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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Golden Entertainment, Inc.    GDEN

GOLDEN ENTERTAINMENT, INC.

(GDEN)
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GOLDEN ENTERTAINMENT : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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08/09/2019 | 06:03am EST

As used in this Quarterly Report on Form 10-Q, unless the context suggests otherwise, the terms "Golden," "we," "our" and "us" refer to Golden Entertainment, Inc. and its subsidiaries.


The following information should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included in Item 1 of this
Quarterly Report on Form 10-Q and the audited consolidated financial statements
and notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K
for the year ended December 31, 2018 filed with the Securities and Exchange
Commission ("SEC").

Forward-Looking Statements


This Quarterly Report on Form 10-Q, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains
forward-looking statements regarding future events and our future results that
are subject to the safe harbors created under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Forward-looking statements can generally be identified by the use of
words such as "anticipate," "believe," "continue," "could," "estimate,"
"expect," "forecast," "intend," "plan," "project," "seek," "should," "think,"
"will," "would" and similar expressions. In addition, forward-looking statements
include statements regarding cost savings, synergies, growth opportunities and
other financial and operating benefits of our casino and other acquisitions; our
strategies, objectives, business opportunities and plans for future expansion,
developments or acquisitions; anticipated future growth and trends in our
business or key markets; projections of future financial condition, operating
results, income, capital expenditures, costs or other financial items;
anticipated regulatory and legislative changes; and other characterizations of
future events or circumstances as well as other statements that are not
statements of historical fact. Forward-looking statements are based on our
current expectations and assumptions regarding our business, the economy and
other future conditions. These forward-looking statements are subject to
assumptions, risks and uncertainties that may change at any time, and readers
are therefore cautioned that actual results could differ materially from those
expressed in any forward-looking statements. Factors that could cause our actual
results to differ materially include: our ability to realize the anticipated
cost savings, synergies and other benefits of our casino and other acquisitions,
including the casinos we recently acquired in Las Vegas and Laughlin, Nevada,
and integration risks relating to such transactions; changes in national,
regional and local economic and market conditions; legislative and regulatory
matters (including the cost of compliance or failure to comply with applicable
laws and regulations); increases in gaming taxes and fees in the jurisdictions
in which we operate; litigation; increased competition; our ability to renew our
distributed gaming contracts; reliance on key personnel (including our Chief
Executive Officer, Chief Operating Officer, and Chief Strategy and Financial
Officer); the level of our indebtedness and our ability to comply with covenants
in our debt instruments; terrorist incidents; natural disasters; severe weather
conditions (including weather or road conditions that limit access to our
properties); the effects of environmental and structural building conditions;
the effects of disruptions to our information technology and other systems and
infrastructure; factors affecting the gaming, entertainment and hospitality
industries generally, and other factors identified under the heading "Risk
Factors" in our Annual Report on Form 10-K and in Part II, Item 1A of this
report, or appearing elsewhere in this report and in our other filings with the
SEC. Readers are cautioned not to place undue reliance on any forward-looking
statements, which speak only as of the filing date of this report. We undertake
no obligation to revise or update any forward-looking statements for any reason.

Overview

We own and operate a diversified entertainment platform, consisting of a portfolio of gaming assets that focus on resort casino operations and distributed gaming (including gaming in our branded taverns).


We conduct our business through two reportable operating segments: Casinos and
Distributed Gaming. In our Casinos segment, we own and operate ten resort casino
properties in Nevada and Maryland. Our Distributed Gaming segment involves the
installation, maintenance and operation of slots and amusement devices in
non-casino locations such as restaurants, bars, taverns, convenience stores,
liquor stores and grocery stores in Nevada and Montana, and the operation of
branded taverns targeting local patrons located primarily in the greater Las
Vegas, Nevada metropolitan area.



Casinos



On January 14, 2019, we completed the acquisition of Edgewater Gaming, LLC and
Colorado Belle Gaming, LLC (the "Acquired Entities") from Marnell Gaming, LLC
("Marnell") for $156.2 million in cash (after giving effect to the post-closing
adjustment provisions in the purchase agreement) and the issuance by us of
911,002 shares of our common stock to certain assignees of Marnell (the
"Laughlin Acquisition"). The Laughlin Acquisition added two resort casino
properties in Laughlin, Nevada to our casino portfolio: the Edgewater Hotel &
Casino Resort (the "Edgewater") and the Colorado Belle Hotel & Casino Resort
(the "Colorado Belle"), which increase our scale and presence in the Southern
Nevada market. The results of operations of the Acquired Entities are included
in our results subsequent to the acquisition date. See Note 2, Acquisitions, in
the accompanying unaudited consolidated financial statements for additional
information.



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We own and operate ten resort casino properties in Nevada and Maryland, comprising:

The STRAT Hotel, Casino & SkyPod ("The Strat"): The Strat is our premier

casino property, located on Las Vegas Blvd on the north end of the Las Vegas

Strip. The Strat comprises the iconic SkyPod, a casino, a hotel and a retail

center. As of June 30, 2019, The Strat featured an 80,000 sq. ft. casino,

      2,429 hotel rooms, 644 slots, 44 table games, a race and sports book, 12
      restaurants, two rooftop pools, a fitness center, retail shops and
      entertainment facilities.



