2019 ANNUAL
REPORT
Dear Fellow Shareholders,
As I write this letter reflecting back on 2019, I want to first extend my sympathies to those
directly affected by COVID-19 and our appreciation to the first responders, healthcare
providers and other essential workers that are keeping our communities safe and healthy.
The pandemic is obviously having a profoundly negative impact on a macro level, and more
specifically, to our hospitality industry. As a result, we have been focused on supporting our
team members and emerging from this challenge prepared to address the business
environment ahead.
In review of 2019, we completed several milestones including the completion of our major renovations at The
STRAT. We concluded over $100 million of investment in the property which resulted in approximately 600 new
guest rooms, an updated SkyPod experience, a renovated casino floor, front desk, concierge desk and mobile
check-in area, two new lounges, a new state-of-the-art sports book, the PT’s Wings and Sports venue, a
remodeled experience and new menu program at our award winning Top of the World Restaurant, and finally,
revisions to the exterior lighting and landscaping. These significant updates have been well received and allowed
us to deliver an overall elevated experience to our guests.
In Laughlin, we completed the acquisition of the Edgewater, Colorado Belle and the Laughlin Event Center. With
the acquisition of these assets we have increased our overall footprint in the Laughlin market, providing various
synergies and additional economies of scale. In addition, we were able to create new cross-marketing
opportunities and leveraged the Laughlin Entertainment Center to drive visitation from our other properties and
distributed gaming business.
In 2019 we also completed the launch of True Rewards, our one-card loyalty program connecting our 10 casinos,
66 taverns and 68 supermarket locations, giving the program over 140 locations where our patrons can earn and
redeem rewards. This innovative loyalty program allows us to effectively cross-market all of our assets to our
members while creating efficiencies through a single loyalty program that encompasses both our casino resorts
and distributed gaming locations.
While 2019 was a year of progress and accomplishment, there is a tremendous amount of uncertainty as we move
further into 2020. However, we are positioned and prepared to operate more efficiently than we ever have once
our properties are reopened. On behalf of the entire Golden Entertainment team, thank you for your confidence
and continued support.
Blake L. Sartini
Chairman and Chief Executive Officer
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, 2019
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
(Registrants 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 every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and
emerging growth company in Rule 12b-2 of the Exchange Act.
(cid:4)
(cid:4)
(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 Exchange Act). Yes (cid:4) No ☒
Based upon the last sale price of the registrants common stock, $0.01 par value, as reported on the Nasdaq Global Market on June 28, 2019 (the
last business day of the registrants 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 $258,957,566. For purposes of these computations only, all of the Registrants executive officers
and directors and entities affiliated with them have been deemed to be affiliates.
As of March 10, 2020, 27,914,593 shares of the registrants 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 registrants 2020 annual meeting of shareholders, to be filed with the Securities and Exchange
Commission within 120 days after the registrants year ended December 31, 2019, 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
Page
ITEM I. BUSINESS................................................................................................................................................
2
ITEM 1A.RISK FACTORS....................................................................................................................................... 10
ITEM IB. UNRESOLVED STAFF COMMENTS ................................................................................................... 23
ITEM 2. PROPERTIES ........................................................................................................................................... 24
ITEM 3. LEGAL PROCEEDINGS ......................................................................................................................... 25
ITEM 4. MINE SAFETY DISCLOSURES ............................................................................................................ 25
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES ..................................................................... 26
ITEM 6. SELECTED FINANCIAL DATA ............................................................................................................ 27
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................................................................................................................. 29
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................... 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......................................................... 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ................................................................................................................... 90
ITEM 9A.CONTROLS AND PROCEDURES ......................................................................................................... 90
ITEM 9B.OTHER INFORMATION ........................................................................................................................ 91
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ................................. 91
ITEM 11. EXECUTIVE COMPENSATION ............................................................................................................ 91
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS .............................................................................................. 91
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE .................................................................................................................................... 92
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES........................................................................... 92
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ........................................................................ 93
ITEM 16. FORM 10-K SUMMARY ........................................................................................................................ 97
SIGNATURES ........................................................................................................................................................... 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 Managements Discussion and Analysis of Financial Condition and
Results of Operations, contains forward-looking statements regarding future events and our future results that are
subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended (the Exchange Act). Forward-looking statements can generally be identified by the use of
words such as anticipate, believe, continue, could, estimate, expect, forecast, intend, 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 casino and 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 casino and other acquisitions, including the casinos we
recently acquired in Las Vegas and Laughlin, Nevada, 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, President and Chief Financial Officer,
and Chief Operating Officer); the level of our indebtedness and our ability to comply with covenants in our debt
instruments; 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; the impact of coronavirus (COVID-19) on our business; and other
factors identified under the heading Risk Factors in Part I, Item 1A of this report, or appearing 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 gaming in our branded taverns).
We conduct our business through two reportable operating segments: Casinos and Distributed Gaming. In our
Casinos segment, we own and operate ten resort casinos: nine in Nevada and one in Maryland. Four of our Nevada
resort casino properties were added in October 2017 as a result of our acquisition of American Casino &
Entertainment Properties LLC (American), and in January 2019 we acquired two additional resort casino
properties in Laughlin, Nevada, 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 restaurants,
bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana, and the operation of
branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area.
On April 25, 2019, we issued $375 million of 7.625% Senior Notes due 2026 (the 2026 Notes) in a private
placement to institutional buyers at face value. The 2026 Notes bear interest at 7.625%, payable semi-annually on
April 15th and October 15th of each year. The net proceeds of the 2026 Notes were used to (i) repay our former
$200 million second lien term loan (the Second Lien Term Loan), (ii) repay outstanding borrowings under our
revolving credit facility under our senior secured credit facility with JPMorgan Chase Bank, N.A. (as administrative
agent and collateral agent), the lenders party thereto and the other entities party thereto (the Credit Facility), (iii)
repay $18 million of the outstanding term loan indebtedness under our Credit Facility, and (iv) pay accrued interest,
fees and expenses related to each of the foregoing. See Note 8, Debt, in the accompanying consolidated financial
statements for additional information.
Acquisitions
On January 14, 2019, we completed the acquisition of Edgewater Gaming, LLC and Colorado Belle Gaming, LLC
(the Laughlin Entities) from Marnell Gaming, LLC (Marnell) for $156.2 million in cash (after giving effect to
the post-closing adjustment provisions in the purchase agreement) and the issuance by us of 911,002 shares of our
common stock to certain assignees of Marnell (the Laughlin Acquisition). The Laughlin Acquisition added two
resort casino properties in Laughlin, Nevada to our casino portfolio: the Edgewater Hotel & Casino Resort and the
Colorado Belle Hotel & Casino Resort, which increase our scale and presence in the Southern Nevada market. The
results of operations of the Laughlin Entities are included in our results subsequent to the acquisition date.
On October 20, 2017, we completed the acquisition of all of the outstanding equity interests of American (the
American Acquisition) for $787.6 million in cash (after giving effect to post-closing adjustments) and the issuance
by us of approximately 4.0 million shares of our common stock to a former American equity holder. The American
Acquisition added four Nevada resort casino properties to our casino portfolio, including The STRAT Hotel, Casino
& SkyPod in Las Vegas. These additional resort casino properties expanded and strengthened our presence in
Nevada and the Las Vegas locals market, significantly increased our operational scale and provided us with an
iconic Las Vegas Strip destination property. The results of operations of American have been included in our results
subsequent to that date.
See Note 4, Acquisitions,
regarding each of these acquisitions.
in the accompanying consolidated financial statements for additional
information
2
Casinos
We own and operate ten resort casino properties in Nevada and Maryland. The following table sets forth certain
information regarding our properties as of December 31, 2019:
Location
Slot
Machines
Table
Games
Hotel
Rooms
Race and
Sport
Book
Bingo
(seats)
Nevada Casinos
The STRAT Hotel, Casino &
SkyPod ("The Strat")
Arizona Charlie's Decatur
Arizona Charlie's Boulder
Aquarius Casino Report
("Aquarius")
Edgewater Hotel & Casino
Resort ("Edgewater")
Colorado Belle Hotel &
Casino Report
("Colorado Belle")
Pahrump Nugget Hotel
Casino ("Pahrump Nugget")
Gold Town Casino
Lakeside Casino & RV Park
Maryland Casino
Rocky Gap Casino Resort
("Rocky Gap")
Las Vegas, NV
Las Vegas, NV
Las Vegas, NV
Laughlin, NV
Laughlin, NV
Laughlin, NV
Pahrump, NV
Pahrump, NV
Pahrump, NV
Flintstone, MD
Totals
•
741
1,013
824
1,172
703
669
402
226
168
665
6,583
44
10
-
33
20
16
9
-
-
18
150
2,429
259
303
1,906
1,052
1,102
69
-
-
198
7,318
approx. 400
approx. 400
approx. 200
-
approx. 100
-
-
-
-
-
1
1
1
1
1
1
1
-
-
-
7
The Strat: The Strat is our premier casino property, located on Las Vegas Blvd on the north end of the Las
Vegas Strip. The Strat comprises the iconic SkyPod, a casino, a hotel and a retail center. As of December
31, 2019, in addition to hotel rooms and gaming in an 80,000 square foot casino, The Strat featured nine
restaurants, two rooftop pools, a fitness center, retail shops and entertainment facilities. As of December
31, 2019, all of the significant renovations planned for The Strat were substantially completed, and we had
invested a total of approximately $90 million in such renovations. An additional $20 million is anticipated
to be spent in the first quarter of 2020 related to renovations primarily completed in 2019, bringing the total
renovation cost to approximately $110 million. Upgrades that have been made to the property encompass
room and suite renovations, a new lounge and sports book, renovations to the SkyPod, a remodeled gift
shop and food and beverage outlets, improvements to the SkyJump experience, renovations to the Top of
the World Restaurant and updated exterior lighting and landscaping surrounding the property.
•
Arizona Charlies casinos: Our Arizona Charlies Decatur and Arizona Charlies Boulder casino properties
primarily serve local Las Vegas patrons, and provide an alternative experience to the Las Vegas Strip.
Arizona Charlies Decatur casino 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. Arizona
Charlies Boulder casino 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, 2019, in addition to hotel rooms, gaming
and bingo facilities, Arizona Charlies Decatur casino offered five restaurants and Arizona Charlies
Boulder casino offered four restaurants and an RV park with approximately 220 RV hook-up sites.
3
•
•
•
Laughlin casinos: We own and operate three casinos in Laughlin, Nevada, which is located approximately
90 miles from Las Vegas on the western riverbank of the Colorado River. Our Laughlin casinos are situated
on 56 adjacent acres along the heart of the Laughlin Riverwalk and cater 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, 2019, in addition to hotel rooms and gaming, the Aquarius had
eight restaurants, the Colorado Belle featured three restaurants, and the Edgewater featured six restaurants
and dedicated entertainment venues, including the Laughlin Event Center. The Laughlin Event Center,
which is situated within walking distance from the Edgewater and in close proximity to our other Laughlin
is an outdoor arena that can seat up to approximately 12,000 guests and hosts various
properties,
entertainment programs throughout the year, such as concerts, festivals, bull riding, rodeo, off-road racing
and extreme sports events.
Pahrump casinos: We own and operate three casinos in Pahrump, Nevada, which is located approximately
60 miles from Las Vegas and is a gateway to Death Valley National Park. As of December 31, 2019, in
addition to hotel rooms, gaming and bingo facilities at our Pahrump casino properties, Pahrump Nugget
offered a bowling center and our Lakeside Casino & RV Park offered 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 (the Maryland DNR) under a 40-
year ground lease expiring in 2052 (plus a 20-year option renewal). As of December 31, 2019, in addition
to hotel rooms and gaming, Rocky Gap offered three restaurants, a spa and the only Jack Nicklaus signature
golf course in Maryland. Rocky Gap is a AAA Four Diamond Award® winning resort and includes 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 restaurants, bars, taverns, convenience stores, liquor stores and grocery
stores in Nevada and Montana. We place our slots and amusement devices in locations where we believe they will
receive maximum customer traffic, generally near a stores entrance. In addition, we own and operate branded
taverns with slots, which target local patrons, primarily in the greater Las Vegas, Nevada metropolitan area. As of
December 31, 2019, our distributed gaming operations comprised approximately 10,900 slots in over 1,000
locations. In August 2017, we were licensed as a video gaming terminal operator in Illinois, providing for potential
expansion into a new jurisdiction, and in October 2018 we received a conditional license to operate in Pennsylvania.
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 agreements, revenue share agreements and participation agreements. Under space agreements, we pay a fixed
monthly rental for the right to install, maintain and operate our slots. Under revenue share agreements, we pay a
percentage of the gaming revenue generated from our slots, rather than a fixed monthly rental fee. With regard to
both space agreements 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 generated from our slots. In Montana, our slot and
amusement device placement contracts are all participation agreements.
4
Our 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, 2019, we owned and
operated 66 branded taverns, which offered a total of over 1,000 onsite slots. We continue to look for opportunistic
and accretive opportunities to pursue additional tavern openings and acquisitions. 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 patrons are typically younger than traditional casino
customers, which diversifies our customer demographic. Our tavern brands include PTs Gold, PTs Pub, Sierra
Gold, Sean Patricks, PTs Place, PTs Ranch, Sierra Junction and SG Bar.
Sales and Marketing
Casinos
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 The Strat casino property (with
almost 600 newly renovated rooms, new and refreshed food and beverage outlets, and the iconic SkyPod), 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.
Our casino sales and marketing efforts also include our new consolidated loyalty program, True RewardsTM,
designed to encourage repeat business at our resort casino properties, as discussed below.
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 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.
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.
Our Distributed Gaming sales and marketing efforts also include our True Rewards loyalty program, which is
designed to encourage repeat business at our branded taverns and at slots located at participating supermarkets, as
discussed below.
5
True Rewards Loyalty Program
Our marketing efforts also seek to capitalize on repeat visitation through the use of our True Rewards loyalty
program. We offer our True Rewards loyalty program at all ten of our resort casino properties, as well as at all of
our branded taverns and at participating supermarkets. Members of our True Rewards loyalty program may earn
points based on gaming activity and amounts spent on rooms, food, beverage and resort activities at our resort
casino properties, and on play and amounts spent on the purchase of food and beverages at our branded taverns and
other participating Distributed Gaming locations. Loyalty points are redeemable for complimentary slot play, food,
beverages, grocery gift cards and hotel rooms, among other items. All points earned in the loyalty program roll up
into a single account balance which is redeemable enterprise-wide at participating locations.
Our rewards technology is designed to track customer behavior indicators such as visitation, customer spend and
customer engagement. As of December 31, 2019, we had approximately 800,000 active players in our marketing
database, providing us with an avenue to drive customer engagement and cross-marketing opportunities across our
resort casino and distributed gaming platform.
Intellectual Property
We 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
loyalty programs and branded 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.
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 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.
6
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
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 FactorsOur 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 FactorsOur 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
shareholders 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.
7
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 FactorsChanges 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
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 Laughlin 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 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, which lawsuits
were settled in 2019. The lawsuits alleged 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. 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.
Alcoholic beverage control regulations require each of our branded taverns and casino properties to apply to a state
authority and, in certain locations, county or municipal authority for a license or permit to sell alcoholic beverages. 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 business or businesses to be forced to cease
operations. Moreover, state liquor laws may prevent the expansion of restaurant operations into certain markets.
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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, 2019 we had approximately 8,000 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 believe we have good relationships with our employees, including those represented
by unions.
At The Strat, four collective bargaining agreements cover our employees. Our collective bargaining agreement with
the International Union of Operating Engineers, Local 501, AFL-CIO expired on March 31, 2018 and was
successfully renegotiated in the first quarter of 2020. Our collective bargaining agreements with the Professional,
Clerical and Miscellaneous Employees, Teamsters Local Union 986 (Valet and Warehouse) expire on March 31,
2024. Our collective bargaining agreement with the Culinary Workers Union, Local 226 and Bartenders Union,
Local 165 expires on May 31, 2023.
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 and is
currently under negotiation. Our collective bargaining agreement with the International Union of Security, Police,
and Fire Professionals of America expires on February 28, 2021. Our collective bargaining agreement with the
United Steelworkers of America expires on March 31, 2021. Our collective bargaining agreement with the
International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts of the
United States, Its Territories and Canada, Local 720, Las Vegas, Nevada expires on November 30, 2022.
At Rocky Gap, our collective bargaining agreement with the United Food and Commercial Workers Union, Local
27 expires on November 1, 2023.
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 Exchange Act, 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 SECs website at www.sec.gov.
9
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 Managements 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 in the Laughlin
Acquisition, could materially adversely affect our business, and we may not realize the full benefits of the
Laughlin Acquisition or our other strategic acquisitions.
Our ability to realize the anticipated benefits of our strategic acquisitions, including our January 2019 Laughlin
Acquisition, 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:
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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 managements 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 Laughlin 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. Integration of
recently acquired businesses into our own operations in particular can be time consuming and present financial,
managerial and operational challenges. Issues that arise during this process may divert managements 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
operations of the Laughlin Entities that arose before the acquisition. Moreover, as non-public companies at the time
of our acquisition, the subsidiaries we acquired in the Laughlin Acquisition did not have 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 acquired businesses into compliance with those requirements may cause us to incur
substantial additional expense.
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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 Laughlin 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. For example, in early 2020, an outbreak of a new strain of coronavirus, COVID-19, was
identified in Wuhan, China. In response to the Coronavirus outbreak, significant travel warnings and restrictions
have been implemented. The extent and duration of such impacts over the longer term remain largely uncertain and
dependent on future developments that cannot be accurately predicted at this time, such as the severity and
transmission rate of the coronavirus, the extent and effectiveness of containment actions taken, including mobility
restrictions, and the impact of these and other factors on travel behavior. It is possible that the spread of the
coronavirus may impact our customers interest in visiting our casino report properties, our branded taverns and
other public facilities. Any such impacts may have an adverse effect on our business.
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.
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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
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 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.
Our significant indebtedness could adversely affect our financial health and prevent us from fulfilling our
obligations.
We have a significant amount of indebtedness. As of December 31, 2019, our senior indebtedness, excluding
unamortized debt issuance costs, was $1.1 billion, which was comprised of $772 million of outstanding term loan
borrowings under our Credit Facility and $375 million of 2026 Notes. Our level of debt could, among other things:
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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. Our
Credit Facility includes a $200 million revolving credit facility, which was undrawn at December 31, 2019. In
addition, our Credit Facility and the indenture governing the 2026 Notes (the Indenture) permit us, subject to
specific limitations,
level of
to incur additional
indebtedness, the related risks that we now face could intensify.
indebtedness. If new indebtedness is added to our current
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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 Credit Facility restricts 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. In addition, under the Indenture we are subject to certain
limitations, including limitations on our ability to incur additional debt and sell assets. 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.
Covenants in our debt instruments restrict our business and could limit our ability to implement our business
plan.
Our Credit Facility and Indenture 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 Credit Facility and Indenture include covenants restricting, among other things, our ability to do
the following:
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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;
• make loans and investments;
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pay dividends, make distributions, or redeem or repurchase capital stock;
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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 Credit Facility is secured by liens
on substantially all of our and the subsidiary guarantors present and future assets (subject to certain exceptions).
If we default under the Credit Facility or Indenture 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 Credit Facility or Indenture 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.
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Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to
increase significantly.
income and cash flows,
The borrowings under our Credit Facility are subject to variable rates of interest and expose us to interest rate risk.
Increases in the interest rate generally, and particularly when coupled with any significant variable rate
indebtedness, could materially adversely impact our interest expenses. If interest rates were to increase, our debt
service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the
same, and our net
including cash available for servicing our indebtedness, will
correspondingly decrease. Each quarter point change in interest rates would result in a $1.9 million change in annual
interest expense on our indebtedness under our Credit Facility. We are not required to enter into interest rate swaps
to hedge such indebtedness. If we decide not to enter into hedges on such indebtedness, our interest expense on such
indebtedness will fluctuate based on variable interest rates. Consequently, we may have difficulties servicing such
unhedged indebtedness and funding our other fixed costs, and our available cash flow for general corporate
requirements may be materially adversely affected. In the future, we may enter into interest rate swaps that involve
the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may
not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into
may not fully mitigate our interest rate risk.
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.
improvements of casino properties in particular
Renovations and other capital
require significant capital
expenditures. For example, between May 2018 and December 2019 we invested approximately $90 million in
strategic renovations of The Strat. 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.
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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
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.
15
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
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 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, which lawsuits
were settled in 2019. The lawsuits alleged 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. 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.
