Bally's Corp - Quarter Report: 2021 September (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended September 30, 2021
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
Commission file number: 001-38850
Bally’s Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 20-0904604 | |||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
100 Westminster Street | Providence, | RI | 02903 | |||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(401) 475-8474
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| Common stock, $0.01 par value | BALY | New York Stock Exchange | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 31, 2021, the number of shares of the registrant’s $0.01 par value common stock outstanding was 54,363,371.
For additional information regarding the Company’s shares outstanding, refer to Note 15 “Stockholders’ Equity.”
BALLY’S CORPORATION
TABLE OF CONTENTS
| Page No. | ||||||||
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
BALLY’S CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except share data)
| September 30, 2021 | December 31, 2020 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 164,259 | $ | 123,445 | |||||||
| Restricted cash | 1,844,758 | 3,110 | |||||||||
| Accounts receivable, net | 39,770 | 14,798 | |||||||||
| Inventory | 12,048 | 9,296 | |||||||||
| Tax receivable | 102,388 | 84,483 | |||||||||
| Prepaid expenses and other current assets | 79,255 | 53,823 | |||||||||
| Total current assets | 2,242,478 | 288,955 | |||||||||
| Property and equipment, net | 780,656 | 749,029 | |||||||||
| Right of use assets, net | 499,133 | 36,112 | |||||||||
| Goodwill | 444,908 | 186,979 | |||||||||
| Intangible assets, net | 996,686 | 663,395 | |||||||||
| Other assets | 5,842 | 5,385 | |||||||||
| Total assets | $ | 4,969,703 | $ | 1,929,855 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current portion of long-term debt | $ | 5,750 | $ | 5,750 | |||||||
| Current portion of lease liabilities | 20,567 | 1,520 | |||||||||
| Accounts payable | 36,976 | 15,869 | |||||||||
| Accrued liabilities | 207,283 | 120,055 | |||||||||
| Total current liabilities | 270,576 | 143,194 | |||||||||
| Long-term debt, net | 2,556,421 | 1,094,105 | |||||||||
| Long-term portion of lease liabilities | 504,885 | 62,025 | |||||||||
| Pension benefit obligations | 8,147 | 9,215 | |||||||||
| Deferred tax liability | 63,123 | 36,983 | |||||||||
| Naming rights liabilities | 190,270 | 243,965 | |||||||||
| Contingent consideration payable | 43,691 | — | |||||||||
| Other long-term liabilities | 15,139 | 13,770 | |||||||||
| Total liabilities | 3,652,252 | 1,603,257 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock ($0.01 par value, 200,000,000 shares authorized; 44,581,568 and 30,685,938 shares issued; 44,581,568 and 30,685,938 shares outstanding) | 445 | 307 | |||||||||
Preferred stock ($0.01 par value; 10,000,000 shares authorized; no shares outstanding) | — | — | |||||||||
| Additional paid-in-capital | 1,368,908 | 294,643 | |||||||||
| Treasury stock, at cost | — | — | |||||||||
| Retained (deficit) earnings | (8,328) | 34,792 | |||||||||
| Accumulated other comprehensive loss | (47,334) | (3,144) | |||||||||
| Total Bally’s Corporation stockholders’ equity | 1,313,691 | 326,598 | |||||||||
| Non-controlling interest | 3,760 | — | |||||||||
| Total stockholders’ equity | 1,317,451 | 326,598 | |||||||||
| Total liabilities and stockholders’ equity | $ | 4,969,703 | $ | 1,929,855 | |||||||
See accompanying notes to condensed consolidated financial statements.
3
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Gaming | $ | 227,594 | $ | 96,588 | $ | 585,791 | $ | 196,191 | |||||||||||||||
| Racing | 2,022 | 1,684 | 6,593 | 4,817 | |||||||||||||||||||
| Hotel | 32,903 | 6,874 | 68,277 | 16,635 | |||||||||||||||||||
| Food and beverage | 29,504 | 6,889 | 68,386 | 23,875 | |||||||||||||||||||
| Other | 22,756 | 4,589 | 45,731 | 13,178 | |||||||||||||||||||
| Total revenue | 314,779 | 116,624 | 774,778 | 254,696 | |||||||||||||||||||
| Operating (income) costs and expenses: | |||||||||||||||||||||||
| Gaming | 75,174 | 25,996 | 182,059 | 59,080 | |||||||||||||||||||
| Racing | 1,996 | 1,681 | 5,715 | 4,877 | |||||||||||||||||||
| Hotel | 9,413 | 2,482 | 22,068 | 6,926 | |||||||||||||||||||
| Food and beverage | 21,419 | 6,016 | 50,632 | 21,951 | |||||||||||||||||||
| Other | 7,624 | 408 | 11,442 | 2,461 | |||||||||||||||||||
| Advertising, general and administrative | 142,905 | 43,996 | 324,615 | 117,594 | |||||||||||||||||||
| Goodwill and asset impairment | — | — | 4,675 | 8,554 | |||||||||||||||||||
| Expansion and pre-opening | 232 | — | 1,772 | — | |||||||||||||||||||
| Acquisition, integration and restructuring | 6,797 | 2,740 | 37,457 | 6,984 | |||||||||||||||||||
| Gain from insurance recoveries, net of losses | (7,942) | (10) | (19,197) | (1,036) | |||||||||||||||||||
| Rebranding | 427 | — | 1,722 | — | |||||||||||||||||||
| Gain on sale-leaseback | — | — | (53,425) | — | |||||||||||||||||||
| Depreciation and amortization | 29,000 | 9,932 | 67,503 | 28,054 | |||||||||||||||||||
| Total operating (income) costs and expenses | 287,045 | 93,241 | 637,038 | 255,445 | |||||||||||||||||||
| Income (loss) from operations | 27,734 | 23,383 | 137,740 | (749) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 547 | 42 | 1,601 | 297 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | (31,853) | (16,950) | (74,480) | (43,688) | |||||||||||||||||||
| Change in value of naming rights liabilities | 6,965 | — | (1,371) | — | |||||||||||||||||||
| Gain (adjustment) on bargain purchases | (1,039) | — | 23,075 | — | |||||||||||||||||||
| Loss on extinguishment of debt | (19,419) | — | (19,419) | — | |||||||||||||||||||
| Other, net | (3,082) | — | (6,905) | — | |||||||||||||||||||
| Total other expense, net | (47,881) | (16,908) | (77,499) | (43,391) | |||||||||||||||||||
| (Loss) income before provision for income taxes | (20,147) | 6,475 | 60,241 | (44,140) | |||||||||||||||||||
| (Benefit) provision for income taxes | (5,400) | (248) | 16,751 | (18,430) | |||||||||||||||||||
| Net (loss) income | $ | (14,747) | $ | 6,723 | $ | 43,490 | $ | (25,710) | |||||||||||||||
| Basic earnings (loss) per share | $ | (0.30) | $ | 0.22 | $ | 0.95 | $ | (0.83) | |||||||||||||||
| Weighted average common shares outstanding - basic | 49,506 | 30,458 | 45,573 | 30,825 | |||||||||||||||||||
| Diluted earnings (loss) per share | $ | (0.30) | $ | 0.22 | $ | 0.95 | $ | (0.83) | |||||||||||||||
| Weighted average common shares outstanding - diluted | 49,506 | 30,635 | 45,876 | 30,825 | |||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE LOSS (unaudited)
(In thousands)
| Three Months Ended | Nine Months Ended | ||||||||||
| September 30, 2021 | September 30, 2021 | ||||||||||
| Net (loss) income | $ | (14,747) | $ | 43,490 | |||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustment | $ | (43,679) | $ | (44,312) | |||||||
Defined benefit pension plan reclassification adjustment(1) | 41 | 122 | |||||||||
| Other comprehensive loss | (43,638) | (44,190) | |||||||||
| Total comprehensive loss | $ | (58,385) | $ | (700) | |||||||
________________________________________________
(1) Tax effect of reclassification adjustment was de minimis.
Note: Net loss income equals comprehensive loss for the three and nine months ended September 30, 2020.
See accompanying notes to condensed consolidated financial statements.
5
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(In thousands, except share data)
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained (Deficit) Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares Outstanding | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | 30,685,938 | $ | 307 | $ | 294,643 | $ | — | $ | 34,792 | $ | (3,144) | $ | — | $ | 326,598 | ||||||||||||||||||||||||||||||||
| Release of restricted stock | 23,811 | — | (990) | — | — | — | (990) | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 4,483 | — | — | — | 4,483 | ||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | 30,000 | — | 129 | — | — | — | 129 | ||||||||||||||||||||||||||||||||||||||||
| Penny warrants exercised | 932,949 | 9 | — | (9) | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Reclassification of Sinclair options | — | — | 59,724 | — | — | — | 59,724 | ||||||||||||||||||||||||||||||||||||||||
| Issuance of MKF penny warrants | — | — | 64,694 | — | — | — | 64,694 | ||||||||||||||||||||||||||||||||||||||||
| Shares issued for purchase of SportCaller | 221,391 | 2 | 11,774 | — | — | — | 11,776 | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (1,012) | (1,012) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (10,705) | — | (10,705) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | 31,894,089 | $ | 318 | $ | 434,457 | $ | (9) | $ | 24,087 | $ | (4,156) | $ | — | $ | 454,697 | ||||||||||||||||||||||||||||||||
| Release of restricted stock | 9,181 | — | (205) | (116) | — | — | (321) | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 3,901 | — | — | — | 3,901 | ||||||||||||||||||||||||||||||||||||||||
| Retirement of treasury shares | — | (21) | (28,488) | 114,842 | (86,333) | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock offering | 12,650,000 | 127 | 667,746 | — | — | — | 667,873 | ||||||||||||||||||||||||||||||||||||||||
| Sinclair shares exchanged for penny warrants | (2,086,908) | — | 114,717 | (114,717) | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Sinclair issuance of penny warrants | — | — | 50,000 | — | — | — | 50,000 | ||||||||||||||||||||||||||||||||||||||||
| Bally Interactive equity issuance | 2,084,765 | 21 | 121,479 | — | — | — | 121,500 | ||||||||||||||||||||||||||||||||||||||||
| Stock options exercised | 40,000 | — | 172 | — | — | — | 172 | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 460 | 460 | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 68,942 | — | 68,942 | ||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | 44,591,127 | $ | 445 | $ | 1,363,779 | $ | — | $ | 6,696 | $ | (3,696) | $ | — | $ | 1,367,224 | ||||||||||||||||||||||||||||||||
| Release of restricted stock | 483 | — | (12) | — | — | — | (12) | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 5,449 | — | — | — | 5,449 | ||||||||||||||||||||||||||||||||||||||||
| Retirement of treasury shares | — | — | (308) | 585 | (277) | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Bally Interactive equity issuance | (10,042) | — | — | (585) | — | — | (585) | ||||||||||||||||||||||||||||||||||||||||
| Acquired non-controlling interest | — | — | — | — | — | — | 3,760 | 3,760 | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (43,638) | (43,638) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (14,747) | — | (14,747) | ||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2021 | 44,581,568 | $ | 445 | $ | 1,368,908 | $ | — | $ | (8,328) | $ | (47,334) | $ | 3,760 | $ | 1,317,451 | ||||||||||||||||||||||||||||||||
6
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(In thousands, except share data)
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Shares Outstanding | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | 32,113,328 | $ | 412 | $ | 185,544 | $ | (223,075) | $ | 250,418 | $ | (1,888) | $ | 211,411 | ||||||||||||||||||||||||||||
| Release of restricted stock | 131,131 | 1 | (2,484) | — | — | — | (2,483) | ||||||||||||||||||||||||||||||||||
Dividends and dividend equivalents - $0.10 per share | — | — | — | — | (3,174) | — | (3,174) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 5,542 | — | — | — | 5,542 | ||||||||||||||||||||||||||||||||||
| Retirement of treasury shares | — | (107) | (48,618) | 254,416 | (205,691) | — | — | ||||||||||||||||||||||||||||||||||
| Share repurchases | (1,649,768) | — | — | (31,341) | — | — | (31,341) | ||||||||||||||||||||||||||||||||||
| Cumulative effect adjustment upon adoption of ASU 2016-13 | — | — | — | — | (58) | — | (58) | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (8,878) | — | (8,878) | ||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2020 | 30,594,691 | $ | 306 | $ | 139,984 | $ | — | $ | 32,617 | $ | (1,888) | $ | 171,019 | ||||||||||||||||||||||||||||
| Release of restricted stock | 24,427 | — | (81) | — | — | — | (81) | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 2,127 | — | — | — | 2,127 | ||||||||||||||||||||||||||||||||||
| Retirement of treasury shares | — | (2) | (733) | 1,951 | (1,216) | — | — | ||||||||||||||||||||||||||||||||||
| Share repurchases | (162,625) | — | — | (1,951) | — | — | (1,951) | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | (23,555) | — | (23,555) | ||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2020 | 30,456,493 | $ | 304 | $ | 141,297 | $ | — | $ | 7,846 | $ | (1,888) | $ | 147,559 | ||||||||||||||||||||||||||||
| Share-based compensation - equity awards | — | — | 1,799 | — | — | — | 1,799 | ||||||||||||||||||||||||||||||||||
| Stock options exercised | 19,564 | — | 84 | — | — | — | 84 | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 6,723 | — | 6,723 | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2020 | 30,476,057 | $ | 304 | $ | 143,180 | $ | — | $ | 14,569 | $ | (1,888) | $ | 156,165 | ||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
7
BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss ) | $ | 43,490 | $ | (25,710) | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 67,503 | 28,054 | |||||||||
| Amortization of operating lease right of use assets | 7,497 | 875 | |||||||||
| Goodwill and asset impairment | 4,675 | 8,554 | |||||||||
| Share-based compensation | 13,833 | 9,468 | |||||||||
| Amortization of debt discount and debt issuance costs | 4,890 | 3,256 | |||||||||
| Gain from insurance recoveries | (18,660) | — | |||||||||
| Gain on sale-leaseback | (53,425) | — | |||||||||
| Loss on assets and liabilities measured at fair value | 21,280 | — | |||||||||
| Loss on extinguishment of debt | 19,419 | — | |||||||||
| Deferred income taxes | (1,296) | (6,209) | |||||||||
| Change in value of naming rights liabilities | 1,371 | — | |||||||||
| Change in contingent consideration payable | (14,830) | — | |||||||||
| Gain on bargain purchases, net of adjustments | (23,075) | — | |||||||||
| Other operating activities | 4,715 | 162 | |||||||||
| Changes in current operating assets and liabilities | (6,544) | (16,739) | |||||||||
| Net cash provided by operating activities | 70,843 | 1,711 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Cash paid for acquisitions, net of cash acquired | (371,655) | (275,947) | |||||||||
| Proceeds from sale-leaseback | 144,000 | — | |||||||||
Deposit for pending acquisition of Bally’s Quad Cities Casino & Hotel | — | (4,000) | |||||||||
| Foreign exchange forward contract premiums | (22,592) | — | |||||||||
| Capital expenditures | (67,158) | (8,566) | |||||||||
| Insurance proceeds from hurricane damage | 18,660 | — | |||||||||
| Other investing activities | (3,382) | — | |||||||||
| Net cash used in investing activities | (302,127) | (288,513) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Issuance of common stock, net | 667,872 | — | |||||||||
| Revolver borrowings | 275,000 | 250,000 | |||||||||
| Revolver payments | (85,000) | (250,000) | |||||||||
Term loan proceeds, net of fees of $0 and $13,820, respectively | — | 261,180 | |||||||||
| Term loan repayments | (4,313) | (2,938) | |||||||||
Senior note proceeds, net of fees of $12,998 | 1,487,003 | — | |||||||||
| Senior note repayments | (210,000) | — | |||||||||
| Payment of redemption premium on debt extinguishment | (14,175) | — | |||||||||
| Payment of financing fees | (9,968) | (1,117) | |||||||||
| Share repurchases | — | (33,292) | |||||||||
| Issuance of Sinclair penny warrants | 50,000 | — | |||||||||
| Payment of shareholder dividends | — | (3,199) | |||||||||
| Share redemption for tax withholdings - restricted stock | (1,323) | (2,564) | |||||||||
| Stock options exercised | 301 | 84 | |||||||||
| Net cash provided by financing activities | 2,155,397 | 218,154 | |||||||||
| Effect of foreign currency on cash and cash equivalents | (41,651) | — | |||||||||
| Net change in cash and cash equivalents and restricted cash | 1,882,462 | (68,648) | |||||||||
| Cash and cash equivalents and restricted cash, beginning of period | 126,555 | 185,502 | |||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | 2,009,017 | $ | 116,854 | |||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest, net of amounts capitalized | $ | 51,396 | $ | 33,627 | |||||||
| Cash paid for income taxes, net of refunds | 35,736 | 4,385 | |||||||||
| Non-cash investing and financing activities: | |||||||||||
| Unpaid property and equipment | $ | 2,974 | $ | 388 | |||||||
| Stock and equity instruments issued for acquisition of SportCaller and Monkey Knife Fight | 197,383 | — | |||||||||
| Acquisitions in exchange for contingent liability | 58,685 | — | |||||||||
| Deferred purchase price payable | 14,071 | — | |||||||||
| Deposit applied to acquisition purchase price | 4,000 | — | |||||||||
See accompanying notes to condensed consolidated financial statements.