Arizona Charlie's casinos: Our Arizona Charlie's Decatur and Arizona

Charlie's Boulder casino properties primarily serve local Las Vegas patrons,

and provide an alternative experience to the Las Vegas Strip. As of June 30,

2019, our Arizona Charlie's Decatur casino offered 259 hotel rooms, 1,040

slots, ten table games, race and sports books, five restaurants and an

approximately 400-seat bingo parlor, and our Arizona Charlie's Boulder

casino offered 303 hotel rooms, 835 slots, eight table games, race and

sports books, four restaurants, and an approximately 450-seat bingo parlor,

      as well as an RV park with approximately 220 RV hook-up sites.



Laughlin casinos: We own and operate three casinos in Laughlin, Nevada,

which is located approximately 90 miles from Las Vegas on the western

riverbank of the Colorado River: the Aquarius Casino Resort (the

"Aquarius"), the Edgewater and the Colorado Belle. Our Laughlin casinos are

situated along the heart of the Laughlin Riverwalk and cater primarily to

patrons traveling from Arizona and Southern California, as well as customers

from Nevada seeking an alternative to the Las Vegas experience. As of June

30, 2019, the Aquarius had 1,906 hotel rooms, 1,200 slots, 33 table games

and eight restaurants. As of June 30, 2019 the Colorado Belle had 1,102

hotel rooms, 698 slots, 16 table games and three restaurants. As of June 30,

2019 the Edgewater had 1,052 hotel rooms, 714 slots, 20 table games and six

restaurants and dedicated entertainment venues, including the Laughlin Event

      Center.



Pahrump casinos: We own and operate three casinos in Pahrump, Nevada, which

is located approximately 60 miles from Las Vegas and is a gateway to Death

Valley National Park: the Pahrump Nugget Hotel Casino ("Pahrump Nugget"),

Gold Town Casino and Lakeside Casino & RV Park. As of June 30, 2019, Pahrump

Nugget offered 69 hotel rooms, 406 slots, 10 table games, a race and sports

book, an approximately 200-seat bingo facility and a bowling center. As of

June 30, 2019, our Gold Town Casino offered 229 slots, and our Lakeside

      Casino & RV Park offered 171 slots, an approximately 100-seat bingo
      facility, and approximately 160 RV hook-up sites.




   •  Rocky Gap Casino Resort ("Rocky Gap"): Rocky Gap is situated on

approximately 270 acres in the Rocky Gap State Park in Maryland, which we

lease from the Maryland Department of Natural Resources under a 40-year

ground lease expiring in 2052 (plus a 20-year option renewal). As of June

30, 2019, Rocky Gap offered 665 slots, 19 table games, two casino bars,

three restaurants, a spa and the only Jack Nicklaus signature golf course in

      Maryland. Rocky Gap is a AAA Four Diamond Award® winning resort with 198
      hotel rooms, as well as an event and conference center.




Distributed Gaming

Our Distributed Gaming segment involves the installation, maintenance and
operation of slots and amusement devices in non-casino locations such as
restaurants, bars, taverns, convenience stores, liquor stores and grocery stores
in Nevada and Montana. We place our slots and amusement devices in locations
where we believe they will receive maximum customer traffic, generally near a
store's entrance. In addition, we own and operate branded taverns with slots,
which target local patrons, primarily in the greater Las Vegas, Nevada
metropolitan area. As of June 30, 2019, our distributed gaming operations
comprised approximately 10,700 slots in over 1,000 locations.

Our branded taverns offer a casual, upscale environment catering to local
patrons offering superior food, craft beer and other alcoholic beverages, and
typically include 15 onsite slots. As of June 30, 2019, we owned and operated 65
branded taverns, which offered a total of over 1,000 onsite slots. Most of our
taverns are located in the greater Las Vegas, Nevada metropolitan area and cater
to local patrons seeking more convenient entertainment establishments than
traditional casino properties. Our tavern brands include PT's Gold, PT's Pub,
Sierra Gold, Sean Patrick's, PT's Place, PT's Ranch, PT's Brewing Company,
Sierra Junction and SG Bar. We also own a brewery in Las Vegas, PT's Brewing
Company, which produces craft beer for our taverns and casinos.

                                       22

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Results of Operations


The following discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements and notes thereto included elsewhere
in this Quarterly Report on Form 10-Q for the three and six months ended June
30, 2019 and 2018.



