (5,502) | |
| (3,243) | ||||||||||||
Income tax (benefit) provision | | | (5,612) | | | 202 | ||||||||||||
Net income (loss) | | $ | 5,484 | | $ | (6,703) | | $ | 2,039 | | $ | (11,061) | | $ | 110 | | $ | (3,445) |
| | | | | | | | | | | | | | | | | | |
Basic earnings (loss) per share | | $ | 0.16 | | $ | (0.25) | | $ | 0.07 | | $ | (0.41) | | $ | — | | $ | (0.13) |
Diluted earnings (loss) per share | | $ | 0.15 | | $ | (0.25) | | $ | 0.06 | | $ | (0.46) | | $ | — | | $ | (0.13) |
See condensed notes to consolidated financial statements.
3
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
| | | | | | | | | | | | |
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
|
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||
ASSETS | | | | | | | | | | | | |
Current assets |
| |
|
| |
|
| |
|
| |
|
Cash and equivalents | | $ | 104,962 | | $ | 37,698 | | $ | 109,041 | | $ | 88,721 |
Restricted cash | | | 176,579 | | | — | | | 210,494 | | | 176,572 |
Accounts receivable, net of allowance of $209 and $176 | |
| 3,398 | |
| 4,904 | ||||||
Accounts receivable, net of reserves of $259 and $257 | |
| 5,350 | |
| 4,693 | ||||||
Inventories | |
| 1,947 | |
| 1,511 | |
| 1,529 | |
| 1,660 |
Prepaid expenses and other | |
| 6,234 | |
| 2,461 | |
| 3,580 | |
| 3,726 |
| |
| 293,120 | |
| 46,574 | |
| 329,994 | |
| 275,372 |
| | | | | | | | | | | | |
Property and equipment, net | |
| 124,723 | |
| 115,772 | |
| 181,095 | |
| 149,540 |
Operating lease right-of-use assets, net | | | 17,443 | | | 17,361 | | | 14,998 | | | 15,814 |
Goodwill | |
| 21,286 | |
| 21,286 | |
| 21,286 | |
| 21,286 |
Other intangible assets, net | |
| 10,919 | |
| 10,963 | |
| 10,891 | |
| 10,896 |
Deposits and other | |
| 663 | |
| 660 | |
| 1,710 | |
| 934 |
Deferred income taxes, net | | | 4,556 | | | — | ||||||
| | $ | 468,154 | | $ | 212,616 | | $ | 564,530 | | $ | 473,842 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | |
Accounts payable | | $ | 6,047 | | $ | 4,191 | | $ | 9,926 | | $ | 8,411 |
Accrued payroll and related | |
| 4,902 | |
| 2,397 | |
| 4,139 | |
| 5,473 |
Accrued interest | | | 9,888 | | | 38 | | | 4,134 | | | 9,861 |
Other accrued liabilities | |
| 10,088 | |
| 10,772 | |
| 10,535 | |
| 10,252 |
Current portion of operating lease obligations | | | 3,454 | | | 3,283 | | | 3,609 | | | 3,542 |
Current portion of finance lease obligation | | | 458 | | | 491 | | | 520 | | | 514 |
Current portion of long-term debt | |
| 1,173 | |
| 426 | ||||||
Common stock warrant liability | | | — | | | 2,653 | ||||||
| |
| 36,010 | |
| 24,251 | |
| 32,863 | |
| 38,053 |
| | | | | | | | | | | | |
Operating lease obligations, net of current portion | |
| 14,710 | |
| 14,914 | |
| 11,963 | |
| 12,903 |
Finance lease obligation, net of current portion | | | 3,090 | | | 3,298 | | | 2,651 | | | 2,783 |
Long-term debt, net | |
| 305,361 | |
| 106,832 | |
| 400,590 | |
| 301,619 |
Deferred income taxes, net | |
| 904 | |
| 620 | |
| — | |
| 1,055 |
Contract liabilities, net of current portion | | | 5,073 | | | 5,398 | | | 3,156 | | | 4,714 |
Other long-term liabilities | | | 626 | | | 626 | ||||||
| |
| 365,774 | |
| 155,939 | |
| 451,223 | |
| 361,127 |
Commitments and contingencies (Note 8) | |
|
| |
|
| ||||||
Commitments and contingencies (Note 7) | |
|
| |
|
| ||||||
Stockholders’ equity | |
|
| |
|
| |
|
| |
|
|
Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 28,385,299 shares issued and 34,227,493 and 27,124,292 shares outstanding | |
| 4 | |
| 3 | ||||||
Common stock, $0.0001 par value, 100,000,000 shares authorized; 35,302,549 and 35,302,549 shares issued and 34,345,656 and 34,242,581 shares outstanding | |
| 4 | |
| 4 | ||||||
Additional paid-in capital | |
| 108,262 | |
| 64,826 | |
| 109,268 | |
| 108,911 |
Treasury stock, 1,075,056 and 1,261,007 common shares | |
| (1,311) | |
| (1,538) | ||||||
Accumulated deficit | |
| (4,575) | |
| (6,614) | ||||||
Treasury stock, 956,893 and 1,059,968 common shares | |
| (1,167) | |
| (1,292) | ||||||
Retained earnings | |
| 5,202 | |
| 5,092 | ||||||
| |
| 102,380 | |
| 56,677 | |
| 113,307 | |
| 112,715 |
| | $ | 468,154 | | $ | 212,616 | | $ | 564,530 | | $ | 473,842 |
See condensed notes to consolidated financial statements.
4
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | | | | | Total | |||
| | Common Stock | | Paid-in | | Treasury Stock | | Retained | | Stockholders’ | |||||||||
| | Shares | | Dollars | | Capital | | Shares | | Dollars | | Earnings | | Equity | |||||
Balance, January 1, 2022 | | 35,302 | | $ | 4 | | $ | 108,911 | | 1,060 | | $ | (1,292) | | $ | 5,092 | | $ | 112,715 |
Issuance of stock on | | — | | | — | | | 14 | | (103) | | | 125 | | | — | | | 139 |
Stock-based compensation | | — | |
| — | |
| 343 | | — | |
| — | | | — | |
| 343 |
Net income | | — | |
| — | |
| — | | — | |
| — | | | 110 | |
| 110 |
Balance, March 31, 2022 | | 35,302 | | $ | 4 | | $ | 109,268 | | 957 | | $ | (1,167) | | $ | 5,202 | | $ | 113,307 |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | | | | | Total | |||
| | Common Stock | | Paid-in | | Treasury Stock | | Accumulated | | Stockholders’ | |||||||||
|
| Shares |
| Dollars |
| Capital |
| Shares |
| Dollars |
| Deficit |
| Equity | |||||
Balance, January 1, 2021 |
| 28,385 | | $ | 3 | | $ | 64,826 |
| 1,261 | | $ | (1,538) | | $ | (6,614) | | $ | 56,677 |
Equity offering, net | | 6,917 | | | 1 | | | 42,973 | | — | | | — | | | — | | | 42,974 |
Exercise of stock options | | — | | | — | | | 36 | | (34) | | | 42 | | | — | | | 78 |
Stock-based compensation |
| — | |
| — | |
| 124 |
| — | |
| — | |
| — | |
| 124 |
Net loss |
| — | |
| — | |
| — |
| — | |
| — | |
| (3,445) | |
| (3,445) |
Balance, March 31, 2021 |
| 35,302 | | | 4 | | | 107,959 |
| 1,227 | | | (1,496) | | | (10,059) | | | 96,408 |
Exercise of stock options | | — | | | — | | | 104 | | (152) | | | 185 | | | — | | | 289 |
Stock-based compensation | | — | | | — | | | 199 | | — | | | — | | | — | | | 199 |
Net income | | — | | | — | | | — | | — | | | — | | | 5,484 | | | 5,484 |
Balance, June 30, 2021 | | 35,302 | | $ | 4 | | $ | 108,262 | | 1,075 | | $ | (1,311) | | $ | (4,575) | | $ | 102,380 |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | | | | | Total | |||
| | Common Stock | | Paid-in | | Treasury Stock | | Accumulated | | Stockholders’ | |||||||||
| | Shares | | Dollars | | Capital | | Shares | | Dollars | | Deficit | | Equity | |||||
Balance, January 1, 2021 | | 28,385 | | $ | 3 | | $ | 64,826 | | 1,261 | | $ | (1,538) | | $ | (6,614) | | $ | 56,677 |
Equity offering, net | | 6,917 | |
| 1 | |
| 42,973 | | — | |
| — | | | — | |
| 42,974 |
Issuance of stock on options exercised | | — | | | — | | | 36 | | (34) | | | 42 | | | — | | | 78 |
Stock-based compensation | | — | | | — | | | 124 | | — | | | — | | | — | | | 124 |
Net loss | | — | |
| — | |
| — | | — | |
| — | | | (3,445) | |
| (3,445) |
Balance, March 31, 2021 | | 35,302 | | $ | 4 | | $ | 107,959 | | 1,227 | | $ | (1,496) | | $ | (10,059) | | $ | 96,408 |
See condensed notes to consolidated financial statements.
5
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | | | | | Total | |||
| | Common Stock | | Paid-in | | Treasury Stock | | Accumulated | | Stockholders’ | |||||||||
|
| Shares |
| Dollars |
| Capital |
| Shares |
| Dollars |
| Deficit |
| Equity | |||||
Balance, January 1, 2020 |
| 28,346 | | $ | 3 | | $ | 64,402 |
| 1,270 | | $ | (1,548) | | $ | (6,761) | | $ | 56,096 |
Stock-based compensation |
| — | |
| — | |
| 83 |
| — | |
| — | |
| — | |
| 83 |
Net loss |
| — | |
| — | |
| — |
| — | |
| — | |
| (4,358) | |
| (4,358) |
Balance, March 31, 2020 |
| 28,346 | | | 3 | | | 64,485 |
| 1,270 | | | (1,548) | | | (11,119) | | | 51,821 |
Stock grants | | 13 | | | — | | | 24 | | — | | | — | | | — | | | 24 |
Stock-based compensation | | — | | | — | | | 79 | | — | | | — | | | — | | | 79 |
Net loss | | — | | | — | | | — | | — | | | — | | | (6,703) | | | (6,703) |
Balance, June 30, 2020 | | 28,359 | | $ | 3 | | $ | 64,588 | | 1,270 | | $ | (1,548) | | $ | (17,822) | | $ | 45,221 |
See condensed notes to consolidated financial statements.
5
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
| | | | | | | | | | | | |
| | Six Months Ended | | Three Months Ended | ||||||||
| | June 30, | | March 31, | ||||||||
|
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||
Cash flows from operating activities: |
| |
|
| |
|
| |
|
| |
|
Net income (loss) | | $ | 2,039 | | $ | (11,061) | | $ | 110 | | $ | (3,445) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |
|
| |
|
| ||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | |
|
| |
|
| ||||||
Depreciation and amortization | |
| 3,629 | |
| 4,020 | |
| 1,792 | |
| 1,800 |
Amortization of debt issuance and warrant costs and other | |
| 634 | |
| 496 | ||||||
Amortization of debt issuance costs and discounts (premium) on debt | |
| 386 | |
| 284 | ||||||
Stock-based compensation | |
| 323 | |
| 186 | |
| 343 | |
| 124 |
Change in fair value of stock warrants | |
| 1,347 | |
| (1,562) | |
| 0 | |
| 1,347 |
Loss on disposal of assets | |
| 672 | |
| 439 | ||||||
Proceeds from insurance related to property damage | | | 1,334 | | | 0 | ||||||
Loss on extinguishment of debt | | | 6,104 | | | 0 | ||||||
Loss on disposal of assets, net | |
| 8 | |
| 104 | ||||||
Loss on modification and extinguishment of debt | | | 4,406 | | | 6,134 | ||||||
Increases and decreases in operating assets and liabilities: | |
|
| |
|
| |
|
| |
|
|
Accounts receivable | |
| 1,506 | |
| 422 | |
| (657) | |
| 1,103 |
Prepaid expenses, inventories and other | |
| (4,209) | |
| 554 | |
| 277 | |
| (1,011) |
Deferred taxes | |
| 284 | |
| 91 | |
| (5,611) | |
| 202 |
Common stock warrant liability | | | (4,000) | | | 0 | | | 0 | | | (4,000) |
Contract liabilities | | | 25 | | | (58) | | | (1,555) | | | (350) |
Accounts payable and accrued expenses | |
| 9,094 | |
| 112 | |
| (7,467) | |
| 5,999 |
Net cash provided by (used in) operating activities | |
| 18,782 | |
| (6,361) | ||||||
Net cash (used in) provided by operating activities | |
| (7,968) | |
| 8,291 | ||||||
Cash flows from investing activities: | |
|
| |
|
| |
|
| |
|
|
Purchase of property and equipment | |
| (10,539) | |
| (1,375) | |
| (31,203) | |
| (3,413) |
Other | |
| (32) | |
| 22 | |
| (671) | |
| (8) |
Net cash used in investing activities | |
| (10,571) | |
| (1,353) | |
| (31,874) | |
| (3,421) |
Cash flows from financing activities: | |
|
| |
|
| |
|
| |
|
|
Proceeds from Senior Secured Notes due 2028 borrowings | |
| 310,000 | |
| 0 | |
| 100,000 | |
| 310,000 |
Proceeds from premium on Senior Secured Notes due 2028 borrowings | | | 2,000 | | | 0 | ||||||
Proceeds from equity offering, net of issuance costs | | | 42,974 | | | 0 | | | 0 | | | 42,974 |
Proceeds from CARES Act unsecured loans | |
| 0 | |
| 5,606 | ||||||
Payment of debt discount and issuance costs | |
| (9,405) | |
| (447) | |
| (7,821) | |
| (9,510) |
Repayment of Senior Secured Notes due 2024 | | | (106,825) | | | (550) | | | 0 | | | (106,825) |
Prepayment premiums of Senior Secured Notes due 2024 | |
| (1,261) | |
| 0 | |
| 0 | |
| (1,261) |
Repayment of finance lease obligation | | | (242) | | | (251) | | | (126) | | | (120) |
Proceeds from exercise of stock options | |
| 367 | |
| 0 | |
| 139 | |
| 78 |
Other | | | 24 | | | 0 | | | (108) | | | 24 |
Net cash provided by financing activities | |
| 235,632 | |
| 4,358 | |
| 94,084 | |
| 235,360 |
| | | | | | | | | | | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | |
| 243,843 | |
| (3,356) | ||||||
Net increase in cash, cash equivalents and restricted cash | |
| 54,242 | |
| 240,230 | ||||||
Cash, cash equivalents and restricted cash, beginning of period | |
| 37,698 | |
| 29,851 | |
| 265,293 | |
| 37,698 |
Cash, cash equivalents and restricted cash, end of period | | $ | 281,541 | | $ | 26,495 | | $ | 319,535 | | $ | 277,928 |
| | | | | | | | | | | | |
Supplemental Cash Flow Information: | |
|
| |
|
| |
|
| |
|
|
Cash paid for interest, net of amounts capitalized | | $ | 891 | | $ | 4,336 | | $ | 15,699 | | $ | 812 |
Non-Cash Investing Activities: | |
|
| |
|
| |
|
| |
|
|
Accounts payable related capital expenditures | | $ | 2,681 | | $ | 137 | | $ | 7,001 | | $ | 478 |
See condensed notes to consolidated financial statements.
6
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. ORGANIZATION
Organization. Formed as a Delaware corporation in 1987, Full House Resorts, Inc. owns, leases, operates, develops, manages, and/or invests in casinos and related hospitality and entertainment facilities. References in this document to “Full House,” the “Company,” “we,” “our,” or “us” refer to Full House Resorts, Inc. and its subsidiaries, except where stated or the context otherwise indicates.
The Company currently operates 5 casinos: 4 on real estate that we own or lease and 1 located within a hotel owned by a third party. Construction continues at a sixth property,We are currently constructing 2 additional properties: Chamonix Casino Hotel (“Chamonix”), adjacent to the Company’s existing Bronco Billy’s Casino and Hotel in Cripple Creek, Colorado.Colorado; and The Temporary by American Place (“The Temporary”) in Waukegan, Illinois. We also benefit currently from 6 permitted sports wagering “skins,” 3 in Colorado and 3 in Indiana. Upon the opening of The Temporary, we expect to benefit from an additional skin in Illinois. Other companies operate or will operate these online sports wagering sites under their brands, paying us a percentage of revenues, as defined in each respective agreement, subject to annual minimum amounts. NaN
In December 2021, Full House was selected by the Illinois Gaming Board (“IGB”) to develop its American Place project in Waukegan, Illinois, a northern suburb of our 6 permitted skins haveChicago. During the period that the permanent American Place facility is under construction, we intend to operate a temporary casino facility named The Temporary. In May 2022, we commenced operations, while the last remaining sports skinconstruction of The Temporary, which is expected to begin operationsopen in the coming months. Fall 2022, subject to customary regulatory approvals.
The following table identifies our 5 segments, along with properties and their locations:
| | |
Segments and Properties | | Locations |
Colorado | | |
Bronco Billy’s Casino and Hotel |
| Cripple Creek, CO (near Colorado Springs) |
Chamonix Casino Hotel (under construction) | | Cripple Creek, CO (near Colorado Springs) |
Illinois | | |
The Temporary and American Place (under construction) | | Waukegan, IL (northern suburb of Chicago) |
Indiana | | |
Rising Star Casino Resort |
| Rising Sun, IN (near Cincinnati) |
Mississippi | | |
Silver Slipper Casino and Hotel |
| Hancock County, MS (near New Orleans) |
Nevada | | |
Grand Lodge Casino |
| Incline Village, NV |
Stockman’s Casino |
| Fallon, NV (one hour east of Reno) |
Contracted Sports Wagering | | |
Three sports wagering websites (“skins”) | | Colorado |
Three sports wagering websites (“skins”) | | Indiana |
One sports wagering website (“skin”) upon opening of The Temporary | | Illinois |
The Company manages its casinos based primarily on geographic regions within the United States. Our 2021 results reflect a change in our operating segments. We now break out our on-site and online sports wagering skins in Colorado and Indiana as a standalone segment, Contracted Sports Wagering. Certain reclassifications were made to 2020 amounts to conform to current-period presentationSee Note 10 for enhanced comparability. Such reclassifications had no effect on the previously reported results of operations or financial position.further information.
COVID-19 Pandemic Update. In March 2020, the World Health Organization declared the outbreak of the novel coronavirus as aThe COVID-19 pandemic (“COVID-19”). Although COVID-19 continues to spread throughout the U.S.evolve. Governmental authorities continue to update their precautionary measures and the world, vaccines designedpromote vaccination programs to inhibit the severity andmanage the spread of COVID-19 are now being distributed. As a result, the numbervirus as different variants of newly reported casesthe virus surface and subside. The Company has declined ingenerally benefited from the U.S. from levels seen in late 2020 and early 2021, though new variants have resulted in a reversalgradual relaxation of these trends in recent weeks. The new Delta variant of COVID-19, which appears to be the most transmissible variant to date, has begun to spread globally. COVID-19 has resulted in the implementation of significant, government-imposed measures to prevent or reduce its spread, including travel restrictions,pandemic-related business restrictions closing of borders, “shelter-in-place” orders and business closures. In March 2020, pursuant to state government orders, the Company temporarily closed all of its casino properties.
since 2021.