Alcoholic beverage control regulations require each of our branded taverns and casino properties to apply to a state
authority and, in certain locations, county or municipal authority for a license or permit to sell alcoholic beverages. 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 business or businesses to be forced to cease
operations. Moreover, state liquor laws may prevent the expansion of restaurant operations into certain markets. The
loss or suspension of any liquor or food service license could have a material adverse effect on our business,
financial condition, results of operations and prospects.
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
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
16
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, which 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.
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
including systems to maintain and transmit customers personal and financial
systems and infrastructure,
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,
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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 games 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 customers 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 resort properties solely in Nevada and in Flintstone, Maryland, and conduct our
distributed gaming (including gaming in our branded 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:
•
•
•
•
•
changes in local or regional economic conditions and unemployment rates;
changes in local and state laws and regulations, including gaming laws and regulations;
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).
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Some of our casino properties and most of our tavern properties largely depend on the local markets for customers.
Competition for local customers in Las Vegas in particular is 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 agreements.
the majority of our distributed gaming business under space, revenue share and participation
We conduct
agreements with third parties. Agreements with chain store and other third party customers are renewable at the
option of the owner of the applicable chain store or third party. As our distributed gaming agreements expire, we are
required to compete for renewals. If we are unable to renew a material portion of our space, revenue share and
participation agreements, this could have a material adverse effect on our business, financial condition, results of
operations and prospects. We cannot assure you that our existing agreements will be renewed on reasonable or
comparable terms, or at all.
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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 registrants annual or interim financial statements will
not be prevented or detected on a timely basis. 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, even if without merit, can be expensive to defend and 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 President and Chief Financial Officer, and our Chief Operating 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.
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, 2019, our executive officers and directors and entities affiliated with them owned, in the
aggregate, approximately 33% 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.
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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 shareholders 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 individuals 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 persons 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 Commissions 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 persons ability
to associate or affiliate with gaming licensees in that particular jurisdiction and could impact the persons 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
finding of suitability, subject to limited exceptions for institutional investors that hold a companys voting
securities for investment purposes only. Under Nevada gaming laws, any person who acquires or holds more than
5% of our voting power must report the acquisition or holding to the Gaming Commission. Except for certain
pension or employee benefit plans, each person who acquires or holds the beneficial ownership of any amount of
any class of voting power and who has the intent to engage in any proscribed activity shall (a) within 2 days after
possession of such intent, notify the Chair of the Nevada Board in the manner prescribed by the Chair; (b) apply to
the Gaming Commission for a finding of suitability within 30 days after notifying the Chair pursuant to paragraph
(a); and (c) deposit with the Nevada Board the sum of money required by the Nevada Board to pay the anticipated
costs and charges incurred in the investigation and processing of the application. Proscribed activity means: 1. An
activity that necessitates a change or amendment to our corporate charter, bylaws, management, policies or
operation of the Company; 2. An activity that materially influences or affects the affairs of the Company; or 3. Any
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other activity determined by the Gaming Commission to be inconsistent with holding voting securities for
investment purposes. 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 shareholders background or status jeopardizes our current or proposed gaming licensure, we may be
required to redeem such shareholders 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 shareholders securities may result in the loss of a current or
potential gaming license.
We expect our stock price to be volatile.
The market price of our common stock has been, and is likely to continue to be, volatile. During 2019, the market
price of our common stock has ranged from $12.32 to $20.42. The market price of our common stock may be
significantly affected by many factors, including:
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•
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•
•
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.
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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 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 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 900,000 shares of our common stock in connection with the Laughlin Acquisition
in January 2019, 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.
Provisions in our Articles of Incorporation and Bylaws or our debt 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:
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•
•
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 shareholders share
acquisition date, which may discourage, delay or prevent a change in control of our company. Under the Indenture,
if certain specified change of control events occur, each holder of the 2026 Notes may require us to repurchase all of
such holders 2026 Notes at a purchase price equal to 101% of the principal amount of such notes. In addition, our
Credit Facility provides for an event of default upon the occurrence of certain specified change of control events.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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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 December 31, 2030. See Note 15, Related Party Transactions, in the accompanying consolidated
financial statements for information on our transactions with related parties.
Casinos
The Strat: We own the approximately 34 acres of land on which The Strat is located (of which approximately 17
acres are undeveloped and reserved for future development).
Arizona Charlies Decatur: We own the approximately 17 acres of land on which our Arizona Charlies Decatur
casino property is located. In addition, we lease office, storage and laundry space for our Arizona Charlies Decatur
casino property in an adjacent shopping center. The lease is with an unrelated party and expires in 2097.
Arizona Charlies Boulder: We own the approximately 24 acres of land on which our Arizona Charlies Boulder
casino property is located.
Laughlin Casinos: 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), approximately 22 acres of
land on which the Colorado Belle casino property is located and approximately 16 acres of land on which the
Edgewater casino property is located. In addition, we lease approximately 20 acres of land for the Laughlin Event
Center for our Laughlin casino properties. The lease is with an unrelated party and expires in 2027.
Pahrump Casinos: We own the approximately 40 acres of land on which the 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 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 Credit Facility (subject to receipt of
certain approvals).
Distributed Gaming
We lease our 66 branded tavern locations under non-cancelable operating leases. As of December 31, 2019, the
terms of our tavern leases ranged from six to 31 years, with various renewal options from four to 10 years.
24
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 record reserves. 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.
On August 31, 2018, prior guests of The Strat filed a purported class action complaint against us in the District
Court, Clark County, 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 alleged that the Tax
was charged in violation of the federal Internet Tax Freedom Act, which imposed a national moratorium on the
taxation of Internet access by states and their political subdivisions, and sought, 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,
including Golden
Entertainment, Inc., filed a joint motion to dismiss this matter for lack of merit. The District Court granted this joint
motion to dismiss on February 21, 2019. The plaintiffs filed an appeal to the Supreme Court of Nevada on April 10,
2019. We, and other defendants, filed an appellate response brief on October 19, 2019.
fees and costs. All defendants to this matter,
interest,
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 managements 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.
25
PART II
ITEM 5. MARKET FOR REGISTRANTS 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.
As of March 10, 2020, there were approximately 230 shareholders of record of our common stock.
Dividends
Other than the special cash dividend that was made in July 2016 pursuant to the terms of the Sartini Gaming merger
agreement, we have neither declared nor paid any cash dividends with respect to our common stock. The current
policy of our 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 cash dividends in the future will be at the discretion of our Board of Directors and
will depend upon such factors as our financial condition, results of operations, capital requirements, our general
business condition, restrictions under our Credit Facility and Indenture and any other factors deemed relevant by our
Board of Directors.
Share Repurchase Program
Our Board of Directors has authorized us to repurchase up to $25.0 million worth of shares of common stock,
subject to available liquidity, general market and economic conditions, alternate uses for the capital and other
factors. No shares were repurchased under our share repurchase program during the year ended December 31, 2019.
See Note 9, Equity Transactions and Stock Incentive Plans, in the accompanying consolidated financial statements
for information regarding our share repurchase program.
26
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 Managements 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.
December 31,
December 31,
December 31,
December 31,
December 31,
2019(1)
2018(2)
2017(3)(4)
2016(3)(5)
2015(6)
For the Year Ended:
(In millions, except per share amounts)
Results of Continuing Operations:
Total revenues
Income 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
973 $
46 $
(40) $
852 $
51 $
(21) $
507 $
15 $
2 $
400 $
13 $
16 $
(1.43) $
(0.76) $
0.09 $
0.74 $
(1.43) $
(0.76) $
0.08 $
0.73 $
112 $
1,741 $
1,318 $
290 $
116 $
1,367 $
968 $
315 $
91 $
1,365 $
966 $
320 $
47 $
419 $
172 $
209 $
176
18
25
1.45
1.43
69
379
143
210
(1) Our results for the year ended December 31, 2019 included the operating results of the Laughlin Entities from the
closing date of the Laughlin Acquisition on January 14, 2019. We recorded approximately $90.4 million in
revenues and $1.8 million in net income from the operations of the Laughlin Entities for the year ended
December 31, 2019. Income from operations for the year ended December 31, 2019 included approximately
$1.8 million in acquisition expenses primarily related to the Laughlin Acquisition. Net loss for the year ended
December 31, 2019 included a loss on extinguishment and modification of debt of $9.2 million.
We adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), as amended, as of
January 1, 2019, and elected the option to apply the transition requirements in the new standard at the
effective date of January 1, 2019 with the effects of initially applying Topic 842 recognized as a cumulative-
effect adjustment to retained earnings on January 1, 2019. As a result, total assets and total long-term
liabilities are not comparable to the prior periods in this first year of adoption.
(2)
(3)
Income from operations for the year ended December 31, 2018 included approximately $1.2 million in preopening
expenses primarily related to the opening of new taverns in the Las Vegas Valley and $3.0 million in acquisition
expenses primarily related to the Laughlin Acquisition. Net loss for the year ended December 31, 2018 included an
income tax provision of $9.6 million, which resulted primarily from the change in valuation allowance.
Selected financial data as of and for the years ended December 31, 2017 and 2016 have been retrospectively
adjusted for the adoption of the new revenue recognition standard. See Note 3, Revenue Recognition, in the
accompanying consolidated financial statements for more information. Selected financial data as of and for the
year ended December 31, 2015 has not been adjusted and therefore is not comparable.
27
(4) Our results for the year ended December 31, 2017 included the operating results of American from the closing date of
the American Acquisition, on October 20, 2017. We recorded approximately $76.3 million in revenues and $5.5
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 the non-capital costs associated with the opening of taverns, 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.
(5) Our results for the year ended December 31, 2016 included the operating results of the Montana distributed
gaming businesses we acquired in 2016 from the closing dates of the respective transactions. We recorded
approximately $45.4 million in 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 the non-capital costs associated with the opening of taverns, 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 cash dividend of approximately $23.5 million was paid to shareholders (other than
shareholders that had waived their right to receive such dividend in connection with the Sartini Gaming
merger).
(6) Our results for the year ended December 31, 2015 included the operating results of Sartini Gaming from the
Sartini Gaming merger on August 1, 2015. We recorded approximately $116.8 million in revenues and $10.4
million in net income from the operations of Sartini Gamings 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 Sartini Gaming 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 Sartini Gaming merger. Our results for the year ended December 31, 2015 also
reflected a gain of $23.6 million related to the disposition of our $60.0 million subordinated promissory note
from the Jamul Indian Village to a subsidiary of Penn National Gaming, Inc. in December 2015.
28
ITEM 7. MANAGEMENTS 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 gaming in our branded taverns).
We conduct our business through two reportable operating segments: Casinos and Distributed Gaming. In our
Casinos segment, we own and operate ten 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 restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and
Montana, and the operation of branded taverns targeting local patrons located primarily in the greater Las Vegas,
Nevada metropolitan area.
On April 25, 2019, we issued $375 million of 2026 Notes in a private placement to institutional buyers at face value.
The 2026 Notes bear interest at 7.625%, payable semi-annually on April 15th and October 15th of each year. See
Note 8, Debt, in the accompanying consolidated financial statements for additional information.
Casinos
On January 14, 2019, we completed the acquisition of the Laughlin Entities from Marnell for $156.2 million in cash
(after giving effect to the post-closing adjustment provisions in the purchase agreement) and the issuance by us of
911,002 shares of our common stock to certain assignees of Marnell. The Laughlin Acquisition added two resort
casino properties in Laughlin, Nevada to our casino portfolio: the Edgewater and the Colorado Belle, which increase
our scale and presence in the Southern Nevada market. The results of operations of the Laughlin Entities are
included in our results subsequent
in the accompanying
consolidated financial statements for additional information.
to the acquisition date. See Note 4, Acquisitions,
On October 20, 2017, we completed the acquisition of all of the outstanding equity interests of American for $787.6
million in cash (after giving effect to post-closing adjustments) and the issuance by us of approximately 4.0 million
shares of our common stock to a former American equity holder. The American Acquisition added four Nevada
resort casino properties to our casino portfolio, including The Strat in Las Vegas. The results of operations of
American and its subsidiaries have been included in our results subsequent to that date. See Note 4, Acquisitions, in
the accompanying consolidated financial statements for additional information.
29
We own and operate ten resort casino properties in Nevada and Maryland. The following table sets forth certain
information regarding our properties as of December 31, 2019:
Location
Slot
Machines
Table
Games
Hotel
Rooms
Race and
Sport
Book
Bingo
(seats)
Nevada Casinos
The STRAT Hotel, Casino &
SkyPod ("The Strat")
Arizona Charlie's Decatur
Arizona Charlie's Boulder
Aquarius Casino Report
("Aquarius")
Edgewater Hotel & Casino
Resort ("Edgewater")
Colorado Belle Hotel &
Casino Report
("Colorado Belle")
Pahrump Nugget Hotel
Casino ("Pahrump Nugget")
Gold Town Casino
Lakeside Casino & RV Park
Maryland Casino
Rocky Gap Casino Resort
("Rocky Gap")
Totals
Las Vegas, NV
Las Vegas, NV
Las Vegas, NV
Laughlin, NV
Laughlin, NV
Laughlin, NV
Pahrump, NV
Pahrump, NV
Pahrump, NV
Flintstone, MD
741
1,013
824
1,172
703
669
402
226
168
665
6,583
44
10
-
33
20
16
9
-
-
18
150
2,429
259
303
1,906
1,052
1,102
69
-
-
198
7,318
approx. 400
approx. 400
approx. 200
-
approx. 100
-
-
-
-
-
1
1
1
1
1
1
1
-
-
-
7
•
•
•
•
•
The Strat: The Strat is our premier casino property, located on Las Vegas Blvd on the north end of the Las
Vegas Strip. The Strat comprises the iconic SkyPod, a casino, a hotel and a retail center. As of December
31, 2019, in addition to hotel rooms and gaming in an 80,000 square foot casino, The Strat featured nine
restaurants, two rooftop pools, a fitness center, retail shops and entertainment facilities.
Arizona Charlies casinos: Our Arizona Charlies Decatur and Arizona Charlies Boulder casino properties
primarily serve local Las Vegas patrons, and provide an alternative experience to the Las Vegas Strip. As
of December 31, 2019, in addition to hotel rooms, gaming and bingo facilities, Arizona Charlies Decatur
casino offered five restaurants and Arizona Charlies Boulder casino offered four restaurants and an RV
park with approximately 220 RV hook-up sites.
Laughlin casinos: We own and operate three casinos in Laughlin, Nevada, which is located approximately
90 miles from Las Vegas on the western riverbank of the Colorado River. As of December 31, 2019, in
addition to hotel rooms and gaming, the Aquarius had eight restaurants, the Colorado Belle featured three
restaurants, and the Edgewater featured six restaurants and dedicated entertainment venues, including the
Laughlin Event Center.
Pahrump casinos: We own and operate three casinos in Pahrump, Nevada, which is located approximately
60 miles from Las Vegas and is a gateway to Death Valley National Park. As of December 31, 2019, in
addition to hotel rooms, gaming and bingo facilities at our Pahrump casino properties, Pahrump Nugget
offered a bowling center and our Lakeside Casino & RV Park offered 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 DNR under a 40-year ground lease expiring in 2052 (plus a 20-year
option renewal). As of December 31, 2019, in addition to hotel rooms and gaming, Rocky Gap offered
three restaurants, a spa and the only Jack Nicklaus signature golf course in Maryland. Rocky Gap is a AAA
Four Diamond Award® winning resort and includes an event and conference center.
30
Distributed Gaming
Our Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement
devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery
stores in Nevada and Montana. We place our slots and amusement devices in locations where we believe they will
receive maximum customer traffic, generally near a stores entrance. In addition, we own and operate branded
taverns with slots, which target local patrons, primarily in the greater Las Vegas, Nevada metropolitan area. As of
December 31, 2019, our distributed gaming operations comprised approximately 10,900 slots in over 1,000
locations.
Our 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, 2019, we owned and
operated 66 branded taverns, which offered a total of over 1,000 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 PTs Gold, PTs Pub, Sierra Gold, Sean
Patricks, PTs Place, PTs Ranch, Sierra Junction and SG Bar.
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, 2019.
(In thousands)
Revenues by segment
Casinos
Distributed Gaming
Corporate and other
Total revenues
Operating expenses by segment
Casinos
Distributed Gaming
Corporate and other
Total operating expenses
Selling, general and administrative
Depreciation and amortization
Acquisition and severance expenses
Preopening expenses
Loss on disposal of assets
Gain on contingent consideration
Other operating, net
Total expenses
Operating income
Non-operating expense, net
Income tax benefit (provision)
Net income (loss)
2019
Year Ended December 31,
2018
2017
$
$
$
615,401
357,239
770
973,410
302,371
275,104
1,037
578,512
225,848
116,592
3,488
1,934
919
927,293
$
513,949
337,067
778
851,794
247,042
263,953
3,237
514,232
183,892
94,456
3,740
1,171
3,336
800,827
46,117
(87,538)
1,876
(39,545)
$
50,967
(62,242)
(9,639)
(20,914)
$
179,049
327,506
583
507,138
90,037
255,621
641
346,299
98,382
40,786
6,183
1,632
441
(1,719)
(157)
491,847
15,291
(21,128)
7,921
2,084
31
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Revenues
The $121.6 million, or 14%, increase in revenues resulted primarily from increases of $53.6 million, $32.5 million,
$25.4 million and $10.1 million in gaming, food and beverage, room and other revenues, respectively, due primarily
to the inclusion in 2019 of almost a full year of revenues from the resort casino properties acquired in the Laughlin
Acquisition, the rebranding of The Strat, and growth in our tavern portfolio and Montana distribution gaming
locations.
The $101.5 million, or 20.0%, increase in revenues related to our Casinos segment compared to the prior year
resulted primarily from increases of $37.4 million, $29.3 million, $25.4 million and $9.3 million in gaming, food
and beverage, room and other revenues, respectively, due primarily to the inclusion in 2019 of almost a full year of
revenues from the resort casino properties acquired in the Laughlin Acquisition and the rebranding of The Strat.
The $20.2 million, or 6%, increase in revenues related to our Distributed Gaming segment resulted primarily from
increases of $16.2 million, $3.1 million and $0.8 million in gaming revenues, food and beverage revenues and other
revenues, respectively. These increases reflect the opening of six new taverns in the Las Vegas Valley in 2019, as a
full year of revenues from the three taverns opened in 2018, stabilized performance of our Nevada distributed
gaming locations and the increase of locations and slot product performance in our Montana distributed gaming
locations.
During the year ended December 31, 2019, Adjusted EBITDA in our Casinos segment as a percentage of segment
revenues (or Adjusted EBITDA margin) was 29%, compared to Adjusted EBITDA margin in our Distributed
Gaming segment of 15%. The lower Adjusted EBITDA margin in our Distributed Gaming segment relative to our
Casinos segment reflects the fixed and variable amounts paid to third parties under our space and revenue share
agreements as expenses in the Distributed Gaming segment (which includes the percentage of gaming revenues paid
to third parties under revenue share agreements). See Note 16, Segment Information,
in the accompanying
consolidated financial statements for additional
information regarding segment Adjusted EBITDA and a
reconciliation of segment Adjusted EBITDA to segment net income (loss).
Operating Expenses
The $64.3 million, or 13%, increase in operating expenses compared to the prior year resulted primarily from $23.3
million, $21.6 million, $13.4 million and $6.0 million increases in gaming, food and beverage, room and other
expenses, respectively. These operating expense increases primarily reflect the inclusion in 2019 of almost a full
year of operating expenses relating to the resort casino properties acquired in the Laughlin Acquisition and the
operating expenses of six new taverns, renovated food and beverage outlets at The Strat, and additional Montana
distributed gaming locations.
Selling, General and Administrative Expenses
The $42.0 million, or 23%, increase in selling, general and administrative (SG&A) expenses compared to the prior
year resulted primarily from the inclusion in 2019 of almost a full year of SG&A expenses relating to the resort
casino properties acquired in the Laughlin Acquisition and corporate related expenses.
Within our Casinos segment, SG&A expenses increased $28.8 million, or 26%, resulting primarily from the
inclusion in 2019 of almost a full year of SG&A relating to the resort casino properties acquired in the Laughlin
Acquisition. The majority of the SG&A expenses in this segment comprised labor costs, marketing and advertising,
utilities expenses, repairs and maintenance, and property taxes.
Within our Distributed Gaming segment, SG&A expenses increased $4.8 million or 18%, primarily due to the
opening of six new taverns in the Las Vegas Valley in 2019 as well as a full year of expenses from the three taverns
opened in 2018. The majority of SG&A expenses in this segment comprised payroll and payroll taxes, marketing,
building and rent expense, insurance and property taxes.