8
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. GENERAL INFORMATION
Organization
Bally’s Corporation (the “Company” or “Bally’s”) is a U.S. full-service sports betting/iGaming company with physical casinos and online gaming solutions united under a single, prominent brand. The Company, through its wholly owned subsidiary Twin River Management Group, Inc. (“TRMG”), owns or manages the following properties:
Property by Segment(1) | Location | Type | Built/Acquired | |||||||||||||||||
| East | ||||||||||||||||||||
| Bally’s Twin River Lincoln Casino Resort (“Bally’s Twin River”) | Lincoln, Rhode Island | Casino and Resort | 2007 | |||||||||||||||||
| Bally’s Tiverton Casino & Hotel (“Bally’s Tiverton”) | Tiverton, Rhode Island | Casino and Hotel | 2018 | |||||||||||||||||
Dover Downs Hotel & Casino (“Dover Downs”) | Dover, Delaware | Casino, Hotel and Raceway | 2019 | |||||||||||||||||
Bally’s Atlantic City | Atlantic City, New Jersey | Casino and Hotel | 2020 | |||||||||||||||||
Bally’s Evansville Casino & Hotel (“Bally’s Evansville”) | Evansville, Indiana | Casino and Hotel | 2021 | |||||||||||||||||
| West | ||||||||||||||||||||
| Hard Rock Hotel & Casino (“Hard Rock Biloxi”) | Biloxi, Mississippi | Casino and Resort | 2014 | |||||||||||||||||
| Bally’s Vicksburg Casino (“Bally’s Vicksburg”) | Vicksburg, Mississippi | Casino and Hotel | 2020 | |||||||||||||||||
| Bally’s Kansas City Casino (“Bally’s Kansas City”) | Kansas City, Missouri | Casino | 2020 | |||||||||||||||||
Bally’s Black Hawk (2) | Black Hawk, Colorado | Three Casinos | 2020 | |||||||||||||||||
| Bally’s Shreveport Casino & Hotel (“Bally’s Shreveport”) | Shreveport, Louisiana | Casino and Hotel | 2020 | |||||||||||||||||
Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”) | Lake Tahoe, Nevada | Casino and Resort | 2021 | |||||||||||||||||
Bally’s Quad Cities Casino & Hotel (“Bally’s Quad Cities”) | Rock Island, Illinois | Casino and Hotel | 2021 | |||||||||||||||||
__________________________________
(1) During the second quarter of 2021, the Company updated its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions. Refer to Note 17 “Segment Reporting” for further information.
(2) Includes the recently rebranded Bally’s Black Hawk North Casino, Bally’s Black Hawk West Casino and Bally’s Black Hawk East Casino (previously Golden Gulch Casino).
In addition to the properties noted above, the Company also owns the Bally’s Arapahoe Park racetrack and 13 off-track betting licenses (“Bally’s Arapahoe Park”) in Aurora, Colorado.
Under the Bally Interactive division, the Company owns and manages Bally Interactive, formerly Bet.Works, a U.S. based sports betting platform provider, Horses Mouth Limited (“SportCaller”), a leading Business-to-Business (“B2B”) free-to-play game provider for sports betting and media companies across North America, the UK, Europe, Asia, Australia, LATAM and Africa, Monkey Knife Fight (“MKF”), a North American gaming platform and daily fantasy sports operator, the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States, and Telescope Inc. (“Telescope”), a leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams. On October 1, 2021, the Company completed the acquisition of Gamesys Group, Plc. (“Gamesys”), a leading international online gaming operator that provides entertainment to a global consumer base.
The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “BALY.”
9
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation. The financial statements of our foreign subsidiary is translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in net income (loss).
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of the SEC’s Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There were no material changes in significant accounting policies from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates.
Correction of Cash Flow Classification
Subsequent to the issuance of the Company’s Form 10-Q for the quarterly period ended June 30, 2021, the Company concluded that the $144.0 million in proceeds from the sale-leaseback of the Company’s Dover property were incorrectly classified as cash provided by financing activities rather than cash provided by investing activities within the Company’s unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2021. The accompanying unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2021 correctly reflects such amount as cash provided by investing activities.
The Company will correct the unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2021 when it files its Form 10-Q for the quarterly period ended June 30, 2022 with the SEC. The correction of this error had no effect on the Company’s net cash provided by operating activities or the accompanying unaudited condensed consolidated balance sheet, unaudited condensed consolidated statement of operations, unaudited condensed consolidated statement of comprehensive income, or unaudited condensed consolidated statement of Stockholders’ equity as of and for the three and nine months ended September 30, 2021.
Acquisition of Gamesys Group, Plc.
On October 1, 2021, the Company completed its acquisition of Gamesys for 9,773,537 shares of Bally’s common stock and approximately £1.554 billion in cash (the “Acquisition”).
Based on the October 1, 2021 closing price of $53.08 per share of the Company’s common stock, and a foreign exchange rate of 1.354, the aggregate consideration paid to former Gamesys shareholders in connection with the Acquisition was approximately $2.62 billion. Consideration paid includes $518.8 million in shares and $2.10 billion in cash.
In connection with the Acquisition, the Company refinanced its and Gamesys’ debt with, among other sources, the proceeds of the senior notes offering completed in August 2021, a new bank credit facility entered into on October 1, 2021 and the Company’s common stock offering completed in April 2021. See Note 11 “Long-Term Debt” for further information.
10
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Given the short period of time from the completion of the Acquisition, the date of these condensed consolidated financial statements and the size and complexity of the transaction, the initial accounting for the business combination is incomplete at this time. The Company is not able to provide the valuation of certain components of consideration transferred or provide the allocation of consideration paid to the assets acquired or liabilities assumed. The Company will reflect the preliminary purchase price allocation in its consolidated financial statements for the year ending December 31, 2021.
Gamesys' Chief Executive Officer, Lee Fenton, became Bally’s Chief Executive Officer and joined Bally’s Board of Directors in the class of directors with a term that expires at Bally’s 2023 annual shareholders meeting. George Papanier became President, Retail, the head of Bally’s on-land business, and remains a member of Bally’s Board of Directors.
COVID-19 Pandemic
The COVID-19 pandemic significantly impacted the Company’s business. As of March 16, 2020, all of the Company’s properties at the time were closed as a result of the COVID-19 pandemic. The Company’s properties began to reopen in mid-2020 in some capacity and remained open for the rest of 2020, with the exception of Bally’s Twin River and Bally’s Tiverton, each of which closed again from November 29, 2020 through December 20, 2020. As of September 30, 2021, the Company’s properties have returned to full capacity with minimal restrictions. Although the Company is experiencing positive trends as a result of the reopening of its properties, the COVID-19 pandemic is ongoing and future developments, which are uncertain and cannot be predicted at this time, could have a material negative impact on operations.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents and Restricted Cash
The Company considers all cash balances and highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.
As of September 30, 2021 and December 31, 2020, restricted cash was $1.84 billion and $3.1 million, respectively. The balance at September 30, 2021 includes $1.49 billion of proceeds from the senior notes offering, explained in Note 11 “Long-Term Debt,” and $667.9 million of cash proceeds from the Company’s April 2021 common stock offering, which were classified as restricted for use in the Acquisition. These amounts were held in escrow in GBP and were translated to USD using the foreign exchange rate as of September 30, 2021, resulting in a foreign exchange translation loss reflected within other comprehensive loss for the three months ended September 30, 2021. In addition, restricted cash was comprised of video lottery terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, which is unavailable for the Company’s use. The following table reconciles cash and restricted cash in the condensed consolidated balance sheets to the total shown on the condensed consolidated statements of cash flows.
| September 30, | December 31, | ||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
| Cash and cash equivalents | $ | 164,259 | $ | 123,445 | |||||||
| Restricted cash | 1,844,758 | 3,110 | |||||||||
| Total cash and cash equivalents and restricted cash | $ | 2,009,017 | $ | 126,555 | |||||||
11
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Accounts Receivable, Net
Accounts receivable, net consists of the following:
| September 30, | December 31, | ||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
Amounts due from Rhode Island and Delaware(1) | $ | 8,674 | $ | 3,880 | |||||||
| Gaming receivables | 11,195 | 7,893 | |||||||||
| Non-gaming receivables | 23,483 | 6,092 | |||||||||
| Accounts receivable | 43,352 | 17,865 | |||||||||
| Less: Allowance for doubtful accounts | (3,582) | (3,067) | |||||||||
| Accounts receivable, net | $ | 39,770 | $ | 14,798 | |||||||
__________________________________
(1) Represents the Company’s share of VLT and table games revenue for Bally’s Twin River and Bally’s Tiverton due from the State of Rhode Island and from the State of Delaware for Dover Downs.
Property and Equipment
Property and equipment are recorded at cost. Property and equipment obtained in connection with acquisitions is valued at its estimated fair value as of the date of acquisition. Additions subsequent to the acquisition date are recorded at cost.
Property and equipment are depreciated over the estimated useful lives of the assets using the straight-line method. Expenditures for renewals and betterments that extend the life or value of an asset are capitalized and expenditures for repairs and maintenance are charged to expense as incurred. The costs and related accumulated depreciation applicable to assets sold or disposed are removed from the balance sheet accounts and the resulting gains or losses are reflected in the condensed consolidated statements of operations.
Development costs directly associated with the acquisition, development and construction of a project are capitalized as a cost of the project during the periods in which activities necessary to prepare the property for its intended use are in progress. Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using the weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. During the three and nine months ended September 30, 2021 and 2020, there was no capitalized interest.
As of September 30, 2021 and December 31, 2020, property and equipment was comprised of the following:
| (in thousands) | Estimated Useful Life (in years) | September 30, 2021 | December 31, 2020 | ||||||||||||||
| Land | $ | 75,328 | $ | 78,506 | |||||||||||||
| Land improvements | 3-20 | 34,054 | 29,965 | ||||||||||||||
| Building and improvements | 5-40 | 633,086 | 635,145 | ||||||||||||||
| Equipment | 1-10 | 169,483 | 125,667 | ||||||||||||||
| Furniture and fixtures | 3-10 | 41,030 | 30,277 | ||||||||||||||
| Construction in process | 22,574 | 8,799 | |||||||||||||||
| Total property, plant and equipment | 975,555 | 908,359 | |||||||||||||||
| Less: Accumulated depreciation | (194,899) | (159,330) | |||||||||||||||
| Property and equipment, net | $ | 780,656 | $ | 749,029 | |||||||||||||
12
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Construction in process relates to costs capitalized in conjunction with major improvements that have not yet been placed in service, and accordingly are not currently being depreciated. The construction in process balance at September 30, 2021 includes $10.5 million of costs associated with the various capital projects at Bally’s Atlantic City, Bally Interactive, Bally’s Kansas City, the Rhode Island properties, and Hard Rock Biloxi, as well as $5.3 million of costs associated with software development within our Interactive division. The construction in process balance at December 31, 2021 included costs associated with various capital projects in process, primarily at Hard Rock Biloxi and Dover Downs.
Depreciation expense relating to property and equipment for the three months ended September 30, 2021 and 2020 was $13.5 million and $8.9 million, respectively. Depreciation expense relating to property and equipment for the nine months ended September 30, 2021 and 2020 was $37.4 million and $23.9 million, respectively.
Gain from insurance recoveries, net of losses
Gain from insurance recoveries, net of losses relate to losses incurred resulting from storms impacting the Company’s properties, net of insurance recovery proceeds. During the three and nine months ended September 30, 2021, the Company recorded gain from insurance recoveries, net of losses, of $7.9 million and $19.2 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta, which made landfall in Louisiana shutting down the Company’s Hard Rock Biloxi property for three days during the fourth quarter of 2020. During the three and nine months ended September 30, 2020, we recorded a gain on insurance recoveries of $10,000 and $1.0 million, respectively, related to proceeds received for a damaged roof at the Bally’s Arapahoe Park racetrack.
Long-lived Assets
The Company reviews its long-lived assets, other than goodwill and intangible assets not subject to amortization, for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is still under development, the analysis includes the remaining construction costs. Cash flows expected to be generated by the related assets are estimated over the assets’ useful lives based on updated projections. If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a fair value discounted cash flow model. In connection with its rebranding initiatives, as decisions are made, it is possible that the Company could be required to record impairment charges which could be material. During the second quarter of 2021, the Company recorded an impairment charge on certain of its intangible assets as a result of the Company’s rebranding. Refer to Note 6 “Goodwill and Intangible Assets” for further information.
Strategic Partnership - Sinclair Broadcast Group
On November 18, 2020, the Company and Sinclair Broadcast Group, Inc. (“Sinclair”) entered into a Framework Agreement (the “Sinclair Agreement”), which provides for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service, whereby the Company will receive naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options, and an agreement to share in certain tax benefits resulting from the Transaction with Sinclair (the “TRA”). The initial term of the agreement is ten years from the commencement date of the re-branded Sinclair regional sports networks and can be renewed for one additional 5-year term unless either the Company or Sinclair elect not to renew.
13
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Naming Rights Intangible Asset - Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $88.0 million over the 10-year term of the agreement beginning April 1, 2021. The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of Accounting Standards Codification (“ASC”) 805-50 using a cost accumulation model. The naming rights intangible asset represents the consideration transferred on the acquisition date comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the Tax Receivable Agreement payments, each explained below. The naming rights intangible asset was $323.7 million and $338.2 million as of September 30, 2021 and December 31, 2020, respectively. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $8.6 million and $17.2 million for the three and nine months ended September 30, 2021, respectively. Refer to Note 6 “Goodwill and Intangible Assets” for further information.
Naming Rights Fees - The present value of the annual naming rights fees was recorded as part of the cost of the naming rights intangible asset with a corresponding liability which will be accreted through interest expense over the life of the agreement. The total value of the liability as of September 30, 2021 and December 31, 2020 was $58.3 million and $56.6 million, respectively. The short-term portion of the liability, which was $2.0 million as of September 30, 2021 and December 31, 2020, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $56.3 million and $54.6 million as of September 30, 2021 and December 31 2020, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets. Accretion expense for the three and nine months ended September 30, 2021 was $1.1 million and $3.2 million respectively, and was reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations.
Warrants and Options - The Company issued to Sinclair (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share (“the Penny Warrants”), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”). The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. The issuance pursuant to the warrants and options of shares in excess of 19.9% of the Company’s currently outstanding shares was subject to the approval of the Company’s stockholders in accordance with the rules of the New York Stock Exchange (“NYSE”), which was obtained on January 27, 2021.
Penny Warrants. The Penny Warrants were determined to be an equity classified instrument because they are indexed to the Company’s own stock and met the conditions to be classified as equity under ASC 815, Derivatives and Hedging, including sufficient available shares for the Company to settle the exercise of the warrants in shares. The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $150.4 million on November 18, 2020 at issuance, and was recorded to “Additional paid-in-capital” in the condensed consolidated balance sheets, with an offset to the naming rights intangible asset.
Performance Warrants. The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. The fair value as of September 30, 2021 and December 31, 2020 was $88.0 million and $88.1 million, respectively, and is recorded within “Naming Rights liabilities” of the condensed consolidated balance sheets. Refer to Note 7 “Derivative Instruments” for further information.
Options. As of December 31, 2020, the Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval. The fair value of the Options as of December 31, 2020 was $58.2 million. Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value and $59.7 million was reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the condensed consolidated balance sheet. The increase in fair value of the Options from December 31, 2020 through January 27, 2021 was $1.5 million and resulted in a mark to market loss in the first quarter of 2021, reported in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations. Refer to Note 7 “Derivative Instruments” for further information
14
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Tax Receivable Agreement - The Company is required to share 60% of the tax benefit the Company receives from the Penny Warrants, Options, Performance Warrants and payments under the TRA with Sinclair over the term of the agreement as tax benefit amounts are determined through the filing of the Company’s annual tax returns. Changes in estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the naming rights intangible asset. As of September 30, 2021, the estimate of the TRA liability was $45.7 million, reflecting an increase of $2.7 million from the December 31, 2020 value of $43.0 million, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets. The change in value of the TRA liability is included in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.
3. RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements
Standards implemented
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes. This amendment serves to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes. The amendment also improves the consistent application of ASC Topic 740 by clarifying and amending existing guidance. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company’s adoption of this ASU in the first quarter of 2021, did not have a material impact to its condensed consolidated financial statements.
4. REVENUE RECOGNITION
The Company accounts for revenue earned from contracts with customers under ASC 606, Revenue from Contracts with Customers. The Company generates revenue from five principal sources: gaming services, hotel, racing, food and beverage and other.
Gaming revenue includes the share of VLT revenue for Bally’s Twin River and Bally’s Tiverton, in each case, as determined by each property’s respective master VLT contracts with the State of Rhode Island. Bally’s Twin River is entitled to a 28.85% share of VLT revenue on the initial 3,002 units and a 26.00% share of VLT revenue generated from units in excess of 3,002 units. Beginning July 1, 2021, Bally’s Twin River is entitled to an additional 7.00% share of revenue on VLTs owned by the Company. Bally’s Tiverton is entitled to receive a percentage of VLT revenue that is equivalent to the percentage received by Bally’s Twin River. Gaming revenue also includes Bally’s Twin River’s and Bally’s Tiverton’s share of table games revenue. Bally’s Twin River and Bally’s Tiverton each were entitled to an 83.5% share of table games revenue generated as of September 30, 2021 and 2020. Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Rhode Island operations on a net basis which is the percentage share of VLT and table games revenue received as the Company acts as an agent in operating the gaming services on behalf of the State of Rhode Island.
Gaming revenue also includes Dover Downs’ share of revenue as determined under the Delaware State Lottery Code from the date of its acquisition. Dover Downs is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement. As of September 30, 2021 and 2020, Dover Downs was entitled to an approximately 42% share of VLT revenue and an 80% share of table games revenue. Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Delaware operations on a net basis, which is the percentage share of VLT and table games revenue received, as the Company acts as an agent in operating the gaming services on behalf of the State of Delaware.
15
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Gaming revenue also includes the casino revenue of Hard Rock Biloxi, Bally’s Black Hawk, beginning January 23, 2020, Bally’s Kansas City and Bally’s Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, Bally’s Shreveport, beginning December 23, 2020, Bally’s Lake Tahoe, beginning April 6, 2021, Bally’s Evansville, beginning June 3, 2021, and Bally’s Quad Cities, beginning June 14, 2021, which is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of credits played, are charged to revenue as the amount of the progressive jackpots increase.
