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Section 1: 10-Q (10-Q)

eri-10q_20200331.htm
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65

 

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, 2020

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)

(775328‑0100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.00001 par value

ERI

NASDAQ Stock Market

 

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, 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

 

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 6, 2020 was 77,816,973.

 

 

 

 


 

ELDORADO RESORTS, INC.

QUARTERLY REPORT FOR THE THREE MONTHS ENDED

MARCH 31, 2020

TABLE OF CONTENTS

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

2

Item 1.

FINANCIAL STATEMENTS

 

2

 

Consolidated Balance Sheets at March 31, 2020 (unaudited) and December 31, 2019

 

2

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

3

 

Consolidated Statements of Comprehensive (Loss) Income for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

4

 

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

5

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)

 

6

 

Condensed Notes to Consolidated Financial Statements (unaudited)

 

7

Item 2.

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

 

29

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

49

Item 4.

CONTROLS AND PROCEDURES

 

49

PART II. OTHER INFORMATION

 

50

Item 1.

LEGAL PROCEEDINGS

 

50

Item 1A.

RISK FACTORS

 

51

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

53

Item 3.

DEFAULTS UPON SENIOR SECURITIES

 

53

Item 4.

MINE SAFETY DISCLOSURES

 

53

Item 5.

OTHER INFORMATION

 

53

Item 6.

EXHIBITS

 

54

SIGNATURES

 

55

 

1


 

PART I-FINANCIAL INFORMATION

Item 1.  Financial Statements.

ELDORADO RESORTS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

 

(unaudited)

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

671,747

 

 

$

 

206,317

 

Restricted cash and investments

 

 

 

7,613

 

 

 

 

3,507

 

Marketable securities

 

 

 

31,385

 

 

 

 

34,634

 

Accounts receivable, net

 

 

 

43,693

 

 

 

 

53,899

 

Due from affiliates

 

 

 

696

 

 

 

 

3,806

 

Inventories

 

 

 

17,070

 

 

 

 

18,379

 

Prepaid expenses

 

 

 

27,741

 

 

 

 

30,966

 

Assets held for sale

 

 

 

442,461

 

 

 

 

253,135

 

Total current assets

 

 

 

1,242,406

 

 

 

 

604,643

 

Investment in and advances to unconsolidated affiliates

 

 

 

135,898

 

 

 

 

135,828

 

Property and equipment, net

 

 

 

2,455,332

 

 

 

 

2,614,524

 

Gaming licenses and other intangibles, net

 

 

 

1,063,169

 

 

 

 

1,111,398

 

Goodwill

 

 

 

810,187

 

 

 

 

909,717

 

Right-of-use assets

 

 

 

129,889

 

 

 

 

188,219

 

Other assets, net

 

 

 

54,291

 

 

 

 

76,224

 

Total assets

 

$

 

5,891,172

 

 

$

 

5,640,553

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

246,109

 

 

$

 

246,175

 

Accounts payable

 

 

 

46,514

 

 

 

 

61,951

 

Accrued property, gaming and other taxes

 

 

 

29,891

 

 

 

 

43,050

 

Accrued payroll and related

 

 

 

65,246

 

 

 

 

62,337

 

Accrued interest

 

 

 

35,462

 

 

 

 

36,480

 

Income taxes payable

 

 

 

44,727

 

 

 

 

23,898

 

Short-term lease obligation

 

 

 

14,157

 

 

 

 

19,991

 

Accrued other liabilities

 

 

 

157,230

 

 

 

 

157,079

 

Liabilities related to assets held for sale

 

 

 

131,672

 

 

 

 

37,485

 

Total current liabilities

 

 

 

771,008

 

 

 

 

688,446

 

Long-term financing obligation to GLPI

 

 

 

973,122

 

 

 

 

970,519

 

Long-term debt, less current portion

 

 

 

2,780,691

 

 

 

 

2,324,541

 

Deferred income taxes

 

 

 

158,134

 

 

 

 

197,266

 

Long-term lease obligation

 

 

 

99,449

 

 

 

 

176,932

 

Other long-term liabilities

 

 

 

168,559

 

 

 

 

165,592

 

Total liabilities

 

 

 

4,950,963

 

 

 

 

4,523,296

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

 

 

Common stock, 200,000,000 shares authorized, 77,802,894

   and 77,569,117 issued and outstanding, net of treasury shares, par value

   $0.00001 as of March 31, 2020 and December 31, 2019, respectively

 

 

 

1

 

 

 

 

1

 

Paid-in capital

 

 

 

758,137

 

 

 

 

759,547

 

Retained earnings

 

 

 

190,825

 

 

 

 

366,463

 

Treasury stock at cost, 223,823 shares held at March 31, 2020 and December 31, 2019

 

 

 

(9,131

)

 

 

 

(9,131

)

Accumulated other comprehensive income

 

 

 

377

 

 

 

 

377

 

Total stockholders’ equity

 

 

 

940,209

 

 

 

 

1,117,257

 

Total liabilities and stockholders’ equity

 

$

 

5,891,172

 

 

$

 

5,640,553

 

 

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

2


 

ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

Casino and pari-mutuel commissions

 

$

 

339,749

 

 

$

 

470,686

 

Food and beverage

 

 

 

56,246

 

 

 

 

75,281

 

Hotel

 

 

 

48,376

 

 

 

 

