NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of Business
Golden Entertainment, Inc. and its wholly-owned subsidiaries own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on casino and distributed gaming operations (including gaming in the Company’s branded taverns). The Company’s portfolio includes ten casino properties located in Nevada and Maryland. The Company’s Nevada tavern segment is comprised of the operation of its branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area. The Company’s distributed gaming operations involve the installation, maintenance and operation of slot machines and amusement devices in third-party non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores in Nevada and Montana. Unless otherwise indicated, the terms “Golden” and the “Company,” refer to Golden Entertainment, Inc. together with its subsidiaries.
The Company conducts its business through five reportable segments: Nevada Casino Resorts, Nevada Locals Casinos, Maryland Casino Resort, Nevada Taverns, and Distributed Gaming. Each reportable segment is comprised of the following properties and operations:
| | | | | | | | |
| Reportable Segment | | Location |
| Nevada Casino Resorts | | |
| The STRAT Hotel, Casino & SkyPod (“The STRAT”) | | Las Vegas, Nevada |
| Aquarius Casino Resort (“Aquarius”) | | Laughlin, Nevada |
| Edgewater Hotel & Casino Resort (“Edgewater”) | | Laughlin, Nevada |
Colorado Belle Hotel & Casino Resort (“Colorado Belle”) (1) | | Laughlin, Nevada |
| | |
| Nevada Locals Casinos | | |
| Arizona Charlie’s Boulder | | Las Vegas, Nevada |
| Arizona Charlie’s Decatur | | Las Vegas, Nevada |
| Gold Town Casino | | Pahrump, Nevada |
| Lakeside Casino & RV Park | | Pahrump, Nevada |
| Pahrump Nugget Hotel Casino (“Pahrump Nugget”) | | Pahrump, Nevada |
| | |
| Maryland Casino Resort | | |
| Rocky Gap Casino Resort (“Rocky Gap”) | | Flintstone, Maryland |
| | |
| Nevada Taverns | | |
64 branded tavern locations | | Nevada |
| | |
| Distributed Gaming | | |
| Nevada distributed gaming | | Nevada |
| Montana distributed gaming | | Montana |
(1) The operations of the Colorado Belle remain suspended.
On August 24, 2022, the Company entered into definitive agreements to sell Rocky Gap to Century Casinos, Inc. (“Century”) and VICI Properties, L.P. (“VICI”), an affiliate of VICI Properties Inc., for aggregate consideration of $260.0 million (the “Rocky Gap Transactions”). Specifically, Century agreed to acquire the operations of Rocky Gap from Golden for $56.1 million in cash (subject to adjustment based on Rocky Gap’s working capital and cage cash at closing), subject to the conditions and terms set forth therein, and VICI agreed to acquire the real estate assets relating to Rocky Gap from Golden for $203.9 million in cash, subject to the conditions and terms set forth therein. The Rocky Gap Transactions are required by their terms to close concurrently and the Company expects the Rocky Gap Transactions to close during the second quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions. Refer to discussion in “Note 3 — Assets Held for Sale” for further information.
Impact of COVID-19
As of December 31, 2022, all of the Company’s properties were open other than the Colorado Belle (whose operations remain suspended), and none of the Company’s casino properties or distributed gaming locations were subject to COVID-19 operating restrictions. Despite the resurgence of Omicron variants during 2022, the Company’s casino properties and distributed gaming operations experienced positive trends during the first half of 2022, including an increase in occupancy of hotel rooms and guest visitation following the removal of COVID-19 mitigation measures. The Company’s results of operations in the second half of 2021 also benefited from pent-up demand following the easing of COVID-19 mitigation measures and the effect of government stimulus on discretionary consumer spending. Future COVID-19 variants, mandates, restrictions or mitigation measures imposed by governmental authorities or regulatory bodies are uncertain and could have a significant impact on the Company’s future operations.
Temporary closures of the Company’s operations due to the COVID-19 pandemic resulted in lease concessions for certain of the Company’s branded taverns and route locations in 2020, some of which continued in 2021. Such concessions provided for deferral and, in some instances, forgiveness of rent payments with no substantive amendments to the consideration due per the terms of the original contract and did not result in substantial changes in the Company’s obligations under such leases. The Company elected to account for the deferred rent as variable lease payments, which resulted in a reduction of the rent expense of $2.3 million and $11.9 million for the years ended December 31, 2021 and 2020, respectively. Rent expense that was not forgiven was recorded in future periods as those deferred payments were paid to the Company’s lessors.
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 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. Actual results could differ from those estimates.
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. Reclassifications were made to the Company’s prior period consolidated financial statements to conform to the current period presentation, where applicable. 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. As of December 31, 2022, the Company had $142.0 million in cash and cash equivalents, which included $5.1 million of cash and cash equivalents related to assets held for sale. Although cash and cash equivalents balances may at times exceed the federal insured deposit limit, the Company believes such risk is mitigated by the quality of the institutions holding such deposits.
Accounts Receivable
Accounts receivable consist primarily of gaming, hotel and other receivables, net of allowance for credit losses. Accounts receivable are non-interest bearing and are initially recorded at cost. An estimated allowance for credit losses is maintained to reduce the Company’s accounts receivable to their expected net realizable value based on specific reviews of customer accounts, the age of such accounts, management’s assessment of the customer’s financial condition, historical and current collection experience and management’s expectations of future collection trends based on the current and forecasted economic and business conditions. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received. Historically, the Company’s estimated allowance for credit losses has been consistent with such losses.
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 finance lease agreements 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 major additions, renewals and improvements are capitalized while costs of routine repairs and maintenance are expensed when incurred. A significant amount of the Company’s property and equipment was acquired through business acquisitions and therefore, was initially recognized at fair value on the effective date of the applicable acquisition transaction. Depreciation of property and equipment is computed using the straight-line method over the following estimated useful lives:
| | | | | |
| Building and improvements | 10 - 40 years |
| Furniture and equipment | 3 - 15 years |
| Leasehold improvements | 2 - 15 years |
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 asset’s estimated fair value and its carrying amount. To estimate fair values, the Company generally uses market comparables, when available, or a discounted cash flow model. The estimation of fair value requires significant judgment and is based on assumptions about future cash flows, including future growth rates, operating margins, economic and business conditions, and discount rate, all of which are unpredictable and inherently uncertain. The Company’s long-lived asset impairment tests are performed at the reporting unit level.
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. Sales and other disposals of property and equipment are recorded by removing the related cost and accumulated depreciation from the accounts with gains or losses on sales and other disposals recorded in the Company’s consolidated statements of operations.
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 testing for impairment, 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. 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 that 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 to 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 requires significant judgment and is based on assumptions about future cash flows, including future growth rates, operating margins, economic and business conditions, all of which are unpredictable and inherently uncertain. 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 Company’s properties, and other factors, such that the actual results may differ materially from such estimates. If the Company’s estimates of future cash flows are not met, it may be required to record goodwill impairment charges in the future.
Indefinite-Lived Intangible Assets
The Company’s indefinite-lived intangible assets are comprised of trade names acquired in a business combination. The fair value of the Company’s 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 asset’s 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.
Finite-Lived Intangible Assets
The Company’s finite-lived intangible assets primarily represent assets related to its customer relationships, player relationships, and non-compete agreements, and were acquired in a business combination. The Company’s finite-lived intangible assets are also comprised of leasehold interest and licenses. Finite-lived intangible assets 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 Company’s customer relationship assets represent the value associated with space lease agreements and participation agreements with its distributed gaming customers acquired in an asset purchase or a business acquisition. The Company’s player relationships represent the value associated with its rated casino guests. The initial fair value of these intangible assets was 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 could 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, the Company will recognize an impairment charge in the amount of the excess of the carrying amount over its estimated fair value.
Long-Term Debt
Long-term debt 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 Company’s debt instruments, and are recorded as a direct reduction to the face amount of the Company’s 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. The amount amortized to interest expense was $4.1 million, $4.3 million and $4.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
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.
Leases
The Company determines whether an arrangement is or contains a lease at inception or modification of a contract. An arrangement is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of the identified asset means the lessee has both the right to obtain substantially all economic benefits from the use of the asset and the right to direct the use of the asset.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the commencement date for the arrangements with a term of 12 months or longer and are initially measured based on the present value of lease payments over the defined lease term. The measurement of the operating lease ROU assets also includes any prepaid lease payments made and is net of lease incentives. If the implicit interest rate to be applied to the determination of the present value of lease payments over the lease term is not readily determinable, the Company estimates the incremental borrowing rate based on the information available at the commencement date. The Company’s 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 ROU asset and lease liability. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term. For finance leases,
the ROU asset depreciates on a straight-line basis over the shorter of the lease term or useful life of the ROU asset and the lease liability accretes interest based on the interest method using the discount rate determined at lease commencement.
The Company is the lessor under non-cancelable operating leases for retail and food and beverage outlet space within its casino properties. The Company also enters into operating lease agreements with certain equipment providers for placement of amusement devices and automated teller machines within its casino properties and taverns. The lease arrangements generally include minimum base rent and/or contingent rental clauses based on a percentage of net sales exceeding minimum base rent. Revenue is recorded on a straight-line basis over the term of the lease. The Company recognizes revenue for contingent rentals when the contingency has been resolved.
Revenue Recognition
Revenue from contracts with customers primarily consists of casino wagers, room sales, food and beverage transactions, rental income from the Company’s 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 patron’s 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 Company’s True Rewards® loyalty program.
The Company generally enters into two types of slot and amusement device placement contracts as part of its distributed gaming business: space lease agreements and participation agreements. Under space lease agreements, the Company pays a fixed monthly rental fee for the right to install, maintain and operate its slot machines at a business location and the Company is the sole holder of the applicable gaming license that allows it to operate such slot machines. Under these agreements, the Company recognizes all gaming revenue and records fixed monthly rental fees as gaming expense. Under participation agreements, the business location retains a percentage of the gaming revenue generated from the Company’s slot machines, and as a result both the business location and Golden are required to hold a state issued gaming license. In Montana, the Company’s slot and amusement device placement contracts are all participation agreements.
