UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2022
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission file number: 001-38850
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(401 ) 475-8474
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 29, 2022, the number of shares of the registrant’s $0.01 par value common stock outstanding was 52,538,476 .
For additional information regarding the Company’s shares outstanding, refer to Note 16 “Stockholders’ Equity.”
BALLY’S CORPORATION
TABLE OF CONTENTS
| Page No. | ||||||||
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
BALLY’S CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except share data)
| March 31, 2022 | December 31, 2021 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventory | |||||||||||
| Tax receivable | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Right of use assets, net | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Deferred tax asset | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Current portion of lease liabilities | |||||||||||
| Accounts payable | |||||||||||
| Accrued income taxes | |||||||||||
| Accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net | |||||||||||
| Long-term portion of lease liabilities | |||||||||||
| Pension benefit obligations | |||||||||||
| Deferred tax liability | |||||||||||
| Naming rights liabilities | |||||||||||
| Contingent consideration payable | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock ($ | |||||||||||
Preferred stock ($ | |||||||||||
| Additional paid-in-capital | |||||||||||
| Treasury stock, at cost | ( | ||||||||||
| Retained deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Bally’s Corporation stockholders’ equity | |||||||||||
| Non-controlling interest | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
3
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except per share data)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenue: | |||||||||||
| Gaming | $ | $ | |||||||||
| Hotel | |||||||||||
| Food and beverage | |||||||||||
| Retail, entertainment and other | |||||||||||
| Total revenue | |||||||||||
| Operating (income) costs and expenses: | |||||||||||
| Gaming | |||||||||||
| Hotel | |||||||||||
| Food and beverage | |||||||||||
| Retail, entertainment and other | |||||||||||
| Advertising, general and administrative | |||||||||||
| Expansion and pre-opening | |||||||||||
| Acquisition, integration and restructuring | |||||||||||
| Gain from insurance recoveries, net of losses | ( | ( | |||||||||
| Rebranding | |||||||||||
| Depreciation and amortization | |||||||||||
| Total operating costs and expenses | |||||||||||
| Income from operations | |||||||||||
| Other income (expense): | |||||||||||
| Interest income | |||||||||||
| Interest expense, net of amounts capitalized | ( | ( | |||||||||
| Change in value of naming rights liabilities | ( | ||||||||||
| Adjustment on bargain purchase | ( | ||||||||||
| Other, net | |||||||||||
| Total other expense, net | ( | ( | |||||||||
| Loss before provision for income taxes | ( | ( | |||||||||
| Benefit from income taxes | ( | ( | |||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Basic earnings (loss) per share | $ | $ | ( | ||||||||
| Weighted average common shares outstanding - basic | |||||||||||
| Diluted earnings (loss) per share | $ | $ | ( | ||||||||
| Weighted average common shares outstanding - diluted | |||||||||||
See accompanying notes to condensed consolidated financial statements.
4
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE LOSS (unaudited)
(In thousands)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustment | $ | ( | $ | ( | |||||||
Defined benefit pension plan reclassification adjustment(1) | |||||||||||
| Other comprehensive loss | ( | ( | |||||||||
| Total comprehensive loss | $ | ( | $ | ( | |||||||
__________________________________
(1) Tax effect of reclassification adjustment was de minimis.
See accompanying notes to condensed consolidated financial statements.
