Red Rock Resorts : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of
operations of Red Rock Resorts, Inc. ("we," "our," "us," "Red Rock" or the
"Company") should be read in conjunction with our condensed consolidated
financial statements and related notes (the "Condensed Consolidated Financial
Statements") included in Part I, Item 1 of this Quarterly Report on Form 10-Q,
and with our audited consolidated financial statements and related notes
included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Overview
Red Rock was formed as a Delaware corporation in 2015 to own an indirect equity
interest in, and manage, Station Casinos LLC, a Nevada limited liability company
("Station LLC"). Station LLC is a gaming, development and management company
established in 1976 that owns and operates ten major gaming and entertainment
facilities and ten smaller casino properties (three of which are 50% owned) in
the Las Vegas regional market. Four of our major properties had not reopened as
of March 31, 2021, as discussed within Impact of COVID-19 below. A subsidiary of
Station LLC also managed Graton Resort in northern California on behalf of a
Native American tribe through February 5, 2021.
We own all of the outstanding voting interests in Station LLC and have an
indirect equity interest in Station LLC through our ownership of limited
liability company interests in Station Holdco LLC ("Station Holdco," and such
interests, "LLC Units"), which owns all of the economic interests in Station
LLC. At March 31, 2021, we held 61% of the economic interests and 100% of the
voting power in Station Holdco, subject to certain limited exceptions, and we
are designated as the sole managing member of both Station Holdco and Station
LLC. We control and operate all of the business and affairs of Station Holdco
and Station LLC, and conduct all of our operations through these entities. Our
only material assets are our ownership interests in Station LLC and Station
Holdco, other than tax-related assets and liabilities.
Our Condensed Consolidated Financial Statements reflect the consolidation of
Station LLC and its consolidated subsidiaries, and Station Holdco. The financial
position and results of operations attributable to LLC Units we do not own are
reported separately as noncontrolling interest.
Our principal source of revenue and operating income is gaming, and our
non-gaming offerings include restaurants, hotels and other entertainment
amenities. Approximately 80% to 85% of our casino revenue is generated from slot
play. The majority of our revenue is cash-based and as a result, fluctuations in
our revenues have a direct impact on our cash flows from operations. Because our
business is capital intensive, we rely heavily on the ability of our properties
to generate operating cash flow to repay debt financing and fund capital
expenditures.
Information about our results of operations is included herein and in the notes
to our Condensed Consolidated Financial Statements.
Impact of COVID-19
During 2020, our business was significantly negatively impacted by the COVID-19
pandemic, including the temporary closure of all of our properties from March
17, 2020 through June 3, 2020 in compliance with a statewide emergency order
mandating the closure of all nonessential businesses in Nevada, including
casinos. Due to the effects of the ongoing pandemic, we continued to operate
under state-mandated operational restrictions in the first quarter of 2021,
including an occupancy limit 50% (excluding hotel rooms) as of March 31, 2021.
On April 13, 2021, Nevada Governor Steve Sisolak announced a goal of reopening
Nevada businesses at 100% capacity by June 1, 2021, although the statewide mask
mandate will remain in effect. Capacity limits for Las Vegas-area businesses
increased from 50% to 80% on May 1, 2021.
At March 31, 2021, our Texas Station, Fiesta Rancho, Fiesta Henderson and Palms
properties had not reopened. We will continue to assess the performance of the
reopened properties, as well as the recovery of the Las Vegas market and the
economy as a whole, before considering whether to reopen some or all of the
remaining properties, and we have no plans to reopen any of these properties in
2021. On May 3, 2021, we entered into an agreement to sell Palms Casino Resort
("Palms") for $650 million. See Note 2 to the Condensed Consolidated Financial
Statements for additional information.
In addition, our managed property, Graton Resort, located in Northern
California, was temporarily closed from March 17, 2020 through June 17, 2020 as
a result of the COVID-19 pandemic. The management agreement was originally
expected to expire in November 2020 but was extended as a result of the pandemic
through February 5, 2021, when the tribe terminated the Company's management
role at the facility.
                                       22