Gaming services contracts have two performance obligations for those customers earning incentives under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. 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 consolidated 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. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with incentives earned under loyalty programs, the Company allocates an amount to the loyalty program contract liability based on the stand-alone selling price of the incentive earned for a hotel room stay, food and beverage or other amenity. The estimated standalone selling price of hotel rooms is determined based on observable prices. The standalone selling price of food and beverage, and other miscellaneous goods and services is determined based upon the actual retail prices charged to customers for those items. The performance obligations for the incentives earned under the loyalty programs are deferred and recognized as revenue when the customer redeems the incentive. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately.
The estimated retail value related to goods and services provided to guests without charge or upon redemption under the Company’s player loyalty programs included in departmental revenues, and therefore reducing gaming revenues, are as follows for the three and nine months ended September 30, 2021 and 2020:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Hotel | $ | 18,410 | $ | 3,962 | $ | 37,813 | $ | 9,710 | |||||||||||||||
| Food and beverage | 18,505 | 4,082 | 44,334 | 12,989 | |||||||||||||||||||
| Other | 2,513 | 464 | 4,923 | 2,270 | |||||||||||||||||||
| $ | 39,428 | $ | 8,508 | $ | 87,070 | $ | 24,969 | ||||||||||||||||
During 2020, the Company entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in the states of Colorado and New Jersey from which the Company has received or expects to receive one-time, up front market access fees in cash or equity securities (specific to one operator agreement) and certain other fees in cash generally based on a percentage of the gross gaming revenue generated by the operator, with certain annual minimum guarantees due to the Company. The one-time market access fees received have been recorded as deferred revenue and will be recognized as gaming revenue ratably over the respective contract terms, beginning with the commencement of operations of each respective agreement. The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the nine months ended September 30, 2021. Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $8.7 million as of September 30, 2021 and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.
Racing revenue includes Bally’s Twin River’s, Bally’s Tiverton’s, Bally’s Arapahoe Park’s and Dover Downs’ share of wagering from live racing and the import of simulcast signals. Racing revenue is recognized when the wager is complete based on an established take-out percentage. The Company functions as an agent to the pari-mutuel pool. Therefore, fees and obligations related to the Company’s share of purse funding, simulcasting fees, tote fees, pari-mutuel taxes, and other fees directly related to the Company’s racing operations are reported on a net basis and included as a deduction to racing revenue.
Hotel revenue is recognized at the time of occupancy, which is when the customer obtains control through occupancy of the room. Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met.
Food and beverage revenue are recognized at the time the goods are sold from Company-operated outlets.
16
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
All other revenues, including market access, daily fantasy sports and B2B service revenue generated by the Bally Interactive operating segment, are recognized at the time the goods are sold or the service is provided.
Sales tax and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenue or operating expenses.
In the second quarter of 2021, the Company changed its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions. Refer to Note 17 “Segment Reporting” for further information. The following tables provide a disaggregation of revenue by segment:
| (in thousands) | East | West | Other | Total | |||||||||||||||||||
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||
| Gaming | $ | 131,338 | $ | 95,674 | $ | 582 | $ | 227,594 | |||||||||||||||
| Racing | 306 | — | 1,716 | 2,022 | |||||||||||||||||||
| Hotel | 17,883 | 15,020 | — | 32,903 | |||||||||||||||||||
| Food and beverage | 18,324 | 11,166 | 14 | 29,504 | |||||||||||||||||||
| Other | 9,124 | 2,743 | 10,889 | 22,756 | |||||||||||||||||||
| Total revenue | $ | 176,975 | $ | 124,603 | $ | 13,201 | $ | 314,779 | |||||||||||||||
| Three Months Ended September 30, 2020 | |||||||||||||||||||||||
| Gaming | $ | 50,250 | $ | 46,338 | $ | — | $ | 96,588 | |||||||||||||||
| Racing | 68 | — | 1,616 | 1,684 | |||||||||||||||||||
| Hotel | 2,398 | 4,476 | — | 6,874 | |||||||||||||||||||
| Food and beverage | 3,230 | 3,659 | — | 6,889 | |||||||||||||||||||
| Other | 3,119 | 1,427 | 43 | 4,589 | |||||||||||||||||||
| Total revenue | $ | 59,065 | $ | 55,900 | $ | 1,659 | $ | 116,624 | |||||||||||||||
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||
| Gaming | $ | 308,490 | $ | 275,928 | $ | 1,373 | $ | 585,791 | |||||||||||||||
| Racing | 1,696 | — | 4,897 | 6,593 | |||||||||||||||||||
| Hotel | 35,813 | 32,464 | — | 68,277 | |||||||||||||||||||
| Food and beverage | 41,394 | 26,952 | 40 | 68,386 | |||||||||||||||||||
| Other | 21,065 | 7,846 | 16,820 | 45,731 | |||||||||||||||||||
| Total revenue | $ | 408,458 | $ | 343,190 | $ | 23,130 | $ | 774,778 | |||||||||||||||
| Nine Months Ended September 30, 2020 | |||||||||||||||||||||||
| Gaming | $ | 114,779 | $ | 81,412 | $ | — | $ | 196,191 | |||||||||||||||
| Racing | 1,115 | — | 3,702 | 4,817 | |||||||||||||||||||
| Hotel | 6,462 | 10,173 | — | 16,635 | |||||||||||||||||||
| Food and beverage | 14,525 | 9,350 | — | 23,875 | |||||||||||||||||||
| Other | 9,967 | 3,104 | 107 | 13,178 | |||||||||||||||||||
| Total revenue | $ | 146,848 | $ | 104,039 | $ | 3,809 | $ | 254,696 | |||||||||||||||
Revenue included in operations from SportCaller from the date of its acquisition, February 5, 2021, MKF from the date of its acquisition, March 23, 2021, Bally Interactive from the date of its acquisition, May 28, 2021, AVP from the date of its acquisition, July 12, 2021, and Telescope from the date of its acquisition, August 12, 2021, each through September 30, 2021 are reported in “Other.” Revenue included in operations from Bally’s Lake Tahoe from the date of acquisition, April 6, 2021, and Bally’s Quad Cities from the date of its acquisition, June 14, 2021, through September 30, 2021, are reported in “West.” Revenue included in operations from Bally’s Evansville from the date of its acquisition, June 3, 2021, through September 30, 2021, is reported in “East.” Refer to Note 5. “Acquisitions” for further information.
17
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company’s receivables related to contracts with customers are primarily comprised of marker balances and other amounts due from gaming activities, amounts due for hotel stays, and amounts due from tracks and off track betting (“OTB”) locations. The Company’s receivables related to contracts with customers were $27.0 million and $12.0 million as of September 30, 2021 and December 31, 2020, respectively.
Contract and Contract Related Liabilities
The Company has the following liabilities related to contracts with customers: liabilities for loyalty programs, advance deposits made for goods and services yet to be provided, and unpaid wagers. All of the contract liabilities are short-term in nature. Loyalty program incentives earned by customers are typically redeemed within one year from when they are earned and expire if a customer’s account is inactive for more than 12 months; therefore, the majority of these incentives outstanding at the end of a period will either be redeemed or expire within the next 12 months. While properties were operating at limited capacity, many extended the expiration dates for tiered status programs or temporarily suspended periodic purges of unused loyalty points. As properties have resumed operations at full capacity, many have reinstated their pre-COVID-19 practices or put new loyalty programs into place.
The Company’s contract liabilities related to loyalty programs were $17.7 million and $15.5 million as of September 30, 2021 and December 31, 2020, respectively, and are included as “Accrued liabilities” in the condensed consolidated balance sheets. The Company recognized $5.8 million and $1.4 million of revenue related to loyalty program redemptions for the three months ended September 30, 2021 and 2020, respectively, and $18.0 million and $3.7 million for the nine months ended September 30, 2021 and 2020.
Advance deposits are typically for future banquet events, hotel room reservations and interactive player deposits. The banquet and hotel reservation deposits are usually received weeks or months in advance of the event or hotel stay. The Company holds restricted cash for interactive player deposits, and records a corresponding withdrawal liability. The Company’s contract liabilities related to advance deposits from customers were $3.9 million and $1.0 million as of September 30, 2021 and December 31, 2020, respectively, and are included as “Accrued liabilities” in the condensed consolidated balance sheets.
Unpaid wagers include unpaid pari-mutuel tickets and unpaid sports bet tickets. Unpaid pari-mutuel tickets not claimed within 12 months by the customer who earned them are escheated to the state. The Company’s contract liabilities related to unpaid wagers were $1.9 million and $0.9 million as of September 30, 2021 and December 31, 2020, respectively, and are included as “Accrued liabilities” in the condensed consolidated balance sheets.
5. ACQUISITIONS
Recent Acquisitions
The Company accounted for all of the following recent acquisitions as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805. Under this method of accounting, the purchase price is allocated to the assets acquired and liabilities assumed of the acquiree based upon their estimated fair values at the acquisition date. The fair value of the identifiable intangible assets acquired are determined by using an income approach. Significant assumptions utilized in the income approach are based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The purchase price allocation for the acquisitions of Bally’s Atlantic City, Bally’s Shreveport, Bally’s Lake Tahoe, Bally’s Evansville, Bally’s Quad Cities, SportCaller, Monkey Knife Fight, Bally Interactive, AVP and Telescope, are preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed. There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed.
18
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company recorded transaction costs related to its recent and pending acquisitions of $6.8 million and $37.5 million during the three and nine months ended September 30, 2021, respectively, and $2.7 million and $7.0 million during the three and nine months ended September 30, 2020, respectively. These costs are included in “Acquisition, integration and restructuring” in the condensed consolidated statements of operations. Refer to Note 10 “Acquisition, Integration and Restructuring” for further information.
Bally’s Kansas City and Bally’s Vicksburg
On July 1, 2020, the Company completed its acquisition of the operations and real estate of Bally’s Kansas City and Bally’s Vicksburg from affiliates of Caesars Entertainment, Inc. (“Caesars”). The total consideration paid by the Company in connection with the acquisition was approximately $229.9 million, or $225.5 million net of cash acquired, excluding transaction costs.
The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed as of July 1, 2020 in connection with the acquisitions:
| As of July 1, 2020 | |||||||||||||||||
| (in thousands) | Preliminary as of December 31, 2020 | Year to Date Adjustments | Final as of September 30, 2021 | ||||||||||||||
| Cash and cash equivalents | $ | 4,362 | $ | — | $ | 4,362 | |||||||||||
| Accounts receivable, net | 582 | — | 582 | ||||||||||||||
| Inventory | 164 | — | 164 | ||||||||||||||
| Prepaid expenses and other current assets | 686 | (256) | 430 | ||||||||||||||
| Property and equipment, net | 60,865 | — | 60,865 | ||||||||||||||
| Right of use asset | 10,315 | — | 10,315 | ||||||||||||||
| Intangible assets, net | 138,160 | — | 138,160 | ||||||||||||||
| Other assets | 117 | — | 117 | ||||||||||||||
| Goodwill | 53,896 | 380 | 54,276 | ||||||||||||||
| Accounts payable | (614) | — | (614) | ||||||||||||||
| Accrued liabilities | (3,912) | (236) | (4,148) | ||||||||||||||
| Lease liability | (34,452) | — | (34,452) | ||||||||||||||
| Other long-term liabilities | (306) | 112 | (194) | ||||||||||||||
| Total purchase price | $ | 229,863 | $ | — | $ | 229,863 | |||||||||||
Revenue included in operations from Bally’s Kansas City and Bally’s Vicksburg for the three and nine months ended September 30, 2021 was $30.9 million and $91.4 million, respectively. Net income included in operations from Bally’s Kansas City and Bally’s Vicksburg for the three and nine months ended September 30, 2021 was $4.3 million and $16.9 million, respectively.
19
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Bally’s Atlantic City
On November 18, 2020, the Company completed its acquisition of Bally’s Atlantic City from Caesars and paid cash of approximately $24.7 million at closing, or $16.1 million net of cash acquired, excluding transaction costs. The Company recorded a liability of $2.0 million related to a net working capital adjustment which was reflected in “Accrued liabilities” in the condensed consolidated balance sheets as of December 31, 2020. The amount was paid in full during the first quarter of 2021.
In connection with the approval of the Company’s interim gaming license in the state of New Jersey, the Company committed to the New Jersey Casino Control Commission to spend $90.0 million, increased to $100.0 million in the second quarter of 2021, in capital expenditures over a span of five years to refurbish and upgrade the property’s facilities and expand its amenities. In connection with this commitment, the Company reached an agreement with Caesars, whereby Caesars would reimburse the Company for $30.0 million of the capital expenditure commitment by December 31, 2021. This commitment was accounted for as a contingent consideration asset under ASC 805 and was recognized at its present value as of the acquisition date, which was determined to be $27.7 million, as it represents consideration due back from the seller in connection with a business combination, and is included in “Prepaid expenses and other assets” in the condensed consolidated balance sheets. This contingent consideration asset resulted in an adjusted purchase price of $(0.9) million.
The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Atlantic City on November 18, 2020. There were no purchase accounting adjustments recorded during the nine months ended September 30, 2021.
| (in thousands) | Preliminary as of September 30, 2021 | ||||
| Cash and cash equivalents | $ | 8,651 | |||
| Accounts receivable, net | 1,122 | ||||
| Inventory | 721 | ||||
| Prepaid expenses and other current assets | 1,402 | ||||
| Property and equipment, net | 40,898 | ||||
| Intangible assets, net | 1,120 | ||||
| Accounts payable | (3,131) | ||||
| Accrued liabilities | (7,983) | ||||
| Deferred income tax liabilities | (11,132) | ||||
| Net assets acquired | 31,668 | ||||
| Bargain purchase gain | (32,595) | ||||
| Total purchase price | $ | (927) | |||
The identifiable intangible assets recorded in connection with the closing of the Bally’s Atlantic City acquisition based on preliminary valuations include rated player relationships of $0.9 million and hotel and conference pre-bookings of $0.2 million, which are being amortized on a straight-line basis over estimated useful lives of approximately eight years and three years, respectively. The Company determined that the value of the intangible asset related to gaming licenses was de minimis, primarily due to the previously mentioned capital expenditure commitment required to obtain the licenses. The preliminary fair value of the identifiable intangible assets acquired was determined by using a cost approach and an income approach for the rated player relationships and pre-bookings, respectively.
Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $32.6 million was recorded during the fourth quarter ended December 31, 2020. The Company believes that it was able to acquire the net assets of Bally’s Atlantic City for less than fair value as a result of a capital expenditure requirement imposed on the Company by the New Jersey Casino Control Commission, which would have been imposed on the seller had they not divested the property.
Revenue included in operations from Bally’s Atlantic City for the three and nine months ended September 30, 2021 was $46.8 million and $108.4 million, respectively.
20
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Bally’s Shreveport Casino & Hotel
On December 23, 2020, the Company completed its acquisition of Bally’s Shreveport for a total purchase price of approximately $137.2 million. Cash paid by the Company at closing, net of $5.0 million of cash acquired and offset by a receivable of $0.8 million resulting from a net working capital adjustment, was $133.1 million, excluding transaction costs.
The identifiable intangible assets recorded in connection with the closing of the Bally’s Shreveport acquisition based on preliminary valuations include gaming licenses of $57.7 million with an indefinite life and rated player relationships of $0.4 million, which are being amortized on a straight-line basis over estimated useful lives of approximately eight years. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.
The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Shreveport on December 23, 2020. There were no purchase accounting adjustments recorded during the nine months ended September 30, 2021.
| (in thousands) | Preliminary as of September 30, 2021 | ||||
| Cash and cash equivalents | $ | 4,980 | |||
| Accounts receivable, net | 1,936 | ||||
| Inventory | 495 | ||||
| Prepaid expenses and other current assets | 245 | ||||
| Property and equipment, net | 125,822 | ||||
| Right of use assets | 9,260 | ||||
| Intangible assets, net | 58,140 | ||||
| Other assets | 403 | ||||
| Accounts payable and Accrued liabilities | (6,138) | ||||
| Lease liability | (14,540) | ||||
| Deferred tax liability | (11,457) | ||||
| Other long-term liabilities | (680) | ||||
| Net assets acquired | 168,466 | ||||
| Bargain purchase gain | (31,276) | ||||
| Total purchase price | $ | 137,190 | |||
Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $31.3 million was recorded during the fourth quarter of 2020. The Company believes that it was able to acquire the net assets of Bally’s Shreveport for less than fair value as a result of a distressed sale whereby Eldorado was required by the Federal Trade Commission to divest the Bally’s Shreveport property prior to its merger with Caesars coupled with the timing of the agreement to purchase which was in the middle of COVID-19 related shutdowns of casinos in the United States.
Revenue included in operations from Bally’s Shreveport for the three and nine months ended September 30, 2021 was $28.7 million and $90.6 million, respectively. Net income included in operations from Bally’s Shreveport for the three and nine months ended September 30, 2021 was $4.0 million and $16.5 million, respectively.
Bally’s Lake Tahoe Casino Resort
On April 6, 2021, the Company acquired Bally’s Lake Tahoe, formerly MontBleu Resort Casino & Spa, in Lake Tahoe, Nevada from Eldorado and certain of its affiliates for $14.2 million, payable one year from the closing date and subject to customary post-closing adjustments. The deferred purchase price is included within “Accrued liabilities” of the condensed consolidated balance sheet.
21
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The identifiable intangible assets recorded in connection with the closing of the Bally’s Lake Tahoe acquisition based on preliminary valuations include gaming licenses of $5.2 million with an indefinite life and a tradename of $0.2 million, which is being amortized on a straight-line basis over its estimated useful life of approximately six months. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.
