Bally's Corp 8-K/A, filed Feb 12, 2021
Bally's Corp (BALY)
8-K/A
2021-02-12
For: 2020-12-22
View Original
Added on
April 11, 2026
About this 8-K/A
Bally's Corp filed this 8-K/A on February 12, 2021, reporting on events of December 22, 2020.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K/A
(Amendment No. 1)
_______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 12, 2021 (December 22, 2020 )
________________________
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| (Address of Principal Executive Offices and Zip Code) | ||||||||
________________________
(401 ) 475-8474
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12 (b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
EXPLANATORY NOTE
Bally’s Corporation (the “Company”) completed its acquisition of Eldorado Resort Casino Shreveport (“Shreveport”) from Caesars Entertainment, Inc. on December 23, 2020 and had previously acquired the outstanding equity securities of IOC-Kansas City, Inc. (subsequently rebranded “Casino KC”) and Rainbow Casino-Vicksburg Partnership, L.P. (subsequently rebranded “Casino Vicksburg,” and together with Shreveport and Casino KC, the "Acquired Companies") from Eldorado Resorts, Inc. on July 2, 2020. This Amendment No. 1 files the required financial statements and pro forma financial information of the Acquired Companies and should be read in conjunction with the Company’s December 29, 2020 Current Report on Form 8-K and the Company’s other SEC filings.
Item 9.01 Financial Statements and Exhibits.
(a)Financial Statements of business acquired.
The audited financial statements of Shreveport as of and for the years ended December 31, 2019 and 2018 and the notes related thereto are filed as Exhibit 99.2 hereto.
The unaudited financial statements of Shreveport as of and for the nine months ended September 30, 2020 and 2019 and the notes related thereto are filed as Exhibit 99.1 hereto.
(b)Pro forma financial information.
The unaudited pro forma condensed combined balance sheet of the Company as of September 30, 2020 and the unaudited pro forma condensed combined statements of income of the Company for the year ended December 31, 2019 and the nine months ended September 30, 2020, in each case giving pro forma effect to the Company's acquisition of all outstanding equity securities of the Acquired Companies and the notes related thereto are filed as Exhibit 99.3 hereto and are incorporated herein by reference.
(d)Exhibits.
The following exhibits are filed herewith:
(d) Exhibits
| Exhibit No. | Description | |||||||
| 23.1 | ||||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | Unaudited Pro Forma Condensed Combined Balance Sheet of Bally's Corporation as of September 30, 2020 and Unaudited Pro Forma Condensed Combined Statements of Income of Bally's Corporation for the years ended December 31, 2019 and 2018 and the nine months ended September 30, 2020 and 2019, in each case giving pro forma effect to the Company’s acquisition of all the outstanding equity securities of Shreveport and the notes related thereto | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BALLY'S CORPORATION | ||||||||
| By: | /s/ Stephen H. Capp | |||||||
| Name: | Stephen H. Capp | |||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||
Date: February 12, 2021
Exhibit 23.1
Consent of Independent Auditors
We consent to the use of our report dated February 12, 2021, with respect to the financial statements of Eldorado Resort Casino Shreveport JTV included in this Form 8-K/A of Bally’s Corporation.
/s/ Ernst & Young LLP
Las Vegas, Nevada | ||
February 12, 2021 | ||
Exhibit 99.1
FINANCIAL STATEMENTS
Eldorado Resort Casino Shreveport JTV
As of and for the Three and Nine Months Ended September 30, 2020 and 2019
Eldorado Resort Casino Shreveport JTV
| TABLE OF CONTENTS | ||||||||
| Financial Statements: | ||||||||
| Balance Sheets | 1 | |||||||
| Statements of Income | 2 | |||||||
| Statements of Changes in Net Parent Investment | 3 | |||||||
| Statements of Cash Flows | 4 | |||||||
| Notes to Financial Statements | 5 | |||||||
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Eldorado Resort Casino Shreveport JTV
BALANCE SHEETS
September 30, 2020 and 2019
(dollars in thousands)
| 2020 | 2019 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 6,626 | $ | 8,064 | |||||||
| Accounts receivable, net | 1,819 | 1,848 | |||||||||
| Inventories | 938 | 1,019 | |||||||||
| Prepaid expenses and other assets | 399 | 445 | |||||||||
| Total current assets | 9,782 | 11,376 | |||||||||
| Property and equipment, net | 79,916 | 86,034 | |||||||||
| Gaming licenses | 20,574 | 19,679 | |||||||||
| Right-of-use assets | 11,808 | 11,978 | |||||||||
| Other assets, net | 403 | 358 | |||||||||
| Total assets | $ | 122,483 | $ | 129,425 | |||||||
| LIABILITIES AND NET PARENT INVESTMENT | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | 1,497 | $ | 1,559 | ||||||||
| Accrued property, gaming and other taxes | 1,522 | 2,394 | |||||||||
| Accrued payroll and related | 1,311 | 2,047 | |||||||||
| Accrued interest | — | 1,305 | |||||||||
| Short-term lease obligation | 969 | 1,038 | |||||||||
| Accrued other liabilities | 2,508 | 2,492 | |||||||||
| Total current liabilities | 7,807 | 10,835 | |||||||||
| Long-term debt | — | 111,862 | |||||||||
| Long-term lease obligation | 13,057 | 13,037 | |||||||||
| Other long term liabilities | 446 | — | |||||||||
| Total liabilities | 21,310 | 135,734 | |||||||||
| Net parent investment | 101,173 | (6,309) | |||||||||
| Total liabilities and net parent investment | $ | 122,483 | $ | 129,425 | |||||||
| See accompanying notes to financial statements. | |||||||||||
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Eldorado Resort Casino Shreveport JTV
STATEMENT OF INCOME
(dollars in thousands)
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Casino | $ | 15,863 | $ | 20,182 | $ | 38,624 | $ | 63,812 | |||||||||||||||
| Food and beverage | 1,677 | 4,511 | 6,004 | 14,111 | |||||||||||||||||||
| Hotel | 2,422 | 2,959 | 5,076 | 8,276 | |||||||||||||||||||
| Other | 315 | 564 | 880 | 1,764 | |||||||||||||||||||
| Total revenues | 20,277 | 28,216 | 50,584 | 87,963 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Casino | 6,991 | 10,409 | 19,866 | 31,916 | |||||||||||||||||||
| Food and beverage | 1,001 | 3,244 | 4,499 | 10,617 | |||||||||||||||||||
| Hotel | 687 | 790 | 1,751 | 2,307 | |||||||||||||||||||
| Other | 138 | 374 | 561 | 1,107 | |||||||||||||||||||
| Marketing and promotions | 449 | 1,283 | 1,681 | 4,103 | |||||||||||||||||||
| General and administrative | 2,695 | 4,314 | 8,601 | 12,880 | |||||||||||||||||||
| Management fee | 615 | 851 | 1,531 | 2,658 | |||||||||||||||||||
| Depreciation and amortization | 1,739 | 1,893 | 5,299 | 5,649 | |||||||||||||||||||
| Total operating expenses | 14,315 | 23,158 | 43,789 | 71,237 | |||||||||||||||||||
| Operating income | 5,962 | 5,058 | 6,795 | 16,726 | |||||||||||||||||||
| Interest expenses | 522 | 1,958 | 4,437 | 5,873 | |||||||||||||||||||
| Net income | $ | 5,440 | $ | 3,100 | $ | 2,358 | $ | 10,853 | |||||||||||||||
| See accompanying notes to the financial statements. | |||||||||||||||||||||||
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Eldorado Resort Casino Shreveport JTV
STATEMENT OF CHANGES IN NET PARENT INVESTMENTS
(dollars in thousands)
| Balance at December 31, 2018 | $ | (645) | |||
| Net income | 4,401 | ||||
| Net distributions to parent | (4,469) | ||||
| Balance at March 31, 2019 | (716) | ||||
| Net income | 3,351 | ||||
| Net distributions to parent | (8,928) | ||||
| Balance at June 30, 2019 | (6,293) | ||||
| Net income | 3,101 | ||||
| Net distribution to parent | (3,117) | ||||
| Balance at September 30, 2019 | $ | (6,309) | |||
| Balance at December 31, 2019 | $ | (7,046) | |||
| Net loss | (110) | ||||
| Net distributions to parent | (7,300) | ||||
| Balance at March 31, 2020 | (14,456) | ||||
| Net loss | (2,975) | ||||
| Net distribution to parent | 5,719 | ||||
| Balance at June 30, 2020 | (11,709) | ||||
| Net income | 5,440 | ||||
| Net contribution from parent | 107,442 | ||||
| Balance at September 30, 2020 | $ | 101,173 | |||
| See accompanying notes to financial statements. | |||||
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Eldorado Resort Casino Shreveport JTV
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2020 and 2019
(dollars in thousands)
| 2020 | 2019 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 2,358 | $ | 10,853 | |||||||
| Adjustments to reconcile net loss to net cash | |||||||||||
| provided by operating activities | |||||||||||
| Depreciation and amortization | 5,299 | 5,649 | |||||||||
| Other | 40 | (102) | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 12 | 1,599 | |||||||||
| Inventory | 141 | 78 | |||||||||
| Prepaid expenses and other assets | (11) | (99) | |||||||||
| Interest payable | (3,263) | (1,958) | |||||||||
| Accounts payable and accrued expenses | 622 | 483 | |||||||||
| Net cash provided by operating activities | 5,198 | 16,503 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment, net of reimbursements | (526) | (3,086) | |||||||||
| Net cash used in investing activities | (526) | (3,086) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net contribution to parent | (6,896) | (16,518) | |||||||||
| Net used in financing activities | (6,896) | (16,518) | |||||||||
| Change in cash and cash equivalents | (2,224) | (3,101) | |||||||||
| Cash, cash equivalents at beginning of year | 8,850 | 11,165 | |||||||||
| Cash, cash equivalents at end of year | $ | 6,626 | $ | 8,064 | |||||||
| Non-cash investing and financing activities | |||||||||||
| Capital expenditures included in accounts payable | $ | 6 | $ | 7 | |||||||
| Gaming license contributed from parent | $ | 895 | $ | — | |||||||
| Settlement of debt | $ | 111,862 | $ | — | |||||||
| See accompanying notes to financial statements. | |||||||||||
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Eldorado Resort Casino Shreveport JTV
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
The accompanying financial statements include the accounts and transactions of Eldorado Resort Casino Shreveport JTV (“Company”) of which is a wholly-owned subsidiary of Caesars Entertainment, Inc. (“Parent” or “Caesars”). The Company owns and operates gaming, hospitality and entertainment businesses.