--------------------------------------------------------------------------------

Table of Contents

Subsequent to the reopening of most of our properties in June 2020, we have seen
favorable customer trends which continued throughout the first quarter of 2021,
including strong visitation from a younger demographic, increased spend per
visit, more time spent on device and increased return of our core customers.
These positive trends, in combination with business optimization and cost
reduction measures implemented in the second quarter of 2020, continue to drive
strong operating results since our reopening. However, we cannot predict whether
these trends will continue, nor can we predict the extent to which the impacts
of COVID-19 on the United States and Las Vegas economies may affect our business
in the future.
The United States economy and the economy in the Las Vegas metropolitan area
have been negatively affected by the unprecedented impacts of COVID-19. A
significant portion of our business is dependent upon customers who live and/or
work in the Las Vegas metropolitan area. In February 2021, the unemployment rate
in the Las Vegas metropolitan area was 9.3%, down from a high of 34% in April
2020. Statewide, the unemployment rate declined to 8.1% in March 2021, as
compared to 30% in April 2020. Despite the economic impacts of the COVID-19
pandemic, the median price of an existing single-family home in Las Vegas was up
14% for March 2021 as compared to the prior year. This continues a trend of
significant improvement in home values in Las Vegas since 2012, with the median
home price reaching another all-time high of $363,000 in March 2021 according to
the Las Vegas Realtors®. In addition, Las Vegas remains one of the fastest
growing metropolitan areas in the United States, posting a 1.5% growth rate in
2020. Due to uncertainties surrounding the ongoing pandemic, we cannot predict
whether the recovery in unemployment and the positive trends in housing prices
and population growth in the Las Vegas area will continue.
As a result of the pandemic, related operational restrictions, the temporary
closure of all of our properties and the ongoing closure of four of our
properties, our operating results for the three months ended March 31, 2021 and
those of the prior year period are not comparable.
Key Performance Indicators
We use certain key indicators to measure our performance.
Gaming revenue measures:
•Slot handle, table game drop and race and sports write are measures of volume.
Slot handle represents the dollar amount wagered in slot machines, and table
game drop represents the total amount of cash and net markers issued that are
deposited in table game drop boxes. Write represents the aggregate dollar amount
wagered on race and sports events.
•Win represents the amount of wagers retained by us.
•Hold represents win as a percentage of slot handle or table game drop.
As our customers are primarily Las Vegas residents, our hold percentages are
generally consistent from period to period. Notwithstanding the impact of the
COVID-19 pandemic, fluctuations in our casino revenue are primarily due to the
volume and spending levels of customers at our properties.
Food and beverage revenue measures:
•Average guest check is a measure of food sales volume and product offerings at
our restaurants, and represents the average amount spent per customer visit.
•Number of guests served is an indicator of volume.
Room revenue measures:
•Occupancy is calculated by dividing occupied rooms, including complimentary
rooms, by rooms available.
•Average daily rate ("ADR") is calculated by dividing room revenue, which
includes the retail value of complimentary rooms, by rooms occupied, including
complimentary rooms.
•Revenue per available room is calculated by dividing room revenue by rooms
available.
                                       23

--------------------------------------------------------------------------------

Table of Contents

Results of Operations Information about our results of operations is presented below (amounts in thousands):

                                                                                        Three Months Ended
                                                                                            March 31,                  Percent
                                                                                          2021                2020      change
Net revenues                                                                                    $ 352,619            $ 377,388              (6.6) %
Operating (loss) income                                                                           (71,153)               2,706                  n/m

Casino revenues                                                                                   259,938              208,267              24.8  %
Casino expenses                                                                                    63,116               83,275             (24.2) %
Margin                                                                                               75.7  %              60.0  %

Food and beverage revenues                                                                         46,872               88,331             (46.9) %
Food and beverage expenses                                                                         41,057               92,486             (55.6) %
Margin                                                                                               12.4  %              (4.7) %

Room revenues                                                                                      21,944               40,076             (45.2) %
Room expenses                                                                                      11,091               20,673             (46.4) %
Margin                                                                                               49.5  %              48.4  %

Other revenues                                                                                     15,557               21,357             (27.2) %
Other expenses                                                                                      5,350                9,634             (44.5) %

Management fee revenue                                                                              8,308               19,357             (57.1) %

Selling, general and administrative expenses                                                       78,910              101,273             (22.1) %
Percent of net revenues                                                                              22.4  %              26.8  %

Depreciation and amortization                                                                      54,255               58,534              (7.3) %
Write-downs and other charges, net                                                                    260                8,807                  n/m

Asset impairment                                                                                  169,733                    -                  n/m
Interest expense, net                                                                             (27,267)             (36,058)            (24.4) %
Loss on extinguishment/modification of debt, net                                                   (8,140)             (11,411)                 n/m
Change in fair value of derivative instruments                                                       (128)             (20,010)                 n/m
Provision for income tax                                                                             (217)            (113,185)                 n/m
Net loss attributable to noncontrolling interests                                                 (41,785)             (25,601)                 n/m
Net loss attributable to Red Rock                                                                 (64,778)            (152,199)                 n/m

_______________________________________________________________

n/m = Not meaningful We view each of our Las Vegas casino properties as an individual operating segment. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing programs, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American management arrangements into one reportable segment. The results of operations for our Native American management