7
As a result, the Company experienced a material decline in its revenues until its properties began reopening when permitted by local authorities. The reopening dates were:
During the shutdown period, the Company evaluated labor, marketing and other costs at its businesses so that, upon reopening, its properties could reopen with significantly lower operating costs. As a result, the Company’s operating performance since reopening in mid-2020 has been stronger than pre-pandemic levels, despite business restrictions throughout its properties and certain pandemic-related additional costs. The extent to which the Company’s financial and operating results in future periods may be affected by COVID-19, including the new Delta variant, will largely depend on future developments, which are highly uncertain and cannot be accurately predicted at this time. Significant uncertainties include the ability to operate; new information which may emerge concerning new strains of COVID-19 and their severity; vaccination rates among the population; the effectiveness of COVID-19 vaccines against the Delta variant; any additional actions imposed by governmental authorities to contain COVID-19 and the Delta variant or minimize its impact; increased operating costs and constraints to implement sanitation and social distancing requirements; increased costs for materials due to supply chain constraints; and general economic conditions, among others.
The disruptions arising from COVID-19 continued to impact the Company during the three- and six-months ended June 30, 2021. The duration and intensity of this global health emergency and related disruptions are uncertain. While each of the Company’s properties are currently open and operating restrictions eased during the second quarter of 2021, the current economic and regulatory environment in each of the Company’s jurisdictions continues to evolve. For example, mask mandates for all employees and guests were re-introduced at our Nevada properties in July 2021 in compliance with recent orders from Nevada state government officials. The manner in which governments will react as the global and regional impact ofHowever, the COVID-19 pandemic, and certain precautionary measures, have created economic uncertainty both in the United States and globally, as well as significant volatility in, and disruption to, financial markets, labor markets and supply chains. Global supply chain disruptions have resulted in shipping delays, increased shipping costs, supply shortages, and inflationary pressures, including overall increases in prices such as fuel, food, and building materials. These increased costs and supply shortages continued to put additional constraints on our operating business and our construction projects for the three months ended March 31, 2022. We do not know when these cost constraints and supply chain issues will materially alleviate and, accordingly, they may continue to impact our existing business and our construction projects in the near term.
We believe that as the COVID-19 pandemic evolves, the direct and indirect impacts on global macro-economic conditions, as well as conditions specific to us, are becoming more difficult to isolate or quantify. In addition, these direct and indirect factors can make it difficult to isolate and quantify the portion of our costs that are a direct result of the pandemic versus costs arising from factors that may have been influenced by the pandemic, including supply chain constraints, increased prices and inflationary pressures, and changes over time is uncertain,in the spending patterns of customers. These factors and such actions could significantly altertheir effects on our operations may persist for a longer period, even after the Company’s current operations.COVID-19 pandemic has subsided.
During the first half of 2021, the Company completed several transactions, which include:
As of June 30, 2021, the Company had total cash and cash equivalents of $281.5 million, including $176.6 million in restricted cash for the construction of Chamonix.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted. These consolidated financial statements should be read in conjunction with the Company’s 20202021 annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.
8
The interim consolidated financial statements of the Company included herein reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of annualized results for an entire year.
The consolidated financial statements include the accounts of Full House and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Fair Value and the Fair Value Input Hierarchy. Fair value measurements affect the Company’s accounting for net assets acquired in acquisition transactions and certain financial assets and liabilities. Fair value measurements are also used in the Company’s periodic assessments of long-lived tangible and intangible assets for possible impairment, including for property and equipment, goodwill, and other intangible assets. Fair value is defined as the expected price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
GAAP categorizes the inputs used for fair value into a three-level hierarchy:
● | Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities; |
● | Level 2: Comparable inputs other than quoted prices that are observable for similar assets or liabilities in less active markets; and |
● | Level 3: Unobservable inputs which may include metrics that market participants would use to estimate values, such as revenue and earnings multiples and relative rates of return. |
The Company utilizes Level 1 inputs when measuring the fair value of its 2028 Notes (see Note 5).
The Company utilizes Level 2 inputs when measuring the fair value of its asset purchases and acquisitions (see Note 4).
The Company utilizes Level 3 inputs when measuring the fair value of net assets acquired in business combination transactions, subsequent assessments for impairment, and most financial instruments, including but not limited to the estimated fair value of common stock warrants at issuance and for recurring changes in the related warrant liability (see Note 6).liability.
8
Cash Equivalents and Restricted Cash. Cash equivalents include cash involved in operations and cash in excess of daily requirements that is invested in highly liquid, short-term investments with initial maturities of three months or less when purchased.
Restricted cash balances consist of funds initially totaling $180 million, which were placed into a construction reserve account to fundfor the completion of the Chamonix construction project.
Accounts Receivable. Accounts receivable consist primarily of casino, hotel and other receivables, are typically non-interest bearing, and are carried net of an appropriate reserve to approximate fair value. Reserves are estimated based on specific review of customer accounts including the customers’ willingness and ability to pay and nature of collateral, if any, as well as historical collection experience and current economic and business conditions. Accounts are written off when management deems the account to be uncollectible and recoveries of accounts previously written off are recorded when received. Management believes that, as of March 31, 2022, no significant concentrations of credit risk existed for which a reserve had not already been recorded.
Revenue Recognition of Recognition:
Accrued Club Points and Deferred Revenues
Accrued Club Points:Customer Loyalty Programs: Operating Revenues and Related Costs and Expenses. The Company’s revenues consist primarily of casino gaming, food and beverage, hotel, and other revenues (such as sports wagering, golf, RV park operations, and entertainment). The majority of the Company’s revenues are derived from casino gaming, principally slot machines.
Gaming revenue is the difference between gaming wins and losses, not the total amount wagered. The Company accounts for its gaming transactions on a portfolio basis as such wagers have similar characteristics and it would not be practical to view each wager on an individual basis.
The Company sometimes provides discretionary complimentary goods and services (“discretionary comps”), primarily to casino customers.. For these types of transactions, the Company allocates revenue to the department providing the complimentary goods or services based upon its estimated standalone selling price, offset by a reduction in casino revenues.
9
Many of the Company’s customers choose to earn points under its customer loyalty programs. As points are accrued, the Company defers a portion of its gaming revenue based on the estimated standalone value of loyalty points being earned by the customer. The standalone value of loyalty points is derived from the retail value of food, beverages, hotel rooms, and other goods or services for which such points may be redeemed. A liability related to these customer loyalty points is recorded, net of estimated breakage and other factors, until the customer redeems these points under loyalty programs by property for various benefits, primarily for “free casino play,” complimentary dining, or hotel stays. Such liabilities were approximately $0.7 million for June 30, 2021 and $0.8 million for December 31, 2020, and these amounts are included in “other accrued liabilities”stays, among others, depending on the consolidated balance sheets.each property’s specific offers. Upon redemption, the related revenue is recognized at retail value within the department providing the goods or services, offset byservices. Unredeemed points are forfeited if the customer becomes and remains inactive for a reductionspecified period of time. Such liabilities were approximately $0.8 million for each of March 31, 2022 and December 31, 2021, and these amounts are included in “other accrued liabilities” on the liability.consolidated balance sheets.
Revenue for food and beverage, hotel, and other revenue transactions is typically the net amount collected from customers for such goods and services, plus the retail value of (i) discretionary comps and (ii) comps provided in return for redemption of loyalty points. The Company records such revenue as the good or service is transferred to the customer. Additionally, the Company may collect deposits in advance for future hotel reservations or entertainment, among other services, which represent obligations toof the Company until the service is provided to the customer.
9
Deferred Revenues: Market Access Fees from Sports Wagering Agreements. In 2019, theThe Company entered into several ten-year agreements with various unaffiliated companies allowing for online/mobileonline sports wagering within Indiana, Colorado and Colorado,Illinois, as well as on-site sports wagering at Rising Star andCasino Resort, Bronco Billy’s casinosCasino and Hotel, and The Temporary/American Place (the “Sports Agreements”). The contracts differ as to the percentages of revenues that we receive. Also, some contracts require payments in advance of the contract year, while others call for settlement in arrears. As part of these long-term Sports Agreements, the Company received $6 million in one-time market access fees totaling $6 million, which were recorded as a long-term liability in the same amountliabilities and are being recognized as revenue ratably over the initial contract terms, beginning with the commencement of operations. The market access fees are not refundable under ordinary circumstances. The Company subsequently received an additional $5 million of one-time market access fees in May 2022 for its recently-executed Illinois Sports Agreement. As with the prior Sports Agreements, such market access fee will be similarly capitalized and amortized over the initial term of eachthe agreement, beginning with the commencement of operations.
Indiana. TwoNaN of the Company’s Sports Agreements commenced operations in December 2019 and April 2021, respectively. The third party for the remaining Sports Agreement is expected to gowent live contractually in the coming months.December 2021.
Colorado. The Company’s three contracted mobile sports wagering websites3 Sports Agreements commenced online operations in June 2020, December 2020 and April 2021.2021, respectively.
Deferred revenues also includeIllinois. The Company signed a totalSports Agreement in May 2022 for Illinois. Such operations are expected to commence either concurrent with, or after, the opening of $2.0 million relatedThe Temporary, upon receipt of customary gaming approvals.
In addition to the market access fees, deferred revenue includes the annual prepayment of contracted revenue, as required in two2 of the Sports Agreements. Bronco Billy’sWe received $1.0 million of prepaid revenue for contracted sports operations that commenced in Colorado in December 2020, and Rising Star received $1.0 million of prepaid revenue for contracted sports operations that commenced in Indiana in April 2021. As of March 31, 2022, $1.3 million of such deferred revenue has been recognized.
SuchDeferred revenues consisted of the following, as discussed above:
| | | | | | | | | | | | | | | | |
(In thousands) | | | | June 30, | | December 31, | | | | March 31, | | December 31, | ||||
|
| Balance Sheet Location | | 2021 |
| 2020 |
| Balance Sheet Location | | 2022 |
| 2021 | ||||
Deferred revenue, current | | Other accrued liabilities | | $ | 1,722 | | $ | 1,372 | | Other accrued liabilities | | $ | 1,826 | | $ | 1,822 |
Deferred revenue, net of current portion | | Contract liabilities, net of current portion | | | 5,073 | | | 5,398 | | Contract liabilities, net of current portion | | | 3,156 | | | 4,714 |
| | | | $ | 6,795 | | $ | 6,770 | | | | $ | 4,982 | | $ | 6,536 |
In February 2022, 1 of the Company’s contracted parties for sports wagering gave notice of its intent to cease operations on May 15, 2022, which will create 1 available skin in each of Colorado and Indiana. Accordingly, this accelerated the recognition of $1.6 million of deferred revenue, which is now being recognized through the May 2022 termination date, as opposed to the remaining eight years of the original 10-year term. The Company is currently negotiating with other companies to be the replacement operator for such skins, but there can be no assurance that the Company will be able to replace them on similar terms as our existing agreements.
Other Revenues. The transaction price of rooms, food and beverage, and retail contracts is the net amount collected from the customer for such goods and services. The transaction price for such contracts is recorded as revenue when the good or service is transferred to the customer over their stay at the hotel or when the delivery is made for the food, beverage, retail and other contracts. Sales and usage-based taxes are excluded from revenues.
Revenue by Source. The Company presents earned revenue as disaggregated by the type or nature of the good or service (casino, food and beverage, hotel, and other operations comprised mainly of retail, golf, entertainment, and contracted sports wagering) and by relevant geographic region within Note 10.
Income Taxes. For interim income tax reporting for the three- and six-monthsthree-months ended June 30, 2021,March 31, 2022, the Company estimates its annual effective tax rate and applies it to its year-to-date pretax income or loss.
10
Reclassifications. The Company made certain minor financial statement presentation reclassifications to prior-period amounts to conform to the current-period presentation. Such reclassifications had no effect on the previously reported results of operations or financial position.
10
Earnings (Loss) Per Share. Earnings (loss) per share is net income (loss) applicable to common stock divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional dilutive effects for all potentially-dilutive securities, including share-based awards outstanding under the Company’s stock compensation plan and warrants, using the treasury stock method.
Leases. The Company determines if a contract is or contains a lease at inception or modification of the agreement. A contract is or contains a lease if there are identified assets and the right to control the use of an identified asset is conveyed for a period of time in exchange for consideration. Control over the use of the identified asset means that the lessee has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.
For material leases with terms greater than a year, the Company records right-of-use (“ROU”) assets and lease liabilities on the balance sheet, as measured on a discounted basis. For finance leases, the Company recognizes interest expense associated with the lease liability and depreciation expense associated with the ROU asset; for operating leases, the Company recognizes straight-line rent expense.
The Company does not recognize ROU assets or lease liabilities for leases with a term of 12 months or less. However, costs related to short-term leases with terms greater than one month, which the Company deems material, are disclosed as a component of lease expenses when applicable. Additionally, the Company accounts for new and existing leases containing both lease and non-lease components (“embedded leases”) together as a single lease component by asset class for gaming-related equipment; therefore, the Company does not allocate contract consideration to the separate lease and non-lease components based on their relative standalone prices.
Finance and operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement. As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate as estimated by third-party valuation specialists in determining the present value of future payments based on the information available at the commencement date and/or modification date. The expected lease terms include options to extend the lease when it is reasonably certain that the Company will exercise such options. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term for operating leases. For finance leases, the ROU asset depreciates on a straight-line basis over the shorter of the lease term or useful life of the ROU asset and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.
RecentRecently Issued Accounting Pronouncements
Income Taxes. Not Yet Adopted. In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). This standard simplifies the accounting for income taxes and includes removal of certain exceptions to the general principles of ASC 740, Income Taxes, and updates and simplifies certain areas of the codification. ASU 2019-12 was effective for the Company beginning on January 1, 2021, but did not have a material impact on its financial statements upon adoption.
The Company believes that there are no other recently-issued accounting standards not yet effective that are currently likely to have a material impact on its financial statements.
3. LEASES
The Company has no leases in which it is the lessor. As lessee, the Company has 1 finance lease for a hotel and various operating leases for land, casino and office space, equipment, buildings, and signage. The Company’s lease terms, including extensions, range from one month to approximately 3736 years. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land lease at Silver Slipper does include contingent rent, as further discussed below.
11
Operating Leases
Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, the Company’s subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately 31 acres of marshlands and a 7-acre parcel on which the Silver Slipper Casino and Hotel is situated. The agreementland lease includes fixed, base monthly payments of $77,500 plus contingent rents of 3% of monthly gross gaming revenue (as defined in the lease) in excess of $3.65 million, with no scheduled base rent increases through the remaining lease term ending in 2058.
The Company executed a fourth amendment to the original lease with the landlord, effective March 2020, which granted a waiver of base rent for April and May of 2020. Such abatement totaled $155,000 and the value of such abatement will be amortized over the remaining term of the lease. From April 1, 2022 through October 1, 2027, the Company may buy out the lease for $15.5 million plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date. In 2021, total rent paid during the year was $2.1 million, including $1.2 million of contingent rents.
Bronco Billy’s / Chamonix Lease through January 2035 and Option to Purchase. Bronco Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes 6 renewal options in three-year increments to 2035. In May 2019, Bronco Billy’sThe Company considers the renewal options reasonably certain of being exercised its second renewal option to extend the lease term through January 31, 2023 and currently pays $32,500 per month in rent.2026, with current annual lease payments of $0.4 million. The lease also contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property.
In June 2021, the Company remeasured this lease’s related ROU asset and liability balances by factoring in an additional renewal term through January 2026, with monthly rent increases to $35,000 starting in February 2023. Since part of Chamonix will be built on this leased land, management believes this remeasurement fairly accounts for such easement, until the Company becomes reasonably certain of exercising the purchase option.
Third Street Corner Building through August 2023 and Option to Purchase. The Company leased a nearby closed casino in August 2018 and reopened it in November 2018. The reopened casino did not produce enough incremental revenue to offset the incremental costs, and it was closed in September 2020. The Company has the right to purchase the casino at any time during the extended lease term as extended. Currently, the purchase price is $2.7 million if exercised by October 31, 2021 and increases tofor $2.8 million for purchase dates thereafter.million.
As part of the Chamonix development project, this building is currently used as office space for construction personnel, obviating the need for construction trailers. The lease includes a minimum three-yearhad an initial three-year term with annual lease payments of $0.2 million, and was subsequently extended in June 2021 for an additional two yearsto August 13, 2023 with current annual lease payments of $0.3 million. Beginning in March 2021, such rent expenses have been capitalized as construction costs for Chamonix.
Grand Lodge Casino Lease through August 2023. The Company’s subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Incline Hotel, LLC, the owner of the Hyatt Equities, L.L.C.Regency Lake Tahoe Resort (“Hyatt”Hyatt Lake Tahoe”), to operate the Grand Lodge Casino. The leaseIt is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the 2028 Notes (see Note 5). HyattThe lessor currently has an option to purchase the Company’s leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve-monthtwelve-month period preceding the acquisition (or pro-rated if less than twelve months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property. The current monthly rent of $166,667 is applicable through the remaining lease term ending in August 2023.
In July 2020, the Company executed a fifth amendment to the Hyatt lease that retroactively reduced rent amounts due during the closure period, specifically a 25% reduction in rent for March 2020 and a 50% reduction in rent for each of April and May of 2020. Such reductions totaled $208,000 and such benefit is being amortized over the remaining life of the lease.
Corporate Office Lease through January 2025. The Company leases 4,479 square feet of office space in Las Vegas, Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires in January 2025.
12
Finance Lease
Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel at a price based upon the hotel’s original cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At June 30, 2021,March 31, 2022, such potential purchase price was $3.5$3.2 million. Upon expiration of the lease term in October 2027, (i) the landlord has the right to sell the hotel to the Company, and (ii) the Company has the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs.
