Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the securities laws. Forward-looking statements are statements as to matters that are not historical facts, and include statements about our plans, objectives, expectations and intentions. Forward-looking statements are not guarantees and are subject to risks and uncertainties. Forward-looking statements are based on our current expectations and assumptions. Although we believe that our expectations and assumptions are reasonable at this time, they should not be regarded as representations that our expectations will be achieved. Actual results may vary materially. Forward-looking statements speak only as of the time of this Quarterly Report on Form 10-Q and we do not undertake to update or revise them as more information becomes available, except as required by law. Important factors beyond those that apply to most businesses, some of which are beyond our control, that could cause actual results to differ materially from our expectations and assumptions include, without limitation: •uncertainties surrounding the COVID-19 pandemic, including limitations on our operations, increased costs, changes in customer behaviors, impact on our employees and the ongoing impact of COVID-19 on general economic conditions; •unexpected costs, difficulties integrating and other events impacting our recently completed and proposed acquisitions and our ability to realize anticipated benefits; •risks associated with our rapid growth, including those affecting customer and employee retention, integration and controls; •risks associated with the impact of the digitalization of gaming on our casino operations, our expansion into iGaming and sports betting and the highly competitive and rapidly changing aspects of our new interactive businesses generally; •the very substantial regulatory restrictions applicable to us, including costs of compliance; •restrictions and limitations in agreements to which we are subject, including our debt, could significantly affect our liquidity and our ability to operate our business; and •other risks identified in Part I. Item 1A. "Risk Factors" ofBally's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 as filed with theSEC onMarch 10, 2021 and other filings with theSEC . The foregoing list of important factors is not exclusive and does not include matters like changes in general economic conditions that affect substantially all gaming businesses.
You should not to place undue reliance on our forward-looking statements.
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Overview
Our objective is to be a leading omni-channel gaming and interactive entertainment company. We are already a leading owner and operator of land-based casinos in ten states inthe United States . In 2020, we acquired the rights to the name "Bally's" as part of our strategy to become the leadingU.S. full-service sports betting/iGaming company with physical casinos and online gaming solutions united under a single, prominent brand. We took other key steps to build our iGaming and sports betting business in the past year, including entering into a strategic partnership with Sinclair Broadcast Group, Inc. to leverage the Bally's brand and combine our sports betting technology with Sinclair's expansive national footprint, which includes 188 local TV stations, 21 regional sports networks (of which 19 have been rebrandedBally's Sports), the STIRR streaming service, the Tennis Channel and five stadium digital TV and internet sports networks. In 2021, we have acquiredBally's Interactive, formerly Bet.Works, a sports betting platform provider, SportsCaller, a leading B2B free-to-play ("FTP") game provider, Monkey Knife Fight, the third-largest fantasy sports platform inNorth America , and theAssociation of Volleyball Professionals ("AVP"), a premier professional beach volleyball organization. Our properties on a combined basis have 706,457 square feet of gaming space, approximately 15,146 slot machines or VLTs, 500 gaming tables, 72 stadium gaming positions, 74 dining establishments, 36 bars, 3,885 hotel rooms and six entertainment venues.
We are a
Gamesys Acquisition OnApril 13, 2021 , we announced the terms of the Acquisition with Gamesys. Gamesys is a leading international online gaming operator that provides entertainment to a global consumer base. Under the terms of the Acquisition, Gamesys shareholders would have the option to receive, for each share of Gamesys,1,850 pence in cash or shares of our common stock (at an exchange ratio of 0.343 for each Gamesys share) or a combination of both. Certain of Gamesys' current shareholders holding 25.6% of Gamesys' shares have agreed to receive shares of our common stock in the Acquisition. OnJune 30, 2021 , the transaction was approved by a majority of the Gamesys andBally's shareholders who were present and voted, in person or by proxy, at the respective separate shareholder meetings. The Acquisition is conditioned upon regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter.
Financing for the Acquisition
We obtained a binding commitment pursuant to a commitment letter and an interim facilities agreement from Deutsche Bank AG,London Branch,Goldman Sachs USA and Barclays Bank PLC and other banks (the "Lenders") to provide fully committed bridge term loan facilities up to £1,435.0 million €336.0 million (collectively, the "Bridge Commitment") to fund the Acquisition. OnApril 20, 2021 , we announced the completion of an underwritten public offering of common stock. We issued a total of 12.65 million shares of common stock in the offering. OnApril 20, 2021 , we escrowed £485.5 million of the net proceeds of the offering (including from the warrant issuance described below), reducing the Bridge Commitment by that amount. OnAugust 6, 2021 , the Company's subsidiaries,Premier Entertainment Sub, LLC andPremier Entertainment Finance Corp. , entered into an agreement for the issuance of the New Notes. The offering is expected to close onAugust 20, 2021 , subject to customary closing conditions. All or substantially all of the net proceeds from the notes offering will be placed in escrow accounts to fund a portion of the Acquisition. If the Acquisition is not completed, the escrowed amounts will be released from escrow and applied to redeem the bonds and the remaining amounts will be returned to the Company. Upon the Acquisition closing, the Company will assume the role of issuer under the New Notes and certain of the Company's subsidiaries will guarantee the New Notes. Upon closing of the notes offering and the placement of the proceeds in escrow, a portion of the Bridge Commitment will be retired and GLPI's commitment to purchase shares of the Company's common stock with a value up to$500.0 million (the "GLPI Commitment") will terminate in accordance with its terms. 45 --------------------------------------------------------------------------------
In order to manage the risk of appreciation of the GBP-denominated purchase price, the Company has entered into foreign exchange forward contracts.