64,784

 

Other

 

 

 

28,698

 

 

 

 

25,072

 

Net revenues

 

 

 

473,069

 

 

 

 

635,823

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

Casino and pari-mutuel commissions

 

 

 

159,156

 

 

 

 

210,306

 

Food and beverage

 

 

 

53,255

 

 

 

 

60,385

 

Hotel

 

 

 

22,268

 

 

 

 

23,650

 

Other

 

 

 

9,181

 

 

 

 

11,249

 

Marketing and promotions

 

 

 

24,953

 

 

 

 

32,301

 

General and administrative

 

 

 

91,675

 

 

 

 

119,888

 

Corporate

 

 

 

16,482

 

 

 

 

16,754

 

Impairment charges

 

 

 

160,758

 

 

 

 

958

 

Depreciation and amortization

 

 

 

50,433

 

 

 

 

57,757

 

Total operating expenses

 

 

 

588,161

 

 

 

 

533,248

 

Gain on sale or disposal of property and equipment

 

 

 

1,458

 

 

 

 

22,318

 

Transaction expenses

 

 

 

(9,294

)

 

 

 

(1,894

)

(Loss) income from unconsolidated affiliates

 

 

 

(252

)

 

 

 

605

 

Operating (loss) income

 

 

 

(123,180

)

 

 

 

123,604

 

OTHER EXPENSE:

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

(66,464

)

 

 

 

(73,510

)

Loss on extinguishment of debt

 

 

 

(158

)

 

 

 

 

Unrealized loss on investments and marketable securities

 

 

 

(23,008

)

 

 

 

(1,460

)

Total other expense

 

 

 

(89,630

)

 

 

 

(74,970

)

(Loss) income before income taxes

 

 

 

(212,810

)

 

 

 

48,634

 

Benefit (provision) for income taxes

 

 

 

37,172

 

 

 

 

(10,405

)

Net (loss) income

 

$

 

(175,638

)

 

$

 

38,229

 

Net (loss) income per share of common stock:

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 

(2.25

)

 

$

 

0.49

 

Diluted

 

$

 

(2.25

)

 

$

 

0.49

 

Weighted average basic shares outstanding

 

 

 

77,954,038

 

 

 

 

77,567,147

 

Weighted average diluted shares outstanding

 

 

 

77,954,038

 

 

 

 

78,589,110

 

 

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

3


 

ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Net (loss) income

 

$

 

(175,638

)

 

$

 

38,229

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

Comprehensive (loss) income, net of tax

 

$

 

(175,638

)

 

$

 

38,229

 

 

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

 

 

4


 

ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Income

 

 

Shares

 

 

Amount

 

 

Total

 

Balance, December 31, 2019

 

 

77,792,940

 

 

$

 

1

 

 

$

 

759,547

 

 

$

 

366,463

 

 

$

 

377

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

1,117,257

 

Issuance of restricted stock units

 

 

356,367

 

 

 

 

 

 

 

 

5,742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,742

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(175,638

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(175,638

)

Shares withheld related to net share settlement

   of stock awards

 

 

(122,590

)

 

 

 

 

 

 

 

(7,152

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,152

)

Balance, March 31, 2020

 

 

78,026,717

 

 

$

 

1

 

 

$

 

758,137

 

 

$

 

190,825

 

 

$

 

377

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

940,209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

 

77,438,889

 

 

$

 

1

 

 

$

 

748,076

 

 

$

 

290,206

 

 

$

 

1

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

1,029,153

 

Cumulative change in accounting principle, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,744

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,744

)

Issuance of restricted stock units

 

 

330,641

 

 

 

 

 

 

 

 

4,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,948

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,229

 

Shares withheld related to net share settlement

   of stock awards

 

 

(106,542

)

 

 

 

 

 

 

 

(4,322

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,322

)

Balance, March 31, 2019

 

 

77,662,988

 

 

$

 

1

 

 

$

 

748,702

 

 

$

 

323,691

 

 

$

 

1

 

 

 

 

223,823

 

 

$

 

(9,131

)

 

$

 

1,063,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

5


 

ELDORADO RESORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

 

(175,638

)

 

$

 

38,229

 

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

   activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

50,433

 

 

 

 

57,757

 

Amortization of deferred financing costs, discount and debt premium

 

 

 

4,187

 

 

 

 

4,547

 

Deferred revenue

 

 

 

(1,889

)

 

 

 

(1,397

)

Equity in loss (gain) of unconsolidated affiliates

 

 

 

252

 

 

 

 

(605

)

Loss on extinguishment of debt

 

 

 

158

 

 

 

 

 

Lease amortization

 

 

 

855

 

 

 

 

675

 

Unrealized loss on investments

 

 

 

23,008

 

 

 

 

1,460

 

Stock compensation expense

 

 

 

5,742

 

 

 

 

4,948

 

Gain on sale or disposal of property and equipment

 

 

 

(1,458

)

 

 

 

(22,318

)

Impairment charges

 

 

 

160,758

 

 

 

 

958

 

(Benefit) provision for deferred income taxes

 

 

 

(39,130

)

 

 

 

5,224

 

Other

 

 

 

360

 

 

 

 

145

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

8,603

 

 

 

 

(3,933

)

Prepaid expenses and other assets

 

 

 

589

 

 

 

 

14,331

 

Income taxes payable

 

 

 

20,829