                                       24

--------------------------------------------------------------------------------

Table of Contents

segment are discussed in the section entitled "Management Fee Revenue" below and
the results of our Las Vegas operations are discussed in the remaining sections
below.
Net Revenues. Net revenues for the three months ended March 31, 2021 decreased
by $24.8 million as compared to the prior year period, primarily due to a $65.4
million decrease in non-gaming revenue from our Las Vegas operations and an $11
million decrease in management fee revenue, which was partially offset by a
$51.7 million increase in revenues from our casino operations. Our revenues
continue to reflect the impact of the ongoing COVID-19 pandemic, the related
state-mandated occupancy, social distancing and other restrictions in place at
our reopened properties, as well as the impact of the ongoing closure of four of
our properties.
Operating (Loss) Income. For the three months ended March 31, 2021, we had an
operating loss of $71.2 million as compared to operating income of $2.7 million
for the prior year period. The year-over-year decrease for the three months
ended March 31, 2021 was primarily due to a $169.7 million asset impairment
charge associated with net assets of Palms that are expected to be sold within
the next twelve months. The decrease was partially offset by the impact of cost
reduction measures we instituted in March 2020 in response to the COVID-19
pandemic, as well as the change in the mix of gaming and non-gaming revenues. We
also recognized additional payroll and related costs in the prior year period
upon the temporary closure of our properties as a result of our commitment as of
March 31, 2020 to provide regular pay and health benefits to all of our
full-time team members through April 30, 2020. Additional information about
factors impacting our operating (loss) income is discussed below.
Casino. For the three months ended March 31, 2021, casino revenue increased by
24.8% and casino expenses decreased by 24.2%, each as compared to the prior year
period, reflecting higher revenue across all categories of casino revenue,
primarily slots and race and sports book, despite the ongoing closure of four of
our properties. Slot handle increased by 7.3%, table games drop decreased by
8.5% and race and sports write increased by 47.3% for the three months ended
March 31, 2021 as compared to the prior year period. Casino expenses decreased
as a result of cost reduction measures at our reopened properties and the
ongoing closure of the four properties, as well as the impact of additional
payroll and related costs during the prior year period.
Food and Beverage.  Food and beverage includes revenue and expenses from
restaurants, bars and catering at all of our Las Vegas properties. For the three
months ended March 31, 2021, food and beverage revenue decreased by 46.9% and
food and beverage expenses decreased by 55.6%, each as compared to the prior
year period, primarily due to the impact of the four closed properties and the
closure of all our buffets, as well as the impact of COVID-19-related operating
restrictions. Food and beverage expense decreased as compared to the prior year
period due to cost reduction measures and the ongoing closure of the four
properties, as well as the impact of additional payroll and related costs during
the prior year period.
Room.  Information about our hotel operations is presented below:
                                       Three Months Ended March 31,
                                                               2021           2020
Occupancy                                                       60.1  %        82.7  %
Average daily rate                                          $ 117.07       $ 132.52
Revenue per available room                                  $  70.35       $ 109.55


For the three months ended March 31, 2021, room revenues decreased by 45.2% and
room expenses decreased by 46.4% as compared to the prior period. The decrease
in revenues for the period was due to reduced occupancy and average daily rate
as a result of decreased travel amid the COVID-19 pandemic and the impact of the
ongoing closure of four of our properties. The decrease in room expenses for the
period was commensurate with the decrease in revenues and reflects the ongoing
closure of the four properties, our cost reduction measures and the impact of
additional payroll and related costs during the prior year period.
Other. Other primarily represents revenues from tenant leases, retail outlets,
bowling, spas, entertainment and other, and their corresponding expenses. For
the three months ended March 31, 2021, other revenues decreased by 27.2% and
other expenses decreased by 44.5% as compared to the prior year period,
primarily due to the ongoing closure of the four properties, a reduction in
non-gaming amenities offered at our reopened properties, such as movie theaters,
and lower revenues from amenities that were operating.
Management Fee Revenue. Management fee revenue primarily represents fees earned
from our agreements with a Native American tribe to manage Graton Resort. For
the three months ended March 31, 2021, management fee revenue
                                       25