5
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(In thousands, except share data)
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained (Deficit) Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares Outstanding | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||
| Release of restricted stock | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Retirement of treasury shares | — | ( | ( | ( | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share repurchases | ( | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Penny warrants exercised | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of MKF penny warrants | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Settlement of consideration to SportCaller | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares Outstanding | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | $ | $ | ( | $ | — | $ | ||||||||||||||||||||||||||||||||||||||
| Release of restricted stock | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Penny warrants exercised | — | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Reclassification of Sinclair options | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of MKF penny warrants | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued for purchase of SportCaller | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | $ | $ | ( | $ | — | $ | |||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
6
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Non-cash lease expense | |||||||||||
| Share-based compensation | |||||||||||
| Amortization of debt discount and debt issuance costs | |||||||||||
| Gain from insurance recoveries | ( | ||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Loss on assets and liabilities measured at fair value | |||||||||||
| Change in value of naming rights liabilities | ( | ||||||||||
| Change in contingent consideration payable | ( | ( | |||||||||
| Adjustment on bargain purchase | |||||||||||
| Other operating activities | |||||||||||
| Changes in current operating assets and liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Cash paid for acquisitions, net of cash acquired | ( | ||||||||||
| Capital expenditures | ( | ( | |||||||||
| Insurance proceeds from hurricane damage | |||||||||||
| Cash paid for internally developed software | ( | ||||||||||
| Acquisition of gaming licenses | ( | ( | |||||||||
| Other intangible asset acquisitions | ( | ||||||||||
| Other investing activities | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Issuance of long-term debt | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Payment of financing fees | ( | ||||||||||
| Share repurchases | ( | ||||||||||
| Other financing activities | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of foreign currency on cash and cash equivalents | ( | ||||||||||
| Net change in cash and cash equivalents and restricted cash | ( | ||||||||||
| Cash and cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest, net of amounts capitalized | $ | $ | |||||||||
| Cash paid for income taxes, net of refunds | ( | ||||||||||
| Non-cash investing and financing activities: | |||||||||||
| Unpaid property and equipment | $ | $ | |||||||||
| Stock and equity instruments issued for acquisition of SportCaller and Monkey Knife Fight | |||||||||||
| Acquisitions in exchange for contingent liability | |||||||||||
See accompanying notes to condensed consolidated financial statements.
7
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. GENERAL INFORMATION
Description of Business
Bally’s Corporation (the “Company” or “Bally’s”) is a global gaming, hospitality and entertainment company with casinos and resorts and online gaming (“iGaming”) business-to-business-to-consumer (“B2B2C”) businesses. The Company owns and manages the following casino and resort properties:
| Casinos and Resorts | Location | Type | Built/Acquired | |||||||||||||||||
| Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”) | Lincoln, Rhode Island | Casino and Resort | 2004 | |||||||||||||||||
| Bally’s Arapahoe Park | Aurora, Colorado | Racetrack/OTB Site | 2004 | |||||||||||||||||
| Hard Rock Hotel & Casino Biloxi (“Hard Rock Biloxi”) | Biloxi, Mississippi | Casino and Resort | 2014 | |||||||||||||||||
| Bally’s Tiverton Casino & Hotel (“Bally’s Tiverton”) | Tiverton, Rhode Island | Casino and Hotel | 2018 | |||||||||||||||||
Bally’s Dover Casino Resort (“Bally’s Dover”)(1) | Dover, Delaware | Casino, Resort and Raceway | 2019 | |||||||||||||||||
Bally’s Black Hawk(1)(2) | Black Hawk, Colorado | Three Casinos | 2020 | |||||||||||||||||
| Bally’s Kansas City Casino (“Bally’s Kansas City”) | Kansas City, Missouri | Casino | 2020 | |||||||||||||||||
| Bally’s Vicksburg Casino (“Bally’s Vicksburg”) | Vicksburg, Mississippi | Casino and Hotel | 2020 | |||||||||||||||||
| Bally’s Atlantic City Casino Resort (“Bally’s Atlantic City”) | Atlantic City, New Jersey | Casino and Hotel | 2020 | |||||||||||||||||
| Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”) | Shreveport, Louisiana | Casino and Hotel | 2020 | |||||||||||||||||
| Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”) | Lake Tahoe, Nevada | Casino and Resort | 2021 | |||||||||||||||||
Bally’s Evansville Casino & Hotel (“Bally’s Evansville”)(1) | Evansville, Indiana | Casino and Hotel | 2021 | |||||||||||||||||
Bally’s Quad Cities Casino & Hotel (“Bally’s Quad Cities”)(1) | Rock Island, Illinois | Casino and Hotel | 2021 | |||||||||||||||||
__________________________________
(1) Properties leased from Gaming and Leisure Properties, Inc. (“GLPI”) under the Master Lease agreement. Refer to Note 13 “Leases” for further information. The Company completed its sale-leaseback transaction of Bally’s Quad Cities and Bally’s Black Hawk on April 1, 2022.
(2) Includes Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino.