In its distributed gaming business, the Company concluded it maintains control of the services directly before they are transferred to its customer and it considers its customer to be the gaming player since the Company controls all aspects of the slot machines. The Company retains control over the slot machines placed at the business location’s premises by controlling the hold percentage, types of slot machines and games made available on such machines, physical access to the contents of the gaming devices, and the repair and servicing of the slot machines. Therefore, these agreements do not contain a lease under Accounting Standards Codification (“ASC”) 842 and are accounted for under ASC 606. The Company is considered to be the principal in these arrangements and records its share of revenue generated under participation agreements on a gross basis with the business location’s share of revenue recorded as gaming expenses.
Wagering contracts that include complimentary products and services provided by the Company to incentivize gaming, such as complimentary food, beverage, rooms, entertainment, merchandise and other discretionary complimentaries, and wagering contracts that include products and services provided to a patron in exchange for points earned under the Company’s loyalty program contain more than one performance obligation. The transaction price is allocated to each performance obligation in the gaming wagering contract. The amount allocated to loyalty points earned is based on an estimate of the standalone selling price of the loyalty points, which is determined by the redemption value less an estimate for points not expected to be redeemed. The amount allocated to discretionary complimentaries is the standalone selling price of the underlying goods or services, which is determined using the retail price at which those goods or services would be sold separately in similar transactions. The remaining amount of the transaction price is allocated to wagering activity using the residual approach as the standalone selling price for gaming wagers is highly variable due to wide disparity of wagering options available to the Company’s patrons. The amount wagered, frequency of wagering, patron betting habits, and outcomes of the games of chance are unpredictable. As a result, no stand-alone selling price of a gaming transaction is determinable and the residual approach is utilized to represent the net revenue ascribed to the gaming wager.
For wagering contracts that include discretionary complimentaries, 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 in the consolidated statements of operations. For wagering contracts that include products and services provided to a patron in exchange for points earned under the Company’s 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 ASC 606, Revenue from Contracts with Customers. 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 in the Company’s consolidated statements of operations. The Company’s performance obligation related to its loyalty program is generally completed within one year, as participants’ points expire after thirteen months of no activity.
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 recorded to other revenue in the Company’s consolidated statements of operations and is generated from base rents through long-term leases with retail tenants. Base rent, adjusted for contractual escalations as applicable, 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.
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. The Company generally has three types of liabilities related to contracts with customers:
•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 True Rewards loyalty program at all ten of its casino properties, as well as at all of its branded taverns and other participating distributed gaming locations. Members of the Company’s True Rewards loyalty program earn points based on gaming activity and food and beverage purchases at the Company’s casino properties, branded taverns and participating distributed gaming locations. Loyalty points are redeemable for slot play, promotional table game chips, food and beverages and grocery gift cards. All points earned in the loyalty program roll up into a single account balance which is redeemable at over 140 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 Company’s casinos and branded 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, since participants’ points expire after thirteen months of no activity. The True Rewards points accruals are included in current liabilities on the Company’s consolidated balance sheets. Changes in the program, increases in membership and changes in the redemption patterns of the participants can impact this liability.
•Customer Deposits and 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.
The following table summarizes the Company’s activity for contract and contract related liabilities:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Outstanding Chip Liability | | Loyalty Program | | Customer Deposits and Other |
| (In thousands) | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| Balance at January 1 | | $ | 1,184 | | | $ | 997 | | | $ | 2,995 | | | $ | 3,969 | | | $ | 4,937 | | | $ | 3,497 | |
Balance at December 31 (1) | | 1,312 | | | 1,308 | | | 2,861 | | | 3,250 | | | 5,119 | | | 5,656 | |
| Increase (decrease) | | $ | 128 | | | $ | 311 | | | $ | (134) | | | $ | (719) | | | $ | 182 | | | $ | 2,159 | |
(1) Balance at December 31, 2021 included $0.1 million, $0.3 million and $0.7 million in Outstanding Chip Liability, Loyalty Program and Customer Deposits and Other, respectively, related to assets held for sale. Such balances were excluded from 2022 amounts.
Costs to Acquire a Contract with a Customer
As part of the Company’s distributed gaming business, the Company incurs incremental costs to acquire customer contracts in the form of up-front fully recoverable consideration provided to a customer upon execution of the agreement. Such costs are recorded as other current and non-current assets in the Company’s consolidated balance sheets and are amortized over the term of the contract. The amount of costs to acquire customer contracts recorded by the Company was $7.3 million as of both December 31, 2022 and 2021.
Gaming Taxes
The Company’s casinos located in Nevada are subject to taxes based on gross gaming revenues and pay annual fees based on the number of slot machines and table games licensed during the year. Rocky Gap is subject to gaming taxes based on gross gaming revenues and also pays an annual flat tax based on the number of table games and video lottery terminals in operation during the year. The Company’s distributed gaming operations in Nevada are subject to taxes based on the Company’s share of non-restricted gross gaming revenue for those locations that have grandfathered rights to more than 15 slot machines for play, and/or annual and quarterly fees at all branded tavern and third-party distributed gaming locations. The Company’s distributed gaming operations in Montana are subject to taxes based on the Company’s share of gross gaming revenue. These gaming taxes are recorded as gaming expenses in the consolidated statements of operations. Total gaming taxes and licenses were $73.2 million, $72.2 million and $51.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Advertising Expenses
The Company expenses advertising, marketing and promotional costs as incurred. Advertising costs included in selling, general and administrative expenses in the Company’s consolidated statements of operations were $12.2 million, $9.9 million and $6.9 million for the years ended December 31, 2022, 2021 and 2020, 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 Company’s common stock on the date of grant. All of the Company’s share-based compensation expense is recorded in selling, general and administrative expenses in the consolidated statements of operations.
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 (Loss) per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average common shares outstanding. Diluted net income per share in profitable periods reflects the effect of all potentially dilutive common shares outstanding by dividing net income by the weighted-average of all common and potentially dilutive shares outstanding. In the event of a net loss, diluted shares are not considered because of their anti-dilutive effect. For the year ended December 31, 2022, diluted net income per share excluded the weighted average effect of 150,384 shares of common stock. No shares of common stock related to time-based and performance-based restricted stock units were anti-dilutive for the year ended December 31, 2021 and for the year ended December 31, 2020, the amount of potential common share equivalents excluded from the computation was 915,025.
Recent Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Company considers the applicability and impact of all ASUs. While management continues to assess the possible impact of the adoption of new accounting standards and the future adoption of the new accounting standards that are not yet effective on the Company’s financial statements, management currently believes that the following new standards have or may have an impact on the Company’s consolidated financial statements and disclosures:
Accounting Standards Issued and Adopted
In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors — Certain Leases with Variable Lease Payments. The ASU addresses an issue related to a lessor’s accounting for lease contracts that have variable lease payments that do not depend on a reference index or a rate and would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. The amendment allows the lessor to classify and account for such lease contracts as operating. The Company adopted the standard effective January 1, 2022, and the adoption did not have a material impact on the Company’s financial statements or disclosures.
Accounting Standards Issued But Not Yet Adopted
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The ASU improves the accounting for revenue contracts with customers acquired in a business combination by addressing diversity in practice and inconsistency related to recognition of contract assets and liabilities acquired in a business combination. The provisions of this ASU require that an acquiring entity account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts. The standard is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years with early adoption permitted. The Company does not expect the impact of the adoption of this ASU to be material to its financial statements or disclosures.
Management does not believe that any other recently issued accounting standards that are not yet effective are likely to have a material impact on the Company’s financial statements.
Note 3 – Assets Held for Sale
The Company classifies assets as held for sale when a sale is probable, is expected to be completed within one year, and the asset group meets all of the accounting criteria to be classified as held for sale. As discussed in “Note 1 — Nature of Business,” on August 24, 2022, the Company entered into definitive agreements to sell Rocky Gap. The Rocky Gap Transactions are expected to close in the second quarter of 2023, subject to satisfaction or waiver of customary regulatory approvals and closing conditions. As a result, the assets related to the Rocky Gap property were classified as held for sale as of September 30, 2022
and the Company ceased recording depreciation and amortization of the long-lived assets included in the sale from the date of execution of the definitive agreements. Operations of Rocky Gap have historically been represented in the Company’s Maryland Casino Resort reportable segment.
The carrying amounts of the assets and liabilities held for sale in the Rocky Gap Transactions consisted of the following:
| | | | | |
| (In thousands) | December 31, 2022 |
| ASSETS | |
| Current assets | |
| Cash and cash equivalents | $ | 5,145 | |
| Accounts receivables, net | 2,354 | |
| Prepaid expenses | 539 | |
| Inventories | 548 | |
| Other | 46 | |
| Total current assets held for sale | 8,632 | |
| Property and equipment, net | 23,877 | |
| Operating lease right-of-use assets, net | 5,980 | |
| Intangible assets, net | 1,064 | |
| Other assets | 9 | |
| Total assets held for sale | $ | 39,562 | |
| LIABILITIES | |
| Current liabilities | |
| Current portion of finance leases | $ | 103 | |
| Current portion of operating leases | 436 | |
| Accounts payable | 1,195 | |
| Accrued payroll and related | 1,071 | |
| Other accrued liabilities | 1,972 | |
| Total current liabilities related to assets held for sale | 4,777 | |
| Non-current finance leases | 204 | |
| Non-current operating leases | 5,206 | |
| Total liabilities related to assets held for sale | $ | 10,187 | |
Rocky Gap generated revenues of $78.0 million, $78.2 million, and $51.6 million, and pretax income of $23.0 million, $22.2 million, and $10.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Note 4 – Property and Equipment
Property and equipment, net, consisted of the following:
| | | | | | | | | | | |
| At December 31, |
| (In thousands) | 2022 | | 2021 |
| Land | $ | 125,240 | | | $ | 125,240 | |
| Building and improvements | 923,157 | | | 937,759 | |
| Furniture and equipment | 244,735 | | | 246,323 | |
| Construction in process | 23,224 | | | 16,347 | |
| Property and equipment | 1,316,356 | | | 1,325,669 | |
| Accumulated depreciation | (475,625) | | | (421,449) | |
| Property and equipment, net | $ | 840,731 | | | $ | 904,220 | |
Depreciation expense for property and equipment, including finance leases, totaled $92.7 million, $98.6 million, and $103.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.