OnApril 20, 2021 , we issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of$50 million , the same price per share as the public offering price inBally's common stock public offering ($55.00 per share).
2021 Acquisition Update
We seek to continue to grow our business by actively pursuing the acquisition and development of new gaming opportunities and reinvesting in our existing operations. We believe that interactive gaming, including mobile sports betting and iGaming, represent a significant strategic opportunity for our future growth. In addition, we seek to increase revenues at our brick and mortar casinos through enhancing the guest experience by providing popular games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with high-quality guest service. We believe that our recent and pending acquisitions have expanded and will, in the case of the pending acquisitions, further expand both our operating and digital/interactive footprints, provide us access to the potentially lucrative interactive mobile sports betting and iGaming markets, and diversify us from a financial standpoint, while continuing to mitigate our susceptibility to regional economic downturns, idiosyncratic regulatory changes and increases in regional competition. •SportCaller - OnFebruary 5, 2021 , we acquired SportCaller, one of the leading B2B FTP game providers for sports betting and media companies acrossNorth America , theUK ,Europe ,Asia ,Australia , LATAM andAfrica , for$24.0 million in cash and 221,391 shares of our common stock (valued at approximately$12.0 million ), subject to adjustment, and up to$12.0 million in value of additional shares if SportCaller meets certain post-closing performance targets (calculated based on a $USD to Euro exchange ratio of 0.8334). •Monkey Knife Fight - OnMarch 23, 2021 , we acquired MKF for (1) immediately exercisable penny warrants to purchase up to 984,446Bally's common shares (subject to adjustment) at closing and (2) contingent penny warrants to purchase up to 787,557 additionalBally's common shares half of which are issuable on each of the first and second anniversary of closing. The total value of the warrants at signing was$90.0 million . •Bally'sLake Tahoe - OnApril 6, 2021 , we acquiredBally's Lake Tahoe Casino Resort , formallyMontBleu Resort Casino & Spa , inLake Tahoe, Nevada for$14.2 million , payable one year from the closing date, subject to customary post-closing adjustments. •Tropicana Las Vegas - OnApril 13, 2021 , we agreed to purchase theTropicana Las Vegas Hotel and Casino inLas Vegas, Nevada from GLPI valued at approximately$300.0 million . The purchase price for the Tropicana property's non-land assets is$150 million . In addition, we agreed to lease the land underlying the Tropicana property from GLPI for an initial term of 50 years at annual rent of$10.5 million , subject to increase over time. We also will enter into a sale-and-leaseback with GLPI relating to ourBally's Black Hawk, formerlyBlack Hawk Casinos , properties and the Jumer's property for a cash purchase price of$150 million payable by GLPI. The lease will have initial annual fixed rent of$12.0 million , subject to increase over time. •Bally's Interactive - OnMay 28, 2021 , we acquiredBally's Interactive, formally Bet.Works Corp. , for approximately$71.6 million in cash and 2,084,765 of the Company's common shares, subject in each case to customary adjustments. •Tropicana Evansville - OnJune 3, 2021 , we acquired the Tropicana Evansville casino from Caesars Entertainment, Inc. The total purchase price was$139.2 million , subject to customary adjustments. •Jumer's - OnJune 14, 2021 , we acquired Jumer'sCasino & Hotel inRock Island, Illinois for$119.2 million in cash, subject to customary post-closing adjustments. •Association of Volleyball Professionals ("AVP") - OnJuly 12, 2021 , we acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour inthe United States . 46 --------------------------------------------------------------------------------
Operating Structure
As ofJune 30, 2021 , the Company had four operating segments; East, West,Bally's Interactive andMile High USA . In the second quarter of 2021, we changed our management structure to better align with our strategic growth initiatives in light of recent and pending acquisitions, which resulted in the re-alignment of our operating and reportable segments. The properties included within the East and West reportable segments, are as follows: •East - includesTwin River Casino Hotel ,Tiverton Casino Hotel , Dover Downs,Bally's Atlantic City , and Tropicana Evansville •West - includes Hard Rock Biloxi,Casino Vicksburg ,Bally's Kansas City ,Shreveport ,Bally's Black Hawk,Bally's Lake Tahoe , and Jumer'sBally's Interactive, which includes SportCaller, MKF,Bally's Interactive, and our online and mobile sports betting operations, andMile High USA , were determined to be immaterial operating segments and are therefore, included in the "Other" category along with shared services provided byTwin River Management Group (our management subsidiary).
We are currently evaluating our pending acquisition of Gamesys for segment
reporting purposes. We expect that our pending acquisition of
Our agreements with Sinclair provide for a long-term strategic partnership for 10 years that combines our vertically integrated, proprietary sports betting technology and expansive market access footprint with Sinclair's premier portfolio of local broadcast stations and live regional sports networks ("RSNs"), STIRR streaming service, its popular Tennis Channel, and digital and over-the-air television network, Stadium.Bally's and Sinclair will partner to create unrivaled sports gamification content on a national scale, positioningBally's as a leading omni-channel gaming company with physical casinos and online sports betting and iGaming solutions united under a single brand.