The accompanying financial statements as of and for the years ended December 31, 2019 and 2018 include the accounts and transactions of the Company and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The results for the period reflect all adjustments, which are of a normal recurring nature, that management considers necessary for a fair presentation of operating results.
The accompanying financial statements have been prepared from separate records maintained by the Parent and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had been operated as entities unaffiliated with the Parent. Portions of certain expenses represent allocations from the Parent. See Note 7, “Related-Party Transactions.”
On January 13, 2020, Parent entered into a definitive agreement to sell the Company. The transaction was completed on December 22, 2020.
Note 2. Summary of Significant Accounting Policies
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. Estimates used by management included, among other things, the useful lives for depreciable assets, the allowance for doubtful accounts receivable, cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill, and other intangible assets, and contingencies and litigation. Actual results could differ from those estimates.
Cash and Cash Equivalents—The Company consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents includes cash maintained for gaming operations.
Inventories—Inventories are stated at the lower of average cost, using a first-in, first-out basis, or net realizable value. Inventory consists primarily of uniforms, food and beverage and retail merchandise.
Property and Equipment—Property and equipment are stated at cost or fair value if acquired in a business combination. Depreciation is computed using the straight-line method over the estimated useful life of the asset or the term of the lease, whichever is less. Costs of major improvements are capitalized, while costs
5
Eldorado Resort Casino Shreveport JTV
NOTES TO FINANCIAL STATEMENTS
of normal repairs and maintenance are charged to expense as incurred. Gains or losses on dispositions of property and equipment are included in operating income.
Depreciation is computed using the straight-line method over the following estimated useful lives of the assets:
| Land improvements............................................. | 10 to 20 years | ||||
| Buildings and improvements............................... | 10 to 40 years | ||||
| Furniture, fixtures and equipment....................... | 3-15 years | ||||
| Riverboat............................................................. | 5 to 25 years | ||||
The Company evaluate their property and equipment and other long-lived assets to be held and used for impairment whenever indicators of impairment exist. The Company compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment charge is recorded. All recognized impairment losses are recorded as operating expenses. No impairment was recorded during the three and nine months ended September 30, 2020 and 2019.
Goodwill and Other Intangible Assets - Goodwill represents the excess of purchase price over the fair market value of net assets acquired in business combinations and has been allocated to each reporting units. Each of the Company are considered separate reporting units. Goodwill and indefinite-lived intangible assets are reviewed for impairment at least annually and between annual test dates in certain circumstances. No impairments were indicated as a result of the annual impairment review for goodwill and indefinite-lived intangible assets in 2020 and 2019.
Indefinite-lived intangible assets consist primarily of expenditures associated with obtaining racing and gaming licenses. Indefinite-lived intangible assets are not subject to amortization but are subject to an annual impairment test. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess amount. No impairment was recorded during the three and nine months ended September 30, 2020 and 2019.
Finite-lived intangible assets consist of trade names and player loyalty programs acquired in business combinations. Amortization is completed using the straight-line method over the estimated useful life of the asset. The Company evaluate for impairment whenever indicators of impairment exist. When indicators are noted, the Company then compare estimated undiscounted future cash flows to the carrying value of the asset. If the undiscounted future cash flows exceed the carrying value, no impairment is recorded. No impairment charges were recorded during the three and nine months ended September 30, 2020 and 2019.
Outstanding Chip Liability—The Company recognize the impact on gaming revenues on an annual basis to reflect an estimate of the change in the value of outstanding chips that are not expected to be redeemed.
6
Eldorado Resort Casino Shreveport JTV
NOTES TO FINANCIAL STATEMENTS
This estimate is determined by measuring the difference between the total value of chips placed in service less the value of chips under the Company’ control. This measurement is performed on an annual basis utilizing a methodology in which a consistent formula is applied to estimate the percentage value of chips not in custody that are not expected to be redeemed. In addition to the formula, certain judgments are made with regard to various denominations and souvenir chips. The outstanding chip liability is included in accrued other liabilities on the balance sheets.
Loyalty Program—The Company offer programs whereby participating customers can accumulate points for wagering that can be redeemed for credits for free play on slot machines, food and beverage, merchandise and in limited situations, cash. The incentives earned by customers under these programs are based on previous revenue transactions and represent separate performance obligations. Points earned, less estimated breakage, are recorded as a reduction of casino revenues at the retail value of such benefits owed to the customer and recognized as departmental revenue based on where such points are redeemed, upon fulfillment of the performance obligation. The loyalty program liability represents a deferral of revenue until redemption occurs, which is typically less than one year.
For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocate an amount to the loyalty point liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for a non-gaming good or service. An amount is allocated to the gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately. The loyalty point liability is deferred and recognized as revenue when the customer redeems the points for the non-gaming good or service at the time such goods or services are delivered to the customer.
Casino Revenue—The Company recognize as casino revenue the net win from gaming activities, which is the difference between gaming wins and losses, not the total amount wagered. Progressive jackpots are accrued and charged to revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives.
Gaming wager contracts involve two performance obligations for those customers earning points under the Company’ loyalty program and a single performance obligation for customers who don’t participate in the program. The Company apply a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract.
Complimentaries—The Company offer discretionary coupons and other discretionary complimentaries to customers outside of the loyalty program. The retail value of complimentary food, beverage and other services provided to customers, including loyalty point redemptions, is recognized in revenues when the goods or services are transferred to the customer. Complimentaries provided by third parties at the
7
Eldorado Resort Casino Shreveport JTV
NOTES TO FINANCIAL STATEMENTS
discretion and under the control of the Company is recorded as an expense when incurred. The Company’ revenues included complimentaries and loyalty point redemptions of $2.2 million and $6.6 million for the three and nine months ended September 30, 2020, respectively and $4.8 million and $14.4 million for the three and nine months ended September 30, 2019 respectively.
Non-gaming Revenue—Hotel, food and beverage and other operating revenues are recognized as services are performed. The transaction price for hotel, food and beverage contracts is the net amount collected from the customer for such goods and services. Food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred when the delivery is made for the food and beverage. The Company also provide goods and services that may include multiple performance obligations, such as packages, for which revenues are allocated on a pro rata basis based on each service's stand-alone selling price.
Advertising—Advertising costs are expensed the first time the related advertisement appears. Total advertising costs, including direct mail costs, totaled $0.1 million and $0.4 million for the three and nine months ended September 30, 2020, respectively and $0.1 million and $0.7 million for the three and nine months ended September 30, 2019, respectively.
Income Taxes –The Company is taxed as a partnership for federal and state income tax purposes. The accompanying financial statements do not include a provision for income taxes since any income or losses allocated to the Members are reportable for income tax purposes. Company’s income tax return and the amount of allocable income are subject to examination by federal and state taxing authorities. If an examination results in a change to our income, the Members’ taxes may also change.