                                        Three Months Ended June 30,            Six Months Ended June 30,
(In thousands)                           2019                 2018              2019               2018
Revenues by segment
Casinos                             $      158,716$      130,926$     310,090$   261,413
Distributed Gaming                          89,153               85,397           177,510           169,558
Corporate and other                            201                  220               362               361
Total revenues                             248,070              216,543           487,962           431,332
Operating expenses by segment
Casinos                                     77,236               62,402           150,779           123,121
Distributed Gaming                          67,936               66,612           135,593           131,962
Corporate and other                            219                  793               416             1,565
Total operating expenses                   145,391              129,807           286,788           256,648
Selling, general and administrative         56,235               43,615           113,182            87,821
Depreciation and amortization               29,976               22,854            57,241            48,091
Acquisition and severance expenses           1,123                  565             2,667             1,864
Preopening expenses                            738                  389             1,516               837
Loss on disposal of assets                     585                  218               832               295
Total expenses                             234,048              197,448           462,226           395,556

Operating income                            14,022               19,095            25,736            35,776
Non-operating expense, net                 (29,774 )            (14,604 )         (50,157 )         (26,136 )
Income tax benefit (provision)               1,344                 (897 )           1,995            (2,116 )
Net income (loss)                   $      (14,408 )$        3,594$     (22,426 )$     7,524

Three and Six Months Ended June 30, 2019 Compared to Three and Six Months Ended June 30, 2018


Revenues

The $31.5 million, or 15%, increase in revenues for the three months ended June
30, 2019 compared to the prior year period resulted from increases of $13.7
million, $8.7 million, $7.9 million and $1.2 million in gaming, food and
beverage, room and other revenues, respectively, due primarily to the impact of
the Acquired Entities.

Casinos segment revenue increased $27.8 million, or 21%, for the three months
ended June 30, 2019 compared to the prior year period. Gaming revenues in the
Casinos segment increased $10.3 million, which reflected the inclusion in the
current year period of $9.1 million of gaming revenue from the Acquired Entities
and a combined increase in slot revenue of $1.6 million at The Strat and
Aquarius. The increase was offset by a decrease in the Nevada casinos' race and
sports book revenue of $0.4 million resulting from the outsourcing of our race
and sports book management in the first quarter of 2019, the income from which
is classified as other operating revenue. Casinos segment food and beverage
revenue increased by $8.3 million due primarily to The Strat and the inclusion
in the current year period of food and beverage revenues from the Acquired
Entities, partially offset by decreases in food and beverage revenues at our
other casino properties. Casinos segment room revenues increased by $7.9 million
primarily due to The Strat and the inclusion in the current year period of room
revenues from the Acquired Entities. Casinos segment other revenues increased by
$1.2 million primarily due to the contribution of $1.5 million of other revenues
from the Acquired Entities, and was partially offset by a decrease in other
revenues at The Strat of $0.4 million.

Distributed Gaming segment revenue increased $3.8 million or 4% for the three
months ended June 30, 2019 compared to the prior year period due to an increase
of $3.4 million in gaming revenues (reflecting a $1.8 million increase from new
sales at our additional locations and machines in Montana and a $1.6 million
increase in Nevada from our six new taverns that opened since the prior year
period and improved performance of our slot devices at non-casino locations) and
of $0.4 million in branded tavern food and beverage revenues.

The $56.6 million, or 13%, increase in revenues for the six months ended June
30, 2019 compared to the prior year period resulted from increases of $23.6
million, $15.8 million, $13.2 million and $4.0 million in gaming, food and
beverage, room and other revenues, respectively, due primarily to the impact of
the Acquired Entities.

Casinos segment revenue increased $48.7 million, or 19%, for the six months
ended June 30, 2019 compared to the prior year period. Gaming revenues in the
Casinos segment increased $16.7 million, which reflected the inclusion in the
current year period of $16.8 million of gaming revenue from the Acquired
Entities and an increase in slot revenue of $1.5 million at some of our Nevada
casinos. The increase was offset by a decrease in the Nevada casinos' race and
sports book revenue of $0.9 million resulting from the outsourcing of our race
and sports book management in the first quarter of 2019, the income from which
is classified as other operating revenue, and a decrease in table game revenue
of $0.7 million at The Strat. Casinos segment food and beverage revenue

                                       23

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increased by $14.7 million due primarily to the inclusion in the current year
period of $14.5 million in food and beverage revenues from the Acquired Entities
and an increase of $1.1 million in food and beverage revenue at The Strat,
partially offset by decreases in food and beverage revenues at our other casino
properties. Casinos segment room revenues increased by $13.2 million primarily
due to increased room revenues from the Aquarius as well as the inclusion in the
current year period of $10.7 million in room revenues from the Acquired
Entities. Casinos segment other revenues increased by $4.0 million primarily due
to the contribution of $4.8 million of other revenues from the Acquired
Entities, and was partially offset by a decrease in other revenues at The Strat
of $1.0 million.

Distributed Gaming segment revenue increased $8.0 million or 5% for the six
months ended June 30, 2019 compared to the prior year period due to an increase
of $6.9 million in gaming revenues (reflecting a $3.3 million increase from new
sales at our additional locations and machines in Montana and a $3.6 million
increase in Nevada from our six new taverns that opened since the prior year
period and improved performance of our slot devices at non-casino locations) and
of $1.1 million in branded tavern food and beverage revenues (primarily due to
the inclusion in the current year period of a full period of revenues from the
three taverns opened in 2018).



