GOLDEN ENTERTAINMENT, INC. As used in this Quarterly Report on Form 10-Q, unless the context suggests
otherwise, the terms "Golden," "we," "our" and "us" refer to
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 endedDecember 31, 2019 filed with theSecurities 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," "may," "plan," "project," "potential," "seek," "should," "think," "will," "would" and similar expressions, or they may use future dates. In addition, forward-looking statements include statements regarding the impact of the COVID-19 pandemic on our business; 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: the uncertainty of the extent, duration and effects of the COVID-19 pandemic and the response of governments, including government-mandated closures or travel restrictions; our ability to realize the anticipated cost savings, synergies and other benefits of our casino and other acquisitions, including the casinos we recently acquired inLas Vegas andLaughlin, 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, President and Chief Financial Officer, and Chief Operating 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 theSEC . 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 inNevada andMaryland . 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 inNevada andMontana , and the operation of branded taverns targeting local patrons located primarily in the greaterLas Vegas, Nevada metropolitan area. 15 --------------------------------------------------------------------------------
Casinos
We own and operate ten resort casino properties inNevada andMaryland . The following table sets forth certain information regarding our properties as ofMarch 31, 2020 : Slot Table Hotel Race and Location Machines Games Rooms Sport Book Bingo (seats)Nevada Casinos The STRAT Hotel , Casino & SkyPod ("The Strat") Las Vegas, NV 748 44 2,429 1 - Arizona Charlie's Boulder Las Vegas, NV 824 - 303 1 approx. 400
Arizona Charlie's Decatur
259 1 approx. 400Aquarius Casino Resort ("Aquarius") Laughlin, NV 1,166 33 1,906 1 -Colorado Belle Hotel & Casino Resort ("Colorado Belle") Laughlin, NV 663 16 1,102 1 -Edgewater Hotel & Casino Resort ("Edgewater") Laughlin, NV 703 20 1,052 1 - Gold Town Casino Pahrump, NV 226 - - - - Lakeside Casino & RV Park Pahrump, NV 168 - - - approx. 100Pahrump Nugget Hotel Casino ("Pahrump Nugget") Pahrump, NV 402 9 69 1 approx. 200 Maryland CasinoRocky Gap Casino Resort ("Rocky Gap") Flintstone, MD 665 16 198 - - Totals 6,578 148 7,318 7
• The Strat: The Strat is our premier casino property, located on
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 March 31, 2020 , in
addition to hotel rooms and gaming in an 80,000 square foot casino, TheStrat offered nine restaurants, two rooftop pools, a fitness center, retail
shops and entertainment facilities.
•
Charlie's Boulder casino properties primarily serve local
and provide an alternative experience to the Las Vegas Strip. As of March
31, 2020, in addition to hotel rooms, gaming and bingo facilities,
Charlie's Boulder casino offered four restaurants and an RV park with
approximately 220 RV hook-up sites and Arizona Charlie's Decatur casino
offered five restaurants.
•
which is located approximately 90 miles from
riverbank of the
rooms and gaming, the Aquarius had eight restaurants, the Colorado Belle
offered three restaurants, and the Edgewater offered six restaurants and
dedicated entertainment venues, including the Laughlin Event Center .
•
is located approximately 60 miles from
gaming and bingo facilities at our
offered a bowling center and our
hook-up sites.
•
the
under a 40-year ground lease expiring in 2052 (plus a 20-year option
renewal). As of
Gap offered three restaurants, a spa and the only
golf course in
resort and includes 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 March 31, 2020 , our distributed gaming operations
comprised approximately 11,000 slots in over 1,000 locations.
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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 March 31, 2020 , we owned and operated
66 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, Sierra Junction and SG Bar.