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.
Due to the significant impact of the COVID-19 pandemic on the Company’s operations for the year ended December 31, 2020, the Company revised its cash flow projections throughout the year ended December 31, 2020 to reflect the then-current economic environment, including the uncertainty around the nature, timing and extent of elimination or easing of the restrictions on its operations, and utilized such projections in performing interim and annual qualitative and quantitative assessments of its property and equipment for potential impairment. The revised cash flow projections also reflected the Company’s decision to keep operations of its Colorado Belle property suspended. Based on the results of interim and annual assessments conducted during the year, the Company concluded that there was no impairment of the Company’s long-lived assets as of and for the year ended December 31, 2020. Management determined that for the years ended December 31, 2022 and 2021, there were no new indicators of impairment of the Company’s long-lived assets aside from the Colorado Belle, the operations of which remain suspended. Based on the qualitative and quantitative assessments conducted during the year, including specific procedures on the Colorado Belle property, the Company concluded that there was no impairment of the Company’s long-lived assets as of December 31, 2022 and 2021.
Note 5 – Goodwill and Intangible Assets
The Company tests goodwill and 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 the carrying value of a reporting unit exceeds its fair value. Finite-lived intangible assets are evaluated for potential impairment whenever there is an indicator that the carrying value of an asset group may not be recoverable. Refer to “Note 2 — Summary of Significant Accounting Policies” for further information on the Company’s accounting policies related to its goodwill and intangible assets. Mandatory shut-down of the Company’s properties commencing in March 2020 that lasted for a majority of the second quarter of 2020 resulted in a deterioration in the performance of the Company’s casino properties in particular, which required the Company to revise its cash flow projections to reflect the then-current economic environment, including the uncertainty surrounding the nature, timing, and extent of elimination of or change to the restrictions on the Company’s operations. As a result, the Company conducted an interim qualitative and quantitative assessment of its goodwill and intangible assets for potential impairment in each quarter of 2020 and performed its annual quantitative test of goodwill and indefinite-lived intangible assets for potential impairment during the fourth quarter of 2020. The analyses performed by the Company throughout 2020 resulted in non-cash impairment charges recorded to the Company’s Nevada Casino Resorts goodwill and indefinite-lived trade names in the amount of $27.1 million and $6.9 million, respectively.
Management determined that there were no new indicators of impairment for the years ended December 31, 2022 and 2021, and the Company concluded that there was no impairment of the Company’s goodwill and intangible assets as of December 31, 2022 and 2021.
The estimated fair value of goodwill during the interim periods in 2021 and for the annual quantitative test in both 2021 and 2022 was determined using an income valuation approach utilizing discounted cash flow models. The annual quantitative test in 2020 was conducted using a combination of an income valuation approach utilizing discounted cash flow models and a market valuation approach. The market valuation approach considers comparable market data based on multiples of revenue or earnings before interest, taxes, depreciation and amortization. The income valuation approach conducted in 2020 utilized the following Level 3 inputs: discount rate of 12.0% - 13.5%; long-term revenue growth rate of 2.0% - 3.0%. The income valuation approach conducted in 2021 and 2022 utilized a discount rate of 13% and 13.5%, respectively, and long-term revenue growth rate of 2.5% in both periods.
The estimated fair value of indefinite-lived intangible assets in 2020, 2021 and 2022 was determined using the income approach by applying the relief from royalty methodology using Level 3 inputs. For 2020, the Company applied a royalty rate of 0.75% to 2.0%, a discount rate of 12.0% to 13.5% and long-term revenue growth rate of 2.0% to 3.0%. For 2021, the Company utilized a royalty rate of 1.0% to 2.0%, a discount rate of 13.0% and a long-term revenue growth rate of 2.5%. For 2022, the Company utilized a royalty rate of 1.0% to 2.0%, a discount rate of 13.5% and a long-term revenue growth rate of 2.5%.
The following table summarizes goodwill balances by reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Nevada Casino Resorts | | Nevada Locals Casinos | | Maryland Casino Resort | | Nevada Taverns | | Distributed Gaming | | Total Goodwill |
| Balance, December 31, 2021 and 2022 | $ | 22,105 | | | $ | 38,187 | | | $ | — | | | $ | 20,459 | | | $ | 77,645 | | | $ | 158,396 | |
Intangible assets, net, consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2022 |
| (In thousands) | | Useful Life (Years) | | Gross Carrying
Value | | Cumulative
Amortization | | Cumulative Impairment | | Intangible Assets, Net |
| Indefinite-lived intangible assets | | | | | | | | | | |
| Trade names | | Indefinite | | $ | 53,690 | | | $ | — | | | $ | (6,890) | | | $ | 46,800 | |
| | | | 53,690 | | | — | | | (6,890) | | | 46,800 | |
| Amortizing intangible assets | | | | | | | | | | |
| Customer relationships | | 4-16 | | 81,105 | | | (41,743) | | | — | | | 39,362 | |
| Player relationships | | 2-14 | | 42,990 | | | (40,455) | | | — | | | 2,535 | |
| Non-compete agreements | | 2-5 | | 9,840 | | | (9,114) | | | — | | | 726 | |
| In-place lease value | | 4 | | 1,170 | | | (1,170) | | | — | | | — | |
| Leasehold interest | | 4 | | 570 | | | (570) | | | — | | | — | |
| Other | | 4-25 | | 1,366 | | | (1,237) | | | — | | | 129 | |
| | | | 137,041 | | | (94,289) | | | — | | | 42,752 | |
| Balance, December 31, 2022 | | | | $ | 190,731 | | | $ | (94,289) | | | $ | (6,890) | | | $ | 89,552 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, 2021 |
| (In thousands) | | Useful Life (Years) | | Gross Carrying
Value | | Cumulative
Amortization | | Cumulative Impairment | | Intangible Assets, Net |
| Indefinite-lived intangible assets | | | | | | | | | | |
| Trade names | | Indefinite | | $ | 53,690 | | | $ | — | | | $ | (6,890) | | | $ | 46,800 | |
| | | | 53,690 | | | — | | | (6,890) | | | 46,800 | |
| Amortizing intangible assets | | | | | | | | | | |
| Customer relationships | | 4-16 | | 81,105 | | | (35,879) | | | — | | | 45,226 | |
| Player relationships | | 2-14 | | 42,990 | | | (39,812) | | | — | | | 3,178 | |
| Non-compete agreements | | 2-5 | | 9,840 | | | (8,349) | | | — | | | 1,491 | |
Gaming license (1) | | 15 | | 2,100 | | | (1,210) | | | — | | | 890 | |
| In-place lease value | | 4 | | 1,170 | | | (1,155) | | | — | | | 15 | |
| Leasehold interest | | 4 | | 570 | | | (570) | | | — | | | — | |
| Other | | 4-25 | | 1,814 | | | (1,356) | | | — | | | 458 | |
| | | | 139,589 | | | (88,331) | | | — | | | 51,258 | |
| Balance, December 31, 2021 | | | | $ | 193,279 | | | $ | (88,331) | | | $ | (6,890) | | | $ | 98,058 | |
(1) Relates to Rocky Gap.
Total amortization expense related to intangible assets was $7.4 million, $8.1 million, and $21.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. Estimated future amortization expense related to intangible assets is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter | | Total (1) |
| Estimated amortization expense | | $ | 7,209 | | | $ | 6,313 | | | $ | 5,974 | | | $ | 5,869 | | | $ | 5,737 | | | $ | 11,650 | | | $ | 42,752 | |
(1) The Company did not have intangible assets that were not placed in service as of December 31, 2022.
Note 6 – Accrued Liabilities
Accrued liabilities consisted of the following:
| | | | | | | | | | | |
| At December 31, |
| (In thousands) | 2022 | | 2021 |
| Gaming liabilities | $ | 10,952 | | | $ | 12,311 | |
| Accrued taxes, other than income taxes | 9,291 | | | 9,035 | |
| Interest | 6,036 | | | 6,168 | |
| Other accrued liabilities | 5,027 | | | 5,549 | |
| Deposits | 2,059 | | | 2,284 | |
| Total current accrued liabilities | $ | 33,365 | | | $ | 35,347 | |
Note 7 – Long-Term Debt
Long-term debt, net, consisted of the following:
| | | | | | | | | | | |
| At December 31, |
| (In thousands) | 2022 | | 2021 |
| Term Loan | $ | 575,000 | | | $ | 650,000 | |
| 2026 Unsecured Notes | 335,461 | | | 375,000 | |
| Finance lease liabilities | 2,157 | | | 3,005 | |
| Notes payable | 90 | | | 602 | |
| Total long-term debt and finance leases | 912,708 | | | 1,028,607 | |
| Unamortized discount | (7,899) | | | (11,689) | |
| Unamortized debt issuance costs | (3,790) | | | (5,392) | |
| Total long-term debt and finance leases after debt issuance costs and discount | 901,019 | | | 1,011,526 | |
| Current portion of long-term debt and finance leases | (555) | | | (1,057) | |
| Long-term debt, net and finance leases | $ | 900,464 | | | $ | 1,010,469 | |
Senior Secured Credit Facility
In October 2017, the Company entered into a senior secured credit facility consisting of a $900 million senior secured first lien credit facility (consisting of an $800 million term loan (the “Term Loan”) maturing on October 20, 2024 and a $100 million revolving credit facility (the “Revolving Credit Facility”)) with JPMorgan Chase Bank, N.A. (as administrative agent and collateral agent), the lenders party thereto and the other entities party thereto (the “Credit Facility”). The Revolving Credit Facility was subsequently increased from $100 million to $200 million in 2018, increasing the total Credit Facility capacity to $1 billion. On October 12, 2021, the Company further modified the terms of the Revolving Credit Facility by increasing its size to $240 million and extending the maturity date from October 20, 2022 to April 20, 2024. The Company incurred $0.7 million in debt modification costs and fees related to this modification of the Revolving Credit Facility that have been deferred and are being amortized over the term of the Revolving Credit Facility using the straight-line method.