Commencing
OnApril 12, 2021 , we announced that we had entered into a memorandum of understanding with Sinclair to work collectively to facilitate the production and broadcast ofBally's produced content during non-game windows. Together, we will also explore opportunities to includeBally's programming in Sinclair-owned media platforms and affiliates other than the Bally Sports RSNs, which may include Sinclair's Tennis Channel and Stadium network assets.
Enabling Legislation and proposed Joint Venture with IGT in
OnJune 11, 2021 , the Governor ofRhode Island signed into law the Marc A. Crisafulli Economic Development Act, which among other things, authorizes and directs the state to enter into and amend contracts with the Company and results in changes to our Regulatory Agreement inRhode Island , including an increase in the ratios applicable to us and greater flexibility to complete sale-leaseback transactions. In addition, our master contract withRhode Island will be extended on existing terms untilJune 30, 2043 , and we have committed to investing$100 million inRhode Island over this extended term, including an expansion and the addition of new amenities atTwin River Casino Hotel . This legislation authorizes a joint venture withInternational Gaming Technology PLC ("IGT") to become a licensed technology provider and supply theState of Rhode Island with all VLTs at bothTwin River Casino Hotel andTiverton Casino Hotel for a 20-year period startingJuly 1, 2023 . IGT would own 60% of the joint venture. As ofJuly 1, 2021 until the joint venture is operating, we will supply 23% of all VLTs in return for 7% net terminal income from the machines. 47 --------------------------------------------------------------------------------
COVID-19 Pandemic
The COVID-19 pandemic has significantly impacted, and is likely to continue to impact, our business in a material manner. As ofMarch 16, 2020 , all of our properties at the time were temporarily closed as a result of the COVID-19 pandemic. Our properties began to reopen in mid-2020 in some capacity and remained open for the rest of 2020, with the exception ofTwin River Casino Hotel andTiverton Casino Hotel which closed again fromNovember 29, 2020 throughDecember 20, 2020 . All of our properties have reopened with minimal restrictions. Our revenues have begun to recover due to the recent increase in consumer confidence, reduction in travel restrictions, and faster than anticipated vaccine roll-out, and our operations are increasingly operating with less and less restrictions. While we are working closely with government officials on operational aspects of our re-opened properties and our desire to get additional amenities online, we cannot predict the duration of any limitations the government or we may impose on our operations. Continuing restrictions on our operations, the economic uncertainty that COVID-19 continues to cause and the personal risk tolerances of our customers have caused, and may continue to cause, our business to be negatively impacted. In light of the foregoing, we are unable to determine when, or if, all our properties will return to pre-pandemic demand.
Key Performance Indicator
The main key performance indicator used in managing our business is adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), a non-GAAP measure. Adjusted EBITDA is defined as earnings for the Company, or where noted our reporting segments, before, in each case, interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating income, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments. We use Adjusted EBITDA to analyze the performance of our business and it is used as a determining factor for performance based compensation for members of our management team. We have historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period performance. Also, we present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. Adjusted EBITDA information is presented because management believes that it is a commonly-used measure of performance in the gaming industry and that it is considered by many to be a key indicator of our operating results. Management believes that while certain items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluating our earnings performance, it is useful to exclude such items when comparing current performance to prior periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods presented or they may not relate specifically to current operating trends or be indicative of future results. Adjusted EBITDA should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, as an indicator of our performance. In addition, Adjusted EBITDA as used by us may not be defined in the same manner as other companies in our industry, and, as a result, may not be comparable to similarly titled non-GAAP financial measures of other companies.
Second Quarter and First Six Months 2021 Results
We reported revenue and income from operations of$267.7 million and$80.5 million , respectively, for the three months endedJune 30, 2021 , compared to revenue and loss from operations of$28.9 million and$21.0 million , respectively, for the same period last year. We reported revenue and income from operations of$460.0 million and$110.0 million , respectively, for the six months endedJune 30, 2021 , compared to revenue and loss from operations of$138.1 million and$24.1 million , respectively for the same period last year. During the second quarter of 2021, our properties returned to full capacity and began operating under minimal restrictions. In the prior year, our properties were closed from mid-March intoJune 2020 . 48 --------------------------------------------------------------------------------
Other notable factors affecting our results for the three and six months ended
•Revenue for the second quarter increased 825.6% to$267.7 million driven by$105.4 million of aggregate revenue from acquisitions in the second half of 2020, includingBally's Kansas City andCasino Vicksburg ($33.1 million ),Bally's Atlantic City ($35.9 million ) andShreveport ($36.4 million ), and$29.2 million of aggregate revenue from acquisitions in the first half of 2021, includingBally's Lake Tahoe ($9.7 million ), Tropicana Evansville ($11.7 million ), Jumer's ($2.3 million ), and those in theBally's Interactive operating segment ($5.5 million ); •Revenue for the first half of 2021 increased 233.2% to$460.0 million driven by$184.0 million of aggregate revenue from acquisitions completed in the second half of 2020 includingBally's Kansas City andCasino Vicksburg ($60.5 million ),Bally's Atlantic City ($61.6 million ) andShreveport ($61.9 million ) and$30.3 million aggregate revenue from acquisitions in the first half of 2021,Bally's Lake Tahoe , Tropicana Evansville and Jumer's, noted above, and those in theBally's Interactive operating segment ($6.6 million ). •$53.4 million gain on sale-leaseback in connection with our sale of the Dover Downs property to GLPI during the second quarter of 2021; •$24.1 million gain on bargain purchases during the second quarter related to the acquisitions of Tropicana Evansville andBally's Lake Tahoe ; 49 --------------------------------------------------------------------------------