COVID-19 Pandemic
InDecember 2019 , an outbreak of COVID-19 began inWuhan ,Hubei Province ,China . The disease has since spread rapidly across the world, causing theWorld Health Organization to declare COVID-19 a pandemic onMarch 12, 2020 . Since that time, people across the globe have been advised to avoid non-essential travel, and steps have been taken by governmental authorities, including in the States in which the Company operates, to implement closures of non-essential operations to contain the spread of the virus. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. Following executive orders issued by the Governors ofNevada ,Maryland andMontana , in the week ofMarch 16, 2020 , all of our properties were temporarily closed to the public and our Distributed Gaming operations at third party locations were suspended. Although our Distributed Gaming operations inMontana resumed onMay 4, 2020 , we cannot predict when any of our closed properties will be able to reopen and on what conditions, nor when our Distributed Gaming operations inNevada will be able to resume. The disruptions arising from the COVID-19 pandemic had a significant adverse impact on our financial condition and results of operations during the three months endedMarch 31, 2020 . The duration of the global health emergency and the related disruptions is uncertain. In connection with the reopening of our casino properties, we anticipate that social distancing requirements will include reduced seating at table games and a decreased number of active slot machines on the casino floor. Additionally, there is uncertainty around the impact that the COVID-19 pandemic will have on our operations in the months that follow reopening. Given the dynamic nature of these circumstances, the impact on our results of operations, cash flows and financial condition in 2020 is expected to be material, but cannot be reasonably estimated at this time as it is unknown when the COVID-19 pandemic will end, when or how quickly our properties will be permitted to re-open and current travel restrictions will be modified or cease to be necessary, and the willingness of customers to spend on travel and entertainment. We will continue to monitor the developments of COVID-19 and intend to actively manage our business to respond to the potential impacts.
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 months endedMarch 31, 2020 and 2019. Three Months Ended March 31, (In thousands) 2020 2019 Revenues by segment Casinos$ 127,970 $ 151,374 Distributed Gaming 78,984 88,357 Corporate and other 203 161 Total revenues 207,157 239,892 Operating expenses by segment Casinos 66,850 73,543 Distributed Gaming 64,909 67,657 Corporate and other 322 197 Total operating expenses 132,081 141,397 Selling, general and administrative 47,610 56,947 Depreciation and amortization 31,156 27,265 Impairment of goodwill 6,461 - Acquisition and severance expenses 2,976 1,544 Loss on disposal of assets 589 247 Preopening expenses 105 778 Total expenses 220,978 228,178 Operating (loss) income (13,821 ) 11,714 Non-operating expense, net (18,747 ) (20,383 ) Income tax (provision) benefit (52 ) 651 Net loss$ (32,620 ) $ (8,018 ) 17
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Three Months Ended
Revenues
The$32.7 million , or 14%, decrease in revenues for the three months endedMarch 31, 2020 compared to the prior year period resulted from decreases of$16.6 million ,$8.2 million ,$5.7 million and$2.2 million in gaming, food and beverage, room and other revenues, respectively, due primarily to the impact of the temporary closures of all of our properties and suspension of our Distributed Gaming operations as a result of the COVID-19 pandemic. The$23.4 million , or 15%, decrease in revenues related to our Casinos segment for the three months endedMarch 31, 2020 compared to the prior year period resulted primarily from decreases of$9.0 million ,$6.6 million ,$5.7 million , and$2.1 million in gaming, food and beverage, room and other revenues, respectively, due primarily to the temporary closures of our casino properties as a result of the COVID-19 pandemic. The$9.4 million , or 11%, decrease in revenues related to our Distributed Gaming segment for the three months endedMarch 31, 2020 compared to the prior year period resulted primarily from decreases of$7.6 million ,$1.6 million , and$0.2 million in gaming, food and beverage and other revenues, respectively, due primarily to the temporary suspension of our Distributed Gaming operations as a result of the COVID-19 pandemic. During the three months endedMarch 31, 2020 , Adjusted EBITDA in our Casinos segment as a percentage of segment revenues (or Adjusted EBITDA margin) was 25%, compared to Adjusted EBITDA margin in our Distributed Gaming segment of 9%. During the three months endedMarch 31, 2019 , Adjusted EBITDA margin in our Casinos segment was 31%, compared to Adjusted EBITDA margin in our Distributed Gaming segment of 15%. 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$9.3 million , or 7%, decrease in operating expenses for the three months endedMarch 31, 2020 compared to the prior year resulted primarily from$4.2 million ,$3.3 million ,$0.5 million and$1.3 million decreases in gaming, food and beverage, room and other expenses, respectively. These operating expense decreases primarily reflect the temporary closures of our casino properties, branded taverns and distributed gaming routes as a result of the COVID-19 pandemic.