12
The components of lease expense are as follows:
| | | | | | | | |
(In thousands) |
| |
| Three Months Ended | ||||
| | | | March 31, | ||||
Lease Costs | | Classification within Statement of Operations | | 2022 |
| 2021 | ||
Operating leases: |
|
|
| |
| | |
|
Fixed/base rent |
| Selling, General and Administrative Expenses | | $ | 1,165 | | $ | 1,159 |
Short-term payments | | Selling, General and Administrative Expenses | | | 27 | | | — |
Variable payments |
| Selling, General and Administrative Expenses | |
| 384 | |
| 402 |
Finance lease: |
| | |
|
| |
| |
Amortization of leased assets |
| Depreciation and Amortization | |
| 39 | |
| 39 |
Interest on lease liabilities |
| Interest Expense, Net | |
| 37 | |
| 43 |
Total lease costs | | | | $ | 1,652 | | $ | 1,643 |
| | | | | | | | | | | | | | |
(In thousands) |
| |
| Three Months Ended |
| Six Months Ended | ||||||||
| | | | June 30, | | June 30, | ||||||||
Lease Costs | | Statement of Operations Classification | | 2021 |
| 2020 | | 2021 |
| 2020 | ||||
Operating leases: |
|
|
| |
| | |
|
| |
| | |
|
Fixed/base rent(1) |
| Selling, General and Administrative Expenses | | $ | 1,086 | | $ | 1,199 | | $ | 2,245 | | $ | 2,399 |
Variable payments |
| Selling, General and Administrative Expenses | |
| 418 | |
| 4 | |
| 820 | |
| 158 |
Finance lease: |
|
| |
|
| |
| | |
|
| |
|
|
Amortization of leased assets |
| Depreciation and Amortization | |
| 39 | |
| 39 | |
| 78 | |
| 79 |
Interest on lease liabilities |
| Interest Expense, Net | |
| 41 | |
| 62 | |
| 84 | |
| 94 |
Total lease costs | | | | $ | 1,584 | | $ | 1,304 | | $ | 3,227 | | $ | 2,730 |
__________
Leases recorded on the balance sheet consist of the following:
| | | | | | | | | | | | | | | | |
(In thousands) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | March 31, | | December 31, | ||
Leases |
| Balance Sheet Classification |
| June 30, 2021 | | December 31, 2020 |
| Balance Sheet Classification |
| 2022 | | 2021 | ||||
Assets |
|
|
| |
| | |
|
|
|
| |
| |
| |
Operating lease assets |
| Operating Lease Right-of-Use Assets, Net |
| $ | 17,443 | | $ | 17,361 |
| Operating Lease Right-of-Use Assets, Net |
| $ | 14,998 | | $ | 15,814 |
Finance lease assets |
| Property and Equipment, Net(1) | |
| 4,801 | |
| 4,879 |
| Property and Equipment, Net(1) | |
| 4,683 | |
| 4,722 |
Total lease assets |
|
| | $ | 22,244 | | $ | 22,240 |
|
| | $ | 19,681 | | $ | 20,536 |
| | | | | | | | | | | | | | | | |
Liabilities |
|
| |
|
| |
|
|
|
| |
|
| |
|
|
Current |
|
| |
|
| |
|
|
|
| |
|
| |
|
|
Operating |
| Current Portion of Operating Lease Obligations | | $ | 3,454 | | $ | 3,283 |
| Current Portion of Operating Lease Obligations | | $ | 3,609 | | $ | 3,542 |
Finance |
| Current Portion of Finance Lease Obligation | |
| 458 | |
| 491 |
| Current Portion of Finance Lease Obligation | |
| 520 | |
| 514 |
Noncurrent |
|
| |
| | |
| |
|
| |
| | |
| |
Operating |
| Operating Lease Obligations, Net of Current Portion | |
| 14,710 | |
| 14,914 |
| Operating Lease Obligations, Net of Current Portion | |
| 11,963 | |
| 12,903 |
Finance |
| Finance Lease Obligation, Net of Current Portion | |
| 3,090 | |
| 3,298 |
| Finance Lease Obligation, Net of Current Portion | |
| 2,651 | |
| 2,783 |
Total lease liabilities |
|
| | $ | 21,712 | | $ | 21,986 |
|
| | $ | 18,743 | | $ | 19,742 |
__________
(1) | Finance lease assets are recorded net of accumulated amortization of |
13
Maturities of lease liabilities as of June 30, 2021March 31, 2022 are summarized as follows:
| | | | | | | | | | | | |
(In thousands) | | | | | | | | | | | | |
|
| Operating |
| Financing |
| Operating |
| Financing | ||||
Years Ending December 31, | | Leases | | Lease(1) | | Leases | | Lease(1) | ||||
2021 (excluding the six months ended June 30, 2021) | | $ | 2,447 | | $ | 274 | ||||||
2022 | |
| 4,852 | |
| 652 | ||||||
2022 (excluding the three months ended March 31, 2022) | | $ | 3,631 | | $ | 434 | ||||||
2023 | |
| 3,539 | |
| 652 | |
| 3,539 | |
| 652 |
2024 | |
| 1,663 | |
| 652 | |
| 1,663 | |
| 652 |
2025 | |
| 1,466 | |
| 652 | |
| 1,466 | |
| 652 |
2026 | |
| 965 | |
| 652 | ||||||
Thereafter | |
| 30,105 | |
| 1,195 | |
| 29,140 | |
| 543 |
Total future minimum lease payments | |
| 44,072 | |
| 4,077 | |
| 40,404 | |
| 3,585 |
Less: Amount representing interest | |
| (25,908) | |
| (529) | |
| (24,832) | |
| (414) |
Present value of lease liabilities | |
| 18,164 | |
| 3,548 | |
| 15,572 | |
| 3,171 |
Less: Current lease obligations | |
| (3,454) | |
| (458) | |
| (3,609) | |
| (520) |
Long-term lease obligations | | $ | 14,710 | | $ | 3,090 | | $ | 11,963 | | $ | 2,651 |
__________
(1)The Company’s only material finance lease is at Rising Star Casino Resort for a 104-room hotel.
Other information related to lease term and discount rate is as follows:
| | | | | | | | | | | | |
Lease Term and Discount Rate | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 | ||||
Weighted-average remaining lease term |
|
| | |
| |
|
| | |
| |
Operating leases |
| 20.15 | years | | 20.4 | years |
| 22.3 | years | | 21.5 | years |
Finance lease |
| 6.3 | years | | 6.8 | years |
| 5.5 | years | | 5.8 | years |
Weighted-average discount rate |
|
| | |
| |
|
| | |
| |
Operating leases |
| 9.20 | % | | 9.41 | % |
| 9.35 | % | | 9.32 | % |
Finance lease |
| 4.50 | % | | 4.50 | % |
| 4.50 | % | | 4.50 | % |
Supplemental cash flow information related to leases is as follows:
| | | | | | |
(In thousands) |
| Six Months Ended | ||||
| | June 30, | ||||
Cash paid for amounts included in the measurement of lease liabilities: | | 2021 | | 2020 | ||
Operating cash flows for operating leases(1) | | $ | 2,439 | | $ | 1,659 |
Operating cash flows for finance lease | | $ | 84 | | $ | 94 |
Financing cash flows for finance lease | | $ | 242 | | $ | 251 |
__________
| | | | | | |
(In thousands) |
| Three Months Ended | ||||
| | March 31, | ||||
Cash paid for amounts included in the measurement of lease liabilities: | | 2022 | | 2021 | ||
Operating cash flows for operating leases | | $ | 1,221 | | $ | 1,218 |
Operating cash flows for finance lease | | $ | 37 | | $ | 43 |
Financing cash flows for finance lease | | $ | 126 | | $ | 120 |
4. ACQUISITIONS
Fountain Square of Waukegan Land Purchase. In connection with the development of its American Place project in Waukegan, Illinois, the Company entered into an agreement in January 2022 to purchase approximately 10 acres of land adjoining the approximately 30-acre casino site to be leased from the City, providing space for additional parking and access to the casino site from a major road. The land was acquired on March 17, 2022 for total consideration of $7.5 million.
14
4. ACQUISITIONS
Cripple Creek Land and Real Estate Purchase. As part of the development of Chamonix, the Company purchased Carr Manor, a boutique hotel with 14 guest rooms. This transaction closed on March 31, 2021 as an asset purchase for total consideration of $2.8 million. The purchase included 5 parcels of land, which adds to the Company’s land ownership in Cripple Creek by approximately 1.6 acres and provides additional guest parking. The addition of Carr Manor allows Bronco Billy’s to provide overnight accommodations to its guests during the construction of Chamonix, as many of Bronco Billy’s existing hotel rooms are either currently closed, being utilized by construction personnel, or will be demolished as part of the construction of Chamonix.
Additionally, on April 16, 2021, the Company purchased a lot and building near its operations in Cripple Creek, Colorado for $600,000.
5. LONG-TERM DEBT
Long-term debt, related discountspremium (discount) and issuance costs consist of the following:
| | | | | | | | | | | | |
(In thousands) | | June 30, | | December 31, | | March 31, | | December 31, | ||||
| | 2021 | | 2020 | | 2022 | | 2021 | ||||
Revolving Credit Facility due 2026 | | $ | — | | $ | — | | $ | — | | $ | — |
Senior Secured Notes due 2028(1) | | | 310,000 | | | — | | | 410,000 | | | 310,000 |
Senior Secured Notes due 2024(2) | | | — | | | 106,825 | ||||||
Unsecured Loans (CARES Act)(3) | | | 5,606 | | | 5,606 | ||||||
Less: Unamortized discounts and debt issuance costs | |
| (9,072) | |
| (5,173) | ||||||
Less: Unamortized debt issuance costs and premium/(discount), net | |
| (9,410) | |
| (8,381) | ||||||
| |
| 306,534 | |
| 107,258 | | $ | 400,590 | | $ | 301,619 |
Less: Current portion of long-term debt | |
| (1,173) | |
| (426) | ||||||
| | $ | 305,361 | | $ | 106,832 |
__________
(1) |
Debt Refinancing:Senior Secured Notes Issuance.due 2028. On February 12, 2021, the Company refinanced all $106.8 million of its existing outstanding Senior Secured Notes due 2024 (the “Prior Notes”) with the issuance of $310 million aggregate principal amount of 8.25% Senior Secured Notes due 2028 (the “2028 Notes”). The 2028 Notes bear interest at a fixed rate of 8.25% per year and mature on February 15, 2028. There is no mandatory debt amortization prior to the maturity date. Interest on the 2028 Notes is payable on February 15 and August 15 of each year, with the first interest payment due on August 15, 2021.
The net proceeds from the sale of the 2028 Notes were used to redeem all of the Prior Notes (including a 0.90% prepayment premium) and to repurchase all outstanding warrants. Additionally, $180 million of bond proceeds were placed into a construction reserve account to fund construction of Chamonix. Accordingly, this amount is recorded as restricted cash. Net of transaction fees and expenses, approximately $8 million was added to unrestricted cash and equivalents.
15
The 2028Notes bear interest at a fixed rate of 8.25% per year and mature on February 15, 2028. There is no mandatory debt amortization prior to the maturity date. Interest on the Notes is payable on February 15 and August 15 of each year, with the next interest payment due on August 15, 2022.
The Notes are guaranteed, jointly and severally (such guarantees, the “Guarantees”), by each of the Company’s restricted subsidiaries (collectively, the “Guarantors”). The 2028 Notes and the Guarantees are the Company’s and the Guarantors’ general senior secured obligations, subject to the terms of the Collateral Trust Agreement (as defined in the Indenture), ranking senior in right of payment to all of the Company’s and the Guarantors’ existing and future debt that is expressly subordinated in right of payment to the 2028 Notes and the Guarantees, if any. The 2028 Notes and the Guarantees will rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future senior debt.
The 2028 Notes contain representations and warranties, financial covenants, and restrictions on dividends customary for notes of this type. Mandatory prepayments, in whole or in part, of the 2028 Notes will be required upon the occurrence of certain events, including sales of certain assets, upon certain changes of control, or should the Company have certain unused funds in the construction disbursement account following the completion of Chamonix.
15
On or prior to February 15, 2024, the Company may redeem up to 35% of the original principal amount of the 2028 Notes with proceeds of certain equity offerings at a redemption price of 108.25%, plus accrued and unpaid interest to the redemption date. In addition, the Company may redeem some or all of the 2028 Notes prior to February 15, 2024 at a redemption price of 100% of the principal amount of the 2028 Notes, plus accrued and unpaid interest to the redemption date and a “make-whole” premium.
At any time on or after February 15, 2024, the Company may redeem some or all of the 2028 Notes for cash at the following redemption prices:
| | | |
Redemption Periods |
| Percentage Premium | |
February 15, 2024 to February 14, 2025 |
| 104.125 | % |
February 15, 2025 to February 14, 2026 |
| 102.063 | % |
February 15, 2026 and Thereafter | | 100.000 | % |
Prior NotesRevolving Credit Facility due 2026.. On February 2, 2018,7, 2022, the Company sold $100 million of Prior Notesentered into a First Amendment to qualified institutional buyers. On May 10, 2019,Credit Agreement with Capital One, N.A., which, among other things, increased the Company sold an additional $10 million in aggregate principal amount of Prior Notes. Collectively, the Prior Notes were due to mature on February 2, 2024 and included quarterly principal payments as defined and interest based on the greater of the three-month London Interbank Offered Rate (“LIBOR”) or 1.0%, plus a margin rate of 7.0%. The Prior Notes also had a prepayment premium of 0.9% when repaid on February 12, 2021.
The Prior Notes contained certain representations and warranties, events of default, and financial covenants that were more restrictive than the 2028 Notes. For example, the Company was required to maintain a total leverage ratio, which measured Consolidated EBITDA (as defined in the indenture) against outstanding debt. Due to the impact of the COVID-19 pandemic onborrowing capacity under the Company’s business operations in 2020, the Company executed amendments, and paid negotiated amendment fees, to delete the total leverage ratio covenantCredit Agreement, dated as of March 31, June 30, and September 30, among other items.
Revolving Credit Facility. On March 31, 2021, the Company entered into an agreement, which provides for afrom $15.0 million to $40.0 million (the “Credit Facility”). The amended $40.0 million senior secured five-year revolving credit facility matures on March 31, 2026 and includes a letter of credit sub-facility (the “Credit Facility”).sub-facility. The Credit Facility may be used for working capital and other ongoing general purposes.
UntilUnder the completion of Chamonix,First Amendment to Credit Agreement, the interest rate per annum applicable to loans under the Credit Facility willwas amended to be, at the Company’s option, either (i) LIBORthe Secured Overnight Financing Rate (“SOFR”) plus a margin equal to 3.50% and a Term SOFR adjustment of 0.15%, or (ii) a base rate plus a margin equal to 2.50%. AfterUpon completion of Chamonix (as defined in the agreement), the interest rate per annum applicable to loans under the Credit Facility will be reduced to, at the Company’s option, either (i) LIBORSOFR plus a margin equal to 3.00% and a Term SOFR adjustment of 0.15%, or (ii) a base rate plus a margin equal to 2.00%. TheTerms regarding the annual commitment fee, per annum payable is equal to 0.50% of the unused portion of the Credit Facility. The Company has also agreed to pay customary letter of credit fees, if any such lettersand repayment date of credit are issued. The Credit Facility is available, subject to the satisfaction of customary conditions, until March 31, 2026, at which time all amounts borrowed must be repaid.remain unchanged from the original Credit Agreement, dated as of March 31, 2021. As of June 30, 2021,this report date, there were 0 drawn amounts under the Credit Facility or anyand an outstanding lettersstandby letter of credit.credit of $1 million related to the American Place project.
The Credit Facility is equally and ratably secured by the same assets and guarantees securing the 2028 Notes. The Company may make prepayments of any amounts outstanding under the Credit Facility (without any reduction of the revolving commitments) in whole or in part at any time without penalty.
16
The Credit Facility contains a number of negative covenants that, subject to certain exceptions, are substantially similar to the covenants contained in the 2028 Notes. The Credit Facility also includes a requirement that the Company maintain, for the quarters ending March 31, 2021 and June 30, 2021, cash and equivalents totaling at least $20.0 million, excluding any amounts in the construction reserve accounts reserved for construction of Chamonix. The Credit Facility also requires compliance with a financial covenant as of the last day of each fiscal quarter, such that Adjusted EBITDA (as defined) for the trailing twelve-month period must equal or exceed the utilized portion of the Credit Facility, if drawn. The Company was in compliance with both covenantsthis financial covenant as of June 30, 2021.
Unsecured Loans Under the CARES Act. On May 8, 2020, two wholly-owned subsidiaries of the Company executed promissory notes (the “Promissory Notes”) evidencing unsecured loans in the aggregate amount of $5,606,200 through programs established under the CARES Act (the “Loans”) and administered by the U.S. Small Business Administration (the “SBA”). Such funds were principally used to rehire several hundred employees at Rising Star and Bronco Billy’s in advance of, and subsequent to, their reopenings in mid-June. The Loans were made through Zions Bancorporation, N.A. dba Nevada State Bank (the “Lender”), bear interest at a rate of 1.00% per annum, and originally had a two-year term.
Legislation subsequently extended the original maturity dates to May 3, 2025 with no change to the annual interest rate. After a 15-month deferment period for principal and interest payments, the Company is required to make monthly loan payments totaling $128,557 beginning in September 2021. The Loans may be prepaid at any time prior to maturity with no prepayment penalties. Such Loans may be forgiven, either in whole or in part, depending on the amount of such proceeds that are used for certain eligible expenses over a 24-week period, including primarily the payroll and health benefits of employees who might otherwise have been without jobs or health benefits. The Company has through the maturity date of the loans to apply for forgiveness; however, there is no certainty that any or all of such Loans will be forgiven.March 31, 2022.
6. COMMON STOCK WARRANT LIABILITY
On February 12, 2021, the Company used a portion of the proceeds from the 2028 Notes offering to redeem all of its outstanding warrants. As part of the Company’s former Second Lien Credit Facility, which was retired in 2018, the Company granted the second lien lenders 1,006,568 warrants. The settled repurchase price to redeem the warrants was $4.0 million.
The Company previously measured the fair value of the warrants at each reporting period. However, upon redemption of the warrants on February 12, 2021, the fair value was determined based on the negotiated repurchase price of $4.0 million. This resulted in a final incremental fair value adjustment of $1.3 million in the first quarter of 2021.
7. INCOME TAXES
The Company’s effective income tax ratesrate for the three-three-months ended March 31, 2022 and six-months ended June 30, 2021 were 1.5%was 102.0% and 12.2%(6.2%), respectively, compared torespectively. The significant change in the effective income tax rates of 0.1% and (0.8)% for the corresponding prior-year periods. The Company’s tax rates differ from the statutory rate of 21.0%was primarily due to the Company’s projections for pre-tax book income in 2022, the effects of tax amortization on indefinite lived intangibles in 2022, valuation allowances, against net deferred tax assets, as well asand certain permanent item differences between tax and financial reporting purposes. The Company expects that it will reverse the tax benefit that was booked, as of March 31, 2022, in future interim periods as pre-tax book income offsets the year-to-date, pre-tax loss.
The Company continues to assess the realizability of deferred tax assets (“DTAs”) and concluded that it has not met the “more likely than not” threshold. As of March 31, 2022, the Company continues to provide a valuation allowance against its DTAs that cannot be offset by existing deferred tax liabilities. In accordance with Accounting Standards Codification 740 (“ASC 740”), this assessment has taken into consideration the jurisdictions in which these DTAs reside. The valuation allowance against DTAs has no effect on the actual taxes paid or owed by the Company.
16
In the future, if it is determined that we meet the “more likely than not” threshold of utilizing our deferred tax assets as required under ASC 740, we may reverse some or all of our valuation allowance. We will continue to evaluate the need for the valuation allowance during each interim period in 2022. Should we continue on our trend of improving net income results in recent years, absent any unforeseen impact to our operations, we expect that the valuation allowance could be reversed by the end of 2022. Such valuation allowance and its potential reversal has no impact on the actual income taxes paid or the Company’s financial situation.
8.7. COMMITMENTS AND CONTINGENCIES AND SUBSEQUENT EVENT
Litigation
The Company is party to a number of pending legal proceedings related to matters that occurred in the normal course of business. Management does not expect that the outcome of any such proceedings, either individually or in the aggregate, will have a material effect on the Company’s financial position, results of operations and cash flows.
17
Options to Lease Land
Option Agreement for Public Trust Tidelands Lease in Mississippi. The Company has been evaluating the potential construction of an additional hotel tower and related amenities at Silver Slipper, a portion of which would extend out over the adjoining Gulf of Mexico. In contemplation for such potential future expansion, the Company paid $5,000 for an option agreement – entered into by the Company on June 8, 2021 and approved by the Governor of Mississippi on July 13, 2021 – for a 30-year lease of approximately a half-acre of tidelands, with a term extension for another 30 years, if exercised. This initial six-month option can be renewed for 3 additional six-month incrementsperiods, with the payment of $5,000 uponfor each extension. In November 2021, the Company paid an additional $5,000 to exercise its first six-monthoption renewal. extension through the end of May 2022. This option was further extended through the end of November 2022, when the Company paid an additional $5,000 to exercise its second six-month option extension in the second quarter of 2022.
Upon commencement of the land lease, and for the first 18 months or until the beginning of the next six-month period after the opening of commercial operations on the leased premises, whichever occurs sooner, rent during construction would be $10,000 for each six-month period until the earlier of six(“Construction Rent”). Construction Rent would terminate no later than 18 months after hotel operations have started or December 31, 2022.the commencement of the lease. Thereafter, annual rent would be $105,300, with adjustments, based on the consumer price index aton each anniversary. Before construction can commence, additional entitlements are necessary, including certain environmental approvals. There can be no certainty that the tidelands lease option will be exercised or that the contemplated Silver Slipper expansion will be built.
9. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS’ EQUITYContracted Sports Wagering in Illinois
Earnings (Loss) Per Share
In May 2022, the Company entered into an agreement with an affiliate of Circa Sports to jointly develop and manage on-site sportsbooks at both The table below reconciles basicTemporary and diluted income (loss)American Place casinos in Illinois. Circa Sports currently operates at Circa Resort & Casino in Las Vegas, and offers online sports wagering in several states. In addition to the on-site sportsbook, Circa Sports will utilize the Company’s expected mobile sports skin to conduct Internet sports wagering throughout the state. In exchange for such rights, the Company subsequently received a market access fee of $5 million in May 2022, and will also receive a percentage of revenues (as defined) totaling at least $5 million per shareyear, on an annualized basis, once Circa Sports launches its mobile sports skin in Illinois, subject to customary regulatory approvals. The term of common stock:the agreement is for eight years, with 2 four-year extension opportunities at the option of Circa Sports.
| | | | | | | | | | | | |
(In thousands) | | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Numerator: |
| |
|
| |
|
| |
|
| |
|
Net income (loss) – basic | | $ | 5,484 | | $ | (6,703) | | $ | 2,039 | | $ | (11,061) |
Adjustment for assumed conversion of warrants | | | — | | | — | | | — | | | (1,562) |
Net income (loss) – diluted | | $ | 5,484 | | $ | (6,703) | | $ | 2,039 | | $ | (12,623) |
| | | | | | | | | | | | |
Denominator: | |
|
| |
|
| |
|
| |
|
|
Weighted-average common and common share equivalents - basic | |
| 34,156 | |
| 27,079 | |
| 30,776 | |
| 27,077 |
Potential dilution from share-based awards | | | 2,472 | | | — | | | 2,380 | | | — |
Potential dilution from assumed conversion of warrants | |
| — | |
| — | |
| — | |
| 182 |
Weighted-average common and common share equivalents - diluted | |
| 36,628 | |
| 27,079 | |
| 33,156 | |
| 27,259 |
Anti-dilutive share-based awards and warrants excluded from the calculation of diluted loss per share | |
| 172 | |
| 4,204 | |
| 172 | |
| 3,198 |
Stockholders’ Equity
On March 29, 2021, the Company completed an underwritten public offering (the “Offering”) for a total of 6,917,250 shares of its common stock, par value $0.0001 per share (the “Common Stock”), which includes 902,250 shares of Common Stock sold pursuant to the underwriters’ exercise of an option to purchase additional shares of Common Stock to cover over-allotments. The price to the public in the Offering was $6.65 per share of Common Stock, and net proceeds were approximately $43.0 million after deducting underwriting discounts, commissions and offering expenses. The Company intends to use the net proceeds from this offering for general corporate purposes, including its current and future development projects.
1817
8. EARNINGS (LOSS) PER SHARE AND STOCKHOLDERS’ EQUITY
Earnings (Loss) Per Share
The table below reconciles basic and diluted earnings (loss) per share of common stock:
| | | | | | |
(In thousands) | | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Numerator: |
| |
|
| |
|
Net income (loss) ─ basic | | $ | 110 | | $ | (3,445) |
Net income (loss) ─ diluted | | $ | 110 | | $ | (3,445) |
| | | | | | |
Denominator: | |
|
| |
|
|
Weighted-average common and common share equivalents ─ basic | |
| 34,262 | |
| 27,357 |
Potential dilution from share-based awards | | | 2,361 | | | — |
Weighted-average common and common share equivalents ─ diluted | |
| 36,623 | |
| 27,357 |
Anti-dilutive share-based awards excluded from the calculation of diluted loss per share | |
| 411 | |
| 3,140 |
10.9. SHARE-BASED COMPENSATION
On May 19, 2021, stockholders approved an amendment to the 2015 Equity Incentive Plan (the “2015 Plan”) to increase the number of shares available for issuance by 2,000,000 shares.
Restricted Stock Awards.Performance-Based Shares. On May 19, 2021, theThe Company issued to non-executive members of its Board of Directors, as compensation for their annual service, a total of 31,512 restricted shares under the 2015 Plan with a one-year vesting period. Additionally, the Company issued 69,975 performance-based shares in January 2021 and a total of 20,75036,849 performance-based shares to three3 of the Company’s executives in May 2021.during the first quarter of 2022. The vesting for these performance-based shares is based on the compounded annual growth rate of the Company’s Adjusted EBITDA and Free Cash Flow Per Share, as defined, for the three-year periods ending December 31, 2021,2022, December 31, 2022,2023, and December 31, 2023.2024. For the 20212022 period, one-sixthone-sixth of such performance-based shares will vest on the anniversary date of the award if the Company’s annual Adjusted EBITDA for 20212022 reflects at least 10% per annum growth since 2018,2019, and one-sixth of such performance-based shares will vest on the anniversary date if the Company’s annual Free Cash Flow Per Share for 20212022 reflects at least 12% per annum growth since 2018.2019. Vesting of the performance-based shares is similar for the 2023 and 2024 periods.
On March 14, 2022, the Company issued 23,325 shares of stock to 1 of the Company’s executives for having previously met performance-based metrics in 2021 pertaining to Adjusted EBITDA growth and 2023 periods.Free Cash Flow Per Share growth.
As of June 30, 2021,March 31, 2022, the Company had 1,725,4781,561,690 share-based awards authorized by shareholders and available for grant from the Company’s 2015 Equity Incentive Plan.
The following table summarizes information related to the Company’s common stock options as of June 30, 2021:March 31, 2022:
| | | | | | | | | | |
|
| |
| Weighted |
| |
| Weighted | ||
| | Number | | Average | | Number | | Average | ||
| | of Stock | | Exercise | | of Stock | | Exercise | ||
| | Options | | Price | | Options | | Price | ||
Options outstanding at January 1, 2021 |
| 3,183,708 | | $ | 1.71 | |||||
Options outstanding at January 1, 2022 |
| 3,221,956 | | $ | 2.19 | |||||
Granted |
| 295,620 | |
| 7.17 |
| 141,939 | |
| 9.64 |
Exercised |
| (185,951) | |
| 2.00 |
| (79,750) | |
| 1.74 |
Canceled/Forfeited |
| (41,333) | |
| 1.81 |
| — | |
| — |
Expired |
| — | |
| — |
| — | |
| — |
Options outstanding at June 30, 2021 |
| 3,252,044 | | $ | 2.19 | |||||
Options exercisable at June 30, 2021 |
| 2,483,423 | | $ | 1.64 | |||||
Options outstanding at March 31, 2022 |
| 3,284,145 | | $ | 2.53 | |||||
Options exercisable at March 31, 2022 |
| 2,562,961 | | $ | 1.70 |
18
Components of compensation expense are as follows:
| | | | | | |
(In thousands) | | Three Months Ended | ||||
| | March 31, | ||||
Compensation Expense | | 2022 | | 2021 | ||
Stock options | | $ | 218 | | $ | 103 |
Restricted and performance-based shares | |
| 125 | |
| 21 |
| | $ | 343 | | $ | 124 |
Share-based compensation expense totaled $199,000 and $103,000 for the three-months ended June 30, 2021 and 2020, respectively, and $323,000 and $186,000 for the six-months ended June 30, 2021 and 2020, respectively. The expense for 2021 includes restricted shares issued to non-executive members of the Company’s Board of Directors as compensation for their annual service, and includes estimates for certain performance-based shares that were issued to the Company’s executives as noted above.
As of June 30, 2021,March 31, 2022, there was approximately $1.9$2.1 million of unrecognized compensation cost related to unvested stock options previously granted that is expected to be recognized over a weighted-average period of approximately 2.52.3 years. As of such date, there was also $0.7 million of unrecognized compensation cost related to unvested restricted and performance shares, which is expected to be recognized over a weighted-average period of 1.6 years.
10. SEGMENT REPORTING AND DISAGGREGATED REVENUE
The Company manages its reporting segments based on geographic regions within the United States and type of income. Its current operating segments, as of 2022, are: Mississippi, Indiana, Colorado, Nevada, and Contracted Sports Wagering. The Company’s management views the states where each of its casino resorts are located as operating segments, in addition to its contracted sports wagering segment. Operating segments are aggregated based on geography, economic characteristics, types of customers, types of services and products provided, the regulatory environments in which they operate, and their management and reporting structure.
The Company utilizes Adjusted Segment EBITDA as the measure of segment profit in assessing performance and allocating resources at the reportable segment level. Adjusted Segment EBITDA is defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, preopening expenses, impairment charges, asset write-offs, recoveries, gain (loss) from asset disposals, project development and acquisition costs, non-cash share-based compensation expense, and corporate-related costs and expenses that are not allocated to each segment.
19
11. SEGMENT REPORTING AND DISAGGREGATED REVENUE
The Company manages its reporting segments based on geographic regions within the United States and type of income. Those 5 segments, as of 2021, are: Mississippi, Indiana, Colorado, Nevada, and Contracted Sports Wagering. The Company’s management views the states where each of its casino resorts are located as operating segments, in addition to its contracted sports wagering 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. During the first quarter of 2021, since it is a significantly different business than its core casino business, the Company changed the aggregation of its operations to present Contracted Sports Wagering as a separate segment. This change of the reportable segments reflects realignment within the Company stemming from the expansion of the Company’s contracted on-site and online sports wagering skins. Additionally, this new segment breakout aims to enhance transparency of operations and allows for a more appropriate valuation of the Company’s various business components.
The Company utilizes Adjusted Segment EBITDA as the measure of segment profit in assessing performance and allocating resources at the reportable segment level. Adjusted Segment EBITDA is defined as earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, pre-opening expenses, impairment charges, asset write-offs, recoveries, gain (loss) from asset disposals, project development and acquisition costs, non-cash share-based compensation expense, and corporate-related costs and expenses that are not allocated to each segment. As a result of the change in reportable segments described above, the Company has recast previously-reported segment information to conform to the current presentation in the following tables for enhanced comparability, which had no effect on previously reported results of operations or financial position.
The following tables present the Company’s segment information:
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended June 30, 2021 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 16,872 | | $ | 7,886 | | $ | 5,575 | | $ | 4,314 | | $ | — | | $ | 34,647 |
Food and beverage | |
| 5,561 | |
| 939 | |
| 624 | |
| 316 | |
| — | |
| 7,440 |
Hotel | |
| 1,268 | |
| 1,131 | |
| 111 | |
| — | |
| — | |
| 2,510 |
Other operations | |
| 538 | |
| 621 | |
| 72 | |
| 85 | |
| 1,529 | |
| 2,845 |
| | $ | 24,239 | | $ | 10,577 | | $ | 6,382 | | $ | 4,715 | | $ | 1,529 | | $ | 47,442 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 8,983 | | $ | 2,666 | | $ | 1,839 | | $ | 1,412 | | $ | 1,500 | | $ | 16,400 |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (1,829) |
Corporate expenses | | | | | | | | | | | | | | | | |
| (1,472) |
Project development costs | | | | | | | | | | | | | | | | |
| (126) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (568) |
Stock-based compensation | | | | | | | | | | | | | | | | | | (199) |
Operating income | | | | | | | | | | | | | | | | |
| 12,206 |
Other (expense) income: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (6,670) |
Gain on extinguishment of debt | | | | | | | | | | | | | | | | |
| 30 |
| | | | | | | | | | | | | | | | | | (6,640) |
Income before income taxes | | | | | | | | | | | | | | | | | | 5,566 |
Income tax provision | | | | | | | | | | | | | | | | |
| 82 |
Net income | | | | | | | | | | | | | | | | | $ | 5,484 |
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended March 31, 2022 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 14,683 | | $ | 6,716 | | $ | 3,631 | | $ | 4,054 | | $ | — | | $ | 29,084 |
Food and beverage | |
| 4,939 | |
| 873 | |
| 420 | |
| 279 | |
| — | |
| 6,511 |
Hotel | |
| 1,222 | |
| 822 | |
| 135 | |
| — | |
| — | |
| 2,179 |
Other operations, including | |
| 469 | |
| 225 | |
| 47 | |
| 78 | |
| 2,830 | |
| 3,649 |
| | $ | 21,313 | | $ | 8,636 | | $ | 4,233 | | $ | 4,411 | | $ | 2,830 | | $ | 41,423 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 5,950 | | $ | 1,138 | | $ | (319) | | $ | 828 | | $ | 2,767 | | $ | 10,364 |
Other operating expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (1,792) |
Corporate expenses | | | | | | | | | | | | | | | | |
| (1,967) |
Project development costs | | | | | | | | | | | | | | | | |
| (165) |
Preopening costs | | | | | | | | | | | | | | | | | | (786) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (8) |
Stock-based compensation | | | | | | | | | | | | | | | | | | (343) |
Operating income | | | | | | | | | | | | | | | | |
| 5,303 |
Other expenses: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (6,399) |
Loss on modification of debt | | | | | | | | | | | | | | | | |
| (4,406) |
| | | | | | | | | | | | | | | | | | (10,805) |
Loss before income taxes | | | | | | | | | | | | | | | | | | (5,502) |
Income tax benefit | | | | | | | | | | | | | | | | |
| (5,612) |
Net income | | | | | | | | | | | | | | | | | $ | 110 |
20
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended June 30, 2020 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 6,645 | | $ | 1,824 | | $ | 1,486 | | $ | 1,000 | | $ | — | | $ | 10,955 |
Food and beverage | |
| 1,757 | |
| 91 | |
| 88 | |
| 58 | |
| — | |
| 1,994 |
Hotel | |
| 560 | |
| 118 | |
| 41 | |
| — | |
| — | |
| 719 |
Other operations | |
| 160 | |
| 174 | |
| 18 | |
| 28 | |
| 463 | |
| 843 |
| | $ | 9,122 | | $ | 2,207 | | $ | 1,633 | | $ | 1,086 | | $ | 463 | | $ | 14,511 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 1,200 | | $ | (1,361) | | $ | (199) | | $ | (562) | | $ | 447 | | $ | (475) |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (1,980) |
Corporate expenses | | | | | | | | | | | | | | | | | | (910) |
Project development costs | | | | | | | | | | | | | | | | |
| (259) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (439) |
Stock-based compensation | | | | | | | | | | | | | | | | |
| (103) |
Operating loss | | | | | | | | | | | | | | | | |
| (4,166) |
Other expenses: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (2,447) |
Adjustment to fair value of warrants | | | | | | | | | | | | | | | | | | (94) |
| | | | | | | | | | | | | | | | | | (2,541) |
Loss before income taxes | | | | | | | | | | | | | | | | | | (6,707) |
Income tax benefit | | | | | | | | | | | | | | | | |
| (4) |
Net loss | | | | | | | | | | | | | | | | | $ | (6,703) |
21
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Six Months Ended June 30, 2021 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 32,912 | | $ | 14,601 | | $ | 10,839 | | $ | 8,359 | | $ | — | | $ | 66,711 |
Food and beverage | |
| 10,255 | |
| 1,686 | |
| 1,037 | |
| 563 | |
| — | |
| 13,541 |
Hotel | |
| 2,439 | |
| 2,050 | |
| 232 | |
| — | |
| — | |
| 4,721 |
Other operations | |
| 990 | |
| 830 | |
| 178 | |
| 161 | |
| 2,518 | |
| 4,677 |
| | $ | 46,596 | | $ | 19,167 | | $ | 12,286 | | $ | 9,083 | | $ | 2,518 | | $ | 89,650 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 16,613 | | $ | 3,799 | | $ | 3,548 | | $ | 2,636 | | $ | 2,477 | | $ | 29,073 |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (3,629) |
Corporate expenses | | | | | | | | | | | | | | | | | | (3,376) |
Project development costs | | | | | | | | | | | | | | | | |
| (173) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (672) |
Stock-based compensation | | | | | | | | | | | | | | | | |
| (323) |
Operating income | | | | | | | | | | | | | | | | |
| 20,900 |
Other expenses: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (11,126) |
Loss on extinguishment of debt | | | | | | | | | | | | | | | | |
| (6,104) |
Adjustment to fair value of warrants | | | | | | | | | | | | | | | | | | (1,347) |
| | | | | | | | | | | | | | | | | | (18,577) |
Income before income taxes | | | | | | | | | | | | | | | | | | 2,323 |
Income tax expense | | | | | | | | | | | | | | | | |
| 284 |
Net income | | | | | | | | | | | | | | | | | $ | 2,039 |
22
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Six Months Ended June 30, 2020 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 15,715 | | $ | 6,852 | | $ | 5,491 | | $ | 3,648 | | $ | — | | $ | 31,706 |
Food and beverage | |
| 6,436 | |
| 1,244 | |
| 855 | |
| 449 | |
| — | |
| 8,984 |
Hotel | |
| 1,530 | |
| 976 | |
| 187 | |
| — | |
| — | |
| 2,693 |
Other operations | |
| 534 | |
| 382 | |
| 81 | |
| 97 | |
| 887 | |
| 1,981 |
| | $ | 24,215 | | $ | 9,454 | | $ | 6,614 | | $ | 4,194 | | $ | 887 | | $ | 45,364 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 3,032 | | $ | (2,851) | | $ | (669) | | $ | (953) | | $ | 836 | | $ | (605) |
Other operating costs and expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | | | (4,020) |
Corporate expenses | | | | | | | | | | | | | | | | | | (2,029) |
Project development costs | | | | | | | | | | | | | | | | |
| (315) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (439) |
Stock-based compensation | | | | | | | | | | | | | | | | |
| (186) |
Operating loss | | | | | | | | | | | | | | | | |
| (7,594) |
Other (expense) income: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (4,938) |
Adjustment to fair value of warrants | | | | | | | | | | | | | | | | | | 1,562 |
| | | | | | | | | | | | | | | | | | (3,376) |
Loss before income taxes | | | | | | | | | | | | | | | | | | (10,970) |
Income tax expense | | | | | | | | | | | | | | | | |
| 91 |
Net loss | | | | | | | | | | | | | | | | | $ | (11,061) |
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended March 31, 2021 | ||||||||||||||||
| | | | | | | | | | Contracted | | | ||||||
| | | | | | | | | | Sports | | | ||||||
| | Mississippi | | Indiana | | Colorado | | Nevada | | Wagering | | Total | ||||||
Revenues | | | | | | | | | | | | | | | | | | |
Casino | | $ | 16,040 | | $ | 6,715 | | $ | 5,264 | | $ | 4,045 | | $ | — | | $ | 32,064 |
Food and beverage | |
| 4,693 | |
| 748 | |
| 413 | |
| 247 | |
| — | |
| 6,101 |
Hotel | |
| 1,170 | |
| 919 | |
| 122 | |
| — | |
| — | |
| 2,211 |
Other operations, | |
| 453 | |
| 208 | |
| 106 | |
| 76 | |
| 989 | |
| 1,832 |
| | $ | 22,356 | | $ | 8,590 | | $ | 5,905 | | $ | 4,368 | | $ | 989 | | $ | 42,208 |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA | | $ | 7,630 | | $ | 1,134 | | $ | 1,710 | | $ | 1,224 | | $ | 976 | | $ | 12,674 |
Other operating expenses: | | | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | | | | | | | | | | | | | | |
| (1,800) |
Corporate expenses | | | | | | | | | | | | | | | | | | (1,905) |
Project development costs | | | | | | | | | | | | | | | | |
| (47) |
Loss on disposal of assets, net | | | | | | | | | | | | | | | | | | (104) |
Stock-based compensation | | | | | | | | | | | | | | | | |
| (124) |
Operating income | | | | | | | | | | | | | | | | |
| 8,694 |
Other expenses: | | | | | | | | | | | | | | | | | | |
Interest expense, net | | | | | | | | | | | | | | | | |
| (4,456) |
Loss on extinguishment of debt | | | | | | | | | | | | | | | | |
| (6,134) |
Adjustment to fair value of warrants | | | | | | | | | | | | | | | | | | (1,347) |
| | | | | | | | | | | | | | | | | | (11,937) |
Loss before income taxes | | | | | | | | | | | | | | | | | | (3,243) |
Income tax provision | | | | | | | | | | | | | | | | |
| 202 |
Net loss | | | | | | | | | | | | | | | | | $ | (3,445) |
| | | | | | |
(In thousands) | | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Total Assets | | | | | | |
Mississippi | | $ | 78,465 | | $ | 85,838 |
Indiana | |
| 32,414 | |
| 34,857 |
Colorado | |
| 308,475 | |
| 258,436 |
Nevada | |
| 11,810 | |
| 13,091 |
Contracted Sports Wagering | | | 3,410 | | | 2,168 |
Corporate and Other(1) | |
| 129,956 | |
| 79,452 |
| | $ | 564,530 | | $ | 473,842 |
__________
(1)Includes $15.3 million related to American Place, which is expected to open in Fall 2022.
| | | | | | |
(In thousands) | | June 30, | | December 31, | ||
|
| 2021 |
| 2020 | ||
Total Assets | | | | | | |
Mississippi | | $ | 87,210 | | $ | 83,809 |
Indiana | |
| 36,584 | |
| 37,798 |
Colorado | |
| 233,063 | |
| 44,961 |
Nevada | |
| 13,747 | |
| 13,248 |
Contracted Sports Wagering | | | 1,859 | | | 1,329 |
Corporate and Other | |
| 95,691 | |
| 31,471 |
| | $ | 468,154 | | $ | 212,616 |
2321
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions that may cause our actual results to differ materially from those discussed in the forward-looking statements. This discussion should be read in conjunction with our historical financial statements and related notes thereto and the other disclosures contained elsewhere in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes for the fiscal year ended December 31, 2020,2021, which were included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 12, 2021.15, 2022. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. Full House Resorts, Inc., together with its subsidiaries, may be referred to as “Full House,” the “Company,” “we,” “our” or “us,” except where stated or the context otherwise indicates.