--------------------------------------------------------------------------------

Table of Contents

decreased by 57.1% as compared to the prior year period due to the termination
of the management agreement on February 5, 2021. The Graton Resort management
agreement was originally expected to expire in November 2020 but was extended as
a result of the pandemic through February 5, 2021, when the tribe terminated our
management role at the facility. Whether the management agreement provides for
an additional extension beyond that date is in dispute.
Selling, General and Administrative ("SG&A"). For the three months ended
March 31, 2021, SG&A expenses decreased by $22.4 million as compared to the
prior year period, primarily due to the ongoing closure of the four properties
and various cost reduction initiatives, including employee costs, as well as
additional payroll and related costs in the prior year period.
Depreciation and Amortization. For the three months ended March 31, 2021,
depreciation and amortization expense decreased by 7.3% as compared to the prior
year period. Depreciation expense decreased primarily due to certain assets
becoming fully depreciated. Amortization expense decreased due to the conclusion
of the amortization of the intangible asset related to the Graton Resort
management agreement in the fourth quarter of 2020.
Write-downs and Other Charges, net. Write-downs and other charges, net include
asset disposals, severance, preopening and redevelopment, business innovation
and technology enhancements and non-routine expenses. For the three months ended
March 31, 2021, write-downs and other charges, net totaled $0.3 million. For the
three months ended March 31, 2020, write-downs and other charges, net totaled
$8.8 million, which included net losses on asset disposals, contract termination
costs and other expenses related to various technology projects, as well as
severance.
Asset Impairment. For the three months ended March 31, 2021, we recorded an
asset impairment charge of $169.7 million to reduce the carrying amount of the
net assets of Palms to their estimated fair value less cost to sell as a result
of entering into a purchase agreement to sell the assets at a price less than
their aggregate carrying amount. See Note 2 to the Condensed Consolidated
Financial Statements for additional information.
Interest Expense, net. Interest expense, net decreased to $27.3 million for the
three months ended March 31, 2021 as compared to $36.1 million for the same
period in 2020. The decrease in interest expense was primarily due to lower
variable interest rates on our credit facility, mainly due to a decrease in
LIBOR, as well as lower outstanding indebtedness. Interest rates have remained
very low since March 2020 in response to economic and growth uncertainty
surrounding the COVID-19 pandemic. Additional information about long-term debt
is included in Note 6 to the Condensed Consolidated Financial Statements.
Loss on Extinguishment/Modification of Debt, net. For the three months ended
March 31, 2021, we recognized a loss of $8.1 million as a result of the partial
redemption of the 5.00% Senior Notes. See Note 6 for additional information. For
the three months ended March 31, 2020, we recognized a $11.4 million loss on
extinguishment/modification of debt, net, primarily resulting from an amendment
to the credit facility in February 2020.
Change in Fair Value of Derivative Instruments. During the three months ended
March 31, 2021, we recognized a net loss of $0.1 million in the fair value of
our interest rate swaps, as compared to a net loss of $20.0 million for the
prior year period. While fair values remained relatively flat in the current
period, the loss in the prior period was primarily due to downward movements in
the forward interest rate curve. Our two remaining swaps are set to expire in
July 2021.
Provision for Income Tax. For the three months ended March 31, 2021, we
recognized income tax expense of $0.2 million. Station Holdco is treated as a
partnership for income tax reporting purposes and Station Holdco's members are
liable for federal, state and local income taxes based on their share of Station
Holdco's taxable income. We are not liable for income tax on the noncontrolling
interests' share of Station Holdco's taxable income nor benefit from a taxable
loss. Due to these factors, our effective tax rate of (0.2)% for the three
months ended March 31, 2021 was less than the statutory rate. We recognized
income tax expense of $113.2 million for the three months ended March 31, 2020,
primarily related to the establishment of a full valuation allowance on our
deferred tax assets due to the uncertainty of realizing the tax benefits.
Net Loss Attributable to Noncontrolling Interests. Net loss attributable to
noncontrolling interests for the three months ended March 31, 2021 and 2020
represented the portion of net loss attributable to the ownership interest in
Station Holdco not held by us.
                                       26

--------------------------------------------------------------------------------

Table of Contents

Adjusted EBITDA
Adjusted EBITDA for the three months ended March 31, 2021 and 2020 for our two
reportable segments and a reconciliation of net loss to Adjusted EBITDA are
presented below (amounts in thousands). The Las Vegas operations segment
includes all of our Las Vegas area casino properties and the Native American
management segment includes our Native American management arrangements.
                                                              Three Months Ended
                                                                  March 31,
                                                                            2021            2020
Net revenues
Las Vegas operations                                                    $  342,817      $  356,465
Native American management                                                   8,087          19,260
Reportable segment net revenues                                            350,904         375,725
Corporate and other                                                          1,715           1,663
Net revenues                                                            $  352,619      $  377,388

Net loss                                                                $ (106,563)     $ (177,800)
Adjustments
Depreciation and amortization                                               54,255          58,534
Share-based compensation                                                     2,741           4,053
Write-downs and other charges, net                                             260           8,807

Asset impairment                                                           169,733               -
Interest expense, net                                                       27,267          36,058
Loss on extinguishment/modification of debt, net                             8,140          11,411
Change in fair value of derivative instruments                                 128          20,010
Provision for income tax                                                       217         113,185
Other                                                                          471              42
Adjusted EBITDA                                                         $  156,649      $   74,300

Adjusted EBITDA
Las Vegas operations                                                    $  160,680      $   68,485
Native American management                                                   7,604          17,601
Corporate and other                                                        (11,635)        (11,786)
Adjusted EBITDA                                                         $  156,649      $   74,300