Selling, General and Administrative Expenses
The$8.2 million , or 15%, decrease in selling, general and administrative ("SG&A") expenses for the three months endedMarch 31, 2020 compared to the prior year period was primarily due to the temporary closures of our casino properties, branded taverns and distributed gaming routes as a result of the COVID-19 pandemic, which resulted in a decrease in payroll expense. SG&A expenses were comprised of marketing and advertising, utilities, building rent, maintenance contracts, corporate office overhead, information technology, legal, accounting, third party service providers, executive compensation, share based compensation and payroll expenses and payroll taxes.
Acquisition Expenses
Acquisition expenses during the three months endedMarch 31, 2020 and 2019 related primarily to additional consulting services related to our acquisition ofEdgewater Gaming, LLC andColorado Belle Gaming, LLC fromMarnell Gaming, LLC , which closed onJanuary 14, 2019 (the "Laughlin 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 months ended
Depreciation and Amortization
Depreciation and amortization expenses increased$3.9 million , or 14%, compared to the prior year, primarily due to the depreciation of the assets -related to the remodel of The Strat and the amortization of the intangibles related to the Laughlin Acquisition. Non-Operating Expense,Net Non -operating expense, net decreased$1.6 million for the three months endedMarch 31, 2020 compared to the prior year period, primarily due to a$2.2 decrease in loss on change in fair value of derivative compared to prior year and offset by a$0.6 million increase in interest expense from the substantially higher level of indebtedness under our senior secured credit facilities following the Laughlin Acquisition in 2019. 18 --------------------------------------------------------------------------------
Income Taxes
Our effective tax rate was (0.2)% and 7.9% for the three months endedMarch 31, 2020 and 2019, respectively. For each three month period 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.
Non-GAAP Measures
To supplement our consolidated financial statements presented in accordance withUnited 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, impairment of goodwill, acquisition and severance expenses, preopening and related expenses, asset disposals and other writedowns, share-based compensation expenses, and change in fair value of derivative. The following table presents a reconciliation of Adjusted EBITDA to net income (loss): Three Months Ended March 31, (In thousands) 2020 2019 Net loss$ (32,620 ) $ (8,018 ) Depreciation and amortization 31,156 27,265 Impairment of goodwill 6,461 - Acquisition and severance expenses 2,976 1,544 Preopening and related expenses(1) 330 2,232 Asset disposals and other writedowns 589 637 Share-based compensation 2,246 4,184 Other, net 357 864 Interest expense, net 18,746 18,135 Change in fair value of derivative 1 2,248 Income tax (benefit) provision 52 (651 ) Adjusted EBITDA$ 30,294 $ 48,440
(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 True
Rewards loyalty program.