32
Corporate SG&A expenses increased $9.5 million, or 19% compared to the prior year, primarily from labor costs
and professional services in accounting. The majority of SG&A expense in this segment comprised of corporate
office overhead, information technology, legal, accounting, third party service providers, executive compensation,
share based compensation, payroll expenses and payroll taxes.
Acquisition and Severance Expenses
Acquisition and severance expenses during the year ended December 31, 2019 related primarily to the Laughlin
Acquisition, which closed on January 14, 2019 and subsequent integration activities. During the prior year,
acquisition expenses primarily related to the American Acquisition and the Laughlin Acquisition.
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 2019 and 2018, preopening expenses related primarily to costs incurred in the opening of new taverns in the
Las Vegas Valley.
Depreciation and Amortization
Depreciation and amortization expenses increased $22.1 million, or 23%, compared to the prior year, primarily due
to the depreciation of the assets and the amortization of the intangibles acquired in the Laughlin Acquisition.
Non-Operating Expense, Net
Non-operating expense, net increased $25.3 million compared to the prior year, primarily due to a $10.2 million
increase in interest expense from the higher level of indebtedness following the consummation of the Laughlin
Acquisition, and a loss on change in fair value of derivative of $3.7 million. Non-operating expense, net in 2019 also
included $5.5 million related to a loss on extinguishment of debt.
Income Taxes
Income tax benefit for the year ended December 31, 2019 was approximately $1.9 million, which resulted primarily
from the change in valuation allowance. Income tax expense for the year ended December 31, 2018 was
approximately $9.6 million, attributable primarily to the change in valuation allowance. The effective tax rate was
4.5% for the year ended December 31, 2019, which differed from the federal tax rate of 21% due primarily to the
change in valuation allowance. The effective tax rate for the year ended December 31, 2018 was (85.5)%, which
differed from the federal tax rate of 21% due primarily to the change in valuation allowance.
As of December 31, 2019, we evaluated all available positive and negative evidence related to our ability to utilize
our deferred tax assets. We considered the expected future taxable income (and losses) and deductions from existing
deferred tax assets and liabilities, net operating loss carryforwards, tax credit carryforwards, and other factors in
reaching the conclusion that the deferred tax assets are not currently expected to be realized, and that therefore, the
valuation allowance against the deferred tax assets required adjustment.
The Company recognizes penalties and interest related to uncertain tax benefits in the provision for income taxes.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
For a discussion of our results of operations for the year ended December 31, 2018 as compared to the year ended
December 31, 2017, see Managements Discussion and Analysis of Financial Condition and Results of Operations
in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 21, 2018.
33
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 severance expenses, loss on disposal of assets,
share-based compensation expenses, gain on contingent consideration, loss on extinguishment of debt, gain/loss on
change in fair value of derivative, and other operating expenses.
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA:
(In thousands)
Net income (loss)
Depreciation and amortization
Preopening and related expenses (1)
Acquisition and severance expenses
Asset disposal and other writedowns
Share-based compensation
Other, net
Gain on contingent consideration
Interest expense, net
Loss on extinguishment of debt
Change in fair value of derivative
Income tax provision (benefit)
Adjusted EBITDA
2019
Year Ended December 31,
2018
2017
$
$
(39,545) $
116,592
4,548
3,488
1,309
10,124
2,216
74,220
9,150
4,168
(1,876)
184,394
$
(20,914)
94,456
1,171
3,740
3,336
9,988
1,088
64,028
(1,786)
9,639
164,746
$
$
2,084
40,786
1,632
6,183
441
8,754
1,460
(1,719)
19,598
1,708
(178)
(7,921)
72,828
(1)
Preopening and related expenses include rent, organizational costs, non-capital costs associated with the
opening of tavern and casino locations, and expenses related to The Strat rebranding and the launch of the
True Rewards loyalty program.
Liquidity and Capital Resources
As of December 31, 2019, we had $111.7 million in cash and cash equivalents. 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.
34
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 our universal shelf registration
statement effective for the future sale of up to $150.0 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, 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. Our net proceeds from the offering were approximately
$25.6 million after deducting underwriting discounts and offering expenses.
In April 2019, we issued $375 million of 2026 Notes in a private placement to institutional buyers at face value. The
net proceeds of the 2026 Notes were used to (i) repay our former $200 million Second Lien Term Loan, (ii) repay
outstanding borrowings under our revolving credit facility under our Credit Facility, (iii) repay $18 million of the
outstanding term loan indebtedness under our Credit Facility, and (iv) pay accrued interest, fees and expenses
related to each of the foregoing.
Cash Flows
Net cash provided by operating activities was $113.9 million for the year end December 31, 2019 compared to $98.0
million for the prior year. The increase was primarily due to the flow-through effect of higher revenues from the
Laughlin Acquisition.
Net cash used in investing activities was $256.1 million for the year ended December 31, 2019, which included
$107.3 million for capital expenditures and $149.0 million for the Laughlin Acquisition. Net cash used in investing
activities was $69.2 million for the year ended December 31, 2018, which included $68.2 million for capital
expenditures.
Net cash provided by financing activities was $137.8 million for the year ended December 31, 2019, which
primarily related to $375.0 million of proceeds from the issuance of the 2026 Notes offset by $220.0 million of
repayments under our Credit Facility. Net cash used in financing activities was $3.3 million for the year ended
December 31, 2018, which primarily related to $19.6 million of stock repurchases authorized in November 2018 and
$8.0 million of repayments under our Credit Facility, offset by $25.6 million of net proceeds to us in the
underwritten public offering completed in January 2018.
Senior Secured Credit Facility
In October 2017, we entered into the Credit Facility, then consisting of a $800 million term loan and a $100 million
revolving credit facility. The revolving credit facility was subsequently increased from $100 million to $200 million
in 2018.
As of December 31, 2019, we had $772 million in outstanding term loan borrowings under the Credit Facility, no
letters of credit outstanding under the Credit Facility, and our revolving credit facility was undrawn, leaving
borrowing availability under the revolving credit facility as of December 31, 2019 of $200 million.
Borrowings under the Credit Facility 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 agents 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
loan) 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 loan only), plus in each case, an
applicable margin. The applicable margin for the term loan under the Credit 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 ranges from
35
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
commitment fee for the revolving credit facility is payable quarterly at a rate of 0.375% or 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, 2019, the weighted-average effective interest rate on our outstanding borrowings under the
Credit Facility was approximately 5.3%.
The revolving credit facility matures on October 20, 2022, and the term loan under the Credit Facility matures on
October 20, 2024. The term loan under the Credit Facility is repayable in 27 quarterly installments of $2 million
each, which commenced in March 2018, followed by a final installment of $746 million at maturity.
Borrowings under the Credit Facility 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 Facility, 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 loan under the
Credit Facility 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 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 Facility also prohibits 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, and certain affiliated
entities). If we default under the Credit Facility 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 Facility as of
December 31, 2019.
Senior Notes due 2026
On April 15, 2019, we issued $375 million of 2026 Notes in a private placement to institutional buyers at face value.
The 2026 Notes bear interest at 7.625%, payable semi-annually on April 15th and October 15th of each year.
In conjunction with the issuance of the 2026 Notes, we incurred approximately $6.7 million in debt financing costs
and fees that have been deferred and are being amortized over the term of the 2026 Notes using the effective interest
method.
The net proceeds of the 2026 Notes were used to (i) repay our former $200 million Second Lien Term Loan, (ii)
repay outstanding borrowings under the revolving credit facility under our Credit Facility, (iii) repay $18 million of
the outstanding term loan indebtedness under the Credit Facility, and (iv) pay accrued interest, fees and expenses
related to each of the foregoing.
The 2026 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on April 15,
2022 at a redemption price of 103.813%, during the 12 months beginning on April 15, 2023 at a redemption price of
101.906%, and at any time on or after April 15, 2024 at a redemption price of 100%, in each case plus accrued and
unpaid interest, if any, thereon to the redemption date. Prior to April 15, 2022, we may redeem up to 40% of the
2026 Notes at a redemption price of 107.625% of the principal amount thereof, plus accrued and unpaid interest, if
any, thereon to the redemption date, from the net cash proceeds of specified equity offerings. Prior to April 15,
2022, we may also redeem the 2026 Notes, in whole or in part, at a redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and an Applicable Premium (as defined in the Indenture), if any,
thereon to the redemption date.
36
The 2026 Notes are guaranteed on a senior unsecured basis by each of our existing and future wholly-owned
domestic subsidiaries that guarantees the Credit Facility. The 2026 Notes are our and the subsidiary guarantors
general senior unsecured obligations and rank equally in right of payment with all of our respective existing and
future unsecured unsubordinated debt. The 2026 Notes are effectively junior in right of payment to our and the
subsidiary guarantors existing and future secured debt, including under the Credit Facility (to the extent of the value
of the assets securing such debt), are structurally subordinated to all existing and future liabilities (including trade
payables) of any of our subsidiaries that do not guarantee the 2026 Notes, and are senior in right of payment to all of
our and the subsidiary guarantors existing and future subordinated indebtedness.
Under the Indenture, 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 the event of a change of control (which includes the acquisition of more than
50% of our capital stock, other than by certain permitted holders, which include, among others, Blake L. Sartini,
Lyle A. Berman, and certain affiliated entities), each holder will have the right to require us to repurchase all or any
part of such holders 2026 Notes at a purchase price in cash equal to 101% of the aggregate principal amount of the
2026 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase.
Expenses Related to Extinguishment and Modification of Debt
In April 2019, we recognized a $5.5 million loss on extinguishment of debt and $3.7 million of expense related to
modification of debt, related to the repayment of our Second Lien Term Loan and an $18 million prepayment of the
term loan under our Credit Facility.
Share Repurchase Program
On November 7, 2018, our Board of Directors authorized the repurchase of up to $25.0 million shares of common
stock, subject to available liquidity, general market and economic conditions, alternate uses for the capital and other
factors. During the year ended December 31, 2018, we repurchased approximately 1.2 million shares of our
common stock in open market transactions for approximately $19.6 million at an average price of $16.06 per share.
The November 7, 2018 authorization was replaced on March 12, 2019, when our Board of Directors authorized us to
repurchase up to $25.0 million worth of additional shares of common stock, subject to available liquidity, general
market and economic conditions, alternate uses for the capital and other factors. Share repurchases may be made
from time to time in open market transactions, block trades or in private transactions in accordance with applicable
securities laws and regulations and other legal requirements, including compliance with our finance agreements.
There is no minimum number of shares that we are required to repurchase and the repurchase program may be
suspended or discontinued at any time without prior notice. No shares were repurchased under our share repurchase
program during the year ended December 31, 2019.
Other Items Affecting Liquidity
The outcome of the following specific matters, including our commitments and contingencies, may also affect our
liquidity.
Commitments, Capital Spending and Development
We perform on-going refurbishment and maintenance at our facilities, of which certain maintenance costs are
capitalized if such improvement or refurbishment extends the life of the related asset, while other maintenance costs
that do not so qualify are expensed as incurred. The commitment of capital and the related timing thereof are
contingent upon, among other things, negotiation of final agreements and receipt of approvals from the appropriate
regulatory bodies. We intend to fund such capital expenditures through our revolving credit facility and operating
cash flows.
See Note 14, Commitments and Contingencies, in the accompanying consolidated financial statements for additional
information regarding commitments and contingencies that may also affect our liquidity.
37
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2019:
2020
2021
2022
2023
2024
Thereafter
Total
(In thousands)
Term loan
Senior Notes due 2026
Notes payable
Interest on long-term debt (1)
Operating leases (2)
Finance lease obligations (3)
Purchase obligations (4)
$
$
4,835
67,890
45,171
4,442
973
8,000 $ 744,000 $ 772,000
375,000
6,369
364,923
289,513
15,596
11,155
$ 123,311 $ 122,048 $ 116,483 $ 107,891 $ 96,695 $1,268,128 $1,834,556
8,000 $
14
66,898
31,540
529
910
4,000 $
1,495
67,651
43,653
3,953
1,296
8,000 $
25
67,303
37,218
2,617
1,320
375,000
38,125
101,441
3,828
5,734
57,056
30,490
227
922
(1)
(2)
(3)
(4)
Represents estimated interest payments on our outstanding term loan balance based on interest rates as of
December 31, 2019 until maturity. Includes interest on senior notes and notes payable.
Includes total operating lease interest obligations of $71.3 million.
Includes total finance lease interest obligations of $3.1 million.
Represents obligations related to license agreements.
Other Opportunities
We may investigate and pursue expansion opportunities in our existing or new markets from time to time. Such
expansions will be influenced and determined by a number of factors, which may include licensing availability and
approval, suitable investment opportunities and availability of acceptable financing. Investigation and pursuit of
such opportunities may require us to make substantial investments or incur substantial costs, which we may fund
through cash flows from operations or borrowing availability under our revolving credit facility. To the extent such
sources of funds are not sufficient, we may also seek to raise such additional funds through public or private equity
or debt financings or from other sources. No assurance can be given that additional financing will be available or
that, if available, such financing will be obtainable on terms favorable to us. Moreover, we can provide no
assurances that the investigation or pursuit of an opportunity will result in a completed transaction.
Critical Accounting Policies and Estimates
Managements 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, 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 statement. See Note 2, Summary of Significant Accounting Policies, in
the accompanying consolidated financial statements for information regarding our significant accounting policies.
38
Property and Equipment
Property and equipment, net was $1,047 million as of December 31, 2019, comprising 60.1% of our consolidated
total assets. We evaluate the carrying value 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.
Property and equipment 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
We test our goodwill for impairment annually during the fourth quarter of each year, and whenever events or
circumstances indicate that it is more likely than not that impairment may have occurred. Impairment testing for
goodwill is performed at the reporting unit level, and we consider each of our operating properties to be a separate
reporting unit.
When performing the annual goodwill impairment testing, we either conduct a qualitative assessment to determine
whether it is more likely than not that the asset is impaired or elect to bypass this qualitative assessment and perform
a quantitative test for impairment. Under the qualitative assessment, we consider both positive and negative factors,
including macroeconomic conditions, industry events, financial performance and other changes, and make a
determination of whether it is more likely than not that the fair value of goodwill is less than its carrying amount. If,
after assessing the qualitative factors, we determine it is more likely than not the asset is impaired, we perform a
quantitative test in which the estimated fair value of the reporting unit is compared with its carrying amount,
including goodwill. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss
is recognized in an amount equal to the excess, limited to the amount of goodwill allocated to the reporting unit.
When performing the quantitative test, we estimate the fair value of each reporting unit using the expected present
value of future cash flows along with value indications based on our current valuation multiple and multiples of
comparable publicly traded companies. The estimation of fair value requires management to make critical estimates,
judgments and assumptions, including estimating expected future cash flows and selecting appropriate discount
rates, valuation multiples and market comparables. Application of alternative estimates and assumptions could
produce significantly different results.
As of our 2019 annual goodwill testing date, the estimated fair values of each of our properties exceeded their
respective carrying amounts. If the fair value of any of our properties should decline in the future, we may be
required to recognize a goodwill impairment charge, which could be material. A propertys fair value may decline as
a result of a decrease in the propertys actual or projected operating results or changes in significant assumptions and
judgments used in the estimation process, including the discount rate and market multiple.
39
Indefinite-Lived Intangible Assets
Our indefinite-lived intangible assets include trade names and licenses. The fair value of our trade names is
estimated using the income approach to valuation at each of our reporting units. We test our indefinite-lived
intangible assets for impairment annually during the fourth quarter of each year, and whenever events or
circumstances indicate that it is more likely than not that an asset is impaired. Indefinite-lived intangible assets are
not amortized unless it is determined that an assets useful life is no longer indefinite. We periodically review our
indefinite-lived assets to determine whether events and circumstances continue to support an indefinite useful life. If
an indefinite-lived intangible asset no longer has an indefinite life, the asset is tested for impairment and is
subsequently accounted for as a finite-lived intangible asset.
Finite-Lived Intangible Assets
finite-lived intangible assets primarily represent assets related to our customer
relationships, player
Our
relationships, non-compete agreements and leasehold interest, which are amortized over their estimated useful lives
using the straight-line method. We periodically evaluate the remaining useful lives of our finite-lived intangible
assets to determine whether events or circumstances warrant a revision to the remaining period of amortization.
Lessee Arrangements
We are the lessee under non-cancelable real estate leases, equipment leases and space agreements. Beginning on
January 1, 2019 (the date of our adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic
842)), operating lease right-of-use (ROU) assets and liabilities are recognized at the commencement date and
initially measured based on the present value of lease payments over the defined lease term. Our lease terms may
include options to extend or terminate the lease. We assess these options using a threshold of reasonably certain. For
leases we are reasonably certain to renew, those option periods are included within the lease term and, therefore, the
measurement of the right-of-use asset and lease liability. Lease expense for lease payments is recognized on a
straight-line basis over the lease term. Our lease agreements do not contain any material residual value guarantees,
restrictions or covenants.
Our lease agreements for land, buildings and taverns with lease and non-lease components are accounted for
separately. The lease and non-lease components of certain vehicle and equipment leases are accounted for as a
single lease component. Additionally, for certain vehicle and equipment leases, a portfolio approach is utilized to
effectively account for the operating lease ROU assets and liabilities.
As most of our leases do not provide an implicit rate, the incremental borrowing rate is estimated based on the
information available at the commencement date in determining the present value of lease payments. The implicit
rate will be used when readily determinable. The operating lease ROU assets also include any prepaid lease
payments made and are net of lease incentives. We do not record an asset or liability for operating leases with a term
of 12 months or less. Prior to the adoption of Topic 842 on January 1, 2019, we did not record an asset or liability
for any of our operating leases.
Lessor Arrangements
We are the lessor under non-cancelable operating leases for retail and food and beverage outlet space within our
resort casino properties. The lease arrangements generally include minimum base rent and/or contingent rental
clauses based on a percentage of net sales exceeding minimum base rent. Generally, the terms of the leases range
between five and 10 years, with options to extend the leases. We record revenue on a straight-line basis over the
term of the lease and recognizes revenue for contingent rentals when the contingency has been resolved. We have
elected to combine lease and non-lease components for the purpose of measuring lease revenue. Revenue is recorded
in other operating revenue on the consolidated statements of operations.
40
Acquisition Method of Accounting
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 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.
Revenue Recognition
Revenue from contracts with customers primarily consists of casino wagers, room sales, food and beverage
transactions, rental income from our retail tenants and entertainment sales.
Casino gaming revenues are the aggregate of gaming wins and losses. The commissions rebated to premium players
for cash discounts and other cash incentives to patrons related to gaming play are recorded as a reduction to casino
gaming revenues. Gaming contracts include a performance obligation to honor the patrons wager and typically
include a performance obligation to provide a product or service to the patron on a complimentary basis to
incentivize gaming or in exchange for points earned under our loyalty programs.
We generally enter into three types of slot and amusement device placement contracts as part of our distributed
gaming business: space agreements, revenue share agreements and participation agreements. Under space
agreements, we pay a fixed monthly rental fee for the right to install, maintain and operate our slots at a business
location. Under these agreements, we recognize all gaming revenue and record fixed monthly rental fees as gaming
expenses. Under revenue share agreements, we pay the business location a percentage of the gaming revenue
generated from our slots placed at the location and record that amount as an expense. With regard to both space 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, which we record as an expense. In Montana, our
slot and amusement device placement contracts are all participation agreements. In our distributed gaming business,
we consider our customers to be the gaming player since we control all aspects of the slot machines. Due to the
maintaining of control of the services directly before they are transferred to the customer, we are considered to be
the principal in these transactions and therefore record revenue on a gross basis.
For wagering contracts that include complimentary products and services provided by us to incentivize gaming, we
allocate the stand-alone selling price of each product and service to the respective revenue type. Complimentary
products or services provided under our control and discretion that are supplied by third parties are recorded as an
operating expense.
For wagering contracts that include products and services provided to a patron in exchange for points earned under
our loyalty program, True Rewards, we allocate the estimated stand-alone selling price of the points earned to the
loyalty program liability. Upon redemption of loyalty program points for Golden-owned products and services, the
stand-alone selling price of each product or service is allocated to the respective revenue type. For redemptions of
points with third parties, the redemption amount is deducted from the loyalty program liability and paid directly to
the third party. Any discounts received by us from the third party in connection with this transaction are recorded to
other revenue.
41
After allocation to the other revenue types for products and services provided to patrons as part of a wagering
contract, the residual amount is recorded to casino gaming revenue as soon as the wager is settled. As all wagers
have similar characteristics, we account for our gaming contracts collectively on a portfolio basis.
Revenue from leases is primarily recorded to other revenues and is generated from base rents through long-term
leases with retail tenants. Base rent, adjusted for contractual escalations, is recognized on a straight-lined basis over
the term of the related lease. Overage rent is paid by a tenant when its sales exceed an agreed upon minimum
amount and is not recognized by us until the threshold is met.