The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Lake Tahoe on April 6, 2021:
| As of April 6, 2021 | |||||||||||||||||
| (in thousands) | Preliminary as of June 30, 2021 | Year to Date Adjustments | Preliminary as of September 30, 2021 | ||||||||||||||
| Total current assets | $ | 5,089 | $ | — | $ | 5,089 | |||||||||||
| Property and equipment, net | 6,361 | — | 6,361 | ||||||||||||||
| Right of use assets, net | 57,017 | — | 57,017 | ||||||||||||||
| Intangible assets, net | 5,430 | — | 5,430 | ||||||||||||||
| Accounts payable and Accrued liabilities | (3,095) | (307) | (3,402) | ||||||||||||||
| Lease liability | (52,927) | — | (52,927) | ||||||||||||||
| Other long-term liabilities | (1,127) | — | (1,127) | ||||||||||||||
| Net assets acquired | 16,748 | (307) | 16,441 | ||||||||||||||
| Bargain purchase gain | (2,576) | 307 | (2,269) | ||||||||||||||
| Total purchase price | $ | 14,172 | $ | — | $ | 14,172 | |||||||||||
Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $2.6 million was recorded during the second quarter ended June 30, 2021. An adjustment of $0.3 million, reducing the bargain purchase gain to $2.3 million, was recorded in the third quarter ended September 30, 2021. The original agreement to acquire Bally’s Lake Tahoe from Eldorado was made concurrently with the agreement of Bally’s Shreveport and the Company believes that it was able to acquire Bally’s Lake Tahoe for less than fair value as a result of a distressed sale prior to Eldorado’s merger by Caesars, as noted above.
Revenue included in operations from Bally’s Lake Tahoe for the three and nine months ended September 30, 2021 was $11.3 million and $21.0 million, respectively. Net income included in operations from Bally’s Lake Tahoe for the three and nine months ended September 30, 2021 was $0.5 million and $1.0 million, respectively.
Bally’s Evansville
On June 3, 2021, the Company completed the acquisition of the Bally’s Evansville casino operations from Caesars. The total purchase price was $139.7 million, subject to customary adjustments. Cash paid by the Company at closing, net of $9.4 million cash acquired and offset by a payable of $1.7 million resulting from a net working capital adjustment, was $128.1 million, excluding transaction costs.
In connection with the acquisition of the Bally’s Evansville casino operations, the Company entered into a sale-leaseback arrangement with an affiliate of Gaming & Leisure Properties, Inc. (“GLPI”) for the Dover Downs property. Refer to Note 12 “Leases” for further information.
The identifiable intangible assets recorded in connection with the closing of the Bally’s Evansville acquisition based on preliminary valuations include gaming licenses of $153.6 million with an indefinite life and rated player relationships of $0.6 million which are being amortized on a straight-line basis over an estimated useful life of approximately eight years. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.
22
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Bally’s Evansville on June 3, 2021:
| As of June 3, 2021 | |||||||||||||||||
| (in thousands) | Preliminary as of June 30, 2021 | Year to Date Adjustments | Preliminary as of September 30, 2021 | ||||||||||||||
| Cash and cash equivalents | $ | 9,355 | $ | — | $ | 9,355 | |||||||||||
| Accounts receivable, net | 1,492 | (18) | 1,474 | ||||||||||||||
| Inventory and Prepaid expenses and other current assets | 1,212 | (10) | 1,202 | ||||||||||||||
| Property and equipment, net | 12,325 | — | 12,325 | ||||||||||||||
| Right of use assets, net | 285,772 | — | 285,772 | ||||||||||||||
| Intangible assets, net | 154,210 | — | 154,210 | ||||||||||||||
| Other assets | 468 | — | 468 | ||||||||||||||
| Accounts payable and Accrued liabilities | (10,568) | (70) | (10,638) | ||||||||||||||
| Lease liability | (285,772) | — | (285,772) | ||||||||||||||
| Deferred tax liability | (7,469) | — | (7,469) | ||||||||||||||
| Other long-term liabilities | (310) | — | (310) | ||||||||||||||
| Net assets acquired | 160,715 | (98) | 160,617 | ||||||||||||||
| Bargain purchase gain | (21,537) | 628 | (20,909) | ||||||||||||||
| Total purchase price | $ | 139,178 | $ | 530 | $ | 139,708 | |||||||||||
Based on the preliminary purchase price allocation, the fair value of the assets acquired and liabilities assumed exceed the purchase price consideration and therefore, a bargain purchase gain of $21.5 million was recorded during the second quarter ended June 30, 2021. An adjustment of $0.6 million, reducing the bargain purchase gain to $20.9 million, was recorded in the third quarter ended September 30, 2021. The Company believes it was able to acquire Bally’s Evansville for less than fair value as a result of a distressed sale prior to Eldorado’s merger with Caesars, as noted above.
Revenue included in operations from Bally’s Evansville for the three and nine months ended September 30, 2021 was $40.1 million and $51.8 million, respectively. Net income included in operations from Bally’s Evansville for the three and nine months ended September 30, 2021 was $4.3 million and $5.1 million, respectively.
Bally’s Quad Cities Casino & Hotel
On June 14, 2021, the Company completed its acquisition of Bally’s Quad Cities in Rock Island, Illinois. Pursuant to the terms of the Equity Purchase Agreement, the Company has acquired all of the outstanding equity securities of The Rock Island Boatworks, Inc., for a purchase price of $118.9 million in cash, subject to customary post-closing adjustments. Cash paid by the Company at closing, net of $3.2 million cash acquired, the $4.0 million deposit paid in the third quarter of 2020 and offset by a receivable of $0.3 million resulting from a networking capital adjustment, was $112.3 million, excluding transaction costs.
The identifiable intangible assets recorded in connection with the closing of the Bally’s Quad Cities acquisition based on preliminary valuations include gaming licenses of $30.3 million with an indefinite life, as well as, rated player relationships and a tradename of $0.7 million and $0.2 million, respectively, which are being amortized on a straight-line basis over their estimated useful lives of approximately 9 years and 4 months, respectively. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach.
23
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the Bally’s Quad Cities acquisition on June 14, 2021:
| As of June 14, 2021 | |||||||||||||||||
| (in thousands) | Preliminary as of June 30, 2021 | Year to Date Adjustments | Preliminary as of September 30, 2021 | ||||||||||||||
| Cash and cash equivalents | $ | 3,241 | $ | (308) | $ | 2,933 | |||||||||||
| Accounts receivable, net | 2,855 | 131 | 2,986 | ||||||||||||||
| Inventory and Prepaid expenses and other current assets | 844 | (46) | 798 | ||||||||||||||
| Property and equipment, net | 73,135 | — | 73,135 | ||||||||||||||
| Intangible assets, net | 31,180 | — | 31,180 | ||||||||||||||
| Goodwill | 14,191 | 402 | 14,593 | ||||||||||||||
| Total current liabilities | (6,244) | (453) | (6,697) | ||||||||||||||
| Total purchase price | $ | 119,202 | $ | (274) | $ | 118,928 | |||||||||||
Revenue included in operations from Bally’s Quad Cities for the three and nine months ended September 30, 2021 was $12.3 million and $14.6 million, respectively.
Interactive Acquisitions
SportCaller - On February 5, 2021, the Company acquired SportCaller for total consideration of $42.6 million including $24.0 million in cash, and 221,391 of the Company’s common shares at closing, pending adjustment, and up to $12.0 million in value of additional shares if SportCaller meets certain post-closing performance targets (calculated based on a USD to Euro exchange ratio of 0.8334).
Monkey Knife Fight - On March 23, 2021, the Company acquired Fantasy Sports Shark, LLC d/b/a/ Monkey Knife Fight for total consideration of $118.6 million including (1) immediately exercisable penny warrants to purchase up to 984,446 of the Company’s common shares (subject to adjustment) at closing and (2) contingent penny warrants to purchase up to 787,557 additional Company common shares, half of which are issuable on each of the first and second anniversary of closing. The contingency relates to MKF’s continued operations in jurisdictions in which it operates at closing at future dates.
The Company paid cash of $22.8 million, net of cash acquired, for SportCaller and MKF. Total non-cash consideration transferred for SportCaller and MKF was $135.3 million, which included $58.7 million of the fair value of contingent consideration as of the SportCaller and MKF acquisition dates. Refer to Note 8 “Fair Value Measurements” for further information.
Bally Interactive - On May 28, 2021, the Company acquired Bally Interactive, formerly Bet.Works Corp., for approximately $71.6 million in cash and 2,084,765 of the Company’s common shares, subject in each case to customary adjustments. The shareholders of Bally Interactive will not transfer any shares of Company common stock received prior to June 1, 2022 and, for the following 12 months, may transfer only up to 1% of the Company’s common stock per every 90 days.
AVP - On July 12, 2021, the Company acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States, for $10.0 million in cash, subject to customary post-closing adjustments.
Telescope - On August 12, 2021, the Company acquired an 84.16% controlling interest in Telescope, a leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams, for $27.7 million, subject to customary post-closing adjustments. The remaining 15.84% of Telescope is owned by certain selling shareholders and is reported as a non-controlling interest. The non-controlling interest is convertible into shares of Bally’s common stock based on a fixed exchange ratio share-settlement feature, valued using the Company’s common stock price, and is classified as permanent equity. Earnings attributable to the non-controlling interest are not material for the quarter ended September 30, 2021.
24
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The identifiable intangible assets recorded in connection with the closing of SportCaller, MKF, Bally Interactive, AVP, and Telescope (collectively the “Bally Interactive Acquisitions”) are based on preliminary valuations and include customer relationships of $41.5 million, which are being amortized over estimated useful lives between and ten years, developed software of $122.4 million, which is being amortized over its estimated useful lives between and ten years, and tradenames of $3.1 million, which are being amortized over their estimated useful lives between and 15 years. Total goodwill recorded in connection with the Bally Interactive Acquisitions was $243.1 million.
These Bally Interactive transactions have been accounted for as business combinations using the acquisition method with Bally’s as the accounting acquirer in accordance with ASC 805.
The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed in connection with the Bally Interactive Acquisitions:
| (in thousands) | Preliminary as of September 30, 2021 | |||||||
| Cash and cash equivalents | $ | 7,435 | ||||||
| Accounts receivable, net | 4,061 | |||||||
Prepaid expenses and other current assets | 2,143 | |||||||
| Property and equipment, net | 518 | |||||||
Intangible assets, net | 167,075 | |||||||
Goodwill | 243,138 | |||||||
Total current liabilities | (13,770) | |||||||
| Deferred tax liability | (15,805) | |||||||
| Acquired non-controlling interest | (3,760) | |||||||
| Net investment in the Bally Interactive Acquisitions | $ | 391,035 | ||||||
During the nine months ended September 30, 2021, the Company recorded purchase accounting adjustments for MKF, SportCaller and Bally Interactive, increasing intangible assets by $0.5 million and reducing goodwill and current liabilities by $0.5 million and $1.1 million, respectively.
Revenue included in operations from the Bally Interactive Acquisitions from their respective dates of acquisition, each noted above, for the three and nine months ended September 30, 2021 was $11.4 million and $18.0 million, respectively.
Supplemental Pro Forma Consolidated Information
The following table represents unaudited supplemental pro forma consolidated revenue and net (loss) income based on Bally’s Lake Tahoe and Bally’s Evansville’s historical reporting periods as if the acquisitions had occurred as of January 1, 2020. The revenue, earnings and proforma effects of other acquisitions completed during the nine months ended September 30, 2021, which include Bally’s Quad Cities and the Bally Interactive Acquisitions, are not material to results of operations, individually or in the aggregate:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| (in thousands, except per share data) | September 30, 2020 | September 30, 2021 | September 30, 2020 | ||||||||||||||
| Revenue | $ | 159,708 | $ | 844,356 | $ | 349,100 | |||||||||||
| Net income (loss) | $ | 11,111 | $ | (3,145) | $ | (46,140) | |||||||||||
| Net income (loss) per share, basic | $ | 0.36 | $ | (0.07) | $ | (1.50) | |||||||||||
| Net income (loss) per share, diluted | $ | 0.36 | $ | (0.07) | $ | (1.50) | |||||||||||
25
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Pending Acquisitions
Tropicana Las Vegas
On April 13, 2021, the Company agreed to purchase the Tropicana Las Vegas Hotel and Casino in Las Vegas, Nevada (“Tropicana Las Vegas”) from GLPI valued at approximately $300 million. The purchase price for the Tropicana property’s non-land assets is $150.0 million. In addition, the Company agreed to lease the land underlying the Tropicana property from GLPI for an initial term of 50 years at an annual rent of $10.5 million, subject to increases over time. The Company and GLPI will also enter into a sale-and-leaseback transaction relating to the Company’s Black Hawk Casinos properties and the Bally’s Quad Cities property for a cash purchase price of $150.0 million payable by GLPI. The lease will have initial annual fixed rent of $12.0 million, subject to increase over time.
6. GOODWILL AND INTANGIBLE ASSETS
The change in carrying value of goodwill by reportable segment for the nine months ended September 30, 2021 and 2020 is as follows (in thousands):
| East | West | Other | Total | ||||||||||||||||||||
| Goodwill as of December 31, 2020 | $ | 84,148 | $ | 102,831 | $ | — | $ | 186,979 | |||||||||||||||
| Goodwill from current year business acquisitions | — | 14,593 | 243,138 | 257,731 | |||||||||||||||||||
| Effect of foreign exchange | — | — | (182) | (182) | |||||||||||||||||||
| Purchase accounting adjustments on prior year business acquisitions | — | 380 | — | 380 | |||||||||||||||||||
Goodwill as of September 30, 2021 | $ | 84,148 | $ | 117,804 | $ | 242,956 | $ | 444,908 | |||||||||||||||
| East | West | Total | |||||||||||||||
| Goodwill as of December 31, 2019 | $ | 84,148 | $ | 48,934 | $ | 133,082 | |||||||||||
| Goodwill from current year business acquisitions | — | 58,743 | 58,743 | ||||||||||||||
| Impairment charges | — | (5,254) | (5,254) | ||||||||||||||
| Goodwill as of September 30, 2020 | $ | 84,148 | $ | 102,423 | $ | 186,571 | |||||||||||
The change in intangible assets, net for the nine months ended September 30, 2021 is as follows (in thousands):
| Intangible assets, net as of December 31, 2020 | $ | 663,395 | |||
| Intangible assets from current year business combinations | 357,895 | ||||
| Change in TRA | 2,689 | ||||
| Effect of foreign exchange | (1,172) | ||||
| Impairment charges | (4,675) | ||||
| Other | 8,677 | ||||
| Less: Accumulated amortization | (30,123) | ||||
Intangible assets, net as of September 30, 2021 | $ | 996,686 | |||
26
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company’s identifiable intangible assets consist of the following:
| Weighted average remaining life (in years) | September 30, 2021 | ||||||||||||||||||||||
| (in thousands, except years) | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||
| Amortizable intangible assets: | |||||||||||||||||||||||
Naming rights - Sinclair(1) | 9.5 | $ | 340,930 | $ | (17,202) | $ | 323,728 | ||||||||||||||||
| Trade names | 28.0 | 20,439 | (16,787) | 3,652 | |||||||||||||||||||
| Hard Rock license | 25.8 | 8,000 | (1,758) | 6,242 | |||||||||||||||||||
| Customer relationships | 6.1 | 54,909 | (9,876) | 45,033 | |||||||||||||||||||
| Developed technology | 8.7 | 121,697 | (6,273) | 115,424 | |||||||||||||||||||
| Other | 3.4 | 7,522 | (1,318) | 6,204 | |||||||||||||||||||
| Total amortizable intangible assets | 553,497 | (53,214) | 500,283 | ||||||||||||||||||||
| Intangible assets not subject to amortization: | |||||||||||||||||||||||
| Gaming licenses | Indefinite | 476,209 | $ | — | 476,209 | ||||||||||||||||||
| Bally’s trade name | Indefinite | 18,981 | — | 18,981 | |||||||||||||||||||
| Novelty game licenses | Indefinite | 1,213 | — | 1,213 | |||||||||||||||||||
| Total unamortizable intangible assets | 496,403 | — | 496,403 | ||||||||||||||||||||
| Total intangible assets, net | $ | 1,049,900 | $ | (53,214) | $ | 996,686 | |||||||||||||||||
(1) Naming rights intangible asset in connection with Sinclair Agreement. Refer to Note 2 “Significant Accounting Policies” for further information. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks. There was no amortization expense for the year ended December 31, 2020.
| Weighted average remaining life (in years) | December 31, 2020 | ||||||||||||||||||||||
| (in thousands, except years) | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||
| Amortizable intangible assets: | |||||||||||||||||||||||
Naming rights - Sinclair(2) | 10.0 | $ | 338,241 | $ | — | $ | 338,241 | ||||||||||||||||
| Trade names | 8.6 | 21,600 | (16,475) | 5,125 | |||||||||||||||||||
| Hard Rock license | 26.5 | 8,000 | (1,576) | 6,424 | |||||||||||||||||||
| Player relationships | 5.8 | 10,515 | (5,483) | 5,032 | |||||||||||||||||||
| Other | 3.7 | 1,950 | (750) | 1,200 | |||||||||||||||||||
| Total amortizable intangible assets | 380,306 | (24,284) | 356,022 | ||||||||||||||||||||
| Intangible assets not subject to amortization: | |||||||||||||||||||||||
| Gaming licenses | Indefinite | 287,108 | — | 287,108 | |||||||||||||||||||
| Bally’s trade name | Indefinite | 19,052 | — | 19,052 | |||||||||||||||||||
| Novelty game licenses | Indefinite | 1,213 | — | 1,213 | |||||||||||||||||||
| Total unamortizable intangible assets | 307,373 | — | 307,373 | ||||||||||||||||||||
| Total intangible assets, net | $ | 687,679 | $ | (24,284) | $ | 663,395 | |||||||||||||||||
(2) See note (1) above.