Executive Overview
Our primary business is the ownership and/or operation of casino and related hospitality and entertainment facilities, which includes offering casino gambling, hotel accommodations, dining, golf, RV camping, sports betting, entertainment, and retail outlets, among other amenities. We currently operate five casinos: four on real estate that we own or operate five casino properties in four states – Mississippi, Colorado, Indianalease and Nevada – andone located within a hotel owned by a third party. We are currently constructing a sixth casino hotel in Colorado. We view our Mississippi and Indiana properties as distinct operating segments, both of our Colorado properties (including our under-constructiontwo additional properties: Chamonix Casino Hotel (“Chamonix”) project) as an operating segment,in Cripple Creek, Colorado; and both of our Nevada properties as an operating segment.The Temporary by American Place (“The Temporary”) in Waukegan, Illinois. We also benefit from sixseven permitted sports “skins” that we are allowed, or will be allowed, to operate,operate: three in Colorado, and three in Indiana. We have contracted with otherIndiana, and one in Illinois that we expect to be able to operate upon the opening of The Temporary, pending customary regulatory approvals. Other companies tooperate or will operate these online sports wagering sites under their own brands, in exchange forpaying us a percentage of revenues, as defined, subject to annual minimum amounts. As
In December 2021, we were selected by the Illinois Gaming Board (“IGB”) to develop our American Place project in Waukegan, Illinois, a northern suburb of this report date, fiveChicago. While the permanent American Place facility is under construction, we intend to operate a temporary casino facility named The Temporary. In May 2022, we commenced construction of our six permitted skins have commenced operations. We expect our last remaining skinThe Temporary, which is expected to begin operationsopen in Indiana in the coming months.
During the first quarter of 2021, because it is a significantly different business from our core casinos, we changed the aggregation of our operationsFall 2022, subject to present Contracted Sports Wagering as a separate segment. This enhances transparency of our operations and allows for a more appropriate valuation of our various business components.customary regulatory approvals.
The following table identifies our five segments, along with properties and their locations:
| | |
Segments and Properties | | Locations |
Colorado | | |
Bronco Billy’s Casino and Hotel |
| Cripple Creek, CO (near Colorado Springs) |
Chamonix Casino Hotel (under construction) | | Cripple Creek, CO (near Colorado Springs) |
Illinois | | |
The Temporary and American Place (under construction) | | Waukegan, IL (northern suburb of Chicago) |
Indiana | | |
Rising Star Casino Resort |
| Rising Sun, IN (near Cincinnati) |
Mississippi | | |
Silver Slipper Casino and Hotel |
| Hancock County, MS (near New Orleans) |
Nevada | | |
Grand Lodge Casino |
| Incline Village, NV |
Stockman’s Casino |
| Fallon, NV (one hour east of Reno) |
Contracted Sports Wagering | | |
Three sports wagering websites (“skins”) | | Colorado |
Three sports wagering websites (“skins”) | | Indiana |
One sports wagering website (“skin”) upon opening of The Temporary | | Illinois |
22
Our financial results are dependent upon the number of patrons that we attract to our properties and the amounts those guests spend per visit. While we provide credit at some of our casinos where we are permitted to by local gaming regulations, most of our revenues are cash-based, through customers wageringwager with cash or payingpay for non-gaming services with cash or credit cards. Our revenues are primarily derived from slot machines, but also include table games, keno, and sports betting. In addition, we derivereceive a significant amount of revenue from our hotels and our food and beverage outlets. We also derive revenues from our golf course at Rising Star, our recreational vehicle parks (“RV parks”) as owned at Rising Star and managed at Silver
24
Slipper, our ferry service at Rising Star, and retail outlets and entertainment. We often provide hotel rooms, food and beverages, entertainment, ferry usage, and golf privileges to customers on a complimentary basis; the value of such services areis included as revenue in those categories, offset by contra-revenue in the casino revenue category. As a result, the casino revenues in our financial statements reflect patron gaming wins and losses, reduced by the retail value of complimentary services, the value of free play provided to customers, the value of points earned by casino customers that can be redeemed for services or free play, and accrualsadjustments for certain progressive jackpots offered by the Company.
We may experience significant fluctuations in our quarterly operating results due to seasonality, variations in gaming hold percentages and other factors. Consequently, our operating results for any quarter or year are not necessarily comparable and may not be indicative of future periods’ results.
Our market environment is highly competitive and capital-intensive. Nevertheless, there are significant restrictions and barriers to entry vis-à-vis opening new casinos in most of the markets in which we operate. We rely on the ability of our properties to generate operating cash flow to pay interest, repay debt, and fund maintenance and certain growth-related capital expenditures. We continuously focus on improving the operating margins of our existing properties through a combination of revenue growth and expense management. We also assess growth and development opportunities, which include capital investments at our existing properties, the development of new properties, and the acquisition of existing properties.
Recent Developments
COVID-19 Pandemic Update. In March 2020, the World Health Organization declared the outbreak of the novel coronavirus as aThe COVID-19 pandemic (“COVID-19”). Although COVID-19 continues to spread throughout the U.S.evolve. Governmental authorities continue to update their precautionary measures and the world, vaccines designedpromote vaccination programs to inhibit the severity andmanage the spread of the virus as different variants of the virus surface and subside. We have generally benefited from the gradual relaxation of pandemic-related business restrictions since 2021.
However, the COVID-19 are now being distributed. As a result, the number of newly-reported cases has declinedpandemic, and certain precautionary and stimulus measures, have created economic uncertainty both in the U.S. from levels seenUnited States and globally, as well as significant volatility in, late 2020 and early 2021, though new variantsdisruption to, financial markets, labor markets and supply chains. Global supply chain disruptions have resulted in a reversal ofshipping delays, increased shipping costs, supply shortages, and inflationary pressures, including overall increases in prices such as fuel, food, and building materials. These increased costs and supply shortages continued to put additional constraints on our operating business and our construction projects for the three months ended March 31, 2022. We do not know when these trends in recent weeks. The new Delta variant of COVID-19, which appearscost constraints and supply chain issues will materially alleviate and, accordingly, they may continue to be the most transmissible variant to date, has begun to spread globally. COVID-19 has resultedimpact our existing business and our construction projects in the implementationnear term.
At the same time, government stimulus checks and infrastructure packages can positively affect our businesses. The timing and scale of significant, government-imposed measuressuch packages, however, is inconsistent amongst periods and such government programs are uncertain to prevent or reduce its spread, including travel restrictions, business restrictions, closing of borders, “shelter-in-place” orders and business closures. In March 2020, pursuant to state government orders to preventcontinue into the spread of COVID-19, we temporarily closed all of our casino properties. As a result, we experienced a material declinefuture at the same levels that they have in our revenues until our properties reopened when permitted by local authorities in May and June 2020.the past, if at all.
During the shutdown period, we evaluated labor, marketing and other costs at our businesses soWe believe that upon reopening, our properties could reopen with significantly lower operating costs. As a result, our operating performance since reopening in mid-2020 has been stronger than pre-pandemic levels, despite capacity restrictions throughout our casinos and in our restaurants and certain pandemic-related costs. The extent to which our financial and operating results in future periods may be affected by COVID-19, including the new Delta variant, will largely depend on future developments, which are highly uncertain and cannot be accurately predicted at this time. Significant uncertainties include the ability to operate; new information which may emerge concerning new strains of COVID-19 and their severity; vaccination rates among the population; the effectiveness of COVID-19 vaccines against the Delta variant; any additional actions imposed by governmental authorities to contain COVID-19 and the Delta variant or minimize its impact; increased operating costs and capacity restrictions as a result of COVID-19; increased costs for materials due to supply chain constraints; and general economic conditions, among others.
The disruptions arising from COVID-19 continued to impact us during the six months ended June 30, 2021. The duration and intensity of this global health emergency and related disruptions are uncertain. While each of our properties are currently open and operating restrictions continued to ease during the second quarter of 2021, the current economic and regulatory environment in each of our jurisdictions continues to evolve. For example, mask mandates for all employees and guests were re-introduced at our Nevada properties in July 2021 in compliance with recent orders from Nevada state government officials. The manner in which governments will react as the global and regional impact of the COVID-19 pandemic evolves, the direct and indirect impacts on global macro-economic conditions, as well as conditions specific to us, are becoming more difficult to isolate or quantify. In addition, these direct and indirect factors can make it difficult to isolate and quantify the portion of our costs that are a direct result of the pandemic versus costs arising from factors that may have been influenced by the pandemic, including supply chain constraints, inflationary pressures and increased prices, and changes over time is uncertain,in the spending pattern of customers. These factors and such actions could significantly altertheir effects on our current operations.operations may persist for a longer period, even after the COVID-19 pandemic has subsided.
2523
Debt Refinancing. Financing.On February 12, 2021,7, 2022, we issued $310closed a private offering of $100 million aggregate principal amount of newadditional 8.25% Senior Secured Notes due 2028 Notes.(the “Additional Notes”), which sold at a price of 102.0% of such principal amount. Proceeds from the sale of the Additional Notes are being used: (i) to develop, equip and open The proceeds were usedTemporary, which we intend to redeem all $106.8 million of our senior secured notes due 2024 (the “Prior Notes”)operate while we design and to repurchase all outstanding warrants. Additionally, $180 million of bond proceeds were placed in a construction reserve account to fund our Chamonix project, including designing, developing, constructing, equipping and openingconstruct the project. Proceeds were also usedpermanent American Place facility, (ii) to pay the transaction fees and expenses related toof the offering, leaving approximately $8 million added to our unrestricted cash balances.
Underwritten Equity Offering. On March 29, 2021, pursuant to an underwritten public offering (the “Equity Offering”), we issued an aggregateoffer and sale of 6,917,250 shares of our common stock, par value $0.0001 per share (the “Common Stock”), including 902,250 shares of Common Stock sold pursuant to the Representative’s exercise of a “greenshoe” option to purchase additional shares of Common Stock to cover over-allotments. The price to the public in the Equity Offering was $6.65 per share of Common Stock. The gross proceeds to the Company were approximately $46.0 million, before deducting underwriting discountsAdditional Notes and commissions and our estimated offering expenses. We intend to use the net proceeds from the Equity Offering(iii) for development, working capital and general corporate purposes.
New Credit Facility. On March 31, 2021, Also in February 2022, we entered into a credit agreement among Full House Resorts, Inc., as borrower, the lenders party thereto, and Capital One, National Association, as administrative agent. The credit agreement provides for a $15.0 million, five-year,amended our senior secured revolving credit facility agreement to, among other things, increase its size from $15.0 million to $40.0 million. As of this report date, there were no drawn amounts under the Credit Facility and includes ait has been solely used to provide an outstanding standby letter of credit sub-facility, which may be used for working capital and other ongoing general purposes.
Chamonix Casino Hotel Project. In 2018, we began planning and design work on Chamonix, a new and distinct luxury hotel and casino located adjacent to our existing Bronco Billy’s casino. Reflecting changes madeof $1 million related to the state’s gaming laws in November 2020, including the elimination of betting limits and the approval of new table games, we increased the size of Chamonix by 67% to approximately 300 luxury guest rooms and suites, from our previously-planned 180 guest rooms. Such plans were approved by the Cripple Creek Historic Preservation Commission and Cripple Creek City Council in January and February 2021.
We recently completed the major portion of the on-site utility work. Installation of micro-piles to support the foundations are approximately 25% complete. Substantial completion of the project is expected in the fourth quarter of 2022 and will include a new casino, approximately 300 luxury guest rooms and suites, parking garage, meeting and entertainment space, outdoor rooftop pool, spa, and fine-dining restaurant. It is still relatively early in the construction process, so estimates of cost and completion dates still contain substantial uncertainty.
The development plan for our Chamonix site allows us to add an additional hotel wing. We are currently evaluating whether to build this additional hotel wing now, given the ease to do so while we construct the broader Chamonix project. That additional wing, if constructed, would increase the total capacity of our hotel by 23%, to approximately 370 guestrooms. We believe that it could be funded, along with the rest of the project, from our existing cash balances, which totaled $281.5 million at the end of the second quarter. Such addition requires approvals from the Cripple Creek Historic Preservation Commission and Cripple Creek City Council. There can be no assurance that we will obtain such approvals and choose to further expand our ChamonixAmerican Place project.
Sports Wagering in Colorado and IndianaIllinois. Under state laws,In May 2022, we are permitted a totalentered into an agreement with an affiliate of sixCirca Sports to jointly develop and manage on-site sportsbooks at both The Temporary and American Place. Circa Sports currently operates at Circa Resort & Casino in Las Vegas, and offers online sports wagering “skins,” three in Colorado and threeseveral states. In addition to the on-site sportsbook, Circa Sports will utilize our expected mobile sports skin in Indiana. As of March 31, 2021, three of our sixIllinois to conduct Internet sports wagering skins had commenced operations. The fourththroughout the state upon the opening of the Temporary, subject to customary regulatory approvals. In exchange for such rights, we received a market access fee of $5 million in May 2022 and fifth skins commenced operations on April 1and April 23, 2021, respectively. We believe that the Company’s last remaining skin will commence operations in the coming months. Wealso receive a percentage of defined revenues of each skin, subject to annual minimums. When all six skins are in operation, we should receive a contractual minimum of $7(as defined) totaling at least $5 million per year, on an annualized basis, once Circa Sports launches its mobile sports skin in Illinois. The term of sports gaming revenues,the agreement is for eight years, with minimal related expenses.
26
Waukegan Proposal (American Place). We continue to be one of three bidders for the opportunity to build a new casino in Waukegan, Illinois, midway between Chicago and Milwaukee, an area with high population density and no nearby existing casino. If awarded the license by the Illinois Gaming Board (“IGB”), we intend to develop and operate a temporary casino on that site while a permanent casino (named “American Place”) is being constructed. American Place is expected to include a world-class casino with a state-of-the-art sportsbook; a premium boutique hotel comprised of twenty luxurious villas, each ranging from 1,500 to 2,500 square feet with full butler service; a 1,500-seat live entertainment venue; and various food and beverage outlets. American Place was one of three proposals certified by the Waukegan City Council in late 2019. At that time, the city’s consultant ranked American Place as the top proposal amongst the various submissions on numerous different criteria.
According to the IGB, the process for it to choose the preferred developer has been slowed by the COVID-19 pandemic. The IGB recently retained an experienced consultant to assist in its review. The IGB Administrator has indicated that he believes the IGB can make a preliminary suitability determination within six months of hiring an appropriate financial consultant. We can provide no assurances as to the timing or certainty that our project will be chosen by the Illinois Gaming Board for the available gaming license in Waukegan.Circa Sports.
Key Performance Indicators
We use several key performance indicators to evaluate the operations of our properties. These key operating measures are presented as supplemental disclosures because management uses these measures to better understand period-over-period fluctuations in our casino and hotel operating revenues. These key performance indicators include the following and are disclosed in our discussions, where applicable, for certain jurisdictions on segment performance:
Gaming revenue indicators:
Slot coin-in is the gross dollar amount wagered in slot machines and table game drop is the total amount of cash or credit exchanged into chips at table games for use by our customers. Slot coin-in and table game drop are indicators of volume, and are monitored on a consolidated basis in relation to slot and table game win. Such metrics can be influenced by marketing activity and, since reopening our properties, have not necessarily been indicative of profitability trends.
Slot win is the difference between customer wagers and customer winnings on slot machines. Table game hold is the difference between the amount of money or markers exchanged into chips and customer winnings paid. Slot win and table game hold percentages represent the relationship between slot win and coin-in and table game win and drop. Both the win/hold and win/hold percentages are monitored on a consolidated basis in our evaluation of Company performance.
Room revenue indicators:
Hotel occupancy rate is an indicator of the utilization of our available rooms. Complimentary room sales, or the retail value of accommodations gratuitously furnished to customers, are included in the calculation of the hotel occupancy rate.
Adjusted EBITDA, Adjusted Segment EBITDA and Adjusted Segment EBITDA Margin:
Management uses Adjusted EBITDA as a measure of our performance. For a description of Adjusted EBITDA, see “Non-GAAP Financial Measure.” We utilize Adjusted Segment EBITDA, a financial measure in accordance with generally accepted accounting principles in the United States of America (“GAAP”), as the measure of segment profitprofitability in assessing performance and allocating resources at the reportable segment level. For information regarding our operating segments, see Note 1110 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report. In addition, we use Adjusted Segment EBITDA Margin, which is calculated by dividing Adjusted Segment EBITDA by the segment’s total revenues.