Under the North America Interactive reportable segment, the Company owns and manages the following businesses:
•Bally’s Interactive, a B2B2C sportsbook and iCasino platform provider and operator;
•Horses Mouth Limited (“SportCaller”), a business-to-business (“B2B”) free-to-play game provider for sports betting companies;
•Monkey Knife Fight (“MKF”), a business-to-consumer daily fantasy sports (“DFS”) platform and operator;
•Joker Gaming, known as Live at the Bike, an online subscription streaming service featuring livestream and on-demand poker videos and podcasts;
•the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States (“US”);
•Telescope Inc. (“Telescope”), a leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams; and
•Degree 53, a United Kingdom (“UK”)-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries.
The North America Interactive reportable segment also includes the North American operations of Gamesys.
The Company’s International Interactive reportable segment includes the interactive activities in Europe and Asia of Gamesys Group Ltd. (“Gamesys”), a B2B2C iCasino and online bingo platform provider and operator, acquired by the Company on October 1, 2021, and Solid Gaming, a games content aggregation business.
The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “BALY.”
8
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company include the accounts of the Company, its majority-owned subsidiaries and entities the Company identifies as variable interest entities (“VIEs”), of which the Company is determined to be the primary beneficiary. All intercompany transactions and balances have been eliminated in the consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation. The financial statements of our foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in net income (loss).
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of the SEC’s Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There were no material changes in significant accounting policies from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates.
COVID-19 Pandemic
As of March 31, 2022, the Company’s properties are all operating with minimal restrictions. Although the Company is experiencing positive trends as a result of the reopening of its properties, the COVID-19 pandemic is ongoing and future developments, which are uncertain and cannot be predicted at this time, could have a material negative impact on operations.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents and Restricted Cash
The Company considers all cash balances and highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.
As of March 31, 2022 and December 31, 2021, restricted cash of $62.9 million and $68.6 million, respectively, consisted primarily of player deposits and payment service provider deposits in connection with the Company’s iGaming operations. Restricted cash also includes Video Lottery Terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, which are unavailable for the Company’s use. The following table reconciles cash and restricted cash in the condensed consolidated balance sheets to the total shown on the condensed consolidated statements of cash flows.
| March 31, | December 31, | ||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash and cash equivalents and restricted cash | $ | $ | |||||||||
9
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Accounts Receivable, Net
Accounts receivable, net consists of the following:
| March 31, | December 31, | ||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
Amounts due from Rhode Island and Delaware(1) | $ | $ | |||||||||
| Gaming receivables | |||||||||||
| Non-gaming receivables | |||||||||||
| Accounts receivable | |||||||||||
| Less: Allowance for doubtful accounts | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
__________________________________
(1) Represents the Company’s share of VLT and table games revenue for Bally’s Twin River and Bally’s Tiverton due from the State of Rhode Island and from the State of Delaware for Bally’s Dover.
Gain from insurance recoveries, net of losses
Gain from insurance recoveries, net of losses, relate to losses incurred resulting from storms impacting the Company’s properties, net of insurance recovery proceeds. During the three months ended March 31, 2022 and 2021, the Company recorded a gain from insurance recoveries, net of losses, of $0.2 million and $10.7 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta, which made landfall in Louisiana shutting down the Company’s Hard Rock Biloxi property for three days during the fourth quarter of 2020.
Gaming Expenses
Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and advertising costs directly associated with the sale of the Company’s interactive gaming products and services. Gaming expenses also includes racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting.
Advertising Expense
The Company expenses advertising costs as incurred. For the three months ended March 31, 2022 and 2021, advertising expense was $65.3 million and $1.4 million, respectively. Advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three months ended March 31, 2022 was $63.1 million. There was no advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three months ended March 31, 2021.
Strategic Partnership - Sinclair Broadcast Group
On November 18, 2020, the Company and Sinclair Broadcast Group, Inc. (“Sinclair”) entered into a Framework Agreement (the “Sinclair Agreement”), which provides for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service, whereby the Company will receive naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options, and an agreement to share in certain tax benefits resulting from the Transaction with Sinclair (the “TRA”). The initial term of the agreement is ten years from the commencement date of the re-branded Sinclair regional sports networks and can be renewed for one additional five-year term unless either the Company or Sinclair elect not to renew.
10
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Naming Rights Intangible Asset - Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $88.0 million over the 10-year term of the agreement beginning April 1, 2021. The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of Accounting Standards Codification (“ASC”) 805-50 using a cost accumulation model. The naming rights intangible asset represents the consideration transferred on the acquisition date comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the Tax Receivable Agreement (“TRA”) payments, each explained below. The naming rights intangible asset was $300.7 million and $311.7 million as of March 31, 2022 and December 31, 2021, respectively. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $8.4 million for the three months ended March 31, 2022. Refer to Note 8 “Goodwill and Intangible Assets” for further information.