Allowance for Doubtful Accounts—The Company reserve for receivables that may not be collected. Methodologies for estimating the allowance for doubtful accounts range from specific reserves to various percentages applied to aged receivables. Historical collection rates are considered, as are customer relationships, in determining specific reserves.
Note 3. Leases
The Company have operating leases for various real estate and equipment. Certain of the Company’ lease agreements include rental payments based on a percentage of sales over specified contractual amounts, and rental payments are adjusted periodically for inflation and based on usage. The Company’ leases include options to extend the lease term one month to one year.
8
Eldorado Resort Casino Shreveport JTV
NOTES TO FINANCIAL STATEMENTS
The components of lease expense are as follows (amounts are in thousands):
| For the three months ended September 30 | For the nine months ended September 30 | ||||||||||||||||||||||
| Lease Expense: | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Operating lease expense | $ | 277 | $ | 303 | $ | 849 | $ | 908 | |||||||||||||||
| Short-term and variable lease expense | 143 | 543 | 453 | 1,698 | |||||||||||||||||||
| Total lease expense | $ | 420 | $ | 845 | $ | 1,302 | $ | 2,606 | |||||||||||||||
Note 4. Property and Equipment, Net
Property and equipment, net consists of the following at September 30, 2020 and 2019 (amounts are in thousands):
| Property and equipment: | 2020 | 2019 | |||||||||
| Land and land improvements | $ | 9,429 | $ | 9,429 | |||||||
| Buildings and other leasehold improvements | 81,503 | 76,948 | |||||||||
| Furniture, fixtures and equipment | 53,490 | 58,284 | |||||||||
| Riverboat | 41,130 | 40,814 | |||||||||
| Construction in progress | 246 | 199 | |||||||||
| Total property and equipment | 185,798 | 185,674 | |||||||||
| Less accumulated depreciation and amortization | (100,583) | (99,639) | |||||||||
| Property and equipment, net | $ | 85,215 | $ | 86,035 | |||||||
The Company recorded depreciation expense of $1.7 million and $5.3 million during the three and nine months ended September 30, 2020, respectively and $1.9 million and $5.7 million during the three and Nine months ended September 30, 2019, respectively.
Note 5. Gaming License
Gaming licenses represent intangible assets acquired from the purchase of a gaming entity located in a gaming jurisdiction where competition is limited, such as when only a limited number of gaming operators are allowed to operate in the jurisdiction. These gaming license rights are not subject to amortization as the Company has determined that they have indefinite useful lives.
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Eldorado Resort Casino Shreveport JTV
NOTES TO FINANCIAL STATEMENTS
Note 6. Debt
7% Senior Notes due 2023
On July 23, 2015, the Parent issued at par $375.0 million in aggregate principal amount of 7.0% senior notes due 2023 (“7% Senior Notes due 2023”) pursuant to the Indenture, dated as of July 23, 2015 (the “2023 Indenture”), between the Parent and U.S. Bank, National Association, as Trustee. Of the $375.0 million borrowed, $13,0 million was allocated to the Company. The 7% Senior Notes due 2023 will mature on August 1, 2023, with interest payable semi-annually in arrears on February 1 and August 1 of each year.
In July 2020, the outstanding debt allocated to the Company’s was repaid.
Note 7. Related Party Transactions
Net parent investment—Net parent investments primarily arise from cash transfers between the Company and the Parent related to casino operations.
Note 8. Commitments and Contingencies
Litigation—The Company are engaged in various litigation matters. Although the ultimate liability of this litigation and these claims cannot be determined at this time, the Company believe there will not be a material adverse effect on the Company’ financial position or results of operations.
Note 9. Subsequent Event
In preparing these financial statements, the Company evaluated events and transactions for potential recognition or disclosure through February 12, 2021, the date the Company’ financial statements were available to be issued.
10
Exhibit 99.2
FINANCIAL STATEMENTS
Eldorado Resort Casino Shreveport JTV
As of and for the Years Ended December 31, 2019 and 2018
With Report of Independent Auditors
Eldorado Resort Casino Shreveport JTV
TABLE OF CONTENTS | ||||||||||||||||||||||||||||||||||||||
| Report of Independent Auditors | 1 | |||||||||||||||||||||||||||||||||||||
| Financial Statements: | ||||||||||||||||||||||||||||||||||||||
| Balance Sheets | 2 | |||||||||||||||||||||||||||||||||||||
| Statements of Income | 3 | |||||||||||||||||||||||||||||||||||||
| Statement of Changes in Parent Investment | 4 | |||||||||||||||||||||||||||||||||||||
| Statements of Cash Flows | 5 | |||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | 6 | |||||||||||||||||||||||||||||||||||||
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Caesars Entertainment, Inc.
We have audited the accompanying financial statements of Eldorado Resort Casino Shreveport JTV, which comprise the balance sheets as of December 31, 2018 and 2019, and the related statements of income, changes in net parent investment and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eldorado Resort Casino Shreveport JTV, at December 31, 2018 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
February 12, 2021
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Eldorado Resort Casino Shreveport JTV
Balance Sheets
(dollars in thousands)
| December 31, | |||||||||||||||||
| ASSETS | 2019 | 2018 | |||||||||||||||
| Current assets: | |||||||||||||||||
| Cash and cash equivalents | 8,850 | 11,165 | |||||||||||||||
| Accounts receivable, net | 1,871 | 3,345 | |||||||||||||||
| Inventories | 1,079 | 1,097 | |||||||||||||||
| Prepaid expenses and other assets | 388 | 346 | |||||||||||||||
| Total current assets | 12,188 | 15,953 | |||||||||||||||
| Property and equipment, net | 84,753 | 89,101 | |||||||||||||||
| Gaming licenses | 19,679 | 19,679 | |||||||||||||||
| Right-of-use assets | 11,925 | — | |||||||||||||||
| Other assets, net | 403 | 358 | |||||||||||||||
| Total assets | $ | 128,948 | $ | 125,091 | |||||||||||||
| LIABILITIES AND STOCKHOLDER'S EQUITY | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Accounts payable | 1,691 | 3,337 | |||||||||||||||
| Accrued property, gaming and other taxes | 921 | 1,206 | |||||||||||||||
| Accrued payroll and related | 1,595 | 1,668 | |||||||||||||||
| Accrued interest | 3,263 | 3,263 | |||||||||||||||
| Short-term lease obligation | 1,011 | — | |||||||||||||||
| Accrued other liabilities | 2,610 | 2,395 | |||||||||||||||
| Total current liabilities | 11,091 | 11,869 | |||||||||||||||
| Long-term debt | 111,862 | 111,862 | |||||||||||||||
| Long-term lease obligation | 13,041 | 2,005 | |||||||||||||||
| Total liabilities | 135,994 | 125,736 | |||||||||||||||
| Net parent investment | (7,046) | (645) | |||||||||||||||
| Total liabilities and net parent investment | $ | 128,948 | $ | 125,091 | |||||||||||||
| See accompanying notes to financial statements. | |||||||||||||||||
2
Eldorado Resort Casino Shreveport JTV
Statements of Income
For the years ended December 31,
(dollars in thousands)
| 2019 | 2018 | ||||||||||||||||
| Revenues: | |||||||||||||||||
| Casino | $ | 82,972 | $ | 90,400 | |||||||||||||
| Food and beverage | 18,504 | 20,898 | |||||||||||||||
| Hotel | 10,932 | 10,123 | |||||||||||||||
| Other | 2,336 | 2,709 | |||||||||||||||
| Total revenues | 114,744 | 124,130 | |||||||||||||||
| Operating expenses: | |||||||||||||||||
| Casino | 11,166 | 13,869 | |||||||||||||||
| Gaming Taxes | 28,052 | 31,039 | |||||||||||||||
| Food and beverage | 13,798 | 16,021 | |||||||||||||||
| Hotel | 3,059 | 3,260 | |||||||||||||||
| Other | 1,505 | 1,661 | |||||||||||||||
| Marketing and promotions | 5,605 | 6,979 | |||||||||||||||
| General and administrative | 19,568 | 19,895 | |||||||||||||||
| Management fees | 3,468 | 3,724 | |||||||||||||||
| Depreciation and amortization | 7,493 | 7,396 | |||||||||||||||
| Total operating expenses | 93,714 | 103,844 | |||||||||||||||
| (Loss) Gain on disposal of property and equipment | (7) | 648 | |||||||||||||||
| Operating income | 21,023 | 20,934 | |||||||||||||||
| Interest expense | (7,830) | (7,816) | |||||||||||||||
| Net income | $ | 13,193 | $ | 13,118 | |||||||||||||
| See accompanying notes to financial statements. | |||||||||||||||||
3
Eldorado Resort Casino Shreveport JTV
Statement of Changes in Net Parent Investment
(dollars in thousands)
| Balance at December 31, 2017 | $ | (1,024) | |||
| Net income | 13,118 | ||||
| Net distribution to Parent | (12,739) | ||||
| Balance at December 31, 2018 | (645) | ||||
| Net income | 13,193 | ||||
| Net distribution to Parent | (19,594) | ||||
| Balance at December 31, 2019 | $ | (7,046) | |||
| See accompanying notes to financial statements. | |||||
4
Eldorado Resort Casino Shreveport JTV
Statements of Cash Flows
For the years ended December 31,
(dollars in thousands)
| 2019 | 2018 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 13,193 | $ | 13,118 | |||||||
| Adjustments to reconcile net income to net cash | |||||||||||
| provided by operating activities: | |||||||||||
| Depreciation and amortization | 7,493 | 7,396 | |||||||||
| Loss (gain) on disposal of property and equipment | 7 | (648) | |||||||||
| Other | (156) | 43 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 1,630 | (473) | |||||||||
| Prepaid expenses and other assets | (69) | 20 | |||||||||
| Accounts payable and accrued expenses | (1,226) | (2,501) | |||||||||
| Net cash provided by operating activities | 20,872 | 16,955 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase of property and equipment | (3,593) | (3,332) | |||||||||
| Proceeds from property and equipment | — | 670 | |||||||||
| Net cash used in investing activities | (3,593) | (2,662) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Net distribution to parent | (19,594) | (12,739) | |||||||||
| Net used in financing activities | (19,594) | (12,739) | |||||||||
| Change in cash and cash equivalents | (2,315) | 1,554 | |||||||||
| Cash, cash equivalents at beginning of year | 11,165 | 9,611 | |||||||||
| Cash, cash equivalents at end of year | $ | 8,850 | $ | 11,165 | |||||||
| Non-cash investing and financing activities | |||||||||||
| Capital expenditures included in accounts payable | $ | 70 | $ | 511 | |||||||
| See accompanying notes to financial statements. | |||||||||||
5
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
Note 1. Organization and Basis of Presentation
The accompanying financial statements include the accounts and transactions of Eldorado Resort Casino Shreveport JTV (“Company”) of which is a wholly-owned subsidiary of Caesars Entertainment Inc. (“Parent” or “Caesars”). The Company owns a casino which operates as a gaming, hospitality and entertainment business.