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.
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.
42
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt. As of
December 31, 2019, our variable rate long-term debt primarily comprised our indebtedness under the Credit Facility.
As of December 31, 2019, we had $772 million of outstanding borrowings under the Credit Facility. Our primary
interest rate under the Credit Facility is the Eurodollar rate plus an applicable margin. As of December 31, 2019, the
weighted-average effective interest rate on our outstanding borrowings under the Credit Facility was approximately
5.3%. Assuming the outstanding balance under our Credit Facility remained constant over a year, a 50 basis point
increase in the applicable interest rate would increase interest incurred, prior to effects of capitalized interest, by
$3.9 million over a twelve-month period.
As of December 31, 2019, our investment portfolio included $111.7 million in cash and cash equivalents. As of
December 31, 2019, we did not hold any short-term investments.
43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
GOLDEN ENTERTAINMENT, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firms..............................................................................
Consolidated Balance Sheets ................................................................................................................................
Consolidated Statements of Operations ...............................................................................................................
Consolidated Statements of Shareholders Equity................................................................................................
Consolidated Statements of Cash Flows ...............................................................................................................
Notes to Consolidated Financial Statements.........................................................................................................
Page
45
49
50
51
52
54
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Golden Entertainment, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Golden Entertainment, Inc. and subsidiaries (the
Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, shareholders'
equity and cash flows for each of the two years ended December 31, 2019, and the related notes and financial
statement schedule 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
financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the two years ended December 31, 2019, in conformity with U.S. generally accepted accounting
principles.
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, 2019, based on
Integrated Framework issued by the Committee of Sponsoring
criteria established in Internal Control
Organizations of the Treadway Commission (2013 framework) and our report dated March 13, 2020 expressed an
unqualified opinion thereon.
-
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for
leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the
related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Companys financial statements 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 U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission 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 the financial statements are free of material
misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material
misstatement of the 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 financial statements. Our audit also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audit provides a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Companys auditor since 2018.
Las Vegas, Nevada
March 13, 2020
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON THE CONSOLIDATED FINANCIAL STATEMENTS
To the Stockholders and the Board of Directors
Golden Entertainment, Inc.
Opinion on the Financial Statements and Schedule. We have audited the accompanying consolidated statements
of operations, shareholders equity, and cash flows of Golden Entertainment, Inc (the Company) for the year
ended December 31, 2017, and the related notes to the consolidated financial statements (collectively referred to as
the financial statements). In our opinion, the financial statements present fairly, in all material respects, the
Companys consolidated results of operations and its cash flows for the year ended December 31, 2017, in
conformity with accounting principles generally accepted in the United States (U.S).
Change in Accounting Principle. As discussed in Note 3, the financial statements have been restated as a result of
the Companys election of the full retrospective method of its 2018 adoption of the Financial Accounting Standards
Boards Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.
Basis for Opinion. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audit 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.
We began serving as the Companys auditors in 2005, and did so continuously until 2017.
/s/ Piercy Bowler Taylor & Kern
Certified Public Accountants
Las Vegas, Nevada
March 15, 2018, except with respect to the effects of the restatement discussed in Note 3 as to which the date is
March 15, 2019
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Golden Entertainment, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Golden Entertainment, Inc. and subsidiaries internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In
our opinion, Golden Entertainment, Inc. and subsidiaries (the Company) maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.
As indicated in the accompanying Managements Annual Report on Internal Control over Financial Reporting,
managements assessment of and conclusion on the effectiveness of internal control over financial reporting did not
include the internal controls of Edgewater Gaming, LLC and Colorado Belle Gaming, LLC (the Laughlin Entities),
with the exception of accounts payable and property and equipment internal controls, which are included in the 2019
consolidated financial statements of the Company and constituted 1.0% of total assets as of December 31, 2019 and
9.3% of 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 the Laughlin Entities, with the
exception of accounts payable and property and equipment internal controls.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheet of Golden Entertainment, Inc. and subsidiaries (the Company) as
of December 31, 2019, the related consolidated statements of operations, shareholders' equity and cash flows for the
year ended December 31, 2019, and the related notes and schedules listed in the Index at Item 15 (a)(2), and our
report dated March 13, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Companys 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 Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Companys 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 U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
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 based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
47
Definition and Limitations of Internal Control Over Financial Reporting
A companys 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 generally accepted accounting principles. A companys 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 generally accepted accounting principles, 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 reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys
assets that could have a material effect on the 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/ Ernst & Young LLP
Las Vegas, Nevada
March 13, 2020
48
GOLDEN ENTERTAINMENT, INC.
Consolidated Balance Sheets
(In thousands, except per share data)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net of allowance of $599 and $503, respectively
Prepaid expenses
Inventories
Other
Total current assets
Property and equipment, net
Operating lease right-of-use assets, net
Goodwill
Intangible assets, net
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt and finance leases
Current portion of operating leases
Accounts payable
Accrued taxes, other than income taxes
Accrued payroll and related
Accrued liabilities
Total current liabilities
Long-term debt, net and finance leases
Non-current operating leases
Deferred income taxes
Other long-term obligations
Total liabilities
Commitments and contingencies (Note 14)
Shareholders' equity
Common stock, $.01 par value; authorized 100,000 shares; 27,879 and
26,779 common shares issued and outstanding, respectively
Additional paid-in capital
Accumulated deficit
Total shareholders' equity
Total liabilities and shareholders' equity
December 31,
2019
2018
$
$
$
111,678
16,247
19,879
8,237
4,388
160,429
1,046,536
203,531
184,325
135,151
10,945
1,740,917
8,497
33,883
30,146
7,495
27,221
25,522
132,764
1,130,374
184,301
1,088
2,646
1,451,173
116,071
12,779
17,722
6,759
3,428
156,759
894,953
158,134
141,128
15,595
1,366,569
10,480
27,812
6,540
19,780
18,848
83,460
960,563
2,593
4,801
1,051,417
279
461,643
(172,178)
289,744
1,740,917
$
268
435,245
(120,361)
315,152
1,366,569
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
49
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
Year Ended December 31,
2018
2019
2017
Revenues
Gaming
Food and beverage
Rooms
Other
Total revenues
Expenses
Gaming
Food and beverage
Rooms
Other operating
Selling, general and administrative
Depreciation and amortization
Acquisition and severance expenses
Preopening expenses
Loss on disposal of assets
Gain on contingent consideration
Other operating, net
Total expenses
Operating income
Non-operating income (expense)
Interest expense, net
Loss on extinguishment and modification of debt
Change in fair value of derivative
Total non-operating expense, net
Income (loss) before income tax benefit (provision)
Income tax benefit (provision)
Net income (loss)
Weighted-average common shares outstanding
Basic
Dilutive impact of stock options and restricted stock units
Diluted
Net income (loss) per share
Basic
Diluted
$
$
$
$
$
578,803
202,933
132,193
59,481
973,410
334,941
159,728
62,510
21,333
225,848
116,592
3,488
1,934
919
927,293
46,117
525,176
170,453
106,805
49,360
851,794
311,657
138,114
49,129
15,332
183,892
94,456
3,740
1,171
3,336
800,827
50,967
(74,220)
(9,150)
(4,168)
(87,538)
(41,421)
1,876
(39,545) $
(64,028)
1,786
(62,242)
(11,275)
(9,639)
(20,914) $
$ 381,396
81,304
24,163
20,275
507,138
259,579
69,194
10,350
7,176
98,382
40,786
6,183
1,632
441
(1,719)
(157)
491,847
15,291
(19,598)
(1,708)
178
(21,128)
(5,837)
7,921
2,084
27,746
27,746
27,553
27,553
23,105
1,555
24,660
(1.43) $
(1.43) $
(0.76) $
(0.76) $
0.09
0.08
The accompanying notes are an integral part of these consolidated financial statements.
50
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Shareholders Equity
(In thousands)
Balances, December 31, 2016
22,232
$
223
$
Common stock
Shares
Amount
Proceeds from issuance of stock on
options exercised
Share-based compensation
Tax benefit from share-based
compensation
Share issuance related to business
combination
Cumulative effect, change in accounting
for revenue recognition related to
business combination
Net income
Balances, December 31, 2017
Proceeds from issuance of stock on
options exercised
Share-based compensation
Repurchases of common stock
Tax benefit from share-based
compensation
Issuance of common stock, net of
offering costs
Net loss
Balances, December 31, 2018
Cumulative effect of change in
accounting for leases, net of tax
Proceeds from issuance of common
stock, net of issuance costs
Share-based compensation
Share issuance related to business
combination
Tax benefit from share-based
compensation
Net loss
Balances, December 31, 2019
Additional
Paid-In
Capital
290,157
168
8,754
(1,015)
101,446
399,510
1,316
9,641
Accumulated
Deficit
(80,954) $
$
Total
Shareholders'
Equity
209,426
(991)
2,084
(79,861)
(19,586)
169
8,754
(1,015)
101,486
(991)
2,084
319,913
1,322
9,641
(19,598)
(820)
(820)
25,598
435,245
(20,914)
(120,361)
25,608
(20,914)
315,152
(12,272)
(12,272)
55
10,045
16,599
57
10,045
16,608
135
4,046
26,413
610
(1,219)
975
26,779
189
911
1
40
264
6
(12)
10
268
2
9
27,879
$
279
(301)
461,643
(39,545)
$ (172,178) $
(301)
(39,545)
289,744
$
The accompanying notes are an integral part of these consolidated financial statements.
51
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization
Amortization of debt issuance costs and discounts on debt
Share-based compensation
Loss on disposal of assets
Gain on revaluation of contingent consideration
Loss on extinguishment of debt
Change in fair value of derivative
Deferred income taxes
Changes in operating assets and liabilities, net of
acquisitions:
Accounts 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, net of change in
construction payables
Acquisition of businesses, net of cash acquired
Purchase of intangibles and other assets
Proceeds from disposal of property and equipment
Other investing activities
Net cash used in investing activities
Year Ended December 31,
2018
2019
2017
$
(39,545) $
(20,914) $
2,084
116,592
4,532
10,045
919
9,150
4,168
(1,505)
(1,852)
460
(1,497)
265
11,569
184
420
113,905
(107,267)
(148,953)
247
(77)
(256,050)
94,456
5,062
9,641
3,336
(1,786)
10,380
1,913
1,469
(1,775)
(368)
(4,915)
(124)
1,575
97,950
40,786
1,593
8,754
441
(1,719)
1,708
(178)
(7,825)
(1,593)
74
1,553
(2,056)
(22,519)
511
488
22,102
(68,175)
(1,134)
103
(69,206)
(29,463)
(724,473)
(2,220)
(31)
(756,187)
52
GOLDEN ENTERTAINMENT, INC.
Consolidated Statements of Cash Flows (Continued)
(In thousands)
Cash flows from financing activities
Proceeds from issuance of senior notes
Borrowings on revolving credit facility
Repayments of revolving credit facility
Proceeds from term loans
Repayments of term loans
Repayments of notes payable
Principal payments under finance leases
Payments for debt issuance costs
Payments for debt extinguishment and modification costs
Proceeds from issuance of common stock, net of issuance costs
Tax withholding on share-based payments
Repurchases of common stock
Purchase of derivative
Proceeds from leased equipment obligation
Net cash provided by (used in) financing activities
Cash and cash equivalents
Change in cash and cash equivalents
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
Assets acquired under finance lease obligations
Loss on extinguishment of debt
Impairment of right-of-use asset
Common stock issued in connection with acquisitions
Year Ended December 31,
2019
2018
2017
375,000
145,000
(145,000)
(220,000)
(3,070)
(2,485)
(6,686)
(4,763)
57
(301)
137,752
(4,393)
116,071
111,678
63,735
(193)
15,075
7,559
4,388
12,272
16,608
$
$
$
(8,000)
(506)
(1,039)
(219)
26,930
(820)
(19,598)
(3,252)
25,492
90,579
116,071
60,542
11,597
2,398
$
$
$
6,000
(36,000)
969,000
(150,000)
(3,334)
(610)
(4,035)
169
(1,015)
(3,152)
743
777,766
43,681
46,898
90,579
14,143
(84)
2,566
2,758
101,486
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
53
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 gaming in the Companys branded taverns).
The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming.
The Companys Casino segment involves the operation of ten resort casino properties in Nevada and Maryland,
comprising:
The STRAT Hotel, Casino & SkyPod ("The Strat")
Arizona Charlie's Decatur
Arizona Charlie's Boulder
Aquarius Casino Resort ("Aquarius")
Edgewater Hotel & Casino Resort ("Edgewater")
Colorado Belle Hotel & Casino Resort ("Colorado Belle")
Pahrump Nugget Hotel Casino ("Pahrump Nugget")
Gold Town Casino
Lakeside Casino & RV Park
Rocky Gap Casino Resort ("Rocky Gap")
Las Vegas, Nevada
Las Vegas, Nevada
Las Vegas, Nevada
Laughlin, Nevada
Laughlin, Nevada
Laughlin, Nevada
Pahrump, Nevada
Pahrump, Nevada
Pahrump, Nevada
Flintstone, Maryland
The Companys Distributed Gaming segment involves the installation, maintenance and operation of slots and
amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and
grocery stores in Nevada and Montana, and the operation of branded taverns targeting local patrons located
primarily in the greater Las Vegas, Nevada metropolitan area.
On April 25, 2019, the Company issued $375 million of 7.625% Senior Notes due 2026 (the 2026 Notes) in a
private placement to institutional buyers at face value. The 2026 Notes bear interest at 7.625%, payable semi-
annually on April 15th and October 15th of each year. The net proceeds of the 2026 Notes were used to (i) repay the
Companys former $200 million second lien term loan (the Second Lien Term Loan), (ii) repay outstanding
borrowings under the Companys revolving credit facility under the Companys senior secured credit facility with
JPMorgan Chase Bank, N.A. (as administrative agent and collateral agent), the lenders party thereto and the other
entities party thereto (the Credit Facility), (iii) repay $18 million of the outstanding term loan indebtedness under
the Credit Facility, and (iv) pay accrued interest, fees and expenses related to each of the foregoing. See Note 8,
Debt, in the accompanying consolidated financial statements for additional information.
On January 14, 2019, the Company completed the acquisition of Edgewater Gaming, LLC and Colorado Belle
Gaming, LLC (the Laughlin Entities) from Marnell Gaming, LLC (Marnell) for $156.2 million in cash (after
giving effect to the post-closing adjustment provisions in the purchase agreement) and the issuance of 911,002
shares of the Companys common stock to certain assignees of Marnell (the Laughlin Acquisition). The results of
operations of the Laughlin Entities are included in the Companys results subsequent to the acquisition date. See
Note 4, Acquisitions, for information regarding the Laughlin Acquisition.
On October 20, 2017, the Company completed the acquisition of American Casino and Entertainment Properties
LLC (American) from its former equity holders (the American Acquisition). The results of operations of
American and its subsidiaries have been included in the Companys results subsequent to the acquisition date. See
Note 4, Acquisitions, for information regarding the American Acquisition.
54
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 4, Acquisitions, for further information regarding the
Companys business combinations.
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. Certain amounts in the
consolidated financial statements for the previous years have been reclassified to be consistent with current year
presentation. These reclassifications had no effect on previously reported net income.
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 an 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
Companys accounts receivable to their expected net realizable value based on specific reviews of customer
accounts, 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. 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. Costs of repairs and maintenance are
expensed when incurred. A significant amount of the Companys 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
10 - 45 years
3 - 15 years
2 - 15 years
55
The Company reviews the carrying amounts of its long-lived assets, other than goodwill and indefinite-lived
intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. Recoverability is evaluated by comparing the estimated future cash flows of the asset,
on an undiscounted basis, to its carrying amount. If the undiscounted estimated future cash flows exceed the
carrying amount, no impairment is indicated. If the undiscounted estimated future cash flows do not exceed the
carrying amount, impairment is recorded based on the difference between the assets estimated fair value and its
carrying amount. To estimate fair values, the Company typically uses market comparables, when available, or a
discounted cash flow model. Assets to be disposed of are carried at the lower of their carrying amount or fair value
less costs of disposal. The fair value of assets to be disposed of is generally estimated based on comparable asset
sales, solicited offers or a discounted cash flow model. The Companys long-lived asset impairment tests are
performed at the reporting unit level. For the years ended December 31, 2019, 2018 and 2017, there were no
impairment charges.
Goodwill
The Company tests its goodwill for impairment annually during the fourth quarter of each year, and whenever
events or circumstances indicate that it is more likely than not that impairment may have occurred. Impairment
testing for goodwill is performed at the reporting unit level.
When performing the annual goodwill impairment testing, the Company either conducts a qualitative assessment to
determine whether it is more likely than not that the asset is impaired, or elects to bypass this qualitative assessment
and perform a quantitative test for impairment. Under the qualitative assessment, the Company considers both
positive and negative factors, including macroeconomic conditions, industry events, financial performance and other
changes, and makes a determination of whether it is more likely than not that the fair value of goodwill is less than
its carrying amount. If, after assessing the qualitative factors, the Company determines it is more likely than not the
asset is impaired, it then performs a quantitative test in which the estimated fair value of the reporting unit is
compared with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its
estimated fair value, an impairment loss is recognized in an amount equal to the excess, limited to the amount of
goodwill allocated to the reporting unit.
When performing the quantitative test, the Company estimates the fair value of each reporting unit using the
expected present value of future cash flows along with value indications based on current valuation multiples of the
Company and comparable publicly traded companies. The estimation of fair value involves significant judgment by
management. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from
such estimates. Cash flow estimates are based on the current regulatory, political and economic climates, recent
operating information and projections. Such estimates could be negatively impacted by changes in federal, state or
local regulations, economic downturns, competition, events affecting various forms of travel and access to the
Companys properties, and other factors. If the Companys estimates of future cash flows are not met, it may have to
record impairment charges in the future.
Indefinite-Lived Intangible Assets
The Companys indefinite-lived intangible assets include trade names and licenses. The fair value of the Companys
trade names is estimated using the income approach to valuation at each of its reporting units. The Company tests its
indefinite-lived intangible assets for impairment annually during the fourth quarter of each year, and whenever
events or circumstances indicate that it is more likely than not that an asset is impaired. Indefinite-lived intangible
assets are not amortized unless it is determined that an assets useful life is no longer indefinite. The Company
periodically reviews its indefinite-lived assets to determine whether events and circumstances continue to support an
indefinite useful life. If an indefinite-lived intangible asset no longer has an indefinite life, the asset is tested for
impairment and is subsequently accounted for as a finite-lived intangible asset.
56
Finite-Lived Intangible Assets
The Companys finite-lived intangible assets primarily represent assets related to its customer relationships, player
relationships, non-compete agreements and leasehold interest, which are amortized over their estimated useful lives
using the straight-line method. The Company periodically evaluates the remaining useful lives of its finite-lived
intangible assets to determine whether events and circumstances warrant a revision to the remaining period of
amortization.
The Companys customer relationship assets represent the value associated with space agreements and participation
agreements with its distributed gaming customers acquired in an asset purchase or business acquisition. The
Companys player relationships represent the value associated with its rated casino guests. The initial fair value of
these intangible assets were determined using the income approach. The recoverability of the finite-lived intangible
assets could be affected by, among other things, increased competition within the gaming industry, a downturn in
the economy, declines in customer spending which would impact the expected future cash flows associated with the
rated casino guests, declines in the number of customer visits which could impact the expected attrition rate of the
rated casino guests, and erosion of operating margins associated with rated casino guests. Should events or changes
in circumstances cause the carrying amount of a customer relationship intangible asset to exceed its estimated fair
value, an impairment charge in the amount of the excess would be recognized.
Lessee Arrangements
The Company is the lessee under non-cancelable real estate leases, equipment leases and space agreements.
Beginning on January 1, 2019 (the date of the Company's adoption of Accounting Standards Update (ASU) No.
2016-02, Leases (Topic 842), as defined and discussed further in Accounting Standards Issued and Adopted,
below), operating lease right-of-use (ROU) assets and liabilities are recognized at the commencement date and
initially measured based on the present value of lease payments over the defined lease term. The Companys lease
terms may include options to extend or terminate the lease. The Company assesses these options using a threshold of
reasonably certain. For leases the Company is reasonably certain to renew, those option periods are included within
the lease term and, therefore, the measurement of the right-of-use asset and lease liability. Lease expense for lease
payments is recognized on a straight-line basis over the lease term. The Companys lease agreements do not contain
any material residual value guarantees, restrictions or covenants.