Naming Rights Fees - The present value of the annual naming rights fees was recorded as part of the cost of the naming rights intangible asset with a corresponding liability which will be accreted through interest expense over the life of the agreement. The total value of the liability as of March 31, 2022 and December 31, 2021 was $59.0 million and $58.9 million, respectively. The short-term portion of the liability, which was $2.0 57.0 million and $56.9 million as of March 31, 2022 and December 31 2021, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets. Accretion expense for the three months ended March 31, 2022 and 2021 was $1.1 million and $1.0 million respectively, and was reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations.
Warrants and Options - The Company issued to Sinclair (1) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share (“the Penny Warrants”), (2) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (3) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”). The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. The issuance pursuant to the warrants and options of shares in excess of 19.9 % of the Company’s currently outstanding shares was subject to the approval of the Company’s stockholders in accordance with the rules of the NYSE, which was obtained on January 27, 2021.
Penny Warrants & Options. The Penny Warrants and Options are equity classified instruments under ASC 815, Derivatives and Hedging, (“ASC 815”). The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $150.4 million on November 18, 2020 at issuance, and was recorded to “Additional paid-in-capital” in the condensed consolidated balance sheets, with an offset to the naming rights intangible asset. The fair value of the Options was $59.7 million as of December 31, 2021 and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets.
Performance Warrants. The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. Refer to Note 9 “Fair Value Measurements” for further information.
Tax Receivable Agreement - The Company is required to share 60 % of the tax benefit the Company receives from the Penny Warrants, Options, Performance Warrants and payments under the TRA with Sinclair over the term of the agreement as tax benefit amounts are determined through the filing of the Company’s annual tax returns. Changes in estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the naming rights intangible asset. The TRA liability was $39.6 million and $42.2 million as of March 31, 2022 and December 31, 2021, respectively, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets. The change in value of the TRA liability is included in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.
11
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Variable Interest Entities
The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE. An entity is a VIE if it has any of the following characteristics (1) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, (2) equity holders, as a group, lack the characteristics of a controlling financial interest or (3) the entity is structured with non-substantive voting rights. The primary beneficiary of the VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company consolidates its investment in a VIE when it determines that it is its primary beneficiary.
In determining whether it is the primary beneficiary of the VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; and significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses. Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions.
Management analyzed and concluded that Breckenridge Curacao B.V. is a VIE because it does not have sufficient equity investment at risk. The Company has determined that it is the primary beneficiary and consolidates the VIE because (a) although the Company does not control all decisions of the VIE, the Company has the power to direct the activities of the VIE that most significantly impact its economic performance through various contracts with the entity and (b) the nature of these agreements between the VIE and the Company provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are based upon off-market rates and commensurate to the level of services provided. The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided. As a result, the Company consolidates all of the assets, liabilities and results of operations of the VIE and its subsidiaries in the accompanying consolidated financial statements. As of March 31, 2022 and December 31, 2021 Breckenridge Curacao B.V. had total assets of $86.7 million and $85.4 million, respectively, and total liabilities of $76.5 million and $75.2 million, respectively. Breckenridge Curacao B.V. had revenues of $86.9 million for the three months ended March 31, 2022.
The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.
Related Party Transaction
On September 26, 2019, prior to the Company’s acquisition of Gamesys, Gamesys (Holdings) Limited (“GHL”) was acquired by JPJ Group plc (“JPJ”) and subsequently renamed Gamesys. In connection with the JPJ acquisition, £10.0 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing. The Company recorded deferred consideration of $14.9 million and $15.1 million within current liabilities of the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively. Of such amount, approximately $7.4 million was payable to related parties as former majority shareholders. The Company paid the deferred consideration in April 2022.
3. RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements
Standards to be implemented
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 amendments in this update address diversity in practice and inconsistency related to recognition of an acquired contract liability and the effect of payment terms on subsequent revenue recognition for the acquirer. This update is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently in the process of evaluating the impact of this amendment on its condensed consolidated financial statements.