The accompanying financial statements as of and for the years ended December 31, 2019 and 2018 include the accounts and transactions of the Company and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
The accompanying financial statements have been prepared from separate records maintained by the Parent and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had been operated as entities unaffiliated with the Parent. Portions of certain expenses represent allocations from the Parent. See Note 8, “Related-Party Transactions.”
On January 13, 2020, the Parent entered into a definitive agreement to sell the real property and outstanding equity interest in the Company to Bally’s Corporation (“Bally’s”) for approximately $140.0 million, subject to customary working capital adjustments. The sale was completed on December 22, 2020.
Note 2. Summary of Significant Accounting Policies
Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the financial statements, and (iii) the reported amounts of revenues and expenses during the reporting period. Estimates used by management included, among other things, the useful lives for depreciable assets, the allowance for doubtful accounts receivable, cash flows in assessing the recoverability of long-lived assets, asset impairments, goodwill, and other intangible assets, and contingencies and litigation. Actual results could differ from those estimates.
Cash and Cash Equivalents—The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents includes cash maintained for gaming operations.
Inventories—Inventories are stated at the lower of average cost, using a first-in, first-out basis, or net realizable value. Inventory consists primarily of uniforms, food and beverage and retail merchandise.
Property and Equipment—Property and equipment are stated at cost or fair value if acquired in a business combination. Depreciation is computed using the straight-line method over the estimated useful life of the asset or the term of the lease, whichever is less. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred. Gains or losses on dispositions of property and equipment are included in operating income.
6
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
Depreciation is computed using the straight-line method over the following estimated useful lives of the assets:
| Land improvements............................................. | 10 to 20 years | ||||
| Buildings and improvements............................... | 10 to 40 years | ||||
| Furniture, fixtures and equipment....................... | 3-15 years | ||||
| Riverboat............................................................. | 5 to 25 years | ||||
The Company evaluates their property and equipment and other long-lived assets to be held and used for impairment whenever indicators of impairment exist. The Company compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment charge is recorded. All recognized impairment losses are recorded as operating expenses. No impairments were recorded during the years ended December 31, 2019 and 2018.
Intangible Assets –Indefinite-lived intangible assets are reviewed for impairment at least annually and between annual test dates in certain circumstances. Indefinite‑lived intangible assets consist primarily of expenditures associated with obtaining gaming licenses. Indefinite‑lived intangible assets are not subject to amortization but are subject to an annual impairment test. If the carrying amount of an indefinite‑lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess amount. No impairments were recorded during the years ended December 31, 2019 and 2018.
Outstanding Chip Liability—The Company recognizes the impact on gaming revenues on an annual basis to reflect an estimate of the change in the value of outstanding chips that are not expected to be redeemed. This estimate is determined by measuring the difference between the total value of chips placed in service less the value of chips under the Company’s control. This measurement is performed on an annual basis utilizing a methodology in which a consistent formula is applied to estimate the percentage value of chips not in custody that are not expected to be redeemed. In addition to the formula, certain judgments are made with regard to various denominations and souvenir chips. The outstanding chip liability is included in accrued other liabilities on the Company’s balance sheet.
Loyalty Program—The Company offer programs whereby participating customers can accumulate points for wagering that can be redeemed for credits for free play on slot machines, food and beverage, merchandise and in limited situations, cash. The incentives earned by customers under these programs are based on previous revenue transactions and represent separate performance obligations. Points earned, less estimated breakage, are recorded as a reduction of casino revenues at the retail value of such benefits owed to the customer and recognized as departmental revenue based on where such points are redeemed, upon fulfillment of the performance obligation. The loyalty program liability represents a deferral of revenue until redemption occurs, which is typically less than one year.
7
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with the loyalty points earned, the Company allocates an amount to the loyalty point liability based on the stand-alone selling price of the points earned, which is determined by the value of a point that can be redeemed for a non-gaming good or service. An amount is allocated to the gaming wager performance obligation using the residual approach as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately. The loyalty point liability is deferred and recognized as revenue when the customer redeems the points for the non-gaming good or service at the time such goods or services are delivered to the customer.
Casino Revenue—The Company recognizes as casino revenue the net win from gaming activities, which is the difference between gaming wins and losses, not the total amount wagered. Progressive jackpots are accrued and charged to revenue at the time the obligation to pay the jackpot is established. Gaming revenues are recognized net of certain cash and free play incentives.
Gaming wager contracts involve two performance obligations for those customers earning points under the Company’s loyalty program and a single performance obligation for customers who don’t participate in the program. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract.
Complimentaries—The Company offers discretionary coupons and other discretionary complimentaries to customers outside of the loyalty program. The retail value of complimentary food, beverage and other services provided to customers, including loyalty point redemptions, is recognized in revenues when the goods or services are transferred to the customer. Complimentaries provided by third parties at the discretion and under the control of the Company is recorded as an expense when incurred. The Company’s revenues included complimentaries and loyalty point redemptions of $18.8 million and $21.4 million for the years ended December 31, 2019 and 2018.
Non-gaming Revenue—Hotel, food and beverage and other operating revenues are recognized as services are performed. The transaction price for hotel, food and beverage contracts is the net amount collected from the customer for such goods and services. Food and beverage services have been determined to be separate, stand-alone performance obligations and the transaction price for such contracts is recorded as revenue as the good or service is transferred when the delivery is made for the food and beverage. The Company also provides goods and services that may include multiple performance obligations, such as packages, for which revenues are allocated on a pro rata basis based on each service's stand-alone selling price.
Advertising—Advertising costs are expensed the first time the related advertisement appears. Total advertising costs, including direct mail costs, totaled $1.0 million and $1.6 million for the years ended December 31, 2019 and 2018.
8
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
Income Taxes –The Company is taxed as a partnership for federal and state income tax purposes. The accompanying financial statements do not include a provision for income taxes since any income or losses allocated to the Members are reportable for income tax purposes. Company’s income tax return and the amount of allocable income are subject to examination by federal and state taxing authorities. If an examination results in a change to our income, the Members’ taxes may also change.
Allowance for Doubtful Accounts—The Company reserves for receivables that may not be collected. Methodologies for estimating the allowance for doubtful accounts range from specific reserves to various percentages applied to aged receivables. Historical collection rates are considered, as are customer relationships, in determining specific reserves.
Recently Issued Accounting Pronouncements Implemented in 2019
In February 2016 (as amended through December 2018), the FASB issued ASU No. 2016-02 codified as Accounting Standards Codification (“ASC”) 842, Leases, (“ASC 842”) which addressed the recognition and measurement of leases. Under the new guidance, for all leases (with the exception of short-term leases), at the commencement date, lessees were required to recognize a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to control the use of a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. ASC 842 required a transition adoption election using either 1) a modified retrospective approach with periods prior to the adoption date being recast or 2) a prospective adoption approach with a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods continuing to be reported under current lease accounting guidance.