During the three and six months ended June 30, 2019, Adjusted EBITDA in our
Casinos segment as a percentage of segment revenues (or Adjusted EBITDA margin)
was 30% and 31%, respectively, compared to Adjusted EBITDA margin in our
Distributed Gaming segment of 15% in each period. During the three and six
months ended June 30, 2018, Adjusted EBITDA margin in our Casinos segment was
32% and 33%, respectively, compared to Adjusted EBITDA margin in our Distributed
Gaming segment of 15% in each period. The lower Adjusted EBITDA margin in our
Distributed Gaming segment relative to our Casinos segment reflects the fixed
and variable amounts paid to third parties under our space and revenue share
agreements as expenses in the Distributed Gaming segment (which includes the
percentage of gaming revenues paid to third parties under revenue share
agreements). See Note 11, Segment Information, in the accompanying unaudited
consolidated financial statements for additional information regarding segment
Adjusted EBITDA and a reconciliation of segment Adjusted EBITDA to segment net
income (loss).

Operating Expenses

The $15.6 million, or 12%, increase in operating expenses for the three months
ended June 30, 2019 compared to the prior year period resulted primarily from
the inclusion of operating expenses of the Acquired Entities. Gaming expenses
increased $5.5 million for the three months ended June 30, 2019 compared to the
prior year period. Of this increase, $4.0 million related to the inclusion of
gaming expenses relating to the Acquired Entities in the current year period,
and $1.1 million related to gaming expenses in our Distributed Gaming segment,
which included an increase of $1.6 million relating to our Montana distributed
gaming operations, offset by $0.5 million decrease from our Nevada distributed
gaming operations. The increase of $4.9 million of food and beverage expense
compared to the prior year period was due primarily to the inclusion in the
current year period of $4.7 million relating to the Acquired Entities, combined
with increases of $0.7 million relating to The Strat (reflecting increased and
improved offerings at The Strat), offset by a decrease in food and beverage
revenues at our other casino properties. The $3.7 million year-over-year
increase in room expense was due primarily to the inclusion in the current year
period of $3.3 million relating to the Acquired Entities, combined with an
increase of $0.8 million related to The Strat. The $1.5 million year-over-year
increase in other operating expenses was almost entirely due to the inclusion in
the current year period of other operating expenses relating to the Acquired
Entities.

The $30.1 million, or 12%, increase in operating expenses for the six months
ended June 30, 2019 compared to the prior year period resulted primarily from
the inclusion of operating expenses of the Acquired Entities. Gaming expenses
increased $10.2 million for the six months ended June 30, 2019 compared to the
prior year period. Of this increase, $7.1 million related to the inclusion of
gaming expenses relating to the Acquired Entities in the current year period,
and $2.7 million related to gaming expenses in our Distributed Gaming segment,
which included an increase of $2.9 million relating to our Montana distributed
gaming operations, offset by a slight decrease from our Nevada distributed
gaming operations. The increase of $9.5 million of food and beverage expense
compared to the prior year period was due primarily to the inclusion in the
current year period of $8.5 million relating to the Acquired Entities, combined
with increases of $0.6 million relating to our Nevada distributed gaming
operations and $1.2 million relating to The Strat (reflecting increased and
improved offerings at The Strat), offset by a decrease in food and beverage
revenues at our other casino properties. The $6.6 million year-over-year
increase in room expense was due primarily to the inclusion in the current year
period of $5.7 million relating to the Acquired Entities, combined with an
increase of $1.2 million related to The Strat. The $3.9 million year-over-year
increase in other operating expenses was almost entirely due to the inclusion in
the current year period of other operating expenses relating to the Acquired
Entities.

Selling, General and Administrative Expenses


The $12.2 million, or 28%, increase in selling, general and administrative
("SG&A") expenses for the three months ended June 30, 2019 compared to the prior
year period resulted primarily from the inclusion in the current year period of
$6.3 million in SG&A expenses relating to the Acquired Entities, an increase in
corporate SG&A of $4.5 million and an increase in Distributed Gaming segment
SG&A of $1.4 million.

Within our Casinos segment, the majority of the SG&A expenses are comprised of
marketing and advertising, utilities, maintenance contracts, payroll expenses
and payroll taxes. Casino segment SG&A expenses increased $7.6 million, or 29%,
for the three months ended June 30, 2019, compared to the prior year period,
resulting primarily from the inclusion $6.3 million in the current year period
of SG&A related to the Acquired Entities. The remaining increase was primarily
due to increases in expenses for labor and advertising at The Strat.

                                       24

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Within our Distributed Gaming segment, the majority of the SG&A expenses are
comprised of marketing and advertising, utilities, building rent, payroll
expenses and payroll taxes. Distributed gaming segment SG&A expenses increased
$1.4 million, or 24%, for the three months ended June 30, 2019 compared to the
prior year period, primarily due to an increase in salaries and bonuses.

Corporate SG&A expenses represent corporate office overhead, information
technology, legal, accounting, third party service providers, executive
compensation, share based compensation, payroll expenses and payroll taxes. The
$4.5 million, or 46%, increase in corporate SG&A for the three months ended June
30, 2019 compared to the prior year period resulted primarily from increases in
outside service expenses in finance, marketing and human resources as well as in
salaries and wages.