The Companys lease agreements for land, buildings and taverns with lease and non-lease components are
accounted for separately. The lease and non-lease components of certain vehicle and equipment leases are accounted
for as a single lease component. Additionally, for certain vehicle and equipment leases, a portfolio approach is
utilized to effectively account for the operating lease ROU assets and liabilities.
As most of the Companys leases do not provide an implicit rate, the incremental borrowing rate is estimated based
on the information available at the commencement date in determining the present value of lease payments. The
implicit rate will be used when readily determinable. The operating lease ROU assets also include any prepaid lease
payments made and are net of lease incentives. The Company does not record an asset or liability for operating
leases with a term of 12 months or less. Prior to the adoption of Topic 842 on January 1, 2019, the Company did not
record an asset or liability for any of its operating leases.
Lessor Arrangements
The Company is the lessor under non-cancelable operating leases for retail and food and beverage outlet space
within its resort casino properties. The lease arrangements generally include minimum base rent and/or contingent
rental clauses based on a percentage of net sales exceeding minimum base rent. Generally, the terms of the leases
range between five and 10 years, with options to extend the leases. The Company records revenue on a straight-line
basis over the term of the lease and recognizes revenue for contingent rentals when the contingency has been
resolved. The Company has elected to combine lease and non-lease components for the purpose of measuring lease
revenue. Revenue is recorded in other operating revenue on the consolidated statements of operations.
57
Business Combinations
The Company allocates the business combination purchase price to tangible and identifiable intangible assets
acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over those fair
values is recorded as goodwill. The Company determined the fair value of identifiable intangible assets, such as
player relationships and trade names, as well as any other significant tangible assets or liabilities, such as long-lived
property. The fair value allocation methodology requires management to make assumptions and apply judgment to
estimate the fair value of acquired assets and liabilities assumed. Management estimates the fair value of assets and
liabilities primarily using discounted cash flows and replacement cost analysis. Provisional fair value measurements
of acquired assets and liabilities assumed may be retrospectively adjusted during the measurement period. The
measurement period ends once the Company is able to determine it has obtained all necessary information that
existed as of the acquisition date or once the Company determines that such information is unavailable. The
measurement period does not extend beyond one year from the acquisition date.
Derivative Instruments
The Company uses derivative financial instruments to manage interest rate exposure. The fair value of derivative
financial instruments is recognized as an asset or liability at each balance sheet date, with changes in fair value
recorded in earnings as the Company's derivative financial instruments do not qualify for hedge accounting. The fair
value approximates the amount the Company would pay if these contracts were settled at the respective valuation
dates.
Contract and Contract Related Liabilities
The Company provides numerous products and services to its customers. There is often a timing difference between
the cash payment by the customers and recognition of revenue for each of the associated performance obligations.
As of December 31, 2019 and 2018, the amount of gaming liabilities was $12.4 million and $12.5 million,
respectively. The Companys primary types of gaming liabilities associated with contracts with gaming customers
include outstanding chip and loyalty program liabilities.
Outstanding Chip Liability
The outstanding chip liability represents the collective amounts owed to customers in exchange for gaming chips in
their possession. Outstanding chips are expected to be recognized as revenue or redeemed for cash within one year
of being purchased.
Loyalty Program
The Company offers its new consolidated True RewardsTM loyalty program at all ten of its resort casino properties,
as well as at all of its branded taverns and at participating supermarkets. Members of the Companys True Rewards
loyalty program may earn points based on gaming activity and amounts spent on rooms, food, beverage and resort
activities at the Companys resort casino properties, and on play and amounts spent on the purchase of food and
beverages at the Companys branded taverns and other participating Distributed Gaming locations. Loyalty points
are redeemable for complimentary slot play, food, beverages, grocery gift cards and hotel rooms, among other items.
All points earned in the loyalty program roll up into a single account balance which is redeemable enterprise-wide at
participating locations.
The Company records a liability based on the value of points earned, less an estimate for points not expected to be
redeemed. This liability represents a deferral of revenue until such time as the participant redeems the points earned.
Redemption history at the Companys casinos and taverns is used to assist in the determination of the estimated
accruals. Loyalty program points are expected to be redeemed and recognized as revenue within one year of being
earned. Participants points expire after thirteen months of no activity. The True Rewards points accruals are
included in current liabilities on the Companys consolidated balance sheet. Changes in the program, increases in
membership and changes in the redemption patterns of the participants can impact this liability.
58
Other
Customer deposits and other deferred revenue represent cash deposits made by customers for future non-gaming
services to be provided by the Company. With the exception of tenant deposits, which are tied to the terms of the
lease and typically extend beyond a year, the majority of these customer deposits and other deferred revenue are
expected to be recognized as revenue or refunded to the customer within one year of the date the deposit was
recorded.
Long-Term Debt, Net
Long-term debt, net is reported as the outstanding debt amount, net of unamortized debt issuance costs and debt
discount. These include legal and other direct costs related to the issuance of debt and discounts granted to the initial
purchasers or lenders of the Companys debt instruments, and are recorded as a direct reduction to the face amount
of the Companys outstanding long-term debt on the consolidated balance sheets. The debt discount and debt
issuance costs are accreted to interest expense using the effective interest method or, if the amounts approximate the
effective interest method, on a straight-line basis over the contractual term of the underlying debt. Approximately
$4.5 million, $5.1 million and $1.6 million was amortized to interest expense during the years ended December 31,
2019, 2018 and 2017, respectively.
Revenue Recognition
See Note 3, Revenue Recognition for information regarding the Companys revenue recognition polices.
Gaming Taxes
The Companys 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 Companys distributed gaming operations in Nevada are subject to taxes based on the
Companys 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
Companys distributed gaming operations in Montana are subject to taxes based on the Companys 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 $62.1 million, $55.3 million and $41.5 million for the years ended December
31, 2019, 2018 and 2017, respectively.
Advertising Expenses
The Company expenses advertising costs as incurred. Advertising expenses, which are primarily included in selling,
general and administrative expenses, were $13.1 million, $10.1 million and $3.3 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
Share-Based Compensation Expense
The Company has various share-based compensation programs, which provide for equity awards including stock
options, time-based restricted stock units (RSUs) and performance-based restricted stock units (PSUs). 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 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 RSUs and PSUs, compensation expense is calculated based on the fair market value of the
Companys common stock on the date of grant. All of the Companys share-based compensation expense is
recorded in selling, general and administrative expenses in the consolidated statements of operations. See Note 9,
Equity Transactions and Stock Incentive Plans, for additional discussion.
59
Income Taxes
The Company is subject to income taxes in the United States. Accounting standards require the recognition of
deferred tax assets, net of applicable reserves, and liabilities for the estimated future tax consequences attributable to
differences between financial statement carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The
effect of a change in tax rates on the income tax provision and deferred tax assets and liabilities generally is
recognized in the results of operations in the period that includes the enactment date. Accounting standards also
require recognition of a future tax benefit to the extent that realization of such benefit is more likely than not;
otherwise, a valuation allowance is applied.
The Company's income tax returns are subject to examination by the Internal Revenue Service and other tax
authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such
examinations based on accounting standards for uncertain income taxes. The accounting standards prescribe a
minimum recognition threshold a tax position is required to meet before being recognized in the financial
statements.
Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting
standards utilize a two-step approach for evaluating tax positions. If a tax position, based on its technical merits, is
deemed more likely than not to be sustained, then the tax benefit is measured as the largest amount of benefit that is
more likely than not to be realized upon settlement.
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. Due to the net loss for the years ended December 31, 2019 and 2018, 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 for these periods. The amount of potential common share equivalents
were 916,907 and 2,014,012 for years ended December 31, 2019 and 2018, respectively.
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 ASUs, to the FASBs 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 impact the
Companys financial statements and disclosures:
Accounting Standards Issued and Adopted
The Company adopted Topic 842, as amended, as of January 1, 2019, and elected the option to apply the transition
requirements in the new standard at the effective date of January 1, 2019 with the effects of initially applying Topic
842 recognized as a cumulative-effect adjustment to retained earnings on January 1, 2019. As a result, the balance
sheet presentation is not comparable to the prior period in this first year of adoption.
60
The Company elected the package of practical expedients permitted under the transition guidance within the new
standard, which allows the carry forward of the Companys Leases Topic 840 assessment regarding definition of a
lease, lease classification, and initial direct costs. The Company also elected the short-term lease exception, which
allows leases with a lease term of 12 months or less to be accounted for similar to existing operating leases. The
Company elected not to separate non-lease components from lease components and, instead, to account for each
separate lease component and the non-lease components associated with it as a single lease component, recognized
on the balance sheet. The Company did not elect the use-of-hindsight, which requires an entity to use hindsight in
determining the lease term and in assessing impairment of right-of-use assets, or the practical expedient pertaining to
land easements, which is not applicable.
The standard did not materially impact the Companys consolidated net earnings and had no impact on cash flows.
The effect of adopting Topic 842 on the January 1, 2019 consolidated balance sheet is as follows:
(In thousands)
Prepaid expenses
Property and equipment, net
Operating lease right-of-use assets, net
Intangible assets, net
Operating lease liability
Other long-term obligations
Accumulated deficit
Prior to Adoption Effect of Adoption(1) Post Adoption
17,528
$
897,456
140,715
138,625
155,878
1,716
(132,633)
17,722 $
894,953
141,128
4,801
(120,361)
(194) $
2,503
140,715
(2,503)
155,878
(3,085)
(12,272)
(1)
Prepaid expenses, favorable lease intangible and deferred lease expense included in other long-term
obligations were reclassed to the related right-of-use asset upon adoption of Topic 842 and represents a non-
cash investing activity.
In June 2018, the FASB issued ASU No. 2018-07, Compensation Stock Compensation, which expands previous
guidance to include all share-based payment arrangements related to the acquisition of goods and services from both
non-employees and employees. The Company adopted the standard as of January 1, 2019, and the adoption did not
have a material impact on the Companys financial statements and disclosures.
Accounting Standards Issued But Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (Topic 326).
The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology
that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable
information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments,
the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for
recognizing credit losses which reflects losses that are probable. The Company will adopt Topic 326 on January 1,
2020 and has determined the adoption will not have a material impact on the Companys financial statements and
disclosures.
the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure
In August 2018,
FrameworkChanges to the Disclosure Requirements for Fair Value Measurement (Topic 820). The new
guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing,
modifying, and adding certain disclosures on fair value measurements in Topic 820. The amendments on changes in
unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop
Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied
prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All
other amendments should be applied retrospectively to all periods presented upon their effective date. The Company
will adopt Topic 820 on January 1, 2020 and has determined the adoption will not have a material impact on the
Companys financial statements and disclosures.
61
In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a
Cloud Computing Arrangement That Is a Service Contract. The ASU is intended to eliminate potential diversity in
practice in accounting for costs incurred to implement cloud computing arrangements that are service contracts by
requiring customers in such arrangements to follow internal-use software guidance with respect to such costs, with
any resulting deferred implementation costs recognized over the term of the contract in the same income statement
line item as the fees associated with the hosting element of the arrangement. The Company will adopt this ASU on
January 1, 2020 and has determined the adoption will not have a material impact on the Companys financial
statements and disclosures.
No other recently issued accounting standards that are not yet effective have been identified that management
believes are likely to have a material impact on the Companys financial statements.
Note 3 Revenue Recognition
Revenue Recognition
Revenue from contracts with customers primarily consists of casino wagers, room sales, food and beverage
transactions, rental income from the Companys retail tenants and entertainment sales.
Casino gaming revenues are the aggregate of gaming wins and losses. The commissions rebated to premium players
for cash discounts and other cash incentives to patrons related to gaming play are recorded as a reduction to casino
gaming revenues. Gaming contracts include a performance obligation to honor the patrons wager and typically
include a performance obligation to provide a product or service to the patron on a complimentary basis to
incentivize gaming or in exchange for points earned under the Companys loyalty program.
The Company generally enters into three types of slot and amusement device placement contracts as part of its
distributed gaming business: space agreements, revenue share agreements and participation agreements. Under
space agreements, the Company pays a fixed monthly rental fee for the right to install, maintain and operate the
Companys slots at a business location. Under these agreements, the Company recognizes all gaming revenue and
records fixed monthly rental fees as gaming expenses. Under revenue share agreements, the Company pays the
business location a percentage of the gaming revenue generated from the Companys slots placed at the location and
records that amount as an expense. With regard to both space 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 Companys slots which the Company records as an expense. In Montana, the Companys slot and
amusement device placement contracts are all participation agreements. In its distributed gaming business, the
Company considers its customer to be the gaming player since the Company controls all aspects of the slot
machines. Due to the maintaining of control of the services directly before they are transferred to the customer, the
Company is considered to be the principal in these transactions and therefore records revenue on a gross basis.
For wagering contracts that include complimentary products and services provided by the Company to incentivize
gaming, the Company allocates the stand-alone selling price of each product and service to the respective revenue
type. Complimentary products or services provided under the Company's control and discretion that are supplied by
third parties are recorded as an operating expense.
For wagering contracts that include products and services provided to a patron in exchange for points earned under
the Companys True Rewards loyalty program, the Company allocates the estimated stand-alone selling price of the
points earned to the loyalty program liability. The loyalty program liability is a deferral of revenue until redemption
occurs under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (Topic 606). Upon
redemption of loyalty program points for Company-owned products and services, the stand-alone selling price of
each product or service is allocated to the respective revenue type. For redemptions of points with third parties, the
redemption amount is deducted from the loyalty program liability and paid directly to the third party. Any discounts
received by the Company from the third party in connection with this transaction are recorded to other revenue. The
Companys performance obligation related to its loyalty program is generally completed within one year, as
participants points expire after thirteen months of no activity.
62
After allocation to the other revenue types for products and services provided to patrons as part of a wagering
contract, the residual amount is recorded to casino gaming revenue as soon as the wager is settled. As all wagers
have similar characteristics, the Company accounts for its gaming contracts collectively on a portfolio basis. Gaming
contracts are typically completed daily based on the outcome of the wagering transaction and include a distinct
performance obligation to provide gaming activities.
Revenue from leases is primarily recorded to other revenues and is generated from base rents through long-term
leases with retail tenants. Base rent, adjusted for contractual escalations, is recognized on a straight-lined basis over
the term of the related lease. Overage rent is paid by a tenant when its sales exceed an agreed upon minimum
amount and is not recognized by the Company until the threshold is met.
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.
Significant Impacts of Adoption of Topic 606
The adoption of Topic 606 principally affected the presentation of promotional allowances and how the Company
measured the liability associated with its prior loyalty programs that were in place at the time of adoption (Golden
Rewards, ace|PLAY, Gold Mine Rewards and Rocky Gap Rewards Club). The promotional allowances line item
was eliminated from the consolidated statement of operations with amounts being deducted from the respective
revenue line items, and the cost of providing such complimentaries is no longer included in gaming expense.
Additionally, the valuation of points associated with the Companys loyalty programs was changed from cost to fair
value, with the Company recording an increase to the loyalty point liability.
The Company elected to adopt the full retrospective method to apply the new guidance to each prior reporting
period presented as if it had been in effect since January 1, 2016. The only cumulative effect of the adoption
recognized was a decrease in retained earnings of $1.0 million on October 20, 2017 (no income tax effect), related to
the loyalty program point liability of the business combination.
Adoption of the new standard did not have a significant impact on the Companys previously reported net revenues,
expenses, operating income, and net income. The impact of adoption of the new standard to previously reported
selected financial statement information was as follows:
(In thousands)
Gross revenues
Promotional allowances
Net revenues
Operating income
Net income
Note 4 Acquisitions
Laughlin Acquisition
Overview
As Reported
Year Ended December 31, 2017
Adjustments
As Adjusted
$
$
538,676
(28,868)
509,808
15,378
2,171
(31,538) $
28,868
(2,670)
(87)
(87)
507,138
507,138
15,291
2,084
On January 14, 2019, the Company completed the acquisition of the Laughlin Entities from Marnell for $156.2
million in cash (after giving effect to the post-closing adjustment provisions in the purchase agreement) and the
issuance of 911,002 shares of the Companys common stock to certain assignees of Marnell. The results of
operations of the Laughlin Entities are included in the Companys results subsequent to the acquisition date.
63
Acquisition Method of Accounting
The Laughlin Acquisition has been accounted for using the acquisition method of accounting. The determination of
the fair value of the acquired assets and assumed liabilities (and the related determination of estimated lives of
depreciable tangible and identifiable intangible assets) was completed in the fourth quarter of 2019.
The following table summarizes the allocation of the purchase price, based on estimates of the fair values of the
assets acquired and liabilities assumed:
(In thousands)
Current assets
Property and equipment
Right-of-use assets
Intangible assets
Goodwill
Other noncurrent assets
Liabilities
Lease liabilities
Total assets acquired, net of liabilities assumed
Preliminary
Allocation as of
March 31, 2019
12,615
$
126,198
2,620
19,234
24,736
(10,023)
(2,620)
172,760
$
Adjustments
$
(123)
(1,131)
(324)
1,455
123
$
Final
Purchase
Price
Allocation
$
$
12,492
125,067
2,620
18,910
26,191
123
(10,023)
(2,620)
172,760
The goodwill recognized is the excess of the purchase price over the final values assigned to the assets acquired and
liabilities assumed. All of the goodwill was assigned to the Casinos reportable operating segment and $15.0 million
is expected to be deductible for income tax purposes.
The following table summarizes the values assigned to acquired property and equipment and estimated useful lives
by category:
(In thousands)
Land
Building and site improvements
Furniture and equipment
Construction in process
Total property and equipment
Useful Life (Years)
Not applicable
10-30
2-13
Not applicable
$
$
4,160
102,450
18,290
167
125,067
The following table summarizes the values assigned to acquired intangible assets and estimated useful lives by
category:
(In thousands)
Non-compete agreements
Trade names
Player relationships
Total intangible assets
Useful Life (Years)
5
Indefinite
2
$
$
3,630
6,980
8,300
18,910
The following table summarizes the components of the purchase price paid by the Company to Marnell in the
Laughlin 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
Fair value of common stock issued (911,002 shares)
Total purchase price
Amount
156,152
16,608
172,760
$
$
64
Pro Forma Combined 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 Laughlin Acquisition had occurred on January 1,
2018, or what such results or financial condition will be for any future periods. The unaudited pro forma combined
financial information is based on estimates and assumptions and on the information available at the time of the
preparation thereof. The unaudited pro forma combined financial information does not reflect non-recurring charges
that were incurred in connection with the Laughlin Acquisition, nor any cost savings and synergies expected to
result from the Laughlin Acquisition (and associated costs to achieve such savings or synergies), nor any costs
associated with severance, restructuring or integration activities resulting from the Laughlin Acquisition.
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 the Laughlin Entities for the
year ended December 31, 2018, adjusted to give effect to the Laughlin Acquisition and related transactions.
(In thousands, except per share data)
Pro forma combined revenues
Pro forma combined net loss
Weighted-average common shares outstanding:
Basic
Diluted
Pro forma combined net loss per share:
Basic
Diluted
Year Ended
December 31, 2018
$
$
951,802
(16,432)
28,464
28,464
(0.58)
(0.58)
As the Laughlin Acquisition occurred on January 14, 2019, the unaudited pro forma combined financial information
for the year ended December 31, 2019, would not reflect significant adjustments to the consolidated financial
information.
In connection with the Laughlin Acquisition, the Company incurred approximately $1.8 million of acquisition costs
for the year ended December 31, 2019. For the year ended December 31, 2019, the Laughlin Entities contributed
revenue of approximately $90.4 million and operating expenses related to the Laughlin Entities were approximately
$47.9 million.
American Acquisition
Overview
On October 20, 2017, the Company completed the acquisition of all of the outstanding equity interests of American
for $787.6 million in cash (after giving effect to post-closing adjustments) and the issuance of approximately 4.0
million shares of its common stock to a former American equity holder with a fair value of $101.5 million, based on
the closing price of the Companys common stock on October 20, 2017 of $25.08 per share.
Acquisition Method of Accounting
The American Acquisition has been accounted for using the acquisition method of accounting. The determination of
the fair value of the acquired assets and assumed liabilities (and the related determination of estimated lives of
depreciable tangible and identifiable intangible assets) was completed in the second quarter of 2018. There were no
measurement period adjustments that were material to the Companys consolidated financial statements.