The Company adopted ASC 842 on January 1, 2019 using the prospective adoption approach, and therefore, comparative periods continue to be reported under current lease accounting guidance consistent with previously issued financial statements. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which among other things, allowed the Company to carry forward the historical lease identification, lease classification and treatment of initial direct costs for leases entered into prior to January 1, 2019. The Company also made an accounting policy election to not record short-term leases with an initial term of 12 months or less on the balance sheet for all classes of underlying assets. The Company also elected to not adopt the hindsight practical expedient for determining lease terms.
The operating leases, in which the Company is the lessee, are recorded on the balance sheet as a ROU asset with a corresponding lease liability. The lease liability is remeasured each reporting period with a corresponding change to the ROU asset. Upon adoption of ASC 842, the Company recorded a ROU asset and related operating lease liability totaling $14.5 million with no impact on the statement of income or statement of cash flows.
9
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
Note 3. Leases
The Company’s management determines if a contract is or contains a lease at inception or modification of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.
Finance and operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date. As the implicit rate is not determinable in most of the Company’s leases, management uses the Parent’s incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. The expected lease terms include options to extend or terminate the lease when it is reasonably certain the Company will exercise such options. Lease expense for operating leases with minimum lease payments is recognized on a straight-line basis over the expected lease term.
The Company’s lease arrangements have lease and non-lease components. For leases in which the Company is the lessee, the Company accounts for the lease components and non-lease components as a single lease component for all classes of underlying assets. Leases, in which the Company is the lessor, are substantially all accounted for as operating leases and the lease components and non-lease components are accounted for separately, which is consistent with the Company’s historical accounting. Leases with an expected or initial term of 12 months or less are not accounted for on the balance sheet and the related lease expense is recognized on a straight-line basis over the expected lease term.
The Company has operating leases for various real estate and equipment. Certain of the Company’s lease agreements include rental payments based on a percentage of sales over specified contractual amounts, and rental payments are adjusted periodically for inflation and based on usage. The Company’s leases include options to extend the lease term one month to one year.
Leases recorded on the balance sheet consist of the following:
| Leases | Classification on the Balance Sheet | December 31, 2019 | |||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Operating lease ROU assets | Right of use assets | $ | 11,925 | ||||||||||||||||||||
LIABILITIES | |||||||||||||||||||||||
| Current: | |||||||||||||||||||||||
| Operating | Short-term lease obligation | $ | 1,011 | ||||||||||||||||||||
| Noncurrent: | |||||||||||||||||||||||
| Operating | Long-term lease obligation | $ | 13,041 | ||||||||||||||||||||
10
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
Other information related to lease terms and discount rates are as follows as of December 31, 2019:
| Weighted Average Remaining Lease Term | |||||||||||||||||
| Operating Leases | 31.4 years | ||||||||||||||||
Weighted Average Discount Rate | |||||||||||||||||
| Operating Leases(1) | 7.1% | ||||||||||||||||
(1)Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.
The components of lease expense are as follows for the year ended December 31, 2019:
| Operating lease expense | $ | 1,211 | ||||||||||||
| Short-term and variable lease expense | 1,329 | |||||||||||||
| Total lease expense | $ | 2,540 | ||||||||||||
Total lease expense for the year ended December 31, 2018 was $3,074.
Supplemental cash flow information related to leases is as follows for the year ended December 31, 2019:
| Cash paid for amounts included in the measurement of lease liabilities (amounts are in thousands): | |||||||||||
| Operating cash flows for operating leases | $ | 1,089 | |||||||||
In addition to the payments made for operating leases noted above, the Company paid $1.3 million for short-term and variable leases.
Maturities of lease liabilities are summarized as follows:
| Year ending December 31, | ||||||||||||||
| 2020 | $ | 1,011 | ||||||||||||
| 2021 | 1,032 | |||||||||||||
| 2022 | 1,032 | |||||||||||||
| 2023 | 1,032 | |||||||||||||
| 2024 | 1,032 | |||||||||||||
| Thereafter | 30,687 | |||||||||||||
| Total future minimum lease payments | 35,826 | |||||||||||||
| Less: amount representing interest | (21,774) | |||||||||||||
| Present value of future minimum lease payments | 14,052 | |||||||||||||
| Less: current lease obligations | (1,011) | |||||||||||||
| Long-term lease obligations | $ | 13,041 | ||||||||||||
11
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
Note 4. Property and Equipment, Net
Property and equipment, net consists of the following:
| December 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| Land and land improvements | $ 9,429 | $ 9,429 | |||||||||
| Buildings and other leasehold improvements | 81,280 | 80,913 | |||||||||
| Furniture, fixtures and equipment | 53,343 | 51,447 | |||||||||
| Riverboat | 41,026 | 41,023 | |||||||||
| Construction in progress | 275 | 449 | |||||||||
| Total property and equipment | 185,353 | 183,261 | |||||||||
| Less accumulated depreciation and amortization | (100,600) | ( 94,160) | |||||||||
| Property and equipment, net | $ 84,753 | $ 89,101 | |||||||||
The Company recorded depreciation expense of $7.5 million and $7.4 million during the years ended December 31, 2019 and 2018.
Note 5. Gaming License
Gaming licenses represent intangible assets acquired from the purchase of a gaming entity located in a gaming jurisdiction where competition is limited, such as when only a limited number of gaming operators are allowed to operate in the jurisdiction. These gaming license rights are not subject to amortization as the Company has determined that they have indefinite useful lives.
Note 6. Debt
7% Senior Notes due 2023
On July 23, 2015, the Parent issued at par $375.0 million in aggregate principal amount of 7.0% senior notes due 2023 (“7% Senior Notes due 2023”) pursuant to the Indenture, dated as of July 23, 2015 (the “2023 Indenture”), between the Parent and U.S. Bank, National Association, as Trustee. Of the $375.0 million borrowed, $111.9 million was allocated to the Company. The 7% Senior Notes due 2023 will mature on August 1, 2023, with interest payable semi-annually in arrears on February 1 and August 1 of each year. In July 2020, the outstanding debt allocated to the Company’s was repaid.
Note 7. Employee Benefit Plan
The Company participate in a 401(k) plan sponsored by the Parent covering substantially all of the Company’s employees. The Company’s contribution expense related to this plan was $0.3 million and $0.2 million for the years ended December 31, 2019 2018. This plan allows for an employer contribution up to 50 percent of the first six percent of each participating employee’s contribution, subject to statutory and certain other limits.
12
Eldorado Resorts Casino Shreveport JTV
Notes to Financial Statements
December 31, 2019 and 2018
(amounts are in thousands)
Note 8. Related Party Transactions
Net parent investment—Net parent investments primarily arise from cash transfers between the Company and the Parent related to casino operations.
Overhead charges and management fees—The Company has a shared services agreements with the Parent. Under the agreements, the Company is charged a fixed overhead rate to cover information systems, marketing, e-commerce and other corporate activities. The Company expensed $1.0 million in overhead charges during the years ended December 31, 2019 and 2018, which is included in general and administrative expense in the combined Statement of Income. In addition, under the agreement, the Parent provides certain management, administrative and corporate services to the Company in exchange for a fee. The Company expensed $3.4 million and $3.7 million for shared services during the years ended December 31, 2019 and 2018, respectively which was included in management fees in the combined statements of operations.
Note 9. Commitments and Contingencies
Litigation—The Company is engaged in various litigation matters. Although the ultimate liability of this litigation and these claims cannot be determined at this time, the Company believe there will not be a material adverse effect on the Company’s financial position or results of operations.
Note 10. Subsequent Event
In preparing these financial statements, the Company evaluated events and transactions for potential recognition or disclosure through February 12, 2021, the date the Company’s financial statements were available to be issued.
13
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements are presented to illustrate the estimated effects of the acquisitions (the “Acquisitions”) by Twin River Management Group, a Delaware corporation and wholly owned subsidiary of Bally's Corporation, a Delaware corporation (“Bally's” or the “Company”), of IOC-Kansas City, Inc. (“Casino KC”), Rainbow Casino-Vicksburg Partnership, L.P. (“Casino Vicksburg”) and Eldorado Resort Casino Shreveport (“Shreveport”) (collectively the "Acquired Companies" ) from Caesars Entertainment, Inc. (“Caesars”), formerly Eldorado Resorts, Inc.