The $24.8 million, or 28%, increase in SG&A expenses for the six months ended
June 30, 2019 compared to the prior year period resulted primarily from the
inclusion in the current year period of $11.2 million in SG&A expenses relating
to the Acquired Entities, an increase in corporate SG&A of $9.4 million and an
increase in Distributed Gaming segment SG&A of $2.6 million.

Casino segment SG&A expenses increased $14.1 million, or 27%, for the six months
ended June 30, 2019, compared to the prior year period, resulting primarily from
the inclusion $11.2 million in the current year period of SG&A related to the
Acquired Entities. The remaining increase was primarily due to increases in
expenses for labor and advertising at The Strat and labor, advertising and
printing at the Aquarius.

Distributed Gaming segment SG&A expenses increased $2.6 million, or 22%, for the
six months ended June 30, 2019 compared to the prior year period, primarily due
to an increase in salaries, bonuses, building rent, and expenses for marketing
and cleaning supplies.

Corporate SG&A expenses increases $9.4 million, or 43%, increase in corporate
SG&A for the six months ended June 30, 2019 compared to the prior year period
resulted primarily from increases in outside service expenses in finance,
marketing and human resources as well as in salaries and wages.

Acquisition Expenses


Acquisition expenses during the three and six months ended June 30, 2019 related
primarily to the Laughlin Acquisition, which closed on January 14, 2019, and
expenses during the three and six months ended June 30, 2018 related to the
American Acquisition.

Preopening Expenses


Preopening expenses consist of labor, food, utilities, training, initial
licensing, rent and organizational costs incurred. Non-capital costs associated
with the opening of tavern and casino locations are also expensed as preopening
expenses as incurred.

During the three and six months ended June 30, 2019 and 2018, preopening expenses related primarily to costs incurred in the opening of new taverns in the Las Vegas Valley.

Depreciation and Amortization


The increase in depreciation and amortization expenses for each of the three
months ended June 30, 2019 compared to the prior year period, was primarily due
to the depreciation of the assets and the amortization of the intangibles
acquired in the Laughlin Acquisition.

The increase in depreciation and amortization expenses for each of the six
months ended June 30, 2019 compared to the prior year period, was primarily due
to the depreciation of the assets and the amortization of the intangibles
acquired in the Laughlin Acquisition, the opening of new taverns in the first
half of 2019, and the installation of new gaming systems at some of our Nevada
casinos. The increase was offset by the decrease in depreciation and
amortization expense at The Strat related to the disposal of several assets and
the change in useful life of depreciation.

Non-Operating Expense, Net


Non-operating expense, net increased $15.2 million for the three months ended
June 30, 2019 compared to the prior year period, primarily due to a $3.1 million
increase in interest expense from the substantially higher level of indebtedness
following the Laughlin Acquisition, a loss on extinguishment and modification of
debt of $9.2 million and a loss on change in fair value of derivative of $1.5
million versus a gain on change in fair value of derivative of $1.5 million in
the prior year period.

Non-operating expense, net increased $24.0 million for the six months ended June
30, 2019 compared to the prior year period, primarily due to a $6.5 million
increase in interest expense from the substantially higher level of indebtedness
following the Laughlin Acquisition, a loss on extinguishment and modification of
debt of $9.2 million and a loss on change in fair value of derivative of $3.7
million versus a gain on change in fair value of derivative of $4.7 million in
the prior year period.

Income Taxes

Our effective tax rate was 8.2% and 22.0% for the six months ended June 30, 2019
and 2018, respectively. For the six months ended June 30, 2019, the effective
tax rate differed from the federal tax rate of 21% due primarily to the change
in valuation allowance against our deferred tax assets during the first six
months of 2019. For the six months ended June 30, 2018, the effective tax rate
differed from the federal tax rate of 21% due primarily to expenditures that are
not deductible for tax purposes.

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Non-GAAP Measures


To supplement our consolidated financial statements presented in accordance with
United States generally accepted accounting principles ("GAAP"), we use Adjusted
EBITDA, a measure we believe is appropriate to provide meaningful comparison
with, and to enhance an overall understanding of, our past financial performance
and prospects for the future. We believe Adjusted EBITDA provides useful
information to both management and investors by excluding specific expenses and
gains that we believe are not indicative of our core operating results. Further,
Adjusted EBITDA is a measure of operating performance used by management, as
well as industry analysts, to evaluate operations and operating performance and
is widely used in the gaming industry. The presentation of this additional
information is not meant to be considered in isolation or as a substitute for
measures of financial performance prepared in accordance with GAAP. In addition,
other companies in our industry may calculate Adjusted EBITDA differently than
we do. A reconciliation of net income (loss) to Adjusted EBITDA is provided in
the table below.

We define "Adjusted EBITDA" as earnings before interest and other non-operating
income (expense), income taxes, depreciation and amortization, acquisition
expenses, preopening expenses, gain/loss on disposal of property and equipment,
share-based compensation expenses, executive severance, rebranding, class action
litigation expenses, other gains and losses, and change in fair value of
derivative.