The year-over-year changes in Adjusted EBITDA were due to the factors described
within Results of Operations above.
Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental
disclosure. We believe that Adjusted EBITDA is a widely used measure of
operating performance in our industry and is a principal basis for valuation of
gaming companies. We believe that in addition to net loss, Adjusted EBITDA is a
useful financial performance measurement for assessing our operating performance
because it provides information about the performance of our ongoing core
operations. Adjusted EBITDA includes net loss plus depreciation and
amortization, share-based compensation, write-downs and other charges, net,
asset impairment, interest expense, net, loss on extinguishment/modification of
debt, net, change in fair value of derivative instruments, provision for income
tax and other.
To evaluate Adjusted EBITDA and the trends it depicts, the components should be
considered. Each of these components can significantly affect our results of
operations and should be considered in evaluating our operating performance, and
the impact of these components cannot be determined from Adjusted EBITDA.
Further, Adjusted EBITDA does not represent net income or cash flows from
operating, investing or financing activities as defined by GAAP and should not
be considered as an alternative to net income as an indicator of our operating
performance. Additionally, Adjusted EBITDA does not consider capital
expenditures and other investing activities and should not be considered as a
measure of our liquidity. In addition, it should be noted that not all gaming
companies that report EBITDA or adjustments to this measure may calculate EBITDA
or such adjustments in the same manner as we do, and therefore, our measure of
Adjusted EBITDA may not be comparable to similarly titled measures used by other
gaming companies.
                                       27

--------------------------------------------------------------------------------

Table of Contents

Holding Company Financial Information
The indentures governing the 5.00% Senior Notes and 4.50% Senior Notes contain
certain covenants that require Station LLC to furnish to the holders of the
notes certain annual and quarterly financial information relating to Station LLC
and its subsidiaries. The obligation to furnish such information may be
satisfied by providing consolidated financial information of the Company along
with additional disclosure explaining the differences between such information
and the financial information of Station LLC and its subsidiaries on a
standalone basis. The following financial information about the Company and its
consolidated subsidiaries, exclusive of Station LLC and its subsidiaries (the
"Holding Company"), is furnished to explain the differences between the
financial information of the Holding Company and the financial information of
Station LLC and its subsidiaries for the periods presented in this report. The
primary differences between the financial information of the Holding Company and
that of Station LLC relate to income taxes of the Holding Company and the
liability relating to the tax receivable agreement ("TRA").
At March 31, 2021, the difference between the balance sheet for Station LLC and
its consolidated subsidiaries and the balance sheet for the Holding Company is
that the Holding Company had liabilities that are solely the Holding Company's,
consisting of a $28.0 million noncurrent liability under the TRA and $0.7
million of other current liabilities. At December 31, 2020, the Holding Company
had a $27.4 million noncurrent liability under the TRA and $0.6 million of other
net current liabilities.
For the three months ended March 31, 2021, the Holding Company recognized a net
loss of $0.2 million representing provision for income tax. For the three months
ended March 31, 2020, the Holding Company recognized a net loss of $113.2
million, primarily representing provision for income tax to establish a full
valuation allowance against its deferred tax assets.
Liquidity and Capital Resources
The following liquidity and capital resources discussion contains certain
forward-looking statements with respect to our business, financial condition,
results of operations, dispositions, acquisitions, investments and subsidiaries,
which involve risks and uncertainties that cannot be predicted or quantified,
and consequently, actual results may differ materially from those expressed or
implied herein. Such risks and uncertainties include, but are not limited to,
the risks described in Item 1A-Risk Factors in our Annual Report on Form 10-K
for the year ended December 31, 2020.
At March 31, 2021, we had $117.9 million in cash and cash equivalents. Station
LLC maintains its borrowing availability under its revolving credit facility,
subject to continued compliance with the terms of the credit facility. At
March 31, 2021, Station LLC's borrowing availability was $826.7 million, which
was net of $175.0 million in outstanding borrowings and $29.4 million in
outstanding letters of credit and similar obligations.
Our primary capital requirements for the near term are expected to be related to
the operation and maintenance of our properties and debt service payments. Our
anticipated uses of cash for the remainder of 2021 include required principal
and interest payments on Station LLC's indebtedness totaling $19.4 million and
$69.4 million, respectively, and approximately $77.0 million to $87.0 million
for maintenance and investment capital expenditures. In addition, we anticipate
making additional cash distributions, which we refer to as "tax distributions"
to the holders of LLC Units. We anticipate that these tax distributions will be
made quarterly and in amounts that may vary from quarter to quarter. Other
payment obligations include salaries, wages and employee benefits, service
contracts, property taxes, insurance and other obligations. In May 2020, we
suspended the payment of dividends until further notice.
In February 2019, our board of directors approved an equity repurchase program
authorizing the repurchase of up to an aggregate of $150 million of our Class A
common stock. In February 2021, our board of directors approved an extension of
the equity repurchase program through December 31, 2022. We are not obligated to
repurchase any shares under the program. Subject to applicable laws and the
provisions of any agreements restricting our ability to do so, repurchases may
be made at our discretion from time to time through open market purchases,
negotiated transactions or tender offers, depending on market conditions and
other factors. During the three months ended March 31, 2021, we repurchased
382,602 shares of our Class A common stock in open market transactions at a
weighted-average price of $29.39 per share, and we have $135.9 million of
remaining repurchases authorized under the program. From time to time, we may
also seek to repurchase our outstanding indebtedness. Any such purchases may be
funded by existing cash balances or the incurrence of debt, including borrowings
under our credit facility. The amount and timing of any repurchase will be based
on business and market conditions, capital availability, compliance with debt
covenants and other considerations.
We expect that cash on hand, cash generated from operations and, to the extent
necessary, borrowings available under the credit facility, will be sufficient to
fund our operations and capital requirements and service our outstanding
indebtedness
                                       28