27
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2021 Tradename Impairment
During the second quarter of 2021, the Company committed to rebrand a majority of its casino portfolio with the Bally’s tradename. In connection with this rebranding initiative, the Company determined it should complete an interim quantitative impairment test of its tradenames at Dover Downs and Bally’s Black Hawk, formerly the Black Hawk Casinos. As a result of the analysis, the Company recorded an impairment charge of $4.7 million during the second quarter ended June 30, 2021 which is recorded within “Goodwill and asset impairment” of the condensed consolidated statement of operations. Dover Downs and Bally’s Black Hawk are reported within the East and West reportable segments, respectively.
2020 Black Hawk Casinos Impairment
Late in the first quarter of 2020, as a result of the economic and market conditions surrounding the COVID-19 pandemic and the decline in stock price and market capitalization the Company experienced at the time, the Company determined that it was more likely than not that the carrying value of all of its reporting units exceeded these units’ respective fair values and performed an interim quantitative impairment test of goodwill. Based on this analysis, the Company determined that only the carrying value of its Black Hawk Casinos reporting unit exceeded its fair value by an amount that exceeded the assigned goodwill and indefinite lived intangibles as of the acquisition date. As a result, the Company recorded a total impairment charge of $8.6 million for the nine months ended September 30, 2020, which is included in the “West” reportable segment, and was allocated between goodwill and intangible assets with charges of $5.3 million and $3.3 million, respectively. Refer to Note 5 “Acquisitions” for further information about the preliminary purchase price allocation and goodwill and intangible balance estimated as of the acquisition date.
7. DERIVATIVE INSTRUMENTS
Foreign Exchange Forward Contracts
On April 16, 2021, a subsidiary of the Company entered into a foreign exchange forward contract to hedge the risk of appreciation of the GBP-denominated purchase price related to the Gamesys acquisition pursuant to which the subsidiary can purchase approximately £900 million at a contracted exchange rate.
On April 16, 2021, a subsidiary of the Company entered into two foreign exchange forward contracts to hedge the risk of appreciation of both the GBP-denominated and Euro-denominated debt held by Gamesys which would be paid off at closing of the Gamesys acquisition pursuant to which the subsidiary can purchase £200 million and €336 million, at contracted exchange rates, respectively.
To enter into these foreign exchange forward contracts, the Company paid total premiums to the contract counterparties of $22.6 million.
On August 20, 2021, two of the above mentioned foreign exchange forward contracts were modified, decreasing the notional amount of the GBP-denominated forward purchase commitments by £746 million to £354 million, collectively. The Company received $1.7 million upon settlement of the modification, which decreased the remaining fair value of the contracts.
The Company’s foreign exchange forward contracts are not designated as hedging instruments under ASC 815. These derivative instruments are reported at fair value as an asset or liability in the condensed consolidated balance sheet. Gains (losses) recognized in earnings resulting from the change in fair value are reported within “Other, net” on the condensed consolidated statements of operations.
Sinclair Agreement
As noted in Note 2 “Significant Accounting Policies,” on November 18, 2020, Bally’s entered into a long-term strategic relationship with Sinclair. The Sinclair Agreement provides for Performance Warrants and Options, the accounting for which is explained below.
28
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Performance Warrants - The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. The Performance Warrants are expected to continue to be classified as liability awards with changes in fair value reported within “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.
Options - As of December 31, 2020, the Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval. Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value of $59.7 million and were reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the condensed consolidated balance sheet. The increase in fair value of the Options from $58.2 million as of December 31, 2020, through January 27, 2021 was $1.5 million and resulted in a mark to market loss in the first quarter of 2021, reported within “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.
The fair values of derivative assets and liabilities not designated as hedging instruments as of September 30, 2021 and December 31, 2020 are as follows:
| (in thousands) | Balance Sheet Location | September 30, 2021 | December 31, 2020 | ||||||||||||||
| Assets: | |||||||||||||||||
| Foreign exchange forward contracts | Prepaid expenses and other current assets | $ | 106 | $ | — | ||||||||||||
| Total Assets | $ | 106 | $ | — | |||||||||||||
| Liabilities: | |||||||||||||||||
| Sinclair Performance Warrants | Naming rights liabilities | $ | 87,964 | $ | 88,119 | ||||||||||||
| Sinclair Options | Naming rights liabilities | — | 58,198 | ||||||||||||||
| Total Liabilities | $ | 87,964 | $ | 146,317 | |||||||||||||
The gains (losses) recognized in the condensed consolidated statement of operations for derivatives not designated as hedging instruments during the three and nine months ended September 30, 2021 are as follows:
| Condensed Consolidated Statements of Operations Location | September 30, 2021 | ||||||||||||||||
| (in thousands) | Three months ended | Nine months ended | |||||||||||||||
| Foreign exchange forward contracts | Other, net | $ | (6,003) | $ | (20,776) | ||||||||||||
| Sinclair Performance Warrants | Change in value of naming rights liabilities | 6,965 | 155 | ||||||||||||||
| Sinclair Options | Change in value of naming rights liabilities | — | (1,526) | ||||||||||||||
There was no gain (loss) recognized in the condensed consolidated statement of operations for the three and nine months ended September 30, 2020.
8. FAIR VALUE MEASUREMENTS
The Company categorizes financial assets and liabilities based on the following fair value hierarchy:
Level 1: Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly;
Level 3: Unobservable inputs in which little or no market data exists requiring an entity to develop its own assumptions.
29
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
| September 30, 2021 | |||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | ||||||||||||||
| Assets: | |||||||||||||||||
| Foreign exchange forward contracts | $ | — | $ | 106 | $ | — | |||||||||||
| Other current assets | 336 | — | — | ||||||||||||||
| Total | $ | 336 | $ | 106 | $ | — | |||||||||||
| Liabilities: | |||||||||||||||||
| Sinclair Performance Warrants | $ | — | $ | — | $ | 87,964 | |||||||||||
| Contingent consideration | — | — | 43,691 | ||||||||||||||
| Total | $ | — | $ | — | $ | 131,655 | |||||||||||
| December 31, 2020 | ||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | |||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Sinclair Performance Warrants | $ | — | $ | — | $ | 88,119 | ||||||||||||||
| Sinclair Options | — | 58,198 | — | |||||||||||||||||
| Total | $ | — | $ | 58,198 | $ | 88,119 | ||||||||||||||
The Performance Warrants and acquisition related contingent consideration payable are Level 3 liabilities. A summary of the Level 3 activity is as follows:
| ( in thousands) | Performance Warrants | Contingent Consideration | Total | ||||||||||||||||||||
| Beginning as of December 31, 2020 | $ | 88,119 | $ | — | $ | 88,119 | |||||||||||||||||
| Additions in the period (acquisition fair value) | — | 58,623 | 58,623 | ||||||||||||||||||||
| Change in fair value | (155) | (14,932) | (15,087) | ||||||||||||||||||||
| Ending as of September 30, 2021 | $ | 87,964 | $ | 43,691 | $ | 131,655 | |||||||||||||||||
Foreign exchange forward contracts
The fair values of foreign exchange forward contract assets and liabilities are classified within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.
Sinclair Performance Warrants
Sinclair Performance Warrants are accounted for as a derivative instrument classified as a liability within Level 3 of the hierarchy as the warrants are not traded in active markets and are subject to certain assumptions and estimates made by management related to the probability of meeting performance milestones. These assumptions and the probability of meeting performance targets may have a significant impact on the value of the warrant. The Performance warrants are valued using an option pricing model, considering the Company’s estimated probabilities of achieving the performance milestones for each tranche. Inputs to this valuation approach include volatility of the Company’s common stock trading price, risk free interest rates, the Company’s common stock price as of the valuation date, and expected terms.
30
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Contingent Consideration
Contingent consideration related to acquisitions is recorded at fair value as a liability on the acquisition date and is remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. In connection with the acquisitions of SportCaller and MKF on February 5, 2021 and March 23, 2021, respectively, the Company recorded contingent consideration at fair value of $58.6 million as of the acquisition dates. After the acquisition dates and until the contingencies are resolved, the fair value of contingent consideration payable is adjusted each reporting period based primarily on the expected probability of achievement of the contingency targets which are subject to management’s estimate and the Company’s stock price. These changes in fair value are recognized within “Other, net” of the condensed consolidated statements of operations. Refer to Note 5 “Acquisitions” for further information.
Sinclair Options
As noted in Note 7 “Derivative Instruments,” as of December 31, 2020, the Sinclair Options were accounted for as a derivative liability. The fair value was based on a Black-Scholes model using Level 2 inputs, including volatility rates, risk free rates, the Company’s common stock price and expected term. Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity.
Other current assets
The Company has agreements with certain third-party sports betting operators for online sports betting and related iGaming market access. Pursuant to one of these agreements, the Company has a present right to payment for a fixed number of equity securities in exchange for market access. The Company recorded these securities as a stock receivable at their fair value based on quoted prices in active markets and classified within Level 1 of the hierarchy with changes to fair value included within “Other, net” of the condensed consolidated statements of operations.
9. ACCRUED LIABILITIES
As of September 30, 2021 and December 31, 2020, accrued liabilities consisted of the following:
| (in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
| Gaming liabilities | $ | 41,506 | $ | 33,795 | |||||||
| Compensation | 31,673 | 21,708 | |||||||||
Acquisition related liabilities and transaction services(1) | 18,459 | 7,174 | |||||||||
| Property taxes | 11,335 | 3,486 | |||||||||
| Bally’s trade name accrual, current portion | 9,943 | 9,475 | |||||||||
| Insurance reserves | 10,171 | 7,188 | |||||||||
| Purses due to horsemen | 9,803 | 5,726 | |||||||||
| Legal | 4,745 | 1,761 | |||||||||
| Interest payable | 17,112 | 3,076 | |||||||||
| Other | 52,536 | 26,666 | |||||||||
| Total accrued liabilities | $ | 207,283 | $ | 120,055 | |||||||
__________________________________
(1) Includes the deferred purchase price payable for Bally’s Lake Tahoe of $14.2 million and net working capital accruals for certain recent acquisitions. Refer to Note 5 “Acquisitions” for further information.
31
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
10. ACQUISITION, INTEGRATION AND RESTRUCTURING
The following table reflects acquisition, integration and restructuring expenses the Company recorded during the three and nine months ended September 30, 2021 and 2020:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Acquisition and integration costs: | |||||||||||||||||||||||
| Gamesys | $ | 3,749 | $ | — | $ | 17,320 | $ | — | |||||||||||||||
Bally’s Evansville | 329 | — | 6,421 | — | |||||||||||||||||||
Bally Interactive acquisitions(1) | 842 | — | 4,833 | — | |||||||||||||||||||
Bally’s Quad Cities | 162 | 658 | 1,790 | 658 | |||||||||||||||||||
Richmond, Virginia(2) | 13 | — | 1,890 | — | |||||||||||||||||||
| Bally’s Atlantic City | 2 | 683 | 1,144 | 2,203 | |||||||||||||||||||
| Bally’s Shreveport | 37 | 727 | 964 | 1,758 | |||||||||||||||||||
| Bally’s Lake Tahoe | 82 | — | 947 | — | |||||||||||||||||||
| Bally’s Kansas City and Bally’s Vicksburg | — | 497 | 107 | 1,359 | |||||||||||||||||||
Other(3) | 1,581 | 175 | 2,041 | 986 | |||||||||||||||||||
| Total | 6,797 | 2,740 | 37,457 | 6,964 | |||||||||||||||||||
| Restructuring expense | — | — | — | 20 | |||||||||||||||||||
| Total acquisition, integration and restructuring | $ | 6,797 | $ | 2,740 | $ | 37,457 | $ | 6,984 | |||||||||||||||
(1) Costs associated with the acquisition of SportCaller, MKF, AVP and Telescope, which are included within the Bally Interactive division.
(2) Costs associated with a proposal to develop a casino in the City of Richmond, Virginia, which the Company is no longer pursuing.
(3) Includes costs in connection with the development of a casino in Centre County, Pennsylvania in addition to the acquisitions of Tropicana Las Vegas, Bally’s Black Hawk, Dover Downs and other pending and closed acquisitions.
11. LONG-TERM DEBT
As of September 30, 2021 and December 31, 2020, long-term debt consisted of the following:
| (in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
| Term Loan principal | $ | 564,813 | $ | 569,125 | |||||||
| Revolving Credit Facility | 225,000 | 35,000 | |||||||||
6.75% Senior Notes due 2027 | 315,000 | 525,000 | |||||||||
5.625% Senior notes due 2029 | 750,000 | — | |||||||||
5.875% Senior notes due 2031 | 750,000 | — | |||||||||
| Less: Unamortized original issue discount | (22,467) | (11,771) | |||||||||
| Less: Unamortized deferred financing fees | (20,175) | (17,499) | |||||||||
| Long-term debt, including current maturities | 2,562,171 | 1,099,855 | |||||||||
| Less: Current portion of Term Loan and Revolving Credit Facility | (5,750) | (5,750) | |||||||||
| Long-term debt, net | $ | 2,556,421 | $ | 1,094,105 | |||||||
32
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
May 2019 Senior Secured Credit Facility
On May 10, 2019, the Company entered into a credit agreement (the “Credit Agreement”) with Citizens Bank, N.A., as administrative agent, and the lenders party thereto, consisting of a $300 million Term Loan B facility (the “Term Loan Facility”) and a $250 million revolving credit facility (the “Revolving Credit Facility”). On May 11, 2020, the Company amended the Credit Agreement to increase the Term Loan Facility by $275 million to $525 million. On March 9, 2021, the Company amended the Credit Agreement to increase the borrowing limit under the Revolving Credit Facility to $325 million.
As of September 30, 2021, there were $225.0 million of outstanding borrowings under the Revolving Credit Facility at a weighted average interest rate of 4.73%. As of September 30, 2021, the interest rate for the increased portion of the Term Loan Facility was 10.25%.
The Company’s obligations under the Revolving Credit Facility and the Term Loan Facility were terminated and amounts outstanding were repaid in connection with the Company’s entry into the New Credit Facility on October 1, 2021 as described below under “Subsequent Events.”
6.75% Senior Notes due 2027
On May 10, 2019, the Company issued $400 million aggregate principal amount of 6.75% unsecured senior notes due June 1, 2027, and, on October 9, 2020, the Company issued an additional $125 million aggregate principal amount of 6.75% unsecured senior notes due June 1, 2027 (together, the “Senior Notes”).
On September 7, 2021, the Company redeemed $210 million aggregate principal amount of the Senior Notes at a redemption price of 106.750% of the principal amount using a portion of the proceeds of the Company’s April 2021 public offering of common stock. Accordingly, as of September 30, 2021, $315 million aggregate principal amount of the Senor Notes remained outstanding. On October 5, 2021, the Company redeemed the remaining $315 million aggregate principal amount of the Senior Notes at a redemption price of 109.074% of the principal amount using a portion of the proceeds of its New Term Loan Facility described below under “Subsequent Events.” As of October 5, 2021, no amounts pertaining to these Senior Notes remained outstanding.
In connection with the redemption of $210 million aggregate principal amount of Senior Notes on September 7, 2021, as noted above, the Company recorded a loss on extinguishment of debt of $19.4 million during the three months ended September 30, 2021.
The Company was in compliance with all debt covenants as of September 30, 2021.
New Senior Notes
On August 20, 2021, two unrestricted subsidiaries (together, the “Escrow Issuers”) of the Company issued $750.0 million aggregate principal amount of 5.625% senior notes due 2029 (the “2029 Notes”) and $750.0 million aggregate principal amount of 5.875% Senior Notes due 2031 (the “2031 Notes” and, together with the 2029 Notes, the “New Senior Notes”). The New Senior Notes were issued pursuant to an indenture, dated as of August 20, 2021, among the Escrow Issuers and U.S. Bank National Association, as trustee. Certain of the net proceeds from the New Senior Notes offering were placed in escrow accounts for use in connection with the Gamesys Acquisition.
There are no operations at Bally’s Corporation. Cash held was de minimis at September 30, 2021 and December 31, 2020.
Subsequent Events
Company Assumption of New Senior Notes Issuer Obligation
On October 1, 2021, upon the closing of the Gamesys Acquisition, the Company assumed the issuer obligation under the New Senior Notes.
The New Senior Notes are guaranteed, jointly and severally, by each of the Company’s restricted subsidiaries that guarantees the Company’s obligations under its New Credit Facility.
33
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The 2029 Notes mature on September 1, 2029 and the 2031 Notes mature on September 1, 2031. Interest is payable on the New Senior Notes in cash semi-annually on March 1 and September 1 of each year, beginning on March 1, 2022.
The Company may redeem some or all of the New Senior Notes at any time prior to September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at prices equal to 100% of the principal amount of the New Senior Notes to be redeemed plus certain “make-whole” premiums, plus accrued and unpaid interest. In addition, prior to September 1, 2024, the Company may redeem up to 40% of the original principal amount of each series of the New Senior Notes with proceeds of certain equity offerings at a redemption price equal to 105.625% of the principal amount, in the case of the 2029 Notes, and 105.875%, in the case of the 2031 Notes, plus accrued and unpaid interest. The Company may redeem some or all of the New Senior Notes at any time on or after September 1, 2024, in the case of the 2029 Notes, and September 1, 2026, in the case of the 2031 Notes, at certain redemption prices set forth in the indenture plus accrued and unpaid interest.
The indenture contains covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, (1) incur additional indebtedness, (2) pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments, (3) enter into certain transactions with affiliates, (4) sell or otherwise dispose of assets, (5) create or incur liens and (6) merge, consolidate or sell all or substantially all of the Company’s assets. These covenants are subject to exceptions and qualifications set forth in the indenture.
New Credit Facility
On October 1, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the “New Credit Agreement”) with Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto, providing for senior secured financing of up to $2.565 billion, consisting of a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the “New Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $620.0 million (the “New Revolving Credit Facility”), which will mature in 2026. The New Revolving Credit Facility was undrawn at closing.
The credit facilities allow the Company to increase the size of the New Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the New Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $650 million and 100% of the Company’s consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the New Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio as set out in the New Credit Agreement.