Results of Operations
The following table presents, for the periods indicated, certain revenue and income items:
Three Months Ended June 30, Six Months Ended June 30, (In millions) 2021 2020 2021 2020 Total revenue $ 267.7$ 28.9 $ 460.0 $ 138.1 Income (loss) from operations 80.5 (21.0) 110.0 (24.1) Net income (loss) 68.9 (23.6) 58.2 (32.4)
The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of total revenue:
Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Total revenue 100.0 % 100.0 % 100.0 % 100.0 % Gaming, racing, hotel, food and beverage, and other expenses 33.6 % 50.5 % 34.0 % 42.5 % Advertising, general and administrative 37.8 % 82.9 % 39.5 % 53.3 % Goodwill and asset impairment 1.7 % (0.5) % 1.0 % 6.2 % Gain on sale-leaseback (20.0) % - % (11.6) % - % Other operating costs and expenses 7.1 % 8.0 % 4.8 % 2.3 % Depreciation and amortization 9.6 % 31.6 % 8.4 % 13.1 % Total operating costs and expenses 69.9 % 172.5 % 76.1 % 117.5 % Income (loss) from operations 30.1 % (72.5) % 23.9 % (17.5) % Other income (expense) Interest income 0.2 % 0.4 % 0.2 % 0.2 % Interest expense (8.2) % (52.6) % (9.3) % (19.4) % Change in value of naming rights liabilities 7.1 % - % (1.8) % - % Gain on bargain purchases 9.0 % - % 5.2 % - % Other, net (2.4) % - % (0.8) % - % Total other income (expense), net 5.7 % (52.2) % (6.4) % (19.2) % Income (loss) before provision for income taxes 35.8 % (124.7) % 17.5 % (36.7) % Provision (benefit) for income taxes 10.1 % (43.3) % 4.8 % (13.2) % Net income (loss) 25.8 % (81.4) % 12.7 % (23.5) %
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Note: Amounts in table may not subtotal due to rounding.
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Segment Performance
The following table sets forth certain financial information associated with results of operations for the three and six months endedJune 30, 2021 and 2020. Non-gaming revenue includes hotel, food and beverage and other revenue. Non-gaming expenses include hotel, food and beverage and other expenses. All amounts are before any allocation of corporate costs. (In thousands, except percentages) Three Months Ended June 30, Six
Months Ended
2021 2020 $ Change % Change 2021 2020 $ Change % Change
Revenue:
Gaming and Racing revenue East$ 100,851 $ 9,107 $ 91,744 1,007.4 %$ 178,542 $ 65,576 $ 112,966 172.3 % West 104,020 14,568 89,452 614.0 % 180,254 35,074 145,180 413.9 % Other 2,619 268 2,351 877.2 % 3,972 2,086 1,886 90.4 % Total Gaming and Racing revenue 207,490 23,943 183,547 766.6 % 362,768 102,736 260,032 253.1 % Non-gaming revenue East 31,598 1,311 30,287 2,310.2 % 52,941 22,207 30,734 138.4 % West 23,850 3,626 20,224 557.7 % 38,333 13,065 25,268 193.4 % Other 4,795 44 4,751 10,797.7 % 5,957 64 5,893 9,207.8 % Total Non-gaming revenue 60,243 4,981 55,262 1,109.5 % 97,231 35,336 61,895 175.2 % Total revenue 267,733 28,924 238,809 825.6 % 459,999 138,072 321,927 233.2 % Operating costs and expenses: Gaming and Racing expenses East$ 25,294 $ 5,712 $ 19,582 342.8 %$ 45,774 $ 21,602 $ 24,172 111.9 % West 36,730 4,299 32,431 754.4 % 62,576 12,807 49,769 388.6 % Other 1,326 649 677 104.3 % 2,254 1,871 383 20.5 % Total Gaming and Racing expenses 63,350 10,660 52,690 494.3 % 110,604 36,280 74,324 204.9 % Non-gaming expenses East 61,253 2,163 59,090 2,731.9 % 28,788 15,579 13,209 84.8 % West 35,791 1,769 34,022 1,923.2 % 16,004 6,850 9,154 133.6 % Other 23,192 2 23,190 1,159,500.0 % 894 3 891 29,700.0 % Total Non-gaming expenses 120,236 3,934 116,302 2,956.3 % 45,686 22,432 23,254 103.7 % Advertising, general and administrative East 49,063 10,833 38,230 352.9 % 89,155 37,523 51,632 137.6 % West 29,324 6,592 22,732 344.8 % 52,420 17,289 35,131 203.2 % Other 22,824 6,564 16,260 247.7 % 40,135 18,786 21,349 113.6 %Total Advertising , general and administrative 101,211 23,989 77,222 321.9 % 181,710 73,598 108,112 146.9 %
Margins:
Gaming and Racing expenses as a percentage of Gaming and Racing revenue 31 % 45 % (14) % 30 % 35 % (5) % Non-gaming expenses as a percentage of Non-gaming revenue 200 % 79 % 121 % 47 % 63 % (16) % Advertising, general and administrative as a percentage of Total revenue 38 % 83 % (45) % 40 % 53 % (13) % 51
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Three and Six Months Ended
Revenue Revenue for the three months endedJune 30, 2021 increased 825.6%, or$238.8 million , to$267.7 million , from$28.9 million in the same period last year. Revenue for the six months endedJune 30, 2021 increased 233.2%, or$321.9 million , to$460.0 million , from$138.1 million in the same period last year. Gaming and racing revenue for the three months endedJune 30, 2021 increased 766.6%, or$183.5 million , to$207.5 million from$23.9 million in the same period last year. Gaming and racing revenue for the six months endedJune 30, 2021 increased 253.1%, or$260.0 million , from$102.7 million in the same period last year. With less operating restrictions across our properties resulting from developments in the COVID-19 pandemic and an increase in consumer confidence and visitation, we saw gaming revenue grow, and exceed in some cases, pre-pandemic levels. Incremental revenues from our recent acquisitions also contributed to the increase in revenue for the second quarter and first half of 2021. Revenue from acquisitions which closed in the second half of 2020, includingBally's Kansas City andCasino Vicksburg ,Bally's Atlantic City andShreveport , in the aggregate contributed$105.4 million and$184.0 million to total revenue in the second quarter and first half of 2021, respectively. Revenue from acquisitions that closed in the first half of 2021, including SportCaller, MKF,Bally's Interactive,Bally's Lake Tahoe , Tropicana Evansville, and Jumer's, in the aggregate, contributed$29.2 million and$30.3 million for the second quarter and first half of 2021, respectively. Refer to Note 4 "Acquisitions" for further information on our recent acquisitions.