As of December 31, 2022, the Company had $575 million in principal amount of outstanding Term Loan borrowings under its Credit Facility, no outstanding letters of credit and no borrowings under the Revolving Credit Facility, such that the full borrowing availability of $240 million under the Revolving Credit Facility was available to the Company.
Interest and Fees
Borrowings under the Credit Facility bear interest, at the Company’s option, at either (1) a base rate equal to the greatest of the federal funds rate plus 0.50%, the applicable administrative agent’s prime rate as announced from time to time, or the LIBOR rate for a one-month interest period plus 1.00%, subject to a floor of 1.75% (with respect to the term 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 Company’s 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 Company’s net leverage ratio, and is accrued based on the average
daily unused amount of the available revolving commitment. The weighted-average effective interest rate on the Company’s outstanding borrowings under the Credit Facility was approximately 4.85% for the year ended December 31, 2022.
Optional and Mandatory Prepayments and Related Loss on Debt Extinguishment and Modification
The Term Loan 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. In April 2019, the Company made a $18 million prepayment of the Term Loan under the Credit Facility with the proceeds from the issuance of the Company’s 7.625% Senior Notes due 2026 (the “2026 Unsecured Notes”). During 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 Company’s former second lien term loan discussed below and $18 million prepayment.
During the years ended December 31, 2022 and 2021, the Company prepaid $75 million and $122 million, respectively, of principal under the Term Loan, thereby eliminating the requirement to make any further quarterly installment payments, prior to maturity. As of December 31, 2022, the final installment payment due at the maturity date of October 20, 2024 is $575 million. The Company recorded non-cash charges in the amounts of $0.5 million and $1.0 million for the accelerated amortization of the debt issuance costs and discount related to the prepayments of the Term Loan for the years ended December 31, 2022 and 2021, respectively.
Guarantees and Collateral
Borrowings under the Credit Facility are guaranteed by each of the Company’s existing and future wholly-owned domestic subsidiaries (other than certain insignificant or unrestricted subsidiaries) and are secured by substantially all of the present and future assets of the Company and its subsidiary guarantors (subject to of certain exceptions).
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 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 Company’s 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 Company’s assets to satisfy the obligations thereunder. The Company was in compliance with its financial covenants under the Credit Facility as of December 31, 2022.
Senior Unsecured Notes
On April 15, 2019, the Company issued $375 million in principal amount of 2026 Unsecured Notes in a private placement to institutional buyers at face value. The 2026 Unsecured Notes bear interest at 7.625%, payable semi-annually on April 15th and October 15th of each year.
In connection with the issuance of the 2026 Unsecured Notes, the Company incurred $6.7 million in debt financing costs and fees that have been deferred and are being amortized over the term of the 2026 Unsecured Notes using the effective interest method.
The net proceeds of the 2026 Unsecured Notes were used to (i) repay the Company’s 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.
During the year ended December 31, 2022, the Company repurchased $39.5 million in principal amount of 2026 Unsecured Notes in open market transactions, thereby reducing the final payment due at maturity to $335.5 million. The Company recorded a non-cash charge in the amount of $1.1 million for the accelerated amortization of the debt issuance costs and discount related to the repurchase of 2026 Unsecured Notes.
Optional Prepayments
The 2026 Unsecured 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.
Financial and Other Covenants
The 2026 Unsecured Notes are guaranteed on a senior unsecured basis by each of the Company’s existing and future wholly-owned domestic subsidiaries that guarantees the Credit Facility. The 2026 Unsecured Notes are the Company and its subsidiary guarantors’ general senior unsecured obligations and rank equally in right of payment with all of the Company’s respective existing and future unsecured unsubordinated debt. The 2026 Unsecured 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 Company’s subsidiaries that do not guarantee the 2026 Unsecured 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 the Company’s 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 holder’s 2026 Unsecured Notes at a purchase price in cash equal to 101% of the aggregate principal amount of the 2026 Unsecured Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase.
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 established a range whereby the counterparty would pay the Company if one-month LIBOR exceeds the ceiling rate of 2.25%. The Interest Rate Cap settled monthly commencing in January 2018 through its expiration on December 31, 2020. No payments or receipts were required to be exchanged on the Interest Rate Cap unless interest rates rose above the pre-determined ceiling rate. The estimated fair value of the Company’s Interest Rate Cap was derived from a market price obtained from a dealer quote. Such quote represents the estimated amount the Company would receive to terminate the contract.
Scheduled Principal Payments of Long-Term Debt
The scheduled principal payments due on long-term debt are as follows (in thousands):
| | | | | |
| Year Ending December 31, | Amount |
| 2023 | $ | 555 | |
| 2024 | 575,158 | |
| 2025 | 133 | |
| 2026 | 137 | |
| 2027 | 335,616 | |
| Thereafter | 1,109 | |
| Total outstanding principal of long-term debt | $ | 912,708 | |
Note 8 – Shareholders’ Equity and Stock Incentive Plans
Share Repurchase Program
On August 3, 2021, the Company’s Board of Directors authorized a share repurchase program of $50 million, which was re-authorized on May 3, 2022 and subsequently increased to $75 million on November 1, 2022. 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 Company’s 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. As of December 31, 2022, the Company had $61.5 million of remaining share repurchase availability under its November 1, 2022 authorization.
The following table includes the Company’s share repurchase activity:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 | | 2020 |
| (In thousands, except per share data) | | | | | |
Shares repurchased (1) | 1,113 | | | 227 | | | 50 | |
| Total cost, including brokerage fees | $ | 51,202 | | | $ | 10,616 | | | $ | 950 | |
Average repurchase price per share (2) | $ | 46.01 | | | $ | 46.87 | | | $ | 19.00 | |
(1)All repurchased shares were retired and constitute authorized but unissued shares.
(2)Figures in the table may not recalculate exactly due to rounding. Average repurchase price per share is calculated based on unrounded numbers.
Stock Incentive Plans
On August 27, 2015, the Board of Directors of the Company approved the Golden Entertainment, Inc. 2015 Incentive Award Plan (the “2015 Plan”), which was approved by the Company’s shareholders at the Company’s 2016 annual meeting. The 2015 Plan authorizes the issuance of stock options, restricted stock, restricted stock units, 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, any unvested options will be forfeited.
The maximum number of shares of the Company’s common stock for which grants may be made under the 2015 Plan is 2.25 million shares, plus an annual increase on January 1st of each year during the ten-year term of the 2015 Plan equal to the lesser of 1.8 million shares, 4% of the total shares of the Company’s common stock outstanding (on an as-converted basis) and such smaller amount as may be determined by the Board of Directors in its sole discretion. The annual increase on January 1, 2022 was 1,153,210 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, 2022, a total of 3,135,469 shares of the Company’s common stock remained available for grants of awards under the 2015 Plan.
Stock Options
The following table summarizes the Company’s stock option activity:
| | | | | | | | | | | | | | | | | | | | | | | |
| Stock Options Outstanding | | Weighted-Average Remaining Term (in years) | | Weighted-Average Exercise Price | | Aggregate Intrinsic Value (in thousands) |
| Outstanding at January 1, 2020 | 3,126,521 | | | 6.1 | | $ | 11.61 | | | |
| Granted | — | | | | | $ | — | | | |
| Exercised | (84,875) | | | | | $ | 3.88 | | | |
| Cancelled | (2,292) | | | | | $ | 13.50 | | | |
| Expired | (148,013) | | | | | $ | 26.61 | | | |
| Outstanding at December 31, 2020 | 2,891,341 | | | 5.5 | | $ | 11.07 | | | $ | 25,520 | |
| Granted | — | | | | | $ | — | | | |
| Exercised | (749,847) | | | | | $ | 10.39 | | | |
| Cancelled | — | | | | | $ | — | | | |
| Expired | — | | | | | $ | — | | | |
| Outstanding at December 31, 2021 | 2,141,494 | | | 4.5 | | $ | 11.31 | | | $ | 83,992 | |
| Granted | — | | | | | $ | — | | | |
| Exercised | (69,500) | | | | | $ | 9.94 | | | |
| Cancelled | — | | | | | $ | — | | | |
| Expired | — | | | | | $ | — | | | |
| Outstanding at December 31, 2022 | 2,071,994 | | | 3.5 | | $ | 11.35 | | | $ | 53,966 | |
| | | | | | | |
| Exercisable at December 31, 2020 | 2,854,813 | | | 5.5 | | $ | 11.04 | | | $ | 25,286 | |
| | | | | | | |
| Exercisable at December 31, 2021 | 2,141,494 | | | 4.5 | | $ | 11.31 | | | $ | 83,992 | |
| | | | | | | |
| Exercisable at December 31, 2022 | 2,071,994 | | | 3.5 | | $ | 11.35 | | | $ | 53,966 | |
The total intrinsic value of stock options exercised was $2.6 million, $26.1 million, and $1.3 million for the years ended December 31, 2022, 2021, and 2020, respectively. The Company has not granted any stock options since 2017 and the cash received from stock options exercised during the year ended December 31, 2022 was less than $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 Company’s stock price, the weighted-average risk-free interest rate and the weighted-average expected life of the options. The Company’s determination of fair value of share-based option awards on the date of grant using the Black-Scholes option pricing model is affected by the following assumptions regarding complex and subjective variables. Any changes in these assumptions may materially affect the estimated fair value of the share-based award.
•Expected dividend yield — As the Company has not historically paid dividends, with the exception of the Special Dividend, the dividend rate variable used in the Black-Scholes model is zero.
•Risk-free interest rate — The risk-free interest rate assumption is based on the U.S. Treasury yield curve in effect at the time of grant and with maturities consistent with the expected term of options.