65
The following table summarizes the allocation of the purchase price, based on 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
$
$
83,079
754,581
264
66,140
52,479
(67,476)
889,067
The following table summarizes the values assigned to acquired property and equipment and estimated useful lives
by category:
(In thousands)
Land
Land improvements
Building and improvements
Furniture, fixtures and equipment
Construction in process
Total property and equipment
Useful Life (Years)
Not applicable
15
45
3-4
Not applicable
$
$
106,800
6,240
607,698
32,829
1,014
754,581
The following table summarizes the values assigned to acquired intangible assets and estimated useful lives by
category:
(In thousands)
Trade names
Player loyalty programs
Leasehold interest
In-place lease value
Total intangible assets
Useful Life (Years)
Indefinite
3
3-80
3-4
$
$
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.
For the period from the American Acquisition date of October 20, 2017 through December 31, 2017, American
generated net revenue of $76.3 million and net income of $5.5 million.
Refinancing
In connection with the closing of the American Acquisition, the Company entered into the Credit Facility, then
consisting of a $800.0 million term loan and a $100.0 million revolving credit facility (which was undrawn at
closing and upsized to $200.0 million in 2018), and the $200.0 million Second Lien Term Loan. The Company used
the net proceeds from the borrowings under these credit facilities primarily to fund the cash purchase price in the
American Acquisition (a portion of which was used to repay Americans outstanding senior secured indebtedness),
to refinance the Companys outstanding senior secured indebtedness under its then-existing senior secured credit
facility, and to pay certain transaction fees and expenses. See Note 8, Debt, for a discussion of the Credit Facility
and associated refinancing.
66
Pro Forma Combined 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 on January
1, 2017 or what such results or financial condition will be for any future periods. The unaudited pro forma combined
financial information is based on estimates and assumptions and on the information available at the time of the
preparation thereof. These 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 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.
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 year ended
December 31, 2017, adjusted to give effect to the American Acquisition and related transactions (including the
refinancing).
(In thousands, except per share data)
Pro forma combined revenues
Pro forma combined net income
Pro forma combined net income per share:
Basic
Diluted
Weighted-average common shares outstanding:
Basic
Diluted
Note 5 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
Year Ended
December 31, 2017
$
$
843,589
23,131
26,342
27,897
0.88
0.83
December 31,
2019
125,240
880,662
222,938
49,869
1,278,709
(232,173)
1,046,536
$
$
2018
121,081
723,354
154,663
35,151
1,034,249
(139,296)
894,953
$
$
Depreciation expense for property and equipment, including capital leases, totaled $93.9 million, $76.7 million, and
$31.3 million for 2019, 2018 and 2017, respectively.
67
Note 6 Goodwill and Intangible Assets, Net
The following table summarizes goodwill activity by reportable segment:
(In thousands)
Balance, January 1, 2018
Goodwill acquired during the year
Balance, December 31, 2018
Goodwill acquired during the year
Balance, December 31, 2019
Intangible assets, net, consisted of the following:
Casinos
Distributed
Gaming
Total
Goodwill
$
$
60,275
60,275
26,191
86,466
$
$
97,859
97,859
97,859
$
$
158,134
-
158,134
26,191
184,325
(In thousands)
Indefinite-lived intangible assets
Trade names
Gaming licenses
Liquor licenses
Amortizing intangible assets
Customer relationships
Player relationships
Non-compete agreements
Leasehold interest
Gaming licenses
In-place lease value
Other
Balance, December 31, 2019
(In thousands)
Indefinite-lived intangible assets
Trade names
Gaming licenses
Liquor licenses
Amortizing intangible assets
Customer relationships
Player relationships
Non-compete agreements
Leasehold interest
Gaming licenses
In-place lease value
Other
Balance, December 31, 2018
December 31, 2019
Gross
Carrying
Value
Cumulative
Amortization
Intangible
Assets, Net
53,690
960
185
54,835
81,105
42,990
9,840
570
2,100
1,301
1,814
139,720
194,555
$
$
$
(24,140)
(26,649)
(5,467)
(345)
(929)
(724)
(1,150)
(59,404)
(59,404) $
53,690
960
185
54,835
56,965
16,341
4,373
225
1,171
577
664
80,316
135,151
December 31, 2018
Gross
Carrying
Value
Cumulative
Amortization
Intangible
Assets, Net
46,710
960
185
47,855
80,654
34,689
6,210
3,110
2,100
1,670
1,769
130,202
178,057
$
$
$
(18,282)
(12,691)
(3,548)
(223)
(788)
(565)
(832)
(36,929)
(36,929) $
46,710
960
185
47,855
62,372
21,998
2,662
2,887
1,312
1,105
937
93,273
141,128
Weighted-
Average Life
Remaining
Indefinite
Indefinite
Indefinite
10.0 years
2.0 years
2.2 years
1.6 years
8.3 years
1.3 years
6.3 years
Weighted-
Average Life
Remaining
Indefinite
Indefinite
Indefinite
11.0 years
3.2 years
2.1 years
64.7 years
9.3 years
2.3 years
7.2 years
$
$
$
$
68
The Rocky Gap gaming license is being amortized over its 15 year term.
Total amortization expense related to intangible assets was $22.7 million, $17.8 million and $9.5 million for 2019,
2018 and 2017, respectively. Estimated future amortization expense related to intangible assets, is as follows:
(In thousands)
Estimated amortization
expense
2020
2021
2022
2023
2024
Thereafter
Total
$ 21,027
$
8,047
$
7,479
$
7,367
$
6,472
$ 29,924
$ 80,316
Note 7 Accrued Liabilities
Accrued liabilities consist of the following:
(In thousands)
Gaming liabilities
Interest
Deposits
Other accrued liabilities
Total accrued and other current liabilities
Note 8 Debt
Senior Secured Credit Facility
December 31,
2019
12,353
6,562
2,734
3,873
25,522
$
$
2018
12,473
305
2,652
3,418
18,848
$
$
In October 2017, the Company entered into the Credit Facility, then consisting of an $800 million term loan and a
$100 million revolving credit facility. The revolving credit facility was subsequently increased from $100 million to
$200 million in 2018.
As of December 31, 2019, the Company had $772 million of outstanding term loan borrowings under the Credit
Facility, no letters of credit outstanding under the Credit Facility, and the revolving credit facility was undrawn,
leaving borrowing availability under the revolving credit facility as of December 31, 2019 of $200 million.
Interest and Fees
Borrowings under the Credit Facility bear interest, at the Companys option, at either (1) a base rate equal to the
greatest of the federal funds rate plus 0.50%, the applicable administrative agents 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 loan) 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 loan only), plus in each case, an
applicable margin. The applicable margin for the term loan under the Credit 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 ranges from
1.50% to 2.00% for base rate loans and 2.50% to 3.00% for LIBOR rate loans, based on the Companys net leverage
ratio. The commitment fee for the revolving credit facility is payable quarterly at a rate of 0.375% or 0.50%,
depending on the Companys net leverage ratio, and is accrued based on the average daily unused amount of the
available revolving commitment. As of December 31, 2019, the weighted-average effective interest rate on the
Companys outstanding borrowings under the Credit Facility was approximately 5.3%.
Optional and Mandatory Prepayments
The revolving credit facility matures on October 20, 2022, and the term loan under the Credit Facility matures on
October 20, 2024. The term loan under the Credit Facility is repayable in 27 quarterly installments of $2.0 million
each, which commenced in March 2018, followed by a final installment of $746.0 million at maturity. In April 2019,
the Company made a $18.0 million prepayment of the term loan under the Credit Facility with the proceeds from the
issuance of the 2026 Notes.
69
Guarantees and Collateral
Borrowings under the Credit Facility are guaranteed by each of the Companys 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).
Financial and Other Covenants
Under the Credit Facility, 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 loan under the Credit Facility 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 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 Facility
also prohibits the occurrence of a change of control, which includes the acquisition of beneficial ownership of 50%
or more of the Companys capital stock (other than by certain permitted holders, which include, among others,
Blake L. Sartini, Lyle A. Berman, and certain affiliated entities). If the Company defaults under the Credit Facility
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 Companys assets to satisfy the obligations thereunder. The
Company was in compliance with its financial covenants under the Credit Facility as of December 31, 2019.
Senior Notes due 2026
On April 15, 2019, the Company issued $375 million of 2026 Notes in a private placement to institutional buyers at
face value. The 2026 Notes bear interest at 7.625%, payable semi-annually on April 15th and October 15th of each
year.
In conjunction with the issuance of the 2026 Notes, the Company incurred approximately $6.7 million in debt
financing costs and fees that have been deferred and are being amortized over the term of the 2026 Notes using the
effective interest method.
The net proceeds of the 2026 Notes were used to (i) repay the Companys former $200 million Second Lien Term
Loan, (ii) repay outstanding borrowings under the revolving credit facility, (iii) repay $18 million of the outstanding
term loan indebtedness under the Credit Facility, and (iv) pay accrued interest, fees and expenses related to each of
the foregoing.
Optional Prepayments
The 2026 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on April 15,
2022 at a redemption price of 103.813%, during the 12 months beginning on April 15, 2023 at a redemption price of
101.906%, and at any time on or after April 15, 2024 at a redemption price of 100%, in each case plus accrued and
unpaid interest, if any, thereon to the redemption date. Prior to April 15, 2022, the Company may redeem up to 40%
of the 2026 Notes at a redemption price of 107.625% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the redemption date, from the net cash proceeds of specified equity offerings. Prior to
April 15, 2022, the Company may also redeem the 2026 Notes, in whole or in part, at a redemption price equal to
100% of the principal amount thereof, plus accrued and unpaid interest and an Applicable Premium (as defined in
the indenture governing the 2026 Notes (the Indenture)), if any, thereon to the redemption date.
70
Financial and Other Covenants
The 2026 Notes are guaranteed on a senior unsecured basis by each of the Companys existing and future wholly-
owned domestic subsidiaries that guarantees the Credit Facility. The 2026 Notes are the Company and its subsidiary
guarantors general senior unsecured obligations and rank equally in right of payment with all of the Companys
respective existing and future unsecured unsubordinated debt. The 2026 Notes are effectively junior in right of
payment to the Company and its subsidiary guarantors existing and future secured debt, including under the Credit
Facility (to the extent of the value of the assets securing such debt), are structurally subordinated to all existing and
future liabilities (including trade payables) of any of the Companys subsidiaries that do not guarantee the 2026
Notes, and are senior in right of payment to all of the Company and its subsidiary guarantors existing and future
subordinated indebtedness.
Under the Indenture, 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 the event of a change of control (which includes the
acquisition of more than 50% of our capital stock, other than by certain permitted holders, which include, among
others, Blake L. Sartini, Lyle A. Berman, and certain affiliated entities), each holder will have the right to require the
Company to repurchase all or any part of such holders 2026 Notes at a purchase price in cash equal to 101% of the
aggregate principal amount of the 2026 Notes repurchased, plus accrued and unpaid interest, if any, to the date of
purchase.
Expenses Related to Extinguishment and Modification of Debt
In April 2019, the Company recognized a $5.5 million loss on extinguishment of debt and $3.7 million of expense
related to modification of debt, related to the repayment of the Companys Second Lien Term Loan and $18 million
prepayment of the term loan under its Credit Facility.
Derivative Instruments
In November 2017, the Company entered into an interest rate cap agreement (the Interest Rate Cap) with a
notional value of $650 million for a cash payment of $3.1 million. The Interest Rate Cap establishes a range
whereby the counterparty will pay the Company if one-month LIBOR exceeds the ceiling rate of 2.25%. The
Interest Rate Cap settles monthly commencing in January 2018 through the termination date in December 31, 2020.
No payments or receipts are exchanged on the Interest Rate Cap unless interest rates rise above the pre-determined
ceiling rate. The estimated fair value of the Companys Interest Rate Cap is derived from a market price obtained
from a dealer quote. Such quote represents the estimated amount the Company would receive to terminate the
contract. The fair value of the Companys Interest Rate Cap was $5.0 million as of December 31, 2018 and was
recorded in other long-term assets in the accompanying consolidated balance sheets. As of December 31, 2019, the
fair value of the Companys Interest Rate Cap was zero.
Former Senior Secured Credit Facility
In connection with the American Acquisition and the entry into the Credit Facility in October 2017, the Company
repaid all principal amounts outstanding under the Companys former credit agreement of approximately $173.4
million, together with accrued interest. The Company recognized a loss on extinguishment of debt of $1.7 million
during the year ended December 31, 2017.
71
Summary of Outstanding Debt
Long-term debt, net, is comprised of the following:
(In thousands)
Term loans
Senior Notes due 2026
Finance lease liabilities
Notes payable
Total long-term debt
Less unamortized discount
Less unamortized debt issuance costs
Less current maturities
Long-term debt, net
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,
2020
2021
2022
2023
2024
Thereafter
Total outstanding principal of long-term debt
Note 9 Equity Transactions and Stock Incentive Plans
Overview of Stock Incentive Plans
December 31,
2019
772,000
375,000
12,463
6,369
1,165,832
(18,885)
(8,076)
1,138,871
(8,497)
1,130,374
$
$
2018
992,000
7,127
1,111
1,000,238
(25,658)
(3,537)
971,043
(10,480)
960,563
8,497
8,360
10,182
8,450
8,187
1,122,156
1,165,832
$
$
$
$
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 Companys shareholders at the Companys
2016 annual meeting. 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 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 Companys 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 Companys common stock outstanding
(on an as-converted basis) and such smaller amount as may be determined by the Board of Directors in its sole
discretion. The annual increase on January 1, 2019 was 1,119,924 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, 2019, a total of 1,280,000 shares of the Companys common stock
remained available for grants of awards under the 2015 Plan.
72
Stock Options
The following table summarizes the Companys stock option activity:
Outstanding at January 1, 2019
Granted
Exercised
Cancelled
Expired
Outstanding at December 31, 2019
Exercisable at December 31, 2019
Weighted-
Average
Remaining
Term
(in years)
7.4
6.1
5.9
Stock
Options
Outstanding
3,424,755
(271,984)
(26,250)
3,126,521
2,728,721
Weighted-
Average
Exercise Price
11.49
$
$
10.08
$
11.69
$
$
11.61
$
11.42
$
Aggregate
Intrinsic
Value
(in thousands)
$
$
24,991
22,496
The total intrinsic value of stock options exercised during the years ended December 31, 2019, 2018 and 2017 was
$1.6 million, $16.1 million and $0.1 million, respectively. The weighted-average grant-date fair value of stock
options granted during the year ended December 31, 2017 was $7.30 per share. No stock options were granted
during the years ended December 31, 2019 and 2018.
The total amount of cash received from stock options exercised during the year ended December 31, 2019 was $0.1
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 Companys stock price, the
weighted-average risk-free interest rate and the weighted-average expected life of the options. The Companys
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.
•
•
•
•
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 Companys 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
Companys 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.
RSUs and PSUs
On March 14, 2018, the Compensation Committee of the Board of Directors of the Company approved a new long-
term incentive structure for equity awards to be granted to the executive officers of the Company under the 2015
Plan. Under this new structure, commencing in the first quarter of 2018, the executive officers of the Company
receive long-term equity awards in a combination of RSUs and PSUs. The number of PSUs that will be eligible to
vest with respect to these PSU awards will be determined based on the Companys attainment of performance goals
set by the Compensation Committee. Following the two-year performance period, the number of vesting eligible
73
PSUs will then be subject to one additional year of time-based vesting. Share-based compensation costs related to
RSU and PSU awards are calculated based on the market price on the date of the grant. The Company periodically
reviews the estimates of performance against the defined criteria to assess the expected payout of each outstanding
PSU grant and adjusts the stock compensation expense accordingly.
The following table summarizes the Companys RSU activity:
RSUs
Weighted-
Average
Grant Date
Fair Value
Total
Fair Value
of Shares
Vested
(in thousands)
Shares
Outstanding at January 1, 2017
Granted
Vested
Cancelled
Outstanding at December 31, 2017
Granted
Vested
Cancelled
Outstanding at December 31, 2018
Granted
Vested
Cancelled
Outstanding at December 31, 2019
The following table summarizes the Companys PSU activity:
Outstanding at January 1, 2017
Granted
Vested
Cancelled
Outstanding at December 31, 2017
Granted
Vested
Cancelled
Outstanding at December 31, 2018
Granted
Vested
Cancelled
Outstanding at December 31, 2019
$
$
141,296
(111,660) $
(29,636) $
241,542
(9,243) $
$
232,299
564,805
$
(103,224) $
(32,622) $
$
661,258
12.57
12.57
12.57
29.09
28.72
29.10
13.88
29.61
20.77
16.44
$
$
$
2,556
1,596
PSUs
Weighted-
Average
Grant Date
Fair Value
Total
Fair Value
of Shares
Vested
(in thousands)
$
$
$
27.87
27.87
28.72
28.41
14.13
20.65
Shares(1)
62,791
62,791
108,957
171,748
204,580
376,328
$
$
$
$
$
$
(1)
The number of shares listed for PSUs granted during 2017 represents the actual number of PSUs granted to
each recipient eligible to vest if the Company meets its performance goals for the applicable period. The
number of shares listed for PSUs granted after 2017 represents the target number of PSUs granted to each
recipient eligible to vest if the Company meets its target performance goals for the applicable period. The
actual number of PSUs eligible to vest with respect to PSUs granted after 2017 will vary depending on
whether or not the Company meets or exceeds the applicable threshold, target or maximum performance goals
for the PSUs, with 200% of the target number of PSUs eligible to vest at maximum performance levels.
74
Share-Based Compensation
The following table summarizes share-based compensation costs by award type:
(In thousands)
Stock options
RSUs
PSUs
Total share-based compensation costs
Year Ended December 31,
2018
2017
2019
$
$
4,850
4,284
911
10,045
$
$
5,191
3,383
1,067
9,641
$
$
5,135
3,554
65
8,754
As of December 31, 2019, the Companys unrecognized share-based compensation expenses related to stock
options, RSUs and PSUs was approximately $2.1 million, $6.3 million and $2.8 million, respectively, which are
expected to be recognized over a weighted-average period of 1.0 year, 2.4 years, and 1.9 years, respectively.
Equity Transactions
In January 2018, the Company completed an underwritten public offering pursuant to its universal shelf registration
statement, in which certain of the Companys shareholders resold an aggregate of 6.5 million shares of the
Companys common stock, and the Company sold 975,000 newly issued shares of its common stock pursuant to the
exercise in full of the underwriters over-allotment option to purchase additional shares. The Companys net
proceeds from the offering were $25.6 million after deducting underwriting discounts and offering expenses.
On November 7, 2018, the Board of Directors authorized the repurchase of up to $25.0 million shares of common
stock, subject to available liquidity, general market and economic conditions, alternate uses for the capital and other
factors. The Company uses the par value method of accounting for its stock repurchases. As a result of the stock
repurchases, the Company reduces common stock and records charges to accumulated deficit. During the year ended
December 31, 2018, the Company repurchased approximately 1.2 million shares of its $0.01 par value common
stock in open market transactions at an average price of $16.06 per share, resulting in a charge to accumulated
deficit of approximately $19.6 million. On March 12, 2019, the Board of Directors authorized the repurchase of up
to $25.0 million worth of additional shares of common stock, subject to available liquidity, general market and
economic conditions, alternate uses for the capital and other factors, which replaces the November 2018 share
repurchase program. Share repurchases may be made from time to time in open market transactions, block trades or
in private transactions in accordance with applicable securities laws and regulations and other legal requirements,
including compliance with the Companys finance agreements. There is no minimum number of shares that the
Company is required to repurchase and the repurchase program may be suspended or discontinued at any time
without prior notice. No shares were repurchased during the year ended December 31, 2019.
Note 10 Income Taxes
Income tax provision (benefits) are summarized as follows:
(In thousands)
Current:
Federal
State
Total current tax benefit
Deferred:
Federal
State
Total deferred tax benefit
Income tax (benefit) provision
2019
Year Ended December 31,
2018
2017
$
$
$
(371) $
(371)
(1,475) $
(30)
(1,505)
(1,876) $
(741) $
(741)
9,872
508
10,380
9,639
$
$
(91)
(5)
(96)
(7,456)
(369)
(7,825)
(7,921)
75
Reconciliation of the statutory federal income tax rate to the Companys 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
Permanent tax differences stock compensation
Permanent tax differences business meals
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
Impact of ASC 842
Change in tax rate and apportionment
Deferred only adjustment to beginning deferred balances
Other, net
Effective tax rate
Year Ended December 31,
2019
2018
2017
21.0%
1.2
(0.7)
(0.9)
(0.1)
0.1
5.9
(32.3)
2.8
7.7
(0.3)
0.1
4.5%
21.0%
4.5
22.0
(5.0)
(0.2)
(144.5)
8.5
(4.8)
(4.3)
17.3
(85.5%)
35.0%
2.0
(12.5)
(17.0)
193.5
11.8
(74.6)
(0.4)
137.8%
The Companys current and non-current deferred tax assets (liabilities) are comprised of the following:
(In thousands)
Deferred tax assets:
Accruals and reserves
Share-based compensation expense
Alternative minimum tax credit carryforward
General business credit carryforward
State tax credits
Net operating loss carryforwards
Operating lease obligation
Other
Valuation allowances
Deferred tax liabilities:
Prepaid services
Amortization of intangible assets
Depreciation of fixed assets
Right-of-use assets
Net deferred tax assets (liabilities)
December 31,
2019
2018
$
$
$
5,346
4,958
371
3,936
5,500
27,269
46,525
583
94,488
(36,652)
57,836
(288)
(7,760)
(7,534)
(43,342)
(58,924)
(1,088)
$
$
$
3,854
3,758
741
2,447
5,500
19,156
944
36,400
(23,276)
13,124
(876)
(9,519)
(5,322)
(15,717)
(2,593)
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, 2019,
include a net increase in valuation allowance of $13.4 million. 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,
2019, negative evidence outweighs positive evidence for the realization of deferred tax assets and as a result has
provided a full valuation allowance against its net deferred tax assets.