2724
Results of Operations
Consolidated operating results
The following tables summarize our consolidated operating results for the three-three-months ended March 31, 2022 and six-months ended June 30, 2021 and 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | Six Months Ended | | | | | Three Months Ended | | | | ||||||||||||
(In thousands) | | June 30, | | | | June 30, | | | | March 31, | | (Decrease) / | |||||||||||||||
|
| 2021 |
| 2020 |
| Increase |
| 2021 |
| 2020 |
| Increase |
| 2022 |
| 2021 |
| Increase | |||||||||
Revenues | | $ | 47,442 | | $ | 14,511 |
| 226.9 | % | | $ | 89,650 | | $ | 45,364 |
| 97.6 | % | | $ | 41,423 | | $ | 42,208 |
| (1.9) | % |
Operating expenses | |
| 35,236 | |
| 18,677 |
| 88.7 | % | |
| 68,750 | |
| 52,958 |
| 29.8 | % | |
| 36,120 | |
| 33,514 |
| 7.8 | % |
Operating income (loss) | |
| 12,206 | |
| (4,166) |
| 393.0 | % | |
| 20,900 | |
| (7,594) |
| 375.2 | % | |||||||||
Operating income | |
| 5,303 | |
| 8,694 |
| (39.0) | % | ||||||||||||||||||
Interest and other non-operating expenses, net | |
| 6,640 | |
| 2,541 |
| 161.3 | % | |
| 18,577 | |
| 3,376 |
| 450.3 | % | |
| 10,805 | |
| 11,937 |
| (9.5) | % |
Income tax provision (benefit) | |
| 82 | |
| (4) |
| 2,150.0 | % | |
| 284 | |
| 91 |
| 212.1 | % | |||||||||
Income tax (benefit) provision | |
| (5,612) | |
| 202 |
| (2,878.2) | % | ||||||||||||||||||
Net income (loss) | | $ | 5,484 | | $ | (6,703) |
| 181.8 | % | | $ | 2,039 | | $ | (11,061) |
| 118.4 | % | | $ | 110 | | $ | (3,445) |
| 103.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | Six Months Ended | | | | | Three Months Ended | | | | |||||||||||||
(In thousands) | | June 30, | | | | June 30, | | | | March 31, | | (Decrease) / | |||||||||||||||
|
| 2021 |
| 2020 |
| Increase |
| 2021 |
| 2020 |
| Increase |
| 2022 |
| 2021 |
| Increase | |||||||||
Casino revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Slots | | $ | 30,554 | | $ | 9,889 |
| 209.0 | % | | $ | 57,616 | | $ | 27,246 |
| 111.5 | % | | $ | 25,527 | | $ | 27,060 |
| (5.7) | % |
Table games | |
| 3,514 | |
| 1,072 |
| 227.8 | % | |
| 7,382 | |
| 3,825 |
| 93.0 | % | |
| 3,275 | |
| 3,868 |
| (15.3) | % |
Other | |
| 579 | |
| (6) |
| 9,750.0 | % | |
| 1,713 | |
| 635 |
| 169.8 | % | |
| 282 | |
| 1,136 |
| (75.2) | % |
| |
| 34,647 | |
| 10,955 |
| 216.3 | % | |
| 66,711 | |
| 31,706 |
| 110.4 | % | |
| 29,084 | |
| 32,064 |
| (9.3) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-casino revenues, net | |
|
| |
|
|
|
| |
|
| |
|
|
|
| | |
|
| |
|
|
|
| | |
Food and beverage | |
| 7,440 | |
| 1,994 |
| 273.1 | % | |
| 13,541 | |
| 8,984 |
| 50.7 | % | |
| 6,511 | |
| 6,101 |
| 6.7 | % |
Hotel | |
| 2,510 | |
| 719 |
| 249.1 | % | |
| 4,721 | |
| 2,693 |
| 75.3 | % | |
| 2,179 | |
| 2,211 |
| (1.4) | % |
Other | |
| 2,845 | |
| 843 |
| 237.5 | % | |
| 4,677 | |
| 1,981 |
| 136.1 | % | |
| 3,649 | |
| 1,832 |
| 99.2 | % |
| |
| 12,795 | |
| 3,556 |
| 259.8 | % | |
| 22,939 | |
| 13,658 |
| 68.0 | % | |
| 12,339 | |
| 10,144 |
| 21.6 | % |
Total revenues | | $ | 47,442 | | $ | 14,511 |
| 226.9 | % | | $ | 89,650 | | $ | 45,364 |
| 97.6 | % | | $ | 41,423 | | $ | 42,208 |
| (1.9) | % |
The following discussion is based on our consolidated financial statements for the three-three-months ended March 31, 2022 and six-months ended June 30, 2021 and 2020. Because all of the Company’s operations were temporarily closed for several months during the 2020 period, the comparisons for the three- and six-month periods are not particularly meaningful. The periods of closure were:2021.
Revenues. Consolidated total revenues fordecreased by 1.9% (or $0.8 million) primarily due to the three- and six-months ended June 30, 2021 continued to be constrained by requirements to maintain “social distancing” duringabsence of government stimulus programs of the ongoing COVID-19 pandemic (though to a lesser degree than the first quarter), including reductionssame scale as in the number of slot machines we operate, the number of people that we can accommodateprior-year period; adverse hold percentages at each table game, the seating capacitytwo of our barsproperties; the competitive launch of online sports wagering in nearby Louisiana, which adversely affected our in-house sportsbook in Mississippi; and restaurants, and restrictions onplanned construction disruptions at Bronco Billy’s to advance the typescompletion of food service we can offer. Despite these constraints, total revenues increased largely due to operations being closed from mid-March 2020 through much of the second quarter of 2020, as noted above. Of note,our Chamonix project. This was, in part, offset by “Other Non-casino Revenues” includes $1.5 million and $2.5that included $2.8 million of revenue related to our contracted sports wagering agreements for the respective three- and six-months ended June 30, 2021, versus $0.5 million and $0.9Contracted Sports Wagering segment, compared to $1.0 million in the respective prior-year periods. period.
Operating Expenses. Consolidated operating expenses increased by 7.8% (or $2.6 million) primarily due to increases in food and beverage costs, additional professional fees and other expenses related to our growth, as well as preopening costs for The Temporary, which is expected to open in Fall 2022.
See “Operating Results – Reportable Segments” below for details.further information within our reportable segments described below.
2825
Operating Expenses. Consolidated operating expenses for the three- and six-months ended June 30, 2021 increased from the prior-year periods, as our workforce was temporarily and dramatically reduced in size for several months during the 2020 closure period. Upon reopening, we improved operating efficiencies at all of our properties, in part by better matching customer demand with the operating hours of our food and beverage and table games departments. We also significantly reduced our marketing expenses upon reopening, benefiting from analytics provided by new marketing systems installed in late 2019. These changes affected payroll and related expenses across all departments at the Company, as well as numerous volume-related costs, such as our cost of the food and beverages served to guests. Note that payroll and related expenses during the 2020 period included a brief period of continuing payroll, health care, and related costs for most of our employees as severance, despite the closure of all of the Company’s properties in mid-March 2020.
See further information within our reportable segments described below.
Interest and Other Non-Operating Expenses.
Interest Expense
Interest expense consists of the following:
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | March 31, | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||||
Interest cost (excluding loan fee amortization) | | $ | 6,569 | | $ | 2,387 | | $ | 11,000 | | $ | 4,873 | | $ | 7,339 | | $ | 4,431 |
Amortization of debt issuance costs and discount | |
| 350 | |
| 271 | |
| 634 | |
| 496 | |
| 438 | |
| 284 |
Capitalized interest | |
| (249) | |
| (211) | |
| (508) | |
| (431) | |
| (1,378) | |
| (259) |
| | $ | 6,670 | | $ | 2,447 | | $ | 11,126 | | $ | 4,938 | | $ | 6,399 | | $ | 4,456 |
The increasesincrease in interest expense for the three- and six-month periods werewas primarily due to the February 2022 issuance of the Additional Notes to fund the construction and opening of The Temporary, which is expected to open in Fall 2022. The increase in interest expense was partially offset by an increase in our debt levels. In February 2021, we refinanced approximately $106.8 millioncapitalized interest due to the construction of the Prior Notes with $310.0 million of new 2028 Notes for, among other reasons, the funding of our Chamonix project, as discussed under “Recent Developments.”The interest rate on the Prior Notes was LIBOR plus 7 percentage points, with a 1% LIBOR floor, resulting in a floating rate of interest that was near the fixed rate coupon on the new debt of 8.25%. The new debt also has a significantly longer term than the Prior Notes.Temporary and Chamonix.
Other Non-Operating Expenses, Net
For the three-monththree-months ended March 31, 2022, we had approximately $4.4 million of other non-operating expenses, consisting of debt modification costs related to our Additional Notes offering in February 2022. The prior-year period ended June 30, 2021, we had other non-operating incomeexpenses totaling $30,000, related to nominal items. Such amount for the six-month period ended June 30, 2021 totaled $7.5 million, including $6.1 million related to the extinguishment of our Prior Notes and $1.3 million for the fair value adjustment tosettlement of our outstanding warrants, which were repurchased in February 2021. The fair value adjustment reflected an increase in the warrant expense from $2.7 million at December 31, 2020, when the Company’s stock traded at lower prices, to their actual repurchase price of $4.0 million. For the prior-year’s six-month period, non-operating expenses included a non-cash benefit of $1.6 million for the fair value adjustment of theformer warrants. While the warrants were outstanding, increases in our share price resulted in increases in the value of the warrants, causing non-cash expense. Conversely, decreases in our share price resulted in decreases in the value of the warrants, causing non-cash income.
29
Income Tax Expense. We recognized an income tax provisionsbenefit of approximately $82,000 and $0.3$5.6 million for the three- and six-monthsthree-months ended June 30, 2021,March 31, 2022, which resulted in an effective income tax ratesrate of 1.5%102.0%. For the three-months ended March 31, 2021, we recognized an income tax provision of approximately $0.2 million, which resulted in an effective income tax rate of (6.2%). The significant change in the effective income tax rate was primarily due to our projections for pre-tax book income in 2022, the effects of tax amortization on indefinite lived intangibles in 2022, valuation allowances, and 12.2%, respectively.certain permanent differences between tax and financial reporting purposes. We expect to reverse the tax benefit that was booked, as of March 31, 2022, in future interim periods as pre-tax book income offsets the year-to-date, pre-tax loss.
We do not expect to pay any federal income taxes or receive any federal tax refunds related to our 20212022 results. TaxAs we have incurred significant losses incurred in 2021 may offsetprior periods, we anticipate current-year taxable income in future years and we have significantwill be offset by tax loss carryforwards from prior years. However, because ofDue in part to recent trends in our profitability, we continue to evaluate the level of uncertainty regarding prospective taxable income, we currently maintainability to realize our deferred tax assets and need for a valuation allowance against our remaining deferred tax assets.on a quarterly basis. In accordance with ASC 740, if we continue to have increased profitability in upcoming periods, then management may conclude a reduction in the valuation allowance is necessary by the end of 2022. The valuation allowance, and the potential reversal of such allowance, has no bearing on the taxes actually paid by the Company, or on its actual financial condition.
Operating Results – Reportable Segments
We manage our casinos based primarily on geographic regions within the United States and type of income. For more information, please refer to our earlier discussion within “Executive Overview” above.
The following table presents detail by segment of our consolidated revenues and Adjusted EBITDA; see “Non-GAAP Financial Measure” for additional information. Additionally, management uses Adjusted Segment EBITDA as the measure of segment profitprofitability in accordance with GAAP.
| | | | | | | | | | | | | | | | | | |
(In thousands) | | Three Months Ended | | |
| | Six Months Ended | | |
| ||||||||
| | June 30, | | | | June 30, | | | ||||||||||
|
| 2021 |
| 2020 |
| Increase |
| 2021 |
| 2020 |
| Increase | ||||||
Revenues |
| |
|
| |
|
|
| |
| |
|
| |
|
|
| |
Mississippi |
| $ | 24,239 | | $ | 9,122 |
| 165.7 | % | | $ | 46,596 | | $ | 24,215 |
| 92.4 | % |
Indiana |
|
| 10,577 | |
| 2,207 |
| 379.2 | % | |
| 19,167 | |
| 9,454 |
| 102.7 | % |
Colorado |
|
| 6,382 | |
| 1,633 |
| 290.8 | % | |
| 12,286 | |
| 6,614 |
| 85.8 | % |
Nevada |
|
| 4,715 | |
| 1,086 |
| 334.2 | % | |
| 9,083 | |
| 4,194 |
| 116.6 | % |
Contracted Sports Wagering | | | 1,529 | | | 463 | | 230.2 | % | | | 2,518 | | | 887 | | 183.9 | % |
|
| $ | 47,442 | | $ | 14,511 |
| 226.9 | % | | $ | 89,650 | | $ | 45,364 |
| 97.6 | % |
Adjusted Segment EBITDA and Adjusted EBITDA |
|
|
| |
|
|
|
| | |
|
| |
|
|
|
| |
Mississippi |
| $ | 8,983 | | $ | 1,200 |
| 648.6 | % | | $ | 16,613 | | $ | 3,032 |
| 447.9 | % |
Indiana |
|
| 2,666 | |
| (1,361) |
| 295.9 | % | |
| 3,799 | |
| (2,851) |
| 233.3 | % |
Colorado |
|
| 1,839 | |
| (199) |
| 1,024.1 | % | |
| 3,548 | |
| (669) |
| 630.3 | % |
Nevada |
|
| 1,412 | |
| (562) |
| 351.2 | % | |
| 2,636 | |
| (953) |
| 376.6 | % |
Contracted Sports Wagering | | | 1,500 | | | 447 | | 235.6 | % | | | 2,477 | | | 836 | | 196.3 | % |
Adjusted Segment EBITDA |
|
| 16,400 | |
| (475) |
| 3,553 | % | |
| 29,073 | |
| (605) |
| 4,905 | % |
Corporate |
|
| (1,472) | |
| (910) |
| 61.8 | % | |
| (3,376) | |
| (2,029) |
| 66.4 | % |
Adjusted EBITDA |
| $ | 14,928 | | $ | (1,385) |
| 1,177.8 | % | | $ | 25,697 | | $ | (2,634) |
| 1,075.6 | % |
| | | | | | | | | | | | | | | | | | |
Adjusted Segment EBITDA Margin | | | | | | | | | | | | | | | | | | |
Mississippi | | | 37.1 | % | | 13.2 | % | 23.9 | pts | | | 35.7 | % | | 12.5 | % | 23.2 | pts |
Indiana | | | 25.2 | % | | (61.7) | % | 86.9 | pts | | | 19.8 | % | | (30.2) | % | 50.0 | pts |
Colorado | | | 28.8 | % | | (12.2) | % | 41.0 | pts | | | 28.9 | % | | (10.1) | % | 39.0 | pts |
Nevada | | | 29.9 | % | | (51.7) | % | 81.6 | pts | | | 29.0 | % | | (22.7) | % | 51.7 | pts |
Contracted Sports Wagering | | | 98.1 | % | | 96.5 | % | 1.6 | pts | | | 98.4 | % | | 94.3 | % | 4.1 | pts |
3026
| | | | | | | | | |
(In thousands) | | Three Months Ended | | |
| ||||
| | March 31, | | (Decrease) / | |||||
|
| 2022 |
| 2021 |
| Increase | |||
Revenues |
| |
|
| |
|
|
| |
Mississippi |
| $ | 21,313 | | $ | 22,356 |
| (4.7) | % |
Indiana |
|
| 8,636 | |
| 8,590 |
| 0.5 | % |
Colorado |
|
| 4,233 | |
| 5,905 |
| (28.3) | % |
Nevada |
|
| 4,411 | |
| 4,368 |
| 1.0 | % |
Contracted Sports Wagering | | | 2,830 | | | 989 | | 186.1 | % |
|
| $ | 41,423 | | $ | 42,208 |
| (1.9) | % |
Adjusted Segment EBITDA and Adjusted EBITDA |
|
|
| |
|
|
|
| |
Mississippi |
| $ | 5,950 | | $ | 7,630 |
| (22.0) | % |
Indiana |
|
| 1,138 | |
| 1,134 |
| 0.4 | % |
Colorado |
|
| (319) | |
| 1,710 |
| (118.7) | % |
Nevada |
|
| 828 | |
| 1,224 |
| (32.4) | % |
Contracted Sports Wagering | | | 2,767 | | | 976 | | 183.5 | % |
Adjusted Segment EBITDA |
|
| 10,364 | |
| 12,674 |
| (18.2) | % |
Corporate |
|
| (1,967) | |
| (1,905) |
| 3.3 | % |
Adjusted EBITDA |
| $ | 8,397 | | $ | 10,769 |
| (22.0) | % |
| | | | | | | | | |
Adjusted Segment EBITDA Margin | | | | | | | | | |
Mississippi | | | 27.9 | % | | 34.1 | % | (6.2) | pts |
Indiana | | | 13.2 | % | | 13.2 | % | — | pts |
Colorado | | | (7.5) | % | | 29.0 | % | (36.5) | pts |
Nevada | | | 18.8 | % | | 28.0 | % | (9.2) | pts |
Contracted Sports Wagering | | | 97.8 | % | | 98.7 | % | (0.9) | pts |
The following table summarizes the consolidated results of our casino activity by key performance indicators as previously defined:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | Six Months Ended | | |
| Three Months Ended | | |
| ||||||||||||||||||
| | June 30, | | Increase / | | June 30, | | Increase / | March 31, | | Increase / | |||||||||||||||||||||
(In thousands) | | 2021 | | 2020 | | (Decrease) |
| 2021 | | 2020 | | (Decrease) | 2022 | | 2021 | | (Decrease) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Slot coin-in | | $ | 514,117 | | | $ | 145,552 | | | 253.2 | % | | $ | 899,618 | | | $ | 433,246 | | | 107.6 | % | $ | 462,173 | | | $ | 450,276 | | 2.6 | % | |
Slot win | | $ | 39,281 | | | $ | 12,074 | | | 225.3 | % | | $ | 69,947 | | | $ | 32,273 | | | 116.7 | % | $ | 34,234 | | | $ | 34,582 | | (1.0) | % | |
Slot hold percentage(1) | | | 7.6 | % | | | 8.3 | % | | (0.7) | pts | | | 7.8 | % | | | 7.4 | % | | 0.4 | pts | | 7.4 | % | | | 7.7 | % | | (0.3) | pts |
Table game drop | | $ | 18,965 | | | $ | 5,530 | | | 243.0 | % | | $ | 32,845 | | | $ | 20,427 | | | 60.8 | % | $ | 19,817 | | | $ | 18,121 | | 9.4 | % | |
Table game win | | $ | 3,563 | | | $ | 1,066 | | | 234.2 | % | | $ | 6,578 | | | $ | 3,041 | | | 116.3 | % | $ | 3,303 | | | $ | 3,872 | | (14.7) | % | |
Table game hold percentage(1) | | | 18.8 | % | | | 19.3 | % | | (0.5) | pts | | | 20.0 | % | | | 14.9 | % | | 5.1 | pts | | 16.7 | % | | | 21.4 | % | | (4.7) | pts |
__________
(1) | The three-year averages for slot hold percentage and table game hold percentage were 7.4% and |
27
Mississippi
Our Mississippi segment consists of the Silver Slipper Casino and Hotel. PursuantTotal revenues during the three-months ended March 31, 2022 decreased by 4.7%, primarily due to a pandemic-related order fromdecline in casino revenue, which decreased by 8.5% (or $1.4 million). The prior-year period was the state gaming commission, we temporarily suspendedbest first quarter in the property’s history in terms of casino revenue and total revenue, assisted by the issuance of government stimulus checks to customers during the period due to the COVID-19 pandemic. Slot revenue decreased overall due to a lower slot hold percentage. The quarter was also affected by the competitive launch of online sports wagering within nearby Louisiana, which adversely affected Silver Slipper’s sports wagering revenues. On-site sports operations for a portioncontributed less than 5% of the property’s Adjusted Segment EBITDA in 2021. However, on-site sports gaming revenues in the quarter decreased 77% versus the prior-year period, from March 16, 2020 through May 21, 2020.
For the three- and six-months ended June 30, 2021, total revenues increased by 165.7% and 92.4%, respectively, as the 2020 period was impacted by more than two months of closure. Slot revenue rose by 147.2% and 106.4% for the respective three- and six-month periods. Similarly, table games revenue rose by 131.5% and 110.8% for the respective three- and six-month periods. Other casino revenues increased by $564,000 and $1.0 million for the respective three- and six-month periods, primarily from our sports book operations.period.