The following table presents a reconciliation of Adjusted EBITDA to net income
(loss):



                                        Three Months Ended June 30,            Six Months Ended June 30,
(In thousands)                           2019                 2018               2019               2018
Net income (loss)                   $       (14,408 )$       3,594$      (22,426 )$     7,524
Depreciation and amortization                29,976              22,854             57,241            48,091
Preopening and related
expenses(1)                                   2,134                 389              3,729               837
Acquisition and severance
expenses                                      1,497                 565              2,667             1,864
Asset disposal and other
writedowns                                    1,123                 218              1,222               295
Share-based compensation                        585               2,758              6,318             4,602
Other, net                                      487                 417              1,351               725
Interest expense, net                        19,135              16,066             37,270            30,809
Loss on extinguishment and
modification of debt                          9,150                   -              9,150                 -
Change in fair value of
derivative                                    1,489              (1,462 )            3,737            (4,673 )
Income tax (benefit) provision               (1,344 )               897             (1,995 )           2,116
Adjusted EBITDA                     $        49,824$      46,296$       98,264$    92,190

(1) Preopening and related expenses include rent, organizational costs,

non-capital costs associated with the opening of tavern and casino locations,

    and expenses related to The Strat rebranding and the launch of the
    TrueRewards loyalty program.



Liquidity and Capital Resources

As of June 30, 2019, we had $116.7 million in cash and cash equivalents. We currently believe that our cash and cash equivalents, cash flows from operations and borrowing availability under our revolving credit facility will be sufficient to meet our capital requirements during the next 12 months.


Our operating results and performance depend significantly on national, regional
and local economic conditions and their effect on consumer spending. Declines in
consumer spending would cause revenues generated in both our Casinos and
Distributed Gaming segments to be adversely affected.

To further enhance our liquidity position or to finance any future acquisition
or other business investment initiatives, we may obtain additional financing,
which could consist of debt, convertible debt or equity financing from public
and/or private credit and capital markets.

In January 2018, we completed an underwritten public offering pursuant to our
universal shelf registration statement, in which certain of our shareholders
resold an aggregate of 6.5 million shares of our common stock, and we sold
975,000 newly issued shares of our common stock. Our net proceeds from the
offering were approximately $25.6 million after deducting underwriting discounts
and offering expenses.

Cash Flows

Net cash provided by operating activities for the six months ended June 30, 2019 remained overall consistent when compared to the prior year period and the timing of operating assets and liabilities.


Net cash used in investing activities was $202.4 million for the six months
ended June 30, 2019, compared to $27.4 million for the prior year period. The
increase in net cash used in investing activities as compared to the prior year
period was primarily due to the closing of the Laughlin Acquisition in January
2019 and the additional capital expenditures in the current year period.

Net cash provided by financing activities was $141.6 million for the six months
ended June 30, 2019, due primarily to our issuance of the 7.625% Senior Notes
due 2026 ("2026 Notes") in April 2019, partially offset by the repayment in full
of our $200 million senior secured second lien term loan facility ("Second Lien
Term Loan").

                                       26
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Net cash provided by financing activities was $20.0 million for the six months ended June 30, 2018, and primarily related to net proceeds to us in the underwritten public offering completed in January 2018, partially offset by repayments under our Credit Facility.

Senior Secured Credit Facility


In October 2017, we entered into a senior secured credit facility consisting of
a $900 million senior secured first lien credit facility (consisting of a $800
million term loan and a $100 million 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.



As of June 30, 2019, we had $772 million in principal amount of outstanding term
loan borrowings under our Credit Facility, no letters of credit outstanding
under the Credit Facility, and our revolving credit facility was undrawn,
leaving borrowing availability under the revolving credit facility as of June
30, 2019 of $200 million.



Borrowings under the Credit Facility bear interest, at our option, at either (1)
a base rate equal to the greatest of the federal funds rate plus 0.50%, the
applicable administrative 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 our net leverage ratio. The commitment fee for the revolving
credit facility is payable quarterly at a rate of 0.375% or 0.50%, depending on
our net leverage ratio, and is accrued based on the average daily unused amount
of the available revolving commitment. As of June 30, 2019, the weighted-average
effective interest rate on our outstanding borrowings under the Credit Facility
was approximately 5.5%.



The revolving credit facility matures on October 20, 2022, and the term loan
under the Credit Facility matures on October 20, 2024. The term loan under the
Credit Facility is repayable in 27 quarterly installments of $2 million each,
which commenced in March 2018, followed by a final installment of $746 million
at maturity.



Borrowings under the Credit Facility are guaranteed by each of our existing and
future wholly-owned domestic subsidiaries (other than certain insignificant or
unrestricted subsidiaries), and are secured by substantially all of the present
and future assets of Golden and our subsidiary guarantors (subject to certain
exceptions).

