2017
ANNUAL REPORT
NEVADA | MONTANA | MARYLAND
Dear Fellow Shareholders,
Dear Fellow Shareholders,
Fiscal 2017 marked a year of transformation for our Company. In October, we acquired four
uniquely positioned properties in Southern Nevada, which included the iconic Stratosphere
Casino, Hotel & Tower on the Las Vegas Strip, as well as two well-known Arizona Charlie’s
branded Las Vegas locals casinos and the market leading Aquarius Casino Resort in Laughlin.
These properties dramatically expanded our presence in Southern Nevada, which currently is
experiencing a robust level of economic activity supporting what we believe to be the most
favorable gaming market in the country.
Fiscal 2017 marked a year of transformation for our Company. In October, we acquired four
uniquely positioned properties in Southern Nevada, which included the iconic Stratosphere
Casino, Hotel & Tower on the Las Vegas Strip, as well as two well-known Arizona Charlie’s
branded Las Vegas locals casinos and the market leading Aquarius Casino Resort in Laughlin.
These properties dramatically expanded our presence in Southern Nevada, which currently is
experiencing a robust level of economic activity supporting what we believe to be the most
favorable gaming market in the country.
As we continue the integration of these new properties, we have developed even more conviction in our decision
As we continue the integration of these new properties, we have developed even more conviction in our decision
to acquire this collection of gaming venues. In a short time, we have recognized player trends and increased
to acquire this collection of gaming venues. In a short time, we have recognized player trends and increased
opportunities to market all of our entertainment experiences to our customers. Combined with our unparalleled
opportunities to market all of our entertainment experiences to our customers. Combined with our unparalleled
distributed gaming platform, our diverse product offering extends from the Las Vegas Strip to almost every
distributed gaming platform, our diverse product offering extends from the Las Vegas Strip to almost every
corner of Nevada. When including our distributed gaming operations in Montana and our Rocky Gap Casino
corner of Nevada. When including our distributed gaming operations in Montana and our Rocky Gap Casino
Resort in Maryland, our total portfolio now comprises more than 16,200 slot machines, 114 table games and
Resort in Maryland, our total portfolio now comprises more than 16,200 slot machines, 114 table games and
5,168 hotel rooms across eight casinos and over 1,000 distributed gaming locations.
5,168 hotel rooms across eight casinos and over 1,000 distributed gaming locations.
We are extremely excited about our recently announced renovation plan for the Stratosphere, which will begin in
We are extremely excited about our recently announced renovation plan for the Stratosphere, which will begin in
the second quarter of 2018. Our three-year phased approach will position the Stratosphere to take advantage of
the second quarter of 2018. Our three-year phased approach will position the Stratosphere to take advantage of
the long-term positive economic outlook for Las Vegas while minimizing disruption of the current operations.
the long-term positive economic outlook for Las Vegas while minimizing disruption of the current operations.
Upon its completion, we will have remodeled over 1,100 rooms, added new group meeting space, refreshed the
Upon its completion, we will have remodeled over 1,100 rooms, added new group meeting space, refreshed the
gaming and tower areas while adding several exciting new food and beverage outlets. These renovations,
gaming and tower areas while adding several exciting new food and beverage outlets. These renovations,
focused on room remodels and group business amenities, will allow us to target new guests for the Stratosphere
focused on room remodels and group business amenities, will allow us to target new guests for the Stratosphere
while delivering an improved product to our existing patrons.
while delivering an improved product to our existing patrons.
With our distributed gaming business, we continue to expand our market leading footprint of 59 wholly-owned
Nevada taverns, having opened two new locations in 2018, to be followed by four more new tavern openings
later this year.
With our distributed gaming business, we continue to expand our market leading footprint of 59 wholly-owned
Nevada taverns, having opened two new locations in 2018, to be followed by four more new tavern openings
later this year.
Lastly, we are pleased to unveil our new company logo, which you are seeing here on the cover of this year’s
annual report. The contemporary look and feel of our new logo represents a nod to our transformation as we
continue to develop our current assets and look for future opportunities.
Lastly, we are pleased to unveil our new company logo, which you are seeing here on the cover of this year’s
annual report. The contemporary look and feel of our new logo represents a nod to our transformation as we
continue to develop our current assets and look for future opportunities.
We will continue to pursue growth opportunities across both our casino and distributed gaming platforms to
increase the scale of our business and expand into new markets. As we execute on our strategic initiatives for
2018, I believe our platform is well positioned to create further value for shareholders. On behalf of our entire
team, thank you for your continued investment and support of Golden Entertainment.
We will continue to pursue growth opportunities across both our casino and distributed gaming platforms to
increase the scale of our business and expand into new markets. As we execute on our strategic initiatives for
2018, I believe our platform is well positioned to create further value for shareholders. On behalf of our entire
team, thank you for your continued investment and support of Golden Entertainment.
Blake L. Sartini
Chairman, President and Chief Executive Officer
Blake L. Sartini
Chairman, President and Chief Executive Officer
April 26, 2018
April 26, 2018
WEBSITE
WEBSITE
GoldenEnt.com
GoldenEnt.com
INVESTOR RELATIONS
INVESTOR RELATIONS
JCIR: Joseph Jaffoni
JCIR: Joseph Jaffoni
212.835.8500
212.835.8500
gden@jcir.com
gden@jcir.com
BOARD OF DIRECTORS
BOARD OF DIRECTORS
MANAGEMENT TEAM
MANAGEMENT TEAM
PROPERTIES & BRANDS
PROPERTIES & BRANDS
Director; former Chief Executive
Director; former Chief Executive
Chief Administrative Officer
Chief Administrative Officer
Edward W. Martin
Edward W. Martin
Executive Vice President and
Executive Vice President and
Rocky Gap Casino Resort
Rocky Gap Casino Resort
Flintstone, Maryland
Flintstone, Maryland
Blake L. Sartini
Blake L. Sartini
Blake L. Sartini
Blake L. Sartini
Chairman of the Board, President
Chairman of the Board, President
Chairman of the Board,
Chairman of the Board,
and Chief Executive Officer
and Chief Executive Officer
President and Chief Executive
President and Chief Executive
Officer
Officer
Lyle A. Berman
Lyle A. Berman
Director; former Chairman of the
Director; former Chairman of the
Stephen A. Arcana
Stephen A. Arcana
Board and Chief Executive Officer
Board and Chief Executive Officer
Executive Vice President and
Executive Vice President and
of Lakes Entertainment, Inc.
of Lakes Entertainment, Inc.
Chief Operating Officer
Chief Operating Officer
Timothy J. Cope
Timothy J. Cope
Charles H. Protell
Charles H. Protell
Director; former President and
Director; former President and
Executive Vice President,
Executive Vice President,
Chief Financial Officer of Lakes
Chief Financial Officer of Lakes
Chief Strategy Officer and
Chief Strategy Officer and
Entertainment, Inc.
Entertainment, Inc.
Chief Financial Officer
Chief Financial Officer
Mark A. Lipparelli
Mark A. Lipparelli
Sean T. Higgins
Sean T. Higgins
Director; Chief Executive Officer
Director; Chief Executive Officer
Executive Vice President and
Executive Vice President and
of Gioco Ventures; Former
of Gioco Ventures; Former
Chief Legal Officer
Chief Legal Officer
Nevada State Senator, District 6
Nevada State Senator, District 6
Blake L. Sartini, II
Blake L. Sartini, II
Senior Vice President of
Senior Vice President of
Distributed Gaming
Distributed Gaming
Thomas E. Haas
Thomas E. Haas
Senior Vice President of
Senior Vice President of
Accounting
Accounting
Robert L. Miodunski
Robert L. Miodunski
Officer of American Gaming
Officer of American Gaming
Systems
Systems
Neil I. Sell
Neil I. Sell
Director; Of Counsel, Maslon
Director; Of Counsel, Maslon
Edelman Borman & Brand, LLP,
Edelman Borman & Brand, LLP,
Minneapolis, Minnesota
Minneapolis, Minnesota
Terrence L. Wright
Terrence L. Wright
Director; Chairman of the Board
Director; Chairman of the Board
of Westcor Land Title Insurance
of Westcor Land Title Insurance
Company
Company
STOCK TRANSFER
STOCK TRANSFER
INFORMATION
INFORMATION
Broadridge Corporate Issuer
Broadridge Corporate Issuer
Solutions, Inc.
Solutions, Inc.
P.O. Box 1342
P.O. Box 1342
Brentwood, NY 11717
Brentwood, NY 11717
CASINOS
CASINOS
Stratosphere Casino,
Stratosphere Casino,
Hotel & Tower
Hotel & Tower
Las Vegas, Nevada
Las Vegas, Nevada
Aquarius Casino Resort
Aquarius Casino Resort
Laughlin, Nevada
Laughlin, Nevada
Arizona Charlie’s Decatur
Arizona Charlie’s Decatur
Las Vegas, Nevada
Las Vegas, Nevada
Arizona Charlie’s Boulder
Arizona Charlie’s Boulder
Las Vegas, Nevada
Las Vegas, Nevada
Pahrump Nugget Hotel
Pahrump Nugget Hotel
Casino
Casino
Pahrump, Nevada
Pahrump, Nevada
Gold Town Casino
Gold Town Casino
Pahrump, Nevada
Pahrump, Nevada
Lakeside Casino & RV Park
Lakeside Casino & RV Park
Pahrump, Nevada
Pahrump, Nevada
DISTRIBUTED GAMING
DISTRIBUTED GAMING
Golden Route Operations
Golden Route Operations
Nevada
Nevada
Montana
Montana
Nevada Tavern Brands
Nevada Tavern Brands
SG Bar
SG Bar
Sierra Gold
Sierra Gold
Sierra Junction
Sierra Junction
Sean Patrick’s
Sean Patrick’s
PT’s Ranch
PT’s Ranch
PT’s Gold
PT’s Gold
PT’s Pub
PT’s Pub
PT’s Place
PT’s Place
PT’s Brewing Company
PT’s Brewing Company
Copies of this Annual Report
Copies of this Annual Report
and the Company’s Annual
and the Company’s Annual
Report on Form 10-K may be
Report on Form 10-K may be
obtained without charge by
obtained without charge by
submitting a written request to:
submitting a written request to:
Golden Entertainment, Inc.
Golden Entertainment, Inc.
c/o Investor Relations
c/o Investor Relations
6595 S Jones Blvd
6595 S Jones Blvd
Las Vegas, NV 89118
Las Vegas, NV 89118
TRADING SYMBOL
TRADING SYMBOL
ANNUAL REPORTS
ANNUAL REPORTS
NASDAQ: GDEN
NASDAQ: GDEN
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2017
or
(cid:4)
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. 000-24993
GOLDEN ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of incorporation or organization)
41-1913991
(I.R.S., Employer Identification No.)
6595 S Jones Boulevard - Las Vegas, Nevada 89118
(Address of principal executive offices)
(702) 893-7777
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.01 par value
Name of Each Exchange on Which Registered
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
(cid:4)
(cid:4) (Do not check if a smaller reporting company)
(cid:4)
Large accelerated filer
Non-accelerated filer
Emerging growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:3)
Based upon the last sale price of the registrant’s common stock, $0.01 par value, as reported on the NASDAQ Global Market on June 30, 2017
(the last business day of the registrant’s most recently completed second quarter), the aggregate market value of the common stock held by non-
affiliates of the registrant as of such date was $241,338,621. For purposes of these computations only, all of the Registrant’s executive officers
and directors and entities affiliated with them have been deemed to be affiliates.
As of March 14, 2018, 27,387,626 shares of the registrant’s common stock, $0.01 par value, were outstanding.
Accelerated filer
Smaller reporting company
(cid:3)
(cid:4)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the registrant’s 2018 annual meeting of shareholders, to be filed with the Securities and Exchange
Commission within 120 days after the registrant’s year ended December 31, 2017, are incorporated by reference into Part III of this Annual
Report on Form 10-K where indicated. Except with respect to information specifically incorporated by reference in this Annual Report on
Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.
GOLDEN ENTERTAINMENT, INC.
ANNUAL REPORT ON FORM 10-K
INDEX
PART I
ITEM I.
BUSINESS.....................................................................................................................................
ITEM 1A. RISK FACTORS ...........................................................................................................................
ITEM IB.
UNRESOLVED STAFF COMMENTS ........................................................................................
ITEM 2.
PROPERTIES ................................................................................................................................
ITEM 3.
LEGAL PROCEEDINGS..............................................................................................................
ITEM 4.
MINE SAFETY DISCLOSURES .................................................................................................
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.......................................
ITEM 6.
SELECTED FINANCIAL DATA.................................................................................................
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ......................................................................................................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ..............................................
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...............................................................................................
ITEM 9A. CONTROLS AND PROCEDURES..............................................................................................
ITEM 9B. OTHER INFORMATION .............................................................................................................
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ......................
ITEM 11.
EXECUTIVE COMPENSATION.................................................................................................
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS..........................................................................
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE .........................................................................................................................
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES ...............................................................
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES.............................................................
ITEM 16.
FORM 10-K SUMMARY .............................................................................................................
SIGNATURES .....................................................................................................................................................
Page
2
12
25
26
27
27
28
29
30
45
46
89
89
90
91
91
91
92
92
93
97
98
[THIS PAGE INTENTIONALLY LEFT BLANK]
As used in this Annual Report on Form 10-K, unless the context suggests otherwise, the terms “Golden,” “we,”
“our” and “us” refer to Golden Entertainment, Inc. and its subsidiaries.
PART I
Forward-Looking Statements
This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and
Results of Operations, contains forward-looking statements regarding future events and our future results that are
subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, or the Exchange Act. Forward-looking statements can generally be identified by the use of words
such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “project,”
“seek,” “should,” “think,” “will,” “would” and similar expressions. In addition, forward-looking statements include
statements regarding cost savings, synergies, growth opportunities and other financial and operating benefits of our
acquisition of American Casino & Entertainment Properties LLC (“American”) and our other acquisitions; our
strategies, objectives, business opportunities and plans for future expansion, developments or acquisitions;
anticipated future growth and trends in our business or key markets; projections of future financial condition,
operating results, income, capital expenditures, costs or other financial items; anticipated regulatory and legislative
changes; and other characterizations of future events or circumstances as well as other statements that are not
statements of historical fact. Forward-looking statements are based on our current expectations and assumptions
regarding our business, the economy and other future conditions. These forward-looking statements are subject to
assumptions, risks and uncertainties that may change at any time, and readers are therefore cautioned that actual
results could differ materially from those expressed in any forward-looking statements. Factors that could cause our
actual results to differ materially include: our ability to realize the anticipated cost savings, synergies and other
benefits of our acquisition of American and our other acquisitions, and integration risks relating to such transactions;
changes in national, regional and local economic and market conditions; legislative and regulatory matters
(including the cost of compliance or failure to comply with applicable laws and regulations); increases in gaming
taxes and fees in the jurisdictions in which we operate; litigation; increased competition; our ability to renew our
distributed gaming contracts; reliance on key personnel (including our Chief Executive Officer, Chief Operating
Officer and Chief Strategy and Financial Officer); the level of our indebtedness and our ability to comply with
covenants in our debt instruments; terrorist incidents; natural disasters; severe weather conditions (including weather
or road conditions that limit access to our properties); the effects of environmental and structural building
conditions; the effects of disruptions to our information technology and other systems and infrastructure; factors
affecting the gaming, entertainment and hospitality industries generally, and other factors identified under the
heading “Risk Factors” in Part I, Item 1A of this report, elsewhere in this report and in our other filings with the
Securities and Exchange Commission (“SEC”). Readers are cautioned not to place undue reliance on any forward-
looking statements, which speak only as of the filing date of this report. We undertake no obligation to revise or
update any forward-looking statements for any reason.
1
ITEM 1. BUSINESS
Corporate Information
We were incorporated in Minnesota in 1998 under the name of GCI Lakes, Inc., which name was subsequently
changed to Lakes Gaming, Inc. in August 1998, to Lakes Entertainment, Inc. in June 2002 and to Golden
Entertainment, Inc. in July 2015. Our shares began trading publicly in January 1999. The mailing address of our
headquarters is 6595 S Jones Boulevard, Las Vegas, Nevada 89118, and our telephone number at that location is
(702) 893-7777.
Business Overview
We own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on
resort casino operations and distributed gaming (including tavern gaming in our wholly-owned taverns).
We conduct our business through two reportable operating segments: Casinos and Distributed Gaming. In our
Casinos segment, we own and operate eight resort casinos, seven in Nevada and one in Maryland. Four of our
Nevada resort casino properties were added to our casino portfolio in October 2017 as a result of our acquisition of
American, as further described below. Our Distributed Gaming segment involves the installation, maintenance and
operation of slots and amusement devices in non-casino locations such as grocery stores, convenience stores, liquor
stores, restaurants, bars and taverns in Nevada and Montana, and the operation of wholly-owned branded taverns
targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area. Financial information
regarding our reporting segments is included in Note 16, Segment Information, in the accompanying consolidated
financial statements.
In January 2018, subsequent to fiscal year end, we completed an underwritten public offering in which certain of our
shareholders resold an aggregate of 6.5 million shares of our common stock, and we sold 975,000 newly issued
shares of our common stock pursuant to the exercise in full of the underwriters’ over-allotment option to purchase
additional shares. Our net proceeds from the offering were approximately $25.3 million after deducting underwriting
discounts and offering expenses. We expect to use these net proceeds for general corporate purposes, which may
include, among other things, capital expenditures, opportunistic acquisitions or working capital.
Acquisitions
On October 20, 2017, we completed the acquisition of all of the outstanding equity interests of American from its
former equity holders (the “American Acquisition”) for aggregate consideration consisting of $781.0 million in cash
(subject to certain post-closing adjustments pursuant to the purchase agreement) and the issuance by us of 4,046,494
shares of our common stock to W2007/ACEP Holdings, LLC (“ACEP Holdings”), a former American equity
holder. Pursuant to the post-closing adjustment provisions in the purchase agreement, the cash portion of the
consideration paid in the American Acquisition was subsequently increased to $787.6 million. The American
Acquisition added four Nevada resort casino properties to our casino portfolio, including the Stratosphere Casino,
Hotel & Tower (the “Stratosphere”) in Las Vegas. The results of operations of American and its subsidiaries have
been included in our results subsequent to that date. See Note 3, Merger and Acquisitions, in the accompanying
consolidated financial statements for additional information. In connection with the closing of the American
Acquisition, we entered into two new credit agreements with respect to a $900.0 million senior secured first lien
credit facility (consisting of $800.0 million in term loans and a $100.0 million revolving credit facility, which was
undrawn at closing) and a $200.0 million senior secured second lien term loan facility. We used the net proceeds
from the borrowings under these facilities at the closing primarily to fund the cash purchase price in the American
Acquisition (a portion of which was used to repay American’s then outstanding senior secured indebtedness), to
refinance our outstanding senior secured indebtedness under our then-existing senior secured credit facility, and to
pay certain transaction fees and expenses. See Note 7, Debt, in the accompanying consolidated financial statements
for a discussion of the new credit agreements and associated refinancing.
In January 2016, we completed the acquisition of approximately 1,100 slots from a distributed gaming operator in
Montana, as well as certain other non-gaming assets and the right to operate within certain locations (the “Initial
Montana Acquisition”). Additionally, in April 2016, we completed the acquisition of approximately 1,800 slots from
a second distributed gaming operator in Montana, as well as amusement devices and other non-gaming assets and
2
the right to operate within certain locations (the “Second Montana Acquisition” and, together with the Initial
Montana Acquisition, the “Montana Acquisitions”). The results of operations of the distributed gaming businesses
acquired in the Montana Acquisitions have been included in our results subsequent to their respective acquisition
dates. See Note 3, Merger and Acquisitions, in the accompanying consolidated financial statements for additional
information.
On July 31, 2015, we acquired Sartini Gaming, Inc. (“Sartini Gaming”) through the merger of a wholly-owned
subsidiary of Golden with and into Sartini Gaming, with Sartini Gaming surviving as a wholly-owned subsidiary of
Golden (the “Merger”). The results of operations of Sartini Gaming and its subsidiaries have been included in our
results subsequent to that date.
Casinos
We own and operate eight resort casino properties in Nevada and Maryland, comprising the Stratosphere, Arizona
Charlie’s Decatur and Arizona Charlie’s Boulder in Las Vegas, Nevada, the Aquarius Casino Resort (the
“Aquarius”) in Laughlin, Nevada, the Pahrump Nugget Hotel Casino (“Pahrump Nugget”), Gold Town Casino and
Lakeside Casino & RV Park in Pahrump, Nevada, and the Rocky Gap Casino Resort (“Rocky Gap”) in Flintstone,
Maryland.
The Stratosphere: The Stratosphere is our premier casino property, located on Las Vegas Blvd on the
north end of the Las Vegas Strip. A gaming and entertainment complex, the Stratosphere comprises the
iconic Stratosphere Tower, a casino, a hotel and a retail center. As of December 31, 2017, the Stratosphere
featured an 80,000 sq. ft. casino and offered nearly 2,430 hotel rooms, 748 slots, 42 table games, a race and
sports book, 15 restaurants, two rooftop pools, a fitness center, retail shops and entertainment facilities.
Arizona Charlie’s casinos: Our Arizona Charlie’s Decatur and Arizona Charlie’s Boulder casino
properties primarily serve local Las Vegas patrons, and provide an alternative experience to the Las Vegas
Strip. Our Arizona Charlie’s Decatur casino property is located four miles west of the Las Vegas Strip in
the heavily populated west Las Vegas area, and is easily accessible from US Route 95, a major highway in
Las Vegas. Our Arizona Charlie’s Boulder casino property is located on Boulder Highway, in an
established retail and residential neighborhood in the eastern metropolitan area of Las Vegas. The property
is easily accessible from I-515, the primary east/west highway in Las Vegas. As of December 31, 2017, our
Arizona Charlie’s Decatur casino offered approximately 260 hotel rooms and a total of 1,037 slots, seven
table games, race and sports books, six restaurants, and an approximately 300-seat bingo parlor, and our
Arizona Charlie’s Boulder casino offered approximately 300 hotel rooms and a total of 839 slots, seven
table games, race and sports books, four restaurants, and an approximately 450-seat bingo parlor. Our
Arizona Charlie’s Boulder casino also offers an RV park with approximately 220 RV hook-up sites.
Aquarius: The Aquarius is located in Laughlin, Nevada, which is located approximately 90 miles from
Las Vegas on the western riverbank of the Colorado River. The Aquarius caters primarily to patrons
traveling from Arizona and Southern California, as well as customers from Nevada seeking an alternative
to the Las Vegas experience. As of December 31, 2017, the Aquarius had approximately 1,900 hotel rooms
and offered 1,232 slots, 33 table games and ten restaurants.
Pahrump casinos: We own and operate three casinos in Pahrump, Nevada, the gateway to Death Valley
National Park, located approximately 60 miles from Las Vegas. Pahrump Nugget is our largest property in
Pahrump, Nevada. As of December 31, 2017, Pahrump Nugget offered approximately 70 hotel rooms, 419
slots, eight table games, a race and sports book, an approximately 200-seat bingo facility and a bowling
center. As of December 31, 2017, our Gold Town Casino offered 226 slots and an approximately 100-seat
bingo facility, and our Lakeside Casino & RV Park offered 188 slots and approximately 160 RV hook-up
sites.
Rocky Gap: Rocky Gap is situated on approximately 270 acres in the Rocky Gap State Park in Maryland,
which we lease from the Maryland Department of Natural Resources under a 40-year operating ground
lease expiring in 2052 (plus a 20-year option renewal). As of December 31, 2017, Rocky Gap offered 665
slots, 17 table games, two casino bars, three restaurants, a spa and the only Jack Nicklaus signature golf
course in Maryland. Rocky Gap is a AAA Four Diamond Award® winning resort with approximately 200
hotel rooms, as well as an event and conference center.
3
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Distributed Gaming
Our Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement
devices in non-casino locations such as grocery stores, convenience stores, liquor stores, restaurants, bars and
taverns in Nevada and Montana. In addition, we operate wholly-owned branded taverns with slots, which target
local patrons, primarily in the greater Las Vegas, Nevada metropolitan area. We also hold a video gaming terminal
operator license for distributed gaming in Illinois. We place our slots and amusement devices in locations where we
believe they will receive maximum customer traffic, generally near a store’s entrance. As of December 31, 2017, our
distributed gaming operations comprised approximately 10,900 slots in over 1,000 locations.
Nevada law limits distributed gaming operations (also known as “restricted gaming” operations) to certain types of
non-casino locations, including grocery stores, drug stores, convenience stores, restaurants, bars, taverns and liquor
stores, where gaming is incidental to the primary business being conducted at the location and games are generally
limited to 15 or fewer slots and no other forms of gaming activity. The gaming area in these business locations is
typically small, and in many instances, segregated from the primary business area, including the use of alcoves in
grocery stores and drug stores and installation of slots into the physical bar (also known as “bar top” slots) in bars
and taverns. Such segregation provides greater oversight and supervision of the slots. Under Montana law,
distributed gaming operations are limited to business locations licensed to sell alcoholic beverages for on-premises
consumption only, with such locations generally restricted to offering a maximum of 20 slots.
In Nevada, we generally enter into three types of slot placement contracts as part of our distributed gaming business:
space lease, revenue share and participation agreements. Under space lease agreements, we pay a fixed monthly
rental fee for the right to install, maintain and operate our slots at a business location. Under revenue share
agreements, we pay the business location a percentage of the gaming revenue generated from our slots placed at the
location, rather than a fixed monthly rental fee. With regard to both space lease and revenue share agreements, we
hold the applicable gaming license to conduct gaming at the location (although revenue share locations are required
to obtain separate regulatory approval to receive a percentage of the gaming revenue). Under participation
agreements, the business location holds the applicable gaming license and retains a percentage of the gaming
revenue that it generates from our slots. In Montana, our slot and amusement device placement contracts are all
revenue share agreements.
Our wholly-owned branded taverns offer a casual, upscale environment catering to local patrons offering superior
food, craft beer and other alcoholic beverages, and typically include 15 onsite slots. As of December 31, 2017, we
operated 57 wholly-owned branded taverns, which offered a total of over 920 onsite slots. Most of our taverns are
located in the greater Las Vegas, Nevada metropolitan area and cater to local patrons seeking more convenient
entertainment establishments than traditional casino properties. Our tavern brands include PT’s Gold, PT’s Pub,
Sierra Gold, Sean Patrick’s, PT’s Place, PT’s Ranch, PT’s Brewing Company, Sierra Junction and SG Bar. We also
opened our first brewery in Las Vegas, PT’s Brewing Company, during the first quarter of 2016 to produce craft
beer for our taverns and casinos.
Sales and Marketing
Casinos
Our Nevada resort casinos are located in Las Vegas, Laughlin and Pahrump, Nevada, and include the Stratosphere
casino property located on the north end of the Las Vegas Strip. Accordingly, we market our Nevada resort casino
properties to both the locals market and tourist traffic, targeting the value-driven customer. We seek to attract local
residents to our Nevada casinos through promotions geared towards enhancing local play, including dining offerings
at our casino restaurants and promotions of our bowling and bingo amenities. Promotional programs for out-of-
market patrons focus primarily on our iconic Stratosphere casino property, our newly remodeled hotel rooms at
Pahrump Nugget and our award-winning recreational vehicle park surrounding a lake at the Lakeside Casino & RV
Park.
Rocky Gap is located in western Maryland in close proximity to the affluent and heavily populated metropolitan
areas of Pittsburgh, Pennsylvania, Baltimore, Maryland and Washington, D.C., as well as two major interstate
freeways. Rocky Gap serves as a premier destination for both local and out-of-market patrons. Our marketing efforts
for Rocky Gap are primarily focused on attracting patrons through local and regional campaigns promoting both the
amenities of Rocky Gap and the vast array of outdoor activities available in the Rocky Gap State Park. A portion of
Rocky Gap’s business is also arranged through group sales and bus coach wholesalers.
4
Our casino sales and marketing efforts also include various rewards and loyalty programs designed to encourage
repeat business at our resort casino properties. At our Las Vegas and Laughlin casinos in Nevada, we offer the
ace|PLAY® rewards program. At our Pahrump, Nevada casinos, we offer the Gold Mine RewardsTM loyalty
program. The close proximity of our Pahrump casino properties allows us to leverage the convenience of a one-card
player rewards system, where reward points and other benefits can be earned and redeemed across all three of our
Pahrump casinos via a single card. At Rocky Gap, we offer the Rewards ClubTM loyalty program. Depending on the
program, members of our rewards programs may earn points based on gaming activity and amounts spent on rooms,
food, beverage and resort activities, which points may be redeemable for complimentary slot play, food, beverages
and hotel rooms, among other items. As of December 31, 2017, we had approximately 700,000 active players in our
marketing database, providing cross-marketing opportunities across our resort casino and distributed gaming
platform.
Distributed Gaming
We conduct our operations in our Distributed Gaming segment in Nevada and Montana. Our Distributed Gaming
customer base is comprised of the third party distributed gaming customers with whom we enter into slot and
amusement device placement contracts for the installation, maintenance and operation of slots and amusement
devices at non-casino locations, the primarily local patrons that use our slots and amusement devices in such
locations and the primarily local patrons of our wholly-owned branded taverns. We seek to place our slots and
amusement devices in strategic, high-traffic areas, including in our branded taverns, and the majority of our
marketing efforts are focused on maximizing profitability from a high-frequency, convenience-driven customer base
in the counties in which we operate.
Our marketing efforts also seek to capitalize on repeat visitation through the use of loyalty programs, such as our
Golden Rewards® promotional program for our wholly-owned branded taverns. Members of our Golden Rewards
programs earn points based on play and amounts spent on the purchase of food and beverage, which points are
redeemable for complimentary slot play, food and beverages and other items. Our rewards technology is designed to
track customer behavior indicators such as visitation, customer spend and customer engagement. Brand equity is
also leveraged in our taverns through the number of our branded tavern locations located throughout the greater Las
Vegas, Nevada metropolitan area. Our advertising initiatives include both traditional and non-traditional channels
such as direct mail, email, radio, print, television, social media, search engine optimization and static/dynamic
billboards.
Intellectual Property
Our policy is to pursue registration of our important trademarks and service marks in the states where we do
business and with the United States Patent and Trademark Office. We have registered and/or have pending as
trademarks with the United States Patent and Trademark Office, among other trademarks and service marks,
“Golden Entertainment” and “Golden Gaming,” as well as various names, brands and logos relating to our resort
casino properties, customer rewards and loyalty programs and wholly-owned taverns. In addition, we have also
registered or applied to register numerous other trademarks in various jurisdictions in the United States in
connection with our properties, facilities and development projects. We also hold a patent in the United States
related to player tracking systems.
Sale of Jamul Tribe Promissory Note
On December 9, 2015, we sold our $60.0 million subordinated promissory note (the “Jamul Note”) from the Jamul
Indian Village (the “Jamul Tribe”) to a subsidiary of Penn National Gaming, Inc. (“Penn National”) for $24.0
million in cash. Under the terms of the January 2015 merger agreement with Sartini Gaming (the “Merger
Agreement”) and subject to applicable law, we agreed that the proceeds received from the sale of the Jamul Note,
net of related costs, would be distributed in a special cash dividend to our shareholders holding shares as of the
record date for such dividend (other than shareholders that had waived their right to receive such dividend in
connection with the Merger). On June 17, 2016, our Board of Directors approved and declared the special dividend
to the eligible shareholders of record on the close of business on June 30, 2016 (the “Record Date”) of cash in the
aggregate amount of approximately $23.5 million (the “Special Dividend”), which was paid on July 14, 2016. The
5
$1.71 per share amount of the Special Dividend was calculated by dividing the aggregate amount of the Special
Dividend by 13,759,374 outstanding shares of common stock held by eligible shareholders on the Record Date
(rounded down to the nearest whole cent per share).
In connection with the special dividend and in accordance with our equity incentive plans approved by our
shareholders, equitable anti-dilutive adjustments were made to the exercise prices of outstanding stock options to
purchase shares of our common stock in order to preserve the value of such stock options following the Special
Dividend. Accordingly, effective as of the close of business on the dividend payment date of July 14, 2016, the
exercise price of each stock option under our equity incentive plans outstanding on the Record Date was reduced by
$1.71 per share. See Note 9, Share-Based Compensation, in the accompanying consolidated financial statements for
information on our anti-dilutive adjustments to the outstanding stock options.
Competition
The resort casino and distributed gaming industries are highly competitive. Our resort casino business competes
with numerous casinos and casino-hotels of varying quality and size in our markets. We also compete with other
non-gaming resorts and vacation destinations, and with various other casino and other entertainment businesses. The
casino entertainment business is characterized by competitors that vary considerably in their size, quality of
facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities,
level of amenities, management talent and geographic diversity. Many of our regional and national competitors have
greater brand recognition and significantly greater resources than we have. Their greater resources may also provide
them with the ability to expand operations in the future.
Furthermore, several states are currently considering legalizing casino gaming in designated areas, and Native
American tribes may develop or expand gaming properties in markets located more closely to our customer base
(particularly Native American casinos located in California). The expansion of casino gaming in or near any
geographic area from which we attract or expect to attract a significant number of our customers, including legalized
casino gaming in neighboring states and on Native American land, could have a significant adverse effect on our
business, financial condition, results of operations and prospects.
With respect to our distributed gaming businesses, we face direct competition for our space lease, revenue share and
participation locations from others involved in the distributed gaming business, as well as substantial competition
for customers from other operators of casinos, hotels, taverns and other entertainment venues. Many of our regional
and national competitors have greater brand recognition and significantly greater resources than we have. Their
greater resources may also provide them with the ability to expand operations in the future.
In addition, in both of our segments we face ever-increasing competition from online gaming, including mobile
gaming applications for smart phones and tablet computers, state-sponsored lotteries, card clubs, sports books,
fantasy sports websites and other forms of legalized gaming. Various forms of internet gaming have been approved
in Nevada, and legislation permitting internet gaming has been proposed by the federal government and other states.
The expansion of internet gaming in Nevada and other jurisdictions could result in significant additional competition
for our operations.
Regulation
Gaming Regulation
We are subject to extensive federal, state, and local regulation. State and local government authorities in the
jurisdictions in which we operate require us to obtain gaming licenses and require our officers, key employees and
business entity affiliates to demonstrate suitability to be involved in gaming operations. These are privileged
licenses or approvals which are not guaranteed by statute or regulation. State and local government authorities may
limit, condition, suspend or revoke a license, impose substantial fines, and take other actions, any of which could
have a material adverse effect on our business, financial condition, results of operations and prospects. We cannot
assure you that we will be able to obtain and maintain the gaming licenses and related approvals necessary to
conduct our gaming operations. Any failure to maintain or renew our existing licenses, registrations, permits or
approvals could have a material adverse effect on our business, financial condition, results of operations and
6
prospects. Furthermore, if additional gaming laws or regulations are adopted, these regulations could impose
additional restrictions or costs that could have a significant adverse effect on us and our business. For additional
information, see “Part I, Item 1A. Risk Factors—Our business is subject to extensive gaming regulation, which is
costly to comply with, and gaming authorities have significant control over our operations.”
Gaming authorities may, in their sole and absolute discretion, require the holder of any securities issued by us to file
applications, be investigated, and be found suitable to own our securities if they have reason to believe that the
security ownership would be inconsistent with the declared policies of their respective states. Further, the costs of
any investigation conducted by any gaming authority under these circumstances is typically required to be paid by
the applicant, and refusal or failure to pay these charges may constitute grounds for a finding that the applicant is
unsuitable to own the securities. Our articles of incorporation require our shareholders to cooperate with gaming
authorities in such investigations and permit us to redeem the securities held by any shareholder whose holding of
shares of our capital stock may result, in the judgment of our board of directors, in our failure to obtain or our loss of
any license or franchise from any governmental agency held by us to conduct any portion of our business. If any
gaming authority determines that a person is unsuitable to own our securities, then, under the applicable gaming
laws and regulations, we can be sanctioned, including the loss of our privileged licenses or approvals, if, without the
prior approval of the applicable gaming authority, we conduct certain business with the unsuitable person. For
additional information, see “Part I, Item 1A. Risk Factors—Our shareholders are subject to extensive government
regulation and, if a shareholder is found unsuitable by a gaming authority, that shareholder would not be able to
beneficially own our common stock directly or indirectly. Our shareholders may also be required to provide
information that is required by gaming authorities and we have the right, under certain circumstances, to redeem a
shareholder’s securities; we may be forced to use our cash or incur debt to fund redemption of our securities.”