Liquidity and Capital Resources
As ofMarch 31, 2020 , we had$301.8 million in cash and cash equivalents. We currently believe that our cash and cash equivalents, and cash flows from operations will be sufficient to meet our capital requirements during the next 12 months. In order to preserve our liquidity and position ourselves to withstand the ongoing interruption to our operations from the COVID-19 pandemic, we reduced our cash operating expenses, deferred all capital expenditures and, onMarch 16, 2020 , we drew the available capacity of$200 million under our revolving credit facility as a precautionary measure. In accordance with the terms of the revolving credit facility, the proceeds from these borrowings may be used for working capital, general corporate or other permitted purposes. 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. 19 --------------------------------------------------------------------------------
Cash Flows
Net cash provided by operating activities was$11.2 million for the three months endedMarch 31, 2020 , compared to$26.8 million for the prior year. The decrease was primarily due to the impact of the COVID-19 pandemic on our operations (as described above) and the timing of working capital spending. Net cash used in investing activities was$18.2 million for the three months endedMarch 31, 2020 , compared to$176.1 million for the prior year period. The decrease in net cash used in investing activities was primarily due to the closing of the Laughlin Acquisition inJanuary 2019 and the additional capital expenditures in the prior year period.
Net cash provided by financing activities was
Net cash provided by financing activities was
Senior Secured Credit Facility
As ofMarch 31, 2020 , our senior secured credit facility consisted of a$1.0 billion senior secured first lien credit facility (consisting of an$800 million term loan and a$200 million revolving credit facility) withJPMorgan Chase Bank, N.A . (as administrative agent and collateral agent), the lenders party thereto and the other entities party thereto (the "Credit Facility"). OnMarch 16, 2020 , we fully drew the available capacity of$200 million under our revolving credit facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic. In accordance with the terms of the revolving credit facility, the proceeds from these borrowings may be used for working capital, general corporate or other permitted purposes. As ofMarch 31, 2020 , 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$200 million in principal amount of borrowings outstanding under our revolving credit facility. 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 ofMarch 31, 2020 , the weighted-average effective interest rate on our outstanding borrowings under the Credit Facility was approximately 3.9%. The revolving credit facility matures onOctober 20, 2022 , and the term loan under the Credit Facility matures onOctober 20, 2024 . The term loan under the Credit Facility is repayable in 27 quarterly installments of$2 million each, which commenced inMarch 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 ofMarch 31, 2020 . 20
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Senior Notes due 2026
OnApril 15, 2019 , we issued$375 million in principal amount of 7.625% Senior Notes due 2026 (the "2026 Notes") in a private placement to institutional buyers at face value. The 2026 Notes bear interest at 7.625%, payable semi-annually onApril 15th andOctober 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 2026 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning onApril 15, 2022 at a redemption price of 103.813%, during the 12 months beginning onApril 15, 2023 at a redemption price of 101.906%, and at any time on or afterApril 15, 2024 at a redemption price of 100%, in each case plus accrued and unpaid interest, if any, thereon to the redemption date. Prior toApril 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 toApril 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. 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 of 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 , 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.
Other Items Affecting Liquidity
The outcome of the following specific matters, including our commitments and contingencies, 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 9, Commitments and Contingencies, in the accompanying unaudited consolidated financial statements for additional information regarding commitments and contingencies that may also affect our liquidity.
Share Repurchase Program
OnMarch 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. 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 months endedMarch 31, 2020 , no shares of our common stock were repurchased under our share repurchase programs.
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.
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--------------------------------------------------------------------------------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 endedDecember 31, 2019 , previously filed with theSEC . 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 endedDecember 31, 2019 . There were no material changes to our critical accounting policies and estimates during the three months endedMarch 31, 2020 .
Commitments and Contractual Obligations
Other than the borrowing inMarch 2020 of$200 million under our revolving credit facility, which matures onOctober 20, 2022 , no significant changes occurred in the first quarter of 2020 to the contractual commitments discussed under Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Items Affecting Liquidity - Contractual Obligations, in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Seasonality We believe that our Casinos and Distributed Gaming segments are affected by seasonal factors, including holidays, weather and travel conditions. OurLas Vegas andPahrump casinos as well as ourNevada 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 inLaughlin andRocky Gap typically experience higher revenues during summer months with increased visitation and may be adversely impacted by inclement weather during winter months. OurMontana 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 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.
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