The credit facilities are guaranteed by the Company’s restricted subsidiaries, subject to certain exceptions, and secured by a first-priority lien on substantially all of the Company’s and each of the guarantors’ assets, subject to certain exceptions.
Borrowings under the credit facilities bear interest at a rate equal to, at the Company’s option, either (1) LIBOR determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs and subject to a floor of 0.50% in the case of term loans and 0.00% in the case of revolving loans or (2) a base rate determined by reference to the greatest of (a) the federal funds rate plus 0.50%, (b) the prime rate, (c) the one-month LIBOR rate plus 1.00%, (d) solely in the case of term loans, 1.50%, and (e) solely in the case of revolving loans, 1.00%, in each case of clauses (1) and (2), plus an applicable margin. In addition, on a quarterly basis, the Company is required to pay each lender under the New Revolving Credit Facility a 0.50% or 0.375% commitment fee in respect of commitments under the New Revolving Credit Facility, with the applicable commitment fee determined based on the Company’s total net leverage ratio.
The credit facilities contain covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, sell assets, make certain investments, and grant liens. These covenants are subject to exceptions and qualifications set forth in the New Credit Agreement. The New Revolving Credit Facility contains a financial covenant regarding a maximum first lien net leverage ratio that applies when borrowings under the New Revolving Credit Facility exceed 30% of the total revolving commitment.
34
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
12. LEASES
GLPI Master Lease
In connection with the acquisition of Bally’s Evansville, an affiliate of GLPI has agreed to acquire the real estate associated with the Evansville Casino from the Seller for $340.0 million and lease it to the Company under a master lease agreement (the “Master Lease”). GLPI has also agreed to acquire the real estate associated with Dover Downs for $144.0 million and lease it back to the Company under the Master Lease. The Master Lease with GLPI has an initial term of 15 years and includes four, five-year options to renew and requires combined minimum annual payments of $40.0 million, subject to escalation. The acquisition of Evansville and commencement of the Master Lease was June 4, 2021.
During the second quarter of 2021, the Company sold the real estate associated with Dover Downs to GLPI and recorded a gain of $53.4 million representing the difference in the transaction price and the derecognition of assets. This gain is reflected as “Gain on sale-leaseback” in the condensed consolidated statements of operations.
During the second quarter of 2021, the company recognized a lease liability and corresponding right of use asset of $117.3 million and $276.9 million related to Dover Downs and Bally’s Evansville, respectively. These leases are accounted for as operating leases within the provisions of ASC 842 over the lease term or until a re-assessment event occurs.
Operating Leases
In addition to the operating lease components under the GLPI Master Lease, the Company is committed under various long-term operating lease agreements primarily related to submerged tidelands, property and equipment at Hard Rock Biloxi, Bally’s Kansas City, Bally’s Shreveport, and Bally’s Lake Tahoe. These leases include various renewal options which are included in the lease term when the Company has determined it is reasonably certain of exercising the options. Certain of these leases include percentage rent payments based on property revenues and/or rent escalation provisions determined by increases in the consumer price index (“CPI”). These percentage rent and escalation provisions are treated as variable lease payments and recognized as lease expense in the period in which the obligation for those payments are incurred. Discount rates used to determine the present value of the lease payments are based on a credit-adjusted secured borrowing rate commensurate with the term of the lease.
In the second quarter of 2021, in connection with the acquisition of Bally’s Lake Tahoe, the Company assumed a lease for the real estate and land underlying the operations of the Bally’s Lake Tahoe facility. The original term of the lease expires on December 31, 2035, at which point the Company will have five options to renew the lease for additional periods of five years each. The renewal options have not been included in the calculation of the lease liability or right of use asset as the Company is not reasonably certain to exercise the options. The fixed rent due under the lease can escalate each year based on changes in CPI. Additionally, the Company is obligated to pay an annual percentage rent based on property net revenues.
Additionally, certain of the Company’s subsidiaries lease office space, parking space, memorabilia and equipment under agreements classified as operating leases that expire on various dates through 2027. Variable expenses generally represent the Company’s share of the landlord’s operating expenses, percentage rent and CPI increases. The Company does not have any leases classified as financing leases.
The Company had operating lease liabilities of approximately $525.5 million and $63.5 million as of September 30, 2021 and December 31, 2020, respectively, and right of use assets of approximately $499.1 million and $36.1 million as of September 30, 2021 and December 31, 2020, respectively, which were included in the condensed consolidated balance sheets.
35
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following summarizes quantitative information about the Company’s operating leases:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Operating leases: | |||||||||||||||||||||||
| Operating lease costs | $ | 13,214 | $ | 1,083 | $ | 20,909 | $ | 2,183 | |||||||||||||||
| Variable lease costs | 706 | 13 | 1,624 | 37 | |||||||||||||||||||
| Operating lease expense | 13,920 | 1,096 | 22,533 | 2,220 | |||||||||||||||||||
| Short-term lease expense | 5,084 | 526 | 7,907 | 1,381 | |||||||||||||||||||
| Total lease expense | $ | 19,004 | $ | 1,622 | $ | 30,440 | $ | 3,601 | |||||||||||||||
Supplemental cash flow and other information for the three and nine months ended September 30, 2021 and 2020, related to operating leases was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Cash paid for amounts included in the lease liability - operating cash flows from operating leases | $ | 12,249 | $ | 543 | $ | 18,386 | $ | 1,642 | |||||||||||||||
| Right of use assets obtained in exchange for operating lease liabilities | $ | 1,106 | $ | — | $ | 127,729 | $ | 116 | |||||||||||||||
| September 30, 2021 | December 31, 2020 | ||||||||||
| Weighted average remaining lease term | 15.9 years | 24.3 years | |||||||||
| Weighted average discount rate | 6.2 | % | 7.3 | % | |||||||
As of September 30, 2021, future minimum rental commitments under noncancelable operating leases are as follows:
| (in thousands) | September 30, 2021 | ||||
| Remaining 2021 | $ | 14,934 | |||
| 2022 | 52,256 | ||||
| 2023 | 52,292 | ||||
| 2024 | 52,304 | ||||
| 2025 | 52,092 | ||||
| Thereafter | 611,680 | ||||
| Total | 835,558 | ||||
| Less: present value discount | (310,106) | ||||
| Operating lease liabilities | $ | 525,452 | |||
Future operating lease payments as shown above include $108.1 million related to extension options that are reasonably certain of being exercised.
The Company also has leasing arrangements with third-party lessees at its properties. Leasing arrangements for which the Company acts as a lessor are not deemed material as of September 30, 2021 and December 31, 2020.
36
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
13. EQUITY PLANS
Equity Incentive Plans
The Company has three equity incentive plans: the 2010 BLB Worldwide Holdings, Inc. Stock Option Plan (the “2010 Option Plan”), the 2015 Stock Incentive Plan (“2015 Incentive Plan”) and the Bally’s Corporation 2021 Equity Incentive Plan (“2021 Incentive Plan”), collectively (the “Equity Incentive Plans”).
The 2010 Option Plan provided for options to acquire 2,455,368 shares of the Company’s common stock. Options granted to employees, officers and directors of the Company under the 2010 Option Plan vested on various schedules by individual as defined in the individual participants’ option agreements. Vested options can generally be exercised all or in part at any time until the tenth anniversary of the date of grant. Effective December 9, 2015, it was determined that no new awards would be granted under the 2010 Option Plan. During the nine months ended September 30, 2021, there were 70,000 options exercised at a weighted average exercise price of $4.31 per share and an aggregate intrinsic value of $0.3 million. As of September 30, 2021, there were 20,000 unexercised options outstanding.
The 2015 Incentive Plan provided for the grant of stock options, restricted stock award (“RSAs”), restricted share units (“RSUs”), performance share units (“PSUs”) and other stock-based awards (collectively, “restricted awards”) (including those with performance-based vesting criteria) to employees, directors or consultants of the Company. The 2015 Incentive Plan authorized for the issuance of up to 1,700,000 shares of the Company’s common stock pursuant to grants of awards made under the plan. Effective May 18, 2021, no new awards will be granted under the 2015 Incentive Plan as a result of the new 2021 Incentive Plan being approved at the Company’s 2021 Annual Shareholder Meeting. The 2021 Incentive Plan provides for the grant of stock options, RSAs, RSUs, PSUs and other awards (including those with performance-based vesting criteria) to employees, directors or consultants of the Company. The 4,250,000 shares of the Company’s common stock, decreased by the number of shares subject to awards granted under the 2015 Incentive Plan between December 31, 2020 and May 18, 2021, or 221,464 shares, plus any shares subject to awards granted under the 2021 Incentive Plan or the 2015 Incentive Plan that are added back to the share pool under the 2021 Incentive Plan pursuant to the plan’s share counting rules, are authorized for issuance under the 2021 Incentive Plan. During the nine months ended September 30, 2021, the Company granted 488,009 restricted awards with an aggregate intrinsic value of $27.5 million of which 221,667 were granted under the 2015 Incentive Plan and 266,342 were granted under the 2021 Incentive Plan. As of September 30, 2021, 3,707,178 shares remain available for grant under the 2021 Incentive Plan, which includes shares added back to the share pool based on share counting rules. There were 875,988 restricted awards outstanding as of September 30, 2021.
Share-Based Compensation
The Company recognized total share-based compensation expense of $5.4 million and $13.8 million for the three and nine months ended September 30, 2021, respectively, and $1.8 million and $9.5 million for the three and nine months ended September 30, 2020, respectively. The total income tax benefit for share-based compensation arrangements was $1.5 million and $0.7 million for the three months ended September 30, 2021 and 2020, respectively, and $4.0 million and $3.6 million for the nine months ended September 30, 2021 and 2020, respectively.
14. BENEFIT PLANS
The Company participates in and contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of its union-represented employees. The Company acquired a defined benefit pension plan with the acquisition of Dover Downs on March 28, 2019 (“Dover Downs Pension Plan”) which is a non-contributory, tax qualified defined benefit pension plan that has been frozen since July 2011.
37
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Dover Downs Defined Benefit Pension Plan
The net periodic benefit (income) cost and other changes in plan assets and benefit obligations, excluding service cost, is set forth in the table below for the three and nine months ended September 30, 2021 and 2020.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Service cost | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Interest cost | 224 | 223 | 672 | 669 | |||||||||||||||||||
| Expected return on plan assets | (357) | (357) | (1,071) | (1,071) | |||||||||||||||||||
| Net periodic benefit income | $ | (133) | $ | (134) | $ | (399) | $ | (402) | |||||||||||||||
Contributions
Minimum pension contributions of $0.5 million are required to be made to the Dover Downs Pension Plan under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), in 2021. The Company expects to contribute approximately $0.7 million in 2021. The Company contributed $0.2 million and $0.4 million to the Dover Downs Pension Plan during the three and nine months ended September 30, 2021, respectively. In 2020, under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), minimum required contributions for single-employer pension plans, including quarterly contributions, that were otherwise due during calendar year 2020 were instead due January 1, 2021. During the three and nine months ended September 30, 2020, the Company contributed $0.5 million to the Dover Downs Pension Plan which included the minimum required contributions for first and second quarters of 2020, including all applicable interest after having elected not to make a contribution to the Dover Downs Pension Plan for the first quarter of 2020, as well as the final payment for the 2019 plan year.
401(k) Plan
The Company has a retirement savings plan under Section 401(k) of the Internal Revenue Code covering non-union employees and certain union employees that reside in the United States. The plan allows employees to defer up to the lesser of the Internal Revenue Code prescribed maximum amount or 100% of their income on a pre-tax basis through contributions to the plan. Total employer contribution expense was $0.9 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $2.2 million and $0.6 million for the nine months ended September 30, 2021 and 2020, respectively.
15. STOCKHOLDERS’ EQUITY
Capital Return Program and Quarterly Cash Dividend
On June 14, 2019, the Company announced that its Board of Directors approved a capital return program under which the Company could expend a total of up to $250 million for a share repurchase program and payment of dividends. Share repurchases may be effected in various ways, which could include open-market or private repurchase transactions, accelerated stock repurchase programs, tender offers or other transactions. The amount, timing and terms of any return of capital transaction will be determined based on prevailing market conditions and other factors. The Company expects to fund any share repurchases and dividends from existing capital resources. There is no fixed time period to complete share repurchases.
On July 26, 2019, the Company completed a modified Dutch auction tender offer (“Offer”), purchasing 2,504,971 common shares at an aggregate purchase price of $73.9 million. The Offer was funded with cash on hand.
On February 10, 2020 and October 4, 2021, the Board of Directors approved increases in the capital return program of $100 million and $350 million, respectively.
38
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Total share repurchase activity, including a private repurchase transaction, during the nine months ended September 30, 2020 was as follows:
| (in thousands, except share data) | Nine Months Ended September 30, 2020 | ||||
| Number of common shares repurchased | 1,812,393 | ||||
| Total cost | $ | 33,292 | |||
| Average cost per share, including commissions | $ | 18.37 | |||
__________________________________
There was no share repurchase activity during the nine months ended September 30, 2021.
Common Stock Offering
On April 20, 2021, the Company completed an underwritten public offering of common stock at a price to the public of $55.00 per share. The Company issued a total of 12,650,000 shares of Bally’s common stock in the offering, which included 1,650,000 shares issued pursuant to the full exercise of the underwriters' over-allotment option.
The net proceeds from the offering were approximately $671.4 million, after deducting underwriting discounts, but before expenses.
On April 20, 2021, the Company issued to affiliates of Sinclair a warrant to purchase 909,090 common shares for an aggregate purchase price of $50.0 million, the same price per share as the public offering price in Bally’s common stock public offering ($55.00 per share). The net proceeds were used to finance a portion of the purchase price of the Gamesys acquisition.
The exercise price of the warrant is nominal, and its exercise is subject to, among other conditions, requisite gaming authority approvals. Sinclair agreed not to acquire more than 4.9% of Bally’s outstanding common shares without such approvals. In addition, in accordance with the agreements that Bally’s and Sinclair entered into in November 2020, Sinclair exchanged 2,086,908 common shares for substantially identical warrants.
Treasury Stock
The Company records the repurchase of shares of common stock at cost based on the settlement date of the transaction. Upon settlement, these shares are classified as treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares. There was no share repurchase activity during the three and nine months ended September 30, 2021. As mentioned above, Sinclair exchanged 2,086,908 common shares for substantially identical warrants. The common stock received by the Company was recorded as treasury stock and subsequently retired during the second quarter of 2021. The Company retired 10,042 and 2,099,268 shares of its common stock held in treasury during the three and nine months ended September 30, 2021, respectively. The Company retired 10,892,083 shares of its common stock held in treasury during the nine months ended September 30, 2020. There were no shares retired during the three months ended September 30, 2020. The shares were returned to the status of authorized but unissued shares. As of September 30, 2021, there were no shares remaining in treasury.
During the nine months ended September 30, 2020, the Company paid cash dividends of $0.10 per common share, for a total cost of approximately $3.2 million. There were no cash dividends paid during the nine months ended September 30, 2021. As of September 30, 2021 and December 31, 2020, $84.9 million remained available for use under the above-mentioned capital return program.
39
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Shares Outstanding
As of September 30, 2021, the Company had 44,581,568 common shares issued and outstanding. The Company issued warrants, options and other contingent consideration in acquisitions and strategic partnerships that are expected to result in the issuance of common shares in future periods resulting from the exercise of warrants and options or the achievement of certain performance targets. These incremental shares and the shares issued by the consummation of the Gamesys acquisition on October 1, 2021 are summarized below:
| Sinclair Penny Warrants (Note 2) | 7,911,724 | ||||
| Sinclair Performance Warrants (Note 2) | 3,279,337 | ||||
Sinclair Options(1) (Note 2) | 1,639,669 | ||||
| Monkey Knife Fight penny warrants (Note 5) | 24,611 | ||||
| Monkey Knife Fight contingent shares (Note 5) | 787,557 | ||||
| Telescope contingent shares (Note 5) | 75,678 | ||||
SportCaller contingent shares(2) (Note 5) | 230,830 | ||||
| Gamesys acquisition (Note 1) | 9,773,537 | ||||
| Outstanding awards under Equity Incentive Plans (Note 13) | 895,988 | ||||
| 24,618,931 | |||||
(1) Consists of four equal tranches to purchase shares with exercise prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing of the Sinclair Agreement.
(2) The contingent consideration related to the SportCaller acquisition is 10M EUR, payable in shares subject to certain post-acquisition earnout targets and based on share price at time of payment. For purposes of this estimate, the Company used the EUR>USD conversion rate of 1.1574 as of September 30, 2021 and the closing share price of Company common shares of $50.14 per share to calculate the shares expected to be issued if all earn-out targets are met.
NOTE 16. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table reflects the changes in accumulated other comprehensive loss by component, net of tax, for the nine months ended September 30, 2021. There was no change in accumulated other comprehensive loss for the nine months ended September 30, 2020.
| (in thousands) | Foreign Currency Translation Adjustment | Benefit Plans | Total | ||||||||||||||
| Accumulated other comprehensive loss at December 31, 2020 | $ | — | $ | (3,144) | $ | (3,144) | |||||||||||
| Current period other comprehensive loss | (44,312) | — | (44,312) | ||||||||||||||
Reclassification adjustment to net earnings(1) | — | 122 | 122 | ||||||||||||||
| Accumulated other comprehensive loss at September 30, 2021 | $ | (44,312) | $ | (3,022) | $ | (47,334) | |||||||||||
__________________________________
(1) Approximately $40 thousand for each quarter ended March 31, June 30, and September 30, 2021.