12
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. REVENUE RECOGNITION
The Company recognizes revenue in accordance with ASC 606 which requires companies to recognize revenue in a way that depicts the transfer of promised goods or serves. In addition, the standard requires more detailed disclosures to enable readers of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company generates revenue from four principal sources: gaming (which includes retail gaming, online gaming, sports betting and racing), hotel, food and beverage and retail entertainment and other.
The Company determines revenue recognition through the following steps:
•Identify the contract, or contracts, with the customer;
•Identify the performance obligations in the contract;
•Determine the transaction price;
•Allocate the transaction price to performance obligations in the contract; and
•Recognize revenue when or as the Company satisfies performance obligations by transferring the promised good or services
The Company is currently engaged in gaming services, which include retail, online and racing. Additional services include hotel, food and beverage. The amount of revenue recognized by the Company is measured at the transaction price or the amount of consideration that the Company expects to receive through satisfaction of the identified performance obligations.
Retail gaming, online gaming and sports betting revenue, each as described below, contain a single performance obligation. Retail gaming transactions have an obligation to honor the outcome of a wager and to payout an amount equal to the stated odds, including the return of the initial wager, if the customer receives a winning hand. These elements of honoring the outcome of the hand of play and generating a payout are considered one performance obligation. Online gaming and sports betting represent a single performance obligation for the Company to operate contests or games and award prizes or payouts to users based on results of the arrangement. Revenue is recognized at the conclusion of each contest, wager or wagering game hand. Incentives can be used across online gaming products. The Company allocates a portion of the transaction price to certain customer incentives that create material future customer rights and are a separate performance obligation. In addition, in the event of a multi-stage contest, the Company will allocate transaction price ratably from contest start to the contest’s final stage. Racing revenue is earned through advance deposit wagering which consists of patrons wagering through an advance deposit account. Each wagering contract contains a single performance obligation.
The transaction price for a gaming wagering contract is the difference between gaming wins and losses, not the total amount wagered. The transaction price for racing operations, inclusive of live racing events conducted at the Company’s racing facilities, is the commission received from the pari-mutuel pool less contractual fees and obligations primarily consisting of purse funding requirements, simulcasting fees, tote fees and certain pari-mutuel taxes that are directly related to the racing operations. The transaction price for food and beverage and hotel is the net amount collected from the customer for such goods and services. Hotel, food and beverage services have been determined to be separate, stand-alone performance obligations and revenue is recognized as the good or service is transferred at the point in time of the transaction.
The following contains a description of each of the Company’s revenue streams:
Gaming Revenue
Retail Gaming
The Company recognizes retail gaming revenue as the net win from gaming activities, which is the difference between gaming inflows and outflows, not the total amount wagered. Progressive jackpots are estimated and recognized as revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives.
13
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Gaming services contracts have two performance obligations for those customers earning incentives under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient to account for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the impact on the consolidated financial statements of applying the revenue recognition guidance to the portfolio would not differ materially from the application of an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with incentives earned under loyalty programs, the Company allocates an amount to the loyalty program contract liability based on the stand-alone selling price of the incentive earned for a hotel room stay, food and beverage or other amenity. The performance obligation related to loyalty program incentives are deferred and recognized as revenue upon redemption by the customer. The amount associated with gaming wagers is recognized at the point the wager occurs, as it is settled immediately.
Gaming revenue includes the share of VLT revenue for Bally’s Twin River and Bally’s Tiverton, in each case, as determined by each property’s respective master VLT contracts with the State of Rhode Island. Bally’s Twin River is entitled to a 28.85 % share of VLT revenue on the initial 3,002 units and a 26.00 % share on VLT revenue generated from units in excess of 3,002 units. Beginning July 1, 2021, Bally’s Twin River is entitled to an additional 7.00 % share of revenue on VLTs owned by the Company. Bally’s Tiverton is entitled to receive a percentage of VLT revenue that is equivalent to the percentage received by Bally’s Twin River. Gaming revenue also includes Bally’s Twin River’s and Bally’s Tiverton’s share of table games revenue. Bally’s Twin River and Bally’s Tiverton each were entitled to an 83.5 % share of table games revenue generated as of March 31, 2022 and 2021. Revenue is recognized when the wager is settled, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Rhode Island operations on a net basis which is the percentage share of VLT and table games revenue received as the Company acts as an agent in operating the gaming services on behalf of the State of Rhode Island.