•Expected term — The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding. It is based upon the Company’s experience as to the average historical term of option grants that were exercised, canceled or forfeited. Management believes historical data is reasonably representative of future exercise behavior.
•Expected volatility — The volatility assumption is based on the historical actual volatility of the Company’s stock. Management concluded there were no factors identified which were unusual and which would distort the volatility
figure if used to estimate future volatility. Future volatility may be substantially less or greater than expected volatility.
RSUs and PSUs
Executive officers of the Company receive long-term incentive equity awards in a combination of RSUs and PSUs, issued under the 2015 Plan. The number of PSUs that will be eligible to vest with respect to these PSU awards will be determined based on the Company’s attainment of performance goals set by the Compensation Committee. Following the one- or two-year performance periods, the number of “vesting eligible” PSUs will then be subject to two- or one- additional years of time-based vesting, respectively. 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 Company’s RSU activity:
| | | | | | | | | | | | | | | | | | | | |
| | RSUs |
| | Shares | | Weighted-
Average Grant Date Fair Value | | Total Fair Value of Shares Vested (in thousands) |
| Outstanding at January 1, 2020 | | 661,258 | | | $ | 16.44 | | | |
| Granted | | 624,415 | | | $ | 9.65 | | | |
| Vested | | (308,222) | | | $ | 16.06 | | | $ | 3,336 | |
| Cancelled | | (33,494) | | | $ | 16.58 | | | |
| Outstanding at December 31, 2020 | | 943,957 | | | $ | 12.06 | | | |
| Granted | | 318,356 | | | $ | 31.46 | | | |
| Vested | | (426,770) | | | $ | 14.20 | | | $ | 14,203 | |
| Cancelled | | (20,123) | | | $ | 26.08 | | | |
| Outstanding at December 31, 2021 | | 815,420 | | | $ | 18.17 | | | |
| Granted | | 123,970 | | | $ | 51.86 | | | |
| Vested | | (363,450) | | | $ | 17.78 | | | $ | 18,963 | |
| Cancelled | | (28,269) | | | $ | 17.63 | | | |
| Outstanding at December 31, 2022 | | 547,671 | | | $ | 26.09 | | | |
The following table summarizes the Company’s PSU activity:
| | | | | | | | | | | | | | | | | | | | |
| | PSUs |
| | Shares (1) | | Weighted-
Average Grant Date Fair Value | | Total Fair Value of Shares Vested (in thousands) |
| Outstanding at January 1, 2020 | | 376,328 | | | $ | 20.65 | | | |
| Granted | | 404,880 | | | $ | 8.86 | | | |
| Vested | | (5,254) | | (2) | $ | 28.72 | | | $ | 47 | |
| Cancelled | | (32,235) | | (2) | $ | 28.72 | | | |
| Outstanding at December 31, 2020 | | 743,719 | | | $ | 13.82 | | | |
| Granted | | 129,503 | | | $ | 29.00 | | | |
| Vested | | (89,920) | | (2) (3) | $ | 25.73 | | | $ | 2,608 | |
| Cancelled | | (77,725) | | (2) (3) | $ | 25.23 | | | |
| Outstanding at December 31, 2021 | | 705,577 | | (4) | $ | 13.84 | | | |
| Granted | | 83,579 | | | $ | 53.51 | | | |
| Performance certification | | 534,383 | | (5) | $ | — | | | |
| Vested | | (247,380) | | (6) | $ | 12.51 | | | $ | 13,030 | |
| Cancelled | | — | | | $ | — | | | |
| Outstanding at December 31, 2022 | | 1,076,159 | | | $ | 17.17 | | | |
(1)The number of shares for the PSUs listed as granted 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 for those PSUs 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.
(2)During the first quarter of 2020, the Company’s financial results for the performance goals applicable to the PSUs granted in March 2018 were certified, which resulted in the reduction of the PSUs granted in 2018 to the number of PSUs eligible to vest from 108,957 to 76,722 shares (with the 32,235 share adjustment shown in the table above as “Cancelled”), 5,254 of which shares vested in March 2020 and 71,468 of which shares vested in March 2021.
(3)62,791 of the 77,725 PSUs cancelled during the year ended December 31, 2021 related to PSUs granted in November 2017, for which applicable performance goals were not met. 14,934 of the 77,725 PSUs cancelled during the period related to PSUs granted in March 2019 (the “2019 PSU Awards”). The Company’s financial results for the applicable performance goals were certified in March 2021, which resulted in the reduction of the shares subject to the 2019 PSU Awards from 204,580 to 189,646. In addition, 18,452 of the shares under the 2019 PSU Awards vested during the first quarter of 2021.
(4)Includes 171,194 shares of PSUs granted in March 2019 that were certified below target during the three months ended March 31, 2021 and vested in March 2022. Also includes PSUs granted in March 2020 and March 2021 at “target.”
(5)The Company’s financial results for the applicable performance goals were certified during the three months ended March 31, 2022 and 200% of the target PSUs granted in March 2020 and March 2021 were deemed “earned.” Includes 38,093 incremental shares issued in March 2022 in connection with vesting of PSUs granted in March 2020 due to such award “earned” at 200% of the “target.” The remaining PSUs granted in March 2020 and March 2021 will be eligible to vest on March 14, 2023 and 2024, respectively.
(6)Comprises 171,194 shares of PSUs granted in March 2019 and 76,186 shares of PSUs granted in March 2020 that vested in March 2022.
Share-Based Compensation
The following table summarizes share-based compensation costs by award type:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (In thousands) | 2022 | | 2021 | | 2020 |
| Stock options | $ | — | | | $ | 191 | | | $ | 1,919 | |
| RSUs | 6,900 | | | 6,867 | | | 5,264 | |
| PSUs | 5,980 | | | 6,786 | | | 2,342 | |
| Total share-based compensation costs | $ | 12,880 | | | $ | 13,844 | | | $ | 9,525 | |
As of December 31, 2022, the Company’s unrecognized share-based compensation expense related to RSUs and PSUs was $8.2 million and $6.2 million, respectively, which is expected to be recognized over a weighted-average period of 1.2 years and 0.6 years for RSUs and PSUs, respectively. The Company did not have any remaining unrecognized share-based compensation expense related to stock options as of December 31, 2022.
Note 9 – Income Taxes
Income tax provision (benefit) is summarized as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (In thousands) | 2022 | | 2021 | | 2020 |
| Current: | | | | | |
| Federal | $ | 13,877 | | | $ | — | | | $ | (371) | |
| State | 274 | | | 95 | | | — | |
| Total current tax provision (benefit) | $ | 14,151 | | | $ | 95 | | | $ | (371) | |
| Deferred: | | | | | |
| Federal | $ | (13,462) | | | $ | 325 | | | $ | 430 | |
| State | (168) | | | 16 | | | 2 | |
| Total deferred tax (benefit) provision | (13,630) | | | 341 | | | 432 | |
| Income tax provision | $ | 521 | | | $ | 436 | | | $ | 61 | |
Reconciliation of the statutory federal income tax rate to the Company’s actual rate based on income (loss) before income tax provision (benefit) is summarized below:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2022 | | 2021 | | 2020 |
| Statutory federal tax rate | 21.00 | % | | 21.00 | % | | 21.00 | % |
| State income taxes, net of federal income taxes | 0.62 | | | 1.41 | | | 0.89 | |
| Permanent tax differences – stock compensation | (6.31) | | | (3.93) | | | (0.43) | |
| Permanent tax differences – business meals | 0.44 | | | 0.23 | | | (0.07) | |
| Permanent tax differences – executive compensation and other | 9.27 | | | 2.13 | | | (0.86) | |
| Change in valuation allowance | (23.99) | | | (19.69) | | | (19.09) | |
| FICA credit generated | (1.09) | | | (0.28) | | | 0.33 | |
| Change in tax rate and apportionment | (0.26) | | | (0.03) | | | 0.11 | |
| Deferred only adjustment to beginning deferred balances | 0.95 | | | (0.57) | | | (1.92) | |
| Effective tax rate | 0.63 | % | | 0.27 | % | | (0.04) | % |
The Company’s current and non-current deferred tax assets (liabilities) are comprised of the following:
| | | | | | | | | | | |
| December 31, |
| (In thousands) | 2022 | | 2021 |
| Deferred tax assets: | | | |
| Accruals and reserves | $ | 6,350 | | | $ | 7,688 | |
| Share-based compensation expense | 966 | | | 5,781 | |
| General business credit carryforward | — | | | 489 | |
| State tax credits | 3,867 | | | 4,192 | |
| Net operating loss carryforwards | 753 | | | 6,076 | |
| Operating lease obligation | 36,483 | | | 41,877 | |
| Depreciation of fixed assets | 6,532 | | | 4,875 | |
| Other | 493 | | | 545 | |
| 55,444 | | | 71,523 | |
| Valuation allowances | (5,680) | | | (30,783) | |
| $ | 49,764 | | | $ | 40,740 | |
| Deferred tax liabilities: | | | |
| Prepaid services | $ | (2,116) | | | $ | (3,282) | |
| Amortization of intangible assets | (2,895) | | | (941) | |
| Right-of-use assets | (32,984) | | | (38,378) | |
| (37,995) | | | (42,601) | |
| Net deferred tax assets (liabilities) | $ | 11,769 | | | $ | (1,861) | |
| | | |
| Non-current deferred tax assets | $ | 11,822 | | | $ | — | |
| Non-current deferred tax liabilities | (53) | | | (1,861) | |
| Net deferred tax assets (liabilities) | $ | 11,769 | | | $ | (1,861) | |
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, 2022 include a net decrease in valuation allowance of $25.1 million. During the first quarter of 2022, the Company concluded that it was more likely than not that the Company would generate sufficient taxable income within the applicable net operating loss carry-forward periods to realize a portion of its deferred tax assets, which resulted in a partial reversal of the deferred tax asset valuation allowance.