40
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
17. SEGMENT REPORTING
During the second quarter of 2021, the Company updated its reporting segments to better align with its strategic growth initiatives in light of recent and pending acquisitions. The growth and diversification achieved through the Company’s recent and pending acquisitions has resulted in a change in the way the Company’s chief operating decision maker makes operating decisions, assesses the performance of the business and allocates resources. As a result of this realignment, the Company determined it had four operating segments: East, West, Bally Interactive and Bally’s Arapahoe Park. Bally Interactive and Bally’s Arapahoe Park were determined to be immaterial operating segments and are therefore, included in the “Other” category along with interest expense and certain corporate operating expenses that are not allocated to the other segments, including, among other expenses, share-based compensation, merger and acquisition costs and certain non-recurring charges. The properties included within the East and West reportable segments, along with the components of the Other category, are as follows:
| East | West | Other | ||||||||||||
Bally’s Twin River Lincoln Casino Resort (1) | Hard Rock Biloxi (3) | Bally Interactive(5) | ||||||||||||
Bally’s Tiverton Casino & Hotel (1) | Bally’s Vicksburg (3) | Bally’s Arapahoe Park | ||||||||||||
Dover Downs (2) | Bally’s Kansas City Casino (4) | Twin River Management Group (6) | ||||||||||||
Bally’s Atlantic City (2) | Bally’s Black Hawk (4) | |||||||||||||
Bally’s Evansville | Bally’s Shreveport Casino & Hotel(3) | |||||||||||||
Bally’s Lake Tahoe Casino Resort | ||||||||||||||
Bally’s Quad Cities Casino Hotel | ||||||||||||||
___________________________________________
(1) Previously reported within the “Rhode Island” segment.
(2) Previously reported within the “Mid-Atlantic” segment.
(3) Previously reported within the “Southeast” segment.
(4) Previously reported within the “West” segment.
(5) Immaterial operating segment which includes SportCaller, MKF and Bally Interactive (formerly Bet.Works) as well as online and mobile sports betting operations.
(6) Immaterial operating segment that includes interest expense and certain operating expenses that are not allocated to the other segments, which include, among other expenses, share-based compensation, merger and acquisition costs and certain non-recurring charges.
The Company is currently evaluating the acquisition of Gamesys for segment reporting purposes, but it is expected that it will be reported as International Interactive and the Company’s existing operating segment Bally Interactive, will be reported as North America Interactive. It is expected that the pending acquisition of Tropicana Las Vegas will be reported in the West and the Pennsylvania development project will be included in the East.
As of September 30, 2021, the Company’s operations are predominately within the United States and has immaterial operations in other jurisdictions. The Company does not have any revenues from any individual customers that exceed 10% of total reported revenues.
41
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The following table shows revenues, income (loss), and identifiable assets for each of the Company’s reportable segments. The Other category is included in the following tables in order to reconcile the segment information to the Company’s condensed consolidated financial statements. The prior year results presented below were reclassified to conform to the new segment presentation.
| (in thousands) | East | West | Other | Total | |||||||||||||||||||
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||
| Total revenue | $ | 176,975 | $ | 124,603 | $ | 13,201 | $ | 314,779 | |||||||||||||||
| Income (loss) from operations | 34,469 | 31,217 | (37,952) | 27,734 | |||||||||||||||||||
| Net income (loss) | 25,386 | 24,001 | (64,134) | (14,747) | |||||||||||||||||||
| Depreciation and amortization | 5,763 | 8,279 | 14,958 | 29,000 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | 15 | — | 31,838 | 31,853 | |||||||||||||||||||
| Change in value of naming rights liabilities | — | — | 6,965 | 6,965 | |||||||||||||||||||
| Gain (adjustment) on bargain purchases | — | — | (1,039) | (1,039) | |||||||||||||||||||
| Capital expenditures | 13,630 | 11,050 | 6,693 | 31,373 | |||||||||||||||||||
| Goodwill | 84,148 | 117,804 | 242,956 | 444,908 | |||||||||||||||||||
| Total assets | 1,282,971 | 1,090,759 | 2,595,973 | 4,969,703 | |||||||||||||||||||
| Three Months Ended September 30, 2020 | |||||||||||||||||||||||
| Total revenue | $ | 59,065 | $ | 55,900 | $ | 1,659 | $ | 116,624 | |||||||||||||||
| Income (loss) from operations | 14,578 | 14,524 | (5,719) | 23,383 | |||||||||||||||||||
| Net income (loss) | 10,702 | 11,381 | (15,360) | 6,723 | |||||||||||||||||||
| Depreciation and amortization | 5,571 | 4,279 | 82 | 9,932 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | 30 | — | 16,920 | 16,950 | |||||||||||||||||||
| Capital expenditures | 914 | 2,104 | 100 | 3,118 | |||||||||||||||||||
| Goodwill | 84,148 | 102,423 | — | 186,571 | |||||||||||||||||||
| Total assets | 627,654 | 593,038 | 36,189 | 1,256,881 | |||||||||||||||||||
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||
| Total revenue | $ | 408,458 | $ | 343,190 | $ | 23,130 | $ | 774,778 | |||||||||||||||
| Income (loss) from operations | 124,825 | 100,693 | (87,778) | 137,740 | |||||||||||||||||||
| Net income (loss) | 90,353 | 77,397 | (124,260) | 43,490 | |||||||||||||||||||
| Depreciation and amortization | 17,275 | 21,695 | 28,533 | 67,503 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | 49 | — | 74,431 | 74,480 | |||||||||||||||||||
| Gain on sale-leaseback | (53,425) | — | — | (53,425) | |||||||||||||||||||
| Change in value of naming rights liabilities | — | — | (1,371) | (1,371) | |||||||||||||||||||
| Gain on bargain purchases | — | — | 23,075 | 23,075 | |||||||||||||||||||
| Capital expenditures | 25,436 | 33,773 | 7,949 | 67,158 | |||||||||||||||||||
| Goodwill | 84,148 | 117,804 | 242,956 | 444,908 | |||||||||||||||||||
| Total assets | 1,282,971 | 1,090,759 | 2,595,973 | 4,969,703 | |||||||||||||||||||
| Nine Months Ended September 30, 2020 | |||||||||||||||||||||||
| Total revenue | $ | 146,848 | $ | 104,039 | $ | 3,809 | $ | 254,696 | |||||||||||||||
| Income (loss) from operations | 9,096 | 8,295 | (18,140) | (749) | |||||||||||||||||||
| Net income (loss) | 6,602 | 7,710 | (40,022) | (25,710) | |||||||||||||||||||
| Depreciation and amortization | 18,022 | 9,804 | 228 | 28,054 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | 107 | — | 43,581 | 43,688 | |||||||||||||||||||
| Capital expenditures | 4,299 | 3,524 | 743 | 8,566 | |||||||||||||||||||
| Goodwill | 84,148 | 102,423 | — | 186,571 | |||||||||||||||||||
| Total assets | 627,654 | 593,038 | 36,189 | 1,256,881 | |||||||||||||||||||
42
BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
18. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share is calculated in accordance with ASC 260, Earnings Per Share, which requires entities that have issued securities other than common stock that participate in dividends with common stock (“participating securities”) to apply the two-class method to compute basic earnings (loss) per common share. The two-class method is an earnings allocation method under which basic earnings (loss) per common share is calculated for each class of common stock and participating security as if all such earnings had been distributed during the period. To calculate basic earnings (loss) per share, the earnings allocated to common shares is divided by the weighted average number of common shares outstanding, contingently issuable warrants, and RSUs, RSAs, and PSUs for which no future service is required as a condition to the delivery of the underlying common stock (collectively, basic shares).
Diluted earnings per share includes the determinants of basic earnings per share and, in addition, reflects the dilutive effect of the common stock deliverable for stock options, using the treasury stock method, and for RSUs, RSAs and PSUs for which future service is required as a condition to the delivery of the underlying common stock.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net (loss) income | $ | (14,747) | $ | 6,723 | $ | 43,490 | $ | (25,710) | |||||||||||||||
| Weighted average common shares outstanding - basic | 49,506 | 30,458 | 45,573 | 30,825 | |||||||||||||||||||
| Weighted average effect of dilutive securities | — | 177 | 303 | — | |||||||||||||||||||
| Weighted average common shares outstanding - diluted | 49,506 | 30,635 | 45,876 | 30,825 | |||||||||||||||||||
| Basic earnings (loss) per share | $ | (0.30) | $ | 0.22 | $ | 0.95 | $ | (0.83) | |||||||||||||||
| Diluted earnings (loss) per share | $ | (0.30) | $ | 0.22 | $ | 0.95 | $ | (0.83) | |||||||||||||||
There were 4,953,791 and 4,922,577 share-based awards that were considered anti-dilutive for the three and nine months ended September 30, 2021, respectively. There were 88,244 share-based awards that were considered anti-dilutive for the nine months ended September 30, 2020. There were no share-based awards that were considered anti-dilutive for the three months ended September 30, 2020.
On November 18, 2020, the Company issued penny warrants, performance-based warrants, and options which participate in dividends with the Company’s common stock subject to certain contingencies. In the period in which the contingencies are met, those instruments are participating securities to which income will be allocated using the two-class method. The warrants and options do not participate in net losses. The penny warrants were considered exercisable for little to no consideration and are therefore, included in basic shares outstanding at their issuance date. For the three and nine months ended September 30, 2021, the shares underlying the performance warrants were anti-dilutive as certain contingencies were not met. Refer to Note 2 “Significant Accounting Policies” for further information regarding the Sinclair Transaction.
19. SUBSEQUENT EVENTS
Acquisitions
On October 1, 2021, the Company completed its acquisition of Gamesys for approximately £1.554 billion in cash and 9,773,537 of the Company’s common shares, subject in each case to customary adjustments. The Company financed the Acquisition and refinanced its and Gamesys’ debt, utilizing, among other sources, the net proceeds from Bally’s April 2021 common stock offering, the proceeds of borrowings under new bank credit facilities, as well as the issuance of new bonds. Refer to Note 1 “General Information” for further information.
On October 25, 2021, the Company acquired Degree 53 Limited (“Degree 53”), a UK-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries.
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BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Senior Notes
On October 1, 2021, Bally’s assumed the issuer obligation under two series of notes issued into escrow on August 20, 2021: $750 million aggregate principal amount of 5.625% senior notes due 2029 and $750 million aggregate principal amount of 5.875% Senior Notes due 2031. Refer to Note 11 “Long-Term Debt” for further information.
Credit Facility
On October 1, 2021, Bally’s entered into a credit agreement providing for senior secured credit facilities consisting of a $1.945 billion senior secured first lien term loan facility and an undrawn $620 million senior secured first lien revolving credit facility. Refer to Note 11 “Long-Term Debt” for further information.
Capital Return Program
On October 4, 2021, the Board of Directors approved an increase in the capital return program of $350 million. Refer to Note 15 “Stockholders’ Equity” for further information.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the securities laws. Forward-looking statements are statements as to matters that are not historical facts, and include statements about our plans, objectives, expectations and intentions.
Forward-looking statements are not guarantees and are subject to risks and uncertainties. Forward-looking statements are based on our current expectations and assumptions. Although we believe that our expectations and assumptions are reasonable at this time, they should not be regarded as representations that our expectations will be achieved. Actual results may vary materially. Forward-looking statements speak only as of the time of this report and we do not undertake to update or revise them as more information becomes available, except as required by law.
Important factors beyond those that apply to most businesses, some of which are beyond our control, that could cause actual results to differ materially from our expectations and assumptions include, without limitation:
•uncertainties surrounding the COVID-19 pandemic, including limitations on our operations, increased costs, changes in customer behaviors, impact on our employees and the ongoing impact of COVID-19 on general economic conditions;
•unexpected costs, difficulties integrating and other events impacting our recently completed and proposed acquisitions and our ability to realize anticipated benefits;
•risks associated with our rapid growth, including those affecting customer and employee retention, integration and controls;
•risks associated with the impact of the digitalization of gaming on our casino operations, our expansion into iGaming and sports betting and the highly competitive and rapidly changing aspects of our businesses generally;
•the very substantial regulatory restrictions applicable to us, including costs of compliance;
•restrictions and limitations in agreements to which we are subject, including our debt; and
•other risks identified in Part I. Item 1A. "Risk Factors" of Bally's Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC on March 10, 2021 and other filings with the SEC.
The foregoing list of important factors is not exclusive and does not include matters like changes in general economic conditions that affect substantially all gaming businesses.
You should not to place undue reliance on our forward-looking statements.
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Overview
We are a global casino-entertainment company with a growing omni-channel presence of Online Sports Betting and iGaming offerings. We own and manage 14 land-based casinos in ten states in the United States. In 2020, we acquired the rights to the name “Bally’s” as part of our strategy to become the leading U.S. full-service sports betting/iGaming company with physical casinos and online gaming solutions united under a single, prominent brand. We took other key steps to build our iGaming and sports betting business in the past year, including entering into a strategic partnership with Sinclair Broadcast Group, Inc. (“Sinclair”) to leverage the Bally’s brand and combine our sports betting technology with Sinclair’s expansive national footprint, which includes 188 local TV stations, 21 regional sports networks (of which 19 have been rebranded Bally’s Sports), the STIRR streaming service, the Tennis Channel and five stadium digital TV and internet sports networks. On October 1, 2021, we acquired Gamesys Group, Plc. (“Gamesys”), a leading international online gaming operator that provides entertainment to a global consumer base. Also in 2021, we have acquired Bally Interactive, formerly Bet.Works, a sports betting platform provider, SportsCaller, a leading B2B free-to-play (“FTP”) game provider, Monkey Knife Fight, the third-largest fantasy sports platform in North America, the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization, and Telescope Inc. (“Telescope”), the leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams.
Our casino properties on a combined basis have 706,426 square feet of gaming space, approximately 15,028 slot machines or VLTs, 501 gaming tables, 72 stadium gaming positions, 71 dining establishments, 37 bars, 3,885 hotel rooms and seven entertainment venues.
2021 Acquisition Update
We seek to continue to grow our business by actively pursuing the acquisition and development of new gaming opportunities and reinvesting in our existing operations. We believe that interactive gaming, including mobile sports betting and iGaming, represent a significant strategic opportunity for our future growth. In addition, we seek to increase revenues at our brick and mortar casinos through enhancing the guest experience by providing popular games, restaurants, hotel accommodations, entertainment and other amenities in attractive surroundings with high-quality guest service. We believe that our recent and pending acquisitions have expanded and will, in the case of the pending acquisitions, further expand both our operating and digital/interactive footprints, provide us access to the potentially lucrative interactive mobile sports betting and iGaming markets, and diversify us from a financial standpoint, while continuing to mitigate our susceptibility to regional economic downturns, idiosyncratic regulatory changes and increases in regional competition.
Gamesys Acquisition
On October 1, 2021, we acquired Gamesys, a leading UK-based global online gaming operator. In connection with the acquisition, Gamesys shareholders received, in the aggregate, 9,773,537 shares of our common stock and approximately £1.544 billion in cash. Based on the October 1, 2021 closing price of $53.08 per share of the Company’s common stock, and a foreign exchange rate of 1.354, the aggregate consideration paid to former Gamesys shareholders was approximately $2.62 billion, or $518.8 million of the Company’s common stock and $2.10 billion in cash.
We believe that Gamesys’ proven technology platform will foster our continued buildout of our interactive offerings in North America, including real-money gaming options in online sports betting and iGaming. Additionally, unifying Bally’s and Gamesys’ player databases and technologies provides us with one of the largest portfolios of omni-channel cross-selling opportunities, consisting of land-based gaming, online sports betting, iCasino, poker, bingo, daily fantasy sports and free-to-play games. We believe that these offerings, coupled with our media partnership with Sinclair Broadcast Group, position the Company to capitalize on significant growth opportunities in the rapidly expanding U.S. online entertainment and sports betting markets.
Other 2021 Acquisitions
In addition to the Gamesys acquisition, we completed or signed definitive agreements for the following transactions in 2021:
•SportCaller - On February 5, 2021, we acquired SportCaller, one of the leading B2B FTP game providers for sports betting and media companies across North America, the UK, Europe, Asia, Australia, LATAM and Africa, for $24.0 million in cash and 221,391 shares of our common stock (valued at approximately $12.0 million), subject to adjustment, and up to $12.0 million in value of additional shares if SportCaller meets certain post-closing performance targets (calculated based on a $USD to Euro exchange ratio of 0.8334).
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•Monkey Knife Fight - On March 23, 2021, we acquired MKF for immediately exercisable penny warrants to purchase up to 984,446 of our common shares (subject to adjustment) at closing and contingent penny warrants to purchase up to 787,557 additional of our common shares half of which are issuable on each of the first and second anniversary of closing. The total value of the warrants at signing was $90.0 million.
•Bally’s Lake Tahoe - On April 6, 2021, we acquired Bally’s Lake Tahoe Casino Resort, formally MontBleu Resort Casino & Spa, in Lake Tahoe, Nevada for $14.2 million, payable one year from the closing date, subject to customary post-closing adjustments.
•Tropicana Las Vegas - On April 13, 2021, we agreed to purchase the Tropicana Las Vegas Hotel and Casino in Las Vegas, Nevada from GLPI. The purchase price for the Tropicana property’s non-land assets is $150 million. In addition, we agreed to lease the land underlying the Tropicana property from GLPI for an initial term of 50 years at annual rent of $10.5 million, subject to increase over time. We also will enter into a sale-and-leaseback with GLPI relating to our Bally’s Black Hawk, formerly Black Hawk Casinos, properties and the Bally’s Quad Cities property for $150 million. The lease will have initial annual fixed rent of $12.0 million, subject to increase over time.
•Bally Interactive - On May 28, 2021, we acquired Bally Interactive, formally Bet.Works Corp., for approximately $71.6 million in cash and 2,084,765 of our common shares, subject in each case to customary post-closing adjustments.
•Bally’s Evansville - On June 3, 2021, we acquired the Bally’s Evansville casino from Caesars Entertainment, Inc. The total purchase price was $139.7 million, subject to customary post-closing adjustments.