Our directors, officers and key employees are also subject to a variety of regulatory requirements and various
privileged licensing and related approval procedures in the various jurisdictions in which we operate gaming
facilities. If any gaming authority with jurisdiction over our business were to find any of our directors, officers or
key employees unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to
sever our relationship with that person. Furthermore, such gaming authorities may require us to terminate the
employment of any person who refuses to file appropriate applications. Either result could have a material adverse
effect on our business, operations and prospects.
Applicable gaming laws and regulations also restrict our ability to issue securities, incur debt, and undertake other
financing activities. Such transactions would generally require approval of gaming authorities, and our financing
counterparties, including lenders, might be subject to various licensing and related approval procedures in the
various jurisdictions in which we operate gaming facilities. If state regulatory authorities were to find any person
unsuitable with regard to his, her or its relationship to us or any of our subsidiaries, we would be required to sever
our relationship with that person, which could materially adversely affect our business.
The gaming industry also represents a significant source of tax revenue, particularly to the State of Nevada and its
counties and municipalities. From time to time, various federal, state and local legislators and other government
officials have proposed and adopted changes in tax laws, or in the administration or interpretation of such laws,
affecting the gaming industry. It is not possible to determine the likelihood of possible changes in tax laws or in the
administration or interpretation of such laws. Such changes, if adopted, could have a material adverse effect on our
future financial position, results of operations, cash flows and prospects. For additional information, see “Part I, Item
1A. Risk Factors—Changes to gaming tax laws could increase our cost of doing business and have a material
adverse effect on our financial condition.”
From time to time, local and state lawmakers, as well as special interest groups, have proposed legislation that
would expand, restrict or prevent gaming operations in the jurisdictions in which we operate. Any such change to
the regulatory environment or the adoption of new federal, state or local government legislation could have a
material adverse effect on our business, financial condition, results of operations and prospects.
Other Regulation
Our business is subject to a variety of other federal, state and local laws, rules, regulations and ordinances. These
laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages,
environmental matters, employees, currency transactions, taxation, zoning and building codes, and marketing and
7
advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws
and regulations could be enacted. Changes to any of the laws, rules, regulations or ordinances to which we are
subject, new laws or regulations, or material differences in interpretations by courts or governmental authorities
could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our operations are subject to various environmental laws and regulations relating to emissions and discharges into
the environment, and the storage, handling and disposal of hazardous and non-hazardous substances and wastes.
These laws and regulations are complex, and subject to change, and violations can lead to significant costs for
corrective action and remediation, fines and penalties. Under certain of these laws and regulations, a current or
previous owner or operator of property may be liable for the costs of remediating contamination on its property,
without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and
regardless of whether the practices that resulted in the contamination were legal at the time that they occurred, as
well as incur liability to third parties impacted by such contamination. The presence of contamination, or failure to
remediate it properly, may adversely affect our ability to use, sell or rent property. As we acquire additional casino,
resort and tavern properties, such as the casino properties we acquired in the American Acquisition, we may not
know the full level of exposure that we may have undertaken despite appropriate due diligence. We endeavor to
maintain compliance with environmental laws, but from time to time, current or historical operations on or adjacent
to, our properties may have resulted or may result in noncompliance with environmental laws or liability for cleanup
pursuant to environmental laws. In that regard, we may incur costs for cleaning up contamination relating to
historical uses of certain of our properties.
Many of our employees, especially those that interact with our customers, receive a base salary or wage that is
established by applicable state and federal laws that establish a minimum hourly wage that is, in turn, supplemented
through tips and gratuities from customers. In February and April 2017, several former employees filed two separate
purported class action lawsuits against us and on behalf of similarly situated individuals employed by us in Nevada.
The lawsuits allege that we violated certain Nevada labor laws, including payment of an hourly wage below the
statutory minimum wage without providing a qualified health insurance plan and an associated failure to pay proper
overtime compensation. For additional information, please see Part I, Item 3 of this Annual Report on Form 10-K
under the heading “Legal Proceedings.” From time to time, state and federal lawmakers have increased the
minimum wage. It is difficult to predict when such increases may take place. Any such change to the minimum
wage could have a material adverse effect on our business, financial condition, results of operations and prospects.
The manufacture and sale of alcoholic beverages is a highly regulated and taxed business. Our brewery operations at
PT’s Brewing Company in Las Vegas, Nevada require federal, state, and local licenses, permits and approvals. Our
restaurant and on-site brewery at PT’s Brewing Company operate pursuant to exceptions to the “tied house” laws,
which in Nevada generally prohibit a manufacturer or supplier of brewery products from engaging in the business of
wholesaling and prevent a wholesaler from engaging, directly or indirectly, in retail sales. Our brewery operations
are subject to more restrictive regulations and increased taxation by federal, state and local governmental entities
than are those of non-alcohol related beverage businesses. Federal, state and local laws and regulations govern the
production and distribution of beer, including permitting, licensing, trade practices, labeling, advertising, marketing,
distributor relationships and related matters. Federal, state and local governmental entities also levy various taxes,
license fees, and other similar charges and may require bonds to ensure compliance with applicable laws and
regulations. Failure to comply with applicable federal, state or local laws and regulations could result in higher
taxes, penalties, fees, and suspension or revocation of permits, licenses or approvals and could have a material
adverse effect on our business, financial condition, results of operations and prospects. From time to time, local and
state lawmakers, as well as special interest groups, have proposed legislation that would increase the federal and/or
state excise tax on alcoholic beverages or certain types of alcoholic beverages. If adopted, such measures could
affect some or all of our proprietary craft beer production. If federal or state excise taxes are increased, we may have
to raise prices to maintain our current profit margins. Higher taxes may reduce overall demand for beer, thus
negatively impacting sales of our beer. Further federal or state regulation may be forthcoming that could further
restrict the distribution and sale of alcohol products. Any material increase in taxes or fees, or the adoption of
additional taxes or fees or regulations, could have a material adverse effect on our business, financial condition,
results of operations and prospects.
8
In addition, each restaurant we operate must obtain a food service license from local authorities. Failure to comply
with such regulations could cause our licenses to be revoked or our related restaurant business or businesses to be
forced to cease operations. Moreover, state liquor laws may prevent the expansion of restaurant operations into
certain markets.
Seasonality
We believe that our Casinos and Distributed Gaming segments are affected by seasonal factors, including holidays,
weather and travel conditions. Our casinos and distributed gaming businesses in Nevada have historically
experienced lower revenues during the summer as a result of fewer tourists due to higher temperatures, as well as
increased vacation activity by local residents. Rocky Gap typically experiences higher revenues during summer
months and may be significantly adversely impacted by inclement weather during winter months. Our Nevada
distributed gaming operations typically experience higher revenues during the fall which corresponds with several
professional sports seasons. Our Montana distributed gaming operations typically experience higher revenues during
the fall due to the inclement weather in the state and less opportunity for outdoor activities, in addition to the impact
from professional sports seasons. While other factors like unemployment levels, market competition and the
diversification of our business may either offset or magnify seasonal effects, some seasonality is likely to continue,
which could result in significant fluctuation in our quarterly operating results.
Employees
As of December 31, 2017, we had approximately 6,910 employees, of which approximately 2,000 were covered by
various collective bargaining agreements. Other unions may seek to organize the workers of our resort casino
properties from time to time. We historically have had good relationships with the unions representing our
employees and believe that our employee relations are good.
At the Stratosphere, three collective bargaining agreements cover our employees. Our collective bargaining
agreement with the Professional, Clerical and Miscellaneous Employees, Teamsters Local Union 986 expires on
March 31, 2018. Our collective bargaining agreement with the Culinary Workers Union, Local 226 and Bartenders
Union, Local 165 expires on May 31, 2018. Our collective bargaining agreement with the International Union of
Operating Engineers, Local 501, AFL-CIO expires on March 31, 2018.
At the Aquarius, four collective bargaining agreements cover our employees. Our collective bargaining agreement
with the International Union of Operating Engineers, Local 501, AFL-CIO expires on March 31, 2020. Our
collective bargaining agreement with the International Alliance of Theatrical Stage Employees, Moving Picture
Technicians, Artist and Allied Crafts of the United States, Its Territories and Canada, Local 720, Las Vegas, Nevada
expires on November 30, 2022. Our collective bargaining agreement with the United Steelworkers of America
expires on April 1, 2018. Our collective bargaining agreement with the Security, Police, and Fire Professional of
America expires on February 28, 2021.
At Rocky Gap, our collective bargaining agreement with the United Food and Commercial Workers Union, Local
27 expires on November 1, 2019.
9
Executive Officers
Set forth below is information concerning our executive officers, and their ages as of December 31, 2017.
Name
Blake L. Sartini
Stephen A. Arcana
Charles H. Protell
Sean T. Higgins
Edward W. Martin, III
Blake L. Sartini II
Gary A. Vecchiarelli
Age
58
53
43
53
53
32
40
Position
Chairman of the Board, President and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Executive Vice President, Chief Strategy Officer and Chief
Financial Officer
Executive Vice President of Governmental Affairs and Chief
Legal Officer
Executive Vice President, Chief Administrative Officer
Senior Vice President of Distributed Gaming
Senior Vice President of Finance and Accounting
Blake L. Sartini joined Golden as Chairman of the Board, President and Chief Executive Officer in July 2015 in
connection with the Merger. Prior to the Merger, Mr. Sartini served as the president and chief executive officer of
Sartini Gaming from its formation in January 2012, and as the founder and chief executive officer of Golden
Gaming, LLC (“Golden Gaming”), which he founded in 2001. Prior to establishing Golden Gaming, Mr. Sartini
served in various management and executive positions with Station Casinos, LLC, including executive vice
president and chief operating officer. Mr. Sartini also served as a director of Station Casinos, LLC from 1993 until
2001. Mr. Sartini is a member of the University of Nevada, Las Vegas Foundation’s Board of Trustees and was
appointed to the Nevada Gaming Policy Committee in March 2014 by the Governor of Nevada. Mr. Sartini received
a bachelor of science degree in business administration from the University of Nevada, Las Vegas.
Stephen A. Arcana joined Golden as Executive Vice President and Chief Operating Officer in July 2015 in
connection with the Merger. Prior to the Merger, Mr. Arcana served as the chief operating officer for Golden
Gaming from August 2003 until the closing of the Merger. From November 1995 to March 2003, Mr. Arcana held
several executive positions with Station Casinos, LLC. Prior to joining Station Casinos, LLC, Mr. Arcana held a
variety of hotel operations and food and beverage positions over a ten-year period with the Sands Hotel in Atlantic
City, New Jersey. Mr. Arcana received a bachelor of science degree in hotel and restaurant management from
Widener University School of Hotel and Restaurant Management in Chester, Pennsylvania.
Charles H. Protell joined Golden as Executive Vice President, Chief Strategy Officer and Chief Financial Officer in
November 2016. Prior to joining Golden, Mr. Protell served as managing director at Macquarie Capital’s investment
banking group since May 2011, and as co-founder and a managing director at REGAL Capital Advisors from
January 2009 until its acquisition by Macquarie Capital in May 2011. Prior to co-founding REGAL Capital
Advisors, Mr. Protell held various investment banking roles at Credit Suisse, Deutsche Bank and CIBC World
Markets. Mr. Protell received a bachelor of science degree in commerce from the University of Virginia.
Sean T. Higgins joined Golden as Senior Vice President of Government Affairs and Business Development in
March 2016 and was promoted to Executive Vice President of Governmental Affairs and Business Development and
Chief Legal Officer in October 2016. Prior to joining Golden, Mr. Higgins served as principal of STH Strategies, a
firm he founded in early 2015. From August 2011 to January 2015, Mr. Higgins was managing principal of Porter
Gordon Silver Communications, a full-service government affairs and business strategic consulting firm. From July
2010 to January 2015, Mr. Higgins was a partner in the law firm of Gordon Silver. Prior to that, Mr. Higgins spent
17 years as general counsel and head of government affairs for a multijurisdictional gaming company. Mr. Higgins
received his law degree from Santa Clara University School of Law and his undergraduate degree in business
administration from Southern Methodist University. He is licensed to practice law in the state of Nevada.
Edward W. Martin, III joined Golden as Executive Vice President, Chief Administrative Officer in October 2017 in
connection with the American Acquisition. Prior to joining Golden, Mr. Martin served as the chief operating officer,
chief financial officer, treasurer and a member of the board of directors of American from September 2008 to
October 2017. Prior to joining American, Mr. Martin held senior level finance, strategic planning, and development
positions with Station Casinos, LLC, Silverton Casino, LLC, and Maloof Companies. From 1999 to 2011, Mr.
Martin was a member of the board of directors of Nevada First Bank and its successor, the Bank of Nevada, the
10
Nevada affiliate of Western Alliance Bancorporation (NYSE:WAL), and also served as chairman of the audit
committee and as a member of the regulatory oversight committee. Mr. Martin currently serves on the board of
directors of The Centech Group, a position he has held since 2013, a provider of network and telecom systems and
solutions. Mr. Martin also serves as a member of the Board of Trustees of the College Savings Plans of Nevada, a
position he has held since 2010. Mr. Martin received a bachelor of business administration degree from The
University of Texas at Austin and attended the Owen Graduate School of Management at Vanderbilt University.
Blake L. Sartini II joined Golden as Senior Vice President of Distributed Gaming in July 2015 in connection with
the Merger. In his current position, he oversees all distributed gaming operations in Nevada and Montana, as well as
the Nevada tavern locations operating under the brand names PT’s, Sierra Gold, SG Bar and Sean Patrick’s. From
January 2010 until the Merger, Mr. Sartini II served in various roles with Sartini Gaming, including as Vice
President of Operations for Golden Route Operations, LLC (“GRO”), a subsidiary of Sartini Gaming, from
September 2014 until the Merger, as assistant director for GRO from January 2012 to September 2014, and as a
marketing manager from January 2010 to January 2012. Prior to joining Sartini Gaming, Mr. Sartini II served as
senior business associate with the Ultimate Fighting Championship for its international event operations and talent
relations in the United Kingdom. Mr. Sartini II received a bachelor of science degree in business administration
from Chapman University in Orange, California.
Gary A. Vecchiarelli joined Golden as Senior Vice President of Finance and Accounting in January 2017. From
May 2012 to December 2016, Mr. Vecchiarelli served as chief financial officer of Galaxy Gaming, Inc., a public
company that develops, manufactures and distributes casino table games and wagering platforms. Prior to that,
Mr. Vecchiarelli spent most of his career working in public accounting including as audit manager for BDO USA,
LLP and audit supervisor for McGladrey & Pullen, LLP. Mr. Vecchiarelli received a bachelor of science degree in
business administration in accounting from California State University at San Jose. Mr. Vecchiarelli was President
of Financial Executives International, Las Vegas Chapter in 2017 and has resided on its board of directors since
2012. Mr. Vecchiarelli is a member of the American Institute of Certified Public Accountants and maintains active
CPA licenses in California and Nevada.
Website and Available Information
Our website is located at www.goldenent.com. Through a link on the Investors section of our website, we make the
following filings available free of charge and as soon as reasonably practicable after they are electronically filed or
furnished with the SEC: our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current
Reports on Form 8-K and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Copies of
these documents are also available to our shareholders upon written request to our Chief Financial Officer at 6595 S
Jones Boulevard, Las Vegas, Nevada 89118. Information on the website does not constitute part of this Annual
Report on Form 10-K.
These filings are also available free of charge on the SEC’s website at www.sec.gov. In addition, any materials filed
with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C.
20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-
800-SEC-0330.
11
ITEM 1A. RISK FACTORS
You should consider each of the following factors as well as the other information in this Annual Report on Form
10-K in evaluating our business and prospects. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also
materially adversely impact our business, financial condition, results of operations or prospects. If any of the
following risks actually occur, our business, financial condition, results of operations or prospects could be
materially harmed and the trading price of our common stock could decline. You should also refer to the other
information set forth in this Annual Report on Form 10-K, including the information in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-
K, as well as our consolidated financial statements and the related notes.
Any failure to successfully integrate our businesses and businesses we acquire, including the American business,
could materially adversely affect our business, and we may not realize the full benefits of the American
Acquisition or our other strategic acquisitions.
Our ability to realize the anticipated benefits of our strategic acquisitions, including our acquisition of American in
October 2017 and our acquisition of Montana distributed gaming businesses in 2016, will depend, to a large extent,
on our ability to successfully integrate our businesses with the businesses we acquire. Integrating and coordinating
the operations and personnel of multiple businesses and managing the expansion in the scope of our operations and
financial systems involves complex operational, technological and personnel-related challenges. The potential
difficulties, and resulting costs and delays, relating to the integration of our business with our strategic acquisitions
include:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the difficulty in integrating newly acquired businesses and operations in an efficient and effective manner;
the challenges in achieving strategic objectives, cost savings and other benefits expected from acquisitions;
the diversion of management’s attention from day-to-day operations;
additional demands on management related to the increased size and scope of our company following
significant acquisitions, such as the American Acquisition;
the assimilation of employees and the integration of different business cultures;
challenges in attracting and retaining key personnel;
the need to integrate information, accounting, finance, sales, billing, payroll and regulatory compliance
systems;
challenges in keeping existing customers and obtaining new customers; and
challenges in combining product offerings and sales and marketing activities.
There is no assurance that we will successfully or cost-effectively integrate our businesses with the businesses we
acquire, and the costs of achieving systems integration may substantially exceed our current estimates. The
integration of the recently acquired American business into our own operations in particular will be time consuming
and presents financial, managerial and operational challenges. Issues that arise during this process may divert
management’s attention away from our day-to-day operations, and any difficulties encountered in the integration
process could cause internal disruption in general, which could adversely impact our relationships with customers,
suppliers, employees and other constituencies. Combining our different systems, technology, networks and business
practices could be more difficult and time consuming than we anticipated, and could result in additional
unanticipated expenses. Our combined results of operations could also be adversely affected by any issues we
discover that were attributable to American’s operations that arose before the acquisition. Moreover, as non-public
companies at the time of our acquisition, neither American nor our other recent strategic acquisitions had to comply
with the requirements of the Sarbanes-Oxley Act of 2002 for internal control over financial reporting and other
procedures. Bringing the legacy systems for these businesses into compliance with those requirements may cause us
to incur substantial additional expense.
12
In addition, the integration process may cause an interruption of, or loss of momentum in, the activities of our
combined business. If management is not able to effectively manage the integration process, or if any significant
business activities are interrupted as a result of the integration process, our business could suffer and our results of
operations and financial condition may be harmed. Even if our businesses are successfully integrated, we may not
realize the full benefits of the American Acquisition or our other strategic acquisitions, including anticipated
synergies, cost savings or growth opportunities, within the expected timeframes or at all. In addition, we have
incurred, and may incur additional, significant integration and restructuring expenses to realize synergies. However,
many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. These expenses
could, particularly in the near term, exceed the savings that we expect to achieve from elimination of duplicative
expenses and the realization of economies of scale and cost savings. Although we expect that the realization of
efficiencies related to the integration of the businesses may offset incremental transaction-related and restructuring
costs over time, we cannot give any assurance that this net benefit will be achieved in the near term, or at all. Any of
these matters could materially adversely affect our businesses or harm our financial condition, results of operations
and prospects.
Our business may be adversely affected by economic conditions, acts of terrorism, natural disasters, severe
weather, contagious diseases and other factors affecting discretionary consumer spending, any of which could
have a material adverse effect on our business.
The demand for gaming, entertainment and leisure activities is highly sensitive to downturns in the economy and the
corresponding impact on discretionary consumer spending. Any actual or perceived deterioration or weakness in
general, regional or local economic conditions, unemployment levels, the job or housing markets, consumer debt
levels or consumer confidence, as well as any increase in gasoline prices, tax rates, interest rates, inflation rates or
other adverse economic or market conditions, may lead to our customers having less discretionary income to spend
on gaming, entertainment and discretionary travel, any of which may have a material adverse effect on our business,
financial condition, results of operations and prospects.
Acts of terrorism, natural disasters, severe weather conditions and actual or perceived outbreaks of public health
threats and pandemics could also significantly affect demand for gaming, entertainment and leisure activities and
discretionary travel, any of which could have a material adverse effect on our business, financial condition, results
of operations and prospects. Furthermore, our properties are subject to the risk that operations could be halted for a
temporary or extended period of time, as a result of casualty, forces of nature, adverse weather conditions, flooding,
mechanical failure, or extended or extraordinary maintenance, among other causes. If there is a prolonged disruption
at any of our casino properties due to natural disasters, terrorist attacks or other catastrophic events, our business,
financial condition, results of operations and prospects could be materially adversely affected. Additionally, if
extreme weather adversely impacts general economic or other conditions in the areas in which our properties are
located or from which we draw our patrons or prevents patrons from easily coming to our properties, our business,
financial condition, results of operations and prospects could be materially adversely affected.
We face substantial competition in both of our business segments, and may lose market share.
The resort casino and distributed gaming industries are highly competitive. Our resort casino business competes
with numerous casinos and casino-hotels of varying quality and size in our markets. We also compete with other
non-gaming resorts and vacation destinations, and with various other casino and other entertainment businesses. The
casino entertainment business is characterized by competitors that vary considerably in their size, quality of
facilities, number of operations, brand identities, marketing and growth strategies, financial strength and capabilities,
level of amenities, management talent and geographic diversity. Many of our regional and national competitors have
greater brand recognition and significantly greater resources than we have. Their greater resources may also provide
them with the ability to expand operations in the future.
If our competitors operate more successfully than we do, if they attract customers away from us as a result of
aggressive pricing and promotion, if they are more successful than us in attracting and retaining employees, if their
properties are enhanced or expanded, if they operate in jurisdictions that give them operating advantages due to
differences or changes in gaming regulations or taxes, or if additional hotels and casinos are established in and
around our markets, we may lose market share or the ability to attract or retain employees. Furthermore, several
states are currently considering legalizing casino gaming in designated areas, and Native American tribes may
13
develop or expand gaming properties in markets located more closely to our customer base (particularly Native
American casinos located in California). The expansion of casino gaming in or near any geographic area from which
we attract or expect to attract a significant number of our customers, including legalized casino gaming in
neighboring states and on Native American land, could have a significant adverse effect on our business, financial
condition and results of operations.
With respect to our distributed gaming businesses, we face direct competition for our space lease, revenue share and
participation locations from others involved in the distributed gaming business, as well as substantial competition
for customers from other operators of casinos, hotels, taverns and other entertainment venues. In addition, in both of
our segments we face ever-increasing competition from online gaming, including mobile gaming applications for
smart phones and tablet computers, state-sponsored lotteries, card clubs, sports books, fantasy sports websites and
other forms of legalized gaming. Various forms of internet gaming have been approved in Nevada, and legislation
permitting internet gaming has been proposed by the federal government and other states. The expansion of internet
gaming in Nevada and other jurisdictions could result in significant additional competition for our operations.
We incurred significant indebtedness in connection with the American Acquisition and our significant
indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations.
We incurred significant indebtedness in connection with the American Acquisition and the associated refinancing of
our former senior secured credit facility. As of December 31, 2017, the total principal amount of our senior secured
indebtedness, excluding unamortized debt issuance costs, was $1.0 billion. As a result of the increases in our
outstanding debt, demands on our cash resources have increased. The increased level of debt could, among other
things:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
require us to dedicate a larger portion of our cash flow from operations to the servicing and repayment of
our debt, thereby reducing funds available for working capital, capital expenditures and acquisitions, and
other general corporate requirements;
limit our ability to obtain additional financing to fund future working capital, capital expenditures and other
general corporate requirements;
limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we
operate;
restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities;
increase our vulnerability to general adverse economic and industry conditions and increases in interest
rates;
place us at a competitive disadvantage compared to our competitors that have less debt; and
adversely affect our credit rating or the market price of our common stock.
Any of these risks could impact our ability to fund our operations or limit our ability to expand our business, which
could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may incur additional indebtedness, which could further increase the risks associated with our leverage.
We may incur significant additional indebtedness in the future, which may include financing relating to capital
expenditures, potential acquisitions or business expansion, working capital or general corporate purposes. The senior
secured credit facilities that we entered into in connection with the closing of the American Acquisition included a
$100.0 million senior secured revolving credit facility, which was undrawn at December 31, 2017. In addition, our
senior secured credit facilities permit us, subject to specific limitations, to incur additional indebtedness. If new
indebtedness is added to our current level of indebtedness, the related risks that we now face could intensify.
14
We may not be able to generate sufficient cash flows to service all of our indebtedness and fund our operating
expenses, working capital needs and capital expenditures, and we may be forced to take other actions to satisfy
our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our indebtedness will depend upon our future operating
performance and our ability to generate cash flow in the future, which are subject to general economic, financial,
business, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you
that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us
in an amount sufficient to enable us to pay our indebtedness or fund our other liquidity needs. If our cash flows and
capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems
and could be forced to reduce or delay investment and capital expenditures, dispose of material assets or operations,
seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any
such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such
alternative actions may not allow us to meet our scheduled debt service obligations. Our senior secured credit
facilities restrict our ability to dispose of assets and use the proceeds from asset dispositions, and may also restrict
our ability to raise debt or equity capital to repay or service our indebtedness. If we cannot make scheduled
payments on our debt, we will be in default and, as a result, our lenders could declare all outstanding amounts to be
due and payable, terminate or suspend their commitments to loan money and foreclose against the assets securing
such debt, and we could be forced into bankruptcy or liquidation, any of which could have a material adverse effect
on our business, financial condition, results of operations and prospects and could result in you losing your
investment in our company.
Covenants in our debt instruments restrict our business and could limit our ability to implement our business
plan.
Our senior secured credit facilities contain, and any future debt instruments likely will contain, covenants that may
restrict our ability to implement our business plan, finance future operations, respond to changing business and
economic conditions, secure additional financing, and engage in opportunistic transactions, such as strategic
acquisitions. Our senior secured credit facilities include covenants restricting, among other things, our ability to do
the following:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
incur, assume or guarantee additional indebtedness;
issue redeemable stock and preferred stock;
grant or incur liens;
sell or otherwise dispose of assets, including capital stock of subsidiaries;
(cid:129) make loans and investments;
(cid:129)
pay dividends, make distributions, or redeem or repurchase capital stock;
(cid:129)
(cid:129)
enter into transactions with affiliates; and
consolidate or merge with or into, or sell substantially all of our assets to, another person.
In addition, our revolving credit facility contains a financial covenant applying a maximum net leverage ratio when
borrowings under the facility exceed 30% of the total revolving commitment. Our senior secured credit facilities are
secured by liens on substantially all of our and the subsidiary guarantors’ present and future assets (subject to certain
exceptions).
If we default under any of our senior secured credit facilities because of a covenant breach or otherwise, all
outstanding amounts thereunder could become immediately due and payable. We cannot assure you that we will be
able to comply with the covenants in our senior secured credit facilities or that any covenant violations will be
waived. Any violation that is not waived could result in an event of default and, as a result, our lenders could declare
all outstanding amounts to be due and payable, terminate or suspend their commitments to loan money and foreclose
against the assets securing such debt, and we could be forced into bankruptcy or liquidation, any of which could
have a material adverse effect on our business, financial condition, results of operations and prospects and could
result in you losing your investment in our company.
15
The casino, hotel and hospitality industry is capital intensive and we may not be able to finance development,
expansion and renovation projects, which could put us at a competitive disadvantage.
Our casino and tavern properties have an ongoing need for renovations and other capital improvements to remain
competitive, including room refurbishments, amenity upgrades, and replacement, from time to time, of furniture,
fixtures and equipment. We may also need to make capital expenditures to comply with applicable laws and
regulations. Construction projects entail significant risks, which can substantially increase costs or delay completion
of a project. Such risks include shortages of materials or skilled labor, unforeseen engineering, environmental or
geological problems, work stoppages, weather interference and unanticipated cost increases. Most of these factors
are beyond our control. In addition, difficulties or delays in obtaining any of the requisite licenses, permits or
authorizations from regulatory authorities can increase the cost or delay the completion of an expansion or
development. Significant budget overruns or delays with respect to expansion and development projects could
materially adversely affect our results of operations.
Renovations and other capital improvements of casino properties in particular require significant capital
expenditures. In addition, any such renovations and capital improvements usually generate little or no cash flow
until the projects are completed. We may not be able to fund such projects solely from cash provided from operating
activities. Consequently, we may have to rely upon the availability of debt or equity capital to fund renovations and
capital improvements, and our ability to carry them out will be limited if we cannot obtain satisfactory debt or equity
financing, which will depend on, among other things, market conditions. We cannot assure you that we will be able
to obtain additional equity or debt financing on favorable terms or at all. Our failure to renovate and maintain our
casino and tavern properties from time to time may put us at a competitive disadvantage to casinos or taverns
offering more modern and better maintained facilities, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
Changes to gaming tax laws could increase our cost of doing business and have a material adverse effect on our
financial condition.
The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its
counties and municipalities. Gaming companies are currently subject to significant state and local taxes and fees in
addition to normal federal and state corporate income taxes, and such taxes and fees are subject to increase at any
time. From time to time, various federal, state and local legislators and other government officials have proposed
and adopted changes in tax laws, or in the administration or interpretation of such laws, affecting the gaming
industry. In addition, any worsening of economic conditions and the large number of state and local governments
with significant current or projected budget deficits could intensify the efforts of state and local governments to raise
revenues through increases in gaming taxes and/or property taxes. It is not possible to determine with certainty the
likelihood of changes in tax laws or in the administration or interpretation of such laws. Any material increase, or
the adoption of additional taxes or fees, could have a material adverse effect on our business, financial condition,
results of operations and prospects.
Our business is subject to extensive gaming regulation, which is costly to comply with, and gaming authorities
have significant control over our operations.
We are subject to a variety of gaming regulations in the jurisdictions in which we operate, including the extensive
gaming laws and regulations of the State of Nevada. Compliance with these regulations is costly and time-
consuming. Regulatory authorities at the federal, state and local levels have broad powers with respect to the
regulation and licensing of casino and gaming operations and may revoke, suspend, condition or limit our gaming or
other licenses, impose substantial fines on us and take other actions, any one of which could have a material adverse
effect on our business, financial condition, results of operations and prospects. We cannot assure you that we will be
able to obtain and maintain the gaming licenses and related approvals necessary to conduct our gaming operations.
Any failure to maintain or renew our existing licenses, registrations, permits or approvals could have a material
adverse effect on our business, financial condition, results of operations and prospects.
Our directors, officers and key employees are also subject to a variety of regulatory requirements and must be
approved by certain gaming authorities. If any gaming authority with jurisdiction over our business were to find an
officer, director or key employee of ours unsuitable for licensing or unsuitable to continue having a relationship with
16
us, we would be required to sever our relationship with that person. Furthermore, such gaming authorities may
require us to terminate the employment of any person who refuses to file appropriate applications. Either result
could have a material adverse effect on our business, operations and prospects.
Applicable gaming laws and regulations also restrict our ability to issue securities, incur debt and undertake other
financing activities. Such transactions would generally require approval of gaming authorities, and our financing
counterparties, including lenders, might be subject to various licensing and related approval procedures in the
various jurisdictions in which we operate gaming facilities. Further, our gaming regulators can require us to
disassociate ourselves from suppliers or business partners found unsuitable by the regulators. If any gaming
authorities were to find any person unsuitable with regard to his, her or its relationship to us or any of our
subsidiaries, we would be required to sever our relationship with that person, which could have a material adverse
effect on our business, operations and prospects.
If additional gaming regulations are adopted in a jurisdiction in which we operate, such regulations could impose
restrictions on us that would prevent us from operating our business as it is currently operated, or the increased costs
associated with compliance with such regulations could lower our profitability. From time to time, various proposals
are introduced in the legislatures of the jurisdictions in which we have operations that, if enacted, could adversely
affect the tax, regulatory, operational or other aspects of the gaming industry and our company. Any such change to
the regulatory environment or the adoption of new federal, state or local government legislation could impose
additional restrictions or costs or could otherwise have a material adverse effect on our business, financial condition,
results of operations and prospects.
Any violation of applicable anti-money laundering laws or regulations or the Foreign Corrupt Practices Act
could adversely affect our business, financial condition, results of operations and prospects.
We handle significant amounts of cash in our operations and are subject to various reporting and anti-money
laundering laws and regulations. Recently, U.S. governmental authorities have evidenced an increased focus on
compliance with anti-money laundering laws and regulations in the gaming industry. Any violation of anti-money
laundering laws or regulations could have a material adverse effect on our business, financial condition, results of
operations and prospects. Internal control policies and procedures and employee training and compliance programs
that we have implemented to deter prohibited practices may not be effective in prohibiting our employees,
contractors or agents from violating or circumventing our policies and the law. If we or our employees or agents fail
to comply with applicable laws or our policies governing our operations, we may face investigations, prosecutions
and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal
sanctions. Any such government investigations, prosecutions or other legal proceedings or actions could have a
material adverse effect on our business, financial condition, results of operations and prospects.
We are subject to numerous other federal, state and local laws that may expose us to liabilities or have a
significant adverse impact on our operations. Changes to any such laws could have a material adverse effect on
our operations and financial condition.
Our business is subject to a variety of other federal, state and local laws, rules, regulations and ordinances. These
laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages,
environmental matters, employees, currency transactions, taxation, zoning and building codes, and marketing and
advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws
and regulations could be enacted. Changes to any of the laws, rules, regulations or ordinances to which we are
subject, new laws or regulations, or material differences in interpretations by courts or governmental authorities
could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our operations are subject to various environmental laws and regulations relating to emissions and discharges into
the environment, and the storage, handling and disposal of hazardous and non-hazardous substances and wastes.
These laws and regulations are complex, and subject to change, and violations can lead to significant costs for
corrective action and remediation, fines and penalties.
Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the
costs of remediating contamination on its property, without regard to whether the owner or operator knew of, or
17
caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination
were legal at the time that they occurred, as well as incur liability to third parties impacted by such contamination.
The presence of contamination, or failure to remediate it properly, may adversely affect our ability to use, sell or
rent property. As we acquire additional casino, resort and tavern properties, such as the casino properties we
acquired in the American Acquisition, we may not know the full level of exposure that we may have undertaken
despite appropriate due diligence. We endeavor to maintain compliance with environmental laws, but from time to
time, current or historical operations on or adjacent to, our properties may have resulted or may result in
noncompliance with environmental laws or liability for cleanup pursuant to environmental laws. In that regard, we
may incur costs for cleaning up contamination relating to historical uses of certain of our properties.
Many of our employees, especially those that interact with our customers, receive a base salary or wage that is
established by applicable state and federal laws that establish a minimum hourly wage that is, in turn, supplemented
through tips and gratuities from customers. In February and April 2017, several former employees filed two separate
purported class action lawsuits against us and on behalf of similarly situated individuals employed by us in Nevada.
The lawsuits allege that we violated certain Nevada labor laws, including payment of an hourly wage below the
statutory minimum wage without providing a qualified health insurance plan and an associated failure to pay proper
overtime compensation. For additional information, please see Part I, Item 3 of this Annual Report on Form 10-K
under the heading “Legal Proceedings.” From time to time, state and federal lawmakers have increased the
minimum wage. It is difficult to predict when such increases may take place. Any such change to the minimum
wage could have a material adverse effect on our business, financial condition, results of operations and prospects.
The manufacture and sale of alcoholic beverages is a highly regulated and taxed business. Our brewery operations at
PT’s Brewing Company in Las Vegas, Nevada require federal, state, and local licenses, permits and approvals. Our
restaurant and on-site brewery at PT’s Brewing Company operate pursuant to exceptions to the “tied house” laws,
which in Nevada generally prohibit a manufacturer or supplier of brewery products from engaging in the business of
wholesaling and prevent a wholesaler from engaging, directly or indirectly, in retail sales. Our brewery operations
are subject to more restrictive regulations and increased taxation by federal, state and local governmental entities
than are those of non-alcohol related beverage businesses. Federal, state and local laws and regulations govern the
production and distribution of beer, including permitting, licensing, trade practices, labeling, advertising, marketing,
distributor relationships and related matters. Federal, state and local governmental entities also levy various taxes,
license fees, and other similar charges and may require bonds to ensure compliance with applicable laws and
regulations. Failure to comply with applicable federal, state or local laws and regulations could result in higher
taxes, penalties, fees, and suspension or revocation of permits, licenses or approvals and could have a material
adverse effect on our business, financial condition, results of operations and prospects. From time to time, local and
state lawmakers, as well as special interest groups, have proposed legislation that would increase the federal and/or
state excise tax on alcoholic beverages or certain types of alcoholic beverages. If adopted, such measures could
affect some or all of our proprietary craft beer production. If federal or state excise taxes are increased, we may have
to raise prices to maintain our current profit margins. Higher taxes may reduce overall demand for beer, thus
negatively impacting sales of our beer. Further federal or state regulation may be forthcoming that could further
restrict the distribution and sale of alcohol products. Any material increase in taxes or fees, or the adoption of
additional taxes or fees or regulations, could have a material adverse effect on our business, financial condition,
results of operations and prospects.