Gaming revenue also includes Bally’s Dover’s share of revenue as determined under the Delaware State Lottery Code from the date of its acquisition. Bally’s Dover is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement. As of March 31, 2022 and 2021, Bally’s Dover was entitled to an approximate 42 % share of VLT revenue and 80 % share of table games revenue. Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Delaware operations on a net basis, which is the percentage share of VLT and table games revenue received, as the Company acts as an agent in operating the gaming services on behalf of the State of Delaware.
Gaming revenue also includes the casino revenue of Hard Rock Biloxi, Bally’s Black Hawk, beginning January 23, 2020, Bally’s Kansas City and Bally’s Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, Bally’s Shreveport, beginning December 23, 2020, Bally’s Lake Tahoe, beginning April 6, 2021, Bally’s Evansville, beginning June 3, 2021, and Bally’s Quad Cities, beginning June 14, 2021, which is the aggregate net difference between gaming wins and losses, with deferred revenue recognized for prepaid deposits by prior to play, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of credits played, are charged to revenue as the amount of the progressive jackpots increase.
Online gaming
Online gaming refers to digital versions of wagering games available in land-based casinos, such as blackjack, roulette and slot machines. For these offerings, the Company operates similarly to land-based casinos, generating revenue from user wagers net of payouts and incentives awarded to users.
Online gaming revenue includes the online bingo and casino revenue of Gamesys, beginning October 1, 2021. The revenue is earned from operating online bingo and casino websites, which consists of the difference between total amounts wagered by players less winnings payable to players, bonuses allocated and jackpot contributions. Online gaming revenue is recognized at the point in time when the player completes a gaming session and payout occurs. There is no significant degree of uncertainty involved in quantifying the amount of gaming revenue earned, including bonuses, jackpot contributions and loyalty points. Bonuses, jackpot contributions and loyalty points are measured at fair value at each reporting date.
14
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Sports betting
Sports betting involves a user wagering money on an outcome or series of outcomes. If a user wins the wager, the Company pays the user a pre-determined amount known as fixed odds. Sports betting revenue is generated through built-in theoretical margins in each sports wagering opportunity offered to users. Revenue is recognized as total wagers net of payouts made and incentives awarded to users.
During 2020, the Company entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in the states of Colorado and New Jersey from which the Company has received or expects to receive one-time, up front market access fees in cash or equity securities (specific to one operator agreement) and certain other fees in cash generally based on a percentage of the gross gaming revenue generated by the operator, with certain annual minimum guarantees due to the Company. The one-time market access fees received have been recorded as deferred revenue and will be recognized as gaming revenue ratably over the respective contract terms, beginning with the commencement of operations of each respective agreement. The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the three months ended March 31, 2022 and 2021. Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $6.8 million as of March 31, 2022 and December 31, 2021, and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.
All other revenues, including market access, daily fantasy sports and B2B service revenue generated by the North America Interactive and International Interactive reportable segments, are recognized at the time the goods are sold or the service is provided.
Racing
Racing revenue includes Bally’s Twin River’s, Bally’s Tiverton’s, Bally’s Arapahoe Park’s and Bally’s Dover’s share of wagering from live racing and the import of simulcast signals. Racing revenue is recognized upon completion of the wager based upon an established take-out percentage. The Company functions as an agent to the pari-mutuel pool. Therefore, fees and obligations related to the Company’s share of purse funding, simulcasting fees, tote fees, pari-mutuel taxes, and other fees directly related to the Company’s racing operations are reported on a net basis and included as a reduction to racing revenue.
Hotel, Food and Beverage and Retail, Entertainment and Other Revenue
Hotel revenue is recognized at the time of occupancy, which is when the customer obtains control through occupancy of the room. Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met. Food and beverage revenues are recognized at the time the goods are sold from Company-operated outlets. The estimated standalone selling price of hotel rooms is determined based on observable prices. The standalone selling price of food and beverage as well as retail, entertainment and other goods and services are determined based upon the actual retail prices charged to customers for those items. Cancellation fees for hotel and meeting space services are recognized upon cancellation by the customer and are included in hotel, food and beverage revenue within our consolidated statements of operations.