On July 1, 2020, the Company closed its acquisition of the outstanding equity securities of each of Casino KC and Casino Vicksburg from Caesars for an aggregated purchase price of $230,000,000 in cash, subject to customary post-closing adjustments pursuant to the terms of an Equity Purchase Agreement dated July 10, 2019 among Bally's, Caesars, and various of their affiliates. This acquisition was funded with available cash on hand at July 1, 2020 the source of which was from borrowings under the Company's existing debt arrangements.
On December 23, 2020, the Company closed its acquisition of the outstanding equity securities of Shreveport from Caesars for a purchase price of $140,000,000 in cash, subject to customary post-closing adjustments pursuant to the terms of an Equity Purchase Agreement dated April 24, 2020 among Bally's, Caesars, and certain of their affiliates. This acquisition was funded with available cash on hand at December 23, 2020 the source of which was from borrowings under the Company's existing debt arrangements.
The Acquisitions are being accounted for as business combinations using the acquisition method with Bally's as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). Under this method of accounting the respective purchase prices for the Acquisitions will be allocated to the Acquired Companies’ assets acquired and liabilities assumed based upon their estimated fair values at the date of consummation of the Acquisitions.
The following unaudited pro forma condensed combined financial statements illustrate the effects of the acquisitions of Casino KC and Casino Vicksburg, which closed on July 1, 2020, and Shreveport, which closed December 23, 2020.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2020 and the unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2020 and the twelve months ended December 31, 2019 (collectively, the “Pro Forma Statements”) have been prepared in accordance with Article 11 of Regulation S-X, as amended by Securities and Exchange Commission (“SEC’) Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses using accounting policies in accordance with U.S. GAAP. The unaudited pro forma condensed combined financial information is based on Bally's and the Acquired Companies historical consolidated financial statements as adjusted to give effect to the Acquisitions.
Accounting policies used in the preparation of the Pro Forma Statements are based on the unaudited financial statements of Bally's for the nine months ended September 30, 2020 and the audited consolidated financial statements of Bally's for the year ended December 31, 2019.
The pro forma adjustments are based on preliminary estimates and currently available information and assumptions that Bally's management believes are reasonable. The notes to the Pro Forma Statements describe how such adjustments were derived and presented in the Pro Forma Statements. Changes in facts and circumstances or discovery of new information may result in revised estimates. As a result, there may be material adjustments to the Pro Forma Statements. Certain Acquired Companies' historical financial statement caption amounts have been reclassified or combined to conform to Bally's presentation and disclosure requirements.
The Pro Forma Statements should be read in conjunction with the unaudited consolidated financial statements and related notes of Bally's and the unaudited financial statements and related notes of Shreveport as of and for the nine months ended September 30, 2020, the unaudited combined financial statements and related notes of Casino KC and Casino Vicksburg as of and for the six months ended June 30, 2020 and the audited consolidated financial statements and related notes of Bally's and the Acquired Companies as of and for the year ended December 31, 2019.
The unaudited pro forma condensed combined balance sheet combines the balance sheet of Bally's as for September 30, 2020 with the balance sheet of Shreveport as of September 30, 2020 and gives effect the acquisition of Shreveport as if it occurred on September 30, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 combines the consolidated statement of operations of Bally’s for the year ended December 31, 2019 with the Acquired Companies consolidated statement of income for the year ended December 31, 2019 and gives effect to the Acquisitions as if they had occurred on January 1, 2019. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2020 combines the condensed consolidated statement of operations of Bally’s for the nine months ended September 30, 2020 with the Acquired Companies condensed consolidated statement of operations for the six months ended June 30, 2020 in the case of Casino Kansas City and Casino Vicksburg, and nine months ended September 30, 2020 in the case of Shreveport and gives effect to the Acquisitions as if they had occurred on January 1, 2019. Bally’s results of operations included the operations of Casino KC and Casino Vicksburg as of July 1, 2020 and through September 30, 2020.
The unaudited Pro Forma Statements reflect transaction related adjustments management believes are necessary to present fairly Bally’s pro forma balance sheet and results of operations.
The Pro Forma Statements are presented for illustrative purposes only and may not be indicative of the results of operations that would have occurred if the events reflected therein had been in effect on the dates indicated or the results which may be obtained in the future. In preparing the Pro Forma Statements, no adjustments have been made to reflect the potential operating synergies and administrative cost savings or the costs of integration activities that could result from the combination of Bally's and the Acquired Companies.
The Pro Forma Statements include adjustments to record assets and liabilities of the Acquired Companies at their estimated respective fair values based on available information and to give effect to the financing for the Acquisitions. The Pro Forma adjustments included herein are subject to change depending on changes in the components of assets and liabilities and as additional analyses are performed. The final allocation of the purchase prices for the Acquisitions will be determined after completion of a thorough analysis to determine the fair value of the Acquired Companies' tangible and identifiable intangible assets and liabilities as of the date the purchases were completed. Increases or decreases in the estimated fair values of the net assets as compared with the information shown in the Pro Forma Statements may change the amount of the purchase price allocated to goodwill, bargain purchase gain and other assets and liabilities, and may impact the Company’s statement of operations in future periods.
Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2020
(in thousands)
Bally's | Shreveport | Transaction Accounting Adjustments | Note 3 | Pro Forma Combined | |||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 114,995 | $ | 6,626 | $ | (22,000) | (a) | $ | 99,621 | ||||||||||||||||||||
| Restricted cash | 1,859 | — | — | 1,859 | |||||||||||||||||||||||||
| Accounts receivable, net | 17,839 | 1,819 | — | 19,658 | |||||||||||||||||||||||||
| Inventory | 8,575 | 938 | — | 9,513 | |||||||||||||||||||||||||
| Prepaid expenses and other assets | 51,493 | 399 | — | 51,892 | |||||||||||||||||||||||||
| Total current assets | 194,761 | 9,782 | (22,000) | 182,543 | |||||||||||||||||||||||||
| Property and equipment, net | 595,520 | 79,916 | 45,906 | (b) | 721,342 | ||||||||||||||||||||||||
| Right of use assets, net | 27,346 | 11,808 | (2,548) | (b) | 36,606 | ||||||||||||||||||||||||
| Goodwill | 186,571 | — | — | 186,571 | |||||||||||||||||||||||||
| Intangible assets, net | 247,390 | 20,574 | 37,566 | (b) | 305,530 | ||||||||||||||||||||||||
| Other assets | 5,293 | 403 | — | 5,696 | |||||||||||||||||||||||||
| Total assets | $ | 1,256,881 | $ | 122,483 | $ | 58,924 | $ | 1,438,288 | |||||||||||||||||||||
| Liabilities and Shareholders' Equity | — | ||||||||||||||||||||||||||||
| Current portion of long-term debt | $ | 5,750 | $ | — | $ | — | $ | 5,750 | |||||||||||||||||||||
| Current portion of lease obligations | 1,456 | 969 | (910) | (b) | 1,515 | ||||||||||||||||||||||||
| Accounts payable | 13,840 | 1,497 | — | 15,337 | |||||||||||||||||||||||||
| Accrued liabilities | 75,029 | 2,508 | 2,833 | (c) | 80,370 | ||||||||||||||||||||||||
| Accrued property, gaming and other taxes | — | 1,522 | (1,522) | (c) | — | ||||||||||||||||||||||||
| Accrued payroll and related | — | 1,311 | (1,311) | (c) | — | ||||||||||||||||||||||||
| Accrued income taxes payable | — | — | — | — | |||||||||||||||||||||||||
| Intercompany debt | — | — | — | — | |||||||||||||||||||||||||
| Total current liabilities | 96,075 | 7,807 | (910) | 102,972 | |||||||||||||||||||||||||
| Lease obligations, net of current portion | 49,993 | 13,057 | 1,424 | (b) | 64,474 | ||||||||||||||||||||||||