In addition, each restaurant we operate must obtain a food service license from local authorities. Failure to comply
with such regulations could cause our licenses to be revoked or our related restaurant business or businesses to be
forced to cease operations. Moreover, state liquor laws may prevent the expansion of restaurant operations into
certain markets.
Our insurance coverage may not be adequate to cover all possible losses that our properties could suffer. In
addition, our insurance costs may increase and we may not be able to obtain the same insurance coverage in the
future.
Although we have comprehensive property and liability insurance policies for our properties in operation, with
coverage features and insured limits that we believe are customary in their breadth and scope, each such policy has
certain exclusions. Certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes, floods
or terrorist acts, or certain liabilities may be uninsurable or too expensive to justify obtaining insurance. Market
18
forces beyond our control may also limit the scope of the insurance coverage we can obtain or our ability to obtain
coverage at reasonable rates. As a result, we may not be successful in obtaining insurance without increases in cost
or decreases in coverage levels. In addition, in the event of a major casualty, the insurance coverage we carry may
not be sufficient to pay the full market value or replacement cost of our lost investment or in some cases could result
in certain losses being totally uninsured. As a result, we could lose some or all of the capital we have invested in a
property, as well as the anticipated future revenue from the property, and we could remain obligated for debt or
other financial obligations related to the property, any of which could have a material adverse effect on our business,
financial condition, results of operations and prospects. In addition to the damage caused to our property by a
casualty loss (such as fire, natural disasters, acts of war or terrorism), we may suffer business disruption as a result
of these events or be subject to claims by third parties injured or harmed. While we carry business interruption
insurance and general liability insurance, this insurance may not be adequate to cover all losses in such event.
We renew our insurance policies on an annual basis. The cost of coverage may become so high that we may need to
reduce our policy limits or agree to certain exclusions from our coverage. Among other factors, it is possible that
regional political tensions, homeland security concerns, other catastrophic events or any change in government
legislation governing insurance coverage for acts of terrorism could materially adversely affect available insurance
coverage and result in increased premiums on available coverage (which may cause us to elect to reduce our policy
limits), additional exclusions from coverage or higher deductibles.
Increasing prices or shortages of energy and water may increase our cost of operations.
Our properties use significant amounts of water, electricity, natural gas and other forms of energy. Our Nevada
properties in particular are located in a desert where water is scarce and the hot temperatures require heavy use of air
conditioning. While we have not experienced any shortages of energy or water in the past, we cannot guarantee you
that we will not in the future. Other states have suffered from electricity shortages. For example, California and
Texas have experienced rolling blackouts due to excessive air conditioner use because of unexpectedly high
temperatures in the past. We expect that potable water in Nevada, where the majority of our facilities are located,
will become an increasingly scarce commodity at an increasing price.
Work stoppages, labor problems and unexpected shutdowns may limit our operational flexibility and negatively
impact our future profits.
A number of employees at our casino properties are covered by collective bargaining agreements. These agreements
have staggered expirations over the next several years. We cannot ensure that, upon the expiration of existing
collective bargaining agreements, new agreements will be reached without union action or that any such new
agreements will be on terms satisfactory to us. The inability to negotiate and enter into a new collective bargaining
agreement on favorable terms could result in an increase in our operating expenses or covered employees could
strike or engage in other collective behaviors. Any renegotiation of these and other labor agreements could
significantly increase our costs for wages, healthcare, pension plans and other benefits, and could have a material
adverse effect on the business of our casino properties and our financial condition, results of operations and
prospects.
Any work stoppage at one or more of our casino properties could cause significant disruption of our operations or
require us to expend significant funds to hire replacement workers, and qualified replacement labor may not be
available at reasonable costs, if at all. Strikes and work stoppages could also result in adverse media attention or
otherwise discourage customers from visiting our casino properties. As a result, a strike or other work stoppage at
one of our casino properties could have a material adverse effect on the business of our casino properties and our
financial condition, results of operations and prospects.
Any unexpected shutdown of one of our casino properties could have an adverse effect on the business of our casino
properties and our results of operations. There can be no assurance that we will be adequately prepared for
unexpected events, including political or regulatory actions, which may lead to a temporary or permanent shutdown
of any of our casino properties.
19
Our reputation and business could be materially harmed as a result of data breaches, data theft, unauthorized
access or hacking.
Our success depends, in part, on the secure and uninterrupted performance of our information technology and other
systems and infrastructure, including systems to maintain and transmit customers’ personal and financial
information, credit card settlements, credit card funds transmissions and mailing lists. We could encounter
difficulties in developing new systems, maintaining and upgrading current systems and preventing security breaches.
Among other things, our systems are susceptible to outages due to fire, floods, power loss, break-ins, cyber-attacks,
network penetration, denial of service attacks and similar events. An increasing number of companies have disclosed
breaches of their security, some of which have involved sophisticated and highly targeted attacks on their computer
networks. While we have and will continue to implement network security measures and data protection safeguards,
our servers and other computer systems are vulnerable to viruses, malicious software, hacking, break-ins or theft,
data privacy or security breaches, third-party security breaches, employee error or malfeasance and similar events.
Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change
frequently and often are not recognized until launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative measures. If unauthorized parties gain access to our information
technology and other systems, they may be able to misappropriate assets or sensitive information (such as personally
identifiable information of our customers, business partners and employees), cause interruption in our operations,
corruption of data or computers, or otherwise damage our reputation and business. In such circumstances, we could
be held liable to our customers or other parties, or be subject to regulatory or other actions for breaching privacy
rules. Any compromise of our security could result in a loss of confidence in our security measures, and subject us
to litigation, civil or criminal penalties, and negative publicity, any of which could have a material adverse effect on
our business, financial condition, results of operations and prospects. Further, if we are unable to comply with the
security standards established by banks and the payment card industry, we may be subject to fines, restrictions, and
expulsion from card acceptance programs, which could materially adversely affect our operations.
Our revenues may be negatively impacted by volatility in our hold percentage, and we also face the risk of fraud
or cheating.
Casino revenue is recorded as the difference between gaming wins and losses or net win from gaming activities. Net win
is impacted by variations in the hold percentage (the ratio of net win to total amount wagered), or actual outcome, on our
slots, table games, race and sports betting, and all other games we provide to our customers. We use the hold percentage as
an indicator of a game’s performance against its expected outcome. Although each game generally performs within a
defined statistical range of outcomes, actual outcomes may vary for any given period. The hold percentage and actual
outcome on our games can be impacted by the level of a customer’s skill in a given game, errors made by our employees,
the number of games played, faults within the computer programs that operate our slots and the random nature of slot
payouts. If our games perform below their expected range of outcomes, our cash flow may suffer.
In addition, gaming customers may attempt or commit fraud or otherwise cheat in order to increase their winnings.
Acts of fraud or cheating could involve the use of counterfeit chips or other tactics and could include collusion with
our employees. Internal acts of cheating could also be conducted by employees through collusion with dealers,
surveillance staff, floor managers or other casino or gaming area staff. Failure to discover such acts or schemes in a
timely manner could result in losses in our gaming operations, which could be substantial. In addition, negative
publicity related to such schemes could have an adverse effect on our reputation, thereby materially adversely
affecting our business, financial condition, results of operations, and prospects.
Our business is geographically concentrated, which subjects us to greater risks from changes in local or regional
conditions.
We currently operate casinos solely in Nevada and in Flintstone, Maryland, and conduct our distributed gaming
(including tavern gaming in our wholly-owned taverns) business solely in Nevada and Montana. Due to this
geographic concentration, our results of operations and financial condition are subject to greater risks from changes
in local and regional conditions, such as:
(cid:129)
(cid:129)
changes in local or regional economic conditions and unemployment rates;
changes in local and state laws and regulations, including gaming laws and regulations;
20
(cid:129)
(cid:129)
(cid:129)
a decline in the number of residents in or near, or visitors to, our properties;
changes in the local or regional competitive environment; and
adverse weather conditions and natural disasters (including weather or road conditions that limit access to
our properties).
Some of our casino properties and most of our tavern properties largely cater to the local markets and depend on the
local markets for customers. Competition for local customers in Las Vegas in particular has historically been
intense. Local competitive risks and our failure to attract a sufficient number of guests, gaming customers and other
visitors in these locations could adversely affect our business. In addition, the number of visitors to our Nevada
casino properties may be adversely affected by increased transportation costs, the number and frequency of flights
into or out of Las Vegas, and capacity constraints of the interstate highways that connect our casino properties with
the metropolitan areas in which our customers reside.
As a result of the geographic concentration of our businesses, we face a greater risk of a negative impact on our
business, financial condition, results of operations and prospects in the event that any of the geographic areas in
which we operate is more severely impacted by any such adverse condition, as compared to other areas in the United
States.
We may experience seasonal fluctuations that could significantly impact our quarterly operating results.
We may experience seasonal fluctuations that could significantly impact our quarterly operating results. Our casinos
and distributed gaming businesses in Nevada have historically experienced lower revenues during the summer as a
result of fewer tourists due to higher temperatures, as well as increased vacation activity by local residents. Rocky
Gap typically experiences higher revenues during summer months and may be significantly adversely impacted by
inclement weather during winter months. Our Nevada distributed gaming operations typically experience higher
revenues during the fall which corresponds with several professional sports seasons. Our Montana distributed
gaming operations typically experience higher revenues during the winter months due to the inclement weather in
the state and less opportunity for outdoor activities, in addition to the impact from professional sports seasons. While
other factors like unemployment levels, market competition and the diversification of our business may either offset
or magnify seasonal effects, some seasonality is likely to continue, which could result in significant fluctuation in
our quarterly operating results.
Our success depends in part on our ability to acquire, enhance, and/or introduce successful gaming concepts and
game content, and we may be unable to obtain slots or related technology from our third party suppliers on a
timely, cost-effective basis.
Our business is heavily dependent on revenue generated by the games, particularly slots, we offer to our customers.
We source games and game content through third-party suppliers, and currently rely on a limited number of
suppliers for our slots and related technology. We believe that creative and appealing game content, innovative
game concepts and licensed brands produce more revenue for our casinos and other gaming locations and provide
them with a competitive advantage, which in turn enhances our revenue and our ability to attract new business and
to retain existing business. There can be no assurance that we will be able to sustain the acceptance of our existing
game content or effectively obtain from third parties game content or licensed brands that will be widely accepted
by our customers, or that we will be able to obtain slots or related technology on a cost-effective basis. There can be
no assurance that our third party suppliers will be able to produce new creative and appealing game content,
innovative game concepts, and licensed brands in the future that will be widely accepted by our customers. As a
result, we may be forced to incur significant unanticipated costs to secure alternative third party suppliers or adjust
our operations, which could have a material adverse effect on our business, financial condition, results of operations
and prospects.
The success of our distributed gaming business is dependent on our ability to renew our contracts.
We conduct the majority of our distributed gaming business under space lease, revenue share and participation
contracts with third parties. Contracts with chain store and street customers are renewable at the option of the owner
21
of the applicable chain store or street account. As our distributed gaming contracts expire, we are required to
compete for renewals. If we are unable to renew a material portion of our space lease, revenue share and
participation contracts, this could have a material adverse effect on our business, financial condition, results of
operations and prospects. We cannot assure you that our existing space lease, revenue share and participation
contracts will be renewed on reasonable or comparable terms, or at all.
Our business and stock price may be adversely affected if our internal controls are not effective.
We have previously reported material weaknesses in our internal control over financial reporting. A material
weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will
not be prevented or detected on a timely basis. As discussed in Part II, Item 9A, “Controls and Procedures,” the
material weakness identified as of December 31, 2016 was that account reconciliations were not consistently
prepared on a timely basis and subjected to proper review and written approval by a person not involved in their
preparation. Based upon the remediation actions described in such section, management has concluded that such
material weakness has been remediated as of December 31, 2017. Although we believe we have taken appropriate
actions to remediate the control deficiencies we have identified and to strengthen our internal control over financial
reporting, we cannot assure you that we will not discover other material weaknesses in the future. The existence of
one or more internal control deficiencies could result in errors in our financial statements, and substantial costs and
resources may be required to rectify internal control deficiencies. If we cannot produce reliable financial reports,
investors could lose confidence in our reported financial information, the market price of our common stock could
decline significantly, we may be unable to obtain additional financing to operate and expand our business, and our
business, financial condition and prospects could be harmed.
We may be subject to litigation which, if adversely determined, could expose us to significant liabilities, damage
our reputation and result in substantial losses.
From time to time, we are involved in a variety of lawsuits, claims, investigations and other legal proceedings
arising in the ordinary course of business, including proceedings concerning labor and employment matters,
personal injury claims, breach of contract claims, commercial disputes, business practices, intellectual property, tax
and other matters. See Part I, Item 3 of this Annual Report on Form 10-K under the heading “Legal Proceedings” for
additional information. Certain litigation claims may not be covered entirely or at all by our insurance policies, or
our insurance carriers may seek to deny coverage. In addition, litigation claims can be expensive to defend and may
divert our attention from the operations of our businesses. Further, litigation involving visitors to our properties,
even if without merit, can attract adverse media attention.
We evaluate all litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to
estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves
and/or disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates
are based on the information available to management at the time and involve a significant amount of management
judgment. We caution you that actual outcomes or losses may differ materially from those envisioned by our current
assessments and estimates. As a result, litigation can have a significant adverse effect on our businesses and,
because we cannot predict the outcome of any action, it is possible that adverse judgments or settlements could have
a material adverse effect on our business, financial condition, results of operations and prospects.
We depend on a limited number of key employees who would be difficult to replace.
We depend on a limited number of key personnel to manage and operate our business, including our Chief
Executive Officer, our Chief Operating Officer and our Chief Strategy and Financial Officer. We believe our
success depends to a significant degree on our ability to attract and retain highly skilled personnel. The competition
for these types of personnel is intense and we compete with other potential employers for the services of our
employees. As a result, we may not succeed in hiring and retaining the executives and other employees that we
need. An inability to hire quality employees or the loss of key employees could have a material adverse effect on our
business, financial condition, results of operations and prospects.
22
Our executive officers and directors own or control a large percentage of our common stock, which permits them
to exercise significant control over us.
As of December 31, 2017, after giving effect to the underwritten public offering that was completed in January
2018, our executive officers and directors and entities affiliated with them would have owned, in the aggregate,
approximately 34% of the outstanding shares of our common stock. Accordingly, these shareholders will be able to
substantially influence all matters requiring approval by our shareholders, including the approval of mergers or other
business combination transactions and the composition of our Board of Directors. This concentration of ownership
may also delay, defer or even prevent a change in control of our company and would make some transactions more
difficult or impossible without their support. Circumstances may arise in which the interests of these shareholders
could conflict with the interests of our other shareholders.
Our shareholders are subject to extensive governmental regulation and, if a shareholder is found unsuitable by a
gaming authority, that shareholder would not be able to beneficially own our common stock directly or indirectly.
Our shareholders may also be required to provide information that is requested by gaming authorities and we
have the right, under certain circumstances, to redeem a shareholder’s securities; we may be forced to use our
cash or incur debt to fund redemption of our securities.
Gaming authorities may, in their sole and absolute discretion, require the holder of any securities issued by us to file
applications, be investigated, and be found suitable to own our securities if they have reason to believe that the
security ownership would be inconsistent with the declared policies of their respective states. Gaming authorities
have very broad discretion in determining whether an applicant should be deemed suitable. Subject to certain
administrative proceeding requirements, gaming authorities have the authority to deny any application or limit,
condition, restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person
licensed, registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities. The
applicant must pay all costs of investigation incurred by the gaming authorities in conducting any such investigation.
In evaluating individual applicants, gaming authorities typically consider the individual’s reputation for good
character and criminal and financial history, and the character of those with whom the individual associates. If any
gaming authority determines that a person is unsuitable to own our securities, then, under the applicable gaming
laws and regulations, we can be sanctioned, including the loss of our privileged licenses or approvals, if, without the
prior approval of the applicable gaming authority, we conduct certain business with the unsuitable person or fail to
redeem the unsuitable person’s interest in our securities or take such other action with respect to the securities held
by the unsuitable person as the applicable gaming authority requires.
For example, under Nevada gaming laws, each person who acquires, directly or indirectly, beneficial ownership of
any voting security, or beneficial or record ownership of any non-voting security or any debt security, in a public
corporation which is registered with the Nevada Gaming Commission, or the Gaming Commission, may be required
to be found suitable if the Gaming Commission has reason to believe that his or her acquisition of that ownership, or
his or her continued ownership in general, would be inconsistent with the declared public policy of Nevada, in the
sole discretion of the Gaming Commission. Any person required by the Gaming Commission to be found suitable
shall apply for a finding of suitability within 30 days after the Gaming Commission’s request that he or she should
do so and, together with his or her application for suitability, deposit with the Nevada Gaming Control Board, or the
Control Board, a sum of money which, in the sole discretion of the Control Board, will be adequate to pay the
anticipated costs and charges incurred in the investigation and processing of that application for suitability, and
deposit such additional sums as are required by the Control Board to pay final costs and charges.
Furthermore, any person required by a gaming authority to be found suitable, who is found unsuitable by the gaming
authority, may not hold directly or indirectly the beneficial ownership of any voting security or the beneficial or
record ownership of any nonvoting security or any debt security of any public corporation which is registered with
the gaming authority beyond the time prescribed by the gaming authority. A violation of the foregoing may
constitute a criminal offense. A finding of unsuitability by a particular gaming authority impacts that person’s ability
to associate or affiliate with gaming licensees in that particular jurisdiction and could impact the person’s ability to
associate or affiliate with gaming licensees in other jurisdictions.
Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of
voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5%, to report the
acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification or a
23
finding of suitability, subject to limited exceptions for “institutional investors” that hold a company’s voting
securities for investment purposes only. For example, under Nevada gaming laws, any person who acquires more
than 5% of our voting power must report the acquisition to the Gaming Commission. Nevada gaming regulations
also require that beneficial owners of more than 10% of our voting power apply to the Gaming Commission for a
finding of suitability within 30 days after the Chairman of the Nevada Board mails written notice requiring such
filing. Further, an “institutional investor,” as defined in the Nevada gaming regulations, that acquires more than
10%, but not more than 25%, of our voting power may apply to the Gaming Commission for a waiver of such
finding of suitability if such institutional investor holds our voting securities for investment purposes only.
Similarly, under Maryland gaming laws, as interpreted by the Maryland Lottery and Gaming Control Commission,
or the Maryland Commission, any person who acquires 5% or more of our voting securities must report the
acquisition to the Maryland Commission and apply for a “Principal Employee” (if an individual) or “Principal
Entity” (if an entity) license, both of which require a finding of qualification, or seek an institutional investor waiver.
The granting of a waiver rests with the discretion of the Maryland Commission. Further, we may not sell or
otherwise transfer in an issuer transaction more than 5% of the legal or beneficial interest in Rocky Gap without the
approval of the Maryland Commission, after the Maryland Commission determines that the transferee is qualified or
grants the transferee an institutional investor waiver.
Our Articles of Incorporation require our shareholders to provide information that is requested by authorities that
regulate our current or proposed gaming operations. Our Articles of Incorporation also permit us to redeem the
securities held by persons whose status as a security holder, in the opinion of our Board of Directors, jeopardizes our
existing gaming licenses or approvals. The price paid for these securities is, in general, the average closing price for
the 30 trading days prior to giving notice of redemption.
In the event a shareholder’s background or status jeopardizes our current or proposed gaming licensure, we may be
required to redeem such shareholder’s securities in order to continue gaming operations or obtain a gaming license.
This redemption may divert our cash resources from other productive uses and require us to obtain additional
financing which, if in the form of equity financing, would be dilutive to our shareholders. Further, any debt
financing may involve additional restrictive covenants and further leveraging of our fixed assets. The inability to
obtain additional financing to redeem a disqualified shareholder’s securities may result in the loss of a current or
potential gaming license.
We expect our stock price to be volatile, and you may lose some or all of your investment.
The market price of our common stock has been, and is likely to continue to be, volatile. The market price of our
common stock may be significantly affected by many factors, including:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
changes in general or local economic or market conditions;
quarterly variations in operating results;
strategic developments by us or our competitors;
developments in our relationships with our customers, distributors and suppliers;
regulatory developments or any breach, revocation or loss of any gaming license;
changes in our revenues, expense levels or profitability;
changes in financial estimates and recommendations by securities analysts; and
failure to meet the expectations of securities analysts.
Any of these events may cause the market price of our common stock to fall. In addition, the stock market in general
has experienced significant volatility, which may adversely affect the market price of our common stock regardless
of our operating performance.
Future sales of our common stock could lower our stock price and dilute existing shareholders.
In January 2018, the SEC declared effective a universal shelf registration statement with the SEC for the future sale
of up to $150 million in aggregate amount of common stock, preferred stock, debt securities, warrants and units and
the resale of up to approximately 8.0 million shares of our common stock held by the selling securityholders named
therein. The securities may be offered from time to time, separately or together, directly by us or through
24
underwriters, dealers or agents at amounts, prices, interest rates and other terms to be determined at the time of the
offering. For example, in January 2018, certain of the named selling securityholders completed the resale of 6.5
million shares of our common stock and we completed the sale of 975,000 newly issued shares of our common stock
in an underwritten public offering pursuant to this shelf registration statement.
We may also issue additional shares of common stock to finance future acquisitions through the use of equity. For
example, we issued approximately 4.0 million shares of our common stock in connection with the American
Acquisition in October 2017 (all of which shares were resold in the secondary public offering in January 2018), and
approximately 8.5 million shares of our common stock in connection with the acquisition of Sartini Gaming in July
2015 (of which approximately 1.0 million shares were resold in the secondary public offering in January 2018). In
addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock
options and other equity awards pursuant to our employee benefit plans. We cannot predict the size of future
issuances of our common stock or the effect, if any, that future sales and issuances of shares of our common stock
will have on the market price of our common stock. Sales of substantial amounts of our common stock (including
shares issued in connection with the acquisition of Sartini Gaming, upon the exercise of stock options and warrants
or in connection with acquisition financing), or the perception that such sales could occur, may adversely affect
prevailing market prices for our common stock. In addition, these sales may be dilutive to existing shareholders.
Our future results may differ materially from the unaudited pro forma financial results that we have disclosed.
The pro forma financial results that we have disclosed with respect to the American Acquisition have been presented
for illustrative purposes only, were based on various adjustments, assumptions and preliminary estimates and may
not be an indication of our financial condition or results of operations following the American Acquisition for
several reasons. Our actual financial condition and results of operations following the American Acquisition may
not be consistent with, or evident from, these pro forma financial results. In addition, the assumptions used in
preparing the pro forma financial results may not prove to be accurate, and other factors may affect our financial
condition or results of operations following the American Acquisition. Any potential decline in our financial
condition or results of operations may cause significant declines in our stock price.
Provisions in our Articles of Incorporation and Bylaws or our senior secured credit facilities may discourage,
delay or prevent a change in control or prevent an acquisition of our business at a premium price.
Some of the provisions of our Articles of Incorporation and our Bylaws and Minnesota law could discourage, delay
or prevent an acquisition of our business, even if a change in control would be beneficial to the interests of our
shareholders and was made at a premium price. These provisions:
(cid:129)
(cid:129)
(cid:129)
permit our Board of Directors to increase its own size and fill the resulting vacancies;
authorize the issuance of “blank check” preferred stock that our Board of Directors could issue to increase
the number of outstanding shares to discourage a takeover attempt; and
permit shareholder action by written consent only if the consent is signed by all shareholders entitled to
notice of a meeting.
Although we have amended our Bylaws to provide that Section 302A.671 (Control Share Acquisitions) of the
Minnesota Business Corporation Act does not apply to or govern us, we remain subject to 302A.673 (Business
Combinations) of the Minnesota Business Corporation Act, which generally prohibits us from engaging in business
combinations with any “interested” shareholder for a period of four years following the shareholder’s share
acquisition date, which may discourage, delay or prevent a change in control of our company. In addition, our senior
secured credit facilities provide for an event of default upon the occurrence of certain specified change of control
events.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
25
ITEM 2. PROPERTIES
Company Headquarters
We lease a 41,000 square foot building in Las Vegas, Nevada, which houses our company headquarters and a
portion of which we have sub-leased. The lease for our office headquarters building is with a related party and
expires on July 31, 2025. See Note 15, Related Party Transactions, in the accompanying consolidated financial
statements for information on our transactions with related parties.
Casinos
Stratosphere: We own the approximately 34 acres of land on which the Stratosphere is located (of which
approximately 17 acres are undeveloped and reserved for future development).
Arizona Charlie’s Decatur: We own the approximately 17 acres of land on which our Arizona Charlie’s Decatur
casino property is located. In addition, we lease office, storage and laundry space for our Arizona Charlie’s Decatur
casino property in an adjacent shopping center. The lease is with an unrelated party and expires in 2097.
Arizona Charlie’s Boulder: We own the approximately 24 acres of land on which our Arizona Charlie’s Boulder
casino property is located.
Aquarius: We own the approximately 18 acres of land on which the Aquarius casino property is located (of which
approximately 1.6 acres are undeveloped and reserved for future development).
Pahrump Casinos: We own the approximately 40 acres of land on which Pahrump Nugget is located (of which
approximately 20 acres are undeveloped and reserved for future development) and the approximately 35 acres of
land on which our Lakeside Casino & RV Park is located. Our Gold Town Casino is located on four leased parcels
of land, comprising approximately nine acres in the aggregate. The leases are with unrelated third parties and have
various expiration dates beginning in 2026 (for the parcel on which our main casino building is located, which we
lease from a competitor), and we sublease approximately two of the acres to an unrelated third party.
Rocky Gap: We lease the approximately 270 acres in the Rocky Gap State Park on which Rocky Gap is situated
from the Maryland DNR pursuant to a 40-year operating ground lease. The lease expires in 2052, with an option to
renew for an additional 20 years. We own the 170,000 square foot Rocky Gap building.
All of our owned and leased real property for our casino properties, along with substantially all of the assets of the
casino properties, are subject to liens securing all of our obligations under our senior secured credit facilities (subject
to receipt of certain approvals).
Distributed Gaming
We lease our 57 branded tavern locations under non-cancelable operating leases. As of December 31, 2017, the
terms of our tavern leases ranged from one to 15 years, with various renewal options from one to 15 years. Four of
our tavern locations were leased from related parties as of December 31, 2017. See Note 15, Related Party
Transactions, in the accompanying consolidated financial statements for information on our transactions with
related parties.
26
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are involved in a variety of lawsuits, claims, investigations and other legal proceedings
arising in the ordinary course of business, including proceedings concerning labor and employment matters,
personal injury claims, breach of contract claims, commercial disputes, business practices, intellectual property, tax
and other matters for which we have recorded $1.5 million for claims as of the date of this filing. Although lawsuits,
claims, investigations and other legal proceedings are inherently uncertain and their results cannot be predicted with
certainty, we believe that the resolution of our currently pending matters should not have a material adverse effect
on our business, financial condition, results of operations or liquidity. Regardless of the outcome, legal proceedings
can have an adverse impact on us because of defense costs, diversion of management resources and other factors. In
addition, it is possible that an unfavorable resolution of one or more such proceedings could in the future materially
and adversely affect our business, financial condition, results of operations or liquidity in a particular period.
In February and April 2017, several former employees filed two separate purported class action lawsuits against us
in the District Court of Clark County, Nevada, and on behalf of similarly situated individuals employed by us in the
State of Nevada. The lawsuits allege we violated certain Nevada labor laws including payment of an hourly wage
below the statutory minimum wage without providing a qualified health insurance plan and an associated failure to
pay proper overtime compensation. The complaints seek, on behalf of the plaintiffs and members of the putative
class, an unspecified amount of damages (including punitive damages), injunctive and equitable relief, and an award
of attorneys’ fees, interest and costs. In the second half of 2017, we agreed to settle the first of these two cases,
subject to court approval. The second case is in the discovery phase.
In February 2018, a prior guest of the Stratosphere filed a purported class action complaint against us in the United
States District Court, District of Nevada, on behalf of similarly situated individuals and entities that paid the Clark
County Combined Transient Lodging Tax (“Tax”) on the portion of a resort fee that constitutes charges for Internet
access, during the period of February 6, 2014 through the date the alleged conduct ceases. The lawsuit alleges that
the Tax was charged in violation of the federal Internet Tax Freedom Act, which imposes a national moratorium on
the taxation of Internet access by states and their political subdivisions, and seeks, on behalf of the plaintiff and the
putative class, damages equal to the amount of the Tax collected on the Internet access component of the resort fee,
injunctive relief, disgorgement, interest, fees and costs. We have not yet been served with the complaint. In the
event, a complaint is served on us, we anticipate being accorded a stay to respond in connection with an agreement
that other hotel casino operators have entered into with regard to case consolidation while the federal court reviews
subject matter jurisdiction. This case is at an early stage in the proceedings, and we are therefore unable to make a
reasonable estimate of the probable loss or range of losses, if any, that might arise from this matter.
While legal proceedings are inherently unpredictable and no assurance can be given as to the ultimate outcome of
any of the above matters, based on management’s current understanding of the relevant facts and circumstances, we
believe that these proceedings should not have a material adverse effect on our financial position, results of
operations or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
27
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the NASDAQ Global Market under the ticker symbol GDEN. The following table
sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported by
NASDAQ:
2017
High
Low
2016
High
Low
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$
$
14.31 $
10.60
22.18 $
12.90
26.33 $
19.41
10.90 $
9.50
13.49 $
10.41
14.07 $
11.19
34.75
23.58
13.00
8.65
As of March 14, 2018, there were approximately 240 shareholders of record of our common stock.
Pursuant to the terms of the Merger Agreement, the proceeds received from the sale of the Jamul Note, net of related
costs, were distributed on July 14, 2016 in a special dividend of cash in the aggregate amount of approximately
$23.5 million to shareholders that held shares as of the Record Date for such dividend (other than shareholders that
had waived their right to receive such dividend in connection with the Merger). See Note 3, Merger and
Acquisitions, in the accompanying consolidated financial statements for additional information. Other than the
special cash dividend of the net proceeds received from the sale of the Jamul Note, we have neither declared nor
paid any cash dividends with respect to our common stock and the current policy of the Board of Directors is to
retain all future earnings, if any, for use in the operation and development of our business. The payment of any other
cash dividends in the future will be at the discretion of the Board of Directors and will depend upon such factors as
our financial condition, results of operations, capital requirements, our general business condition and any other
factors deemed relevant by the Board of Directors. In addition, the terms of our senior secured credit facilities
restrict our ability to declare or pay dividends on our common stock.
No repurchases of our common stock were made during the fourth quarter of 2017.
28
ITEM 6.
SELECTED FINANCIAL DATA
The Selected Financial Data presented below should be read in conjunction with the consolidated financial statements and
notes thereto included elsewhere in this Annual Report on Form 10-K, and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” included in Part II, Item 7 of this Annual Report on Form 10-K.
Selected consolidated statement of operations data and consolidated balance sheet data are derived from our
consolidated financial statements.
For the Year Ended or As of:
December 31,
December 31,
December 31,
December 28,
December 29,
2017(1)
2016(2)
2015(3)
2014(4)
2013
(In millions, except per share amounts)
Results of Continuing Operations:
Net revenues
Income (loss) from
operations
Net Income (loss)
Net income (loss) per
share — basic
Net income (loss) per
share — diluted
$
$
$
$
$
Balance Sheet:
Cash and cash equivalents $
Total assets
$
Total long-term liabilities $
$
Shareholders’ equity
510 $
403 $
177 $
15 $
2 $
13 $
16 $
18 $
25 $
55 $
(24) $
(25) $
0.09 $
0.74 $
1.45 $
(1.86) $
0.09 $
0.73 $
1.43 $
(1.86) $
91 $
1,365 $
966 $
321 $
47 $
419 $
172 $
209 $
69 $
379 $
143 $
210 $
35 $
122 $
9 $
108 $
39
13
19
1.41
1.40
38
147
10
132
(1) Our results for the year ended December 31, 2017 included the operating results of American from and after the
closing date of the American Acquisition. We recorded approximately $76.3 million in net revenues and $5.6 million
in net income from the operations of American for the year ended December 31, 2017. Income from operations for the
year ended December 31, 2017 included approximately $1.6 million in preopening expenses related to American and
tavern expansion, and $5.0 million in acquisition expenses related to the American Acquisition. Net income for the
year ended December 31, 2017 included an income tax benefit of $7.9 million attributed primarily to a partial release
of the valuation allowance on deferred tax assets and the impact of the Tax Cuts and Jobs Act.
(2) Our results for the year ended December 31, 2016 included the operating results of the distributed gaming
businesses acquired in the Montana Acquisitions from and after the closing dates of the respective transactions.
We recorded approximately $47.0 million in net revenues and $1.6 million in net income from the operations of
the Montana distributed gaming businesses for the year ended December 31, 2016. Income from operations for
the year ended December 31, 2016 included approximately $2.5 million in preopening expenses related to the
Montana distributed gaming businesses and tavern expansion, and a gain on sale of land held for sale of $4.5
million. Net income for the year ended December 31, 2016 included an income tax benefit of $4.3 million
attributed primarily to a partial release of the valuation allowance on deferred tax assets. On July 14, 2016, a
special dividend of cash in the aggregate amount of approximately $23.5 million was paid to shareholders of
record as of the Record Date for such dividend (other than shareholders that had waived their right to receive
such dividend in connection with the Merger). See Note 3, Merger and Acquisitions, in the accompanying
consolidated financial statements for additional information.
(3) Our results for the year ended December 31, 2015 included the operating results of Sartini Gaming from and
after August 1, 2015, following the consummation of the Merger. We recorded approximately $117.6 million
in net revenues and $10.4 million in income from the operations of Sartini Gaming’s distributed gaming and
casino businesses for the year ended December 31, 2015. Income from operations for the year ended
December 31, 2015 included approximately $11.5 million in transaction-related expenses related to the
Merger and net income included income tax benefit of approximately $10.0 million attributed primarily to the
income tax benefit recorded from the release of a valuation allowance on deferred tax assets as a result of
deferred tax liabilities assumed in the Merger. Our results for the year ended December 31, 2015 also reflected
a gain of $23.6 million related to the disposition of the Jamul Note in December 2015.
(4) Our results for the year ended December 28, 2014 reflected an impairment loss of $21.0 million related to the write-
down of our then investment in Rock Ohio Ventures, LLC (“Rock Ohio Ventures”), a cost method investee.
29
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and the related
notes thereto and other financial information included in this Annual Report on Form 10-K. In addition to the
historical information, certain statements in this discussion are forward-looking statements based on current
expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ
significantly from those projected in such forward-looking statements. See “Forward-Looking Statements” in Part I
of this Annual Report on Form 10-K for additional information regarding forward-looking statements.
Overview
We own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on
resort casino operations and distributed gaming (including tavern gaming in our wholly-owned taverns).
We conduct our business through two reportable operating segments: Casinos and Distributed Gaming. In our
Casinos segment, we own and operate eight resort casino properties in Nevada and Maryland. Our Distributed
Gaming segment involves the installation, maintenance and operation of slots and amusement devices in non-casino
locations such as grocery stores, convenience stores, liquor stores, restaurants, bars and taverns in Nevada and
Montana, and the operation of wholly-owned branded taverns targeting local patrons located primarily in the greater
Las Vegas, Nevada metropolitan area.
Casinos
On October 20, 2017, we completed the acquisition of all of the outstanding equity interests of American from its
former equity holders for aggregate consideration consisting of $781.0 million in cash (subject to certain post-
closing adjustments) and the issuance by us of 4,046,494 shares of our common stock to ACEP Holdings, a former
American equity holder. Pursuant to the post-closing adjustment provisions in the purchase agreement, the cash
portion of the consideration paid in the American Acquisition was subsequently increased to $787.6 million. The
American Acquisition added four Nevada resort casino properties to our casino portfolio, including the Stratosphere
in Las Vegas. The results of operations of American and its subsidiaries have been included in our results
subsequent to that date. See Note 3, Merger and Acquisitions, in the accompanying consolidated financial
statements for additional information.
We own and operate eight resort casino properties in Nevada and Maryland, comprising the Stratosphere, Arizona
Charlie’s Decatur and Arizona Charlie’s Boulder in Las Vegas, Nevada, the Aquarius in Laughlin, Nevada,
Pahrump Nugget, Gold Town Casino and Lakeside Casino & RV Park in Pahrump, Nevada, and Rocky Gap in
Flintstone, Maryland.