The estimated retail value related to goods and services provided to guests without charge or upon redemption under the Company’s player loyalty programs included in departmental revenues, and therefore reducing gaming revenues, are as follows for the three months ended March 31, 2022 and 2021:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| Hotel | $ | $ | |||||||||
| Food and beverage | |||||||||||
| Retail, entertainment and other | |||||||||||
| $ | $ | ||||||||||
Sales tax and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenue or operating expenses.
15
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
In the fourth quarter of 2021, the Company changed its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions. Refer to Note 18 “Segment Reporting” for further information. The following tables provide a disaggregation of revenue by segment:
| (in thousands) | Casinos & Resorts | North America Interactive | International Interactive | Total | |||||||||||||||||||
| Three Months Ended March 31, 2022 | |||||||||||||||||||||||
| Gaming | $ | $ | $ | $ | |||||||||||||||||||
| Hotel | |||||||||||||||||||||||
| Food and beverage | |||||||||||||||||||||||
| Retail, entertainment and other | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended March 31, 2021 | |||||||||||||||||||||||
| Gaming | $ | $ | $ | ||||||||||||||||||||
| Hotel | |||||||||||||||||||||||
| Food and beverage | |||||||||||||||||||||||
| Retail, entertainment and other | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | ||||||||||||||||||||
Revenue included in operations from Bally’s Lake Tahoe from the date of acquisition, April 6, 2021, Bally’s Evansville from the date of its acquisition, June 3, 2021, and Bally’s Quad Cities from the date of its acquisition, June 14, 2021 are reported in Casinos & Resorts. Revenue included in operations from SportCaller from the date of its acquisition, February 5, 2021, MKF from the date of its acquisition, March 23, 2021, Bally’s Interactive from the date of its acquisition, May 28, 2021, AVP from the date of its acquisition, July 12, 2021, Telescope from the date of its acquisition, August 12, 2021, Degree 53 from the date of its acquisition, October 25, 2021, and the North American operations of Gamesys, from the date of its acquisition, October 1, 2021 are reported in North America Interactive. Revenue included in operations from the European and Asian activities from Gamesys is reported in International Interactive. Refer to Note 5 “Acquisitions” for further information.
Contract Assets and Contract Related Liabilities
The Company’s receivables related to contracts with customers are primarily comprised of marker balances and other amounts due from gaming activities, amounts due for hotel stays, and amounts due from tracks and OTB locations. The Company’s receivables related to contracts with customers were $37.2 million and $35.5 million as of March 31, 2022 and December 31, 2021, respectively.
The Company has the following liabilities related to contracts with customers: liabilities for loyalty programs, advance deposits made for goods and services yet to be provided and unpaid wagers. All of the contract liabilities are short-term in nature and are included in “Accrued liabilities” in the condensed consolidated balance sheets.
Loyalty program incentives earned by customers are typically redeemed within one year from when they are earned and expire if a customer’s account is inactive for more than 12 months; therefore, the majority of these incentives outstanding at the end of a period will either be redeemed or expire within the next 12 months. While properties were operating at limited capacity, many properties extended the expiration dates for tiered status programs or temporarily suspended periodic purges of unused loyalty points. As properties have resumed operations at full capacity, many have reinstated their pre-COVID-19 practices or put new loyalty programs into place.
Advance deposits are typically for future banquet events, hotel room reservations and interactive player deposits. The banquet and hotel reservation deposits are usually received weeks or months in advance of the event or hotel stay. The Company holds restricted cash for interactive player deposits and records a corresponding withdrawal liability.
Unpaid wagers include the Company’s outstanding chip liability, unpaid slot and pari-mutuel and sports betting tickets.
16
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Liabilities related to contracts with customers as of March 31, 2022 and December 31, 2021 were as follows:
| (in thousands) | March 31, 2022 | December 31, 2021 | |||||||||
| Loyalty programs | $ | $ | |||||||||
| Advanced deposits from customers | |||||||||||
| Unpaid wagers | |||||||||||
| Total | $ | $ | |||||||||
The Company recognized $8.3 million and $2.8 million of revenue related to loyalty program redemptions for the three months ended March 31, 2022 and 2021, respectively.
5. ACQUISITIONS
Recent Acquisitions
The Company accounted for all of the following acquisitions as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805. Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed of the acquiree based upon their estimated fair values at the acquisition date. The fair value of the identifiable intangible assets acquired are determined by using an income approach. Significant assumptions utilized in the income approach are based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The purchase price allocation for the acquisitions of Bally’s Evansville, Bally’s Quad Cities, Gamesys and certain of the Bally’s Interactive Acquisitions, as defined below, are preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed. There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed.