--------------------------------------------------------------------------------

Table of Contents

for the next twelve months. We regularly assess our projected capital
requirements for capital expenditures, repayment of debt obligations, and
payment of other general corporate and operational needs. In the long term, we
expect that we will fund our capital requirements with a combination of cash
generated from operations, borrowings under the credit facility and the issuance
of debt or equity as market conditions may permit. However, our cash flow and
ability to obtain debt or equity financing on terms that are satisfactory to us,
or at all, may be affected by a variety of factors, including competition,
general economic and business conditions and financial markets, all of which may
be adversely impacted by the ongoing COVID-19 pandemic. As a result, we cannot
provide any assurance that we will generate sufficient income and liquidity to
meet all of our liquidity requirements or other obligations.
Following is a summary of our cash flow information (amounts in thousands):
                                         Three Months Ended March 31,
                                              2021                    2020
Net cash provided by (used in):
Operating activities              $        119,760                 $ 47,884
Investing activities                       (16,252)                 (31,288)
Financing activities                      (106,629)                 945,729


Cash Flows from Operations
Our operating cash flows primarily consist of operating income or loss generated
by our properties (excluding depreciation and other non-cash charges), interest
paid and changes in working capital accounts such as inventories, prepaid
expenses, receivables and payables. The majority of our revenue is generated
from our slot machine and table game play, which is conducted primarily on a
cash basis. Our food and beverage, room and other revenues are also primarily
cash-based. As a result, fluctuations in our revenues have a direct impact on
our cash flow from operations.
For the three months ended March 31, 2021, net cash provided by operating
activities was $119.8 million as compared to $47.9 million for the prior year
period. For the current year period, an increase in gaming revenues, favorable
customer trends and cost reduction measures implemented in the second quarter of
2020 continue to drive strong operating results, despite a decrease in
non-gaming revenues and ongoing negative effects of the COVID-19 pandemic,
including state-mandated occupancy and social distancing restrictions, as well
as reduced consumer confidence, discretionary spending and travel. For the three
months ended March 31, 2020, operating cash flows were negatively impacted by
the onset of the pandemic, including the mandatory temporary closure of all of
our properties from March 17, 2020 through June 3, 2020.
Cash Flows from Investing Activities
For the three months ended March 31, 2021 and 2020, cash paid for capital
expenditures totaled $8.0 million and $30.8 million, respectively.
Cash Flows from Financing Activities
During the three months ended March 31, 2021, we incurred net borrowings under
the revolving credit facility of $175.0 million, which were used, along with
cash on hand, to redeem $250.0 million in outstanding principal amount of the
5.00% Senior Notes and to pay a redemption premium of $6.3 million. In addition,
during the three months ended March 31, 2021, we paid $11.2 million to
repurchase 382,602 shares of our Class A common stock pursuant to our equity
repurchase program. We also paid cash tax distributions of $7.6 million to
noncontrolling interest holders of Station Holdco during the period and $2.8
million to a noncontrolling interest holder unaffiliated with Red Rock who
exchanged 100,000 Class B shares and LLC Units for cash.
In February 2020, we issued $750.0 million in principal amount of 4.50% Senior
Notes, the proceeds of which were used to repay $330.8 million of outstanding
borrowings under our term loans and all of the outstanding borrowings under our
revolving credit facility. We subsequently drew $997.5 million under our
revolving credit facility in March 2020 to secure our liquidity position and
preserve financial flexibility in response to the onset of the COVID-19
pandemic. During the three months ended March 31, 2020, we also paid $7.1
million in dividends to Class A common shareholders and $4.6 million in cash
distributions to the noncontrolling interest holders of Station Holdco, as well
as $19.4 million in fees and costs related to the February 2020 amendment of the
credit facility and the issuance of the 4.50% Senior Notes.
                                       29