Operating costs and expenses
Gaming and racing expenses for the three months endedJune 30, 2021 increased$52.7 million , or 494.3%, to$63.4 million from$10.7 million in the prior year comparable period and increased$74.3 million , or 204.9%, to$110.6 million for the six months endedJune 30, 2021 from$36.3 million in the prior year comparable period. This increase was primarily attributable to the inclusion ofShreveport ,Bally's Atlantic City ,Bally's Kansas City andCasino Vicksburg , all acquired in the second half of 2020, which contributed an aggregate$32.0 million and$57.0 million of gaming expenses during the second quarter and first half of 2021, respectively. Our acquisitions of Jumer's, Tropicana Evansville andBally's Lake Tahoe during the second quarter of 2021, also contributed gaming expenses of$6.0 million for the second quarter and first half of 2021. Non-gaming expenses for the three months endedJune 30, 2021 increased$22.6 million , or 574.4%, to$26.5 million from$3.9 million in the same period last year. Non-gaming expenses for the six months endedJune 30, 2021 increased$23.3 million , or 103.7%, to$45.7 million from$22.4 million in the same period last year. This increase was primarily attributable to the inclusion ofBally's Atlantic City ,Shreveport ,Bally's Kansas City andCasino Vicksburg , which were acquired in the second half of 2020, and contributed$13.0 million and$22.3 million of non-gaming expenses for the second quarter and first half of 2021, respectively.
Advertising, general and administrative
Advertising, general and administrative expenses for the three months endedJune 30, 2021 increased$77.2 million , or 321.9%, to$101.2 million from$24.0 million in the same period last year. Advertising, general and administrative expenses for the six months endedJune 30, 2021 increased$108.1 million , or 146.9%, to$181.7 million from$73.6 million in the same period last year. The increase in advertising, general and administrative expenses year-over-year is primarily due to the additions ofBally's Atlantic City ,Shreveport ,Bally's Kansas City andCasino Vicksburg , all acquired in the second half of 2020, which contributed$35.3 million and$66.2 million of expense in the second quarter and first half of 2021, respectively. Our acquisitions of Jumer's, TropicanaEvansville , andBally's Lake Tahoe acquired in the second quarter of 2021, also contributed advertising, general and administrative expenses of$9.5 million to the second quarter of 2021.
Acquisition, integration and restructuring expense
We incurred$18.4 million and$30.7 million of acquisition, integration and restructuring expenses during the three and six months endedJune 30, 2021 , respectively, compared to$2.5 million and$4.2 million in the prior year three and six month periods, respectively. This increase was driven by costs incurred for the pending acquisition of Gamesys,$7.3 million and$13.6 million for the second quarter and first half of 2021, respectively, and acquisitions completed in 2021 which amounted to$9.3 million and$12.3 million for the second quarter and first half of 2021, respectively. Refer to Note 9 "Acquisition, Integration and Restructuring" for further information. 52 --------------------------------------------------------------------------------
Other operating (income), costs and expenses
During the second quarter of 2021, we sold our Dover Downs property to GLPI and recorded a gain on sale-leaseback of$53.4 million . Additionally, we recorded asset impairment charges of$4.7 million related to the Dover Downs andBally's Black Hawk tradenames in connection with our rebranding. We also recorded a gain from insurance of$0.6 million , and$11.3 million during the second quarter and first half of 2021, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta which made landfall inLouisiana shutting down our Hard Rock Biloxi property for three days during the fourth quarter of 2020. Additionally, we recorded rebranding expense of$0.4 million and$1.3 million during the second quarter and first six months of 2021, respectively, in connection with our corporate name change toBally's Corporation inNovember 2020 .