As of December 31, 2022, the Company had $70.5 million of Maryland net operating loss carryforwards (“NOLs”), which do not expire. These net operating losses have the potential to be used to offset future ordinary taxable income and reduce future cash tax liabilities. Additionally, the Company had deferred tax assets of $3.9 million related to Maryland tax credits. The Maryland credit carryforward begins to expire in 2029. Maryland NOLs and credits have been reduced by a full valuation allowance.
As of December 31, 2022, the Company’s 2017 and 2018 federal tax returns were under audit by the IRS.
As of December 31, 2022, the Company had no material uncertain tax positions.
Note 10 – Employee Retirement and Benefit Plans
Defined contribution employee savings plans
The Company’s 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 $0.5 million, $0.4 million, and $0.6 million for the years ended December 31, 2022, 2021, and 2020, respectively, to its defined contribution employee savings plan. The Company’s contributions vest over a five-year period.
Pension plans
As of December 31, 2022, over 1,700 of the Company’s employees were members of various unions and covered by union-
sponsored, collectively bargained, multiemployer health and welfare and defined benefit pension plans. The Company recorded $11.2 million, $9.1 million, and $7.1 million in expenses for these plans for the years ended December 31, 2022, 2021, and 2020, 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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Pension Protection Zone Status (1) | | FIR/RP Status Pending/Implemented | | Surcharge Imposed | | Expiration Date Of Collective-
Bargaining Agreement | |
| Multiemployer Pension Plans | | EIN/Plan Number | | 2021 | | 2020 | | | | |
| Central Pension Fund of the IUOE and Participating Employers | | 36-6052390-001 | | Green | | Green | | No | | No | | 3/31/2022 | (2) |
| Southern Nevada Culinary and Bartenders Pension Plan | | 88-6016617-001 | | Green | | Green | | No | | No | | 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.
(2)The Company is in the process of negotiating an extension to this collective-bargaining agreement following its expiration.
The Company’s cash contributions to each multiemployer pension and benefit plans are as follows:
| | | | | | | | | | | | | | | | | |
| December 31, |
| (In thousands) | 2022 | | 2021 | | 2020 |
| Multiemployer pension plans | | | | | |
| Central Pension Fund of the IUOE and Participating Employers | $ | 691 | | | $ | 637 | | | $ | 545 | |
| Southern Nevada Culinary and Bartenders Pension Plan | 2,054 | | | 1,645 | | | 1,356 | |
| Other pension plans | 168 | | | 146 | | | 142 | |
| Total contributions | $ | 2,913 | | | $ | 2,428 | | | $ | 2,043 | |
| Multiemployer benefit plans (excluding pension plans) | | | | | |
| HEREIU Welfare Fund | $ | 8,007 | | | $ | 6,353 | | | $ | 5,216 | |
| All other | 7 | | | — | | | 3 | |
| Total contributions | $ | 8,014 | | | $ | 6,353 | | | $ | 5,219 | |
For the 2021 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 11 – Financial Instruments and Fair Value Measurements
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 entity’s 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 carrying values of the Company’s cash and cash equivalents, accounts receivable, other current assets and accounts payable approximate fair value because of the short duration of these financial instruments.
The following table summarizes the fair value measurement of the Company’s long-term debt:
| | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| (In thousands) | Carrying Amount | | Fair Value | | Fair Value Hierarchy |
| Term Loan | $ | 575,000 | | | $ | 575,000 | | | Level 2 |
| 2026 Unsecured Notes | 335,461 | | | 330,630 | | | Level 2 |
| Finance lease liabilities | 2,157 | | | 2,157 | | | Level 3 |
| Notes payable | 90 | | | 90 | | | Level 3 |
| Total debt | $ | 912,708 | | | $ | 907,877 | | | |
| | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| (In thousands) | Carrying Amount | | Fair Value | | Fair Value Hierarchy |
| Term Loan | $ | 650,000 | | | $ | 650,813 | | | Level 2 |
| 2026 Unsecured Notes | 375,000 | | | 390,938 | | | Level 2 |
| Finance lease liabilities | 3,005 | | | 3,005 | | | Level 3 |
| Notes payable | 602 | | | 602 | | | Level 3 |
| Total debt | $ | 1,028,607 | | | $ | 1,045,358 | | | |
The estimated fair value of the Company’s Term Loan and 2026 Unsecured Notes is based on a relative value analysis performed as of December 31, 2022 and 2021. The finance lease liabilities and notes payable 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.
Note 12 – Leases
Company as Lessee
The Company is a lessee under non-cancelable operating and finance leases for offices, taverns, land, vehicles, slot machines and equipment. In addition, slot placement contracts in the form of space lease agreements at chain stores are accounted for as operating leases. Under chain store space lease agreements, the Company pays fixed monthly rental fees for the right to install, maintain and operate its slot machines at business locations, which are recorded in gaming expenses. The Company’s slot machine lease agreements with gaming equipment manufacturers are short-term in nature with the majority of such leases being under variable rent structure, with amounts determined based on the performance of the leased machines. Certain other short-term slot machine lease agreements are under fixed fee payment structure.
The leases have remaining lease terms of less than 1 year to 75 years, some of which include options to extend the leases for an additional 1 to 25 years. Some equipment leases and space lease agreements include options to terminate the lease with 60 days to 1 year notice. The Company assesses the options to extend or terminate the lease 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 ROU asset and lease liability.
The Company’s 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. The Company’s lease agreements do not contain any material residual value guarantees, restrictions or covenants.
Lease expense for arrangements with a fixed fee payment structure is recognized on a straight-line basis over the lease term. Lease expense for arrangements under a variable rent structure is recognized in the period in which the obligation for the payment is incurred.
The Company historically leased its office headquarters building and leases the office space in a building adjacent to the Company’s office headquarters building from a related party. Refer to “Note 14 — Related Party Transactions” for more detail. The current and non-current obligations under finance leases are included in “Current portion of long-term debt and finance leases” and “Long-term debt, net and non-current finance leases” in the Company’s consolidated balance sheets, respectively. The finance leases relate to equipment for the Company’s casino properties and buildings for certain casino and branded tavern locations.
The components of lease expense were as follows:
| | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, |
| (In thousands) | Classification | | 2022 | | 2021 |
| Operating lease cost | | | | | |
| Operating lease cost | Operating and SG&A expenses | | $ | 55,907 | | | $ | 54,131 | |
| Variable lease cost | Operating and SG&A expenses | | 17,943 | | | 20,449 | |
| Short-term lease cost | Operating and SG&A expenses | | 4,796 | | | 4,862 | |
| Total operating lease cost | | | $ | 78,646 | | | $ | 79,442 | |
| | | | | |
| Finance lease cost | | | | | |
| Amortization of leased assets | Depreciation and amortization | | $ | 934 | | | $ | 1,693 | |
| Interest on lease liabilities | Interest expense, net | | 114 | | | 300 | |
| Total finance lease cost | | | $ | 1,048 | | | $ | 1,993 | |
Supplemental cash flow information related to leases was as follows:
| | | | | | | | | | | |
| Year Ended December 31, |
| (In thousands) | 2022 | | 2021 |
| Cash paid for amounts included in the measurement of lease liabilities: | | | |
| Operating cash flows used under operating lease agreements | $ | 55,846 | | | $ | 53,527 | |
| Operating cash flows used under finance lease agreements | 109 | | | 293 | |
| Financing cash flows used under finance lease agreements | 541 | | | 6,179 | |
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | |
| December 31, |
| (In thousands) | 2022 | | 2021 |
| Operating leases | | | |
| Operating lease right-of-use assets, gross | $ | 193,565 | | | $ | 221,732 | |
| Accumulated amortization | (45,672) | | | (42,481) | |
| Operating lease right-of-use assets, net | $ | 147,893 | | | $ | 179,251 | |
| | | |
| Current portion of operating leases | $ | 42,200 | | | $ | 40,151 | |
| Non-current operating leases | 121,979 | | | 155,098 | |
| Total operating lease liabilities | $ | 164,179 | | | $ | 195,249 | |
| | | |
| Finance leases | | | |
| Property and equipment, gross | $ | 5,719 | | | $ | 6,278 | |
| Accumulated depreciation | (3,341) | | | (2,407) | |
| Property and equipment, net | $ | 2,378 | | | $ | 3,871 | |
| | | |
| Current portion of finance leases | $ | 465 | | | $ | 546 | |
| Non-current finance leases | 1,692 | | | 2,459 | |
| Total finance lease liabilities | $ | 2,157 | | | $ | 3,005 | |
The following presents additional information related to the Company’s leases as of December 31, 2022:
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| Weighted Average Remaining Lease Term | | | |
| Operating leases | 7.5 years | | 7.8 years |
| Finance leases | 18.0 years | | 16.4 years |
| | | |
| Weighted Average Discount Rate | | | |
| Operating leases | 5.9 | % | | 5.7 | % |
| Finance leases | 6.4 | % | | 6.1 | % |
Maturities of Lease Liabilities
As of December 31, 2022, maturities of lease liabilities were as follows:
| | | | | | | | | | | | | | | | | |
| (In thousands) | Operating Leases | | Finance Leases | | Total |
| 2023 | $ | 50,372 | | | $ | 521 | | | $ | 50,893 | |
| 2024 | 43,268 | | | 227 | | | 43,495 | |
| 2025 | 26,378 | | | 200 | | | 26,578 | |
| 2026 | 16,933 | | | 200 | | | 17,133 | |
| 2027 | 12,755 | | | 214 | | | 12,969 | |
| Thereafter | 54,674 | | | 3,213 | | | 57,887 | |
| Total lease payments | 204,380 | | | 4,575 | | | 208,955 | |
| Amount of interest | (40,201) | | | (2,418) | | | (42,619) | |
| Present value of lease liabilities | $ | 164,179 | | | $ | 2,157 | | | $ | 166,336 | |
As of December 31, 2022, the Company did not have any leases that have not yet commenced but that create significant rights and obligations.