76
As of December 31, 2019,
the Company had approximately $123.5 million of federal net operating loss
carryforwards, which will begin to expire in 2033. 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 a former American equity holder, which
resulted in an ownership change under Section 382 that will generally limit the amount of net operating losses the
Company can utilize annually. As of December 31, 2019,
the American
Acquisition will not result in a loss of net operating loss nor credit carryforwards.
the Company has concluded that
Additionally, the Company had deferred tax assets of approximately $3.9 million related to general business credits.
The general business credit carryforward begins to expire in 2037.
As of December 31, 2019, the Companys 2017 tax year is under audit by the IRS.
As of December 31, 2019, the Company has no uncertain tax positions.
Note 11 Employee Retirement and Benefit Plans
Defined contribution employee savings plans
Effective November 1, 2018 the Company combined its two qualified defined contribution employee savings plans.
The Companys qualified defined contribution employee savings plan allows eligible participants to defer, within
prescribed limits, up to 75% of their income on a pre-tax basis through a portion of their salary and accumulate tax-
deferred earnings as a retirement fund. The Company contributed approximately $0.6 million, $0.2 million and $0.2
million to its defined contribution employee savings plan during the years ended December 31, 2019, 2018 and
2017, respectively. The Companys contributions vest over a five-year period.
Pension plans
As of December 31, 2019, approximately 2,000 of the Companys 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 $11.8 million, $11.0 million, and $2.1 million in expenses for these plans for the
years ended December 31, 2019, 2018, and 2017, respectively. 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:
• Assets contributed to multiemployer plans by one employer may be used to provide benefits to employees
of other participating employers;
•
•
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
EIN/Plan Number
Pension Protection
Zone Status (1)
2018
2017
FIR/RP
Status
Pending/
Implemented
Surcharge
Imposed
Central Pension Fund of the
IUOE and Participating
Employers
Southern Nevada Culinary and
36-6052390-001
Green
Green
Bartenders Pension Plan
88-6016617-001
Green
Green
No
No
No
No
Expiration Date
Of Collective-
Bargaining
Agreement
3/31/2020 and
3/31/2021
5/31/2023
(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.
77
The Companys contributions to each multiemployer pension and benefit plans are as follows:
(In thousands)
Multiemployer pension plans
Central Pension Fund of the IUOE and Participating
Employers
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
2019
December 31,
2018
2017
$
$
$
$
704
2,130
198
3,032
8,757
4
8,761
$
$
$
$
753
2,003
191
2,947
7,807
6
7,813
$
$
$
$
165
453
45
663
1,691
2
1,693
For the 2018 plan year, the latest period for which plan data is available, the Company made less than 5% of total
contributions for all multiemployer pension plans to which the Company contributes.
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:
•
•
•
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 entitys own assumptions.
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value
measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are
observable (Levels 1 and 2) and unobservable (Level 3). Management's assessment of the significance of a
particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities
and their placement within the fair value hierarchy levels.
Financial Instruments
The Companys financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable,
an Interest Rate Cap derivative and debt.
The carrying values of the Companys cash and cash equivalents, accounts receivable and accounts payable
approximate fair value because of the short duration of these financial instruments.
78
The following table summarizes the fair value measurement information about the Companys long-term debt:
(In thousands)
Term loan
Senior Notes due 2026
Finance lease liabilities
Notes payable
Total debt
(In thousands)
Term loans
Finance lease liabilities
Notes payable
Total debt
Carrying
Amount
$
772,000
375,000
12,463
6,369
$ 1,165,832
$
December 31, 2019
Fair
Value
776,806
401,250
12,463
6,369
$ 1,196,888
Carrying
Amount
$
992,000
7,127
1,111
$ 1,000,238
$
December 31, 2018
Fair
Value
952,300
7,127
1,111
960,538
$
Fair Value
Hierarchy
Level 2
Level 2
Level 3
Level 3
Fair Value
Hierarchy
Level 2
Level 3
Level 3
The estimated fair value of the Companys term loan and 2026 Notes is based on a relative value analysis performed
as of December 31, 2019 and 2018. The finance lease liabilities and notes payable debt are fixed-rate debt, are not
traded and do not have observable market inputs, therefore, the fair value is estimated to be equal to the carrying
value.
As of December 31, 2019, the Companys Interest Rate Cap was outstanding with a notional amount of $650 million
and an initial 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 based upon
observable market-based inputs that reflect the present values of the difference between estimated future fixed rate
payments and future variable receipts. The fair value of the Companys Interest Rate Cap asset at December 31,
2018 was $5.0 million and it had no value as of December 31, 2019. As the Company elected to not apply hedge
accounting, the change in fair value of its Interest Rate Cap was recorded in 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
Laughlin Acquisition and the American Acquisition, these amounts were finalized during the fourth quarter of 2019
and the second quarter of 2018, 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).
79
Fair value estimates of intangible assets are based on a variety of methods 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 (0.75% to 1.0% in the Laughlin
Acquisition and 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% 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 Laughlin Acquisition and the American
Acquisition were given an indefinite 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 Laughlin Acquisition and the American Acquisition were given a useful life of two years and three years,
respectively.
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 Companys Nevada gaming licenses, Montana
gaming license and various liquor licenses are anticipated to be indefinite, as they are easily maintained. The
Companys 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 Laughlin Acquisition were given useful lives of five years.
Note 13 Leases
Company as Lessee
The Company has operating and finance leases for offices, taverns, land, vehicles, slot machines and equipment. In
addition, slot placement contracts in the form of space agreements at chain stores are accounted for as operating
leases. Under chain store space 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. The leases, excluding
land, have remaining lease terms of 1 year to 28 years, some of which include options to extend the leases for an
additional 1 to 15 years. Some equipment leases and space agreements include options to terminate the lease with 60
days to 1 years notice. The Company leases slot machines from gaming equipment manufacturers under short-term
agreements. Most of the slot machine leases have variable rent structures, with amounts determined based on the
performance of those machines. Certain others are short-term in nature, with fixed payment amounts. The Company
has an operating ground lease with the Maryland Department of Natural Resources for approximately 270 acres in
the Rocky Gap State Park on which Rocky Gap is situated. The Company leases approximately 20 acres of land in
Laughlin, Nevada for the Laughlin Event Center and four parcels of land in Pahrump, Nevada on which the Gold
Town Casino is located.
The Company leases approximately 4.5 acres of undeveloped land in Carson City. Upon the adoption of Topic 842,
the Company wrote off the associated ROU asset for this land lease of $9.0 million to its beginning balance of
retained earnings as of January 1, 2019. The Company is also lessee for nine taverns and locations subject to space
agreements that it does not plan to develop, operate, or sub-lease. The Company wrote off the associated ROU asset
for these ten leases of $3.0 million to its beginning balance of retained earnings as of January 1, 2019.
80
The Company leases its office headquarters building from a related party. See Note 15, Related Party Transactions,
for more detail.
The current and long-term obligations under finance leases are included in current portion of long-term debt and
finance leases and long-term debt, net and finance leases, respectively. The majority of the finance leases relate
to vehicles used within the Companys Distributed Gaming business and equipment for the Companys casinos.
The components of lease expense are as follows:
Classification
Year Ended
December 31, 2019
$
$
$
$
46,515
17,184
6,617
70,316
2,389
439
2,828
Year Ended
December 31, 2019
$
$
47,084
429
2,485
97,790
7,559
(In thousands)
Operating lease cost
Operating lease cost
Variable lease cost
Short-term lease cost
Total operating lease cost
Finance lease cost
Amortization of lease assets
Interest on lease liabilities
Total finance lease cost
Operating and SG&A expenses
Operating and SG&A expenses
Operating and SG&A expenses
Depreciation and amortization
Interest expense, net
Supplemental cash flow information related to leases is as follows:
(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance leases
81
December 31, 2019
226,884
(23,353)
203,531
33,883
184,301
218,184
19,920
(3,787)
16,133
3,662
8,801
12,463
8.9 years
7.0 years
6.0%
6.5%
Supplemental balance sheet information related to leases is as follows:
(In thousands, except lease term and discount rate)
Operating leases
Operating lease right-of-use assets, gross
Accumulated amortization
Operating lease right-of-use assets, net
Current portion of operating leases
Noncurrent operating leases
Total operating lease liabilities
Finance leases
Property and equipment, gross
Accumulated depreciation
Property and equipment, net
Current portion of finance leases, net
Noncurrent finance leases, net
Total finance lease liabilities
$
$
$
$
$
$
$
$
The following presents additional information related to the Companys leases as of December 31, 2019:
Weighted Average Remaining Lease Term
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
Maturity of Lease Liabilities
As of December 31, 2019, maturities of lease liabilities were as follows:
(In thousands)
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: interest
Present value of lease liabilities
Operating
Leases
Finance
Leases
$
$
45,171 $
43,653
37,218
31,540
30,490
101,441
289,513
(71,329)
218,184 $
4,442 $
3,953
2,617
529
227
3,828
15,596
(3,133)
12,463 $
Total
49,613
47,606
39,835
32,069
30,717
105,269
305,109
(74,462)
230,647
As of December 31, 2019, the Company does not have any leases that have not yet commenced but that create
significant rights and obligations.
82
Company as Lessor
Minimum and contingent operating lease income is as follows:
(In thousands)
Minimum rental income
Contingent rental income
Total rental income
Future minimum rental payments to be received under operating leases:
(In thousands)
Remaining 2020
2021
2023
2024
2025
Thereafter
Total future minimum rentals
Year Ended
December 31, 2019
7,479
1,527
9,006
Operating Leases
4,261
3,280
2,433
1,763
826
1,720
14,283
$
$
$
$
Disclosures related to periods prior to adoption of Topic 842
For the year ended December 31, 2018, operating lease rental expense, calculated on a straight-line basis, was $39.0
million, $1.6 million and $15.1 million for space agreements, related party leases and other operating leases,
respectively. For the year ended December 31, 2017, operating lease rental expense, calculated on a straight-line
basis, was $37.1 million, $2.0 million, and $13.4 million for space agreements, related party leases and other
operating leases, respectively. The Company recorded rental revenue of $7.5 million and $1.3 million for the years
ended December 31, 2018 and 2017, respectively.
As of December 31, 2018, maturities of lease liabilities were as follows:
(In thousands)
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
Less: interest
Present value of lease liabilities
Operating
Leases
Finance
Leases
$
$
55,859 $
27,453
23,041
19,582
16,115
103,436
245,486
$
1,817 $
2,023
1,405
306
253
7,644
13,448
(6,321)
7,127 $
Total
57,676
29,476
24,446
19,888
16,368
111,080
258,934
(6,321)
252,613
83
Note 14 Commitments and Contingencies
Participation and Revenue Share Agreements
In addition to the space 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 participation agreements, the business
location holds the applicable gaming license and retains a percentage of the gaming revenue that it generates from
the Companys slots. Under revenue share agreements, the Company pays the business location a percentage of the
gaming revenue generated from the Companys slots placed at the location, rather than a fixed monthly rental fee.
During the years ended December 31, 2019, 2018 and 2017, the aggregate contingent payments recognized by the
Company as gaming expenses under participation and revenue share agreements were $158.6 million, $147.7
million and $143.3 million, respectively, including $0.9 million, $0.9 million and $1.0 million, respectively, under
participation and revenue share 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 participation
agreements. Under these agreements, the Company pays the business location a percentage of the non-gaming
revenue generated from the Companys amusement devices and ATMs placed at the location. During the years
ended December 31, 2019, 2018 and 2017, the total contingent payments recognized by the Company as operating
expenses for amusement devices and ATMs under such agreements were $1.5 million, $1.4 million and $1.4
million, respectively.
Collective Bargaining Agreements
As of December 31, 2019 the Company had approximately 8,000 employees, of which approximately 2,000 were
covered by various collective bargaining agreements. One collective bargaining agreement expired in 2018, and was
successfully renegotiated in the first quarter of 2020. The Companys other collective bargaining agreements expire
between 2020 and 2024. The Company 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 the Company.
Employment Agreements
The Company has entered into at-will employment agreements with certain of the Companys executive officers.
Under each employment agreement, in addition to the executives annual base salary, the executive is entitled to
participate in the Companys 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 Companys executive officers (as defined in their respective employment agreements), the
Company could be liable for estimated severance payments of up to $5.7 million for Mr. Sartini, $3.1 million for
Charles H. Protell, $2.5 million for Stephen A. Arcana, $1.6 million for Sean T. Higgins, and $0.9 million for Blake
L. Sartini II (assuming each officers respective annual salary and health benefit costs as of December 31, 2019,
subject to amounts in effect at the time of termination and excluding potential expense related to acceleration of
stock options, RSUs and PSUs).
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 records reserves. Although lawsuits, claims, investigations
and other legal proceedings are inherently uncertain and their results cannot be predicted with certainty, the
Company believes that the resolution of its currently pending matters should not have a material adverse effect on its
business, financial condition, results of operations or liquidity. Regardless of the outcome, legal proceedings can
have an adverse impact on the Company because of defense costs, diversion of management resources and other
factors. In addition, it is possible that an unfavorable resolution of one or more such proceedings could in the future
materially and adversely affect the Companys business, financial condition, results of operations or liquidity in a
particular period.
84
On August 31, 2018, prior guests of The Strat filed a purported class action complaint against the Company in the
District Court, Clark County, 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 alleged that
the Tax was charged in violation of the federal Internet Tax Freedom Act, which imposed a national moratorium on
the taxation of Internet access by states and their political subdivisions, and sought, 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,
including Golden
Entertainment, Inc., filed a joint motion to dismiss this matter for lack of merit. The District Court granted this joint
motion to dismiss on February 21, 2019. The plaintiffs filed an appeal to the Supreme Court of Nevada on April 10,
2019. The Company, and other defendants, filed an appellate response brief on October 19, 2019.
fees and costs. All defendants to this matter,
interest,
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 managements 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, 2019, the Company leased its office headquarters building from a company 33% beneficially
owned by Blake L. Sartini, 5% owned by a trust for the benefit of Mr. Sartinis immediate family members
(including Blake L. Sartini, II) for which Mr. Sartini serves as trustee, and 3% beneficially owned by Stephen A.
Arcana. The lease for the Companys office headquarters building expires on December 31, 2030. The rent expense
for the office headquarters building during the years ended December 31, 2019, 2018 and 2017 was $1.3 million,
$1.3 million, and $1.2 million, respectively. No amount was owed to the Company, and no amount was due and
payable by the Company, under this lease as of December 31, 2019 and 2018. Additionally, a portion of the office
headquarters building was sublet to a company owned or controlled by Mr. Sartini. Rental income during each of the
years ended December 31, 2019, 2018 and 2017 for the sublet portion of the office headquarters building was less
than $0.1 million. No amount was owed to the Company under such sublease as of December 31, 2019 and 2018.
Mr. Sartini serves as the Chairman of the Board 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.
In November 2018, the Company entered into a lease agreement for office space in a building to be constructed and
owned by a company 33% beneficially owned by Mr. Sartini, 5% owned by a trust for the benefit of Mr. Sartinis
immediate family members (including Blake L. Sartini, II) for which Mr. Sartini serves as trustee, and 3%
beneficially owned by Mr. Arcana. The lease is intended to commence in 2020 and expires on December 31, 2030.
The rent expense for the space is expected to be approximately $0.3 million per year. Additionally, the lease
agreement includes a right of first refusal for additional space on the second floor of the building
One tavern location that the Company had previously leased from a related party was sold in the second quarter of
2019 to an unrelated third party. A second tavern location that the Company had previously leased from a related
party was sold in 2018 to an unrelated third party. The rent expense for tavern locations leased from related parties
(for the periods in which the leases were with related parties) was $0.2 million, $0.4 million and $0.9 million for the
years ended December 31, 2019, 2018, and 2017, respectively. No amounts were owed to the Company, and no
amount was due and payable by the Company, under such leases as of December 31, 2018. No tavern locations were
leased from related parties as of December 31, 2019.
From time to time, the Companys executive officers and employees use for Company business private aircraft that
are owned by or leased to Sartini Enterprises, Inc., a company controlled by Mr. Sartini, pursuant to aircraft
timesharing, co-user and cost-sharing agreements between the Company and Sartini Enterprises, Inc. that have been
approved by the Audit Committee of the Board of Directors. The aircraft timesharing, co-user and cost-sharing
agreements specify the maximum expense reimbursement that Sartini Enterprises, Inc. can charge the Company
under the applicable regulations of the Federal Aviation Administration for the use of the aircraft and flight crew.
Such costs include fuel, landing fees, hangar and tie-down costs away from the aircrafts operating base, flight
85
planning and weather contract services, crew costs and other related expenses. The Companys compliance
department regularly reviews these reimbursements. During the years ended December 31, 2019, 2018, and 2017,
the Company paid approximately $0.6 million, $0.6 million and $0.2 million, respectively. No amount was due and
payable by the Company as of December 31, 2019 and less than $0.1 million was owed by the Company as of
December 31, 2018, under the aircraft timesharing, co-user and cost-sharing agreements.
One of the distributed gaming locations at which the Companys slots are located is owned in part by Sean T.
Higgins, who serves as Executive Vice President of Government Affairs of the Company. This agreement was in
place prior to Mr. Higginss joining the Company on March 28, 2016. Net revenues and gaming expenses recorded
by the Company from the use of the Companys slots at this location were $1.0 million and $0.9 million,
respectively, during the year ended December 31, 2019, $1.0 million and $0.9 million, respectively, during the year
ended December 31, 2018, and $1.1 million and $1.0 million, respectively, during the year ended December 31,
2017. De minimis amounts were owed to or due and payable by the Company as of December 31, 2019 and no
amount was owed to or due and payable by the Company as of December 31, 2018, related to this agreement.
In connection with the Sartini Gaming 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 pursuant to which the Company paid
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 less than $0.1 million for the year ended December 31, 2018 and $0.2 million for the year ended December 31,
2017. The consulting agreement expired on July 31, 2018.
Note 16 Segment Information
The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming.
The Companys Casinos segment involves the ownership and operation of resort casino properties in Nevada and
Maryland. The Companys Distributed Gaming segment involves the installation, maintenance and operation of
slots and amusement devices in non-casino locations such as restaurants, bars, taverns, convenience stores, liquor
stores and grocery stores in Nevada and Montana, and the operation of branded taverns targeting local patrons
located primarily in the greater Las Vegas, Nevada metropolitan area. The Corporate and Other segment includes
the Companys cash and cash equivalents, miscellaneous receivables and corporate overhead. Costs recorded in the
Corporate and Other segment have not been allocated to the Companys reportable operating segments because
these costs are not easily allocable and to do so would not be practical.
The Company evaluates each segments profitability based upon such segments Adjusted EBITDA, which
represents each segments earnings before interest and other non-operating income (expense), income taxes,
depreciation and amortization, acquisition and severance expenses,
loss (gain) on disposal of property and
equipment, share-based compensation, preopening and related expenses, change in fair value of derivative, and other
gains and losses, calculated before corporate overhead (which is not allocated to each segment).
86
The following tables set forth, for the periods indicated, certain operating data for the Companys segments, and
reconciles net income (loss) to Adjusted EBITDA:
(In thousands)
Revenues
Gaming
Food and beverage
Rooms
Other
Total revenues
Net income (loss)
Depreciation and amortization
Preopening and related expenses (1)
Acquisition and severance expenses
Asset disposal and other writedowns
Share-based compensation
Other, net
Interest expense, net
Loss on extinguishment and modification
of debt
Change in fair value of derivative
Income tax benefit
Adjusted EBITDA
(In thousands)
Revenues
Gaming
Food and beverage
Rooms
Other
Total revenues
Net income (loss)
Depreciation and amortization
Preopening expenses (1)
Acquisition and severance expenses
Loss on disposal of property and
equipment
Share-based compensation
Other, net
Interest expense, net
Change in fair value of derivative
Income tax provision
Adjusted EBITDA
Casinos
Year Ended December 31, 2019
Distributed
Gaming
Corporate and
Other
Consolidated
$
$
$
$
$
$
$
$
294,776
53,963
8,500
357,239
28,365
22,035
1,482
35
(200)
5
52
73
51,847
$
$
$
$
$
770
770
$
(148,089) $
1,639
343
2,878
385
10,108
1,759
73,566
9,150
4,168
(1,876)
(45,969) $
578,803
202,933
132,193
59,481
973,410
(39,545)
116,592
4,548
3,488
1,309
10,124
2,216
74,220
9,150
4,168
(1,876)
184,394
Year Ended December 31, 2018
Distributed
Gaming
Corporate and
Other
Consolidated
278,553
50,817
7,697
337,067
25,870
20,604
365
38
443
3
408
93
47,824
$
$
$
$
$
778
778
$
(129,340) $
1,610
636
3,413
9,948
492
63,825
(1,786)
9,639
(41,563) $
525,176
170,453
106,805
49,360
851,794
(20,914)
94,456
1,171
3,740
3,336
9,988
1,088
64,028
(1,786)
9,639
164,746
$
$
$
$
$
$
$
$
284,027
148,970
132,193
50,211
615,401
80,179
92,918
2,723
575
1,124
11
405
581
178,516
Casinos
246,623
119,636
106,805
40,885
513,949
82,556
72,242
170
289
2,893
37
188
110
158,485
87
(In thousands)
Revenues
Gaming
Food and beverage
Rooms
Other
Total revenues
Net income (loss)
Depreciation and amortization
Preopening expenses (1)
Acquisition and severance expenses
Loss on disposal of property and
equipment
Share-based compensation
Other operating, net
Gain on contingent consideration
Interest expense, net
Loss on extinguishment of debt
Change in fair value of derivative
Income tax benefit
Adjusted EBITDA
Casinos
109,097
34,373
24,163
11,416
179,049
30,351
19,544
636
17
361
(17)
50,892
$
$
$
$
$
$
$
$
Year Ended December 31, 2017
Distributed
Gaming
Corporate and
Other
Consolidated
272,299
46,931
8,276
327,506
29,210
19,601
1,234
414
(240)
(1,719)
390
48,890
$
$
$
$
$
583
583
$
381,396
81,304
24,163
20,275
507,138
(57,477) $
1,641
398
5,547
10
8,754
1,339
19,225
1,708
(178)
(7,921)
(26,954) $
2,084
40,786
1,632
6,183
441
8,754
1,460
(1,719)
19,598
1,708
(178)
(7,921)
72,828
(1)
Preopening and related expenses include rent, organizational costs, non-capital costs associated with the
opening of tavern and casino locations, and expenses related to The Strat rebranding and the launch of the
True Rewards loyalty program.
Assets
The Companys assets by segment consisted of the following amounts:
(In thousands)
Balance at December 31, 2019
Balance at December 31, 2018
Capital Expenditures
Casinos
1,204,574
1,006,292
$
$
$
$
Distributed
Gaming
482,294
299,697
Corporate
and Other
$
$
54,049
60,580
The Companys capital expenditures by segment consisted of the following amounts:
(In thousands)
For the year ended December 31, 2019
For the year ended December 31, 2018
For the year ended December 31, 2017
Casinos(1)
83,382
45,634
9,665
$
$
$
$
$
$
Distributed
Gaming(2)
Corporate
and Other
19,185
15,942
18,011
$
$
$
4,700
6,599
1,787
Consolidated
1,740,917
1,366,569
Consolidated
107,267
68,175
29,463
$
$
$
$
$
(1) Capital expenditures in the Casinos segment exclude non-cash purchases of property and equipment of
approximately $19.1 million, $8.8 million, and $1.8 million for the years ended December 31, 2019, 2018 and
2017, respectively.
88
(2) Capital expenditures in the Distributed Gaming segment exclude non-cash purchases of property and
equipment of approximately $3.6 million, $3.5 million, and $2.6 million for the years ended December 31,
2019, 2018 and 2017, respectively.
Note 17 Selected Quarterly Financial Information (Unaudited):
The following tables present selected quarterly financial information:
(In thousands, except per share amounts)
Revenues
Income from operations
Net loss
Basic loss per share
Diluted loss per share
(In thousands, except per share amounts)
Revenues
Income from operations
Net income (loss)
Basic income (loss) per share
Diluted income (loss) per share (2)
Year ended December 31, 2019
First (1)
Second
Third (2)
Fourth (2)
$
$
$
$
$
$
$
239,892
11,714
(8,018)
(0.29) $
(0.29) $
$
248,070
14,022
(14,408)
(0.52) $
(0.52) $
$
243,314
9,881
(9,447)
(0.34) $
(0.34) $
242,134
10,500
(7,672)
(0.28)
(0.28)
Year ended December 31, 2018
First
Second
Third
Fourth (2)
214,789
16,681
3,930
0.14
0.13
$
$
$
216,543
19,095
3,594
0.13
0.12
$
$
$
$
210,337
9,723
(3,124)
(0.11) $
(0.11) $
210,125
5,468
(25,314)
(0.90)
(0.90)
(1) Results included the operating results of the Laughlin Entities from January 14, 2019, following the
completion of the Laughlin Acquisition.
(2)
For all four quarters of 2019 and the third and fourth quarters of 2018, 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 number of potential common share equivalents was 1,048, 740, 730 and 1,168
for the first, second, third and fourth quarters of 2019, respectively. The number of potential common share
equivalents was 1,870 and 1,028 for the third and fourth quarters of 2018, respectively.
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, 2019.
89
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 SECs 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, 2019, 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, 2019.
b. Managements 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, 2019, based on criteria established in Internal Control Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, our management concluded that our internal control over financial reporting was effective as of
December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by Ernst
& Young LLP, our independent registered public accounting firm, as stated in their report in Part II, Item 8 of this
Annual Report on Form 10-K.
As discussed elsewhere in this Annual Report on Form 10-K, on January 14, 2019, we acquired the Laughlin
Entities. In accordance with guidance issued by the SEC, companies are permitted to exclude acquisitions from their
assessment of internal control over financial reporting for the fiscal year in which the acquisition occurred. Our
managements evaluation of internal control over financial reporting includes only the internal control activities of
the Laughlin Entities related to accounts payable and property and equipment.
We have included the financial results of the Laughlin Entities in the consolidated financial statements from the date
of acquisition. Total revenue from the Laughlin Entities excluded from our assessment of internal controls
represented approximately 9.3% of our consolidated total revenue in 2019. The Laughlin Entities total assets,
excluding property and equipment, goodwill and intangibles, totaled 1.0% of total consolidated assets as of
December 31, 2019.
90
c.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31,
2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
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 2020 annual meeting of shareholders (the Proxy Statement) under the headings
Corporate Governance, Executive Officers, Election of Directors and Ownership of Securities, and is
incorporated herein by reference.
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.
91
The following table provides certain information as of December 31, 2019 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)
2,994,527
$
131,994
3,126,521
$
11.80
7.35
11.61
1,280,100
1,280,100
Plan Category
Golden Entertainment, Inc.
2015 Incentive Award Plan(1)
2007 Lakes Stock Option and
Compensation Plan
Total
(1) As of December 31, 2019, we had 661,258 RSUs and 376,328 PSUs 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 ACCOUNTING 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
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Golden Entertainment, Inc. Consolidated Financial Statements (including related notes to Consolidated
Financial Statements) filed in Part II of this report are listed below:
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Shareholders Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
(a)(2) Schedule II Valuation and Qualifying Accounts
We have omitted all other financial statement schedules because they are not required or are not applicable, or the
required information is shown in the consolidated financial statements or notes to the consolidated financial
statements.
GOLDEN ENTERTAINMENT, INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at
Beginning of
Period
Increase
Decrease
Balance at
End of Period
$
$
23,276
6,983
18,109
$
13,376
16,293
$
(11,126)
36,652
23,276
6,983
Deferred income tax valuation allowance:
Year Ended December 31, 2019
Year Ended December 31, 2018
Year Ended December 31, 2017
(a)(3) Exhibits:
Exhibit
Number
2.1
2.2
3.1
3.2
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
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
Agreement,
Purchase
of
July 14, 2018, by and between Golden
Entertainment, Inc. and Marnell Gaming,
LLC
dated
as
8-K
000-24993
2.1
7/16/2018
Amended
of
Incorporation of Golden Entertainment, Inc.
and Restated Articles
Fifth Amended and Restated Bylaws of
Golden Entertainment, Inc.
8-K
000-24993
3.1
8/4/2015
8-K
000-24993
3.2
8/4/2015
93
Exhibit
Number
4.1
4.2
4.3
10.1
10.1.1
10.1.2
10.2
10.3
10.4
Incorporated by Reference
Form
10-Q 000-24993
File No.
Exhibit
4.1
Filing Date
5/10/2019
Filed or
Furnished
Herewith
10-Q 000-24993
4.1
5/10/2019
Exhibit Description
Indenture, dated as of April 15, 2019,
the
between Golden Entertainment,
Guarantors party thereto and Wilmington
Trust, National Association, as trustee
Inc.,
Inc.
Form of 7.625% Senior Note due 2026 of
(attached as
Golden Entertainment,
Exhibit A to the Indenture incorporated by
reference
to Golden
Entertainment, Inc.s Quarterly Report on
Form 10-Q for the quarter ended March 31,
2019 filed on May 10, 2019)
to Exhibit
4.1
Description of Registered Securities
X
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.
borrower),
Inc.
(as
Incremental Joinder Agreement No. 1, dated
as of June 11, 2018, by and among Golden
the
Entertainment,
subsidiaries of Golden Entertainment, Inc.
party thereto, the lenders party thereto and
JPMorgan
(as
Chase
administrative agent)
borrower),
Bank,
N.A.
Inc.
(as
Incremental Joinder Agreement No. 2, dated
as of November 8, 2018, by and among
Golden Entertainment, Inc. (as borrower),
the subsidiaries of Golden Entertainment,
Inc. party thereto, the lenders party thereto
and JPMorgan Chase Bank, N.A.
(as
administrative agent).
Amended and Restated Ground Lease by
and between Evitts Resort, LLC and the
State of Maryland to the use of
the
Department of Natural Resources, effective
August 3, 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
Stockholders Agreement,
of
January 14, 2019, by and between Golden
Inc. and the stockholders
Entertainment,
party thereto.
dated
as
8-K
000-24993
10.3
10/23/2017
8-K
000-24993
10.1
6/12/2018
10-Q 000-24993
10.1
11/9/2018
8-K
000-24993
10.2
8/9/2012
8-K
000-24993
10.2
8/4/2015
8-K
000-24993
10.1
1/15/2019
94
Exhibit
Number
10.5
10.6
10.7#
10.7.1#
10.7.2#
10.8#
10.8.1#
10.8.2#
10.8.3#
10.9#
10.9.1#
10.9.2#
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Noncompetition Agreement, dated as of
Golden
July 31,
Entertainment, Inc. and Blake L. Sartini
between
2015,
Noncompetition Agreement, dated as of
July 31,
Golden
Entertainment, Inc. and Lyle A. Berman
between
2015,
Employment Agreement,
of
October 1, 2015, by and between Golden
Entertainment, Inc. and Blake Sartini
dated
as
to
Amendment
First
Employment
Agreement, dated as of February 9, 2016, by
and between Golden Entertainment, Inc. and
Blake L. Sartini
8-K
000-24993
10.4
8/4/2015
8-K
000-24993
10.3
8/4/2015
8-K
000-24993
10.1
10/5/2015
10-K 000-24993
10.11.1
3/14/2016
Second Amendment
Employment
Agreement, dated as of March 14, 2018, by
and between Golden Entertainment, Inc. and
Blake L. Sartini
to
10-Q 000-24993
10.1
5/10/2018
Employment Agreement,
of
November 15, 2016, by and between Golden
Entertainment, Inc. and Charles Protell
dated
as
Amendment
First
Employment
Agreement, dated as of March 10, 2017, by
and between Golden Entertainment, Inc. and
Charles Protell
to
8-K
000-24993
10.2
11/17/2016
10-K 000-24993
10.12.1
3/16/2017
Second Amendment
Employment
Agreement, dated as of March 14, 2018, by
and between Golden Entertainment, Inc. and
Charles Protell
to
10-Q 000-24993
10.3
5/10/2018
Amendment
Third
Employment
Agreement, dated as of August 5, 2019, by
and between Golden Entertainment, Inc. and
Charles Protell
to
Employment Agreement,
of
October 1, 2015, by and between Golden
Entertainment, Inc. and Stephen Arcana
dated
as
to
Amendment
First
Employment
Agreement, dated as of February 9, 2016, by
and between Golden Entertainment, Inc. and
Stephen Arcana
Second Amendment
Employment
Agreement, dated as of March 10, 2017, by
and between Golden Entertainment, Inc. and
Stephen Arcana
to
10-Q 000-24993
10.1
11/8/2019
8-K
000-24993
10.2
10/5/2015
10-K 000-24993
10.12.1
3/14/2016
10-K 000-24993
10.11.2
3/16/2017
95
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
Filed or
Furnished
Herewith
Exhibit
Number
10.9.3#
10.10#
10.11#
Amendment
Third
Employment
Agreement, dated as of March 14, 2018, by
and between Golden Entertainment, Inc. and
Stephen Arcana
to
as
dated
Employment Agreement,
of
October 11, 2016, by and between Golden
Entertainment, Inc. and Sean Higgins
Amended
Employment
Agreement, dated as of March 10, 2017, by
and between Golden Entertainment, Inc. and
Blake L. Sartini II
Restated
and
10-Q 000-24993
10.2
5/10/2018
10-K 000-24993
10.14
3/16/2017
10-K 000-24993
10.15
3/16/2017
10-Q 000-24993
10.4
5/10/2018
10.11.1# First Amendment to Amended and Restated
Employment Agreement,
of
March 14, 2018, by and between Golden
Entertainment, Inc. and Blake L. Sartini II
dated
as
10.12#
2007 Amended and Restated Stock Option
and Compensation Plan
DEF 14A 000-24993 Appendix D 6/24/2009
10.12.1# Form of Lakes Entertainment, Inc. Non-
Agreement
Stock
Option
Qualified
(Employees)
10-K 000-24993
10.16.1
3/14/2016
10.12.2# Form of Lakes Entertainment, Inc. Option
10-K 000-24993
10.16.2
3/14/2016
Agreement (Directors)
10.12.3# Form of Stock Option Grant Notice and
Stock Option Award Agreement
Golden Entertainment, Inc. 2015 Incentive
Award Plan
10.13#
8-K
000-24993
10.5
11/17/2016
8-K
000-24993
10.1
9/2/2015
10.13.1# Form of Stock Option Grant Notice and
8-K
000-24993
10.2
9/2/2015
Stock Option Agreement
10.13.2# From of Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award
Agreement
10.13.3# Form of Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award
Agreement (time-based awards)
10.13.4# Form of Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award
Agreement (LTIP awards)
Golden Entertainment, Inc. Non-Employee
Director Compensation Program
10.14#
21
23.1
23.2
31.1
Subsidiaries of Golden Entertainment, Inc.
Consent of Independent Registered Public
Accounting Firm
Consent of Independent Registered Public
Accounting Firm
Certification of Chief Executive Officer
pursuant
to Section 302 of the Sarbanes-
Oxley Act of 2002
96
8-K
000-24993
10.4
11/17/2016
10-Q 000-24993
10.5
5/10/2018
10-Q 000-24993
10.6
5/10/2018
10-Q 000-24993
10.2
8/9/2018
X
X
X
X
Exhibit
Number
31.2
32.1
Exhibit Description
Certification of Chief Financial Officer
to Section 302 of the Sarbanes-
pursuant
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
Incorporated by Reference
Form
File No.
Exhibit
Filing Date
Filed or
Furnished
Herewith
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 and
Chief Executive Officer
Dated as of March 13, 2020
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 13, 2020.
Name
/s/ BLAKE L. SARTINI
Blake L. Sartini
/s/ CHARLES H. PROTELL
Charles H. Protell
/s/ THOMAS E. HAAS
Thomas E. Haas
/s/ LYLE A. BERMAN
Lyle A. Berman
/s/ ANN DOZIER
Ann Dozier
/s/ MARK A. LIPPARELLI
Mark A. Lipparelli
/s/ ANTHONY A. MARNELL III
Anthony A. Marnell III
/s/ ROBERT L. MIODUNSKI
Robert L. Miodunski
/s/ TERRENCE L. WRIGHT
Terrence L. Wright
Title
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
President and
Chief Financial Officer
(Principal Financial Officer)
Senior Vice President of
Accounting
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
98
(cid:40)(cid:59)(cid:43)(cid:44)(cid:37)(cid:44)(cid:55) (cid:22)(cid:20)(cid:17)(cid:20)
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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, 2019. 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 5 YEAR CUMULATIVE TOTAL RETURN*
Among Golden Entertainment, Inc., the NASDAQ Composite Index
and the Dow Jones US Gambling Index
$600
$500
$400
$300
$200
$100
$0
12/14
12/15
12/16
12/17
12/18
12/19
Golden Entertainment, Inc.
NASDAQ Composite
Dow Jones US Gambling
Cumulative Total Returns - Year Ending December 31,
2014
2015
2016
2017
2018
2019
Golden Entertainment, Inc. . . . . . . . . . . . $100.00 $152.20 $207.13 $558.43 $274.00 $328.73
200.49
NASDAQ Composite Index . . . . . . . . . . .
141.02
Dow Jones US Gambling Index . . . . . . .
100.00
100.00
150.96
137.73
116.45
98.28
146.67
95.56
106.96
76.66
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.
[THIS PAGE INTENTIONALLY LEFT BLANK]
BOARD OF DIRECTORS
MANAGEMENT TEAM
PROPERTIES & BRANDS
Blake L. Sartini
Chairman of the Board and
Chief Executive Officer
Blake L. Sartini
Chairman of the Board and
Chief Executive Officer
CASINOS
The STRAT Casino, Hotel & SkyPod
Las Vegas, Nevada
Lyle A. Berman
Director; former Chairman of the
Board and Chief Executive Officer
of Lakes Entertainment, Inc.
Charles H. Protell
President, Chief Financial
Officer and Treasurer
Stephen A. Arcana
Executive Vice President and
Chief Operating Officer
Sean T. Higgins
Executive Vice President,
Government Affairs
Blake L. Sartini, II
Senior Vice President,
Distributed Gaming
Thomas E. Haas
Senior Vice President and
Chief Accounting Officer
Phyllis A. Gilland
Senior Vice President, General
Counsel and Secretary
Ann Dozier
Director; Senior Vice President,
Chief Information Officer of
Southern Glazer’s Wine and
Spirits, LLC
Mark A. Lipparelli
Director; Chief Executive Officer
of Gioco Ventures; Former
Nevada State Senator, District 6
Anthony A. Marnell III
Director; Chairman, Chief
Executive Officer of Marnell
Gaming, LLC
Robert L. Miodunski
Director; former Chief Executive
Officer of American Gaming
Systems
Terrence L. Wright
Director; Chairman of the Board
of Westcor Land Title Insurance
Company
Aquarius Casino Resort
Laughlin, Nevada
Edgewater Hotel Casino Resort
Laughlin, Nevada
Colorado Belle Hotel Casino Resort
Laughlin, Nevada
Arizona Charlie’s Decatur
Las Vegas, Nevada
Arizona Charlie’s Boulder
Las Vegas, Nevada
Pahrump Nugget Hotel Casino
Pahrump, Nevada
Gold Town Casino
Pahrump, Nevada
Lakeside Casino & RV Park
Pahrump, Nevada
Rocky Gap Casino Resort
Flintstone, Maryland
DISTRIBUTED GAMING
Golden Route Operations
Nevada and Montana
Nevada Tavern Brands
SG Bar
Sierra Gold
Sierra Junction
Sean Patrick’s
PT’s Ranch
PT’s Brewing Company
PT’s Gold
PT’s Pub
PT’s Place
STOCK TRANSFER
INFORMATION
Broadridge Corporate Issuer
Solutions, Inc.
P.O. Box 1342
Brentwood, NY 11717
WEBSITE
GoldenEnt.com
TRADING SYMBOL
NASDAQ: GDEN
INVESTOR RELATIONS
JCIR
212.835.8500
gden@jcir.com
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.
c/o Investor Relations
6595 S Jones Blvd
Las Vegas, NV 89118