Depreciation and amortization
Depreciation and amortization for the three months endedJune 30, 2021 was$25.7 million , an increase of$16.6 million , and$38.5 million for the six months endedJune 30, 2021 , an increase of$20.4 million , each compared to the same period last year. The increase in depreciation and amortization is attributable to the addition of properties acquired in the second half of 2020 and the first half of 2021, including fixed asset additions attributable to ourBally's Interactive operating segment, which contributed an aggregate$9.1 million and$13.9 million of depreciation and amortization expense in the second quarter and first half of 2021, respectively.
Income (loss) from operations
Income from operations was$80.5 million for the three months endedJune 30, 2021 compared to loss from operations of$21.0 million in the comparable period in 2020. Income from operations was$110.0 million for the six months endedJune 30, 2021 compared to loss from operations of$24.1 million in 2020. The three and six month comparable periods in 2020 were both impacted negatively by the COVID-19 pandemic with the shut-down of our properties from mid-March into June. As noted above, during the second quarter and the second half of 2021, we experienced strong revenue growth and a return in visitation to our properties as restrictions were lifted.
Total other income (expense), net
Total other income (expense), net for the three months endedJune 30, 2021 increased$30.5 million to$15.4 million of income compared to other expense of$15.1 million the same period last year. This increase was driven by a$24.1 million gain on bargain purchases recorded in connection with the acquisitions of Tropicana Evansville andBally's Lake Tahoe ,$21.5 million and$2.6 million , respectively, coupled with income of$19.1 million recorded to adjust the naming rights liability associated with our contracts with Sinclair Broadcast group to fair value as ofJune 30, 2021 , offset by a$6.6 million increase in interest expense year-over-year. Total other (income) expense, net for the six months endedJune 30, 2021 increased$3.1 million to expense of$29.6 million compared to$26.5 million in the same period last year. This increase was due to an increase in interest expense of$15.9 million year-over-year due to the timing of borrowings and expense of$8.3 million recorded in the first half of 2021 associated with our contracts with Sinclair Broadcast, offset by a gain on bargain purchases of$24.1 million , as noted above.
Provision (benefit) for income taxes
Provision for income taxes for the three months endedJune 30, 2021 was$27.0 million compared to a benefit from income taxes of$12.5 million for the three months endedJune 30, 2020 . The effective tax rate for the quarter was 28.1% compared to 34.7% for the three months endedJune 30, 2020 . Provision for income taxes for the six months ended was$22.2 million compared to a benefit from income taxes of$18.2 million for the six months endedJune 30, 2020 . The effective tax rate for the for the three months endedJune 30, 2020 was 27.6% compared to 35.9% for the three months endedJune 30, 2020 . The increase in provision for income taxes in 2021 is mostly attributable to the increase in net income in the current year and the removal of the favorable carryback rate available during 2020 as a result of the CARES Act. 53 --------------------------------------------------------------------------------
Net income (loss) and earnings (loss) per share
Net income for the three months endedJune 30, 2021 was$68.9 million , or$1.40 per diluted share, an increase of$92.5 million , or 392.7%, from a net loss of$23.6 million , or$(0.77) per diluted share, in the same period last year. As a percentage of revenue, net income increased to 25.8% for the three months endedJune 30, 2021 compared to a net loss of 81.4% for the three months endedJune 30, 2020 . Net income for the six months endedJune 30, 2021 was$58.2 million , an increase of$90.7 million , or 279.6%, from a net loss of$32.4 million , or$(1.05) per diluted share, in the same period last year. As a percentage of revenue, net income increased to 12.7% for the six months endedJune 30, 2020 from a net loss of 23.5% for the six months endedJune 30, 2021 .
These changes were impacted by the factors noted above.
Adjusted EBITDA by Segment
Consolidated Adjusted EBITDA was$83.8 million for the three months endedJune 30, 2021 , up$94.5 million , or 881.1%, from negative Adjusted EBITDA of$10.7 million in the same period last year. Consolidated Adjusted EBITDA was$136.2 million for the six months endedJune 30, 2021 , up$124.9 million , or 1101.6%, from$11.3 million in the same period last year. Adjusted EBITDA for the East segment for the second quarter of 2021 increased$51.9 million , or 502.3%, to$41.6 million and increased$56.7 million , or 513.6%, to$67.7 million for the first half of 2021, each compared to the same prior year periods. These increases were driven by strong results at ourRhode Island and Dover Downs properties. Adjusted EBITDA for the West segment for the second quarter of 2021 increased$47.3 million to$52.1 million and increased$77.2 million , or 742.0%, to$87.6 million for the first half of 2021, each compared to the same prior year periods. These increases were driven by the acquisitions ofShreveport andBally's Kansas City which were acquired in the second half of 2020 coupled with strong results at our Hard Rock Biloxi property. 54 --------------------------------------------------------------------------------
The following tables reconcile Adjusted EBITDA, a non-GAAP measure, to net income (loss), as derived from our financial statements (in thousands):
Three Months Ended June 30, 2021 East West Other Total Net income (loss)$ 53,698 $ 25,777 $ (10,533) $ 68,942 Interest expense, net of interest income 13 (5) 21,291 21,299 Provision (benefit) for income taxes 21,563 7,941 (2,523) 26,981 Depreciation and amortization 5,942 7,444 12,331 25,717 Non-operating (income) expense (1) - - (36,690) (36,690) Acquisition, integration and restructuring - - 18,402 18,402 Share-based compensation - - 3,901 3,901 Gain on sale-leaseback (53,425) - - (53,425) Other (2) 3,784 1,171 3,680 8,635 Allocation of corporate costs 10,015 9,749 (19,764) - Adjusted EBITDA$ 41,590 $ 52,077 $ (9,905) $ 83,762