--------------------------------------------------------------------------------

Table of Contents

Restrictive Covenants
The agreements governing our credit facility and the indentures governing our
senior notes impose significant operating and financial restrictions on us,
including certain limitations on our and our subsidiaries' ability to, among
other things, obtain additional debt or equity financing due to applicable
financial and restrictive covenants in our debt agreements. In addition, our
credit agreement contains certain financial covenants, including maintenance of
a minimum interest coverage ratio and adherence to a maximum total leverage
ratio. During the three months ended March 31, 2021, there were no changes made
to the covenants included in the credit facility or the indentures governing the
senior notes as described in Financial Condition, Capital Resources and
Liquidity in Part II, Item 7 of our Annual Report on Form 10-K for the year
ended December 31, 2020. We believe that as of March 31, 2021, Station LLC was
in compliance with the covenants contained in the credit facility and the
indentures governing the senior notes. However, the ongoing impacts of the
COVID-19 pandemic on our business, operations and results of operations may
negatively impact our ability to remain in compliance with such covenants.
As a result of these covenants and restrictions, we are limited in how we
conduct our business and we may be unable to raise additional debt or equity
financing to provide liquidity if the COVID-19 pandemic, measures implemented to
curtail its spread, changes in the economy, discretionary spending and consumer
confidence have a protracted negative effect on our business. In addition, such
covenants and restrictions may limit our ability to compete effectively or to
take advantage of new business opportunities. Further, our ability to comply
with covenants and restrictions contained in the agreements governing our
indebtedness may be adversely affected by general economic conditions and
industry conditions resulting from COVID-19 related preventative or protective
actions.
Failure to satisfy the covenants contained in the credit agreements, indentures
or other agreements governing our indebtedness would require us to seek waivers
or amendments of such covenants. There can be no assurance that we will be able
to obtain required waivers or amendments, as such matters depend, in part, on
factors outside of our control. If we fail to satisfy our covenants and are
unable to obtain such waivers or amendments, our creditors could exercise
remedies under the applicable documents governing such indebtedness, including
acceleration of such indebtedness.
Off-Balance Sheet Arrangements
At March 31, 2021, we had no variable interests in unconsolidated entities that
provide off-balance sheet financing, liquidity, market risk or credit risk
support, or that engage in leasing, hedging or research and development
arrangements with us, nor did we have retained or contingent interests in assets
transferred to an unconsolidated entity. Our derivative instruments comprise
interest rate swaps as described in Note 7 to the Condensed Consolidated
Financial Statements. At March 31, 2021, we had outstanding letters of credit
and similar obligations totaling $29.4 million.
Native American Development
We have development and management agreements with the North Fork Rancheria of
Mono Indians, a federally recognized Native American tribe located near Fresno,
California, pursuant to which we will assist the tribe in developing and
operating a gaming and entertainment facility to be located on Highway 99 north
of the city of Madera, California. See Note 4 to the Condensed Consolidated
Financial Statements for information about this project.
Regulation and Taxes
We are subject to extensive regulation by Nevada gaming authorities as well as
the National Indian Gaming Commission and the California Gambling Control
Commission. In addition, we will be subject to regulation, which may or may not
be similar to that in Nevada, by any other jurisdiction in which we may conduct
gaming activities in the future.
The gaming industry represents a significant source of tax revenue, particularly
to the State of Nevada and its counties and municipalities. From time to time,
various state and federal legislators and officials have proposed changes in tax
law, or in the administration of such law, affecting the gaming industry. The
Nevada legislature meets every two years for 120 days and when special sessions
are called by the Governor. The current legislative session began on February 1,
2021. There are currently no specific legislative proposals to increase taxes on
gaming revenue, but there are no assurances that an increase in taxes on gaming
or other revenue will not be proposed and passed by the Nevada legislature in
the future.
Description of Certain Indebtedness
A description of our indebtedness is included in Note 7 to the audited
consolidated financial statements included in our Annual Report on Form 10-K for
the year ended December 31, 2020 and Note 6 to the Condensed Consolidated
Financial Statements. Other than the partial redemption of our 5.00% Senior
Notes as described therein, there were no material changes to the terms of our
indebtedness during the three months ended March 31, 2021.
                                       30