| Pension benefit obligations | 7,785 | — | — | 7,785 | |||||||||||||||||||||||||
| Deferred tax liability | 7,581 | — | 13,580 | (b) | 21,161 | ||||||||||||||||||||||||
| Long-term debt, net of current portion | 937,632 | — | 118,000 | (a) | 1,055,632 | ||||||||||||||||||||||||
| Other long-term liabilities | 1,650 | 446 | — | 2,096 | |||||||||||||||||||||||||
| Total liabilities | 1,100,716 | 21,310 | 132,094 | 1,254,120 | |||||||||||||||||||||||||
| Commitments and contingencies | |||||||||||||||||||||||||||||
| Shareholders' equity: | |||||||||||||||||||||||||||||
| Common stock | 304 | — | — | 304 | |||||||||||||||||||||||||
| Additional paid-in-capital | 143,180 | — | — | 143,180 | |||||||||||||||||||||||||
| Treasury stock | — | — | — | — | |||||||||||||||||||||||||
| Retained earnings | 14,569 | 101,173 | (73,170) | (d) | 42,572 | ||||||||||||||||||||||||
| Accumulated other comprehensive loss | (1,888) | — | — | (1,888) | |||||||||||||||||||||||||
| Total shareholders'equity | 156,165 | 101,173 | (73,170) | 184,168 | |||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 1,256,881 | $ | 122,483 | $ | 58,924 | $ | 1,438,288 | |||||||||||||||||||||
Unaudited Pro Forma Condensed Combined Statement of Income - Nine Months Ended September 30, 2020
(in thousands, except share and per share amounts)
| Bally's | Acquired Companies | Transaction Accounting Adjustments | Note 3 | Pro Forma Combined | |||||||||||||||||||||||||||||||||||||
| Revenues | $ | 254,696 | $ | 75,714 | $ | — | $ | 330,410 | |||||||||||||||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||||||||||||||||||||
| Gaming, racing, hotel and food and beverage, retail, entertainment and other | 95,295 | 37,170 | (1,811) | (e) | 130,654 | ||||||||||||||||||||||||||||||||||||
| Marketing and promotions | — | 2,825 | (2,825) | (e) | — | ||||||||||||||||||||||||||||||||||||
| Advertising, general and administrative | 117,594 | 17,669 | 4,636 | (e) | 141,788 | ||||||||||||||||||||||||||||||||||||
| (156) | (f) | ||||||||||||||||||||||||||||||||||||||||
| 2,045 | (g) | ||||||||||||||||||||||||||||||||||||||||
| — | (h) | ||||||||||||||||||||||||||||||||||||||||
| Management fee | — | 2,045 | (2,045) | (g) | — | ||||||||||||||||||||||||||||||||||||
| Acquisition, integration and restructuring | 6,984 | — | — | (h) | 6,984 | ||||||||||||||||||||||||||||||||||||
| Goodwill and asset impairment | 8,554 | — | — | 8,554 | |||||||||||||||||||||||||||||||||||||
| Gain on insurance recoveries | (1,036) | — | — | (1,036) | |||||||||||||||||||||||||||||||||||||
| Depreciation and amortization of intangibles | 28,054 | 8,212 | 43 | (i) | 35,846 | ||||||||||||||||||||||||||||||||||||
| (463) | (j) | ||||||||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | 255,445 | 67,921 | (576) | 322,790 | |||||||||||||||||||||||||||||||||||||
| (Loss) income from operations | (749) | 7,793 | 576 | 7,620 | |||||||||||||||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||||||||||||||
| Interest income | 297 | — | — | 297 | |||||||||||||||||||||||||||||||||||||
| Interest expense, net of amounts capitalized | (43,688) | (6,167) | 6,167 | (k) | (49,952) | ||||||||||||||||||||||||||||||||||||
| (6,264) | (l) | ||||||||||||||||||||||||||||||||||||||||
| Total other income (expense) | (43,391) | (6,167) | (97) | (49,655) | |||||||||||||||||||||||||||||||||||||
| (Loss) income before provision for income taxes | (44,140) | 1,626 | 479 | (42,035) | |||||||||||||||||||||||||||||||||||||
| (Benefit) provision for income taxes | (18,430) | 322 | 558 | (m) | (17,550) | ||||||||||||||||||||||||||||||||||||
| Net (loss) income | $ | (25,710) | $ | 1,304 | $ | (79) | $ | (24,485) | |||||||||||||||||||||||||||||||||
| Net loss per common share: | |||||||||||||||||||||||||||||||||||||||||
| Basic | $ | (0.83) | $ | (0.79) | |||||||||||||||||||||||||||||||||||||
| Diluted | $ | (0.83) | $ | (0.79) | |||||||||||||||||||||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||||||||||||||||||||
| Basic | 30,825 | 30,825 | |||||||||||||||||||||||||||||||||||||||
| Diluted | 30,825 | 30,825 | |||||||||||||||||||||||||||||||||||||||
Unaudited Pro Forma Condensed Combined Statement of Income - Year Ended December 31, 2019
(in thousands, except share and per share amounts)
| Bally's | Acquired Companies | Transaction Accounting Adjustments | Note 3 | Pro Forma Combined | |||||||||||||||||||||||||||||||||||||
| Revenues | $ | 523,577 | $ | 198,559 | $ | — | $ | 722,136 | |||||||||||||||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||||||||||||||||||||
| Gaming, racing, hotel, food and beverage, retail, entertainment and other | 185,172 | 90,084 | — | 275,256 | |||||||||||||||||||||||||||||||||||||
| Marketing and promotions | — | 9,199 | (9,199) | (e) | — | ||||||||||||||||||||||||||||||||||||
| Advertising, general and administrative | 180,400 | 42,911 | 9,227 | (e) | 237,268 | ||||||||||||||||||||||||||||||||||||
| (512) | (f) | ||||||||||||||||||||||||||||||||||||||||
| 5,242 | (g) | ||||||||||||||||||||||||||||||||||||||||
| — | (h) | ||||||||||||||||||||||||||||||||||||||||
| Management fee | — | 5,242 | (5,242) | (g) | — | ||||||||||||||||||||||||||||||||||||
| Acquisition, integration and restructuring | 12,168 | — | — | (h) | 12,168 | ||||||||||||||||||||||||||||||||||||
| Gain on insurance recoveries | (1,181) | — | — | (1,181) | |||||||||||||||||||||||||||||||||||||
| Loss on disposal of property and equipment | — | 28 | (28) | (e) | — | ||||||||||||||||||||||||||||||||||||
| Depreciation and amortization of intangibles | 32,392 | 14,027 | 111 | (i) | 44,192 | ||||||||||||||||||||||||||||||||||||
| (2,338) | (j) | ||||||||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | 408,951 | 161,491 | (2,739) | 567,703 | |||||||||||||||||||||||||||||||||||||
| Income from operations | 114,626 | 37,068 | 2,739 | 154,433 | |||||||||||||||||||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||||||||||||||||||||
| Interest income | 1,904 | — | — | 1,904 | |||||||||||||||||||||||||||||||||||||
| Interest expense, net of amounts capitalized | (39,830) | (13,050) | 13,050 | (k) | (59,662) | ||||||||||||||||||||||||||||||||||||
| (19,832) | (l) | ||||||||||||||||||||||||||||||||||||||||
| Gain on bargain purchase | — | — | 29,153 | (n) | 29,153 | ||||||||||||||||||||||||||||||||||||
| Loss on extinguishment and modification of debt | (1,703) | — | — | (1,703) | |||||||||||||||||||||||||||||||||||||
| Other income | 183 | — | — | 183 | |||||||||||||||||||||||||||||||||||||
| Total other income (expense) | (39,446) | (13,050) | 22,371 | (30,125) | |||||||||||||||||||||||||||||||||||||
| Income before provision for income taxes | 75,180 | 24,018 | 25,110 | 124,308 | |||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 20,050 | 3,024 | 10,078 | (m) | 33,152 | ||||||||||||||||||||||||||||||||||||
| Net income | $ | 55,130 | $ | 20,994 | $ | 15,032 | $ | 91,156 | |||||||||||||||||||||||||||||||||
| Net income per common share: | |||||||||||||||||||||||||||||||||||||||||
| Basic | $ | 1.46 | $ | 2.42 | |||||||||||||||||||||||||||||||||||||
| Diluted | $ | 1.46 | $ | 2.41 | |||||||||||||||||||||||||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||||||||||||||||||||
| Basic | 37,705 | 37,705 | |||||||||||||||||||||||||||||||||||||||
| Diluted | 37,820 | 37,820 | |||||||||||||||||||||||||||||||||||||||
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
Note 1 — Description of Transaction and Basis of Presentation
The unaudited pro forma condensed combined financial information was prepared in accordance with GAAP and pursuant to the rules and regulations of SEC Regulation S-X and presents the pro forma financial position and results of operations of the combined companies based upon the historical financial information of Bally's and the Acquired Companies.
Basis of Presentation
The pro forma financial information has been prepared by Bally’s in accordance with Article 11 of Regulation S-X, as amended by SEC Final Rule Release No. 33-10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses. The pro forma financial information is not necessarily indicative of what Bally’s consolidated statements of operations or consolidated balance sheet would have been had the Acquisitions been completed as of the dates indicated or will be for any future periods. The pro forma financial statements do not purport to project the future financial position or results of operations of Bally’s following the Acquisitions. The pro forma financial information reflects transaction related adjustments management believes are necessary to present fairly Bally’s pro forma balance sheet and results of operations assuming the Acquisitions had been consummated as of September 30, 2020 and January 1, 2019, respectively. The transaction related adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, and reflective of adjustments necessary to report Bally’s financial condition and results of operations as a result of the closing of the Acquisitions.