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(1) Non-operating (income) expense for the applicable periods include: (i) change in value of naming rights liabilities, (ii) gain on bargain purchases and, (iii) other expense, net. (2) Other includes the following non-recurring items for the applicable periods: (i)Goodwill and asset impairment, (ii) expansion and pre-opening expenses, (iii) rebranding expenses, (iv) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to$10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (v) Credit Agreement amendment expenses include costs associated with amendments made to the Company's Credit Agreement, (vi) gains related to insurance recovery proceeds received due to the effects of Hurricane Zeta on the Company's Hard Rock Biloxi property, (vii) expenses incurred to establish the partnership with Sinclair andBally's Interactive acquisition costs, (viii) costs incurred to apply for and obtain sports and iGaming licenses in various jurisdictions, (ix) expenses incurred associated with theRhode Island State Police investigation into a tenant in theLincoln property and a former employee of the Company, (x) expenses incurred associated with the campaign attempting to create an open bid process for theRhode Island Lottery Contract, (xi) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (xii) costs incurred in connection with the implementation of a new human resources information system. Three Months Ended June 30, 2020 East West Other Total Net income (loss)$ (12,388) $ 917 $ (12,084) $ (23,555) Interest expense, net of interest income 16 (5) 15,099 15,110 Provision (benefit) for income taxes (4,439) 53 (8,132) (12,518) Depreciation and amortization 6,215 2,848 80 9,143 Acquisition, integration and restructuring - - 2,458 2,458 Share-based compensation - - 2,127 2,127 Other (1) (2,049) (940) (499) (3,488) Allocation of corporate costs 2,306 1,876 (4,182) - Adjusted EBITDA$ (10,339) $ 4,749 $ (5,133) $ (10,723)
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(1) Other includes the following non-recurring items for the applicable periods: (i)Goodwill and asset impairment, (ii) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to$10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (iii) Credit Agreement amendment expenses include costs associated with amendments made to the Company's Credit Agreement, (iv) gain related to insurance recovery proceeds received for a damaged roof at the Company'sArapahoe Park racetrack, (v) expenses incurred associated with theRhode Island State Police investigation into a tenant in theLincoln property and a former employee of the Company, (vi) expenses incurred associated with the campaign attempting to create an open bid process for theRhode Island Lottery Contract, (vii) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (viii) costs incurred in connection with the implementation of a new human resources information system. 55 --------------------------------------------------------------------------------
Six Months Ended June 30, 2021 East West Other Total Net income (loss)$ 64,967 $ 53,396 $ (60,126) $ 58,237 Interest expense, net of interest income 32 (13) 41,554 41,573 Provision (benefit) for income taxes 25,357 16,093 (19,299) 22,151 Depreciation and amortization 11,512 13,416 13,575 38,503 Non-operating (income) expense(1) - - (11,955) (11,955) Acquisition, integration and restructuring - - 30,660 30,660 Share-based compensation - - 8,384 8,384 Gain on sale-leaseback (53,425) - - (53,425) Other (2) 4,387 (9,476) 7,198 2,109 Allocation of corporate costs 14,858 14,200 (29,058) - Adjusted EBITDA$ 67,688 $ 87,616 $ (19,067) $ 136,237
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(1) Non-operating (income) expense for the applicable periods include: (i) change in value of naming rights liabilities, (ii) gain on bargain purchases, and (iii) other expense, net. (2) Other includes the following non-recurring items for the applicable periods: (i)Goodwill and asset impairment, (ii) expansion and pre-opening expenses, (iii) rebranding expenses, (iv) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to$10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (v) Credit Agreement amendment expenses include costs associated with amendments made to the Company's Credit Agreement, (vi) gains related to insurance recovery proceeds received due to the effects of Hurricane Zeta on the Company's Hard Rock Biloxi property, (vii) expenses incurred to establish the partnership with Sinclair andBally's Interactive acquisition costs, (viii) costs incurred to apply for and obtain sports and iGaming licenses in various jurisdictions, (ix) expenses incurred associated with theRhode Island State Police investigation into a tenant in theLincoln property and a former employee of the Company, (x) expenses incurred associated with the campaign attempting to create an open bid process for theRhode Island Lottery Contract, (xi) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (xii) costs incurred in connection with the implementation of a new human resources information system. Six Months Ended June 30, 2020 East West Other Total Net income (loss)$ (4,100) $ (3,671) $ (24,662) $ (32,433) Interest expense, net of interest income 21 (13) 26,475 26,483 Provision (benefit) for income taxes (1,403) (2,545) (14,234) (18,182) Depreciation and amortization 12,451 5,526 145 18,122 Acquisition, integration and restructuring 20 - 4,224 4,244 Share-based compensation - - 7,669 7,669 Other (1) (2,049) 7,768 (284) 5,435 Allocation of corporate costs 6,092 3,341 (9,433) - Adjusted EBITDA$ 11,032 $ 10,406 $ (10,100) $ 11,338
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(1) Other includes the following non-recurring items for the applicable periods: (i)Goodwill and asset impairment, (ii) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to$10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (iii) Credit Agreement amendment expenses include costs associated with amendments made to the Company's Credit Agreement, (iv) gain related to insurance recovery proceeds received for a damaged roof at the Company'sArapahoe Park racetrack, (v) expenses incurred associated with theRhode Island State Police investigation into a tenant in theLincoln property and a former employee of the Company, (vi) expenses incurred associated with the campaign attempting to create an open bid process for theRhode Island Lottery Contract, (vii) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (viii) costs incurred in connection with the implementation of a new human resources information system.