Non-casino revenue increased by 197.6% and 61.0% for5.0% (or $0.3 million) during the three- and six-months ended June 30, 2021,quarter, driven by revenue growthrevenues from our food and beverage outlets of 216.7% and 59.3%, respectively, which historically account for a majority of our non-casino revenue.5.3%. Hotel revenues increased by 126.8% and 59.5%4.4% for the three- and six-monthsthree-months ended June 30, 2021. Total occupied room-nights increased by 132.2%March 31, 2022 due to 10,939 room-nightshigher average daily room rates. Hotel occupancy for the second quarter of 2021, and increased by 69.6% to 21,376 room-nights forcurrent period was 93.0%, versus 93.5% in the six-month period, reflecting the temporary closure of Silver Slipper last year.prior-year period.
Adjusted Segment EBITDA for the three-three-months ended March 31, 2022 decreased to $6.0 million, reflecting the launch of online sports wagering in Louisiana as mentioned above, as well as cost increases for food and six-months ended June 30, 2021 increased by 648.6% and 447.9%, respectively, driven byother supplies. In the increase in revenues described above and our focus on controlling labor and marketing costs upon the property’s reopening.prior-year period, Adjusted Segment EBITDA was $7.6 million.
Indiana
Our Indiana segment consists of Rising Star Casino Resort. Pursuant to a pandemic-related order from the state gaming commission, we temporarily suspended operations for a portion of the prior-year period, from March 16, 2020 through June 15, 2020.
For the three- and six-months ended June 30, 2021, totalTotal revenues increased by 379.2% and 102.7%, respectively, as volumes during the 2020 periodthree-months ended March 31, 2022 were impacted by approximately three months of closure. Casino revenue increased by 332.4% and 113.1% for the respective three- and six-month periods, driven mainly byflat at $8.6 million. Increases in slot revenue that increased by 326.5% (or $5.4 million) and 118.4% (or $6.9 million) for the corresponding periods. Tableoffset declines in table games revenue, also meaningfully increased, up 392.2% (or $0.6 million) and 83.0% (or $0.8 million) for the three- and six-months ended June 30, 2021.
31
Non-casino revenue increased by 341.3% and 65.5% for the three- and six-months ended June 30, 2021, primarily2.4% (or $45,000) due to increases in food and beverage revenues of $125,000 that offset decreases in hotel operations. Hotelrevenues. The decline in hotel revenues grew by $1.0 million in the second quarter of 2021, and by $1.1 million for the six-month period. Totalwas due to relatively flat average daily rates on fewer occupied room-nights increased by 785.2% to 14,827room-nights. Rising Star had 10,638 occupied room-nights for the secondfirst quarter of 2021, and increased by 24.0%2022, compared to 26,41911,592 occupied room-nights for the six-month period, as our hotel was also shut down during last year’s closureprior-year period. Food and beverage revenues continued to improve, especially as capacity restrictions began to ease in early 2021. For the corresponding three- and six-month periods, food and beverage revenue increased by 928.3% (or $0.8 million) and 35.5% (or $0.4 million).
Adjusted Segment EBITDA was flat at $1.1 million for each of the three-three-months ended March 31, 2022 and six-months ended June 30, 2021 increased2021. Results in the recent quarter were adversely affected by $4.0 million and $6.7 million, respectively. The increase was due to higher volumes (principally due to the closure during the prior-year periods), the launch of an improved loyalty program in June 2020, and a focus on marketing and labor efficiencies throughout the property, including operating hours forlow table games and food and beverage outlets that are more appropriately matched tohold percentage of 10.1%, versus the demand for such services.three-year average of 17.2%. Conversely, a table games hold percentage of 26.0% in the first quarter of 2021 was meaningfully higher than the three-year average, which benefited results in the prior-year’s quarter. As mentioned above, the increase in slot revenue offset the decrease in the table games hold percentage.
Colorado
Our Colorado segment includes Bronco Billy’s Casino and Hotel and the Chamonix project. PursuantTotal revenues during the three-months ended March 31, 2022 decreased by 28.3%, reflecting planned business disruptions to pandemic-related state orders, we temporarily closedaccommodate the construction of Chamonix. These disruptions include the temporary loss of all of the property’s on-site parking and all on-site hotel rooms, as well as the temporary loss of portions of the casino. To alleviate the lack of on-site parking, Bronco Billy’s currently offers, and incurs the cost of offering, complimentary valet parking, as well as a free shuttle service to an off-site parking lot.
Casino revenue decreased by 31.0% (or $1.6 million) for a portion ofthe three-months ended March 31, 2022, which was largely due to the construction disruptions mentioned above. Slot revenue declined by 32.8% (or $1.7 million), while table games revenue rose by 104.8% (or $73,000). Table games operations were significantly affected in the prior-year period by pandemic-related limitations, while operations in the recent period benefitted from March 17, 2020 through June 15, 2020.the elimination of betting limits as of May 1, 2021.
For the three- and six-months ended June 30, 2021, total revenues increasedNon-casino revenue decreased by 290.8% and 85.8%, respectively, as volumes during the 2020 period were impacted by approximately three months of closure. Casino revenue increased by 275.1% and 97.4%6.0% (or $38,000) for the respective three-three-months ended March 31, 2022 due mostly to declines in ATM and six-month periods, drivenrelated surcharge income, partially offset by volumes in slot operations, which revenue increased by 267.0% and 105.3% for the same periods, respectively. Table games revenue increased by $121,000 for the second quarter, but decreased by 37.5% for the six-month period because table games operations were not permitted to reopen in Cripple Creek until February 2021. Foodfood and beverage revenues increased by 607.6% and 21.3% for the respective three- and six-month periods, though limitations on seating and reduced operating hours continued for muchhotel revenues.
28
Adjusted Segment EBITDA for the three-months ended June 30, 2021 increasedMarch 31, 2022 decreased by $2.0 million118.7% to $1.8 million and, for($0.3 million). The decrease during the six-months ended June 30, 2021 by $4.2 million to $3.5 million. These increases werequarter was due to disruptions from the revenue increasesconstruction of Chamonix as described above, (principallyincluding additional operating expenses related to the operation of our new valet and parking shuttle service.
In addition to construction disruption due to our neighboring Chamonix project, we recently began the closure during the prior-year periods), improved labor controls, more efficient marketing due to improved analytics from a new slot marketing system installed atstaged refurbishment of Bronco Billy’s in late 2019, and reductions in food costs and device fees/taxes. Similar to our other properties,itself. Accordingly, Bronco Billy’s paid severance and benefitscontribution to many ofearnings will likely, as expected, be impacted until its employees during part of the 2020 closure period.
new, expanded amenities are completed, which we expect to be in 2023. The market in Cripple Creek is seasonal, favoring the summer months.
Nevada
The Nevada segment consists of the Grand Lodge and Stockman’s casinos. Pursuant to pandemic-related state orders, we temporarily closed both Grand Lodge Casino and Stockman’s Casino for a portion of the prior-year period, from March 17, 2020 through June 4, 2020.
Our Nevada operations have historically been seasonal, with the summer months accounting for a disproportionate share of annual revenues. Additionally, snowfall levels during the winter months can often affect operations, as Grand Lodge Casino is located near several major ski resorts. We typically benefit from a “good” snow year, resulting in extended periods of operation at the nearby ski areas. However, pandemic-related restrictions at the nearby ski resorts in late 2020 and early 2021 affected our business
Total revenues during 2021. The 2020 period was affected by the mandated closure of our casinos.
32
For the three-months ended June 30, 2021, total revenuesMarch 31, 2022 increased by 334.2% or $3.6 million, and increased by 116.6% or $4.9 million for the six-month period. The increases were1.0%, primarily due to higher volumes in 2021, as the prior-year periods were impacted by approximately three months of closure. Casino revenues increased by 331.5% or $3.3 million for the second quarter, and rose by 129.2% or $4.7 million for the six-month period. Much of that increase was from slot revenue, which grew by $2.7 million and $3.9 million for the three- and six-month periods, respectively. Table gamescasino revenue. Slot revenue improved $0.6 million and $0.8 million, respectively, with theby 6.9% (or $217,000) due to higher slot hold percentage increasingon higher coin-in at Grand Lodge. TableHowever, table games were not open at Stockman’s duringrevenue decreased by 20.7% (or $176,000) due to a 7.2 percentage point decrease in the 2021 periods.table games hold percentage on higher table games drop.
Adjusted Segment EBITDA for the three-months ended June 30, 2021 increased by $2.0March 31, 2022 decreased to $0.8 million, to $1.4 million. Forreflecting adverse table games hold and an increase in labor costs. Adjusted Segment EBITDA was $1.2 million in the six-months ended June 30, 2021, it increased by $3.6 million to $2.6 million. Both higher casino revenues and continued cost controls, specifically regarding labor and marketing expenses, have benefited operating results. As restrictions have eased in Nevada, both properties have improved revenues while continuing to maintain control of expenses.prior-year period.
Contracted Sports Wagering
The Contracted Sports Wagering segment consists of our on-site and online sports wagering skins in Colorado, Indiana and, Indiana. Revenues and Adjusted Segment EBITDA were both approximately $1.5 million duringupon launch, Illinois.
For the three-months ended June 30, 2021, and approximately $2.5 million for the six-months ended June 30, 2021. Our fourth and fifth sports wagering skins commenced operations on April 1 and April 23, 2021, resulting in strong sequential growth in both revenues and Adjusted Segment EBITDA. For the three-month period ended June 30, 2020, when only two sports wagering skins were live,March 31, 2022, revenues and Adjusted Segment EBITDA were both approximately $0.5 million. During$2.8 million, an increase from $1.0 million in the six-months ended June 30, 2020, revenues and Adjusted Segment EBITDA were approximately $0.9 million and $0.8 million, respectively. The last remainingprior-year period. These results reflect an additional skin is expected to commencethat contractually went live on December 1, 2021, as well as an acceleration of deferred revenue for two agreements that will cease operations in May 2022. In the coming months.prior-year period, only three skins were in operation. As previously disclosed, in February 2022, one of our contracted parties for sports wagering informed us of its intent to cease operations on May 15, 2022, which will create one available skin in each of Colorado and Indiana. We are currently negotiating with several potential replacement companies, but there can be no assurance that we will be able to replace these agreements on similar terms as our existing agreements.
WeIn May 2022, we entered into an agreement whereby affiliates of Full House and Circa Sports will jointly develop and manage on-site sportsbooks at both The Temporary and American Place. Circa Sports currently operates at Circa Resort & Casino in Las Vegas, and offers online sports wagering in several states. In addition to the on-site sportsbook, Circa Sports will utilize our expected mobile sports skin in Illinois to conduct Internet sports wagering throughout the state. In exchange for such rights, we received a market access fee of $5 million in May 2022 and will also receive a percentage of defined revenues of each skin, subject to annual minimums. When all six skins are in operation, we should receive a contractual minimum of $7payments totaling at least $5 million per year, on an annualized basis, once Circa Sports launches its mobile sports skin in Illinois, pending customary regulatory approvals. The term of the agreement is for eight years, with minimal related expenses.two four-year extension opportunities at the option of Circa Sports.
Corporate
Corporate expenses for the three- and six-month periodsthree-months ended June 30, 2021March 31, 2022 rose by 3.3% (or $62,000) primarily due to an increase in accrued bonus compensation, reflecting the Company’s improved operating results,additional professional fees and professional fees. These increases were partially offset by the allocation of corporate service costs to the casino properties during 2021.
In April 2020, we began allocating certain costs to the properties, consistent with the practice of most public casino companies. Previously, such costs were carried at the corporate level. For the three-months ended June 30, 2021, a total of $426,000 was allocated, consisting of $115,000 of costs allocatedother expenses related to our Mississippi segment, $113,000 to Colorado, $85,000 to Indianagrowth. Segment expenses were $2.0 million and $113,000 to Nevada. For$1.9 million for the six-months ended June 30,first quarters of 2022 and 2021, a totalrespectively.
29
Non-GAAP Financial Measure
“Adjusted EBITDA” is earnings before interest and other non-operating income (expense), taxes, depreciation and amortization, pre-openingpreopening expenses, impairment charges, asset write-offs, recoveries, gain (loss) from asset disposals, project development and acquisition costs, and non-cash share-based compensation expense. Adjusted EBITDA information is presented solely as supplemental disclosure to measures reported in accordance with generally accepted accounting principles in the United States of America (“GAAP”) because management believes this measure is (i) a widely used measure of operating performance in the gaming and hospitality industries and (ii) a principal basis for valuation of gaming and hospitality companies. In addition, a version of Adjusted EBITDA (known as Consolidated Cash Flow) is utilized in the covenants within our credit facility, although not necessarily defined in the same way as above. Adjusted EBITDA is not, however, a measure of financial performance or liquidity under GAAP. Accordingly, this measure should be considered supplemental and not a substitute for net income (loss) or cash flows as an indicator of the Company’s operating performance or liquidity.
33
The following table presents a reconciliation of net income (loss) and operating income (loss) to Adjusted EBITDA:
| | | | | | | | | | | |
(In thousands) | Three Months Ended | | Six Months Ended | ||||||||
| June 30, | | June 30, | ||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Net income (loss) | $ | 5,484 | | $ | (6,703) | | $ | 2,039 | | $ | (11,061) |
Income tax provision (benefit) | | 82 | | | (4) | | | 284 | | | 91 |
Interest expense, net of amounts capitalized | | 6,670 | | | 2,447 | | | 11,126 | | | 4,938 |
(Gain) loss on extinguishment of debt | | (30) | | | — | | | 6,104 | | | — |
Adjustment to fair value of warrants | | — | | | 94 | | | 1,347 | | | (1,562) |
Operating income (loss) | | 12,206 | | | (4,166) | | | 20,900 | | | (7,594) |
Project development costs | | 126 | | | 259 | | | 173 | | | 315 |
Depreciation and amortization | | 1,829 | | | 1,980 | | | 3,629 | | | 4,020 |
Loss on disposal of assets, net | | 568 | | | 439 | | | 672 | | | 439 |
Stock-based compensation | | 199 | | | 103 | | | 323 | | | 186 |
Adjusted EBITDA | $ | 14,928 | | $ | (1,385) | | $ | 25,697 | | $ | (2,634) |
| | | | | |
(In thousands) | Three Months Ended | ||||
| March 31, | ||||
| 2022 |
| 2021 | ||
Net income (loss) | $ | 110 | | $ | (3,445) |
Income tax (benefit) provision | | (5,612) | | | 202 |
Interest expense, net of amounts capitalized | | 6,399 | | | 4,456 |
Loss on modification and extinguishment of debt | | 4,406 | | | 6,134 |
Adjustment to fair value of warrants | | — | | | 1,347 |
Operating income | | 5,303 | | | 8,694 |
Project development costs | | 165 | | | 47 |
Preopening costs | | 786 | | | — |
Depreciation and amortization | | 1,792 | | | 1,800 |
Loss on disposal of assets, net | | 8 | | | 104 |
Stock-based compensation | | 343 | | | 124 |
Adjusted EBITDA | $ | 8,397 | | $ | 10,769 |
3430
The following tables present reconciliations of operating income (loss) to Adjusted Segment EBITDA and Adjusted EBITDA.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2022 | Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
(In thousands) | (In thousands) | (In thousands) | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | | | | | Adjusted | | | | | | | | | | | | | | | | | | | | Adjusted | ||
| | | | | | | | | | | | | | | | | Segment | | | | | | | | | | | | | | | | | | | | Segment | ||
| | Operating | | Depreciation | | Loss on | | Project | | Stock- | | EBITDA and | | Operating | | Depreciation | | Loss on | | Project | | | | Stock- | | EBITDA and | |||||||||||||
| | Income | | and | | Disposal | | Development | | Based | | Adjusted | | Income | | and | | Disposal | | Development | | Preopening | | Based | | Adjusted | |||||||||||||
|
| (Loss) |
| Amortization |
| of Assets |
| Costs |
| Compensation |
| EBITDA |
| (Loss) |
| Amortization |
| of Assets |
| Costs |
| Costs |
| Compensation |
| EBITDA | |||||||||||||
Reporting segments | Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
| Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Mississippi | | $ | 7,742 | | $ | 675 | | $ | 566 | | $ | — | | $ | — | | $ | 8,983 | | $ | 5,251 | | $ | 692 | | $ | 7 | | $ | — | | $ | — | | $ | — | | $ | 5,950 |
Indiana | |
| 2,073 | |
| 593 | |
| — | |
| — | |
| — | |
| 2,666 | |
| 558 | |
| 580 | |
| — | |
| — | |
| — | |
| — | |
| 1,138 |
Colorado | |
| 1,452 | |
| 385 | |
| 2 | |
| — | |
| — | |
| 1,839 | |
| (662) | |
| 342 | |
| 1 | |
| — | |
| — | |
| — | |
| (319) |
Nevada | |
| 1,274 | |
| 138 | |
| — | |
| — | |
| — | |
| 1,412 | |
| 683 | |
| 145 | |
| — | |
| — | |
| — | |
| — | |
| 828 |
Contracted Sports Wagering | | | 1,500 | | | — | | | — | | | — | | | — | | | 1,500 | | | 2,767 | | | — | | | — | | | — | | | — | | | — | | | 2,767 |
| |
| 14,041 | |
| 1,791 | |
| 568 | |
| — | |
| — | |
| 16,400 | |
| 8,597 | |
| 1,759 | |
| 8 | |
| — | |
| — | |
| — | |
| 10,364 |
Other operations | Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Corporate | |
| (1,835) | |
| 38 | |
| — | |
| 126 | |
| 199 | |
| (1,472) | |
| (3,294) | |
| 33 | |
| — | |
| 165 | |
| 786 | |
| 343 | |
| (1,967) |
| | $ | 12,206 | | $ | 1,829 | | $ | 568 | | $ | 126 | | $ | 199 | | $ | 14,928 | | $ | 5,303 | | $ | 1,792 | | $ | 8 | | $ | 165 | | $ | 786 | | $ | 343 | | $ | 8,397 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2021 | |||||||||||||||||||||||||||||||||||
(In thousands) | (In thousands) | (In thousands) | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | Adjusted | | | | | | | | | | | | | | | | | Adjusted | ||
| | | | | | | | | | | | | | | | Segment | | | | | | | | | | | | | | | | Segment | ||||
| | Operating | | Depreciation | | Loss on | | Project | | Stock- | | EBITDA and | | Operating | | Depreciation | | Loss on | | Project | | Stock- | | EBITDA and | ||||||||||||
| | Income | | and | | Disposal | | Development | | Based | | Adjusted | | Income | | and | | Disposal | | Development | | Based | | Adjusted | ||||||||||||
| | (Loss) | | Amortization | | of Assets | | Costs | | Compensation |
| EBITDA | | (Loss) | | Amortization | | of Assets | | Costs | | Compensation |
| EBITDA | ||||||||||||
Reporting segments | Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
| Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Mississippi | | $ | 398 | | $ | 802 | | $ | — | | $ | — | | $ | — | | $ | 1,200 | | $ | 6,948 | | $ | 660 | | $ | 22 | | $ | — | | $ | — | | $ | 7,630 |
Indiana | |
| (1,977) | |
| 616 | |
| — | |
| — | |
| — | |
| (1,361) | |
| 518 | |
| 616 | |
| — | |
| — | |
| — | |
| 1,134 |
Colorado | |
| (579) | |
| 376 | |
| 4 | |
| — | |
| — | |
| (199) | |
| 1,281 | |
| 347 | |
| 82 | |
| — | |
| — | |
| 1,710 |
Nevada | |
| (1,145) | |
| 148 | |
| 435 | |
| — | |
| — | |
| (562) | |
| 1,085 | |
| 139 | |
| — | |
| — | |
| — | |
| 1,224 |
Contracted Sports Wagering | | | 447 | | | — | | | — | | | — | | | — | | | 447 | | | 976 | | | — | | | — | | | — | | | — | | | 976 |
| |
| (2,856) | |
| 1,942 | |
| 439 | |
| — | |
| — | |
| (475) | |
| 10,808 | |
| 1,762 | |
| 104 | |
| — | |
| — | |
| 12,674 |
Other operations | Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Corporate | |
| (1,310) | |
| 38 | |
| — | |
| 259 | |
| 103 | |
| (910) | |
| (2,114) | |
| 38 | |
| — | |
| 47 | |
| 124 | |
| (1,905) |
| | $ | (4,166) | | $ | 1,980 | | $ | 439 | | $ | 259 | | $ | 103 | | $ | (1,385) | | $ | 8,694 | | $ | 1,800 | | $ | 104 | | $ | 47 | | $ | 124 | | $ | 10,769 |
Operating expenses deducted to arrive at operating income (loss) in the above tables for the three-month period ended June 30,March 31, 2022 and 2021 and 2020 included facility rents related to: (i) Mississippi of $0.5 million during 2022 and $0.6 million during 2021, and $0.3 million during 2020, (ii) Nevada of $0.5 million for both periods,during each of 2022 and 2021, and (iii) Colorado of $0.1 million during 2021 and $0.2 million during 2020.each of 2022 and 2021.