(cid:129)
(cid:129)
(cid:129)
The Stratosphere: The Stratosphere is our premier casino property, located on Las Vegas Blvd on the
north end of the Las Vegas Strip. A gaming and entertainment complex, the Stratosphere comprises the
iconic Stratosphere Tower, a casino, a hotel and a retail center. As of December 31, 2017, the Stratosphere
featured an 80,000 sq. ft. casino and offered nearly 2,430 hotel rooms, 748 slots, 42 table games, a race and
sports book, 15 restaurants, two rooftop pools, a fitness center, retail shops and entertainment facilities.
Arizona Charlie’s casinos: Our Arizona Charlie’s Decatur and Arizona Charlie’s Boulder casino
properties primarily serve local Las Vegas patrons, and provide an alternative experience to the Las Vegas
Strip. As of December 31, 2017, our Arizona Charlie’s Decatur casino offered approximately 260 hotel
rooms and a total of 1,037 slots, seven table games, race and sports books, six restaurants, and an
approximately 300-seat bingo parlor, and our Arizona Charlie’s Boulder casino offered approximately 300
hotel rooms and a total of 839 slots, seven table games, race and sports books, four restaurants, and an
approximately 450-seat bingo parlor, as well as an RV park with approximately 220 RV hook-up sites.
Aquarius: The Aquarius is located in Laughlin, Nevada, which is located approximately 90 miles from
Las Vegas on the western riverbank of the Colorado River. The Aquarius caters primarily to patrons
traveling from Arizona and Southern California, as well as customers from Nevada seeking an alternative
30
(cid:129)
(cid:129)
to the Las Vegas experience. As of December 31, 2017, the Aquarius had approximately 1,900 hotel rooms
and offered 1,232 slots, 33 table games and ten restaurants.
Pahrump casinos: We own and operate three casinos in Pahrump, Nevada, the gateway to Death Valley
National Park, approximately 60 miles from Las Vegas. Pahrump Nugget is our largest property in
Pahrump, Nevada. As of December 31, 2017, Pahrump Nugget offered approximately 70 hotel rooms, 419
slots, eight table games, a race and sports book, an approximately 200-seat bingo facility and a bowling
center. As of December 31, 2017, our Gold Town Casino offered 226 slots and an approximately 100-seat
bingo facility, and our Lakeside Casino & RV Park offered 188 slots and approximately 160 RV hook-up
sites.
Rocky Gap: Rocky Gap is situated on approximately 270 acres in the Rocky Gap State Park in Maryland,
which we lease from the Maryland Department of Natural Resources under a 40-year operating ground
lease expiring in 2052 (plus a 20-year option renewal). As of December 31, 2017, Rocky Gap offered 665
slots, 17 table games, two casino bars, three restaurants, a spa and the only Jack Nicklaus signature golf
course in Maryland. Rocky Gap is a AAA Four Diamond Award® winning resort with approximately 200
hotel rooms, as well as an event and conference center.
Distributed Gaming
Our Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement
devices in non-casino locations such as grocery stores, convenience stores, liquor stores, restaurants, bars and
taverns in Nevada and Montana. In addition, we operate wholly-owned branded taverns with slots, which target
local patrons, primarily in the greater Las Vegas, Nevada metropolitan area. We place our slots and amusement
devices in locations where we believe they will receive maximum customer traffic, generally near a store’s entrance.
As of December 31, 2017, our distributed gaming operations comprised approximately 10,900 slots in over 1,000
locations.
Our wholly-owned branded taverns offer a casual, upscale environment catering to local patrons offering superior
food, craft beer and other alcoholic beverages, and typically include 15 onsite slots. As of December 31, 2017, we
operated 57 wholly-owned branded taverns, which offered a total of over 920 onsite slots. Most of our taverns are
located in the greater Las Vegas, Nevada metropolitan area and cater to local patrons seeking more convenient
entertainment establishments than traditional casino properties. Our tavern brands include PT’s Gold, PT’s Pub,
Sierra Gold, Sean Patrick’s, PT’s Place, PT’s Ranch, PT’s Brewing Company, Sierra Junction and SG Bar. We also
opened our first brewery in Las Vegas, PT’s Brewing Company, during the first quarter of 2016 to produce craft
beer for our taverns and casinos.
31
Results of Operations
The following discussion and analysis should be read in conjunction with the consolidated financial statements and
notes thereto included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2017.
(In thousands)
Net revenues by segment
Casinos
Distributed Gaming
Corporate and other
Total net revenues
Operating expenses by segment
Casinos
Distributed Gaming
Corporate and other
Total operating expenses
Selling, general and administrative
Depreciation and amortization
Gain on disposition of notes receivable
Acquisition and merger expenses
Preopening expenses
Executive severance and sign-on bonuses
Gain on revaluation of contingent consideration
Other operating, net
Total expenses
Income from operations
Non-operating expense, net
Income tax benefit
Net income
2017
Year Ended December 31,
2016
2015
$
179,175 $
330,050
583
509,808
97,132 $
305,792
280
403,204
86,050
257,050
641
343,741
103,523
40,786
—
5,041
1,632
1,142
(1,719)
284
494,430
51,533
238,788
11
290,332
68,155
27,506
—
614
2,471
1,037
—
54
390,169
15,378
(21,128)
7,921
2,171 $
$
13,035
(1,060)
4,325
16,300 $
73,245
103,610
187
177,042
40,520
80,340
9
120,869
38,708
10,798
(23,590)
11,525
421
—
—
(52)
158,679
18,363
(3,812)
9,969
24,520
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Net Revenues
The $106.6 million, or 26%, increase in net revenues resulted primarily from increases of $68.3 million and $21.1
million in gaming revenues and food and beverage revenues, respectively, as well as the inclusion of net revenues of
American from and after October 20, 2017.
The $82.0 million, or 84%, increase in net revenues related to our Casinos segment resulted primarily from increases
of $49.3 million and $16.3 million in “same-store” gaming and room revenues, respectively, as well as the inclusion
of net revenues from the resort casino properties we acquired in the American Acquisition from and after October
20, 2017. Additionally, net revenues from Rocky Gap increased $4.0 million due to greater parking capacity to
accommodate peak demand days and marketing enhancements that better cater to our gaming customers.
The $24.3 million, or 8%, increase in net revenues related to our Distributed Gaming segment resulted primarily
from five new taverns in the Las Vegas Valley during 2017, as well as a full year of revenues from the five taverns
we opened in 2016. Additionally, net revenues in 2017 included a full year of revenues from the Montana
distributed gaming businesses we acquired in January and April 2016.
Operating Expenses
The $53.4 million, or 18%, increase in operating expenses resulted primarily from increases of $29.3 million and
$15.3 million in gaming expenses and food and beverage expenses, respectively, the inclusion of a full year of
32
operating expense from the Montana distributed gaming businesses we acquired in January and April 2016, as well
as operating expenses related to the resort casino properties acquired in the American Acquisition on October 20,
2017.
Selling, General and Administrative Expenses
The $35.4 million, or 52%, increase in selling, general and administrative (“SG&A”) expenses resulted primarily
from increases in share-based compensation ($5.1 million and $3.6 million related to stock options and restricted
stock units, respectively), salaries and bonus ($3.3 million), marketing and advertising ($0.9 million) and building
and rent ($1.7 million), which were partially offset by a decrease in professional fees ($1.2 million). Additionally,
the increases reflected the inclusion of $23.6 million in SG&A related to American from and after October 20, 2017,
as well as the opening of five new taverns in the Las Vegas Valley in 2017.
Within our Casinos segment, SG&A expenses increased $20.3 million, or 93%, resulting primarily from the
inclusion of SG&A related to American from and after October 20, 2017. The majority of the SG&A expenses in
this segment comprised marketing and advertising, building and rent expense, bonus and payroll taxes. SG&A
expenses at Rocky Gap did not change significantly year-over-year.
Within our Distributed Gaming segment, SG&A expenses increased $0.7 million or 3%, primarily due to the
opening of five new taverns in the Las Vegas Valley in 2017, the inclusion of a full year of SG&A from the
Montana distributed gaming businesses we acquired in January and April 2016, and the opening of five taverns in
2016, partially offset by a decrease year-over-year in professional fees and equipment rental. The majority of SG&A
expenses in this segment comprised payroll taxes, building and rent expense, professional fees and equipment rental.
Corporate-level SG&A increased $14.6 million, or 64% primarily due to an increase of $1.3 million in professional
fees and $3.6 million in payroll and related expenses, and the inclusion of $3.2 million of corporate-level SG&A
related to American from and after October 20, 2017.
Acquisition and Merger Expenses
Acquisition and merger expenses during 2017 primarily related to the American Acquisition, and during 2016
primarily related to the Merger. Acquisition and merger expenses consisted primarily of financial advisor, legal,
accounting and consulting costs.
Preopening Expenses
Preopening expenses consist of labor, food, utilities, training, initial licensing, rent and organizational costs incurred.
Non-capital costs associated with the opening of tavern and casino locations are also expensed as preopening
expenses as incurred.
During 2017, preopening expenses related primarily to costs incurred in the opening of new tavern locations in the
Las Vegas Valley. During 2016, preopening expenses related primarily to costs incurred in connection with the
Montana Acquisitions and the opening of new tavern locations in the Las Vegas Valley.
Depreciation and Amortization
Depreciation increased $11.1 million, or 55%, due primarily to depreciation of the assets acquired in the American
Acquisition, as well as a full year of depreciation on assets acquired in the Montana Acquisitions.
Amortization of intangibles increased $2.2, or 30%, primarily to intangible assets acquired in the American
Acquisition and the Montana Acquisitions.
33
Non-Operating Expense, Net
Non-operating expense, net increased $20.1 million, primarily due to a $13.1 million increase in interest expense
from the substantially higher level of indebtedness under the new senior secured credit facilities we entered into in
October 2017, partially offset by a gain on change in fair value of derivative of $0.2 million. Non-operating expense,
net in 2017 also included $1.7 million related to a loss on extinguishment of debt.
Income Taxes
Income tax benefit for the year ended December 31, 2017 was approximately $7.9 million, which resulted from the
partial release of the valuation allowance on deferred tax assets and the impact of the Tax Cuts and Jobs Act. Income
tax benefit for the year ended December 31, 2016 was approximately $4.3 million, attributable primarily to a partial
release of the valuation allowance on deferred tax assets. The effective tax rate was 137.8% for the year ended
December 31, 2017, which differed from the federal tax rate of 35% due primarily to the partial release of the
valuation allowance, along with the impact of the Tax Cuts and Jobs Act. The effective tax rate for the year ended
December 31, 2016 was (36.1) %, which differed from the federal tax rate of 35% due to changes in the valuation
allowance on deferred tax assets.
As of December 31, 2017, we evaluated all available positive and negative evidence related to our ability to utilize
our deferred tax assets. We considered the expected future book income (losses), taxable loss carryforward potential
and other factors in reaching the conclusion that some of the deferred tax assets were expected to be realized, and
that therefore, the valuation allowance against the deferred tax assets required adjustment.
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Net Revenues
The $226.2 million, or 128%, increase in net revenues resulted primarily from the inclusion in 2016 of a full year of
net revenues related to the distributed gaming and casino businesses acquired on July 31, 2015 in the Merger
(compared to five months of the prior year period), as well as the addition of the distributed gaming businesses
acquired in the Montana Acquisitions in the first half of 2016.
The $23.9 million, or 33%, increase in net revenues related to our Casinos segment resulted primarily from the
inclusion of a full year of net revenues from the casino businesses acquired in the Merger (compared to five months
of the prior year period). The casino properties acquired in the Merger contributed net revenues of $34.3 million
during the year ended December 31, 2016 compared to $14.0 million during the prior year period. Additionally, net
revenues from Rocky Gap increased $3.7 million, reflecting our expansion of parking capacity to accommodate
peak demand days, the addition of approximately 31 slots to the casino floor, and marketing enhancements to better
cater to our gaming customers.
The $202.2 million, or 195%, increase in net revenues related to our Distributed Gaming segment resulted primarily
from the inclusion of a full year of net revenues from the distributed gaming businesses acquired in the Merger in
2016, as well as net revenues from the distributed gaming businesses acquired in the Montana Acquisitions during
the first half of 2016. The Montana Acquisitions added approximately $47.0 million in net revenues in 2016 from
approximately 2,900 slots and over 1,000 amusement games across approximately 300 locations. The net revenues
related to our Distributed Gaming segment during 2015 related solely to Sartini Gaming’s distributed gaming
business for the five months subsequent to the completion of the Merger.
Operating Expenses
The $169.5 million, or 140%, increase in operating expenses resulted primarily from the inclusion of a full year of
operating expenses related to the distributed gaming and casino businesses acquired in the Merger (compared to five
months of the prior year period), and operating expenses from the distributed gaming businesses acquired in the
Montana Acquisitions, which were completed during the first half of 2016. The increase in operating expenses in
our Casinos segment in 2016 was related primarily to the inclusion of a full year of gaming, food and beverage and
other operating expenses at our Pahrump, Nevada casinos acquired in the Merger. The increase in operating
34
expenses related to our Distributed Gaming segment in 2016 was a result of the inclusion of a full year of gaming,
food and beverage, rooms and other operating expenses at our taverns and third party locations.
Selling, General and Administrative Expenses
The $29.4 million, or 76%, increase in SG&A expenses resulted primarily from the inclusion of a full year of SG&A
expenses related to the distributed gaming and casino businesses acquired on July 31, 2015 in the Merger, as well as
the addition of the distributed gaming businesses acquired during the first half of 2016 in the Montana Acquisitions.
For the year ended December 31, 2016, SG&A expenses included payroll and related expenses of $26.4 million
(including share-based compensation of $3.9 million), marketing and advertising expenses of $3.5 million, building
and rent expense of $15.7 million and professional fees of $5.9 million. Share-based compensation expense
increased during the year ended December 31, 2016 due primarily to $0.9 million of additional expense related to
the 1,494,475 stock options and 141,296 restricted stock units granted during the year (including reversal of expense
for forfeitures), $0.5 million in incremental expense related to the acceleration of unvested stock options related to
terminated employees and $0.9 million of incremental expense recorded for the equitable anti-dilutive adjustments
made to the exercise prices of outstanding vested and unvested stock options during the period in accordance with
our equity incentive plans. For the year ended December 31, 2015, SG&A expenses included payroll and related
expenses of $16.0 million (including share-based compensation), marketing and advertising expenses of $3.4
million, building and rent expense of $10.3 million and professional fees of $3.6 million. For the year ended
December 31, 2016, corporate-level SG&A was $19.8 million compared to $11.4 million in the prior year period.
Within our Casinos segment, SG&A expenses were $22.0 million for the year ended December 31, 2016 compared
to $18.3 million for the prior year period. The increase in 2016 resulted primarily from the completion of the Merger
on July 31, 2015, which resulted in the inclusion of a full year of SG&A expenses related to Sartini Gaming’s
Pahrump casinos for the year ended December 31, 2016 (compared to five months of the prior year period). The
majority of the SG&A expense at our Pahrump casinos was derived from payroll and related costs, building and rent
expense, and promotions for our customers. SG&A expenses at Rocky Gap casino were $13.7 million for the year
ended December 31, 2016 compared to $16.4 million for the prior year period. The decrease in SG&A expenses at
Rocky Gap was a result of cost reduction efforts in marketing and advertising, building expenses, and payroll and
related costs.
Within our Distributed Gaming segment, SG&A expenses were $23.4 million for the year ended December 31, 2016
compared to $9.0 million for the prior year period. The increase in 2016 resulted primarily from the completion of
the Merger on July 31, 2015, which resulted in the inclusion of a full year of SG&A expenses related to Sartini
Gaming’s distributed gaming businesses for the year ended December 31, 2016 (compared to five months of the
prior year period), as well as SG&A expenses related to the distributed gaming businesses acquired in the Montana
Acquisitions, which were consummated during the first half of 2016. SG&A expenses related to the Montana
Acquisitions were approximately $0.8 million due primarily to building and rent expense, as well as professional
fees. The majority of the segment’s SG&A expense was derived from insurance and payroll and related costs, as
well as building and rent expense specifically at the taverns. The addition of five new taverns during 2016 accounted
for incremental SG&A expense for the Distributed Gaming segment compared to the prior year.
Merger Expenses
We incurred approximately $0.6 million in transaction-related costs associated with the Merger and our obligations
under the Merger Agreement during the year ended December 31, 2016 compared to $11.5 million during the prior
year period. Merger expenses consisted primarily of financial advisor, legal, accounting and consulting costs.
Preopening Expenses
During the year ended December 31, 2016, preopening expenses were $2.5 million, which related primarily to costs
incurred in connection with the Montana Acquisitions and new tavern locations in Las Vegas, Nevada. During the
year ended December 31, 2015, preopening expenses were $0.4 million in connection with new tavern locations in
Las Vegas, Nevada.
35
Depreciation and Amortization
Depreciation increased $11.7 million, or 138%, due primarily to depreciation of the assets acquired pursuant to the
Merger, as well as assets acquired in the Montana Acquisitions. Amortization of intangibles increased $5.0 million,
or 217%, related primarily to intangible assets acquired in the Merger and the Montana Acquisitions,.
Non-Operating Expense, Net
Non-operating expense, net was $1.1 million for the year ended December 31, 2016 compared to $3.8 million for
the prior year period. The decrease in non-operating expense, net, was driven primarily by a $3.7 million increase in
interest expense in 2016 compared to the prior year period, related to our entering into a new senior secured credit
facility in July 31, 2015 in connection with the Merger and the incurrence of indebtedness thereunder, offset by a
gain on sale of land held for sale of $4.5 million. Non-operating expense, net for 2015 included $1.2 million related
to a loss on extinguishment of debt.
Income Taxes
Income tax benefit for the year ended December 31, 2016 was approximately $4.3 million, attributed primarily to a
partial release of the valuation allowance on deferred tax assets. The release was the result of positive evidence that
we will more likely than not be able to utilize some of our deferred tax assets. Income tax benefit for the year ended
December 31, 2015 was approximately $10.0 million, primarily related to the partial release of the valuation
allowance on deferred tax assets resulting from the assumption of a $14.7 million net deferred tax liability generated
from intangible assets acquired in the Merger. Our effective tax rate was (36.1) % for the year ended December 31,
2016, which differed from the federal tax rate of 35% due to the release in valuation allowance in the fourth quarter
of 2016. Our effective tax rate was (68.4)% for the year ended December 31, 2015, which differed from the federal
tax rate of 35% due to the $10.2 million release of the valuation allowance and the limitation of the income tax
benefit due to the uncertainty of its future realization.
As of December 31, 2016, we evaluated all available positive and negative evidence related to our ability to utilize
our deferred tax assets. We considered the expected future book income (losses), taxable loss carryforward potential
and other factors in reaching the conclusion that some of the deferred tax assets were expected to be realized, and
that therefore, the valuation allowance against the deferred tax assets required adjustment.
Non-GAAP Measures
To supplement our consolidated financial statements presented in accordance with United States generally accepted
accounting principles (“GAAP”), we use Adjusted EBITDA, a measure we believe is appropriate to provide
meaningful comparison with, and to enhance an overall understanding of, our past financial performance and
prospects for the future. We believe Adjusted EBITDA provides useful information to both management and
investors by excluding specific expenses and gains that we believe are not indicative of our core operating results.
Further, Adjusted EBITDA is a measure of operating performance used by management, as well as industry
analysts, to evaluate operations and operating performance and is widely used in the gaming industry. The
presentation of this additional information is not meant to be considered in isolation or as a substitute for measures
of financial performance prepared in accordance with GAAP. In addition, other companies in our industry may
calculate Adjusted EBITDA differently than we do. A reconciliation of net income (loss) to Adjusted EBITDA is
provided in the table below.
We define “Adjusted EBITDA” as earnings before interest and other non-operating income (expense), income taxes,
depreciation and amortization, preopening expenses, acquisition and merger expenses, share-based compensation
expenses, executive severance and sign-on bonuses, gain on revaluation of contingent consideration, class action
litigation expenses, gain/loss on disposal of property and equipment or investments, gain on change in fair value of
derivative, loss on extinguishment of debt and impairments and other gains and losses.
36
The following table presents a reconciliation of Adjusted EBITDA to net income (loss):
(In thousands)
Adjusted EBITDA
Acquisition and merger expenses
Share-based compensation
Disposition of notes receivable
Depreciation and amortization
Gain on revaluation of contingent consideration
Preopening expenses
Class action litigation expenses
Executive severance and sign-on bonuses
Other operating, net
Income from operations
Non-operating income (expense)
Interest expense, net
Loss on extinguishment of debt
Gain on change in fair value of derivative
Gain on sale of land held for sale
Other, net
Total non-operating expense, net
2017
Year Ended December 31,
2016
2015
$
$
72,915
(5,041)
(8,754)
—
(40,786)
1,719
(1,632)
(1,617)
(1,142)
(284)
15,378
(19,598)
(1,708)
178
—
—
(21,128)
$
48,595
(614)
(3,878)
—
(27,506)
—
(2,471)
—
(1,037)
(54)
13,035
(6,454)
—
—
4,525
869
(1,060)
18,274
(11,525)
(809)
23,590
(10,798)
—
(421)
—
—
52
18,363
(2,728)
(1,174)
—
—
90
(3,812)
14,551
9,969
24,520
Income (loss) before income tax benefit
Income tax benefit
Net income
(5,750)
7,921
2,171
$
11,975
4,325
16,300
$
$
Liquidity and Capital Resources
As of December 31, 2017, we had $90.6 million in cash and cash equivalents and no short-term investments. We
currently believe that our cash and cash equivalents, cash flows from operations and borrowing availability under
our revolving credit facility will be sufficient to meet our capital requirements during the next 12 months.
Our operating results and performance depend significantly on national, regional and local economic conditions and
their effect on consumer spending. Declines in consumer spending would cause revenues generated in both our
Casinos and Distributed Gaming segments to be adversely affected.
To further enhance our liquidity position or to finance any future acquisition or other business investment initiatives,
we may obtain additional financing, which could consist of debt, convertible debt or equity financing from public
and/or private credit and capital markets. In January 2018, the SEC declared effective our universal shelf registration
statement with the SEC for the future sale of up to $150 million in aggregate amount of common stock, preferred
stock, debt securities, warrants and units and the resale of up to approximately 8.0 million shares of our common
stock held by the selling security holders named therein. The securities may be offered from time to time, separately
or together, directly by us or through underwriters, dealers or agents at amounts, prices, interest rates and other
terms to be determined at the time of the offering.
In January 2018, subsequent to fiscal year end, we completed an underwritten public offering pursuant to our
universal shelf registration statement, in which certain of our shareholders resold an aggregate of 6.5 million shares
of our common stock, and we sold 975,000 newly issued shares of our common stock pursuant to the exercise in full
of the underwriters’ over-allotment option to purchase additional shares. Our net proceeds from the offering were
approximately $25.3 million after deducting underwriting discounts and offering expenses. We expect to use these
net proceeds for general corporate purposes, which may include, among other things, capital expenditures,
opportunistic acquisitions or working capital.
37
Cash Flows
Net cash provided by operating activities was $22.1 million for the year ended December 31, 2017, compared to
$37.4 million for the prior year period, which decrease was primarily due to the flow-through effect of lower
revenues and timing of working capital spending. Operating cash flows increased $28.1 million in 2016 compared to
2015 primarily due to the flow-through effect of higher revenues, as well as the timing of working capital spending.
Net cash used in investing activities was $756.2 million for the year ended December 31, 2017, which included a
cash outflow of $724.5 million for the American Acquisition and $29.5 million for capital expenditures. Net cash
used in investing activities in 2016 included cash used in the Montana Acquisitions and capital expenditures. In
2015, net cash provided by investing activities was $90.0 million and related primarily to the cash acquired in the
Merger, partially offset by the net purchase, maturity and sales of short-term investments.
Net cash provided by financing activities was $777.8 million for the year ended December 31, 2017, compared to
net cash provided by financing activities of $11.4 million for the prior year period. Net cash provided by financing
activities in 2017 reflected borrowings of $789.0 million under our new senior secured credit facilities net of
repayments under our previous senior secured credit facility. Net cash provided by financing activities in the prior
year reflected net borrowings of $36.5 million under our then-existing senior secured credit facility, partly offset by
the $23.5 million Special Dividend paid in July 2016. Net cash used in financing activities in 2015 reflected net
repayments of $59.6 million under our then-existing senior secured credit facilities, debt issuance costs of $2.8
million and $3.4 million related to the repurchase of warrants related to the Merger.
Senior Secured Credit Facilities
As of December 31, 2017, our senior secured credit facilities consisted of a $900.0 million senior secured first lien
credit facility (consisting of $800.0 million in term loans and a $100.0 million revolving credit facility) with
JPMorgan Chase Bank, N.A. (as administrative agent and collateral agent), the lenders party thereto and the other
entities party thereto (the “First Lien Facility”), and a $200.0 million senior secured second lien term loan facility
with Credit Suisse AG, Cayman Islands Branch (as administrative agent and collateral agent), the lenders party
thereto and the other entities party thereto (the “Second Lien Term Loan” and, together with the First Lien Facility,
the “Credit Facilities”). As of December 31, 2017, $800.0 million and $200.0 million of term loan borrowings were
outstanding under our First Lien Facility and Second Lien Term Loan, respectively, there were no letters of credit
outstanding under the First Lien Facility, and our revolving credit facility was undrawn, leaving borrowing
availability under the revolving credit facility as of December 31, 2017 of $100.0 million.
Borrowings under each of the Credit Facilities bear interest, at our option, at either (1) a base rate equal to the
greatest of the federal funds rate plus 0.50%, the applicable administrative agent’s prime rate as announced from
time to time, or the LIBOR rate for a one-month interest period plus 1.00%, subject to a floor of 1.75% (with respect
to the term loans) or 1.00% (with respect to borrowings under the revolving credit facility) or (2) the LIBOR rate for
the applicable interest period, subject to a floor of 0.75% (with respect to the term loans only), plus in each case, an
applicable margin. The applicable margin for the term loans under the First Lien Facility is 2.00% for base rate loans
and 3.00% for LIBOR rate loans. The applicable margin for borrowings under the revolving credit facility under the
First Lien Facility ranges from 1.50% to 2.00% for base rate loans and 2.50% to 3.00% for LIBOR rate loans, based
on our net leverage ratio. The applicable margin for the Second Lien Term Loan is 6.00% for base rate loans and
7.00% for LIBOR rate loans. The commitment fee for the revolving credit facility is payable quarterly at a rate of
between 0.375% and 0.50%, depending on our net leverage ratio, and is accrued based on the average daily unused
amount of the available revolving commitment. As of December 31, 2017, the weighted-average effective interest
rate on our outstanding borrowings under the Credit Facilities was approximately 5.1%.
The revolving credit facility under the First Lien Facility matures on October 20, 2022, and the term loans under the
First Lien Facility mature on October 20, 2024. The term loans under the First Lien Facility must be repaid in 27
quarterly installments of $2.0 million each, which commence in March 2018, followed by a final installment of
$746.0 million at maturity. The term loans under the Second Lien Term Loan must be repaid in full at maturity on
October 20, 2025.
38
Borrowings under each of the Credit Facilities are guaranteed by each of our existing and future wholly-owned
domestic subsidiaries (other than certain insignificant or unrestricted subsidiaries), and are secured by substantially
all of the present and future assets of Golden and our subsidiary guarantors (subject to certain exceptions).
Under the Credit Facilities, we and our restricted subsidiaries are subject to certain limitations, including limitations
on our respective ability to: incur additional debt, grant liens, sell assets, make certain investments, pay dividends
and make certain other restricted payments. In addition, we will be required to pay down the term loans under the
Credit Facilities under certain circumstances if we or our restricted subsidiaries issue debt, sell assets, receive certain
extraordinary receipts or generate excess cash flow (subject to exceptions). The revolving credit facility under the
First Lien Facility contains a financial covenant regarding a maximum net leverage ratio that applies when
borrowings under the revolving credit facility exceed 30% of the total revolving commitment. The Credit Facilities
also prohibit the occurrence of a change of control, which includes the acquisition of beneficial ownership of 50% or
more of our capital stock (other than by certain permitted holders, which include, among others, Blake L. Sartini,
Lyle A. Berman, Neil I. Sell and certain affiliated entities). If we default under the Credit Facilities due to a
covenant breach or otherwise, the lenders may be entitled to, among other things, require the immediate repayment
of all outstanding amounts and sell our assets to satisfy the obligations thereunder. We were in compliance with our
financial covenants under the Credit Facilities as of December 31, 2017.
Former Senior Secured Credit Facility
In connection with the American Acquisition and the entry into the Credit Facilities, in October 2017 we repaid all
principal amounts outstanding under our former credit agreement with Capital One, National Association (as
administrative agent) and the lenders named therein (the “Former Credit Agreement”), which amounted to
approximately $173.4 million, together with accrued interest. As a result of the repayment and discharge of the
Former Credit Facility, we recognized a loss on extinguishment of debt of $1.7 million during the year ended
December 31, 2017.
Sale of Jamul Tribe Promissory Note
On December 9, 2015, we sold our $60.0 million Jamul Note to a subsidiary of Penn National for approximately
$24.0 million in cash. We had previously determined the fair value of the Jamul Note to be zero as of December 28,
2014. Under the terms of the Merger Agreement and subject to applicable law, we agreed that the proceeds received
from the sale of the Jamul Note, net of related costs, would be distributed in a special cash dividend to our
shareholders holding shares as of the record date for such dividend (other than shareholders that had waived their
right to receive such dividend in connection with the Merger). Under the terms of the Merger Agreement, Sartini
Gaming’s former sole shareholder, for itself and any related party transferees of its shares, waived their right to
receive such dividend with respect to their shares (which totaled 7,996,393 shares in the aggregate). Also in
connection with the Merger, holders of an additional 457,172 shares waived their right to receive such dividend. On
June 17, 2016, our Board of Directors approved and declared the Special Dividend to the eligible shareholders of
record on the close of business on the Record Date of June 30, 2016 of cash in the aggregate amount of
approximately $23.5 million, which was paid on July 14, 2016. The $1.71 per share amount of the Special Dividend
was calculated by dividing the aggregate amount of the Special Dividend by 13,759,374 outstanding shares of
common stock held by eligible shareholders on the close of business on the Record Date (rounded down to the
nearest whole cent per share).
In connection with the Special Dividend and in accordance with our equity incentive plans approved by our
shareholders, equitable anti-dilutive adjustments were made to the exercise prices of outstanding stock options to
purchase shares of our common stock in order to preserve the value of such stock options following the Special
Dividend. Accordingly, effective as of the close of business on the dividend payment date of July 14, 2016, the
exercise price of each stock option under our equity incentive plans outstanding on the Record Date was reduced by
$1.71 per share. See Note 9, Share-Based Compensation, in the accompanying consolidated financial statements for
information on our anti-dilutive adjustments to the outstanding stock options.
39
Other Items Affecting Liquidity
We currently believe that our cash and cash equivalents, cash flows from operations and borrowing availability
under our revolving credit facility will be sufficient to meet our capital requirements for the next twelve months.
Any additional financing that is needed may not be available to us or, if available, may not be on terms favorable to
us. The outcome of the following specific matters, including our commitments and contingencies, may also affect
our liquidity.
Commitments, Capital Spending and Development
We perform on-going refurbishment and maintenance at our facilities, of which certain maintenance costs are
capitalized if such improvement or refurbishment extends the life of the related asset, while other maintenance costs
that do not so qualify are expensed as incurred. The commitment of capital and the related timing thereof are
contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate
regulatory bodies. We intend to fund such capital expenditures through our revolving credit facility and operating
cash flows.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2017:
(In thousands)
First Lien Facility
Second Lien Term Loan
Interest on long-term debt (1)
Maryland DNR lease(2)
Gold Town Casino leases(3)
Space lease agreements
Related party leases
Other operating leases (4)
Notes payable and capital lease
obligations(5)
2018
2019
2020
2021
2022
Thereafter
$
8,000 $
—
52,961
425
628
28,038
1,559
11,168
8,000 $
—
52,591
425
636
27,006
1,535
10,452
8,000 $
—
52,219
425
642
7,373
1,535
10,293
8,000 $
—
51,852
425
649
3,652
1,535
9,498
8,000 $ 760,000
200,000
107,680
12,998
16,085
703
6,097
53,345
—
51,491
425
535
1,737
1,536
8,468
1,759
1,177
$ 104,538 $ 101,822 $
1,111
81,598 $
465
76,076 $
143
2,343
72,335 $ 1,159,251
(1)
(2)
To the extent that applicable interest rates are variable and ultimate amounts borrowed under the Credit
Facilities may fluctuate, amounts reflected represent estimated interest payments on our current outstanding
balances based on interest rates at December 31, 2017 until maturity. Includes interest on notes payable.
In 2012, we entered into a 40-year operating ground lease with the Maryland DNR for approximately 270
acres in the Rocky Gap State Park in which Rocky Gap is situated. The lease expires in 2052, with an option
to renew for an additional 20 years. Rent payments under the lease include variable amounts based on Rocky
Gap gaming revenue and surcharges on amounts billed to and collected from guests. See Note 13, Leases, in
the accompanying consolidated financial statements for information regarding the lease.
(3) We lease the approximately nine acres of land on which our Gold Town Casino is located from several
unrelated parties.
(4) We lease taverns, equipment and vehicles under noncancelable operating leases. The terms of the tavern leases
range from one to 15 years, with various renewal options from one to 15 years.
(5) Relates to notes payable on equipment purchases and previous tavern acquisitions and our capital lease
obligations, including total capital lease interest obligations of $6.6 million.
40
Other Opportunities
We may investigate and pursue expansion opportunities in our existing or new markets. Such expansions will be
influenced and determined by a number of factors, which may include licensing availability and approval, suitable
investment opportunities and availability of acceptable financing. Investigation and pursuit of such opportunities
may require us to make substantial investments or incur substantial costs, which we may fund through cash flows
from operations or borrowing availability under our revolving credit facility. To the extent such sources of funds are
not sufficient, we may also seek to raise such additional funds through public or private equity or debt financings or
from other sources. No assurance can be given that additional financing will be available or that, if available, such
financing will be obtainable on terms favorable to us. Moreover, we can provide no assurances that the investigation
or pursuit of an opportunity will result in a completed transaction.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on
our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of
these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and
expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including
those related to the application of the acquisition method of accounting, long-lived assets, goodwill and indefinite-
lived intangible assets, revenue recognition and promotional allowances, income taxes and share-based
compensation expenses. We base our estimates and judgments on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ materially from these estimates.
The following represent our accounting policies that involve the more significant judgments and estimates used in
the preparation of our consolidated financial statements. See Note 2, Summary of Significant Accounting Policies, in
the accompanying consolidated financial statements for information regarding our significant accounting policies.
Application of the Acquisition Method of Accounting
The application of the acquisition method of accounting for business combinations requires the use of significant
estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to
appropriately allocate the purchase price consideration between assets that are depreciated and amortized from
goodwill. Accounting for acquisitions requires that assets acquired and liabilities assumed be recorded at their
respective fair values as of the date of acquisition. The fair values of identifiable intangible assets are estimated
using both the cost approach and an income approach, including the excess earnings, relief from royalty, cost
savings method and the with-and-without methods. This requires our management to make significant estimates in
determining the fair values, including market participant assumptions, projected financial information, estimates of
expected cash flows, brand recognition, customer attrition rates and discount rates. Given the need for such
significant judgments, we may engage the assistance of independent valuation firms. Any excess of the purchase
price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.
Our estimates of the fair values of assets acquired and liabilities assumed are based upon assumptions believed to be
reasonable, but are inherently unpredictable and uncertain. During the measurement period, which is up to one year
from the acquisition date, we may record measurement period adjustments to the assets acquired and liabilities
assumed, with a corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent
adjustments are recorded to earnings. Transaction costs are expensed as incurred in our consolidated statement of
operations.
On October 20, 2017, we acquired American. We have applied the acquisition method of accounting to this
transaction. Our estimation of the fair value of the assets acquired and liabilities assumed as of the date of the
transaction was determined based on certain valuations and analyses that we have yet to finalize, and accordingly,
the assets acquired and liabilities assumed in the American Acquisition are subject to adjustment once we complete
such analyses. We may record adjustments to the carrying value of the assets acquired and liabilities assumed with a
corresponding offset to goodwill during the applicable measurement period, which can be up to one year from the
date of the consummation of the acquisition. See Note 3, Merger and Acquisitions, in the accompanying
consolidated financial statements for information regarding the American Acquisition.