Critical Accounting Policies and Estimates
There were no material changes in critical accounting policies and estimates during the period covered by this Quarterly Report on Form 10-Q. Refer to Item 7. of the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 for a complete list of our Critical Accounting Policies and Estimates. 56 --------------------------------------------------------------------------------
Recent Accounting Pronouncements
Refer to Note 2. "Recently Adopted and Issued Accounting Pronouncements" in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that affect us.
Liquidity and Capital Resources
We are a holding company. Our ability to fund our obligations depends on existing cash on hand, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been cash on hand, cash flow from operations, borrowings under our revolving credit facility and proceeds from the issuance of debt and equity securities.
Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and acquire properties at what we believe to be attractive valuations. As such, we continued to invest in our land-based casino business and began to build on our interactive/iGaming gaming business despite the COVID-19 pandemic.
An existing credit facility provides for up to$325.0 million of revolving credit borrowings, the undrawn balance of which was$50.0 million atJune 30, 2021 . Our weighted average cost of debt was 6.31% per annum for the 12 months endedJune 30, 2021 . Based on existing debt market conditions, we expect to be able to reduce the all-in cost of our debt through the refinancings we contemplate but there can be no assurance of this. OnApril 13, 2021 , we announced the Gamesys Acquisition. If only the committed Gamesys holders elect to receive shares of our common stock, the maximum cash consideration payable to Gamesys shareholders would amount to approximately £1.6 billion. We arranged the Bridge Commitment to cover the maximum amount of cash payable in the transaction as required byU.K. law. OnApril 20, 2021 , we completed a public offering of 12,650,000 common shares at a price to the public of$55.00 per share and the sale of warrants to purchase 909,090 shares to affiliates of Sinclair Broadcast Group, Inc. at the same offering price. The net proceeds from the offering and the warrant sale, after deducting underwriting discounts and estimated expenses, of £485 million or$671 million were placed in escrow and the Bridge Commitment was reduced by the same amount. OnAugust 6, 2021 , the Company obtained commitments, subject to satisfaction of customary closing conditions, for proposed senior secured credit facilities, pursuant to which the Lenders have agreed to extend to the Company the New Credit Facilities. OnAugust 6, 2021 , the Company's subsidiaries,Premier Entertainment Sub, LLC andPremier Entertainment Finance Corp. , entered into an agreement for the New Notes. The offering is expected to close onAugust 20, 2021 , subject to customary closing conditions. All or substantially all of the net proceeds from the notes offering will be placed in escrow at which time a portion of the Bridge Commitment will be retired and net proceeds from the equity offerings in excess of the cash consideration payable to shareholders of Gamesys will be released. In addition, when the proceeds from the New Notes are placed in escrow, the GLPI Commitment will terminate in accordance with its terms. If the Acquisition is not completed, the escrowed amounts will be released from escrow and applied to redeem the bonds and the remaining amounts will be returned to the Company. These funds in escrow will be classified as restricted cash until the Acquisition closes or terminates.
We entered into foreign exchange contracts to hedge the risk of appreciation of the Gamesys' GBP-denominated purchase price and the GBP-denominated and Euro-denominated debt to be paid off at closing.
In addition to the capital required to complete the proposed acquisition of Gamesys, we expect that our primary capital requirements going forward will relate to the operation, maintenance and improvement of our properties we acquired along with debt service, rent and acquisition payments. Our capital expenditure requirements are expected to moderately increase as a result of the properties acquired in the last 18 months. We have a$40 million planned redevelopment project for theBally's Kansas City property we acquired in 2020 and we plan to invest$100 million in ourAtlantic City property, which increased by$10 million during the second quarter of 2021 through our licensing process, that we acquired in 2020 over five-years. In addition, we signed an agreement to jointly design and build a new casino inCentre County, Pennsylvania , in which we are a 51% owner. We estimate the total cost of the project, including construction, licensing and sports betting/iGaming operations, at$120 million . We plan to commence our expansion and other capital improvements at ourTwin River Casino Hotel location 57
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related to our partnership with IGT. We expect to use cash on hand and cash generated from operations to meet such obligations. For the six months endedJune 30, 2021 , capital expenditures were$35.8 million , compared to$5.4 million in the same period last year. We expect that our current liquidity, cash flows from operations and borrowings under our credit facility will be sufficient to fund our operations, capital requirements and service our outstanding indebtedness for the next 12 months, including giving effect to our pending acquisitions. However, the COVID-19 pandemic has had, and is expected to continue to have, an adverse effect and caused, and may continue to cause, disruption in the financial markets. While we have undertaken efforts to mitigate the impacts of COVID-19 on our business and maintain liquidity, the extent of the ongoing and future effects of the COVID-19 pandemic on our business, results of operations and financial condition is uncertain and may adversely impact our liquidity in the future. In addition, our ability to access additional capital may also be adversely affected by restrictions on incurring additional indebtedness. In addition, we have obtained commitments for the New Credit Facilities, which, subject to satisfaction of customary closing conditions, is expected to close substantially concurrently with the consummation of the Acquisition.
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