Under the Credit Facility, we and our restricted subsidiaries are subject to
certain limitations, including limitations on our respective ability to: incur
additional debt, grant liens, sell assets, make certain investments, pay
dividends and make certain other restricted payments. In addition, we will be
required to pay down the term loan under the Credit Facility under certain
circumstances if we or our restricted subsidiaries issue debt, sell assets,
receive certain extraordinary receipts or generate excess cash flow (subject to
exceptions). The revolving credit facility contains a financial covenant
regarding a maximum net leverage ratio that applies when borrowings under the
revolving credit facility exceed 30% of the total revolving commitment. The
Credit Facility also prohibits the occurrence of a change of control, which
includes the acquisition of beneficial ownership of 50% or more of our capital
stock (other than by certain permitted holders, which include, among others,
Blake L. Sartini, Lyle A. Berman and certain affiliated entities). If we default
under the Credit Facility due to a covenant breach or otherwise, the lenders may
be entitled to, among other things, require the immediate repayment of all
outstanding amounts and sell our assets to satisfy the obligations thereunder.
We were in compliance with our financial covenants under the Credit Facility as
of June 30, 2019.

Senior Notes due 2026

On April 15, 2019, we issued $375 million in principal amount of 2026 Notes in a
private placement to institutional buyers face value. The 2026 Notes bear
interest at 7.625%, payable semi-annually on April 15th and October 15th of each
year.



In conjunction with the issuance of the 2026 Notes, we incurred approximately
$6.7 million in debt financing costs and fees that have been deferred and are
being amortized over the term of the 2026 Notes using the effective interest
method.

The net proceeds of the 2026 Notes were used to (i) repay our $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.

The 2026 Notes may be redeemed, in whole or in part, at any time during the 12
months beginning on April 15, 2022 at a redemption price of 103.813%, during the
12 months beginning on April 15, 2023 at a redemption price of 101.906%, and at
any time on or after April 15, 2024 at a redemption price of 100%, in each case
plus accrued and unpaid interest, if any, thereon to the redemption date. Prior
to April 15, 2022, we may redeem up to 40% of the 2026 Notes at a redemption
price of 107.625% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the redemption date, from the net cash proceeds of
specified equity offerings. Prior to April 15, 2022, we may also redeem the 2026
Notes, in whole or in part, at a redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and an Applicable Premium (as
defined in the indenture governing the 2026 Notes (the "Indenture")), if any,
thereon to the redemption date.

                                       27

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The 2026 Notes are guaranteed on a senior unsecured basis by each of our
existing and future wholly-owned domestic subsidiaries that guarantees the
Credit Facility. The 2026 Notes are our and the subsidiary guarantors' general
senior unsecured obligations and rank equally in right of payment with all of
our respective existing and future unsecured unsubordinated debt. The 2026 Notes
are effectively junior in right of payment to our and the subsidiary guarantors'
existing and future secured debt, including under the Credit Facility (to the
extent of the value of the assets securing such debt), are structurally
subordinated to all existing and future liabilities (including trade payables)
of any of our subsidiaries that do not guarantee the 2026 Notes, and are senior
in right of payment to all of our and the subsidiary guarantors' existing and
future subordinated indebtedness.

Under the Indenture, we and our restricted subsidiaries are subject to certain
limitations, including limitations on our respective ability to: incur
additional debt, grant liens, sell assets, make certain investments, pay
dividends and make certain other restricted payments. In the event a change of
control (which includes the acquisition of more than 50% of our capital stock,
other than by certain permitted holders, which include, among others, Blake L.
Sartini, Lyle A. Berman, Neil I. Sell and certain affiliated entities), each
holder will have the right to require us to repurchase all or any part of such
holder's 2026 Notes at a purchase price in cash equal to 101% of the aggregate
principal amount of the 2026 Notes repurchased, plus accrued and unpaid
interest, if any, to the date of purchase.

Expenses Related to Extinguishment and Modification of Debt


In April 2019, we recognized a $5.5 million loss on extinguishment of debt and
$3.7 million of expense related to modification of debt, related to the
repayment of our Second Lien Term Loan and an $18 million prepayment of the term
loan under our Credit Facility.

Share Repurchase Program


On March 12, 2019, our Board of Directors authorized the repurchase of up to
$25.0 million additional shares of common stock, subject to available liquidity,
general market and economic conditions, alternate uses for the capital and other
factors, which replaced the prior share repurchase program authorized in
November 2018. Share repurchases may be made from time to time in open market
transactions, block trades or in private transactions in accordance with
applicable securities laws and regulations and other legal requirements,
including compliance with our finance agreements. There is no minimum number of
shares that we are required to repurchase and the repurchase program may be
suspended or discontinued at any time without prior notice. During the three and
six months ended June 30, 2019, no shares of our common stock were repurchased
under our share repurchase programs.

Other Items Affecting Liquidity

The outcome of the following matters may also affect our liquidity.

Commitments, Capital Spending and Development


We perform on-going refurbishment and maintenance at our facilities, of which
certain maintenance costs are capitalized if such improvement or refurbishment
extends the life of the related asset, while other maintenance costs that do not
so qualify are expensed as incurred. The commitment of capital and the related
timing thereof are contingent upon, among other things, negotiation of final
agreements and receipt of approvals from the appropriate regulatory bodies. We
intend to fund such capital expenditures through our revolving credit facility
and operating cash flows.

See Note 10, Commitments and Contingencies, in the accompanying unaudited consolidated financial statements for additional information regarding commitments and contingencies that may also affect our liquidity.