--------------------------------------------------------------------------------

Table of Contents

Derivative and Hedging Activities
A description of our derivative and hedging activities is included in Note 7 to
the Condensed Consolidated Financial Statements.
Critical Accounting Policies and Estimates
A description of our critical accounting policies and estimates is included in
Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.
There were no material changes to our critical accounting policies and estimates
during the three months ended March 31, 2021.
Forward-looking Statements
The outbreak of COVID-19 resulted in the closure of all of our casino properties
and all other casino properties located in Nevada from March 17, 2020 through
June 3, 2020. We reopened the majority of our properties on June 4, 2020, but
certain of our properties will remain closed until we determine when and if to
reopen them based on our analysis of a number of factors, including the health
of the economy as a whole, the health of the Las Vegas economy, customer demand,
expense of operating the properties and restrictions on operations to implement
social distancing and other health and safety protocols. The outbreak of
COVID-19 and measures to implement social distancing have caused, and will
likely continue to cause, widespread unemployment and significant disruptions in
the United States economy generally and the Las Vegas economy in particular. In
addition, we expect that our operations will continue to be negatively impacted
by diminished consumer confidence and discretionary spending and by social
distancing measures applicable to our gaming and entertainment venues.
When used in this report and elsewhere by management from time to time, the
words "may," "might," "could," "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements with respect to
our financial condition, results of operations and our business including our
expansions, development and acquisition projects, legal proceedings and employee
matters. Certain important factors, including but not limited to, financial
market risks, could cause our actual results to differ materially from those
expressed in our forward-looking statements. Potential factors which could
affect our financial condition, results of operations and business includes,
without limitation, our ability to consummate the sale of Palms on the timeline
and terms described herein; the extent and duration of the impact of the
COVID-19 pandemic on the Company's business, financial results and liquidity;
the duration of the closure of the Company's properties that we have not
reopened; the impact and cost of new operating procedures implemented at our
properties in response to the COVID-19 pandemic; the impact of actions that the
Company has undertaken to reduce costs and improve efficiencies to mitigate
losses as a result of the COVID-19 pandemic; the impact of the COVID-19
pandemic, and resulting unemployment and changes in general economic conditions
on discretionary spending and consumer demand; the impact of our substantial
indebtedness; the effects of local and national economic, credit and capital
market conditions on consumer spending and the economy in general, and on the
gaming and hotel industries in particular; the effects of competition, including
locations of competitors and operating and market competition; changes in laws,
including increased tax rates, regulations or accounting standards, third-party
relations and approvals, and decisions of courts, regulators and governmental
bodies (including the current government-mandated operational restrictions);
risks associated with construction projects, including disruption of our
operations, shortages of materials or labor, unexpected costs, unforeseen
permitting or regulatory issues and weather; litigation outcomes and judicial
actions, including gaming legislative action, referenda and taxation; acts of
war or terrorist incidents, natural disasters or civil unrest; risks associated
with the collection and retention of data about our customers, employees,
suppliers and business partners; and other risks described in our filings with
the Securities and Exchange Commission. All forward-looking statements are based
on our current expectations and projections about future events. Readers are
cautioned not to place undue reliance on any forward-looking statements, which
speak only as of the date thereof. We undertake no obligation to publicly
release any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof.
Item 3.  Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and
prices, such as interest rates, foreign currency exchange rates and commodity
prices. There have been no material changes in our market risks from those
disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year
ended December 31, 2020.
LIBOR is expected to be discontinued after 2021. The interest rate per annum
applicable to loans under our credit facility is, at our option, either LIBOR
plus a margin or a base rate plus a margin. The credit facility permits the
administrative agent to approve a comparable or successor base rate in the event
that LIBOR is discontinued, but there can be no assurances as to what the
alternative base rate may be and whether such base rate will be more or less
favorable than LIBOR or any other unforeseen impacts of the potential
discontinuation of LIBOR. We intend to continue monitoring the developments with
respect
                                       31

--------------------------------------------------------------------------------

Table of Contents

to the potential phasing out of LIBOR after 2021 and are working with our
lenders to ensure the transition away from LIBOR will have minimal impact on our
financial condition, but can provide no assurances regarding the impact of the
discontinuation of LIBOR.
Item 4.  Controls and Procedures
The Company's management conducted an evaluation, under the supervision and with
the participation of the principal executive officer and principal financial
officer, of the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the "Exchange Act")) as of March 31, 2021. In designing
and evaluating disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can only
provide reasonable assurance of achieving the desired control objectives, and
management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on this evaluation, the
principal executive officer and principal financial officer concluded that, as
of March 31, 2021, the Company's disclosure controls and procedures were
effective, at the reasonable assurance level, and are designed to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms, and that such information is accumulated and communicated to
management, including our principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure.
There was no change in the Company's internal control over financial reporting
during the Company's most recently completed fiscal quarter that materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
Part II.  Other Information
Item 1.  Legal Proceedings
The Company and its subsidiaries are defendants in various lawsuits relating to
routine matters incidental to their business. No assurance can be provided as to
the outcome of such matters and litigation inherently involves significant
risks.
Item 1A.  Risk Factors
There have been no material changes in the risk factors previously disclosed in
Part I, Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2020.
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table presents Class A share repurchases, including those we have
made pursuant to our equity repurchase program as well as those withheld in
satisfaction of tax withholding obligations on vested restricted stock. The
Class A shares were retired upon repurchase.
                                                                                                Total Number of
                                                                                                Shares Purchased         Approximate Dollar
                                                                         Average Price            as Part of a          Value That May Yet Be
                                              Total Number of           Paid per Share         Publicly Announced        Purchased Under the
For the Month Ended                           Shares Purchased                (1)                 Program (2)                  Program
January 31, 2021                                          -            $            -                      -            $      150,000,000
February 28, 2021                                   282,602                     28.49                282,602                   139,127,052
March 31, 2021                                      113,970                     32.12                100,000                   135,931,259
Totals                                              396,572            $        29.53                382,602

_______________________________________________________________

(1)  Excludes commissions.
(2)  In February 2019, our board of directors approved an equity repurchase
program authorizing the repurchase of up to an aggregate of $150 million of our
Class A common stock. In February 2021, the board of directors extended its
approval of the equity repurchase program through December 31, 2022.
Item 3.  Defaults Upon Senior Securities-None.
                                       32

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses