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Section 1: 10-Q (10-Q)

eri-10q_20180331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10‑Q

(Mark One)

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

For the quarterly period ended March 31, 2018

OR

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

For the transition period                 to                 

Commission File No. 001‑36629

ELDORADO RESORTS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

46‑3657681

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

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

(Address and zip code of principal executive offices)

(775) 328‑0100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non‑accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares of the Registrant’s Common Stock, $0.00001 par value per share, outstanding as of May 03, 2018 was 77,241,115.

 

 

 

 


 

ELDORADO RESORTS, INC.

QUARTERLY REPORT FOR THE THREE MONTHS ENDED

MARCH 31, 2018

TABLE OF CONTENTS

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

 

Item 1.

FINANCIAL STATEMENTS

 

 

 

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

 

2

 

Consolidated Statements of Income for the Three Months Ended March 31, 2018 and 2017 (unaudited)

 

3

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2018 and 2017 (unaudited)

 

4

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 (unaudited)

 

5

 

Condensed Notes to Unaudited Consolidated Financial Statements

 

6

Item 2.

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

 

36

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

52

Item 4.

CONTROLS AND PROCEDURES

 

52

PART II. OTHER INFORMATION

 

 

Item 1.

LEGAL PROCEEDINGS

 

54

Item 1A.

RISK FACTORS

 

54

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

57

Item 3.

DEFAULTS UPON SENIOR SECURITIES

 

57

Item 4.

MINE SAFETY DISCLOSURES

 

57

Item 5.

OTHER INFORMATION

 

57

Item 6.

EXHIBITS

 

58

SIGNATURES

 

59

 

1


 

PART I-FINANCIAL INFORMATION

Item 1.  Financial Statements.

ELDORADO RESORTS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

 

(unaudited)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

183,138

 

 

$

 

134,596

 

Restricted cash

 

 

 

3,659

 

 

 

 

3,267

 

Marketable securities

 

 

 

17,236

 

 

 

 

17,631

 

Accounts receivable, net

 

 

 

33,738

 

 

 

 

45,797

 

Due from affiliates

 

 

 

62

 

 

 

 

243

 

Inventories

 

 

 

15,210

 

 

 

 

16,870

 

Prepaid income taxes

 

 

 

606

 

 

 

 

4,805

 

Prepaid expenses and other

 

 

 

22,626

 

 

 

 

27,823

 

Assets held for sale

 

 

 

199,034

 

 

 

 

 

Total current assets

 

 

 

475,309

 

 

 

 

251,032

 

PROPERTY AND EQUIPMENT, NET

 

 

 

1,396,286

 

 

 

 

1,502,817

 

GAMING LICENSES AND OTHER INTANGIBLES, NET

 

 

 

917,110

 

 

 

 

996,816

 

GOODWILL

 

 

 

719,255

 

 

 

 

747,106

 

NON-OPERATING REAL PROPERTY

 

 

 

14,030

 

 

 

 

18,069

 

OTHER ASSETS, NET

 

 

 

30,230

 

 

 

 

30,632

 

Total assets

 

$

 

3,552,220

 

 

$

 

3,546,472

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

553

 

 

$

 

615

 

Accounts payable

 

 

 

28,354

 

 

 

 

34,778

 

Due to affiliates

 

 

 

10

 

 

 

 

 

Accrued property, gaming and other taxes

 

 

 

36,107

 

 

 

 

43,212

 

Accrued payroll and related

 

 

 

49,944

 

 

 

 

53,330

 

Accrued interest

 

 

 

33,312

 

 

 

 

25,607

 

Income taxes payable

 

 

 

6

 

 

 

 

171

 

Accrued other liabilities

 

 

 

63,606

 

 

 

 

66,037

 

Liabilities related to assets held for sale

 

 

 

5,398

 

 

 

 

 

Total current liabilities

 

 

 

217,290

 

 

 

 

223,750

 

LONG-TERM DEBT, LESS CURRENT PORTION

 

 

 

2,190,110

 

 

 

 

2,189,578

 

DEFERRED INCOME TAXES

 

 

 

167,595

 

 

 

 

162,967

 

OTHER LONG-TERM LIABILITIES

 

 

 

18,594

 

 

 

 

28,579

 

Total liabilities

 

 

 

2,593,589

 

 

 

 

2,604,874

 

COMMITMENTS AND CONTINGENCIES (Note 11)

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

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

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

   December 31, 2017, respectively

 

 

 

1

 

 

 

 

 

Paid-in capital

 

 

 

742,724

 

 

 

 

746,547

 

Retained earnings

 

 

 

215,827

 

 

 

 

194,972

 

Accumulated other comprehensive income

 

 

 

79

 

 

 

 

79

 

Total stockholders’ equity

 

 

 

958,631

 

 

 

 

941,598

 

Total liabilities and stockholders’ equity

 

$

 

3,552,220

 

 

$

 

3,546,472

 

 

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

2


 

ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

Casino

 

$

 

339,458

 

 

$

 

141,554

 

Pari-mutuel commissions

 

 

 

4,070

 

 

 

 

636

 

Food and beverage

 

 

 

52,198

 

 

 

 

32,421

 

Hotel

 

 

 

30,741

 

 

 

 

19,305

 

Other

 

 

 

13,725

 

 

 

 

8,477

 

Net revenues

 

 

 

440,192

 

 

 

 

202,393

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

Casino

 

 

 

165,850

 

 

 

 

79,981

 

Pari-mutuel commissions

 

 

 

3,701

 

 

 

 

1,207

 

Food and beverage

 

 

 

44,776

 

 

 

 

26,018

 

Hotel

 

 

 

12,506

 

 

 

 

9,079

 

Other

 

 

 

7,405

 

 

 

 

6,169

 

Marketing and promotions

 

 

 

21,301

 

 

 

 

10,129

 

General and administrative

 

 

 

74,202

 

 

 

 

31,800

 

Corporate

 

 

 

11,569

 

 

 

 

6,574

 

Impairment charges

 

 

 

9,815

 

 

 

 

 

Depreciation and amortization

 

 

 

31,534

 

 

 

 

15,604

 

Total operating expenses

 

 

 

382,659

 

 

 

 

186,561

 

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

 

 

 

(706

)

 

 

 

32

 

TRANSACTION EXPENSES

 

 

 

(2,548

)

 

 

 

(1,614

)

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES

 

 

 

(85

)

 

 

 

(222

)

OPERATING INCOME

 

 

 

54,194

 

 

 

 

14,028

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(31,251

)

 

 

 

(12,670

)

Total other expense

 

 

 

(31,251

)

 

 

 

(12,670

)

NET INCOME BEFORE INCOME TAXES

 

 

 

22,943

 

 

 

 

1,358

 

PROVISION FOR INCOME TAXES

 

 

 

(2,088

)

 

 

 

(413

)

NET INCOME

 

$

 

20,855

 

 

$

 

945

 

Net Income per share of Common Stock:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 

0.27

 

 

$

 

0.02

 

Diluted

 

$

 

0.27

 

 

$

 

0.02

 

Weighted Average Basic Shares Outstanding

 

 

 

77,353,730

 

 

 

 

47,120,751

 

Weighted Average Diluted Shares Outstanding

 

 

 

78,080,049

 

 

 

 

48,081,281

 

 

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

3


 

ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

NET INCOME

 

$

 

20,855

 

 

$

 

945

 

Other Comprehensive Income, net of tax:

 

 

 

 

 

 

 

 

 

 

Other Comprehensive Income

 

 

 

 

 

 

 

 

Comprehensive Income, net of tax

 

$

 

20,855

 

 

$

 

945

 

 

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

4


 

ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 

20,855

 

 

$

 

945

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

31,534

 

 

 

 

15,604

 

Amortization of deferred financing costs, discount and debt premium

 

 

 

1,446

 

 

 

 

877

 

Equity in loss of unconsolidated affiliates

 

 

 

85

 

 

 

 

222

 

Stock compensation expense

 

 

 

3,679

 

 

 

 

1,733

 

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

 

 

 

706

 

 

 

 

(32

)

Provision for bad debt

 

 

 

375

 

 

 

 

218

 

Impairment charges

 

 

 

9,815

 

 

 

 

 

Provision for deferred income taxes

 

 

 

1,450

 

 

 

 

369

 

Other

 

 

 

23

 

 

 

 

16

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Sale of trading securities

 

 

 

395

 

 

 

 

 

Accounts receivable

 

 

 

9,491

 

 

 

 

5,647

 

Inventory

 

 

 

(154

)

 

 

 

(251

)

Prepaid expenses and other assets

 

 

 

1,801

 

 

 

 

(1,423

)

Interest payable

 

 

 

7,539

 

 

 

 

(10,006

)

Income taxes payable

 

 

 

4,199

 

 

 

 

67

 

Accounts payable and accrued liabilities

 

 

 

(15,232

)

 

 

 

(8,803

)

Net cash provided by operating activities

 

 

 

78,007

 

 

 

 

5,183

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

 

(21,271

)

 

 

 

(6,206

)

Proceeds from sale of property and equipment

 

 

 

150

 

 

 

 

32

 

Cash escrow related to acquisition

 

 

 

 

 

 

 

(376,750

)

Decrease in other assets, net

 

 

 

 

 

 

 

(148

)

Net cash used in investing activities

 

 

 

(21,121

)

 

 

 

(383,072

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of 6% Senior Notes

 

 

 

 

 

 

 

375,000

 

Payments under Term Loan

 

 

 

 

 

 

 

(1,063

)

Borrowings under Prior Revolving Credit Facility

 

 

 

 

 

 

 

23,000

 

Payments under Prior Revolving Credit Facility

 

 

 

 

 

 

 

(29,000

)

Payments on capital leases

 

 

 

(148

)

 

 

 

(94

)

Debt issuance costs

 

 

 

(304

)

 

 

 

(7,016

)

Taxes paid related to net share settlement of equity awards

 

 

 

(7,502

)

 

 

 

(179

)

Proceeds from exercise of stock options

 

 

 

 

 

 

 

434

 

Other

 

 

 

(22

)

 

 

 

 

Net cash (used in) provided by financing activities

 

 

 

(7,976

)

 

 

 

361,082

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

48,910

 

 

 

 

(16,807

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR

 

 

 

147,749

 

 

 

 

63,443

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$

 

196,659

 

 

$

 

46,636

 

 

 

 

 

 

 

 

 

 

 

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO

   AMOUNTS REPORTED WITHIN THE CONDENSED CONSOLIDATED BALANCE SHEETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

183,138

 

 

$

 

44,574

 

Restricted cash

 

 

 

3,659

 

 

 

 

2,062

 

Restricted cash included in other noncurrent assets

 

 

 

9,862

 

 

 

 

 

TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

$

 

196,659

 

 

$

 

46,636

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

 

21,814

 

 

$

 

23,546

 

Local income taxes paid (refunded)

 

 

 

186

 

 

 

 

(20

)

NON-CASH FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

Net change in payables for capital expenditures

 

 

 

2,366

 

 

 

 

2,312

 

 

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

5


 

ELDORADO RESORTS, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

Organization

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

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

ERI owns and operates the following properties:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

6


 

 

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

 

Isle Casino Waterloo (“Waterloo”)A single-level land-based casino in Waterloo, Iowa that includes 940 slot machines, 25 table games, and a 194-room hotel;

 

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

 

Isle of Capri Casino Lula (“Lula”)Two dockside casinos in Lula, Mississippi with 875 slot machines and 20 table games, two on-site hotels with a total of 486 rooms and a 28-space RV Park;

 

Lady Luck Casino Vicksburg (“Vicksburg”)A dockside casino in Vicksburg, Mississippi that includes 616 slot machines, nine table games and a hotel with a total of 89 rooms;

 

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

 

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

 

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

 

Isle of Capri Casino Kansas City (“Kansas City”)A dockside casino located close to downtown Kansas City, Missouri offering 966 slot machines and 18 table games; and

 

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

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

Reclassifications

Certain reclassifications of prior year presentations have been made to conform to the current period presentation.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by US GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, all of which are normal and recurring, considered necessary for a fair presentation and have been included herein. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full year or any future period.

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

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

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

In May 2014 (amended January 2017), the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” (ASC Topic 606) which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and eliminates existing industry guidance, including revenue recognition guidance specific to the gaming industry. The core principle of the revenue model indicates that an entity should recognize revenue to depict the transfer of promised goods or

7


 

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

We adopted this standard effective January 1, 2018, and elected to apply the full retrospective adoption method. The most significant impacts of the adoption are summarized below in Note 2.

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

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

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

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

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

Note 2. Revenue Recognition

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

8


 

Casino Revenue and Pari-mutuel Commissions

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

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

Loyalty Programs and Other Contract Obligations

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

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

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

Non-gaming Revenue

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

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

Complimentaries

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

9


 

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

Adoption of ASC Topic 606

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

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

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

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

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

 

 

 

Three Months Ended March 31, 2017

 

 

 

As Reported

 

 

Adjustments

 

 

As Adjusted

 

Gross revenues

 

$

 

219,546

 

 

$

 

(17,153

)

 

$

 

202,393

 

Promotional allowances

 

 

 

(18,621

)

 

 

 

18,621

 

 

 

 

 

Net revenues

 

$

 

200,925

 

 

$

 

1,468

 

 

$

 

202,393

 

Operating income (loss)

 

$

 

14,149

 

 

$

 

(121

)

 

$

 

14,028

 

Net income (loss)

 

$

 

1,021

 

 

$

 

(76

)

 

$

 

945

 

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

 

10


 

 

 

Three Months Ended March 31, 2018

 

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Corporate

and Other

 

 

Total

 

Casino

 

$

 

49,734

 

 

$

 

88,359

 

 

$

 

97,509

 

 

$

 

103,856

 

 

$

 

 

 

$

 

339,458

 

Pari-mutuel commissions

 

 

 

 

 

 

 

 

 

 

 

3,409

 

 

 

 

661

 

 

 

 

 

 

 

 

4,070

 

Food and beverage

 

 

 

23,211

 

 

 

 

6,916

 

 

 

 

13,860

 

 

 

 

8,211

 

 

 

 

 

 

 

 

52,198

 

Hotel

 

 

 

19,430

 

 

 

 

3,637

 

 

 

 

5,992

 

 

 

 

1,682

 

 

 

 

 

 

 

 

30,741

 

Other

 

 

 

7,204

 

 

 

 

1,883

 

 

 

 

2,030

 

 

 

 

2,481

 

 

 

 

127

 

 

 

 

13,725

 

Net revenues

 

$

 

99,579

 

 

$

 

100,795

 

 

$

 

122,800

 

 

$

 

116,891

 

 

$

 

127

 

 

$

 

440,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2017

 

 

 

West

 

 

Midwest

 

 

South

 

 

East

 

 

Corporate

and Other

 

 

Total

 

Casino

 

$

 

23,833

 

 

$

 

 

 

$

 

23,169

 

 

$

 

94,552

 

 

$

 

 

 

$

 

141,554

 

Pari-mutuel commissions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

636

 

 

 

 

 

 

 

 

636

 

Food and beverage

 

 

 

19,492

 

 

 

 

 

 

 

 

5,734

 

 

 

 

7,195

 

 

 

 

 

 

 

 

32,421

 

Hotel

 

 

 

14,651

 

 

 

 

 

 

 

 

2,924

 

 

 

 

1,730

 

 

 

 

 

 

 

 

19,305

 

Other

 

 

 

5,512

 

 

 

 

 

 

 

 

733

 

 

 

 

2,174

 

 

 

 

58

 

 

 

 

8,477

 

Net revenues

 

$

 

63,488

 

 

$

 

 

 

$

 

32,560

 

 

$

 

106,287

 

 

$

 

58

 

 

$

 

202,393

 

 

Note 3. Isle Acquisition and Final Purchase Price Accounting

Final Purchase Price Accounting – Isle of Capri

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

 

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

 

Shares

 

 

Per share

 

 

 

 

Cash paid for outstanding Isle common stock (1)

 

 

 

 

 

 

 

 

 

 

 

$

 

552,050

 

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

 

 

 

28,468,182

 

 

$

 

19.12

 

 

 

 

544,312

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

828,000

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

10,383

 

Purchase consideration

 

 

 

 

 

 

 

 

 

 

 

$

 

1,934,745

 

 

(1)

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

(2)

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

(3)

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

(4)

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

11


 

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

 

Current and other assets, net

 

$

 

135,925

 

Property and equipment

 

 

 

908,816

 

Goodwill

 

 

 

709,087

 

Intangible assets (i)

 

 

 

517,470

 

Other noncurrent assets

 

 

 

15,082

 

Total assets

 

 

 

2,286,380

 

Current liabilities

 

 

 

(144,306

)

Deferred income taxes (ii)

 

 

 

(189,952

)

Other noncurrent liabilities

 

 

 

(17,377

)

Total liabilities

 

 

 

(351,635

)

Net assets acquired

 

$

 

1,934,745

 

 

(i)

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

(ii)

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

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

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

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

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

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

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

12


 

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

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

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

Isle Operating Results and Transaction Expenses

For the three months ended March 31, 2018, Isle generated revenue of $231.9 million and net income of $30.4 million.

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

Unaudited Pro Forma Information

The following unaudited pro forma information presents the results of operations of the Company for the three months ended March 31, 2017, as if the Isle Acquisition had occurred on January 1, 2017 (in thousands).

 

 

 

Three Months Ended

 

 

 

 

March 31, 2017

 

 

Net operating revenues

 

$

 

448,469

 

 

Net loss

 

 

 

(30,303

)

 

 

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

 

 

Note 4. Assets Held for Sale

On February 28, 2018, the Company entered into definitive agreements to sell substantially all of the assets and liabilities of Presque Isle Downs and Vicksburg to Churchill Downs Incorporated (“CDI”). Under the terms of the agreements, CDI will purchase Presque Isle Downs for cash consideration of approximately $178.9 million and Vicksburg for cash consideration of approximately $50.6 million, in each case subject to a customary working capital adjustment (the “Dispositions”). Additionally, an impairment charge was recorded related to Vicksburg during the three months ended March 31, 2018 (see Note 6).

The Dispositions are subject to receipt of required regulatory approvals, termination of the waiting period under the Hart-Scott-Rodino Act (the “HSR Act”) and other customary closing conditions, including, in the case of Presque Isle

13


 

Downs, the prior closing of the sale of Vicksburg or the entry into an agreement to acquire another asset of the Company. On May 7, 2018, the Company and CDI each received a Request for Additional Information and Documentary Materials, often referred to as a “Second Request,” from the Federal Trade Commission (“FTC”) in connection with the FTC’s review of the Vicksburg acquisition. The Second Request was issued under the HSR Act. Issuance of the Second Request extends the waiting period under the HSR Act until 30 days after the Company and CDI have substantially complied with the Second Request, unless the waiting period is extended voluntarily by the parties or terminated earlier by the FTC. The Company and CDI continue to cooperate fully with the FTC in its review. The Dispositions are expected to close in the third or fourth quarter of 2018 subject to satisfaction of closing conditions (including termination of the waiting period under the HSR Act and, in the case of Presque Isle Downs, the prior closing of the sale of Vicksburg or the entry into an agreement to acquire another asset of the Company.

The Dispositions met the requirements for presentation as assets held for sale under generally accepted accounting principles as of March 31, 2018.

The assets and liabilities hel