Contractual Obligations


The following table summarizes our contractual obligations as of June 30, 2019:



                        Remaining
                          2019           2020          2021          2022          2023       Thereafter         Total
(In thousands)
Term loan              $         -     $       -     $   4,000     $  

8,000 $ 8,000$ 752,000$ 772,000 Senior notes due 2026

            -             -             -             -            -         375,000         375,000
Interest on long-term
debt (1)                    35,187        70,365        70,332        69,980       69,547          97,150         412,561
Operating leases            23,164        30,778        29,443        22,906       17,469         117,243         241,003
Notes payable and
finance
  lease obligations(2)       1,200         2,074         1,481           612          565           7,339          13,271
                       $    59,551$ 103,217$ 105,256$ 101,498$ 95,581$ 1,348,732$ 1,813,835

(1) Represents estimated interest payments on our outstanding balances based on

interest rates as of June 30, 2019 until maturity. Includes interest on notes

payable.

(2) Relates to notes payable on equipment purchases and previous tavern

acquisitions and our finance lease obligations, including total finance lease

    interest obligations of $6.0 million.


                                       28
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Other Opportunities


We may investigate and pursue expansion opportunities in our existing or new
markets from time to time. Such expansions will be influenced and determined by
a number of factors, which may include licensing availability and approval,
suitable investment opportunities and availability of acceptable financing.
Investigation and pursuit of such opportunities may require us to make
substantial investments or incur substantial costs, which we may fund through
cash flows from operations or borrowing availability under our revolving credit
facility. To the extent such sources of funds are not sufficient, we may also
seek to raise such additional funds through public or private equity or debt
financings or from other sources. No assurance can be given that additional
financing will be available or that, if available, such financing will be
obtainable on terms favorable to us. Moreover, we can provide no assurances that
the investigation or pursuit of an opportunity will result in a completed
transaction.

Critical Accounting Policies and Estimates


Management's discussion and analysis of our results of operations and liquidity
and capital resources are based on our consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of these financial
statements requires us to make estimates that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the balance sheet date and reported amounts of revenue and expenses during
the reporting period. On an ongoing basis, we evaluate our estimates and
judgments, including those related to the application of the acquisition method
of accounting, long-lived assets, goodwill and indefinite-lived intangible
assets, revenue recognition, income taxes and share-based compensation expenses.
We base our estimates and judgments on historical experience and on various
other factors that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates.



A description of our critical accounting estimates can be found under Part II.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations in our Annual Report on Form 10-K for the year ended December 31,
2018, previously filed with the SEC. For a more extensive discussion of our
accounting policies, see Note 2, Summary of Significant Accounting Policies, in
the audited consolidated financial statements in our Annual Report on Form 10-K
for the year ended December 31, 2018. As of January 1, 2019, we updated our
lease accounting policies in conjunction with our adoption of the new lease
accounting standard. A description of this change is included in Note 2 to the
unaudited consolidated financial statements and notes thereto included in Item 1
of this Quarterly Report on Form 10-Q. There were no other material changes to
our critical accounting policies and estimates during the six months ended June
30, 2019.

Commitments and Contractual Obligations


On April 15, 2019, we issued the 2026 Notes in a private placement to
institutional buyers, and in connection therewith we repaid and discharged the
Second Lien Term Loan in full, repaid $18 million in principal amount of term
loan borrowings under the Credit Facility, and repaid all of the outstanding
indebtedness under the revolving credit facility under the Credit Facility.
Otherwise, no significant changes occurred in the second quarter of 2019 to the
contractual commitments discussed under Part II. Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations - Commitments and
Contractual Obligations, in our Annual Report on Form 10-K for the year ended
December 31, 2018.

Seasonality

We believe that our Casinos and Distributed Gaming segments are affected by
seasonal factors, including holidays, weather and travel conditions. Our Las
Vegas and Pahrump casinos as well as our Nevada distributed gaming businesses
have historically experienced lower revenues during the summer as a result of
fewer tourists due to higher temperatures in addition to increased vacation
activity by local residents. Our casinos in Laughlin and Rocky Gap typically
experience higher revenues during summer months with increased visitation and
may be adversely impacted by inclement weather during winter months. Our Montana
distributed gaming operations also typically experience higher revenues during
the summer due to the inclement weather in other seasons. While other factors
like unemployment levels, market competition and the diversification of our
business may either offset or magnify seasonal effects, some seasonality is
likely to continue, which could result in significant fluctuation in our
quarterly operating results.

Recently Issued Accounting Pronouncements


See Note 1, Nature of Business and Basis of Presentation, in the accompanying
unaudited consolidated financial statements for information regarding recently
issued accounting pronouncements.

Regulation and Taxes


The casino and distributed gaming industries are subject to extensive regulation
by state gaming authorities. Changes in applicable laws or regulations could
have a material adverse effect on us.

The gaming industry represents a significant source of tax revenues to regulators. From time to time, various federal and state legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. It is not

                                       29

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possible to determine the likelihood of possible changes in tax law or in the
administration of such law. Such changes, if adopted, could have a material
adverse effect on our future financial position, results of operations, cash
flows and prospects.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

© Edgar Online, source Glimpses

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