Bally's has concluded that the Acquisitions represent business combinations pursuant to ASC 805. Bally's has completed a preliminary external valuation analysis of the fair market value of the Acquired Companies' assets acquired and liabilities assumed. Using the total consideration for the transactions, Bally's has preliminarily allocated the purchase price to such assets and liabilities as of the acquisition dates. These preliminary purchase price allocations have been used to prepare pro forma adjustments in the Pro Forma Statements. The final purchase price allocations will be determined when Bally's has completed the detailed valuations and other studies and necessary calculations. The final purchase price allocations could differ materially from the preliminary purchase price allocations. The final purchase price allocations may include changes in allocations to intangible assets, goodwill and bargain purchase based on the results of certain valuations and other studies that have yet to be completed and other changes to assets and liabilities.
Items Not Adjusted in the Unaudited Pro Forma Condensed Combined Financial Information
Bally's anticipates that the Acquisitions will result in increased revenues and operating income as a result of reinvestment in the properties and increased marketing spend. The Company expects to invest approximately $40 million of capital to reposition Casino KC, in addition to increased marketing spend to recapture market share at the Acquired Companies. No assurances can be made that Bally's will be able to achieve these revenue and operating income increases, will spend the estimated capital or when any amounts would be realized/incurred, and no such amounts have been reflected in the Pro Forma Statements.
Note 2 — Preliminary Purchase Price Allocations
Casino KC and Casino Vicksburg
The acquisition of Casino KC and Casino Vicksburg, which closed on July 1, 2020, resulted in Bally's acquiring all of the outstanding equity securities of Casino KC and Casino Vicksburg for an aggregate purchase price of $230 million in cash, subject to certain customary post-closing adjustments. The Company acquired both the operations and real estate of Casino KC and Casino Vicksburg.
Bally's has performed a preliminary valuation analysis of the fair market value of Casino KC and Casino Vicksburg's assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of the acquisition date (in thousands):
| Preliminary as of July 1, 2020 | |||||
| Cash | $ | 4,362 | |||
| Accounts receivable | 582 | ||||
| Inventory | 164 | ||||
| Prepaid expenses and other assets | 686 | ||||
| Property and equipment | 60,865 | ||||
| Right of use asset | 10,315 | ||||
| Intangibles | 138,160 | ||||
| Other assets | 117 | ||||
| Goodwill | 53,896 | ||||
| Accounts payable | (614) | ||||
| Accrued and other current liabilities | (3,912) | ||||
| Lease obligations | (34,452) | ||||
| Other long-term liabilities | (306) | ||||
| Total purchase price | $ | 229,863 | |||
Under the acquisition method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of Shreveport based on its estimated fair value as of the closing date.
Shreveport
The acquisition of Shreveport, which closed on December 23, 2020, resulted in Bally's acquiring all of the outstanding equity securities of Shreveport for a purchase price of $140 million in cash, subject to certain customary post-closing adjustments. The Company acquired both the operations and real estate of Shreveport.
Bally's has performed a preliminary valuation analysis of the fair market value of Shreveport's assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of the acquisition date (in thousands):
| Debit/(Credit) | |||||
| Cash | $ | 6,626 | |||
| Accounts receivable | 1,819 | ||||
| Inventory | 938 | ||||
| Prepaid expenses and other assets | 399 | ||||
| Property and equipment | 125,822 | ||||
| Right of use asset | 9,260 | ||||
| Intangible assets | 58,140 | ||||
| Other assets | 403 | ||||
| Goodwill | — | ||||
| Accounts payable | (1,497) | ||||
| Accrued and other current liabilities | (5,341) | ||||
| Lease obligations | (14,540) | ||||
| Deferred income tax liabilities | (13,580) | ||||
| Other long-term liabilities | (446) | ||||
| Bargain purchase gain | (28,003) | ||||
| Total purchase price | $ | 140,000 | |||
Under the acquisition method of accounting, the fair value of the acquired tangible and intangible assets and assumed liabilities of Shreveport is estimated as of the closing date, with any excess fair value over the total purchase price recognized as a bargain purchase gain.
Note 3 — Pro forma adjustments
The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:
(a) Had the transaction closed on September 30, 2020, the Company would have funded the $140 million purchase price with $22 million of cash and $118 million of borrowings under it's existing Credit Facility.
(b) Represents the elimination of the Net parent investment at Shreveport and the initial allocation of purchase price to identified intangibles, fair value adjustments and resulting bargain purchase gain as of September 30, 2020 as follows (in thousands):
| Total consideration | $ | 140,000 | |||
| Net parent investment | (101,173) | ||||
| Write-down/(write-up) of assets: | |||||
| Property and equipment, net | (45,906) | ||||
| Right of use assets | 2,548 | ||||
| Intangible assets | (37,566) | ||||
| (Write-down)/write-up of liabilities: | |||||
| Short-term lease obligations | (910) | ||||
| Long-term lease obligations | 1,424 | ||||
| Deferred income taxes | 13,580 | ||||
| Bargain purchase gain | $ | (28,003) | |||
(c) Represents the reclassification of balance sheet accounts at Shreveport to conform to the presentation used by Bally's.
(d) Represents the elimination of retained earnings of Shreveport of $101,173 less a bargain purchase gain of $28,003 recorded on the Acquisition as of September 30, 2020.
(e) Represents the reclassification of balances included in Gaming, racing, hotel, food and beverage, retail, entertainment and other, Marketing and promotions and Loss on disposal of property and equipment that Bally's includes in Advertising, general and administrative expenses.
(f) Represents the lease expense adjustment related to the change in right of use asset and lease liability for the Shreveport ground lease and the Casino KC Port City lease in place in Kansas City.
(g) Represents the reclassification to Advertising general and administrative expenses of management fees paid to Eldorado by the Acquired Companies of $2.0 million and $5.2 million for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively, which are not expected to recur. Also included within Advertising, general and administrative expenses for the Acquired Companies are corporate allocations of $2.0 million and $3.2 million for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively which are not expected to recur.
(h) Included in Advertising, general and administrative expenses for the Acquired Companies were transaction costs of $0.6 million and $0.9 million for the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively. Included in Acquisition, integration and restructuring expenses for Bally's were transaction costs of $1.6 million and $1.3 million during the nine months ended September 30, 2020 and the year ended December 31, 2019, respectively. These transaction costs are not expected to recur.
(i) Represents the amortization of intangible assets related to the Acquisitions over a three- to ten-year period as if the Acquisitions occurred on January 1, 2019. The estimated useful lives were determined based on a review of the time period over which economic benefit is estimated to be generated as well as additional factors. Factors considered include contractual life, the period over which a majority of cash flow is expected to be generated or management’s view based on historical experience with similar assets.
(j) Represents the depreciation adjustment of acquired “property and equipment” resulting from the fair value adjustment of these assets relating to the Acquisitions. Bally's estimated that the fair value of property and equipment was greater than Shreveport's book value by $45.9 million but less than Casino KC and Casino's book value by $8.0 million. Therefore, depreciation expense would increase by $0.3 million, or decrease $0.5 million on a combined basis with Casino KC and Casino Vicksburg, for the nine months ended September 30, 2020 and increase by $0.03 million, or decrease $2.3 million on a combined basis with Casino KC and Casino Vicksburg, for the year ended December 31, 2019 using the straight-line method of depreciation. The estimated remaining useful lives of acquired property and equipment range from 2 years to 40 years.
(k) Represents the reversal of interest expense on the intercompany loan on the books of the Acquired Companies during the nine months ended September 30, 2020 and the year ended December 31, 2019.
(l) Represents interest expense for borrowings that would have been needed to finance both the $230 million purchase price of Casino KC and Casino Vicksburg and the $140 million purchase price for Shreveport on the books of Bally's had the Acquisitions closed on January 1, 2019. The adjustment to record interest expense assumes the additional debt was obtained on January 1, 2019 for both transactions and was outstanding for the entire year in 2019 and the first three months of 2020 at which point the Company had financing in place to pay cash for Casino KC and Casino Vicksburg. The adjustment then assumes the additional debt of $140 million for Shreveport was outstanding through September 30, 2020. The interest rate assumed for purposes of preparing this pro forma financial information is 5.36% for the entire year ended December 31, 2019, 4.43% for the three months ended March 31, 2020, and 3.5% for the period from April 2020 through September 30, 2020. This rate represents the Company's effective borrowing rate on its existing debt for each respective period. A 1/8 of a percentage point increase or decrease in the benchmark rate would result in a change in interest expense of approximately $0.2 million and $0.5 million for the nine months ended September 30, 2020 and year ended December 31, 2019, respectively.
(m) Reflects the income tax effect of pro forma adjustments based on the estimated blended federal and state statutory tax rates of 41.8% for the nine months ended September 30, 2020 and 26.7% for the years ended December 31, 2019, respectively.
(n) Represents the non-recurring gain on bargain purchase recorded in connection with the acquisition of Shreveport.