41
Long-Lived Assets
Our long-lived assets were carried at $895.2 million as of December 31, 2017, comprising 65.6% of our
consolidated total assets. We evaluate the carrying value of long-lived assets whenever events or changes in
circumstances indicate that the carrying value of such assets may not be recoverable. If triggering events are
identified, we then compare the estimated undiscounted future cash flows of such assets to the carrying value of the
assets. Any such assets are not impaired if the undiscounted future cash flows exceed their carrying value. If the
carrying value exceeds the undiscounted future cash flows, then an impairment charge is recorded, typically
measured using a discounted cash flow model, which is based on the estimated future results of the relevant
reporting unit discounted using our weighted-average cost of capital and market indicators of terminal year free cash
flow multiples.
A long-lived asset must be tested for recoverability whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. Examples include a significant adverse change in the extent or manner in
which we use the asset, a change in its physical condition, or an unexpected change in financial performance.
We reconsider changes in circumstances on a frequent basis, as well as whenever a triggering event related to
potential impairment has occurred. There are three generally accepted approaches available in developing an opinion
of value: the cost, sales comparison and income approaches. We generally consider each of these approaches in
developing a recommendation of the fair value of the asset; however, the reliability of each approach is dependent
upon the availability and comparability of the market data uncovered, as well as the decision-making criteria used
by market participants when evaluating an asset. We will bifurcate our investment and apply the most indicative
approach to overall fair valuation, or in some cases, a weighted analysis of any or all of these methods. Given the
need for significant judgements in conducting such valuations, we may engage the assistance of independent
valuation firms.
Goodwill and Indefinite-Lived Intangible Assets
We review indefinite-lived intangible assets and goodwill for impairment annually during our fourth quarter and
whenever events or changes in circumstances indicate the carrying amount may not be recoverable. We can opt to
perform a qualitative assessment to test a reporting unit’s goodwill for impairment or we can directly perform the
two-step impairment test. Based on the qualitative assessment, if we determine that the fair value of a reporting unit
is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, the two-step
impairment test will be performed.
In the first step of the impairment test, the current fair value of each reporting unit is estimated using a discounted
cash flow model which is then compared to the carrying value of each reporting unit. If the carrying amount of a
reporting unit exceeds its fair value in step 1 of the impairment test, then step 2 of the impairment test is performed
to determine the implied fair value of goodwill for that reporting unit. If the implied fair value of goodwill is less
than the goodwill allocated for that reporting unit, an impairment loss is recognized.
We consider our Nevada and Montana gaming licenses as indefinite-lived intangible assets that do not require
amortization based on our future expectations to operate our gaming facilities indefinitely as well as our historical
experience in renewing these intangible assets at minimal cost. We consider our trade names related to our Nevada
casinos and taverns as indefinite-lived intangible assets that do not require amortization based on our future
expectations to operate our casinos and taverns indefinitely under these trade names. Rather, these intangible assets
are tested annually for impairment, or more frequently if indicators of impairment exist, by comparing the fair value
of the recorded assets to their carrying amount. If the carrying amount exceeds their fair value, an impairment loss is
recognized. We complete our testing of our intangible assets prior to assessing our goodwill for possible
impairment.
The evaluation of goodwill and indefinite-lived intangible assets requires the use of estimates about future operating
results of each reporting unit to determine the estimated fair value of the reporting unit and the indefinite-lived
intangible assets. We must make various assumptions and estimates in performing our impairment testing. The
implied fair value includes estimates of future cash flows (including an allocation of our projected rental obligation
to our reporting units) that are based on reasonable and supportable assumptions which represent our best estimates
42
of the cash flows expected to result from the use of the assets including their eventual disposition. Changes in
estimates, increases in our cost of capital, reductions in transaction multiples, changes in operating and capital
expenditure assumptions or application of alternative assumptions and definitions could produce significantly
different results. Future cash flow estimates are, by their nature, subjective and actual results may differ materially
from our estimates. If our ongoing estimates of future cash flows are not met, we may have to record impairment
charges in future accounting periods. Our estimates of cash flows are based on the current regulatory and economic
climates, recent operating information and budgets of the various properties where we conduct operations. These
estimates could be negatively impacted by changes in federal, state or local regulations, economic downturns, or
other events affecting our properties.
Forecasted cash flows (based on our annual operating plan as determined in the fourth quarter) can be significantly
impacted by the local economy in which our reporting units operate. For example, increases in unemployment rates
can result in decreased customer visitations and/or lower customer spend per visit. In addition, the impact of new
legislation which approves gaming in nearby jurisdictions or further expands gaming in jurisdictions where our
reporting units currently operate can result in opportunities for us to expand our operations. However, it also has the
impact of increasing competition for our established properties which generally will have a negative effect on those
locations’ profitability once competitors become established, as some erosion of revenues occurs absent an overall
increase in customer visitations. Lastly, increases in gaming taxes approved by state regulatory bodies can
negatively impact forecasted cash flows.
Assumptions and estimates about future cash flow levels and multiples by individual reporting units are complex
and subjective. They are sensitive to changes in underlying assumptions and can be affected by a variety of factors,
including external factors, such as industry, geopolitical and economic trends, and internal factors, such as changes
in our business strategy, which may reallocate capital and resources to different or new opportunities which
management believes will enhance our overall value but may be to the detriment of an individual reporting unit.
Our annual goodwill impairment analysis, performed using the qualitative assessment option as of the first day of
the fourth quarter of the year ended December 31, 2017, resulted in a conclusion that it was more likely than not that
the fair value of our reporting units exceeded their respective carrying values. As a result, we concluded that the
two-step goodwill impairment test was not necessary. Additionally, none of our reporting units incurred goodwill
impairment charges during 2016. If future operating results of our reporting units do not meet current expectations,
it could cause carrying values of our reporting units to exceed their fair values in future periods, potentially resulting
in a goodwill impairment charge.
Revenue Recognition and Promotional Allowances
We generally enter into three types of slot and amusement device placement contracts as part of our distributed
gaming business: space lease, revenue share and participation agreements. Under space lease agreements, we pay a
fixed monthly rental fee for the right to install, maintain and operate our slots at a business location. Under revenue
share agreements, we pay the business location a percentage of the gaming revenue generated from our slots placed
at the location, rather than a fixed monthly rental fee. With regard to both space lease and revenue share agreements,
we hold the applicable gaming license to conduct gaming at the location (although revenue share locations are
required to obtain separate regulatory approval to receive a percentage of the gaming revenue). Under participation
agreements, the business location holds the applicable gaming license and retains a percentage of the gaming
revenue that it generates from our slots. In Montana, our slot and amusement device placement contracts are all
revenue share agreements.
Gaming revenue, which is defined as the difference between gaming wins and losses, is recognized as wins and
losses occur from gaming activities. The retail value of rooms, food and beverage, and other services furnished to
customers without charge, including coupons for discounts when redeemed, is included in gross revenues and then
deducted as a promotional allowance. The estimated cost of providing such promotional allowances is included in
gaming expenses.
Food, beverage, and retail revenues are recorded at the time of sale. Room revenue is recorded at the time of
occupancy. Sales taxes and surcharges collected from customers and remitted to governmental authorities are
presented on a net basis. Accounts receivable deemed uncollectible are charged off through a provision for
uncollectible accounts.
43
Income Taxes
The determination of our income tax-related account balances requires the exercise of significant judgment by
management. Accordingly, we determine deferred tax assets and liabilities based upon the difference between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Management assesses the likelihood that deferred tax assets will
be recovered from future taxable income and establishes a valuation allowance when management believes recovery
is not likely.
We record estimated penalties and interest related to income tax matters, including uncertain tax positions, if any, as
a component of income tax expense.
Share-Based Compensation Expense
We have various share-based compensation programs, which provide for equity awards such as stock options and
restricted stock units. We use the straight-line method to recognize compensation expense associated with share-
based awards based on the fair value on the date of grant. Expense is recognized over the requisite service period
related to each award, which is the period between the grant date and the award’s stated vesting term. The fair value
of stock options is estimated using the Black-Scholes option pricing model. Management makes several assumptions
to determine the inputs into the Black-Scholes option pricing model, including our volatility and expected term
assumptions which can significantly affect the fair value of stock options. For restricted stock units, compensation
expense is calculated based on the fair market value of our common stock on the date of grant. Changes in the
assumptions can materially affect the estimate of the fair value of share-based compensation expense recognized in
the consolidated statement of operations. The extent of the impact will depend, in part, on the extent of awards in
any given year. All of our stock compensation expense is recorded in selling, general and administrative expenses in
the consolidated statements of operations.
Recently Issued Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies in the accompanying consolidated financial statements for
information regarding recently issued accounting pronouncements.
Regulation and Taxes
The casino and distributed gaming industries are subject to extensive regulation by state gaming authorities.
Changes in applicable laws or regulations could have a material adverse effect on us.
The gaming industry represents a significant source of tax revenues to regulators. From time to time, various federal
and state legislators and officials have proposed changes in tax law, or in the administration of such law, affecting
the gaming industry. It is not possible to determine the likelihood of possible changes in tax law or in the
administration of such law. Such changes, if adopted, could have a material adverse effect on our future financial
position, results of operations, cash flows and prospects. See the “Regulation” section included in Part I, Item 1 of
this Annual Report on Form 10-K for further discussion of applicable regulations.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on
our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
44
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. As of
December 31, 2017, approximately 99% of our indebtedness for borrowed money accrued interest at a variable rate,
which primarily comprised our indebtedness under the Credit Facilities.
As of December 31, 2017, we had $800.0 million in principal amount of outstanding borrowings under the First
Lien Facility, and $200.0 million in principal amount of outstanding borrowings under the Second Lien Term Loan.
Our primary interest rate under the Credit Facilities is the Eurodollar rate plus an applicable margin. As of
December 31, 2017, the weighted-average effective interest rate on our outstanding borrowings under the First Lien
Facility was approximately 4.4%, and under the Second Lien Term Loan was approximately 8.3%. Assuming the
outstanding balance under our Credit Facilities remained constant over a year, a 50 basis point increase in the
applicable interest rate would increase interest incurred, prior to effects of capitalized interest, by $5.0 million over a
twelve-month period.
As of December 31, 2017, our investment portfolio included $90.6 million in cash and cash equivalents and a de
minimis amount of short-term investments.
45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
GOLDEN ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm....................................................................................
Consolidated Balance Sheets ...................................................................................................................................
Consolidated Statements of Operations and Comprehensive Income ...................................................................
Consolidated Statements of Shareholders’ Equity...................................................................................................
Consolidated Statements of Cash Flows..................................................................................................................
Notes to Consolidated Financial Statements............................................................................................................
Page
47
50
51
52
53
55
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON CONSOLIDATED FINANCIAL STATEMENTS
Board of Directors and Stockholders
Golden Entertainment, Inc. and Subsidiaries
Las Vegas, Nevada
Opinion on the Consolidated Financial Statements. We have audited the accompanying consolidated balance
sheets of the Golden Entertainment, Inc. and Subsidiaries (the Company) as of December 31, 2017 and 2016, and
the related consolidated statements of operations and comprehensive earnings (loss), shareholders’ equity and cash
flows, for each of the three years in the period ended December 31, 2017, and the notes to the consolidated financial
statements and financial statement schedules listed in the Index at Item 15 (a)(2) (collectively referred to as the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as of December 31, 2017 and 2016, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in
conformity with accounting principles generally accepted in the United States (U.S.).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control — Integrated Framework (2013 edition) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2018, expressed
an unqualified opinion.
Basis for Opinion. These consolidated financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
/s/ Piercy Bowler Taylor & Kern
Certified Public Accountants
We have served as the Company's auditor since 2005
Las Vegas, Nevada
March 15, 2018
47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Board of Directors and Stockholders
Golden Entertainment, Inc. and Subsidiaries
Las Vegas, Nevada
Opinion on Internal Control over Financial Reporting. We have audited the internal control over financial
reporting of the Golden Entertainment, Inc. and Subsidiaries (the Company) as of December 31, 2017, based on
criteria established in Internal Control — Integrated Framework (2013 edition) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO
criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting included in
Item 9A, management’s assessment of and conclusion on the effectiveness of internal control over financial
reporting did not include the internal controls of American Casino and Entertainment Properties LLC (American),
which was acquired on October 20, 2017, and is included in the 2017 consolidated financial statements of the
Company and constituted 68.1% of total assets as of December 31, 2017 and 15% of net revenues for the year then
ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of
the internal control over financial reporting of American.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB) the consolidated balance sheets of the Company as of December 31, 2017 and 2016, and the
related consolidated statements of operations and comprehensive earnings (loss), shareholders’ equity and cash
flows, for each of the three years in the period ended December 31, 2017, and the notes to the consolidated financial
statements and financial statement schedules listed in the Index at Item 15 (a)(2), and our report dated March 15,
2018, expressed an unqualified opinion.
Basis for Opinion. The Company's management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Management’s Report on Internal Control Over Financial Reporting included in Item 9A. Our
responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the United States (U.S.) federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission (SEC) and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control over
financial reporting based on the assessed risk, and performing procedures that respond to those risks and such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
Definition and Limitations of Internal Control over Financial Reporting. The Company's internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States (U.S.). The Company's internal control over financial reporting includes
those policies and procedures that 1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the Company, 2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States (U.S.), and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of the company, and 3) provide
48
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
Company's assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Piercy Bowler Taylor & Kern
Certified Public Accountants
Las Vegas, Nevada
March 15, 2018
49
GOLDEN ENTERTAINMENT, INC.
Consolidated Balance Sheets
(In thousands)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Income taxes receivable
Prepaid expenses
Inventories
Other
Total current assets
Property and equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt
Accounts payable
Accrued taxes, other than income taxes
Accrued payroll and related
Accrued liabilities
Total current liabilities
Long-term debt, net
Deferred income taxes
Other long-term obligations
Total liabilities
Commitments and contingencies (Note 14)
Shareholders' equity
$
$
$
December 31,
2017
2016
$
$
$
90,579
14,692
218
19,397
5,594
2,599
133,079
895,241
158,134
157,692
7,787
13,242
1,365,175
9,759
19,470
6,664
22,570
19,295
77,758
963,200
—
3,226
1,044,184
46,898
6,697
2,340
9,761
2,605
1,346
69,647
137,581
105,655
98,603
—
7,592
419,078
15,752
11,739
3,024
3,478
3,846
37,839
167,690
38
4,085
209,652
Common stock, $.01 par value; authorized 100,000 shares; 26,413 and 22,232
common shares issued and outstanding, respectively
Additional paid-in capital
Accumulated deficit
Total shareholders' equity
Total liabilities and shareholders' equity
264
399,510
(78,783)
320,991
1,365,175
$
223
290,157
(80,954)
209,426
419,078
$
The accompanying notes are an integral part of these consolidated financial statements.
50
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share data)
Revenues
Gaming
Food and beverage
Rooms
Other operating
Gross revenues
Less: Promotional allowances
Net revenues
Expenses
Gaming
Food and beverage
Rooms
Other operating
Selling, general and administrative
Depreciation and amortization
Disposition of notes receivable
Acquisition and merger expenses
Preopening expenses
Executive severance and sign-on bonuses
Gain on revaluation of contingent consideration
Other operating, net
Total expenses
Income from operations
Non-operating income (expense)
Interest expense, net
Loss on extinguishment of debt
Gain on change in fair value of derivative
Gain on sale of land held for sale
Other, net
Total non-operating expense, net
Income (loss) before income tax benefit
Income tax benefit
Net income
Other comprehensive income
Comprehensive income
Weighted-average common shares outstanding
Basic
Dilutive impact of stock options and restricted stock units
Diluted
Net income per share
Basic
Diluted
Year Ended December 31,
2016
2017
2015
$
414,353
79,765
24,165
20,393
538,676
(28,868)
509,808
280,121
47,956
8,899
6,765
103,523
40,786
—
5,041
1,632
1,142
(1,719)
284
494,430
15,378
(19,598)
(1,708)
178
—
—
(21,128)
(5,750)
7,921
2,171
—
2,171
$
346,039
58,659
7,853
11,844
424,395
(21,191)
403,204
$ 148,447
25,584
6,814
5,079
185,924
(8,882)
177,042
250,791
32,639
1,336
5,566
68,155
27,506
—
614
2,471
1,037
—
54
390,169
13,035
(6,454)
—
—
4,525
869
(1,060)
11,975
4,325
16,300
—
16,300
$
98,268
19,373
968
2,260
38,708
10,798
(23,590)
11,525
421
—
—
(52)
158,679
18,363
(2,728)
(1,174)
—
—
90
(3,812)
14,551
9,969
24,520
22
24,542
$
$
23,105
1,555
24,660
22,135
319
22,454
16,878
225
17,103
$
$
0.09
0.09
$
$
0.74
0.73
$
$
1.45
1.43
The accompanying notes are an integral part of these consolidated financial statements.
51
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Shareholders’ Equity
(In thousands)
Common stock
Shares
Amount
Accumulated
Other
Additional
Paid-In Comprehensive Accumulated Shareholders'
Capital
134 $ 205,749 $
Deficit
(98,245) $
Equity
107,616
(22) $
Total
Loss
Balances, December 28, 2014
13,389 $
Proceeds from issuance of stock
on options exercised
Effect of share-based
compensation
Other comprehensive income
Effect of merger
Net income
Balances, December 31, 2015
25
—
168
—
—
8,454
—
21,868
809
—
—
—
77,265
85
—
—
219 283,991
Proceeds from issuance of stock
on options exercised
Effect of share-based
compensation
Share issuance related to business
combination
Special dividend ($1.71 per share)
Net income
Balances, December 31, 2016
Proceeds from issuance of stock
on options exercised
Effect of share-based
compensation
Tax benefit from share-based
compensation
Share issuance related to business
combination
Net income
Balances, December 31, 2017
314
3
1,789
—
—
3,878
50
—
—
22,232
499
1
—
—
—
—
223 290,157
135
1
168
—
—
—
8,754
—
(1,015)
—
—
22
—
—
—
—
—
—
—
—
—
—
—
—
—
168
—
—
—
24,520
(73,725)
809
22
77,350
24,520
210,485
—
1,792
—
3,878
—
(23,529)
16,300
(80,954)
500
(23,529)
16,300
209,426
—
169
—
8,754
—
(1,015)
4,046
—
26,413 $
40 101,446
—
—
264 $ 399,510 $
—
—
— $
—
2,171
(78,783) $
101,486
2,171
320,991
The accompanying notes are an integral part of these consolidated financial statements.
52
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Year Ended December 31,
2016
2017
2015
$
2,171
$
16,300
$
24,520
Depreciation and amortization
Amortization of debt issuance costs and discounts on debt
Accretion and amortization of discounts and premiums on
short-term investments
Share-based compensation
Loss on disposal of property and equipment
Gain on revaluation of contingent consideration
Loss (gain) on extinguishment of debt
Gain on change in fair value of derivative
Gain on sale of land held for sale
Gain on sale of notes receivable
Impairments and other losses
Deferred income taxes
Other operating activities
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable
Income taxes receivable
Prepaid expenses
Inventories and other current assets
Other assets
Accounts payable and other accrued expenses
Accrued taxes, other than income taxes
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Acquisition of businesses, net of cash acquired
Asset purchase
Proceeds from disposal of property and equipment
Purchase of short-term investments
Proceeds from maturities of short-term investments
Proceeds from sale of short-term investments
Collection on notes receivable
Other investing activities
Net cash provided by (used in) investing activities
40,786
1,593
27,506
732
—
8,754
441
(1,719)
1,708
(178)
—
—
—
(7,825)
—
(1,593)
2,121
74
(568)
(2,056)
(22,606)
511
488
22,102
(29,463)
(724,473)
(2,220)
—
—
—
—
—
(31)
(756,187)
—
3,878
54
—
(18)
—
(4,525)
—
—
(4,325)
(49)
(3,151)
(262)
(3,810)
102
—
1,580
2,193
1,190
37,395
(30,634)
(41,273)
—
2,985
—
—
—
—
(2,198)
(71,120)
10,798
525
240
809
303
—
1,174
—
—
(23,590)
357
(10,216)
—
1,033
77
2,035
371
—
900
6
—
9,342
(7,946)
25,539
—
4,413
(25,137)
35,175
36,182
23,590
(1,767)
90,049
53
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Cash Flows – (Continued)
(In thousands)
Cash flows from financing activities
Proceeds from term loans
Repayments of term loans
Borrowings on revolving credit facility
Repayments of revolving credit facility
Repayments of notes payable
Payments for debt issuance costs
Purchase of derivative instrument
Proceeds from leased equipment obligation
Principal payments under capital leases
Proceeds from issuance of common stock
Tax withholding on share-based payments
Dividends paid
Warrant repurchase
Net cash provided by (used in) financing activities
Cash and cash equivalents
Net increase (decrease) for the period
Balance, beginning of period
Balance, end of period
Supplemental cash flow disclosures
Cash paid for interest
Cash paid (received) for income taxes, net
Non-cash investing and financing activities
Payables incurred for capital expenditures
Notes payable issued for property and equipment
Assets acquired under capital lease obligations
Common stock issued in connection with acquisition
Year Ended December 31,
2017
2016
2015
969,000
(150,000)
6,000
(36,000)
(3,334)
(4,035)
(3,152)
743
(610)
169
(1,015)
—
—
777,766
40,000
(8,500)
5,000
—
(2,061)
(500)
—
—
(756)
1,792
—
(23,529)
—
11,446
145,000
(204,560)
—
—
—
(2,803)
—
—
—
168
—
—
(3,435)
(65,630)
43,681
46,898
90,579
$
(22,279)
69,177
46,898
$
33,761
35,416
69,177
14,143
$
(84)
$
1,849
717
2,758
101,486
$
$
5,721
260
—
721
2,726
500
2,321
170
—
2,838
—
77,350
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
54
GOLDEN ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of Business
Golden Entertainment, Inc. and its wholly-owned subsidiaries (collectively, the “Company”) own and operate a
diversified entertainment platform, consisting of a portfolio of gaming assets that focus on resort casino operations
and distributed gaming (including tavern gaming in our wholly-owned taverns).
The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming.
The Company’s Casinos segment involves the operation of eight resort casino properties in Nevada and Maryland,
comprising the Stratosphere Casino, Hotel & Tower (the “Stratosphere”), Arizona Charlie’s Decatur and Arizona
Charlie’s Boulder in Las Vegas, Nevada, the Aquarius Casino Resort (the “Aquarius”) in Laughlin, Nevada, the
Pahrump Nugget Hotel Casino (“Pahrump Nugget”), Gold Town Casino and Lakeside Casino & RV Park in
Pahrump, Nevada, and the Rocky Gap Casino Resort in Flintstone, Maryland (“Rocky Gap”). The casino properties
in Las Vegas and Laughlin, Nevada were added to the Company’s casino portfolio in October 2017 as a result of the
Company’s acquisition of American Casino & Entertainment Properties LLC (“American”), as further described
below.
The Company’s Distributed Gaming segment involves the installation, maintenance and operation of slots and
amusement devices in non-casino locations (such as grocery stores, convenience stores, restaurants, bars, taverns
and liquor stores) in Nevada and Montana, and the operation of wholly-owned branded taverns targeting local
patrons located primarily in the greater Las Vegas, Nevada metropolitan area.
On October 20, 2017, the Company completed the acquisition of all of the outstanding equity interests of American
from its former equity holders (the “American Acquisition”). The results of operations of American and its
subsidiaries have been included in the Company’s results subsequent to that date. See Note 3, Merger and
Acquisitions, for information regarding the American Acquisition.
On January 29, 2016, the Company completed the acquisition of approximately 1,100 slots from a distributed
gaming operator in Montana, as well as certain other non-gaming assets and the right to operate within certain
locations (the “Initial Montana Acquisition”). Additionally, on April 22, 2016, the Company completed the
acquisition of approximately 1,800 slots from a second distributed gaming operator in Montana, as well as
amusement devices and other non-gaming assets and the right to operate within certain locations (the “Second
Montana Acquisition” and, together with the Initial Montana Acquisition, the “Montana Acquisitions”). The results
of operations of the distributed gaming businesses acquired in the Montana Acquisitions have been included in the
Company’s results subsequent to their respective acquisition dates. See Note 3, Merger and Acquisitions, for
information regarding the Montana Acquisitions.
On July 31, 2015, the Company acquired Sartini Gaming, Inc. (“Sartini Gaming”) through the merger of a wholly-
owned subsidiary of the Company with and into Sartini Gaming, with Sartini Gaming surviving as a wholly-owned
subsidiary of the Company (the “Merger”). The results of operations of Sartini Gaming and its subsidiaries have
been included in the Company’s results subsequent to that date. In connection with the Merger, the Company’s
name was changed from Lakes Entertainment, Inc. to Golden Entertainment, Inc. See Note 3, Merger and
Acquisitions, for information regarding the Merger.
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United
States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates. Significant estimates also include preliminary estimates
of values assigned to assets acquired and liabilities assumed in connection with business combinations, including
conclusions of useful lives, separate entity values and underlying valuation metrics and methods. These preliminary
estimates could change significantly during the measurement period which can remain open for up to one year after
the closing date of the business combination. See Note 3, Merger and Acquisitions, for further information regarding
the Company’s business combinations.
55
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All
material intercompany accounts and transactions have been eliminated in consolidation. Additionally, certain minor
reclassifications have been made to the 2016 and 2015 amounts to conform to the current presentation, including a
reclassification of $2.7 million from food and beverage expense to gaming expense.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and highly-liquid investments with original maturities
of three months or less. Although these balances may at times exceed the federal insured deposit limit, the Company
believes such risk is mitigated by the quality of the institutions holding such deposits.
Accounts Receivable
Accounts receivable consist primarily of gaming, hotel and other receivables, net of allowance for doubtful
accounts. Accounts receivable are non-interest bearing and are initially recorded at cost. Accounts are written off
when management deems the account to be uncollectible. An estimated allowance is maintained to reduce the
Company’s accounts receivable to their expected net realizable value. The allowance is estimated based on specific
reviews of customer accounts as well as historical collection experience and current economic and business
conditions. Recoveries of accounts previously written off are recorded when received.
Inventories
Inventories consist primarily of food and beverage and retail items and are stated at the lower of cost or net
realizable value (instead of market) beginning in 2017. The change in accounting principle did not have a material
effect on the Company’s financial position, results of operations or cash flows. Cost is determined using the first-in,
first-out and the average cost inventory methods.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation. Assets held under capital leases are stated at
the lower of the present value of the future minimum lease payments or fair value at the inception of the lease.
Expenditures for additions, renewals and improvements are capitalized and depreciated over their useful lives. Costs
of repairs and maintenance are expensed when incurred. A significant amount of the Company’s property and
equipment was acquired through business acquisitions and therefore was initially recognized at fair value on the
effective dates of the transactions. Depreciation of property and equipment is computed using the straight-line
method over the following estimated useful lives:
Building and site improvements
Furniture and equipment
Leasehold improvements
15 - 45 years
3 - 15 years
2 - 15 years
The Company evaluates property and equipment and other long-lived assets for impairment in accordance with the
guidance for accounting for the impairment or disposal of long-live assets. If an indicator of impairment exists, the
impairment is measured based on fair value compared to book value. For the years ended December 31, 2017 and
2016, there were no impairment charges. For the year ended December 31, 2015 the Company recognized an
impairment charge of $0.4 million.
Goodwill and Intangible Assets
Goodwill represents the purchase price in excess of fair values assigned to the underlying net assets of the acquired
company. Goodwill is assigned to the reporting unit, which is the operating segment level or one level below the
operating segment. Goodwill is not amortized but instead is tested for impairment annually. Intangible assets with
finite lives are amortized using the straight-line method over the periods estimated to be benefited. Finite-lived
intangible assets are also reviewed for impairment if facts and circumstances warrant. Impairment tests are
56
performed on October 1st of each year, or more frequently when negative changes in circumstances are experienced.
No indicators of possible impairment have been identified and no impairment charges have been recorded.
Derivative Instruments
In November 2017, the Company executed a trade with Credit Suisse to purchase a derivative instrument from
which the Company will receive cash payments at the end of each period in which the interest rate exceeds the
agreed upon strike price (the “Interest Rate Cap”). Derivative financial instruments such as the Interest Rate Cap are
recorded at fair value. Changes in the fair value of derivative instruments are recognized in the consolidated
statements of operations and comprehensive income.
Rewards Programs
The Company offers various rewards and loyalty programs at its resort casino properties to encourage repeat
business. At its Las Vegas and Laughlin casinos in Nevada, the Company offers the ace|PLAY rewards program.
Under this program, participants earn points based on gaming activity that can be redeemed for cash, free play,
lodging, food and beverages and merchandise. Participant points expire after thirteen months of no activity.
At its Pahrump, Nevada casinos, the Company offers the Gold Mine Rewards loyalty program. Under this program,
participants earn points based on play and retail purchases, which points are redeemable for food, beverages and
hotel rooms, among other items. The close proximity of the Company’s three Pahrump, Nevada casino properties
allows it to leverage the convenience of a one-card player rewards system, where reward points and other benefits
can be earned and redeemed across all three of the Company’s Pahrump casinos via a single card.
At Rocky Gap, the Company offers the Rewards Club loyalty program. Under this program, participants earn points
based on play and amounts spent on the purchase of rooms, food, beverage and resort activities, which points are
redeemable for complimentary slot play and free goods and services at Rocky Gap’s hotel, restaurants, spa and golf
course.
In its Distributed Gaming segment, the Company offers a Golden Rewards promotional program for its taverns.
Golden Rewards tavern player relationships represent loyalty program members who earn points based on play and
amounts spent on the purchase of food and beverage, which points are redeemable for complimentary slot play, food
and beverages, among other items.
With respect to each of the Company’s rewards and loyalty programs, the Company records a liability based on the
value of points earned, less an estimate for points not expected to be redeemed (“breakage”). The Company records
net points earned for complimentary gaming play as a reduction to gaming revenue and points earned for free goods
and services as promotional allowances. Redemption history at the Company’s casinos and taverns is used to assist
in the determination of the estimated accruals. Changes in the programs, increases in membership and changes in the
redemption patterns of the participants can impact this liability. The ace|PLAY, Gold Mine Rewards, Rewards Club
and Golden Rewards points accruals are included in current liabilities on the Company’s consolidated balance sheet.
Long-Term Debt, Net
Long-term debt, net is reported as the outstanding debt amount net of unamortized debt issuance and debt discount
costs. These costs include legal and other direct costs related to the issuance of the Company’s outstanding debt and
discounts granted to the initial purchasers or lenders of the Company’s debt instruments, and are recorded as a direct
reduction to the face amount of the Company’s outstanding debt. The debt discount and debt issuance costs are
accreted to interest expense using the effective interest method over the contractual term of the underlying debt. In
the event that the Company’s debt is modified, repurchased or otherwise reduced prior to its original maturity date,
the Company ratably reduces the unamortized debt issuance costs and discount and records a loss on extinguishment
of debt.
57
Revenue Recognition and Promotional Allowances
Gaming revenue is the difference between gaming wins and losses and is recognized as wins and losses occur from
gaming activities.
The Company generally enters into three types of slot and amusement device placement contracts as part of the
distributed gaming business: space lease, revenue share and participation agreements. Under space lease agreements,
the Company pays a fixed monthly rental fee for the right to install, maintain and operate the Company’s slots at a
business location. Under these agreements, the Company recognizes all gaming revenue and records fixed monthly
rental fees as gaming expenses in the consolidated statement of operations. Under revenue share agreements, the
Company pays the business location a percentage of the gaming revenue generated from the Company’s slots placed
at the location, rather than a fixed monthly rental fee. With regard to both space lease and revenue share agreements,
the Company holds the applicable gaming license to conduct gaming at the location (although revenue share
locations are required to obtain separate regulatory approval to receive a percentage of the gaming revenue). Under
participation agreements, the business location holds the applicable gaming license and retains a percentage of the
gaming revenue that it generates from the Company’s slots. In Montana, the Company’s slot and amusement device
placement contracts are all revenue share agreements.
The retail value of rooms, food and beverage, and other services furnished to customers without charge, including
coupons for discounts when redeemed, is included in gross revenues and then deducted as a promotional allowance.
The estimated cost of providing such promotional allowances is included primarily in gaming expenses.
Food, beverage, and retail revenues are recorded at the time of sale. Room revenue is recorded at the time of
occupancy. Sales taxes and surcharges collected from customers and remitted to governmental authorities are
presented on a net basis.
Gaming Taxes
The Company’s Nevada casinos are subject to taxes based on gross gaming revenues and pay annual fees based on
the number of slots and table games licensed during the year. Rocky Gap is subject to gaming taxes based on gross
gaming revenues and also pays an annual flat tax based on the number of table games and video lottery terminals in
operation during the year. The Company’s distributed gaming operations in Nevada are subject to taxes based on the
Company’s share of non-restricted gross gaming revenue for those locations that have grandfathered rights to more
than 15 slots for play, and/or annual and quarterly fees at all tavern and third party distributed gaming locations. The
Company’s distributed gaming operations in Montana are subject to taxes based on the Company’s share of gross
gaming revenue. These gaming taxes are recorded as gaming expenses in the consolidated statements of operations.
Total gaming taxes and licenses were $41.5 million, $35.7 million and $24.2 million for the years ended December
31, 2017, 2016 and 2015, respectively.
Advertising Expenses
The Company expenses advertising costs as incurred. Advertising expenses, which are primarily included in selling,
general and administrative expenses, were $3.3 million, $2.6 million and $3.4 million for the years ended December
31, 2017, 2016 and 2015, respectively.
Share-Based Compensation Expense
The Company has various share-based compensation programs, which provide for equity awards including stock
options and restricted stock units. Share-based compensation expense is measured at the grant date, based on the
estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, over the employee's
requisite service period. Compensation costs related to stock option awards are calculated based on the fair value of
the award on the date of grant using the Black-Scholes option pricing model. For restricted stock units,
compensation expense is calculated based on the fair market value of the Company’s common stock on the date of
grant. All of the Company’s share-based compensation expense is recorded in selling, general and administrative
expenses in the consolidated statements of operations. See Note 9, Share-Based Compensation, for additional
discussion.
58
Income Taxes
The determination of the Company’s income tax-related account balances requires the exercise of significant
judgment by management. Accordingly, the Company determines deferred tax assets and liabilities based upon the
difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to affect taxable income. Management assesses the likelihood that
deferred tax assets will be recovered from future taxable income and establishes a valuation allowance when
management believes recovery is not likely. The Company establishes assets and liabilities for uncertain tax
positions taken or expected to be taken in income tax returns using a more-likely-than-not recognition threshold.
The Company records estimated penalties and interest related to income tax matters, including uncertain tax
positions, if any, as a component of income tax expense.
Net Income per Share
For all periods, basic net income per share is calculated by dividing net income by the weighted-average common
shares outstanding. Diluted net income per share in profitable periods reflects the effect of all potentially dilutive
common shares outstanding by dividing net income by the weighted-average of all common and potentially dilutive
shares outstanding. In the event of a net loss, diluted shares are not considered because of their anti-dilutive effect.
Recent Accounting Pronouncements
Changes to generally accepted accounting principles in the United States are established by the Financial
Accounting Standards Board (“FASB”), in the form of Accounting Standards Updates (“ASUs”), to the FASB’s
Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. While
management continues to assess the possible impact on the Company's consolidated financial statements of the
future adoption of new accounting standards that are not yet effective, management currently believes that the
following new standards may have a material impact on the Company’s financial statements and disclosures:
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation, which amends the scope of
modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of
changes to the terms or conditions of share-based payment awards to which an entity would be required to apply
modification accounting. The standard is effective for annual periods beginning after December 15, 2017 and
interim periods therein, and early adoption is permitted. The Company will adopt the standard as of January 1, 2018,
and does not expect the adoption to have a material impact on the Company’s financial statements and disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other, which addresses goodwill
impairment testing. Instead of determining goodwill impairment by calculating the implied fair value of goodwill, an
entity should perform a goodwill impairment test by comparing the fair value of a reporting unit with its carrying
amount. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 and interim periods
therein, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its
consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations, which clarified the definition of a
business with the objective of adding guidance to assist entities with evaluating whether transactions should be
accounted for as acquisitions of assets or businesses. The standard is effective for annual periods beginning after
December 15, 2017 and interim periods therein. The Company will adopt the standard as of January 1, 2018.
In February 2016, the FASB issued ASU 2016-02, Leases, which replaces the existing guidance. ASU 2016-02
requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or
operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset
and a corresponding lease liability. ASU 2016-02 is effective for annual periods beginning after December 15, 2018
and interim periods therein, with early application permitted. The Company is currently evaluating the impact of this
guidance on its consolidated financial statements.
59
In May 2014, the FASB issued a comprehensive new revenue recognition model, ASU 2014-09, Revenue from
Contracts with Customers which created a new Topic 606 (“ASC 606”). The new guidance is intended to clarify the
principles for recognizing revenue and to develop a common revenue standard for United States GAAP applicable to
revenue transactions. Existing industry guidance will be eliminated, including revenue recognition guidance specific
to the gaming industry. The FASB has issued several amendments to the standard, including clarification on
accounting for and identifying performance obligations. This guidance is effective for annual reporting periods
beginning after December 15, 2017, including interim periods within those reporting periods. The guidance should
be adopted by applying either a full retrospective approach for all periods presented in the period of adoption or a
modified retrospective approach with the cumulative effect of initially applying the guidance recognized at the date
of initial application.
The Company will adopt the standard as of January 1, 2018, and will follow the full retrospective approach. The
accompanying financial statements and related disclosures do not reflect the effects of the new revenue standard.
The Company is finalizing the assessment of the effects of the standard on its consolidated financial statements, and
will begin reporting under the new guidance in its consolidated financial statements for the first quarter of 2018. The
quantitative effects of these changes have not yet been determined and are still being analyzed.
The Company’s current presentation, which reports the retail value of services provided to customers without charge
as revenues, with a corresponding contra amount deducted as promotional allowances, will no longer be allowed
under the new revenue standard. Upon adoption of the new guidance, revenues will be allocated among the
Company’s departmental classifications based on the relative standalone selling prices of the goods and services
provided to guests. The Company currently anticipates that this methodology will result in a reduction of reported
gaming revenues by an amount equivalent to reported promotional allowance revenues, with no change to total net
revenues.
Currently, the Company estimates the cost of fulfilling the redemption of rewards earned through customer loyalty
programs based upon the cost of historical redemptions. Upon adoption of the new guidance, the Company will
account for the rewards using a deferred revenue model for the classification and timing of revenue recognized as
well as the classification of related expenses when player rewards are redeemed. The impact of this change in
accounting is not expected to be material to any annual accounting period.
Historically, and in accordance with prior guidance, the Company reported the expense for amounts paid to
operators of wide area progressive games as contra-revenues. Upon adoption of the new guidance, these payments
will be reported as an operating expense. The impact of this classification change will be to increase our gaming
revenues and gaming expenses by equal amounts.
Note 3 – Merger and Acquisitions
American Acquisition
Overview
On October 20, 2017, the Company completed the acquisition of all of the outstanding equity interests of American
from its former equity holders for aggregate consideration consisting of $781.0 million in cash (subject to certain
post-closing adjustments) and the issuance by the Company of 4,046,494 shares of its common stock to
W2007/ACEP Holdings, LLC (“ACEP Holdings”), a former American equity holder. Pursuant to the post-closing
adjustment provisions in the purchase agreement, the cash portion of the consideration paid in the American
Acquisition was subsequently increased to $787.6 million.
At the time of the American Acquisition, American owned and operated four casino hotel properties in Nevada: the
Stratosphere, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder in Las Vegas, and the Aquarius in Laughlin.
As of October 20, 2017, the American casino properties offered an aggregate of 3,865 slots, 89 table games and
4,896 hotel rooms.
60
Purchase Price
The American Acquisition has been accounted for using the acquisition method of accounting in accordance with
Accounting Standards Codification 805, Business Combinations (“ASC 805”), which, among other things,
establishes that equity issued to effect the acquisition be measured at the closing date of the transaction at the then-
current market price. Accordingly, the fair value of the Company's common stock issued to ACEP Holdings at the
closing is based on the closing price per share of the Company's common stock on October 20, 2017 of $25.08.
The following is a summary of the components of the purchase price paid by the Company to the sellers in the
American Acquisition (after taking into account the adjustment to the cash portion of the purchase price pursuant to
the post-closing adjustment provisions of the purchase agreement, as described above):
(In thousands)
Cash consideration
Fair value of common stock issued to ACEP Holdings
Total purchase price
Purchase Price Allocation
Amount
787,581
101,486
889,067
$
$
Under ASC 805, the purchase price of the acquisition is allocated to the tangible and intangible assets acquired and
liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over
the fair values is recorded as goodwill. During the measurement period, which may be up to one year from the
acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with a
corresponding offset to goodwill and will allocate goodwill to each of the business segments at the conclusion of the
measurement period.
The following table summarizes the preliminary allocation of the purchase price as of October 20, 2017 (the closing
date of the American Acquisition), based on preliminary estimates of the fair values of the assets acquired and
liabilities assumed:
(In thousands)
Current assets
Property and equipment
Other noncurrent assets
Intangible assets
Goodwill
Liabilities
Total assets acquired, net of liabilities assumed
Amount
83,079
754,581
264
66,140
52,479
(67,476)
889,067
$
$
The following table summarizes the preliminary values assigned to acquired property and equipment and estimated
useful lives by category:
Land
Land improvements
Building and improvements
Furniture, fixtures and equipment
Construction in process
Total property and equipment
Remaining
Useful Life (Years)
Not applicable
$
15
45
3-4
Not applicable
$
Amount Assigned
(In thousands)
106,800
6,240
607,698
32,829
1,014
754,581
61
The following table summarizes the preliminary values assigned to acquired intangible assets and estimated useful
lives by category:
Trade names
Players loyalty programs
Leasehold interest
In-place lease value
Total intangible assets
Remaining
Useful Life (Years)
Indefinite
3
3-80
3-4
$
$
Amount Assigned
(In thousands)
34,510
26,850
3,110
1,670
66,140
See Note 12, Financial Instruments and Fair Value Measurements, for further discussion regarding the valuation of
the tangible and intangible assets acquired through the American Acquisition.
Refinancing
In connection with the closing of the American Acquisition, the Company entered into two new credit agreements
with respect to a $900.0 million senior secured first lien credit facility (consisting of $800.0 million in term loans
and a $100.0 million revolving credit facility, which was undrawn at closing) (the “First Lien Facility”) and a $200.0
million senior secured second lien term loan facility (the “Second Lien Term Loan” and, together with the First Lien
Facility, the “Credit Facilities”). The Company used the net proceeds from the borrowings under the Credit
Facilities at the closing primarily to fund the cash purchase price in the American Acquisition (a portion of which
was used to repay American’s outstanding senior secured indebtedness), to refinance the Company’s outstanding
senior secured indebtedness under its then-existing senior secured credit facility (the “Former Credit Facility”), and
to pay certain transaction fees and expenses. See Note 7, Debt, for a discussion of the Credit Facilities and
associated refinancing.
Pro Forma Financial Information
The following unaudited pro forma combined financial information has been prepared by management for
illustrative purposes only and does not purport to represent what the results of operations, financial condition or
other financial information of the Company would have been if the American Acquisition had occurred as of the
date indicated or what such results or financial condition will be for any future periods. The unaudited pro forma
combined financial information is based on preliminary estimates and assumptions and on the information available
at the time of the preparation thereof. Any of these preliminary estimates and assumptions may change, be revised or
prove to be materially different, and the estimates and assumptions may not be representative of facts existing at the
time of the American Acquisition. The unaudited pro forma combined financial information does not reflect non-
recurring charges that will be incurred in connection with the American Acquisition, nor any cost savings and
synergies expected to result from the American Acquisition (and associated costs to achieve such savings or
synergies), nor any costs associated with severance, restructuring or integration activities resulting from the
American Acquisition.
62
The following table summarizes certain unaudited pro forma combined financial information derived from a
combination of the historical consolidated financial statements of the Company and of American for the years ended
December 31, 2017 and 2016, adjusted to give effect to the American Acquisition and related transactions
(including the refinancing). The unaudited pro forma combined financial information was prepared as if the
American Acquisition occurred on January 1, 2016.
(In thousands, except per share data)
Pro forma combined net revenues
Pro forma combined net income
Pro forma combined net income per share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
$
$
Year Ended December 31,
2017
2016
843,484 $
23,107
794,265
28,338
0.88 $
0.83
26,342
27,897
1.08
1.07
26,181
26,500
The following adjustments have been made to the pro forma combined net income and pro forma combined net
income per share in the table above:
(cid:129) Adjustment to eliminate the historical shareholders’ equity of American and the issuance of 4,046,494
shares of common stock of the Company to ACEP Holdings at the closing of the American Acquisition
valued at $101.5 million.
(cid:129) Adjustment to eliminate transaction costs incurred by the Company and American in connection with the
American Acquisition.
(cid:129) Adjustments to remove severance costs, sale-related expenses and restricted stock unit compensation costs
incurred by American related to the American Acquisition.
(cid:129) Adjustments to depreciation and amortization expense of property, plant and equipment and intangible
assets acquired by the Company resulting from the effect of the preliminary purchase price allocation.
(cid:129) Adjustments to interest expense and debt issuance costs resulting from the refinancing of the Company’s
and American’s former senior secured credit facilities, and the removal of the historical interest expense of
the Company and American related to their respective senior secured indebtedness that was repaid as part
of the refinancing. The pro forma adjustments are based on the amounts borrowed in the refinancing and
the interest rates in effect at the closing of the American Acquisition.
(cid:129) Adjustment to remove the loss on extinguishment of the Company and American’s senior secured
indebtedness resulting from the refinancing.
(cid:129) Adjustments to income tax benefit (provision) as a result of the application of the guidance in ASC 740 and
the Company’s combined federal and state statutory rate.
Montana Acquisitions
On January 29, 2016, the Company completed the Initial Montana Acquisition, which involved the acquisition of
approximately 1,100 slots, as well as certain other non-gaming assets and the right to operate within certain
locations, from C. Lohman Games, Inc., Rocky Mountain Gaming, Inc. and Brandy’s Shoreliner Restaurant, Inc.,
for total consideration of $20.1 million, including the issuance of $0.5 million of the Company’s common stock
(comprising 50,252 shares at fair value at issuance of $9.95 per share). In connection with the Initial Montana
Acquisition, the Company is required to pay the sellers contingent consideration of up to a total of $2.0 million in
cash paid in four quarterly payments which began in September 2017, subject to certain potential adjustments. In the
third quarter of 2017, the Company revalued the estimated fair value of the contingent consideration and recognized
63
a gain on revaluation of contingent consideration of $1.7 million on the Company’s consolidated statement of
operations. In the first quarter of 2018 the contingent consideration was paid in full. The allocation of the $20.1
million purchase price to the assets acquired as of January 29, 2016 includes $1.7 million of cash, $2.4 million of
property and equipment, $14.4 million of intangible assets and $1.6 million of goodwill. The amounts assigned to
intangible assets include customer relationships of $9.8 million with an economic life of 15 years, non-compete
agreements of $3.9 million with an economic life of five years, trade names of $0.5 million with an economic life of
four years and other amounts of $0.2 million with an economic life of 15 years.
On April 22, 2016, the Company completed the Second Montana Acquisition, which involved the acquisition of
approximately 1,800 slots, as well as amusement devices and certain other non-gaming assets and the right to
operate within certain locations, from Amusement Services, LLC, for total consideration of $25.7 million. The
allocation of the $25.7 million purchase price to the assets acquired as of April 22, 2016 includes $0.3 million of
cash, less than $0.1 million of prepaid gaming license fees, $7.8 million of property and equipment, $11.4 million of
intangible assets and $6.0 million of goodwill. The amounts assigned to intangible assets include customer
relationships of $9.1 million with an economic life of 15 years, non-compete agreements of $1.8 million with an
economic life of five years, trade names of $0.2 million with an economic life of four years and other amounts of
$0.3 million with an economic life of 15 years.
The goodwill recognized in the Montana Acquisitions is primarily attributable to potential expansion and future
development of, and anticipated synergies from, the acquired businesses and is expected to be deductible for income
tax purposes.
The Company reports the results of operations from each of the Montana Acquisitions, subsequent to their
respective closing dates, within its Distributed Gaming segment. Pro forma information is not being presented as
there is no practicable method to calculate pro forma earnings given that the Montana Acquisitions were asset
purchases that represented only a component of the businesses of the sellers. As a result, historical financial
information obtained would have required significant estimates.
Merger with Sartini Gaming, Inc.
On July 31, 2015, the Company acquired Sartini Gaming through the consummation of the Merger. At the effective
time of the Merger, all issued and outstanding shares of capital stock of Sartini Gaming were canceled and converted
into the right to receive shares of the Company’s common stock. At the closing of the Merger, the Company issued
7,772,736 shares of its common stock to The Blake L. Sartini and Delise F. Sartini Family Trust (the “Sartini
Trust”), as sole shareholder of Sartini Gaming in accordance with the agreement and plan of merger (the “Merger
Agreement”). In addition, at the closing of the Merger, the Company issued 457,172 shares of its common stock to
holders of warrants issued by a subsidiary of Sartini Gaming that elected to receive shares of the Company’s
common stock in exchange for their warrants. The total number of shares of the Company’s common stock issued in
connection with the Merger was subject to adjustment pursuant to the post-closing adjustment provisions of the
Merger Agreement. In connection with such post-closing adjustment, the Company issued an additional 223,657
shares of its common stock to the Sartini Trust. As a result, the value of the purchase consideration following such
adjustment was $77.4 million. This amount is the product of the 8,453,565 shares of the Company’s common stock
issued in the aggregate in connection with the Merger and the closing price of $9.15 per share of the Company's
common stock on July 31, 2015. In August 2016, the 777,274 shares previously held in escrow as security in the
event of any claims for indemnifiable losses in accordance with the Merger Agreement were released to the Sartini
Trust in accordance with the terms of the escrow agreement.
Under the Merger Agreement, the number of shares of the Company’s common stock issued in connection with the
Merger reflected the pre-Merger value of Sartini Gaming relative to the pre-Merger value of the Company, which
pre-Merger values were calculated in accordance with formulas set forth in the Merger Agreement. To determine the
number of shares of the Company’s common stock issued in connection with the Merger, the sum of the number of
shares of the Company’s common stock outstanding immediately prior to the Merger and the number of shares
issuable upon the exercise of outstanding in-the-money stock options was divided by the percentage of the total pre-
Merger value of both companies that represented the Company’s pre-Merger value to determine the total number of
fully diluted shares immediately following the Merger. The number of shares of the Company’s common stock
issued in connection with the Merger was the difference between the total number of fully diluted shares
64
immediately following the Merger and the total number of fully diluted shares immediately prior to the Merger. No
fractional shares of the Company’s common stock were issued in connection with the Merger, and any fractional
share was rounded to the nearest whole share.
The Merger Agreement specified the procedure for determining the pre-Merger values of Sartini Gaming and the
Company. The final pre-Merger values of the Company and Sartini Gaming were determined and approved during
the fourth quarter of 2015, pursuant to the post-closing adjustment provisions of the Merger Agreement.
The total number of shares of the Company’s common stock issued in connection with the Merger was as follows:
Pre-Merger
Value of Lakes
$
134,615,083
Lakes %
62.6%
Pre-Merger
Value of Sartini
Gaming
80,523,753
$
Sartini
Gaming %
37.4%
Total Post-Closing
Shares(1)
22,592,260
Total Shares Issued
in Connection
with Merger(2)
8,453,565
(1) Calculated as the sum of the number of shares of the Company’s common stock outstanding immediately after
the Merger (on a fully diluted basis, including shares issuable upon the exercise of outstanding in-the-money
stock options) and the number of shares of the Company’s common stock issued pursuant to the post-closing
adjustment provisions of the Merger Agreement.
(2)
Includes 457,172 shares of the Company’s common stock that were issued to certain former holders of
warrants issued by a subsidiary of Sartini Gaming upon the closing of the Merger.
Merger Accounting
The Merger has been accounted for under the purchase method of accounting in accordance with ASC 805. Under
the purchase method, the total purchase price, or consideration transferred, was measured at the Merger closing date.
The purchase price of the acquisition was allocated to the tangible and intangible assets acquired and liabilities
assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over the
estimated fair values was recorded as goodwill. The goodwill recognized in the Merger was primarily attributable to
potential expansion and future development of, and anticipated synergies from, the tavern brands and the acquired
distributed gaming and casino businesses, while enhancing the Company’s existing brand and casino portfolio. None
of the goodwill recognized is expected to be deductible for income tax purposes. The Company allocated the
goodwill to each reporting unit at the conclusion of the measurement period.
Measurement Period Adjustments
The final pre-Merger values of the Company and Sartini Gaming were determined and approved during the fourth
quarter of 2015, pursuant to the post-closing adjustment provisions of the Merger Agreement. As a result of this
post-closing adjustment calculation, the number of shares issued in connection with the Merger was increased by an
additional 223,657 shares, and the 388,637 shares of the Company's common stock held in escrow as security for the
post-closing adjustment were released to the Sartini Trust. The effect of the issuance of these additional shares on
the purchase price consideration calculation was an increase of $2.1 million to $77.4 million. This amount is the
product of the 8,453,565 total shares of the Company’s common stock issued in connection with the Merger on July
31, 2015 and issued pursuant to the post-closing “true-up” adjustment and the $9.15 per share closing price of the
Company's common stock on July 31, 2015. The Company accounted for the issuance of the additional 223,657
shares, and the adjustment of the purchase price consideration, during the fourth quarter of 2015 when the additional
shares were issued.
The measurement period for the Merger ended on July 31, 2016. In addition to the issuance of the additional shares
pursuant to the post-closing adjustment calculation mentioned above, during the measurement period, the Company:
(cid:129)
recorded a deferred tax liability totaling $14.7 million due to the assumption of a net deferred tax liability
generated from intangible assets acquired in the Merger, with a corresponding increase to goodwill by the
same amount;
65
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
recorded an adjustment to increase goodwill by $1.6 million, decreasing accounts receivable by the same
amount, due to the determination that receivables acquired as part of the Merger were deemed to be
uncollectible as of the Merger date;
further analyzed the trade names acquired as part of the Merger, which were originally given 10 year useful
lives, and concluded that the trade names are indefinite-lived. An adjustment to reverse $0.2 million of
amortization for the trade names in the third quarter of 2015 was recorded during the fourth quarter of
2015;
determined that the preliminary estimated useful lives of certain tangible acquired assets were not
consistent with the useful lives used by other market participants. The useful lives determined during the
measurement period were updated to reflect the Company’s determination and are reflected in the property
and equipment by category table below;
identified an acquired prepaid asset (recorded in other current assets previously) that was reclassified to a
gaming license that represents the Company’s ability and right to operate in its current capacity in
Montana. Management has valued the gaming license using estimates for explicit and implicit costs to
obtain the gaming license and has determined the license has an indefinite life;
recorded an adjustment to increase goodwill by less than $0.1 million, increasing accrued taxes by the same
amount, due to a tax liability resulting from a prior year assumed as part of the Merger;
recorded an adjustment to increase goodwill by $0.3 million, decreasing player relationships at the
Company’s Gold Town Casino by the same amount, due to an increase in the discount rate used in the
valuation upon further review. This adjustment triggered a release of $0.1 million of the previously
recorded deferred tax liability, with a corresponding decrease to goodwill by the same amount; and
identified $0.9 million worth of equipment that was disposed of prior to the Merger but recorded in the
opening balance. As such, the Company recorded an increase to goodwill for the amount of equipment
written off.
Allocation
The final allocation of the $77.4 million purchase price to the assets acquired and liabilities assumed as of July 31,
2015 was as follows:
(In thousands)
Cash
Other current assets
Property and equipment
Intangible assets
Goodwill
Current liabilities
Warrant liability
Debt
Deferred tax liability
Other long-term liabilities
Total purchase price
$
$
Amount
25,539
14,830
83,173
80,460
97,462
(13,245)
(3,435)
(190,587)
(14,576)
(2,217)
77,404
66
The amounts assigned to property and equipment by category are summarized in the table below:
Land
Land improvements
Building and improvements
Leasehold improvements
Furniture, fixtures and equipment
Construction in process
Total property and equipment
Remaining
Useful Life (Years)
Not applicable
5-14
19-25
1-28
1-11
Not applicable
Amount Assigned
(In thousands)
$
$
12,470
4,030
21,310
20,793
21,935
2,635
83,173
The amounts assigned to intangible assets by category as of July 31, 2015 are summarized in the table below:
Trade names
Player relationships
Customer relationships
Gaming licenses
Other intangible assets
Total intangible assets
Remaining
Useful Life (Years)
Indefinite
8-14
13-16
Indefinite
2-10
Amount Assigned
(In thousands)
$
$
12,200
7,300
59,200
960
800
80,460
See Note 12, Financial Instruments and Fair Value Measurements, for further discussion regarding the valuation of
the tangible and intangible assets acquired through the Merger.
Refinancing
In connection with the Merger, the Company entered into the Former Credit Facility to refinance the outstanding
senior secured indebtedness of Sartini Gaming and the Company’s then-existing financing facility with Centennial
Bank.
Jamul Note and Distribution to Shareholders
On December 9, 2015, the Company sold its $60.0 million subordinated promissory note (“Jamul Note”) from the
Jamul Indian Village (“Jamul Tribe”) to a subsidiary of Penn National Gaming, Inc. for $24.0 million in cash. Under
the terms of the Merger Agreement with Sartini Gaming and subject to applicable law, the Company agreed that the
proceeds received from the sale of the Jamul Note, net of related costs, would be distributed in a cash dividend to its
shareholders holding shares as of the record date for such dividend (other than shareholders that had waived their
right to receive such dividend in connection with the Merger). Under the terms of the Merger Agreement, Sartini
Gaming’s former sole shareholder, for itself and any related party transferees of its shares, waived their right to
receive such dividend with respect to their shares (which totaled 7,996,393 shares in the aggregate). Also in
connection with the Merger, holders of an additional 457,172 shares waived their right to receive such dividend. On
June 17, 2016, the Board of Directors of the Company approved and declared the special dividend to the eligible
shareholders of record on the close of business on June 30, 2016 (the “Record Date”) of cash in the aggregate
amount of approximately $23.5 million (the “Special Dividend”), which was paid on July 14, 2016. The $1.71 per
share amount of the Special Dividend was calculated by dividing the aggregate amount of the Special Dividend by
13,759,374 outstanding shares of common stock held by eligible shareholders on the close of business on the Record
Date (rounded down to the nearest whole cent per share).
67
Note 4 – Property and Equipment, Net
The following table summarizes the components of property and equipment, net:
(In thousands)
Land
Building and site improvements
Furniture and equipment
Construction in process
Property and equipment
Less: Accumulated depreciation
Property and equipment, net
December 31,
2017
2016
121,081
705,266
125,339
6,972
958,658
(63,417)
895,241
$
$
12,470
77,515
75,740
5,246
170,971
(33,390)
137,581
$
$
Depreciation expense for property and equipment, including capital leases, totaled $31.3 million, $20.2 million, and
$8.5 million for 2017, 2016, and 2015, respectively.
Note 5 – Goodwill and Intangible Assets, Net
The following table summarizes goodwill activity by reportable segment:
(In thousands)
Balance, January 1, 2016
Goodwill acquired during the year
Acquired goodwill adjusted during the year
Balance, December 31, 2016
Goodwill acquired during the year
Balance, December 31, 2017
Casinos
Distributed
Gaming
Total
Goodwill
$
$
17,080 $
—
(9,284)
7,796
52,479
60,275 $
79,208
8,193
10,458
97,859
—
97,859
$
$
96,288
8,193
1,174
105,655
52,479
158,134
Goodwill represents the initial goodwill allocation related to the Merger and the Montana Acquisitions and final
adjustments to purchase price allocations during the applicable measurement periods, and the initial goodwill
allocation related to the American Acquisition. The impact of the final purchase price allocation adjustments related
to the Merger and the Montana Acquisitions on the Company's results of operations and financial position was
immaterial. The Company may continue to record adjustments to the carrying value of assets acquired with a
corresponding offset to goodwill during the measurement period related to the American Acquisition, which can be
up to one year from the date of the consummation of the acquisition. See Note 3, Merger and Acquisitions, for a
description of the intangible assets acquired through the Merger, the Montana Acquisitions and the American
Acquisition.
68
Intangible assets, net, consisted of the following:
(In thousands)
Indefinite-lived intangible assets
Gaming licenses
Trade names
Other
Amortizing intangible assets
Customer relationships
Player relationships
Gaming license
Non-compete agreements
Leasehold interest
In-place lease value
Other
Balance, December 31, 2017
(In thousands)
Indefinite-lived intangible assets
Gaming licenses
Trade names
Other
Amortizing intangible assets
Customer relationships
Player relationships
Gaming license
Non-compete agreements
Other
Balance, December 31, 2016
Weighted-
Average Life
Remaining
Indefinite
Indefinite
Indefinite
12.1 years
4.2 years
10.3 years
3.0 years
65.7 years
3.3 years
8.2 years
Weighted-
Average Life
Remaining
Indefinite
Indefinite
Indefinite
13.2 years
10.4 years
11.4 years
4.0 years
9.5 years
December 31, 2017
Gross
Carrying
Value
Cumulative
Amortization
Intangible
Assets, Net
$
960
46,710
185
47,855
80,320
34,150
2,100
6,000
3,110
1,670
1,769
129,119
176,974
$
— $
—
—
—
(12,524)
(3,045)
(648)
(2,395)
(32)
(81)
(557)
(19,282)
(19,282) $
960
46,710
185
47,855
67,796
31,105
1,452
3,605
3,078
1,589
1,212
109,837
157,692
December 31, 2016
Gross
Carrying
Value
Cumulative
Amortization
Intangible
Assets, Net
960
12,200
110
13,270
78,100
7,300
2,100
6,000
1,648
95,148
108,418
$
$
— $
—
—
—
(6,932)
(910)
(508)
(1,168)
(297)
(9,815)
(9,815) $
960
12,200
110
13,270
71,168
6,390
1,592
4,832
1,351
85,333
98,603
$
$
$
$
The Rocky Gap gaming license is being amortized over its 15 year term.
Total amortization expense related to intangible assets was $9.5 million, $7.3 million and $2.3 million for 2017,
2016, and 2015, respectively. Estimated future amortization expense related to intangible assets, which includes
acquired intangible assets recorded on a preliminary basis, is as follows:
2021
2022
7,023 $
6,624 $
Thereafter
45,143
(In thousands)
Estimated amortization expense $
2018
17,562 $
2019
17,562 $
2020
15,923 $
69
Note 6 – Accrued Liabilities
Accrued liabilities consist of the following:
(In thousands)
Gaming liabilities
Interest
Other accrued liabilities
Total accrued liabilities
Note 7 – Debt
Senior Secured Credit Facilities
December 31,
2017
2016
11,123
1,770
6,402
19,295
$
$
1,479
9
2,358
3,846
$
$
As of December 31, 2017, the Company’s Credit Facilities consisted of a $900.0 million First Lien Facility
(consisting of $800.0 million in term loans and a $100.0 million revolving credit facility) with JPMorgan Chase
Bank, N.A. (as administrative agent and collateral agent), the lenders party thereto and the other entities party
thereto, and a $200.0 million Second Lien Term Loan with Credit Suisse AG, Cayman Islands Branch (as
administrative agent and collateral agent), the lenders party thereto and the other entities party thereto. As of
December 31, 2017, $800.0 million and $200.0 million of term loan borrowings were outstanding under our First
Lien Facility and Second Lien Term Loan, respectively, there were no letters of credit outstanding under the First
Lien Facility, and our revolving credit facility was undrawn, leaving borrowing availability under the revolving
credit facility as of December 31, 2017 of $100.0 million.
Interest and Fees
Borrowings under each of the Credit Facilities bear interest, at the Company’s option, at either (1) a base rate equal
to the greatest of the federal funds rate plus 0.50%, the applicable administrative agent’s prime rate as announced
from time to time, or the LIBOR rate for a one-month interest period plus 1.00%, subject to a floor of 1.75% (with
respect to the term loans) or 1.00% (with respect to borrowings under the revolving credit facility) or (2) the LIBOR
rate for the applicable interest period, subject to a floor of 0.75% (with respect to the term loans only), plus in each
case, an applicable margin. The applicable margin for the term loans under the First Lien Facility is 2.00% for base
rate loans and 3.00% for LIBOR rate loans. The applicable margin for borrowings under the revolving credit facility
under the First Lien Facility ranges from 1.50% to 2.00% for base rate loans and 2.50% to 3.00% for LIBOR rate
loans, based on the Company’s net leverage ratio. The applicable margin for the Second Lien Term Loan is 6.00%
for base rate loans and 7.00% for LIBOR rate loans. The commitment fee for the revolving credit facility is payable
quarterly at a rate of between 0.375% and 0.50%, depending on the Company’s net leverage ratio, and is accrued
based on the average daily unused amount of the available revolving commitment. As of December 31, 2017, the
weighted-average effective interest rate on the Company’s outstanding borrowings under the Credit Facilities was
approximately 5.1%.
Optional and Mandatory Prepayments
The revolving credit facility under the First Lien Facility matures on October 20, 2022, and the term loans under the
First Lien Facility mature on October 20, 2024. The term loans under the First Lien Facility must be repaid in 27
quarterly installments of $2.0 million each, which commence in March 2018, followed by a final installment of
$746.0 million at maturity. The term loans under the Second Lien Term Loan must be repaid in full at maturity on
October 20, 2025.
Guarantees and Collateral
Borrowing under each of the Credit Facilities are guaranteed by each of the Company’s existing and future wholly-
owned domestic subsidiaries (other than certain insignificant or unrestricted subsidiaries), and are secured by
substantially all of the present and future assets of the Company and its subsidiary guarantors (subject to of certain
exceptions).
70
Financial and Other Covenants
Under the Credit Facilities, the Company and its restricted subsidiaries are subject to certain limitations, including
limitations on their respective ability to: incur additional debt, grant liens, sell assets, make certain investments, pay
dividends and make certain other restricted payments. In addition, the Company will be required to pay down the
term loans under the Credit Facilities under certain circumstances if the Company or its restricted subsidiaries issue
debt, sell assets, receive certain extraordinary receipts or generate excess cash flow (subject to exceptions). The
revolving credit facility under the First Lien Facility contains a financial covenant regarding a maximum net
leverage ratio that applies when borrowings under the revolving credit facility exceed 30% of the total revolving
commitment. The Credit Facilities also prohibit the occurrence of a change of control, which includes the
acquisition of beneficial ownership of 50% or more of the Company’s capital stock (other than by certain permitted
holders, which include, among others, Blake L. Sartini, Lyle A. Berman, Neil I. Sell and certain affiliated entities).
If the Company defaults under the Credit Facilities due to a covenant breach or otherwise, the lenders may be
entitled to, among other things, require the immediate repayment of all outstanding amounts and sell the Company’s
assets to satisfy the obligations thereunder. The Company was in compliance with its financial covenants under the
Credit Facilities as of December 31, 2017.
Former Senior Secured Credit Facility
In connection with the American Acquisition and the entry into the Credit Facilities, in October 2017 the Company
repaid all principal amounts outstanding under the Company’s Former Credit Agreement with Capital One, National
Association (as administrative agent) and the lenders named therein, which amounted to approximately $173.4
million, together with accrued interest. As a result of the repayment and discharge of the Former Credit Facility, the
Company recognized a loss on extinguishment of debt of $1.7 million during the year ended December 31, 2017.
Former Rocky Gap Financing Facility
In connection with the entry into the Former Credit Agreement, in July 2015 the Company repaid all principal
amounts outstanding under the Company’s then-existing $17.5 million financing facility with Centennial Bank,
which amounted to approximately $10.7 million, together with accrued interest. As a result of the repayment of this
facility, the Company recognized a loss on extinguishment of debt of $1.2 million, related to the unamortized
discount under the facility, during the year ended December 31, 2015.
Summary of Outstanding Debt
Long-term debt, net is comprised of the following:
(In thousands)
Term loans
Revolving credit facility
Capital lease obligations
Notes payable
Total long-term debt
Less unamortized discount
Less unamortized debt issuance costs
Less current maturities
Long-term debt, net
December 31,
2017
1,000,000
—
5,839
1,159
1,006,998
(30,122)
(3,917)
972,959
(9,759)
963,200
$
$
2016
150,000
30,000
1,970
3,777
185,747
—
(2,305)
183,442
(15,752)
167,690
$
$
71
Scheduled Principal Payments of Long-Term Debt
The scheduled principal payments due on long-term debt are as follows:
(In thousands)
For the year ending December 31,
2018
2019
2020
2021
2022
Thereafter
Total outstanding principal of long-term debt
Note 8 – Promotional Allowances
$
$
9,759
9,177
9,111
8,465
8,143
962,343
1,006,998
The retail value of food and beverages, rooms and other services furnished to customers without charge, including
coupons for discounts when redeemed, is included in gross revenues and then deducted as promotional allowances.
The estimated retail value of the promotional allowances are as follows:
(In thousands)
Food and beverage
Rooms
Other
Total promotional allowances
Year Ended December 31,
2016
18,324 $
2,263
604
21,191 $
2017
23,886 $
3,790
1,192
28,868 $
2015
6,633
2,035
214
8,882
$
$
The estimated cost of providing these promotional allowances, which is primarily included in gaming expenses, are
as follows:
(In thousands)
Food and beverage
Rooms
Other
Total estimated cost of promotional allowances
Year Ended December 31,
2016
15,201 $
818
367
16,386 $
2017
21,007 $
1,451
413
22,871 $
2015
2,263
608
205
3,076
$
$
Note 9 – Share-Based Compensation
Overview
On August 27, 2015, the Board of Directors of the Company approved the Golden Entertainment, Inc. 2015
Incentive Award Plan (the “2015 Plan”), which was approved by the Company’s shareholders at the Company’s
2016 annual meeting. The 2015 Plan authorizes the issuance of stock options, restricted stock, restricted stock units
(“RSUs”), dividend equivalents, stock payment awards, stock appreciation rights, performance bonus awards and
other incentive awards. The 2015 Plan authorizes the grant of awards to employees, non-employee directors and
consultants of the Company and its subsidiaries. Options generally have a ten-year term. Except as provided in any
employment agreement between the Company and the employee, if an employee is terminated (voluntarily or
involuntarily), any unvested options as of the date of termination will be forfeited.
The maximum number of shares of the Company’s common stock for which grants may be made under the 2015
Plan is 2.25 million shares, plus an annual increase on January 1st of each year during the ten-year term of the 2015
Plan equal to the lesser of 1.8 million shares, 4% of the total shares of the Company’s common stock outstanding
(on an as-converted basis) and such smaller amount as may be determined by the Board in its sole discretion. The
72
annual increase on January 1, 2017 was 889,259 shares. In addition, the maximum aggregate number of shares of
common stock that may be subject to awards granted to any one participant during a calendar year is 2.0 million
shares. As of December 31, 2017, a total of 109,263 shares of the Company’s common stock remained available for
grants of awards under the 2015 Plan.
The 2015 Plan provides that no stock option or stock appreciation right (even if vested) may be exercised prior to
the earlier of August 1, 2018 or immediately prior to the consummation of a change in control of the Company that
would result in an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended.
In June 2007, the Company’s shareholders approved the 2007 Lakes Stock Option and Compensation Plan (the
“2007 Plan”), which is authorized to grant a total of 1.25 million shares of the Company’s common stock. Vested
options are exercisable for ten years from the date of grant; however, if the employee is terminated (voluntarily or
involuntarily), any unvested options as of the date of termination will be forfeited. As of December 31, 2017, no
shares of the Company’s common stock remained available for grants of awards under the 2007 Plan.
In connection with the Special Dividend discussed in Note 3, Merger and Acquisitions, and in accordance with the
Company’s equity incentive plans approved by the Company’s shareholders, equitable anti-dilutive adjustments
were made to the exercise prices of outstanding stock options to purchase shares of Company common stock, in
order to preserve the value of such stock options following the Special Dividend. Accordingly, effective as of the
close of business on July 14, 2016, the exercise price of each outstanding stock option granted prior to the Record
Date under the 2015 Plan, the 2007 Plan and the 1998 Stock Option and Compensation Plan (collectively, the
“Adjusted Options”) was reduced by $1.71 per share. The weighted-average exercise price of the Adjusted Options
presented in the table below have been adjusted accordingly. The Adjusted Options had a weighted-average exercise
price of $7.04 per share after giving effect to such anti-dilutive adjustments. The Adjusted Options have varying
remaining terms, which were not affected by the adjustments. The Company measured the incremental
compensation cost as the excess of the fair value of the Adjusted Options immediately following such anti-dilutive
adjustments over the fair value of the Adjusted Options immediately prior to such anti-dilutive adjustments. Of the
2,337,643 Adjusted Options, 1,908,070 were unvested and 429,573 were vested at the time of the adjustment. The
incremental fair value related to the unvested Adjusted Options resulting from the anti-dilutive adjustments was
estimated to be $1.7 million, which will be recorded over the remaining vesting period of such Adjusted Options.
The incremental fair value related to the vested Adjusted Options resulting from the anti-dilutive adjustments,
determined using the Black-Scholes option pricing model, was $0.7 million and was recorded as share-based
compensation expense during the third quarter of 2016.
Stock Options
The following table summarizes stock option activity:
Outstanding at January 1, 2017
Granted
Exercised
Cancelled
Outstanding at December 31, 2017
Vested at December 31, 2017
Exercisable at December 31, 2017
Stock
Options
Outstanding
Weighted-
Average
Remaining
Term
(in years)
Weighted-
Average
Exercise Price
Aggregate
Intrinsic
Value
(in thousands)
3,402,481
1,124,542
(22,989)
(128,105)
4,375,929
1,851,799
388,040
7.9 $
$
$
$
7.4 $
6.5 $
0.8 $
9.02
15.88
7.36
11.36
10.73 $
7.99 $
4.33 $
95,937
45,705
10,989
The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 was
$0.1 million, $1.8 million and $0.1 million, respectively. The weighted-average grant-date fair value of stock
options granted during the years ended December 31, 2017, 2016 and 2015 was $7.30, $4.80 and $3.72 per share,
respectively.
73
The total amount of cash received from stock options exercised during the year ended December 31, 2017 was $0.2
million.
The Company issues new shares of common stock upon exercise of stock options.
The Company uses the Black-Scholes option pricing model to estimate the fair value and compensation cost
associated with employee incentive stock options, which requires the consideration of historical employee exercise
behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the
weighted-average risk-free interest rate and the weighted-average expected life of the options. The Company’s
determination of fair value of share-based option awards on the date of grant using the Black-Scholes option pricing
model is affected by the following assumptions regarding complex and subjective variables. Any changes in these
assumptions may materially affect the estimated fair value of the share-based award.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
Expected dividend yield — As the Company has not historically paid dividends, with the exception of the
Special Dividend, the dividend rate variable used in the Black-Scholes model is zero.
Risk-free interest rate — The risk-free interest rate assumption is based on the U.S. Treasury yield curve in
effect at the time of grant and with maturities consistent with the expected term of options.
Expected term — The expected term of employee stock options represents the weighted-average period
that the stock options are expected to remain outstanding. It is based upon the Company’s experience as to
the average historical term of option grants that were exercised, canceled or forfeited. Management
believes historical data is reasonably representative of future exercise behavior.
Expected volatility — The volatility assumption is based on the historical actual volatility of the
Company’s stock. Management concluded there were no factors identified which were unusual and which
would distort the volatility figure if used to estimate future volatility. Future volatility may be substantially
less or greater than expected volatility.
The following assumptions were used to estimate the fair value of stock options granted:
Expected dividend yield
Risk-free interest rate
Expected term (in years)
Expected volatility
Restricted Stock Units
The following table summarizes RSU activity:
Outstanding at January 1, 2016
Granted
Outstanding at December 31, 2016
Granted
Vested
Cancelled
Outstanding at December 31, 2017
2017
—
2.21 – 2.47%
10
29.07 – 34.43%
Year Ended December 31,
2016
—
1.43 – 2.40%
10
24.03 – 26.95%
2015
—
2.18 – 2.36%
10
27.24 – 27.60%
Restricted
Stock
Units
Outstanding
Weighted
Average
Grant Date
Fair Value
Total
Fair Value
of Shares
Vested
(in thousands)
—
141,296 $
141,296 $
62,791 $
(111,660) $
(29,636) $
62,791 $
—
12.57
12.57
27.87
12.57 $
12.57
27.87
2,556
There was no RSU activity during the year ended December 31, 2015.
74
Share-Based Compensation
The following table summarizes share-based compensation costs by award type:
(In thousands)
Stock options
Restricted stock units
Total share-based compensation costs
2017
Year Ended December 31,
2016
2015
$
$
5,135 $
3,619
8,754 $
3,717 $
161
3,878 $
809
—
809
For the year ended December 31, 2017, management has evaluated all applicable positive and negative evidence and
believes that the positive evidence is strong enough to warrant a full release of the valuation allowance associated
with the share-based compensation deferred tax asset. The deferred tax asset associated with share-based
compensation was $2.5 million as of December 31, 2017
For the years ended December 31, 2016 and 2015, no income tax benefit was recognized in the Company’s
consolidated statements of operations for share-based compensation arrangements. Management assessed the
likelihood that the deferred tax assets relating to future tax deductions from share-based compensation will be
recovered from future taxable income and determined that a valuation allowance is necessary to the extent that
management currently believes it is more likely than not that tax benefits will not be realized. Management’s
determination is based primarily on historical losses and earnings volatility.
As of December 31, 2017, the Company’s unrecognized share-based compensation expense related to stock options
was approximately $13.0 million, which is expected to be recognized over a weighted-average period of 2.7 years.
As of December 31, 2017, there was $1.7 million of unamortized compensation related to unvested RSUs which is
expected to be recognized over a weighted-average period of 3.9 years.
Note 10 – Income Taxes
Income tax provision (benefits) are summarized as follows:
(In thousands)
Current:
Federal
State
Total current tax benefit (provision)
Deferred:
Federal
State
Total deferred tax benefit
Income tax benefit
2017
Year Ended December 31,
2016
2015
$
$
$
(91) $
(5)
(96)
(7,456) $
(369)
(7,825)
(7,921) $
— $
—
—
247
—
247
(4,091) $
(234)
(4,325)
(4,325) $
(8,939)
(1,277)
(10,216)
(9,969)
75
Reconciliation of the statutory federal income tax rate to the Company’s actual rate based on income (loss) before
income tax benefit is summarized as follows:
Statutory federal tax rate
State income taxes, net of federal income taxes
State tax credit
State rate adjustment
Permanent tax differences – Merger expenses
Permanent tax differences – investment in unconsolidated
investee
Permanent tax differences – executive compensation
Permanent tax differences – other
Purchase price allocation adjustment – Merger
Change in valuation allowance
FICA credit generated
Impact of Tax Cuts and Jobs Act
Other, net
Effective tax rate
Year Ended December 31,
2017
2016
2015
35%
2.0
—
—
—
—
(12.5)
(17.0)
—
193.5
11.8
(74.6)
(0.4)
137.8%
35%
2.0
(45.9)
2.1
—
—
—
2.4
3.7
(34.8)
(4.7)
—
4.1
-36.1%
35%
6.9
—
—
11.4
9.8
—
1.4
—
(131.1)
—
—
(1.8)
-68.4%
The Company’s current and non-current deferred tax assets (liabilities) are comprised of the following:
(In thousands)
Current:
Accruals and reserves
Share-based compensation expense
Development costs
Alternative minimum tax credit carryforward
General business credit carryforward
State tax credits
Net operating loss carryforwards
Other
Valuation allowances
Deferred tax liabilities:
Prepaid services
Amortization of intangible assets
Depreciation of fixed assets
Net deferred tax assets (liabilities)
December 31,
2017
2016
$
$
$
4,348 $
2,532
—
1,483
1,126
5,500
17,350
701
33,040
(6,983)
26,057 $
(884)
(14,304)
(3,082)
(18,270)
7,787 $
1,144
2,366
5
1,468
481
5,500
28,025
1,065
40,054
(18,109)
21,945
(1,034)
(20,024)
(925)
(21,983)
(38)
Deferred tax assets are evaluated by considering historical levels of income, estimates of future taxable income and
the impact of tax planning strategies. The Company's financial results for the year ended December 31, 2017,
include the release of a portion of the valuation allowance recorded against the deferred tax assets of the Company.
This release resulted in the recognition of a $7.9 million income tax benefit. The Company has performed a
continuing evaluation of its deferred tax asset valuation allowance on a quarterly basis. The Company concluded
that, as of December 31, 2017, it is more likely than not that the Company will generate sufficient taxable income
within the applicable net operating loss carry-forward periods to realize a portion of its deferred tax assets. This
conclusion, and the resulting partial release of the deferred tax asset valuation allowance, was based upon
consideration of several factors, including the Company's completion of eight consecutive quarters of profitability,
76
its demonstrated ability to meet or exceed budgets, and its forecast of future profitability. Although the Company’s
operations in the fourth quarter of 2017 reported a book loss, this loss was primarily attributable to costs associated with the
American Acquisition and accordingly is not expected to be recurring.
As of December 31, 2017, the Company had approximately $77.1 million of federal net operating loss
carryforwards, which will begin to expire in 2032. These net operating losses have the potential to be used to offset
future ordinary taxable income and reduce future cash tax liabilities. However, in connection with the American
Acquisition, the Company issued 4,046,494 shares of its common stock to ACEP Holdings, which resulted in an
“ownership change” under Section 382 that will generally limit the amount of net operating losses the Company can
utilize annually. Following an “ownership change” under Section 382, the amount of net operating losses the
Company can utilize in a given year is limited to an amount equal to the aggregate fair market value of the
Company’s common stock immediately prior to the ownership change, multiplied by the long-term exempt interest
rate in effect for the month of the ownership change. The Company estimates that the amount of net operating losses
that it will be able to utilize following the closing of the American Acquisition is limited to approximately $10.8
million annually.
Additionally, the Company had deferred tax assets of approximately $1.5 million related to Alternative Minimum
Tax credits and approximately $1.1 million related to general business credits. The general business credit
carryforward expires in 2037. With the enactment of The Tax Cuts and Jobs Act of 2017, Alternative Minimum Tax
credits can no longer be carried forward indefinitely. Due to the Section 382 limitations and projected taxable
income estimates, it has been determined that the Company will not be able to utilize any of its Alternative
Minimum Tax credits. A valuation allowance against the Alternative Minimum Tax credits has been created
accordingly.
During the second quarter of 2015, the Company was notified by the state of California that its audit of the
Company for the 2010 tax year had been completed and resulted in no adjustments.
During the fourth quarter of 2016, the Company completed an IRS audit for the 2009 through 2013 tax years. The
impact of the audit was not material and has been reflected in the financial statements. The 2014 and 2015 tax years
are still subject to examination.
The Tax Cuts and Jobs Act of 2017 reduced the corporate federal income tax rate to 21%, effective January 1, 2018.
The Company has completed its accounting for the Tax Cuts and Jobs Act. Consequently, the Company has
recorded a decrease related to the net deferred tax assets of $4.3 million, with a corresponding net adjustment to
deferred income tax expense for the year ended December 31, 2017.
Note 11 – Employee Retirement and Benefit Plans
Defined contribution employee savings plans
The Company has a qualified defined contribution employee savings plan for employees (other than those who were
acquired though the American Acquisition). The savings plan allows eligible participants to defer, on a pre-tax basis,
a portion of their salary and accumulate tax-deferred earnings as a retirement fund. The Company currently matches
employee contributions up to a maximum of 4% of participating employees’ gross wages. Company contributions
are vested immediately for this plan.
The Company inherited a qualified defined contribution employee savings plan through the American Acquisition
for all non-union employees previously employed by American and its subsidiaries. The plan allows eligible
participants to defer, within prescribed limits, up to 75% of their income on a pre-tax basis through contributions to
the plan.
The Company also inherited a qualified defined contribution employee savings plan through the Merger for all
employees previously employed by Sartini Gaming. The savings plan for those former Sartini Gaming employees
allows eligible participants to defer, on a pre-tax basis, a portion of their salary and accumulate tax-deferred earnings as
a retirement fund. Beginning on August 1, 2015, the Company matched employee contributions for this plan up to a
maximum of 1% of participating employees’ gross wages. Company contributions are vested over a five-year schedule.
77
With respect to the two plans with Company contributions, the Company contributed approximately $0.2 million,
$0.3 million and $0.2 million during the years ended December 31, 2017, 2016 and 2015, respectively.
Pension plans
The Company inherited various other employee multiemployer benefit and pension plans through the American
Acquisition. As of December 31, 2017, approximately 1,700 of the Company’s employees were members of various
unions and covered by union-sponsored, collectively bargained, multiemployer health and welfare and defined
benefit pension plans. The Company recorded $2.1 million in expenses for these plans for the year ended
December 31, 2017. The Company has no obligation to fund the plans beyond payments made based upon hours
worked. The risks of participating in multiemployer plans are different from single-employer plans, including in the
following aspects:
(cid:129) Assets contributed to multiemployer plans by one employer may be used to provide benefits to employees
of other participating employers;
(cid:129)
(cid:129)
If a participating employer stops contributing to a multiemployer plan, the unfunded obligations of the
multiemployer plan may be required to be borne by the remaining participating employers; and
If an entity chooses to stop participating in some of its multiemployer plans, the entity may be required to
pay those plans an amount based on the underfunded status of those plans, referred to as a “withdrawal
liability.”
The Company considers the following multiemployer pension plans to be significant:
Multiemployer Pension Plans
Central Pension Fund of the
IUOE and Participating
Employers
Southern Nevada Culinary and
Bartenders Pension Plan
Pension Protection
FIR/RP
Status
Expiration Date
Of Collective-
Zone Status (1)
2016
2015
Surcharge
Pending/
Implemented Imposed
Bargaining
Agreement
EIN/Plan Number
36-6052390-001 Green
Green
88-6016617-001 Green
Green
No
3/31/2018 and
3/31/2020
No
5/31/2018
No
No
(1)
The Pension Protection Act of 2006 requires plans that are certified as endangered (yellow) or critical (red) to
develop and implement a funding improvement plan.
The Company’s contributions to each multiemployer pension and benefit plans are as follows:
(In thousands)
Multiemployer pension plans
Operating Engineers Local 501 Security Fund
Southern Nevada Culinary and Bartenders Pension Plan
Other pension plans
Total contributions
Multiemployer benefit plans (excluding pension plans)
HEREIU Welfare Fund
All other
Total contributions
Year End
December 31,
2017
$
$
$
$
165
453
45
663
1,691
2
1,693
For the 2016 plan year, the latest period for which plan data is available, the Company did not make any
contributions to the multiemployer pension and benefit plans it inherited from American, as the American
Acquisition was not consummated until October 2017.
78
Note 12 – Financial Instruments and Fair Value Measurements
Overview
Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting
guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value
and requires certain disclosures. The framework discusses valuation techniques, such as the market approach
(comparable market prices), the income approach (present value of future income or cash flow) and the cost
approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The
following is a brief description of those three levels:
(cid:129)
(cid:129)
(cid:129)
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or
indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices
for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable,
an Interest Rate Cap derivative and debt.
The carrying value of the Company’s cash and cash equivalents, accounts receivable and accounts payable
approximate fair value because of the short duration of these financial instruments. The carrying value of the
Company’s debt approximates fair value because the terms were recently negotiated and based on the Company’s
expected borrowing rate for debt with similar remaining maturities and comparable risk.
As of December 31, 2017, the Company had one Interest Rate Cap outstanding, with a notional amount totaling
$650 million and a purchase price of $3.1 million, which expires on December 31, 2020. Using Level 2 inputs, the
Company adjusts the carrying value of its Interest Rate Cap derivative to estimate fair value quarterly. The fair value
of the Company's asset under its Interest Rate Cap is based upon observable market-based inputs that reflect the
present values of the difference between estimated future fixed rate payments and future variable receipts. Fair value
of the Company’s Interest Rate Cap at December 31, 2017 was $3.3 million. The change in fair value was recorded
on the consolidated statement of operations.
Business Combinations and Long-lived Assets
In connection with business combinations, the Company recognizes assets acquired and liabilities assumed at
estimated fair value and adjusts liabilities for contingent consideration to estimates of fair value quarterly. For the
American Acquisition, these amounts remain preliminary as of December 31, 2017. For the Initial Montana
Acquisition and Second Montana Acquisition, these amounts were finalized during the first and second quarter of
2017, respectively. All value metrics and estimates utilize Level 3 inputs.
Fair value estimates for land, land improvements, building and leasehold improvements, and other property and
equipment are calculated with primary reliance on the cost approach, with secondary consideration being placed on
the market/sales comparison approach. Significant inputs include consideration of highest and best use, replacement
costs, sales comparisons (recent transactions of comparable properties), and market approaches (and the properties’
ability to generate future benefits).
Fair value estimates of intangible assets are based on a variety of methods. Some examples are as follows:
Trade names – Primary reliance for estimating fair value of trade names is typically placed on a relief-from-
royalty method and includes an estimate for a reasonable royalty rate (0.25% to 1.0% in the American
Acquisition) that give consideration to third-party license agreements to determine an implied royalty rate.
Estimated after-tax cash flows are discounted to present value utilizing a range of discount rates from 11.0%
79
to 14.5% depending on the trade name, which reflects the risk of the cash flows related to the asset and the
risk and uncertainty of the cash flows for the trade name relative to the overall business. The trade names
associated with the American Acquisition and the Merger were given an indefinite life. The trade names
associated with the Montana Acquisitions were given a four year useful life.
Player and customer relationships – The estimated fair value of player and customer relationships acquired
typically relies on an excess earnings method under the income approach and/or a cost-to-replace approach.
After-tax cash flow discount rates have varied from 11.0% to 14.0%. The player relationships associated with
the American Acquisition were given a useful life of three years. The player relationships associated with the
Merger were given a useful life of eight years for the taverns and 12 to 14 years for the Pahrump casinos. The
customer relationships associated with the Montana Acquisitions were given a useful life of 15 years, and the
distributed gaming customer relationships associated with the Merger were given a useful life of 13 to 16
years.
Gaming and liquor licenses – Estimated fair value for gaming and liquor licenses is generally determined
based on the cost approach. In performing the cost approach, management uses estimates for explicit and
implicit costs to obtain the licenses. The economic life of the Company’s Nevada gaming licenses, Montana
gaming license and various liquor licenses are anticipated to be indefinite, as they are easily maintained. The
Company’s Maryland gaming license associated with Rocky Gap is subject to amortization as it has a finite
life of 15 years.
Leasehold interest and in-place lease value – The leasehold interest acquired as part of the American
Acquisition comprises third party rights to lease retail space within the casinos. The leasehold interest
acquired as part of the American Acquisition was given a useful life 3 to 80 years and the in-place lease value
was given a useful life of 3 to 4 years.
Non-compete agreements – The estimated fair value of non-compete agreements is generally based on the
lost profits method under the income approach. It uses the difference between estimated future cash flows
“With” and “Without” the non-compete agreements and probability factors associated with the assumptions.
The non-compete agreements associated with the Montana Acquisitions and the Merger were given a useful
life of five years and two years, respectively.
Note 13 – Leases
American Leases
The Company acquired various operating and capital leases through the American Acquisition in October 2017. See
Note 3, Merger and Acquisitions, for a description of the American Acquisition.
For the year ended December 31, 2017, the Company recorded rental revenue of $1.3 million.
The future minimum lease payments to be received by the Company under non-cancelable operating leases are as
follows:
(In thousands)
For the year ending December 31,
2018
2019
2020
2021
2022
Thereafter
Total
$
$
4,137
2,953
1,764
911
102
—
9,867
The above minimum rental income does not include contingent rental income or common area maintenance cost
reimbursement contained within certain retail operating leases.
80
Rocky Gap Lease
The Company entered into an operating ground lease with the Maryland Department of Natural Resources for
approximately 270 acres in the Rocky Gap State Park in which Rocky Gap is situated. The lease expires in 2052,
with an option to renew for an additional 20 years.
Under the lease, rent payments are due and payable annually in the amount of $275,000 plus 0.9% of any gross
operator share of gaming revenue (as defined in the lease) in excess of $275,000, and $150,000 plus any surcharge
revenue in excess of $150,000. Surcharge revenue consists of amounts billed to and collected from guests and are
$3.00 per room per night and $1.00 per round of golf. Rent expense associated with the lease was $0.3 million (net
of surcharge revenue of $0.1 million) during each of the years ended December 31, 2017, 2016 and 2015.
Gold Town Casino Leases
The Company’s Gold Town Casino is located on four leased parcels of land, comprising approximately nine acres in
the aggregate, in Pahrump, Nevada. The leases are with unrelated third parties and have various expiration dates
beginning in 2026 (for the parcel on which the Company’s main casino building is located, which the Company
leases from a competitor). Rent expense associated with these leases was $0.5 million during December 31, 2017
and $0.6 million during each of the years ended December 31, 2016 and 2015. The Company subleases
approximately two of the acres to an unrelated third party. Rental income during each of the years ended December
31, 2017, 2016 and 2015 was less than $0.1 million related to the sublease of the two acres in Pahrump, Nevada.
Other Operating Leases
The Company leases its branded tavern locations, office headquarters building, equipment and vehicles under
noncancelable operating leases that are not subject to contingent rents. The original terms of the current leases for
the Company’s branded tavern locations range from one to 15 years with various renewal options from one to 15
years. The Company has operating leases with related parties for certain of its tavern locations and its office
headquarters building. The lease for the Company’s office headquarters building expires in July 2025. A portion of
the office headquarters building is sublet to a related party. Rental income during each of the years ended December
31, 2017 and 2016 was less than $0.1 million for the sublet portion of the office headquarters building. See Note 15,
Related Party Transactions, for more detail. Slot placement contracts in the form of space lease agreements are also
accounted for as operating leases. Under space lease agreements, the Company pays fixed monthly rental fees for
the right to install, maintain and operate its slots at business locations, which are recorded in gaming expenses.
Operating lease rental expense, which is calculated on a straight-line basis, net of surcharge revenue, is as follows:
(In thousands)
Space lease agreements
Related party leases
Other operating leases
Total rent expense
Year Ended December 31,
2016
40,848 $
2,429
11,784
55,061 $
2017
37,061 $
2,035
13,447
52,543 $
2015
16,032
1,108
4,619
21,759
$
$
Future minimum lease payments, not subject to contingent rents, are as follows:
For the year ending December 31,
(In thousands)
Space lease agreements
Related party leases
Other operating leases
Total minimum operating lease
payments
2019
2018
2020
703 $ 68,509
$28,038 $27,006 $ 7,373 $ 3,652 $ 1,737 $
6,097 13,797
1,559 1,535 1,535 1,535 1,536
12,221 11,513 11,360 10,572 9,428 82,428 137,522
Thereafter Total
2021
2022
$41,818
$40,054
$20,268
$15,759
$12,701
$ 89,228
$219,828
81
Capital Leases
The current and long-term obligations under capital leases are included in “Current portion of long-term debt” and
“Long-term debt, net,” respectively. The majority of the capital leases related to vehicles with minimum lease
payment terms of four years or less.
Future minimum capital lease payments are as follows:
For the year ending December 31,
(In thousands)
Furniture and equipment
Building
Less: Amounts representing interest
Total obligations under capital leases
Note 14 – Commitments and Contingencies
Participation and Revenue Share Agreements
2019 2020 2021 2022 Thereafter Total
2018
$ 1,087 $ 1,140 $ 1,028 $ 439 $
150
(145)
85 $ 6,306 $10,085
1,588 2,351
163
(5,563) (6,597)
(128)
$ 918 $ 1,036 $ 990 $ 444 $ 120 $ 2,331 $ 5,839
150
(319)
150
(188)
150
(254)
In addition to the space lease agreements described above in Note 13, Leases, the Company also enters into slot
placement contracts in the form of participation and revenue share agreements. Under revenue share agreements, the
Company pays the business location a percentage of the gaming revenue generated from the Company’s slots placed
at the location, rather than a fixed monthly rental fee. Under participation agreements, the business location holds
the applicable gaming license and retains a percentage of the gaming revenue that it generates from the Company’s
slots. During the years ended December 31, 2017, 2016 and 2015, the aggregate contingent payments recognized by
the Company (recorded in gaming expenses) under revenue share and participation agreements were $143.3 million,
$128.1 million and $41.7 million, respectively, including $1.0 million, $2.1 million and $0.7 million, respectively,
under revenue share and participation agreements with related parties, as described in Note 15, Related Party
Transactions.
The Company also enters into amusement device and ATM placement contracts in the form of revenue share
agreements. Under these revenue share agreements, the Company pays the business location a percentage of the
non-gaming revenue generated from the Company’s amusement devices and ATMs placed at the location. During
the years ended December 31, 2017 and 2016, the total contingent payments recognized by the Company (recorded
in other operating expenses) for amusement devices and ATMs under such agreements were $1.4 million and $0.9
million, respectively. No amounts were recognized by the Company under such agreements during 2015.
Employment Agreements
The Company has entered into at-will employment agreements with each of the Company’s executive officers.
Under each employment agreement, in addition to the executive’s annual base salary, the executive is entitled to
participate in the Company’s incentive compensation programs applicable to executive officers of the Company.
The executives are also eligible to participate in all health benefits, insurance programs, pension and retirement
plans and other employee benefit and compensation arrangements. Each executive is also provided with other
benefits as set forth in his employment agreement. In the event of a termination without “cause” or a “constructive
termination” of the Company’s executive officers (as defined in their respective employment agreements), the
Company could be liable for estimated severance payments of up to $6.1 million for Mr. Sartini, $1.9 million for
Stephen A. Arcana, $1.9 million for Charles H. Protell, $1.6 million for Sean T. Higgins, and amounts ranging from
$0.4 million to $0.7 million for the Company’s other executive officers (assuming each officer’s respective annual
salary and health benefit costs as of December 31, 2017 are the amounts in effect at the time of termination and
excluding potential expense related to acceleration of stock options and RSUs).
Miscellaneous Legal Matters
From time to time, the Company is involved in a variety of lawsuits, claims, investigations and other legal
proceedings arising in the ordinary course of business, including proceedings concerning labor and employment
matters, personal injury claims, breach of contract claims, commercial disputes, business practices, intellectual
property, tax and other matters for which the Company has recorded $1.5 million for claims as of the date of this
82
filing. Although lawsuits, claims, investigations and other legal proceedings are inherently uncertain and their results
cannot be predicted with certainty, the Company believes that the resolution of its currently pending matters should
not have a material adverse effect on its business, financial condition, results of operations or liquidity. Regardless
of the outcome, legal proceedings can have an adverse impact on the Company because of defense costs, diversion
of management resources and other factors. In addition, it is possible that an unfavorable resolution of one or more
such proceedings could in the future materially and adversely affect the Company’s business, financial condition,
results of operations or liquidity in a particular period.
In February and April 2017, several former employees filed two separate purported class action lawsuits against the
Company in the District Court of Clark County, Nevada, and on behalf of similarly situated individuals employed by
the Company in the State of Nevada. The lawsuits allege that the Company violated certain Nevada labor laws
including payment of an hourly wage below the statutory minimum wage without providing a qualified health
insurance plan and an associated failure to pay proper overtime compensation. The complaints seek, on behalf of the
plaintiffs and members of the putative class, an unspecified amount of damages (including punitive damages),
injunctive and equitable relief, and an award of attorneys’ fees, interest and costs. In the second half of 2017, the
Company agreed to settle the first of these two cases, subject to court approval. The second case is in the discovery
phase.
In February 2018, a prior guest of the Stratosphere filed a purported class action complaint against the Company in
the United States District Court, District of Nevada, on behalf of similarly situated individuals and entities that paid
the Clark County Combined Transient Lodging Tax (“Tax”) on the portion of a resort fee that constitutes charges for
Internet access, during the period of February 6, 2014 through the date the alleged conduct ceases. The lawsuit
alleges that the Tax was charged in violation of the federal Internet Tax Freedom Act, which imposes a national
moratorium on the taxation of Internet access by states and their political subdivisions, and seeks, on behalf of the
plaintiff and the putative class, damages equal to the amount of the Tax collected on the Internet access component
of the resort fee, injunctive relief, disgorgement, interest, fees and costs. The Company not yet been served with the
complaint. In the event a complaint is served on the Company, it anticipates being accorded a stay to respond in
connection with an agreement that other hotel casino operators have entered into with regard to case consolidation
while the federal court reviews subject matter jurisdiction. This case is at an early stage in the proceedings, and the
Company is therefore unable to make a reasonable estimate of the probable loss or range of losses, if any, that might
arise from this matter.
While legal proceedings are inherently unpredictable and no assurance can be given as to the ultimate outcome of
any of the above matters, based on management’s current understanding of the relevant facts and circumstances, the
Company believes that these proceedings should not have a material adverse effect on its financial position, results
of operations or cash flows.
Note 15 – Related Party Transactions
As of December 31, 2017, the Company leased its office headquarters building and one tavern location from a
company 33% beneficially owned by Blake L. Sartini, 5% owned by a trust for the benefit of Mr. Sartini’s
immediate family members (including Blake L. Sartini, II) for which Mr. Sartini serves as trustee, and 3%
beneficially owned by Stephen A. Arcana, and leased one tavern location from a company controlled by Mr. Sartini
through a trust for the benefit of Mr. Sartini’s immediate family members (including Blake L. Sartini, II) for which
Mr. Sartini serves as trustee. In addition, two tavern locations that the Company had previously leased from related
parties were sold in 2017 to unrelated third parties. The lease for the Company’s office headquarters building
expires on July 31, 2025. The rent expense for the office headquarters building during the years ended December 31,
2017, 2016 and 2015 was $1.2 million, $1.1 million, and $0.5 million respectively. Under the office headquarters
lease, there was no amount and less than $0.1 million owed to the Company as of December 31, 2017 and 2016,
respectively, and no amount was due and payable by the Company as of December 31, 2017 and 2016. The leases
for the tavern locations have remaining terms of up to 10 years. The rent for the tavern locations (including sold
tavern locations for the periods in which the leases were with related parties) was $0.9 million, $1.3 million, and
$0.6 million during the years ended December 31 2017, 2016, and 2015, respectively. Under the tavern leases, there
was no amount and less than $0.1 million owed to the Company as of December 31, 2017 and 2016, respectively,
and no amount was due and payable by the Company as of December 31, 2017 and 2016. Additionally, a portion of
the office headquarters building is sublet to a company owned or controlled by Mr. Sartini. Rental income during
each of the years ended December 31, 2017, 2016, and 2015 for the sublet portion of the office headquarters
building was less than $0.1 million. Under this sublease, there was no amount and less than $0.1 million owed to the
Company as of December 31, 2017 and 2016, respectively. Mr. Sartini serves as the Chairman of the Board,
83
President and Chief Executive Officer of the Company and is co-trustee of the Sartini Trust, which is a significant
shareholder of the Company. Mr. Arcana serves as the Executive Vice President and Chief Operating Officer of the
Company. All of these related party lease agreements were in place prior to the consummation of the Merger.
From time to time, the Company’s executive officers and employees use for Company business a private aircraft
owned by Sartini Enterprises, Inc., a company controlled by Mr. Sartini. In April 2016, the Audit Committee of the
Board of Directors approved the Company’s entering into an aircraft timesharing agreement between the Company
and Sartini Enterprises, Inc. pursuant to which the Company will reimburse Sartini Enterprises, Inc. for direct costs
and expenses incurred for travel on the private aircraft by Company employees while on Company business. Sartini
Enterprises, Inc. sold the aircraft subject to this agreement in December 2017. In June 2017, the Audit Committee
approved the Company’s entering into a second aircraft timesharing agreement between the Company and Sartini
Enterprises, Inc. on similar terms for a private aircraft leased by Sartini Enterprises Inc. The aircraft timesharing
agreements specify the maximum expense reimbursement that Sartini Enterprises, Inc. can charge the Company
under the applicable regulations of the Federal Aviation Administration for the use of the aircraft and flight crew.
Such costs include fuel, landing fees, hangar and tie-down costs away from the aircraft’s operating base, flight
planning and weather contract services, crew costs and other related expenses. The Company’s compliance
department regularly reviews these reimbursements. During the years ended December 31, 2017 and 2016, the
Company paid approximately $0.2 million, and $0.1 million, respectively, and as of December 31, 2017 the
Company owed less than $0.1 million, under the aircraft timesharing agreements.
Three of the distributed gaming locations at which the Company’s slots are located are owned in part by the spouse
of Matthew W. Flandermeyer, the Company’s former Executive Vice President and Chief Financial Officer. On
November 11, 2016, Matthew Flandermeyer resigned, effective as of November 28, 2016, from his position with the
Company. Net revenues and gaming expenses recorded by the Company from the use of the Company’s slots at
these three locations were $1.4 million and $1.2 million, respectively, during the year ended December 31, 2016, in
each case excluding net revenues and gaming expenses incurred during the period after the termination of Mr.
Flandermeyer’s employment with the Company (as during such period the agreement was not with a related party).
The gaming expenses recorded by the Company represent amounts retained by the counterparty (with respect to the
two locations that are subject to participation agreements) or paid to the counterparty (with respect to the location
that is subject to a revenue share agreement) from the operation of the slots. All of the agreements were in place
prior to the consummation of the Merger.
One of the distributed gaming locations at which the Company’s slots are located is owned in part by Sean T.
Higgins, who serves as Executive Vice President and Chief Legal Officer of the Company. This agreement was in
place prior to Mr. Higgins joining the Company on March 28, 2016. Net revenues and gaming expenses recorded by
the Company from the use of the Company’s slots at this location were $1.1 million and $1.0 million, respectively,
during the year ended December 31, 2017, and were $0.9 million and $0.8 million, respectively, during the year
ended December 31, 2016, in each case excluding net revenues and gaming expenses incurred during the period
prior to the commencement of Mr. Higgins employment with the Company (as during such period the agreement
was not with a related party). No amounts were owed to or due and payable by the Company related to this
agreement as of December 31, 2017.
Additionally, one distributed gaming location at which the Company’s slots are located was owned in part by
Terrence L. Wright, who serves on the Board of Directors of the Company, who divested his interest in such
distributed gaming location in March 2016. Net revenues and gaming expenses recorded by the Company from the
use of the Company’s slots at this location during the period in which the agreement was with a related party were
$0.1 million during the year ended December 31, 2016. This agreement was in place prior to the consummation of
the Merger.
In connection with the Merger, Lyle A. Berman, who serves on the Board of the Directors of the Company, entered
into a three-year consulting agreement with the Company that pays his wholly-owned consulting firm $200,000
annually, plus reimbursements for certain health insurance, administrative assistant and office costs. Expenses
recorded by the Company for the agreement with Mr. Berman were $0.2 million for each of the years ended
December 31, 2017 and 2016. No amounts were due and payable by the Company related to this agreement at
December 31, 2017.
84
Additionally, in connection with the Merger, Timothy J. Cope, who serves on the Board of Directors of the
Company, entered into a short-term consulting agreement for the period from July 31, 2015 to April 1, 2016 under
which Mr. Cope was paid a total of $140,000, plus reimbursement of certain health insurance costs. Expenses
recorded by the Company for the agreement with Mr. Cope were $0.1 million for the year ended December 31,
2016.
Note 16 – Segment Information
The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming.
During the third quarter of 2015, the Company redefined its reportable segments to reflect the change in its business
following the Merger. Prior to the Merger, the Company conducted its business through the following two segments:
Rocky Gap and Other. Information for the period prior to the Merger has been recast to reflect the new segment
structure and present comparative year-over-year results.
The Company’s Casinos segment involves the ownership and operation of eight resort casino properties in Nevada
and Maryland. The Company’s Distributed Gaming segment involves the installation, maintenance and operation of
slots and amusement devices in certain strategic, high-traffic, non-casino locations (such as grocery stores,
convenience stores, restaurants, bars, taverns and liquor stores) in Nevada and Montana, and the operation of
wholly-owned branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada
metropolitan area. The Corporate and Other segment includes the Company’s cash and cash equivalents,
miscellaneous receivables and corporate overhead. Costs recorded in the Corporate and Other segment have not
been allocated to the Company’s reportable operating segments because these costs are not easily allocable and to do
so would not be practical. Amounts in the Eliminations column represent the intercompany management fee for
Rocky Gap.
The Company evaluates each segment’s profitability based upon such segment’s Adjusted EBITDA, which
represents each segment's earnings before interest and other non-operating income (expense), income taxes,
depreciation and amortization, preopening expense, acquisition and merger expenses, share-based compensation
expenses, executive severance and sign-on bonuses, gain on revaluation of contingent consideration, class action
litigation expenses, gain/loss on disposal of property and equipment or investments, and impairments and other
losses, calculated before corporate overhead (which is not allocated to each segment).
85
The following table sets forth, for the periods indicated, certain operating data for our segments, and reconciles
Adjusted EBITDA to net income (loss) for each segment, as reported in our accompanying consolidated statements
of operations:
Casinos
Year Ended December 31, 2017
Corporate
Distributed
and Other
Gaming
$
179,175 $
330,050 $
Consolidated
509,808
583 $
(In thousands)
Net revenues
Adjusted EBITDA
Acquisition expenses
Share-based compensation
Gain on revaluation of contingent
consideration
Preopening expenses
Class action litigation expenses
Executive severance and sign-on bonuses
Other operating, net
Depreciation and amortization
Income (loss) from operations
Non-operating income (expense)
Interest expense, net
Loss on extinguishment of debt
Gain on change in fair value of derivative
Total non-operating income (expense), net
Income (loss) before income tax benefit
Income tax benefit
Net income (loss)
$
50,979
—
—
—
—
—
(636)
(377)
(19,544)
30,422
48,890
—
—
1,719
(1,234)
—
—
(174)
(19,601)
29,600
(26,954)
(5,041)
(8,754)
—
(398)
(1,617)
(506)
267
(1,641)
(44,644)
16
—
—
16
30,438
—
30,438 $
(390)
—
—
(390)
29,210
—
29,210 $
(19,224)
(1,708)
178
(20,754)
(65,398)
7,921
(57,477) $
72,915
(5,041)
(8,754)
1,719
(1,632)
(1,617)
(1,142)
(284)
(40,786)
15,378
(19,598)
(1,708)
178
(21,128)
(5,750)
7,921
2,171
(In thousands)
Net revenues
Adjusted EBITDA
Merger expenses
Share-based compensation
Loss (gain) on disposal of property and
equipment
Preopening expenses
Executive severance and sign-on bonuses
Depreciation and amortization
Income (loss) from operations
Non-operating income (expense)
Interest expense, net
Gain on sale of land held for sale
Other, net
Total non-operating expense, net
Income (loss) before income tax benefit
(provision)
Income tax benefit (provision)
Net income (loss)
Casinos
Year Ended December 31, 2016
Corporate
Distributed
and Other
Gaming
$
97,132 $
305,792 $
Consolidated
403,204
280 $
23,571
—
—
(94)
—
—
(7,351)
16,126
(9)
—
—
(9)
43,555
—
—
40
(2,179)
—
(18,889)
22,527
(144)
—
—
(144)
(18,531)
(614)
(3,878)
—
(292)
(1,037)
(1,266)
(25,618)
(6,301)
4,525
869
(907)
16,117
—
16,117 $
22,383
(60)
22,323 $
(26,525)
4,385
(22,140) $
$
48,595
(614)
(3,878)
(54)
(2,471)
(1,037)
(27,506)
13,035
(6,454)
4,525
869
(1,060)
11,975
4,325
16,300
86
(In thousands)
Net revenues
Adjusted EBITDA
Merger expenses
Disposition of notes receivable
Share-based compensation
Loss on disposal of property and
equipment
Gain on sale of investment
Impairments and other losses
Preopening expenses
Depreciation and amortization
Income from operations
Non-operating income (expense)
Interest expense, net
Loss on extinguishment of debt
Other, net
Total non-operating expense, net
Income before income tax benefit
Income tax benefit
Net income
Assets
Year Ended December 31, 2015
Corporate
and Other
Distributed
Gaming (1)
Eliminations
Casinos
$
73,245 $ 103,610 $
1,985 $
14,390
—
—
—
(8)
—
—
—
(4,928)
9,454
14,254
—
—
—
—
—
—
(380)
(5,315)
8,559
(10,370)
(11,525)
23,590
(809)
(8)
750
(682)
(41)
(555)
350
(626)
(1,174)
(1,798)
(3,598)
5,856
—
5,856 $
(68)
—
1
(67)
8,492
—
8,492 $
(2,034)
—
1,887
(147)
203
9,969
10,172 $
$
Consolidated
(1,798) $ 177,042
-
18,274
(11,525)
23,590
(809)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
(16)
750
(682)
(421)
(10,798)
18,363
(2,728)
(1,174)
90
(3,812)
14,551
9,969
24,520
The Company’s assets by segment consisted of the following amounts:
(In thousands)
Balance at December 31, 2017
Casinos
Distributed
Gaming
$ 1,039,025 $
298,453 $
Corporate
and Other
Consolidated
27,697 $ 1,365,175
Balance at December 31, 2016
$
108,418 $
294,822 $
15,838 $
419,078
Capital Expenditures
The Company’s capital expenditures by segment consisted of the following amounts:
(In thousands)
For the year ended December 31, 2017
Casinos
Distributed
Gaming
Corporate
and Other
$
9,665 $
18,011 $
1,787 $
Consolidated
29,463
For the year ended December 31, 2016
$
10,267 $
17,730 $
2,637 $
30,634
For the year ended December 31, 2015
$
2,594 $
4,595 $
757 $
7,946
(1) Capital expenditures in the Distributed Gaming segment exclude non-cash purchases of property and
equipment of approximately $2.6 million and $0.7 million for the years ended December 31, 2017 and 2016,
respectively.
87
Note 17 – Selected Quarterly Financial Information (Unaudited):
The following tables present selected quarterly financial information:
(In thousands, except per share amounts)
Net revenues
Income from operations
Net income (loss)
Basic income (loss) per share
Diluted income (loss) per share (4)
(In thousands, except per share amounts)
Net revenues
Income from operations
Net income
Basic income per share
Diluted income per share
First
Year ended December 31, 2017
Third
Second
Fourth (1)
106,646 $
5,318
5,342
0.24 $
0.23 $
110,493 $
2,578
1,713
0.08 $
0.07 $
108,322 $
2,389
8,555
0.38 $
0.36 $
184,347
5,093
(13,439)
(0.53)
(0.53)
First (2)
Year ended December 31, 2016
Second (3)
Third
Fourth
91,034 $
3,737
2,239
0.10 $
0.10 $
102,558 $
5,051
2,800
0.13 $
0.12 $
104,226 $
2,752
1,302
0.06 $
0.06 $
105,386
1,495
9,959
0.45
0.44
$
$
$
$
$
$
(1) Results included the operating results of American from and after October 20, 2017, following the completion
of the American Acquisition.
(2) Results included the operating results of the Initial Montana Acquisition from and after January 30, 2016,
following the completion of the acquisition.
(3) Results included the operating results of the Second Montana Acquisition from and after April 23, 2016,
following the completion of the acquisition.
(4)
For the fourth quarter of 2017, the Company generated a net loss. Accordingly, the effect of all potential
common share equivalents was anti-dilutive, and therefore all such shares were excluded from the
computation of diluted weighted average shares outstanding and diluted loss per share for this period. The
amount of potential common share equivalents was 2,373 for the fourth quarter of 2017.
Because net income (loss) per share amounts are calculated using the weighted-average number of common
equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters in the
tables above may not equal the total net income (loss) per share amounts for the year.
Note 18 – Subsequent Events
The Company's management evaluates subsequent events through the date of issuance of the consolidated financial
statements. There have been no subsequent events that occurred during such period that would require adjustment to
or disclosure in the consolidated financial statements as of and for the year ended December 31, 2017.
88
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
a.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance of achieving the objective
that information in our Exchange Act reports is recorded, processed, summarized and reported within the time
periods specified and pursuant to the requirements of the SEC’s rules and forms and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow for timely decisions regarding required disclosures. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and
management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures as of December 31, 2017, the end of the period covered by this Annual Report on Form 10-K. Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls
and procedures were effective at the reasonable assurance level as of December 31, 2017.
On October 20, 2017, the American Acquisition was completed. As discussed below, we have excluded American
from our evaluation of the effectiveness of internal control over financial reporting. Accordingly, pursuant to the
SEC's general guidance that an assessment of an acquired business’ internal control over financial reporting may be
omitted from the scope of an assessment for one year following the acquisition, the scope of our assessment of the
effectiveness of our disclosure controls and procedures does not include American.
b. Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial
reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on
this evaluation, our management concluded that our internal control over financial reporting was effective as of
December 31, 2017.
On October 20, 2017, the American Acquisition was completed. Management has begun the evaluation of the
internal control structures of American. However, SEC guidance permits management to omit an assessment of an
acquired business’ internal control over financial reporting from management’s assessments of internal control over
financial reporting and disclosure controls and procedures for a period not to exceed one year from the date of the
acquisition. Accordingly, we excluded American from our annual assessment of internal control over financial
reporting as of December 31, 2017. We have reported the operating results of American in our consolidated
statements of operations and cash flows from the acquisition date through December 31, 2017. As of December 31,
2017, total assets related to American represented approximately 68.1% of our total assets, which consisted
primarily of intangible assets, including goodwill, recorded on a preliminary basis as the measurement period for the
business combination remained open as of December 31, 2017. Net revenues from American comprised
89
approximately 15% of our consolidated net revenues for the year ended December 31, 2017. We will include
American in our evaluation of internal control over financial reporting as of December 31, 2018.
The effectiveness of our internal control over financial reporting as of December 31, 2017, likewise excluding the
internal control over financial reporting of American, has been audited by Piercy Bowler Taylor & Kern, our
independent registered public accounting firm, as stated in their report in Part II, Item 8 of this Annual Report on
Form 10-K.
c. Management’s Remediation of Previous Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting
such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial
statements will not be prevented or detected on a timely basis. In our Annual Report on Form 10-K for the year
ended December 31, 2016 and our subsequent Quarterly Reports on Form 10-Q, we reported the following material
weakness in our internal control over financial reporting:
(cid:129)
Untimely Preparation and Review of Account Reconciliations. Account reconciliations were not
consistently prepared on a timely basis and subjected to proper review and written approval by a person
not involved in their preparation.
We took the following actions to remediate this material weakness:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
In November 2016 and January 2017, we hired a new principal financial officer (Charles H. Protell) and
principal accounting officer (Gary A. Vecchiarelli), respectively;
During the second quarter of 2017, management presented to the Audit Committee an action plan for
remediating the identified material weakness and strengthening internal controls overall;
During 2017, in accordance with this action plan, we hired additional personnel with the requisite
expertise in the key functional areas of finance and accounting to supervise the preparation of account
reconciliations and to perform proper reviews of such reconciliations;
Also in accordance with this action plan, we established or enhanced numerous processes and policies
during 2017 relating to various accounting, financial reporting and internal audit tasks;
We also implemented new reconciliation management software to track the status and progress of
account reconciliations each period and quantify unreconciled or unidentified variances; and
In addition, we provided, and will continue to provide, additional training to new and existing
accounting and financial reporting personnel regarding our procedures and systems concerning the
preparation and review of account reconciliations.
For the quarter ended December 31, 2017, management tested the design and operating effectiveness of the newly
implemented controls and concluded that the material weakness described above had been remediated as of
December 31, 2017.
d.
Changes in Internal Control over Financial Reporting
Except as described above, there have been no changes in our internal control over financial reporting during the
quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting. As described above, on October 20, 2017, the American Acquisition was
completed. Management excluded American from its assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2017. Our integration of American may lead us to modify certain internal
controls in future periods.
ITEM 9B. OTHER INFORMATION
None.
90
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item regarding the members of our board of directors and our audit committee,
including our audit committee financial expert, will be included in our definitive Proxy Statement to be filed with
the SEC in connection with our 2018 annual meeting of shareholders (the “Proxy Statement”) under the headings
“Corporate Governance,” “Election of Directors” and “Ownership of Securities,” and is incorporated herein by
reference.
The information required by this item relating to our executive officers is included under the caption “Executive
Officers” in Part I of this Annual Report on Form 10-K and is incorporated herein by reference into this section.
We have adopted a code of ethics applicable to all of our employees (including our principal executive officer,
principal financial officer and principal accounting officer). The code of ethics is designed to deter wrongdoing and
to promote honest and ethical conduct and compliance with applicable laws and regulations. The full text of our
code of ethics is published in the “Investors-Governance” section of our website at www.goldenent.com.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included in the Proxy Statement under the headings “Director
Compensation” and “Executive Compensation,” and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item with respect to security ownership of certain beneficial owners will be
included in the Proxy Statement under the heading “Ownership of Securities,” and is incorporated herein by
reference.
EQUITY COMPENSATION PLAN INFORMATION
On August 27, 2015, our Board of Directors approved the Golden Entertainment, Inc. 2015 Incentive Award Plan
(the “2015 Plan”), which was subsequently approved by our shareholders at our 2016 annual meeting of
shareholders. The 2015 Plan authorizes the issuance of stock options, restricted stock, restricted stock units,
dividend equivalents, stock payment awards, stock appreciation rights, performance bonus awards and other
incentive awards. The 2015 Plan authorizes the grant of awards to employees, non-employee directors and
consultants of the Company and its subsidiaries. Options generally have a ten-year term. Except as provided in any
employment agreement between us and the employee, if an employee is terminated (voluntarily or involuntarily),
any unvested options as of the date of termination will be forfeited.
The maximum number of shares of our common stock for which grants may be made under the 2015 Plan is
2,250,000 shares, plus an annual increase on January 1st of each year during the ten-year term of the 2015 Plan equal
to the lesser of 1,800,000 shares, 4% of the total shares of our common stock outstanding (on an as-converted basis)
and such smaller amount as may be determined by the Board in its sole discretion. The annual increases on January
1, 2018 and 2017 were 889,259 shares and 874,709 shares, respectively. The following annual limitations also
apply: (i) the maximum aggregate number of shares of common stock that may be subject to awards granted to any
one participant during a calendar year is 2,000,000 shares; and (ii) the maximum aggregate amount of cash that may
be paid to any one participant during any calendar year with respect to awards initially payable in cash is $10
million.
At our June 6, 2007 annual shareholders meeting, our shareholders approved the 2007 Lakes Stock Option and
Compensation Plan (the “2007 Plan”), which authorized a total of 250,000 shares of our common stock. In August
of 2009, our shareholders approved an amendment to the 2007 Plan to increase the number of shares of the
Company’s common stock authorized for awards from 250,000 to 1,250,000. The 2007 Plan is designed to integrate
91
compensation of our executives and employees, including our officers and directors, with our long-term interests
and those of our shareholders and to assist in the retention of executives and other key personnel.
The following table provides certain information as of December 31, 2017 with respect to our equity compensation
plans:
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants,
and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding
Securities Reflected
in First Column)
3,730,254 $
645,675
4,375,929 $
11.24
7.73
10.73
109,263
—
109,263
Plan Category
2015 Plan(1)
2007 Plan
Total
(1) As of December 31, 2017, we had 62,791 restricted stock units outstanding that do not have an exercise price;
therefore, the weighted-average exercise price per share only relates to outstanding stock options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item will be included in the Proxy Statement under the headings “Certain
Relationships and Related Transactions” and “Corporate Governance,” and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item will be included in the Proxy Statement under the heading “Independent
Registered Public Accounting Firm” and is incorporated herein by reference.
92
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Consolidated Financial Statements:
PART IV
Report of Independent Registered Public Accounting Firm....................................................................................
Consolidated Balance Sheets as of December 31, 2017 and 2016 ..........................................................................
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2017,
2016 and 2015.....................................................................................................................................................
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2017, 2016 and 2015.........
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015 ........................
Notes to Consolidated Financial Statements............................................................................................................
(a)(2) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2017, 2016 and 2015
Page
47
50
51
52
53
55
99
93
(a)(3) Exhibits:
Exhibit
Number
2.1
2.1.1
2.2
3.1
3.2
10.1
10.2
10.3
10.4
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Agreement and Plan of Merger, dated as of
January 25, 2015, by and among Lakes
Entertainment,
Inc., LG Acquisition
Corporation, Sartini Gaming, Inc. and The
Blake L. Sartini and Delise F. Sartini Family
Trust.
8-K
000-24993
2.1
1/26/2015
First Amendment dated June 4, 2015, to the
Agreement and Plan of Merger, dated
January
Lakes
2015,
Entertainment, Inc. Sartini Gaming, Inc., LG
Acquisition Corporation and The Blake L.
Sartini and Delise F. Sartini Family Trust.
among
25,
8-K
000-24993
2.1
6/4/2015
Membership Interest Purchase Agreement,
dated as of June 10, 2017, by and among
Golden Entertainment, Inc., W2007/ACEP
Managers Voteco, LLC, and W2007/ACEP
Holdings, LLC.
8-K
000-24993
2.1
6/12/2017
Amended
Incorporation of Golden Entertainment, Inc.
and Restated Articles
of
8-K
000-24993
3.1
8/4/2015
Fifth Amended and Restated Bylaws of
Golden Entertainment, Inc.
8-K
000-24993
3.2
8/4/2015
First Lien Credit Agreement, dated as of
October 20, 2017, by and among Golden
Entertainment,
the
subsidiaries of Golden Entertainment, Inc.
party thereto, JPMorgan Chase Bank, N.A.
(as administrative agent and collateral agent)
and the other lenders party thereto.
(as borrower),
Inc.
Inc.,
Second Lien Credit Agreement, dated as of
October 20, 2017, by and among Golden
the
Entertainment,
subsidiaries of Golden Entertainment, Inc.
party
(as
thereto, Credit Suisse AG
administrative agent and collateral agent)
and the other lenders party thereto.
(as borrower),
Amended and Restated Ground Lease by
and between Evitts Resort, LLC and the
State of Maryland
the
Department of Natural Resources, effective
August 3, 2012.
the use of
to
8-K
000-24993
10.3
10/23/2017
8-K
000-24993
10.4
10/23/2017
8-K
000-24993
10.2
8/9/2012
Registration Rights Agreement, dated as of
July 31, 2015, by and between Golden
Entertainment, Inc. and The Blake L. Sartini
and Delise F. Sartini Family Trust
8-K
000-24993
10.2
8/4/2015
94
Exhibit
Number
10.5
10.6
10.7
10.8
10.9
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Registration Rights Agreement, dated as of
October 20, 2017, by and between Golden
Entertainment,
Inc. and W2007/ACEP
Holdings, LLC.
Shareholders’ Agreement, dated as of
January 25, 2015, by and among Lakes
Entertainment, Inc., The Blake L. Sartini and
Delise F. Sartini Family Trust, Lyle A.
Berman and certain other shareholders of
Lakes Entertainment, Inc.
Stockholders Agreement, dated as of
October 20, 2017, by and between Golden
Entertainment,
Inc. and W2007/ACEP
Holdings, LLC.
Noncompetition Agreement, dated as of July
31, 2015, between Golden Entertainment,
Inc. and Blake L. Sartini
Noncompetition Agreement, dated as of July
31, 2015, between Golden Entertainment,
Inc. and Lyle A. Berman
8-K
000-24993
10.1
10/23/2017
8-K
000-24993
10.2
1/26/2015
8-K
000-24993
10.2
10/23/2017
8-K
000-24993
10.4
8/4/2015
8-K
000-24993
10.3
8/4/2015
10.10#
Employment Agreement, dated as of
October 1, 2015, by and between Golden
Entertainment, Inc. and Blake Sartini
8-K
000-24993
10.1
10/5/2015
10.10.1# First
to
Amendment
Employment
Agreement, dated as of February 9, 2016, by
and between Golden Entertainment, Inc. and
Blake L. Sartini
10-K 000-24993
10.11.1
3/14/2016
10.11#
Employment Agreement, dated as of
October 1, 2015, by and between Golden
Entertainment, Inc. and Stephen Arcana
8-K
000-24993
10.2
10/5/2015
10.11.1# First
to
Amendment
Employment
Agreement, dated as of February 9, 2016, by
and between Golden Entertainment, Inc. and
Stephen Arcana
10.11.2# Second Amendment
to Employment
Agreement, dated as of March 10, 2017, by
and between Golden Entertainment, Inc. and
Stephen Arcana
10.12#
Employment Agreement, dated as of
November 15, 2016, by and between Golden
Entertainment, Inc. and Charles Protell
10.12.1# First
to
Amendment
Employment
Agreement, dated as of March 10, 2017, by
and between Golden Entertainment, Inc. and
Charles Protell
10-K 000-24993
10.12.1
3/14/2016
10-K 000-24993
10.11.2
3/16/2017
8-K
000-24993
10.2
11/17/2016
10-K 000-24993
10.12.1
3/16/2017
95
Exhibit
Number
10.13#
10.14#
10.15#
10.16#
10.17#
10.18#
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Employment Agreement, dated as of
November 14, 2016, by and between Golden
Entertainment, Inc. and Gary Vecchiarelli
Employment Agreement, dated as of
October 11, 2016, by and between Golden
Entertainment, Inc. and Sean Higgins
Amended
and Restated Employment
Agreement, dated as of March 10, 2017, by
and between Golden Entertainment, Inc. and
Blake L. Sartini II
Employment Agreement, dated as of
October 26, 2017, by and between Golden
Entertainment, Inc. and Edward W. Martin
III
Separation and General Release Agreement,
dated as of November 11, 2016, by and
between Golden Entertainment, Inc. and
Matthew Flandermeyer
and Restated
Amended
Independent
Contractor Consulting Agreement, dated as
of October 28, 2015, among Golden
Entertainment,
Inc., Berman Consulting
Corporation and Lyle A. Berman
8-K
000-24993
10.3
11/17/2016
10-K 000-24993
10.14
3/16/2017
10-K 000-24993
10.15
3/16/2017
X
8-K
000-24993
10.1
11/17/2016
10-Q 000-24993
10.10.1
11/6/2015
10.19#
2007 Amended and Restated Stock Option
and Compensation Plan
10.19.1# Form of Lakes Entertainment, Inc. Non-
Stock Option Agreement
Qualified
(Employees)
DEF 14A 000-24993 Appendix D 6/24/2009
10-K 000-24993
10.16.1
3/14/2016
10.19.2# Form of Lakes Entertainment, Inc. Option
10-K 000-24993
10.16.2
3/14/2016
Agreement (Directors)
10.19.3# Form of Stock Option Grant Notice and
Stock Option Award Agreement
10.20#
Golden Entertainment, Inc. 2015 Incentive
Award Plan
8-K
000-24993
10.5
11/17/2016
8-K
000-24993
10.1
9/2/2015
10.20.1# Form of Stock Option Grant Notice and
8-K
000-24993
10.2
9/2/2015
Stock Option Agreement
10.20.2# Form of Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award
Agreement
10.21#
Golden Entertainment, Inc. Amended and
Restated
Director
Non-Employee
Compensation Plan
8-K
000-24993
10.4
11/17/2016
10-K 000-24993
10.21
3/16/2017
96
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Exhibit
Number
12.1
21
23.1
31.1
31.2
32.1
Statement Regarding the Computation of
Ratio of Earnings to Fixed Charges
Subsidiaries of Golden Entertainment, Inc.
Consent of Independent Registered Public
Accounting Firm
Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certifications of Chief Executive Officer
and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
Document
101.CAL XBRL Taxonomy Extension Calculation
Linkbase Document
101.DEF XBRL Taxonomy Extension Calculation
Definition Document
101.LAB XBRL Taxonomy Extension Label Linkbase
Document
101.PRE XBRL Taxonomy Extension Presentation
Linkbase Document
X
X
X
X
X
X
X
X
X
X
X
X
#
Management contract or compensatory plan or arrangement in which one or more executive officers or
directors participates
ITEM 16. FORM 10-K SUMMARY
None.
97
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
GOLDEN ENTERTAINMENT, INC.
Registrant
By: /s/ BLAKE L. SARTINI
Blake L. Sartini
Chairman of the Board, President and
Chief Executive Officer
Dated as of March 16, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated as of March 16, 2018.
Name
/s/ BLAKE L. SARTINI
Blake L. Sartini
/s/ CHARLES H. PROTELL
Charles H. Protell
/s/ GARY A. VECCHIARELLI
Gary A. Vecchiarelli
/s/ LYLE A. BERMAN
Lyle A. Berman
/s/ TIMOTHY J. COPE
Timothy J. Cope
/s/ MARK A. LIPPARELLI
Mark A. Lipparelli
/s/ ROBERT L. MIODUNSKI
Robert L. Miodunski
/s/ NEIL I. SELL
Neil I. Sell
/s/ TERRENCE L. WRIGHT
Terrence L. Wright
Title
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President, Chief
Strategy and Financial Officer
(Principal Financial Officer)
Senior Vice President of
Accounting and Finance
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
98
GOLDEN ENTERTAINMENT, INC.
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Deferred income tax valuation allowance:
Year Ended December 31, 2017
Year Ended December 28, 2016
Year Ended December 29, 2015
Balance at
Beginning of
Period
Increase
Decrease
Balance at
End of Period
$
18,109 $
25,593
44,700
— $
—
—
(11,126) $
(7,484)
(19,107)
6,983
18,109
25,593
99
EXHIBIT 31.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFIER
PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF
2002
I, Blake L. Sartini, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Golden Entertainment, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant, and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
March 16, 2018
By: /s/ BLAKE L. SARTINI
Blake L. Sartini
Chairman of the Board, President and
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF
CHIEF FINANCIAL OFFIER
PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF
2002
I, Charles H. Protell, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Golden Entertainment, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant, and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
March 16, 2018
By: /s/ CHARLES H. PROTELL
Charles H. Protell
Executive Vice President,
Chief Strategy Officer and
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATIONS OF
CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned officer of Golden Entertainment, Inc. (the “Company”) hereby certifies, to such officer’s knowledge,
that:
1.
2.
The Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2017 (the
“Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date: March 16, 2018
By: /s/ BLAKE L. SARTINI
Blake L. Sartini
Chairman of the Board, President and
Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned officer of Golden Entertainment, Inc. (the “Company”) hereby certifies, to such officer’s knowledge,
that:
1.
2.
The Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2017 (the
“Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date: March 16, 2018
By: /s/ CHARLES H. PROTELL
Charles H. Protell
Executive Vice President,
Chief Strategy Officer and
Chief Financial Officer
The foregoing certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and
will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liability of that section. The foregoing certifications are not to be incorporated by reference
into any filing of Golden Entertainment, Inc., whether made before or after the date hereof, regardless of any
general incorporation language in such filing.
[THIS PAGE INTENTIONALLY LEFT BLANK]
Performance Graph
The following performance graph compares the cumulative five-year shareholders’ returns (based on
appreciation of the market price of our common stock) on an indexed basis with NASDAQ Composite
Index and the Dow Jones US Gambling Index, during the five years ended December 31, 2017. The
graph plots the changes in value of an initial $100 investment over the indicated time period, assuming
all dividends are reinvested. The stock price performance in this graph is not necessarily indicative of
future stock price performance.
Comparison of Cumulative Five Year Total Return
Among Golden Entertainment, Inc., the NASDAQ Composite Index and
the Dow Jones U.S. Gambling Index
$700
$600
$500
$400
$300
$200
$100
$0
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
Golden Entertainment, Inc.
NASDAQ Composite Index
Dow Jones U.S. Gambling Index
Cumulative Total Returns - Year Ending December 31,
2012
2013
2014
2015
2016
2017
Golden Entertainment, Inc. . . . . . . . . . . . $100.00 $131.67 $112.02 $170.50 $231.36 $623.77
242.71
NASDAQ Composite Index . . . . . . . . . . .
192.05
Dow Jones US Gambling Index . . . . . . .
160.78
139.44
187.22
137.04
171.97
106.90
140.12
171.74
100.00
100.00
The performance graph should not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933 or the Exchange Act of 1934, except to the extent the
Company specifically incorporates the performance graph by reference therein.
Dear Fellow Shareholders,
Dear Fellow Shareholders,
Fiscal 2017 marked a year of transformation for our Company. In October, we acquired four
Fiscal 2017 marked a year of transformation for our Company. In October, we acquired four
uniquely positioned properties in Southern Nevada, which included the iconic Stratosphere
uniquely positioned properties in Southern Nevada, which included the iconic Stratosphere
Casino, Hotel & Tower on the Las Vegas Strip, as well as two well-known Arizona Charlie’s
Casino, Hotel & Tower on the Las Vegas Strip, as well as two well-known Arizona Charlie’s
branded Las Vegas locals casinos and the market leading Aquarius Casino Resort in Laughlin.
branded Las Vegas locals casinos and the market leading Aquarius Casino Resort in Laughlin.
These properties dramatically expanded our presence in Southern Nevada, which currently is
These properties dramatically expanded our presence in Southern Nevada, which currently is
experiencing a robust level of economic activity supporting what we believe to be the most
experiencing a robust level of economic activity supporting what we believe to be the most
favorable gaming market in the country.
favorable gaming market in the country.
As we continue the integration of these new properties, we have developed even more conviction in our decision
As we continue the integration of these new properties, we have developed even more conviction in our decision
to acquire this collection of gaming venues. In a short time, we have recognized player trends and increased
to acquire this collection of gaming venues. In a short time, we have recognized player trends and increased
opportunities to market all of our entertainment experiences to our customers. Combined with our unparalleled
opportunities to market all of our entertainment experiences to our customers. Combined with our unparalleled
distributed gaming platform, our diverse product offering extends from the Las Vegas Strip to almost every
distributed gaming platform, our diverse product offering extends from the Las Vegas Strip to almost every
corner of Nevada. When including our distributed gaming operations in Montana and our Rocky Gap Casino
corner of Nevada. When including our distributed gaming operations in Montana and our Rocky Gap Casino
Resort in Maryland, our total portfolio now comprises more than 16,200 slot machines, 114 table games and
Resort in Maryland, our total portfolio now comprises more than 16,200 slot machines, 114 table games and
5,168 hotel rooms across eight casinos and over 1,000 distributed gaming locations.
5,168 hotel rooms across eight casinos and over 1,000 distributed gaming locations.
We are extremely excited about our recently announced renovation plan for the Stratosphere, which will begin in
We are extremely excited about our recently announced renovation plan for the Stratosphere, which will begin in
the second quarter of 2018. Our three-year phased approach will position the Stratosphere to take advantage of
the second quarter of 2018. Our three-year phased approach will position the Stratosphere to take advantage of
the long-term positive economic outlook for Las Vegas while minimizing disruption of the current operations.
the long-term positive economic outlook for Las Vegas while minimizing disruption of the current operations.
Upon its completion, we will have remodeled over 1,100 rooms, added new group meeting space, refreshed the
Upon its completion, we will have remodeled over 1,100 rooms, added new group meeting space, refreshed the
gaming and tower areas while adding several exciting new food and beverage outlets. These renovations,
gaming and tower areas while adding several exciting new food and beverage outlets. These renovations,
focused on room remodels and group business amenities, will allow us to target new guests for the Stratosphere
focused on room remodels and group business amenities, will allow us to target new guests for the Stratosphere
while delivering an improved product to our existing patrons.
while delivering an improved product to our existing patrons.
With our distributed gaming business, we continue to expand our market leading footprint of 59 wholly-owned
With our distributed gaming business, we continue to expand our market leading footprint of 59 wholly-owned
Nevada taverns, having opened two new locations in 2018, to be followed by four more new tavern openings
Nevada taverns, having opened two new locations in 2018, to be followed by four more new tavern openings
later this year.
later this year.
Lastly, we are pleased to unveil our new company logo, which you are seeing here on the cover of this year’s
Lastly, we are pleased to unveil our new company logo, which you are seeing here on the cover of this year’s
annual report. The contemporary look and feel of our new logo represents a nod to our transformation as we
annual report. The contemporary look and feel of our new logo represents a nod to our transformation as we
continue to develop our current assets and look for future opportunities.
continue to develop our current assets and look for future opportunities.
We will continue to pursue growth opportunities across both our casino and distributed gaming platforms to
We will continue to pursue growth opportunities across both our casino and distributed gaming platforms to
increase the scale of our business and expand into new markets. As we execute on our strategic initiatives for
increase the scale of our business and expand into new markets. As we execute on our strategic initiatives for
2018, I believe our platform is well positioned to create further value for shareholders. On behalf of our entire
2018, I believe our platform is well positioned to create further value for shareholders. On behalf of our entire
team, thank you for your continued investment and support of Golden Entertainment.
team, thank you for your continued investment and support of Golden Entertainment.
BOARD OF DIRECTORS
BOARD OF DIRECTORS
MANAGEMENT TEAM
MANAGEMENT TEAM
PROPERTIES & BRANDS
PROPERTIES & BRANDS
Blake L. Sartini
Blake L. Sartini
Chairman of the Board, President
Chairman of the Board, President
and Chief Executive Officer
and Chief Executive Officer
Blake L. Sartini
Blake L. Sartini
Chairman of the Board,
Chairman of the Board,
President and Chief Executive
President and Chief Executive
Officer
Officer
CASINOS
CASINOS
Stratosphere Casino,
Stratosphere Casino,
Hotel & Tower
Hotel & Tower
Las Vegas, Nevada
Las Vegas, Nevada
Lyle A. Berman
Director; former Chairman of the
Board and Chief Executive Officer
of Lakes Entertainment, Inc.
Lyle A. Berman
Director; former Chairman of the
Board and Chief Executive Officer
of Lakes Entertainment, Inc.
Stephen A. Arcana
Stephen A. Arcana
Executive Vice President and
Executive Vice President and
Chief Operating Officer
Chief Operating Officer
Timothy J. Cope
Timothy J. Cope
Director; former President and
Director; former President and
Chief Financial Officer of Lakes
Chief Financial Officer of Lakes
Entertainment, Inc.
Entertainment, Inc.
Charles H. Protell
Charles H. Protell
Executive Vice President,
Executive Vice President,
Chief Strategy Officer and
Chief Strategy Officer and
Chief Financial Officer
Chief Financial Officer
Mark A. Lipparelli
Mark A. Lipparelli
Director; Chief Executive Officer
Director; Chief Executive Officer
of Gioco Ventures; Former
of Gioco Ventures; Former
Nevada State Senator, District 6
Nevada State Senator, District 6
Sean T. Higgins
Sean T. Higgins
Executive Vice President and
Executive Vice President and
Chief Legal Officer
Chief Legal Officer
Robert L. Miodunski
Robert L. Miodunski
Director; former Chief Executive
Director; former Chief Executive
Officer of American Gaming
Officer of American Gaming
Systems
Systems
Neil I. Sell
Director; Of Counsel, Maslon
Edelman Borman & Brand, LLP,
Minneapolis, Minnesota
Neil I. Sell
Director; Of Counsel, Maslon
Edelman Borman & Brand, LLP,
Minneapolis, Minnesota
Terrence L. Wright
Terrence L. Wright
Director; Chairman of the Board
Director; Chairman of the Board
of Westcor Land Title Insurance
of Westcor Land Title Insurance
Company
Company
Edward W. Martin
Edward W. Martin
Executive Vice President and
Executive Vice President and
Chief Administrative Officer
Chief Administrative Officer
Blake L. Sartini, II
Blake L. Sartini, II
Senior Vice President of
Senior Vice President of
Distributed Gaming
Distributed Gaming
Thomas E. Haas
Thomas E. Haas
Senior Vice President of
Senior Vice President of
Accounting
Accounting
STOCK TRANSFER
STOCK TRANSFER
INFORMATION
INFORMATION
Broadridge Corporate Issuer
Broadridge Corporate Issuer
Solutions, Inc.
Solutions, Inc.
P.O. Box 1342
P.O. Box 1342
Brentwood, NY 11717
Brentwood, NY 11717
TRADING SYMBOL
NASDAQ: GDEN
TRADING SYMBOL
NASDAQ: GDEN
Blake L. Sartini
Blake L. Sartini
Chairman, President and Chief Executive Officer
Chairman, President and Chief Executive Officer
April 26, 2018
April 26, 2018
WEBSITE
GoldenEnt.com
WEBSITE
GoldenEnt.com
INVESTOR RELATIONS
INVESTOR RELATIONS
JCIR: Joseph Jaffoni
JCIR: Joseph Jaffoni
212.835.8500
212.835.8500
gden@jcir.com
gden@jcir.com
Aquarius Casino Resort
Laughlin, Nevada
Aquarius Casino Resort
Laughlin, Nevada
Arizona Charlie’s Decatur
Las Vegas, Nevada
Arizona Charlie’s Decatur
Las Vegas, Nevada
Arizona Charlie’s Boulder
Las Vegas, Nevada
Arizona Charlie’s Boulder
Las Vegas, Nevada
Pahrump Nugget Hotel
Pahrump Nugget Hotel
Casino
Casino
Pahrump, Nevada
Pahrump, Nevada
Gold Town Casino
Pahrump, Nevada
Gold Town Casino
Pahrump, Nevada
Lakeside Casino & RV Park
Lakeside Casino & RV Park
Pahrump, Nevada
Pahrump, Nevada
Rocky Gap Casino Resort
Flintstone, Maryland
Rocky Gap Casino Resort
Flintstone, Maryland
DISTRIBUTED GAMING
Golden Route Operations
Nevada
Montana
DISTRIBUTED GAMING
Golden Route Operations
Nevada
Montana
Nevada Tavern Brands
Nevada Tavern Brands
SG Bar
SG Bar
Sierra Gold
Sierra Gold
Sierra Junction
Sierra Junction
Sean Patrick’s
Sean Patrick’s
PT’s Ranch
PT’s Ranch
PT’s Brewing Company
PT’s Brewing Company
PT’s Gold
PT’s Gold
PT’s Pub
PT’s Pub
PT’s Place
PT’s Place
ANNUAL REPORTS
Copies of this Annual Report
and the Company’s Annual
Report on Form 10-K may be
obtained without charge by
submitting a written request to:
ANNUAL REPORTS
Copies of this Annual Report
and the Company’s Annual
Report on Form 10-K may be
obtained without charge by
submitting a written request to:
Golden Entertainment, Inc.
Golden Entertainment, Inc.
c/o Investor Relations
c/o Investor Relations
6595 S Jones Blvd
6595 S Jones Blvd
Las Vegas, NV 89118
Las Vegas, NV 89118