The Company recorded transaction costs related to its recent and pending acquisitions of $4.5 million and $12.3 million during the three months ended March 31, 2022 and 2021, respectively. These costs are included in “Acquisition, integration and restructuring” in the condensed consolidated statements of operations. Refer to Note 11 “Acquisition, Integration and Restructuring” for further information.
Bally’s Lake Tahoe Casino Resort
On April 6, 2021, the Company acquired Bally’s Lake Tahoe in Lake Tahoe, Nevada from Eldorado Resorts, Inc. (“Eldorado”) and certain of its affiliates for $14.2 million, payable in cash one year from the closing date and subject to customary post-closing adjustments. The deferred purchase price is included within “Accrued liabilities” of the condensed consolidated balance sheet as of March 31, 2022 and December 31, 2021.
The identifiable intangible assets recorded in connection with the closing of the Bally’s Lake Tahoe acquisition include gaming licenses of $5.2 million with an indefinite life and a trade name of $0.2 million, which was amortized on a straight-line basis over its estimated useful life of approximately six months . The fair value of the identifiable intangible assets acquired was determined by using an income approach.
17
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Lake Tahoe on April 6, 2021:
| (in thousands) | Preliminary as of December 31, 2021 | Year to Date Adjustments | Final as of March 31, 2022 | ||||||||||||||
| Total current assets | $ | $ | $ | ||||||||||||||
| Property and equipment, net | |||||||||||||||||
| Right of use assets, net | |||||||||||||||||
| Intangible assets, net | |||||||||||||||||
| Accounts payable and accrued liabilities | ( | ( | ( | ||||||||||||||
| Lease liabilities | ( | ( | |||||||||||||||
| Other long-term liabilities | ( | ( | |||||||||||||||
| Net assets acquired | ( | ||||||||||||||||
| Bargain purchase gain | ( | ( | |||||||||||||||
| Total purchase price | $ | $ | $ | ||||||||||||||
During the year ended December 31, 2021, the Company recorded a bargain purchase gain of $2.0 million based on the preliminary purchase price allocation as the fair value of the assets acquired and liabilities assumed exceeded the purchase price consideration. During the three months ended March 31, 2022, based on the final purchase price allocation, an adjustment of $0.1 million was recorded reducing the bargain purchase gain to $1.9 million. The original agreement to acquire Bally’s Lake Tahoe from Eldorado was made concurrently with the agreement of Bally’s Shreveport and the Company believes that it was able to acquire Bally’s Lake Tahoe for less than fair value as a result of a distressed sale whereby Eldorado was required by the Federal Trade Commission to divest the properties prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the United States.
Bally’s Evansville
On June 3, 2021, the Company completed the acquisition of the Bally’s Evansville casino operations from Caesars. The total purchase price was $139.7 million. Cash paid by the Company at closing, net of $9.4 million cash acquired, was $130.4 million, excluding transaction costs.
In connection with the acquisition of the Bally’s Evansville casino operations, the Company entered into a sale-leaseback arrangement with an affiliate of GLPI for the Bally’s Dover property. Refer to Note 13 “Leases” for further information.
The identifiable intangible assets recorded in connection with the closing of the Bally’s Evansville acquisition based on preliminary valuations include gaming licenses of $153.6 million with an indefinite life and rated player relationships of $0.6 million which are being amortized on a straight-line basis over an estimated useful life of approximately eight years . The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.
18
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Evansville on June 3, 2021. There were no purchase accounting adjustments recorded during the three months ended March 31, 2022.
| (in thousands) | Preliminary as of March 31, 2022 | ||||
| Cash and cash equivalents | $ | ||||
| Accounts receivable, net | |||||
| Inventory and prepaid expenses and other current assets | |||||
| Property and equipment, net | |||||
| Right of use assets, net | |||||
| Intangible assets, net | |||||
| Other assets | |||||
| Accounts payable and accrued liabilities | ( | ||||
| Lease liabilities | ( | ||||
| Deferred tax liability | ( | ||||
| Other long-term liabilities | ( | ||||
| Net assets acquired | |||||
| Bargain purchase gain | |||||