Company as Lessor
The Company leases space to third-party tenants under operating leases primarily for retail and food and beverage outlets within its casino properties. Golden also enters into operating lease agreements with certain equipment providers for placement of amusement devices, gaming machines and automated teller machines within its casino properties and branded taverns. The leases have remaining lease terms of 1 to 10 years, some of which include options to extend the leases for an additional 1 to 15 years.
Lease payments from tenants generally include minimum base rent, adjusted for contractual escalations as applicable, and/or contingent rental clauses based on a percentage of net sales exceeding minimum base rent. 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 combines lease and non-lease components for the purpose of measuring lease revenue, which is recorded in “Other revenue” in the Company’s consolidated statements of operations.
Minimum and contingent operating lease income was as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| (In thousands) | 2022 | | 2021 | | 2020 |
| Minimum rental income | $ | 7,380 | | | $ | 6,041 | | | $ | 3,913 | |
| Contingent rental income | 4,071 | | | 3,169 | | | 1,840 | |
| Total rental income | $ | 11,451 | | | $ | 9,210 | | | $ | 5,753 | |
Future minimum rent payments to be received under operating leases are as follows (in thousands):
| | | | | |
| Year Ending December 31, | Amount |
| 2023 | $ | 5,025 | |
| 2024 | 4,913 | |
| 2025 | 4,875 | |
| 2026 | 4,072 | |
| 2027 | 1,173 | |
| Thereafter | 1,371 | |
| Total future minimum rent payments | $ | 21,429 | |
Note 13 – Commitments and Contingencies
Participation Agreements
In addition to the space lease agreements described in “Note 12 — Leases” and “Note 2 — Summary of Significant Accounting Policies,” the Company enters into slot placement contracts in the form of participation agreements. Under participation agreements, the Company and the business location each hold a state issued gaming license in order to be able to receive a percentage of gaming revenue earned on the Company’s slot machines. The business location retains a percentage of the gaming revenue generated from the Company’s slot machines. The Company is considered to be the principal in these arrangements and therefore, records its share of revenue generated under participation agreements on a gross basis with the business location’s share of revenue recorded as gaming expenses. The aggregate contingent payments recognized by the Company as gaming expenses under participation agreements were $215.0 million, $211.5 million, and $133.2 million for the years ended December 31, 2022, 2021, and 2020, respectively. For the year ended December 31, 2020, such contingent payments also included $0.7 million incurred in related party agreements described in “Note 14 — Related Party Transactions.” Collective Bargaining Agreements
As of December 31, 2022 the Company had over 6,400 employees, of which over 1,700 were covered by various collective bargaining agreements. The Company’s collective bargaining agreements expire between 2023 and 2024 (with some having expired in 2022 with extensions being negotiated). There can be no assurance 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 Company’s executive officers. Under each employment agreement, in addition to the executive’s annual base salary, the executive is entitled to participate in the Company’s incentive compensation programs applicable to executive officers of the Company. The executive officers are also eligible to participate in all health benefits, insurance programs, pension and retirement plans and other employee benefit and compensation arrangements. Each executive officer is also provided with other benefits as set forth in his employment agreement. In the event of a termination without “cause” or a “constructive termination” of the Company’s executive officers (as defined in their respective employment agreements), the Company could be liable for estimated severance payments of up to $4.8 million for Blake L. Sartini, $3.2 million for Charles H. Protell, $2.6 million for Stephen A. Arcana, and $1.0 million for Blake L. Sartini II (assuming each officer’s respective annual salary and health benefit costs as of December 31, 2022, 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 and Other
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 Company’s business, financial condition, results of operations or liquidity in a particular period.
In January 2021, the Company was affected by a ransomware cyber-attack that temporarily disrupted the Company’s access to certain information located on the Company’s network and incurred expenses relating thereto. The Company’s financial information and business operations were not materially affected. The Company implemented a variety of measures to further enhance its cybersecurity protections and minimize the impact of any future cyber incidents. The Company has insurance related to this event and has recovered a portion of the costs it incurred to remediate this matter, which amounts were received and recorded during 2021 and the three months ended March 31, 2022.
In September 2018, the Company entered into an agreement with American Wagering, Inc. and William Hill U.S. HoldCo, Inc. (collectively, “William Hill”), which contemplated that William Hill would be obligated to make a one-time payment to the Company in the event of a change of control transaction with respect to William Hill. Under this agreement, as amended, the April 22, 2021 acquisition of William Hill PLC by Caesars Entertainment, Inc. (“Caesars”) constituted the change of control event triggering this payment. On May 26, 2021, the Company, William Hill and Caesars executed an amendment to the agreement requiring William Hill and Caesars, as the acquiring party, to make a payment in the amount of $60 million by July 15, 2021. The Company received this payment in July 2021 and recognized $60.0 million in non-operating income for the year ended December 31, 2021.
Note 14 – Related Party Transactions
The Company historically 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. Sartini’s immediate family members (including Blake L. Sartini, II) for which Mr. Sartini serves as trustee, and 3% beneficially owned by Stephen A. Arcana. On May 24, 2021 the building was sold to an independent third party, and therefore this lease is no longer with a related party. The rent expense for the office headquarters building for the period in which the location was leased from a related party was $0.5 million and $1.6 million for the years ended December 31, 2021 and 2020, respectively. Additionally, a portion of the office headquarters building was sublet to Sartini Enterprises, Inc., a company controlled by Mr. Sartini. Rental income during each of the years ended December 31, 2022, 2021, and 2020 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, 2022 and 2021. In addition, the Company and Sartini Enterprises, Inc. participate in certain cost-sharing arrangements. No amount was owed by the Company under such arrangements as of December 31, 2022 and the amount due and payable by the Company under such arrangements as of December 31, 2021 was insignificant. Mr. Sartini serves as the Chairman of the Board and Chief Executive Officer of the Company and is a co-trustee of The Blake L. Sartini and Delise F. Sartini Family 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 adjacent to the Company’s office headquarters 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. Sartini’s immediate family members (including Blake L. Sartini, II) for which Mr. Sartini serves as trustee, and 3% beneficially owned by Mr. Arcana. The lease commenced in August 2020 and expires on December 31, 2030. The rent expense for the space was $0.3 million for each of the years ended December 31, 2022 and 2021 and $0.1 million for the year ended December 31, 2020. Additionally, the lease agreement includes a right of first refusal for additional space on the second floor of the building.
From time to time, the Company’s executive officers and employees use a private aircraft leased to Sartini Enterprises, Inc. for Company business purposes pursuant to aircraft time-sharing, co-user and cost-sharing agreements between the Company and Sartini Enterprises, Inc., all of which have been approved by the Audit Committee of the Board of Directors. The aircraft time-sharing, 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 the flight crew. Such costs include fuel, landing fees, hangar and tie-down costs away from the aircraft’s operating base, flight planning and weather contract services, crew costs and other related expenses. The Company’s compliance department regularly reviews these reimbursements. The Company incurred $0.6 million, $0.8 million, and $0.5 million in costs under these arrangements for the years ended December 31, 2022, 2021, and 2020, respectively. The Company owed $0.1 million and $0.2 million under such agreements as of December 31, 2022 and 2021, respectively. No amount was owed to the Company under these agreements as of December 31, 2022 and 2021.
One of the distributed gaming locations at which the Company’s slot machines are located was owned in part by Sean T. Higgins, who previously served as Executive Vice President of Government Affairs of the Company. This agreement was in place prior to Mr. Higgins’s joining the Company on March 28, 2016 and terminated in 2020. Net revenues recorded by the Company from the use of the Company’s slot machines at this location were $0.8 million for the year ended December 31, 2020, for the period in which the location was leased from a related party. Gaming expenses related to this location were $0.7 million for the year ended December 31, 2020, for the period in which the location was leased by a related party.
On December 22, 2020, the Company repurchased 50,000 shares of its common stock from Lyle A. Berman, then an independent non-employee member of the Company’s Board of Directors, pursuant to its share repurchase program at a price of $19.00 per share, resulting in a charge to accumulated deficit for $1.0 million. On May 18, 2022 and November 23, 2022, the Company repurchased 210,000 and 263,418 shares of its common stock, respectively, from Anthony A. Marnell III, an independent non-employee member of the Company’s Board of Directors, pursuant to its share repurchase program. The repurchase prices were $42.61 and $41.35 per share, respectively, resulting in charges to accumulated deficit of $8.9 million and $10.9 million, respectively. All of the affiliate share repurchase transactions were approved by the Audit Committee of the Board of Directors prior to being executed.
Note 15 – Segment Information
The Company conducts its business through five reportable segments: Nevada Casino Resorts, Nevada Locals Casinos, Maryland Casino Resort, Nevada Taverns, and Distributed Gaming.
The Nevada Casino Resorts segment is comprised of destination casino resort properties offering a variety of food and beverage outlets, entertainment venues and other amenities. The casino resort properties in this segment cater primarily to a regional drive-in customer base seeking a value-oriented vacation experience, with guests typically traveling from Southern California or Arizona. The Company’s casino resort properties in Nevada have a significantly larger number of hotel rooms compared to the other casino properties in its portfolio. While hotel stays at these casino resorts are typically longer, the overall frequency of visitation from guests is lower when compared to the Nevada Locals Casinos.
The Nevada Locals Casinos segment is comprised of casino properties that cater to local customers who generally live within a five-mile radius. The Company’s locals casino properties typically experience a higher frequency of customer visits compared to its casino resort properties in Nevada and Maryland, with many of the customers visiting the Company’s Nevada Locals Casinos on a weekly basis. The casino properties within this reportable segment have no or a limited number of hotel rooms and offer fewer food and beverage outlets or other amenities, with revenues primarily generated from slot machine play.