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| | | | | | | | | | | | | | | | | | |
For the Six Months Ended June 30, 2021 | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | Adjusted | |
| | | | | | | | | | | | | | | | | Segment | |
| | Operating | | Depreciation | | Loss on | | Project | | Stock- | | EBITDA and | ||||||
| | Income | | and | | Disposal | | Development | | Based | | Adjusted | ||||||
|
| (Loss) |
| Amortization |
| of Assets |
| Costs |
| Compensation |
| EBITDA | ||||||
Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
Mississippi | | $ | 14,690 | | $ | 1,335 | | $ | 588 | | $ | — | | $ | — | | $ | 16,613 |
Indiana | |
| 2,590 | |
| 1,209 | |
| — | |
| — | |
| — | |
| 3,799 |
Colorado | |
| 2,732 | |
| 732 | |
| 84 | |
| — | |
| — | |
| 3,548 |
Nevada | |
| 2,359 | |
| 277 | |
| — | |
| — | |
| — | |
| 2,636 |
Contracted Sports Wagering | | | 2,477 | | | — | | | — | | | — | | | — | | | 2,477 |
| |
| 24,848 | |
| 3,553 | |
| 672 | |
| — | |
| — | |
| 29,073 |
Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Corporate | |
| (3,948) | |
| 76 | |
| — | |
| 173 | |
| 323 | |
| (3,376) |
| | $ | 20,900 | | $ | 3,629 | | $ | 672 | | $ | 173 | | $ | 323 | | $ | 25,697 |
| | | | | | | | | | | | | | | | | | |
For the Six Months Ended June 30, 2020 | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | Adjusted | |
| | | | | | | | | | | | | | | | Segment | ||
| | Operating | | Depreciation | | Loss on | | Project | | Stock- | | EBITDA and | ||||||
| | Income | | and | | Disposal | | Development | | Based | | Adjusted | ||||||
|
| (Loss) |
| Amortization |
| of Assets |
| Costs |
| Compensation |
| EBITDA | ||||||
Reporting segments | |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
Mississippi | | $ | 1,386 | | $ | 1,646 | | $ | — | | $ | — | | $ | — | | $ | 3,032 |
Indiana | |
| (4,089) | |
| 1,238 | |
| — | |
| — | |
| — | |
| (2,851) |
Colorado | |
| (1,436) | |
| 763 | |
| 4 | |
| — | |
| — | |
| (669) |
Nevada | |
| (1,685) | |
| 297 | |
| 435 | |
| — | |
| — | |
| (953) |
Contracted Sports Wagering | | | 836 | | | — | | | — | | | — | | | — | | | 836 |
| |
| (4,988) | |
| 3,944 | |
| 439 | |
| — | |
| — | |
| (605) |
Other operations |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Corporate | |
| (2,606) | |
| 76 | |
| — | |
| 315 | |
| 186 | |
| (2,029) |
| | $ | (7,594) | | $ | 4,020 | | $ | 439 | | $ | 315 | | $ | 186 | | $ | (2,634) |
Operating expenses deducted to arrive at operating income (loss) in the above tables for the six-month period ended June 30, 2021 and 2020 included facility rents related to: (i) Mississippi of $1.2 million during 2021 and $0.7 million during 2020, (ii) Nevada of $0.9 million for both periods, and (iii) Colorado of $0.2 million during 2021 and $0.3 million during 2020.
Liquidity and Capital Resources
Cash Flows
As of June 30, 2021,March 31, 2022, we had $281.5$319.5 million of cash and equivalents, including $176.6$210.5 million of restricted cash dedicated to the construction of Chamonix. We estimate that between approximately $7 million and $9 million of cash is used in our current day-to-day operations, including for on-site cash in our slot machines, change and redemption kiosks, and cages. We believe that current cash balances, together with the available borrowing capacity under our revolving credit facility and cash flows from operating activities, will be sufficient to meet our liquidity and capital resource needs for the next 12 months of operations.operations, including construction activities.
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Cash flows – operating activities. On a consolidated basis, cash provided byused in operations during the six-monthsthree-months ended June 30, 2021March 31, 2022 was $18.8$8.0 million, compared to cash usedprovided by operations of $6.4$8.3 million in the prior-year period. Trends in our operating cash flows tend to follow trends in operating income, excluding non-cash charges, but are also affected by changes in working capital. OurComparing the 2022 and 2021 periods, our operating cash flows increased primarilydecreased due in part to strong performances at each segment during the 2021 period, partially offset by the redemption of our outstanding warrants in February 2021. Additionally, we received approximately $1.3 million of insurance proceeds during 2021 related to repairs for property damage sustained at Silver Slipper from Hurricane Zeta in October 2020. We expect to settle our remaining insurance claims related to such storm in the third quarter of 2021. The temporary closure of our properties in March 2020 affected operating cash flows in the 2020 period.working capital changes.
Cash flows – investing activities. On a consolidated basis, cash used in investing activities during the six-monthsthree-months ended June 30, 2021March 31, 2022 was $10.6$31.9 million, which primarily related to capital expenditures for Chamonix and real estate purchases in Cripple Creek. This amount also includes approximately $1.7 million for capital expenditures made in 2021 at Silver Slipper due to damages from Hurricane Zeta.The Temporary. Cash used in investing activities during the prior-year period was $1.4$3.4 million, which primarily related to capital expenditures for Chamonix.the purchase of Carr Manor and other land parcels related to our Chamonix project.
Cash flows – financing activities. On a consolidated basis, cash provided by financing activities during the six-monthsthree-months ended June 30, 2021March 31, 2022 was $235.6 million.$94.1 million, compared to cash provided by financing activities of $235.4 million in the prior-year period. In February 2022, we received $102.0 million of gross proceeds from the issuance of our Additional Notes to develop The Temporary while American Place is under construction. In February and March 2021, respectively, we received $310.0 million of gross proceeds from the issuance of our 2028 Notes and gross proceeds of $46.0 million through our underwritten equity offering. These cash inflows in 2021 were partially offset by the payoff of the Prior Notes along with related prepayment premiums, as well asthe redemption of our former warrants, and expenses related to the issuance of our 2028 Notes, our March 2021debt and equity offering, and our new $15.0 million revolving credit facility. Cash provided by financing activities was $4.4 million in the prior-year period, primarily reflecting $5.6 million of new unsecured loans that we took under the Cares Act in May 2020.offerings.
Other Factors Affecting Liquidity
We have significant outstanding debt and contractual obligations, in addition to planned capital expenditures related to the construction of Chamonix.Chamonix, The Temporary, and American Place. Our principal debt matures in February 2028. Certain planned capital expenditures designed to grow the Company, such as the permanent American Place facility and the potential expansion of Silver Slipper, and our American Place proposal, if pursued, may require additional financing and/or temporarily reduce the Company’s ability to repay debt.
Our operations are subject to financial, economic, competitive, regulatory and other factors, many of which are beyond our control. Namely,Such factors include the potential effects of COVID-19 and its variants. The extent to which our liquidity in future periods may be affected by COVID-19 including the global spreading of the new Delta variant, willand its variants may largely depend on future developments. Such future developments which are highly uncertain and cannot be accurately predicted at this time, as discussed under “Recent Developments.”
Debt
Long-term Debt. At June 30, 2021,March 31, 2022, we had $310.0$410.0 million of principal indebtedness outstanding under the 2028 Notes. Additionally, inNotes, and no drawn amounts under the midstCredit Facility or outstanding letters of the pandemic when all operations were suspended, we obtained the CARES Act Loans totaling $5.6 million.credit. We also owe $3.5$3.2 million related to our finance lease of a hotel at Rising Star.
8.25% Senior Secured Notes due 2028. On February 12, 2021, we refinanced all of our outstanding Prior Notes through the issuance of $310 million of new senior secured notes due 2028. The 2028 Notes are secured by liens on substantially all of our assets and are guaranteed by all of our restricted subsidiaries. We placed $180 million of the debt proceeds into a construction reserve account dedicated to the construction of Chamonix.
The 2028 Notes bear interest at a fixed rate of 8.25% per year and mature on February 15, 2028. There is no mandatory debt amortization prior to the maturity date. Interest on the 2028 Notes is payable on February 15 and August 15 of each year.
Senior Secured Revolving Credit Facility due 2026. On March 31, 2021, we entered into a credit agreement for a $15.0 million senior secured five-year revolving credit facility, which includes a letter of credit sub-facility. The credit facility may be used for working capital and other ongoing general purposes, excluding project costs for Chamonix, which was separately funded. The credit facility is equally and ratably secured by the same assets securing the 2028 Notes, and borrowings under the credit facility will be guaranteed by all of our assets and guarantees by all of our subsidiaries.
37
Unsecured Loans Under the CARES Act. On May 8, 2020, two of our wholly-owned subsidiaries obtained the CARES Act Loans in the aggregate amount of $5.6 million. Such funds were principally used to rehire several hundred employees at Rising Star and Bronco Billy’s in advance of, and subsequent to, their reopenings in mid-June 2020 from the mandated closures. Such unsecured loans may be forgiven, either in whole or in part, depending on the amount of such proceeds that are used for certain eligible expenses over a 24-week period, including primarily the payroll and health benefits of employees who might otherwise have been without jobs or health benefits. We intend to seek forgiveness of these loans, as permitted by the legislation, but there is no certainty that any or all of such loans will be forgiven.
See Note 5 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report for details on our debt obligations.
32
Other
Capital Investments. In addition to normal maintenance capital expenditures, we intendcontinue to make significant capital investments related to the construction of Chamonix, The Temporary and American Place.
Chamonix. In January 2021, we increased the size of the Chamonix project’s hotel capacity by 67%, to approximately 300 luxury guest rooms and suites from our previously planned 180 guest rooms. We also revised our construction budget for Chamonix project in Cripple Creek, Colorado, which is currently underway.January 2022, increasing it from $180 million to approximately $250 million, reflecting supply chain issues, inflation, and a difficult construction environment. To fund Chamonix’s construction, we issued our 2028 Notes and placed a portion of such proceeds into a restricted cash account dedicated to Chamonix’s construction (see Note 5 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report for details on our debt obligations). We currently expect to invest approximately $50$125 million into the constructionin 2022 and approximately $100 million in 2023, with an expected opening of Chamonix in 2021the second quarter of 2023.
American Place. We were selected by the IGB to develop and an additional $130operate American Place in Waukegan, Illinois. While the larger permanent facility is under construction, we will operate The Temporary by American Place. In advance of The Temporary’s expected opening in Fall 2022, pending customary regulatory approvals, we plan to invest approximately $100 million inthroughout 2022 though someto furnish, outfit and open the property, including significant upfront gaming license payments and the purchase of these payments may not occur until early 2023 dueslot machines and other equipment that are expected to be transferred to the timingpermanent casino once opened. To fund such construction, in February 2022, we issued $100.0 million of accounts payableAdditional Notes and construction retainage amounts.increased the size of our revolving credit facility to $40.0 million (see Note 5 of our Condensed Notes to Consolidated Financial Statements included in this quarterly report for details on our debt obligations).
Other Capital Expenditures. Additionally, we may fund various other capital expenditure projects, depending on our financial resources. Our capital expenditures may fluctuate due to decisions regarding strategic capital investments in new or existing facilities, and the timing of capital investments to maintain the quality of our properties. No assurance can be given that any of our planned capital expenditure projects will be completed or that any completed projects will be successful. Our annual capital expenditures typically include some number of new slot machines and related equipment; to some extent, we can coordinate such purchases to match our resources.
We evaluate projects based on a number of factors, including profitability forecasts, length of the development period, the regulatory and political environment, and the ability to secure the funding necessary to complete the development or acquisition, among other considerations. No assurance can be given that any additional projects will be pursued or completed or that any completed projects will be successful.
Hyatt Owner’s Option to Purchase our Leasehold Interest and Related Assets. Our lease with the owner of the Hyatt Lake Tahoe to operate the Grand Lodge Casino contains an option for Hyattthe lessor to purchase our leasehold interest and related casino operating assets. See Note 3 to the accompanying consolidated financial statements for further information.
Off-balance Sheet Arrangements
We have no off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.
Critical Accounting Estimates and Policies
We describe our critical accounting estimates and policies in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2020.2021. We also discuss our critical accounting estimates and policies in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the year ended December 31, 2020.2021. There has been no significant change in our estimation methods since the end of 2020.2021.
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Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) for which the Private Securities Litigation Reform Act of 1995 provides a safe harbor. These forward-looking statements can be identified by use of terms such as “believes,” “expects,” “anticipates,” “estimates,” “plans,” “intends,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “future,” “possible,” “seeks,” “may,” “could,” “should,” “will,” “might,” “likely,” “enable,” or similar words or expressions, as well as statements containing phrases such as “in our view,” “we cannot assure you,” “although no assurance can be given,” or “there is no way to anticipate with certainty.” Examples of forward-looking statements include, among others, statements we make regarding our plans, beliefs or expectations regarding our growth strategies; the impact of the coronavirus (COVID-19) pandemic and the Delta variant onpandemic; our business operations; our development and expansion plans, including theexpected construction budgets, estimated commencement budget,and completion dates, expected amenities, and opening timelineour expected operational performance for the new Chamonix, Casino Hotel;The Temporary, and American Place; our investments in capital improvements and other projects, including the amounts of such investments, the timing of commencement or completion of such capital improvements and projects and the resulting impact on our financial results; our sports wagering contracts with third-party providers, including the expected revenues and expenses and our expectations regarding our ability to replace our terminated sports wagering contracts in Colorado and Indiana and the expected timing for the launchcommencement date of theour sports betting “skins” related thereto; the Waukegan proposal, includingwagering contract in Illinois; our ability to obtain the casino license for the Temporary and if we are awarded such license, to obtain financing; our intentions regarding the potential future expansion at Silver Slipper, including the exercise of the tidelands lease option or receipt of any entitlements thereto; andAmerican Place; management’s expectation to exercise its buyout option on the Silver Slipper Casino and Hotel; the adequacy of our financial resources to fund operating requirements and planned capital expenditures and to meet our debt and contractual obligations; our expectations regarding the refinancingexpected sources of our principal debt; ourrevenue; anticipated capital expenditures; our intentions to seek forgivenesssources of the CARES Act Loans; our beliefs regarding compliance with our liquidity and financial covenants; our intentions regarding the use of the net proceeds from the Equity Offering; thefunds; anticipated or potential legislative actions; our beliefs in connection with our marketing efforts; the factors that affect the financial performance of our properties; the adequacy of our insurance; the competitive outlook; our expectations regarding the outcome of legal matters; the impact of recently issued accounting standards; our estimates regarding the cash used in our day-to-day operations; and our estimates regarding certain accounting and tax matters, among others.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others:
Risks Relatedothers, those risks discussed in Part I, Item 1A—Risk Factors and throughout Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of our Annual Report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A—Risk Factors and elsewhere of this Form 10-Q. In addition, you should consult other disclosures made by us (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by us. You should read this Form 10-Q, and the documents that we reference in this Form 10-Q and have filed with the SEC, and our Business and Operations
39
Risks Related to Development and Growth Opportunities
Risks Related to our Indebtedness
40
Risks Related to our Legal and Regulatory Environment
���
Risks Related to Technology
General Risks
We undertake no obligation to publicly update or revise any forward-looking statements as a result of future developments, events or conditions, except as required by law. New risks emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ significantly from those forecast in any forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures — As of June 30, 2021,March 31, 2022, we completed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2021,March 31, 2022, our disclosure controls and procedures are effective at a reasonable assurance level in timely alerting them to material information relating to us, which is required to be included in our periodic SEC filings.
We have established controls and procedures designed at the reasonable assurance level to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the principal executive officer and the principal financial officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting — There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to various legal and administrative proceedings relating to personal injuries, employment matters, commercial transactions and other matters arising in the normal course of business. We do not believe that the final outcome of these matters will have a material adverse effect on our consolidated financial position or results of operations. We maintain what we believe is adequate insurance coverage to further mitigate the risks of such proceedings.
Item 1A. Risk Factors
There were no material changes from the risk factors set forth under Part I, Item 1A “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 20202021 (the “Annual Report”). The continuing COVID-19 pandemic, including the emergence of new variants, has heightened, and in some cases manifested, certain of the risks we normally face in our business, including those disclosed in the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 19, 2021, we granted 5,252 shares of restricted stock under the Company’s 2015 Equity Incentive Plan to each of our six non-employee directors, totaling 31,512 shares of restricted stock. These shares of restricted stock represent the equity portion of each director’s annual compensation for serving on our board and vest on May 19, 2022. These shares were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that it did not involve a public offering.
On May 19, 2021, we granted 8,750 shares of restricted stock to our Chief Financial Officer, 6,000 shares of restricted stock to our General Counsel, and 6,000 shares of restricted stock to our Chief Development Officer under the Company’s 2015 Equity Incentive Plan pursuant to our Annual Incentive Plan for Executives. These shares of restricted stock vest in three equal annual amounts on May 17, 2022, 2023 and 2024, subject to the achievement of certain performance-based criteria, including EBITDA and free cash flow. These shares were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, on the basis that it did not involve a public offering.
4235
Item 6. Exhibits
| | |
Exhibit | | Description |
10.1* | | Employment Agreement, dated April 11, 2022, between Full House Resorts, Inc. and John Ferrucci |
31.1* | | |
31.2* | | |
32.1** | | |
32.2** | | |
101.INS* | | Inline XBRL Instance Document |
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | | Inline XBRL Taxonomy Extension |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* | | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
* Filed herewith.
** Furnished herewith.
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | |
| FULL HOUSE RESORTS, INC. | |
| | |
Date: | By: | /s/ DANIEL R. LEE |
| | Daniel R. Lee Chief Executive Officer (on behalf of the Registrant and as principal executive officer) |
| | |
| | |
Date: | By: | /s/ LEWIS A. FANGER |
| | Lewis A. Fanger Chief Financial Officer (on behalf of the Registrant and as principal financial officer and as principal accounting officer) |
4337