The Maryland Casino Resort segment is comprised of the Rocky Gap casino resort, which is geographically disparate from the Company’s Nevada properties, operates in a separate regulatory jurisdiction and has only a limited number of hotel rooms compared to the Nevada Casino Resorts. Rocky Gap caters to a regional drive-in customer base traveling from mid-Atlantic areas (Maryland, Virginia, Washington DC, Pennsylvania, West Virginia) and offers a full range of amenities, including various food and beverage outlets, signature golf course, spa and pool. As discussed in “Note 1 — Nature of Business,” on August 24, 2022, the Company entered into definitive agreements to sell Rocky Gap. The Rocky Gap Transactions are required
by their terms to close concurrently and the Company expects the Rocky Gap Transactions to close during the second quarter of 2023, subject to the satisfaction or waiver of customary regulatory approvals and closing conditions.
The Nevada Taverns segment is comprised of branded tavern locations, where the Company controls the food and beverage operations as well as the slot machines located within the tavern. The Company’s branded taverns offer a casual, upscale environment catering to local patrons offering superior food, craft beer and other alcoholic beverages, and are typically limited to 15 slot machines.
The Distributed Gaming segment is comprised of the operation of slot machines and amusement devices in over 1,000 third party non-casino locations, such as restaurants, bars, taverns, convenience stores, liquor stores and grocery stores, across Nevada and Montana with a limited number of slot machines in each location. Distributed Gaming operations cater to local residents with high frequency visitation to these locations. The Company places its slot machines and amusement devices in locations where it believes they will receive maximum customer traffic.
The Corporate and Other segment includes the Company’s cash and cash equivalents, miscellaneous receivables and corporate overhead. Costs recorded in the Corporate and Other segment have not been allocated to the Company’s reportable segments because these costs are not easily allocable and to do so would not be practical.
The Company presents Adjusted EBITDA in its segment disclosures because it is the primary metric used by the Company’s chief operating decision makers in measuring both the Company’s past and future expectations of performance. Further, the Company’s annual performance plan used to determine compensation of its executive officers and employees is tied to the Adjusted EBITDA metric. Adjusted EBITDA represents each segment’s earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, impairment of goodwill and intangible assets, severance expenses, preopening and related expenses, gain or loss on disposal of assets, share-based compensation expenses, non-cash lease expense, and other non-cash charges that are deemed to be not indicative of the Company’s core operating results, calculated before corporate overhead (which is not allocated to each reportable segment).
Due to the Company’s use of Adjusted EBITDA as its measure of profit for its reportable segments, the Company includes a reconciliation of the total of the Company’s consolidated Adjusted EBITDA to the Company’s consolidated net income (loss) determined in accordance with GAAP. The Company also discloses Adjusted EBITDA at the reportable segment level, as set forth in the table below:
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (In thousands) | | 2022 | | 2021 | | 2020 |
| Revenues | | | | | | |
| Nevada Casino Resorts | | | | | | |
| Gaming | | $ | 175,014 | | | $ | 179,793 | | | $ | 114,571 | |
| Food and beverage | | 89,424 | | | 83,092 | | | 55,588 | |
| Rooms | | 104,375 | | | 94,952 | | | 61,070 | |
Other (1) | | 38,137 | | | 31,875 | | | 19,414 | |
| Nevada Casino Resorts revenues | | $ | 406,950 | | | $ | 389,712 | | | $ | 250,643 | |
| Nevada Locals Casinos | | | | | | |
| Gaming | | $ | 114,388 | | | $ | 120,537 | | | $ | 82,522 | |
| Food and beverage | | 25,219 | | | 24,036 | | | 18,406 | |
| Rooms | | 10,162 | | | 7,626 | | | 5,598 | |
Other (1) | | 7,745 | | | 7,656 | | | 6,505 | |
| Nevada Locals Casinos revenues | | $ | 157,514 | | | $ | 159,855 | | | $ | 113,031 | |
| Maryland Casino Resort | | | | | | |
| Gaming | | $ | 59,553 | | | $ | 60,797 | | | $ | 40,505 | |
| Food and beverage | | 8,440 | | | 7,932 | | | 4,669 | |
| Rooms | | 7,787 | | | 7,224 | | | 4,743 | |
| Other | | 2,230 | | | 2,202 | | | 1,719 | |
| Maryland Casino Resort revenues | | $ | 78,010 | | | $ | 78,155 | | | $ | 51,636 | |
| Nevada Taverns | | | | | | |
| Gaming | | $ | 53,619 | | | $ | 53,909 | | | $ | 28,128 | |
| Food and beverage | | 51,564 | | | 52,002 | | | 33,047 | |
Other (1) | | 4,782 | | | 4,259 | | | 2,866 | |
| Nevada Taverns revenues | | $ | 109,965 | | | $ | 110,170 | | | $ | 64,041 | |
| Distributed Gaming | | | | | | |
| Gaming | | $ | 358,332 | | | $ | 351,274 | | | $ | 211,027 | |
| Food and beverage | | 716 | | | 753 | | | 371 | |
Other (1) | | 6,424 | | | 5,387 | | | 2,817 | |
| Distributed Gaming revenues | | $ | 365,472 | | | $ | 357,414 | | | $ | 214,215 | |
| Corporate and other | | 3,808 | | | 1,237 | | | 589 | |
| Total Revenues | | $ | 1,121,719 | | | $ | 1,096,543 | | | $ | 694,155 | |
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (In thousands) | | 2022 | | 2021 | | 2020 |
| Adjusted EBITDA | | | | | | |
| Nevada Casino Resorts | | $ | 135,104 | | | $ | 149,077 | | | $ | 57,462 | |
| Nevada Locals Casinos | | 75,848 | | | 80,005 | | | 45,610 | |
| Maryland Casino Resort | | 25,383 | | | 26,697 | | | 15,094 | |
| Nevada Taverns | | 37,610 | | | 39,762 | | | 10,086 | |
| Distributed Gaming | | 44,021 | | | 47,514 | | | 16,866 | |
| Corporate and other | | (50,886) | | | (51,337) | | | (34,861) | |
| Total Adjusted EBITDA | | 267,080 | | | 291,718 | | | 110,257 | |
| Adjustments | | | | | | |
| Other non-operating income | | — | | | 60,000 | | | — | |
| Depreciation and amortization | | (100,123) | | | (106,692) | | | (124,430) | |
| Non-cash lease expense | | (165) | | | (762) | | | (1,344) | |
| Share-based compensation | | (13,433) | | | (14,401) | | | (9,637) | |
| Loss on disposal of assets | | (934) | | | (1,260) | | | (803) | |
| Loss on debt extinguishment and modification | | (1,590) | | | (975) | | | — | |
Preopening and related expenses (1) | | (161) | | | (246) | | | (533) | |
| Severance expenses | | (378) | | | (228) | | | (3,710) | |
| Impairment of goodwill and intangible assets | | — | | | — | | | (33,964) | |
| Other, net | | (3,939) | | | (2,089) | | | (3,275) | |
| Interest expense, net | | (63,490) | | | (62,853) | | | (69,110) | |
| Change in fair value of derivative | | — | | | — | | | (1) | |
| Income tax provision | | (521) | | | (436) | | | (61) | |
| Net income (loss) | | $ | 82,346 | | | $ | 161,776 | | | $ | (136,611) | |
(1) Preopening and related expenses consist of labor, food, utilities, training, initial licensing, rent and organizational costs incurred in connection with the opening of branded tavern and casino locations as well as food and beverage and other venues within the casino locations.
Assets
The Company’s assets by segment consisted of the following amounts:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Nevada Casino Resorts | | Nevada Locals Casinos | | Maryland Casino Resort | | Nevada Taverns | | Distributed Gaming | | Corporate and Other | | Consolidated |
| Balance at December 31, 2022 | $ | 784,242 | | | $ | 164,580 | | | $ | 39,562 | | | $ | 145,065 | | | $ | 258,260 | | | $ | 116,961 | | | $ | 1,508,670 | |
| | | | | | | | | | | | | |
| Balance at December 31, 2021 | $ | 811,016 | | | $ | 165,362 | | | $ | 41,403 | | | $ | 149,296 | | | $ | 262,046 | | | $ | 186,441 | | | $ | 1,615,564 | |
Capital Expenditures
The Company’s capital expenditures by segment consisted of the following amounts:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In thousands) | | Nevada Casino Resorts (1) | | Nevada Locals Casinos (2) | | Maryland Casino Resort (3) | | Nevada Taverns (4) | | Distributed Gaming (5) | | Corporate and Other (6) | | Consolidated |
| For the year ended December 31, 2022 | | $ | 26,347 | | | $ | 4,035 | | | $ | 1,878 | | | $ | 2,712 | | | $ | 9,146 | | | $ | 7,301 | | | $ | 51,419 | |
| | | | | | | | | | | | | | |
| For the year ended December 31, 2021 | | $ | 7,859 | | | $ | 2,813 | | | $ | 1,447 | | | $ | 1,573 | | | $ | 9,912 | | | $ | 5,655 | | | $ | 29,259 | |
| | | | | | | | | | | | | | |
| For the year ended December 31, 2020 | | $ | 23,649 | | | $ | 911 | | | $ | 2,531 | | | $ | 1,750 | | | $ | 5,136 | | | $ | 2,525 | | | $ | 36,502 | |
(1)Capital expenditures in the Nevada Casino Resorts segment exclude non-cash purchases of property and equipment of $5.0 million, $0.6 million, and $1.1 million as of December 31, 2022, 2021, and 2020, respectively.
(2)Capital expenditures in the Nevada Locals Casinos segment exclude non-cash purchases of property and equipment of $0.1 million and $0.2 million as of December 31, 2022 and 2021, respectively.
(3)Capital expenditures in the Maryland Casino Resort segment exclude non-cash purchases of property and equipment of $0.5 million as of December 31, 2020.
(4)Capital expenditures in the Nevada Taverns segment exclude non-cash purchases of property and equipment of $0.2 million, $0.3 million, and $0.1 million as of December 31, 2022, 2021 and 2020, respectively.
(5)Capital expenditures in the Distributed Gaming segment exclude non-cash purchases of property and equipment of $0.3 million and $2.4 million as of December 31, 2021 and 2020, respectively.
(6)Capital expenditures for Corporate and Other exclude non-cash purchases of property and equipment of $0.1 million and $0.5 million as of December 31, 2022 and 2021, respectively.