•Bally’s Quad Cities - On June 14, 2021, we acquired Bally’s Quad Cities Casino & Hotel in Rock Island, Illinois for $118.9 million in cash, subject to customary post-closing adjustments.
•Association of Volleyball Professionals (“AVP”) - On July 12, 2021, we acquired AVP, a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States.
•Telescope Inc. (“Telescope”) - On August 12, 2021 we acquired Telescope, the leading provider of real-time audience engagement solutions for live events, gamified second screen experiences and interactive livestreams.
•Degree 53 Limited (“Degree 53”) - On October 25, 2021 we acquired Degree 53, a UK-based creative agency that specializes in multi-channel website and personalized mobile app and software development for the online gambling and sports industries.
Operating Structure
As of September 30, 2021, the Company had four operating segments; East, West, Bally Interactive and Bally’s Arapahoe Park. In the second quarter of 2021, we changed our management structure to better align with our strategic growth initiatives in light of recent and pending acquisitions, which resulted in the re-alignment of our operating and reportable segments. The properties included within the East and West reportable segments, are as follows:
•East - includes Bally’s Twin River, Bally’s Tiverton, Dover Downs, Bally’s Atlantic City, and Bally’s Evansville
•West - includes Hard Rock Biloxi, Bally’s Vicksburg, Bally’s Kansas City, Bally’s Shreveport, Bally’s Black Hawk, Bally’s Lake Tahoe, and Bally’s Quad Cities
Bally Interactive, which includes SportCaller, MKF, Bally Interactive, AVP, Telescope, our online and mobile sports betting operations, and Bally’s Arapahoe Park, were determined to be immaterial operating segments and are therefore, included in the “Other” category along with shared services provided by Twin River Management Group (our management subsidiary).
We are currently evaluating the acquisition of Gamesys for segment reporting purposes, but it is expected that it will be reported as International Interactive and our existing operating segment Bally Interactive, will be reported as North America Interactive. It is expected that the pending acquisition of Tropicana Las Vegas will be reported in the West and the Pennsylvania development project will be included in the East (explained below).
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Strategic Partnership - Sinclair Broadcast Group
Our agreements with Sinclair provide for a long-term strategic partnership that combines our vertically integrated, proprietary sports betting technology and expansive market access footprint with Sinclair’s premier portfolio of local broadcast stations and live regional sports networks (“RSNs”), STIRR streaming service, its popular Tennis Channel, and digital and over-the-air television network, Stadium. Bally’s and Sinclair will partner to create unrivaled sports gamification content on a national scale, positioning Bally’s as a leading omni-channel gaming company with physical casinos and online sports betting and iGaming solutions united under a single brand.
Commencing April 1, 2021, Sinclair rebranded its 19 former Fox Sports RSNs to Bally Sports.
On April 12, 2021, we announced that we had entered into a memorandum of understanding with Sinclair to work collectively to facilitate the production and broadcast of Bally’s produced content during non-game windows. Together, we will also explore opportunities to include Bally’s programming in Sinclair-owned media platforms and affiliates other than the Bally Sports RSNs, which may include Sinclair's Tennis Channel and Stadium network assets.
Enabling Legislation and proposed Joint Venture with IGT in Rhode Island
On June 11, 2021, the Governor of Rhode Island signed into law the Marc A. Crisafulli Economic Development Act, which among other things, authorizes and directs the state to enter into and amend contracts with the Company and results in changes to our Regulatory Agreement in Rhode Island, including an increase in the ratios applicable to us and greater flexibility to complete sale-leaseback transactions. In addition, our master contract with Rhode Island will be extended on existing terms until June 30, 2043, and we have committed to investing $100 million in Rhode Island over this extended term, including an expansion and the addition of new amenities at Bally’s Twin River. This legislation authorizes a joint venture with International Gaming Technology PLC (“IGT”) to become a licensed technology provider and supply the State of Rhode Island with all VLTs at both Bally’s Twin River and Bally’s Tiverton for a 20-year period starting July 1, 2023. IGT would own 60% of the joint venture. As of July 1, 2021, until the joint venture is operating, we will supply 23% of all VLTs in return for 7% net terminal income from the machines.
COVID-19 Pandemic
The COVID-19 pandemic has significantly impacted, and is likely to continue to impact, our business in a material manner. As of March 16, 2020, all of our properties at the time were temporarily closed as a result of the COVID-19 pandemic. Our properties began to reopen in mid-2020 in some capacity and remained open for the rest of 2020, with the exception of Bally’s Twin River and Bally’s Tiverton which closed again from November 29, 2020 through December 20, 2020. All of our properties have reopened with minimal restrictions. Our revenues have begun to recover due to the recent increase in consumer confidence, reduction in travel restrictions, and faster than anticipated vaccine roll-out, and our operations are increasingly operating with less and less restrictions.
While we are working closely with government officials on operational aspects of our re-opened properties and our desire to get additional amenities online, we cannot predict the duration of any limitations the government or we may impose on our operations. Continuing restrictions on our operations, the economic uncertainty that COVID-19 continues to cause and the personal risk tolerances of our customers have caused, and may continue to cause, our business to be negatively impacted. In light of the foregoing, we are unable to determine when, or if, all our properties will return to pre-pandemic demand.
Key Performance Indicator
The main key performance indicator used in managing our business is adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), a non-GAAP measure. Adjusted EBITDA is defined as earnings for the Company, or where noted our reporting segments, before, in each case, interest expense, net of interest income, provision (benefit) for income taxes, depreciation and amortization, non-operating income, acquisition, integration and restructuring expense, share-based compensation, and certain other gains or losses as well as, when presented for our reporting segments, an adjustment related to the allocation of corporate cost among segments.
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We use Adjusted EBITDA to analyze the performance of our business and it is used as a determining factor for performance based compensation for members of our management team. We have historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period performance. Also, we present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. Adjusted EBITDA information is presented because management believes that it is a commonly used measure of performance in the gaming industry and that it is considered by many to be a key indicator of our operating results. Management believes that while certain items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluating our earnings performance, it is useful to exclude such items when comparing current performance to prior periods because these items can vary significantly depending on specific underlying transactions or events that may not be comparable between the periods presented or they may not relate specifically to current operating trends or be indicative of future results. Adjusted EBITDA should not be construed as an alternative to GAAP net income, its most directly comparable GAAP measure, as an indicator of our performance. In addition, Adjusted EBITDA as used by us may not be defined in the same manner as other companies in our industry, and, as a result, may not be comparable to similarly titled non-GAAP financial measures of other companies.
Third Quarter and First Nine Months 2021 Results
We reported revenue and income from operations of $314.8 million and $27.7 million, respectively, for the three months ended September 30, 2021, compared to revenue and loss from operations of $116.6 million and $23.4 million, respectively, for the same period last year. We reported revenue and income from operations of $774.8 million and $137.7 million, respectively, for the nine months ended September 30, 2021, compared to revenue and loss from operations of $254.7 million and $0.7 million, respectively for the same period last year. As of the third quarter of 2021, our properties have returned to full capacity and are operating under minimal restrictions. In the prior year, our properties were closed from mid-March into June 2020.
Other notable factors affecting our results for the three and nine months ended September 30, 2021 compared to the prior year comparable periods are as follows:
•$150.6 million of aggregate revenue from acquisitions in the fourth quarter of 2020, including Bally’s Atlantic City ($46.8 million) and Bally’s Shreveport ($28.7 million), and acquisitions in the first nine months of 2021, including Bally’s Evansville ($40.1 million), Bally’s Quad Cities ($12.3 million), Bally’s Lake Tahoe ($11.3 million), and those in the Bally Interactive operating segment ($11.4 million);
•$304.4 million of aggregate revenue from acquisitions completed in the fourth quarter of 2020, including Bally’s Atlantic City ($108.4 million) and Bally’s Shreveport ($90.6 million), and acquisitions in the first nine months of 2021, including Bally’s Evansville ($51.8 million), Bally’s Lake Tahoe ($21.0 million) and Bally’s Quad Cities ($14.6 million), and those in the Bally Interactive operating segment ($18.0 million).
•$53.4 million gain on sale-leaseback in connection with our sale of the Dover Downs property to GLPI during the second quarter of 2021;
•$23.1 million gain on bargain purchases during the nine months ended September 30, 2021 related to the acquisitions of Bally’s Evansville and Bally’s Lake Tahoe;
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Results of Operations
The following table presents, for the periods indicated, certain revenue and income items:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Total revenue | $ | 314.8 | $ | 116.6 | $ | 774.8 | $ | 254.7 | |||||||||||||||
| Income (loss) from operations | 27.7 | 23.4 | 137.7 | (0.7) | |||||||||||||||||||
| Net (loss) income | (14.7) | 6.7 | 43.5 | (25.7) | |||||||||||||||||||
The following table presents, for the periods indicated, certain income and expense items expressed as a percentage of total revenue:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Total revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Gaming, racing, hotel, food and beverage, and other expenses | 36.7 | % | 31.4 | % | 35.1 | % | 37.4 | % | |||||||||||||||
| Advertising, general and administrative | 45.4 | % | 37.7 | % | 41.9 | % | 46.2 | % | |||||||||||||||
| Goodwill and asset impairment | — | % | — | % | 0.6 | % | 3.4 | % | |||||||||||||||
| Gain on sale-leaseback | — | % | — | % | (6.9) | % | — | % | |||||||||||||||
| Other operating costs and expenses | (0.2) | % | 2.3 | % | 2.8 | % | 2.3 | % | |||||||||||||||
| Depreciation and amortization | 9.2 | % | 8.5 | % | 8.7 | % | 11.0 | % | |||||||||||||||
| Total operating costs and expenses | 91.2 | % | 80.0 | % | 82.2 | % | 100.3 | % | |||||||||||||||
| Income (loss) from operations | 8.8 | % | 20.0 | % | 17.8 | % | (0.3) | % | |||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest income | 0.2 | % | — | % | 0.2 | % | 0.1 | % | |||||||||||||||
| Interest expense | (10.1) | % | (14.5) | % | (9.6) | % | (17.2) | % | |||||||||||||||
| Change in value of naming rights liabilities | 2.2 | % | — | % | (0.2) | % | — | % | |||||||||||||||
| Gain (adjustment) on bargain purchases | (0.3) | % | — | % | 3.0 | % | — | % | |||||||||||||||
| Loss on extinguishment of debt | (6.2) | % | — | % | (2.5) | % | — | % | |||||||||||||||
| Other, net | (1.0) | % | — | % | (0.9) | % | — | % | |||||||||||||||
| Total other expense, net | (15.2) | % | (14.5) | % | (10.0) | % | (17.0) | % | |||||||||||||||
| (Loss) income before provision for income taxes | (6.4) | % | 5.6 | % | 7.8 | % | (17.3) | % | |||||||||||||||
| (Benefit) provision for income taxes | (1.7) | % | (0.2) | % | 2.2 | % | (7.2) | % | |||||||||||||||
| Net (loss) income | (4.7) | % | 5.8 | % | 5.6 | % | (10.1) | % | |||||||||||||||
____________________________________________________________________________
Note: Amounts in table may not subtotal due to rounding.
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Segment Performance
The following table sets forth certain financial information associated with results of operations for the three and nine months ended September 30, 2021 and 2020. Non-gaming revenue includes hotel, food and beverage and other revenue. Non-gaming expenses include hotel, food and beverage and other expenses. All amounts are before any allocation of corporate costs.
| (In thousands, except percentages) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | $ Change | % Change | 2021 | 2020 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Gaming and Racing revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| East | $ | 131,644 | $ | 50,318 | $ | 81,326 | 161.6 | % | $ | 310,186 | $ | 115,894 | $ | 194,292 | 167.6 | % | |||||||||||||||||||||||||||||||
| West | 95,674 | 46,338 | 49,336 | 106.5 | % | 275,928 | 81,412 | 194,516 | 238.9 | % | |||||||||||||||||||||||||||||||||||||
| Other | 2,298 | 1,616 | 682 | 42.2 | % | 6,270 | 3,702 | 2,568 | 69.4 | % | |||||||||||||||||||||||||||||||||||||
| Total Gaming and Racing revenue | 229,616 | 98,272 | 131,344 | 133.7 | % | 592,384 | 201,008 | 391,376 | 194.7 | % | |||||||||||||||||||||||||||||||||||||
| Non-gaming revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| East | 45,331 | 8,747 | 36,584 | 418.2 | % | 98,272 | 30,954 | 67,318 | 217.5 | % | |||||||||||||||||||||||||||||||||||||
| West | 28,929 | 9,562 | 19,367 | 202.5 | % | 67,262 | 22,627 | 44,635 | 197.3 | % | |||||||||||||||||||||||||||||||||||||
| Other | 10,903 | 43 | 10,860 | 25,255.8 | % | 16,860 | 107 | 16,753 | 15,657.0 | % | |||||||||||||||||||||||||||||||||||||
| Total Non-gaming revenue | 85,163 | 18,352 | 66,811 | 364.1 | % | 182,394 | 53,688 | 128,706 | 239.7 | % | |||||||||||||||||||||||||||||||||||||
| Total revenue | 314,779 | 116,624 | 198,155 | 169.9 | % | 774,778 | 254,696 | 520,082 | 204.2 | % | |||||||||||||||||||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Gaming and Racing expenses | |||||||||||||||||||||||||||||||||||||||||||||||
| East | $ | 37,686 | $ | 11,233 | $ | 26,453 | 235.5 | % | $ | 83,460 | $ | 32,835 | $ | 50,625 | 154.2 | % | |||||||||||||||||||||||||||||||
| West | 37,780 | 15,010 | 22,770 | 151.7 | % | 100,356 | 27,817 | 72,539 | 260.8 | % | |||||||||||||||||||||||||||||||||||||
| Other | 1,704 | 1,434 | 270 | 18.8 | % | 3,958 | 3,305 | 653 | 19.8 | % | |||||||||||||||||||||||||||||||||||||
| Total Gaming and Racing expenses | 77,170 | 27,677 | 49,493 | 178.8 | % | 187,774 | 63,957 | 123,817 | 193.6 | % | |||||||||||||||||||||||||||||||||||||
| Non-gaming expenses | |||||||||||||||||||||||||||||||||||||||||||||||
| East | 21,485 | 4,616 | 16,869 | 365.4 | % | 50,273 | 20,195 | 30,078 | 148.9 | % | |||||||||||||||||||||||||||||||||||||
| West | 12,065 | 4,290 | 7,775 | 181.2 | % | 28,069 | 11,140 | 16,929 | 152.0 | % | |||||||||||||||||||||||||||||||||||||
| Other | 4,906 | — | 4,906 | — | % | 5,800 | 3 | 5,797 | 193,233.3 | % | |||||||||||||||||||||||||||||||||||||
| Total Non-gaming expenses | 38,456 | 8,906 | 29,550 | 331.8 | % | 84,142 | 31,338 | 52,804 | 168.5 | % | |||||||||||||||||||||||||||||||||||||
| Advertising, general and administrative | |||||||||||||||||||||||||||||||||||||||||||||||
| East | 65,654 | 20,476 | 45,178 | 220.6 | % | 154,809 | 57,999 | 96,810 | 166.9 | % | |||||||||||||||||||||||||||||||||||||
| West | 35,039 | 15,344 | 19,695 | 128.4 | % | 87,459 | 32,633 | 54,826 | 168.0 | % | |||||||||||||||||||||||||||||||||||||
| Other | 42,212 | 8,176 | 34,036 | 416.3 | % | 82,347 | 26,962 | 55,385 | 205.4 | % | |||||||||||||||||||||||||||||||||||||
| Total Advertising, general and administrative | 142,905 | 43,996 | 98,909 | 224.8 | % | 324,615 | 117,594 | 207,021 | 176.0 | % | |||||||||||||||||||||||||||||||||||||
| Margins: | |||||||||||||||||||||||||||||||||||||||||||||||
| Gaming and Racing expenses as a percentage of Gaming and Racing revenue | 34 | % | 28 | % | 6 | % | 32 | % | 32 | % | — | % | |||||||||||||||||||||||||||||||||||
| Non-gaming expenses as a percentage of Non-gaming revenue | 45 | % | 49 | % | (4) | % | 46 | % | 58 | % | (12) | % | |||||||||||||||||||||||||||||||||||
| Advertising, general and administrative as a percentage of Total revenue | 45 | % | 38 | % | 7 | % | 42 | % | 46 | % | (4) | % | |||||||||||||||||||||||||||||||||||
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Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 30, 2020
Revenue
As noted above, revenue for the three months ended September 30, 2021 increased 169.9%, or $198.2 million, to $314.8 million, from $116.6 million in the same period last year. Revenue for the nine months ended September 30, 2021 increased 204.2%, or $520.1 million, to $774.8 million, from $254.7 million in the same period last year. Gaming and racing revenue for the three months ended September 30, 2021 increased 133.7%, or $131.3 million, to $229.6 million from $98.3 million in the same period last year. Gaming and racing revenue for the nine months ended September 30, 2021 increased 194.7%, or $391.4 million, from $201.0 million in the same period last year. With less operating restrictions across our properties resulting from developments in the COVID-19 pandemic and an increase in consumer confidence and visitation, we saw gaming revenue grow, and exceed in some cases, pre-pandemic levels.
Incremental revenues from our recent acquisitions also contributed to the increase in revenue for the three and nine months ended September 30, 2021. Revenue from acquisitions which closed in the fourth quarter of 2020, including Bally’s Atlantic City and Bally’s Shreveport, coupled with those that closed in the first nine months of 2021, including SportCaller, MKF, Bally Interactive, Bally’s Lake Tahoe, Bally’s Evansville, Bally’s Quad Cities, AVP and Telescope, contributed, in the aggregate, $150.6 million and $304.4 million to total revenue in the three and nine months ended September 30, 2021, respectively. Refer to Note 5 “Acquisitions” for further information on our recent acquisitions.
Operating costs and expenses
Gaming and racing expenses for the three months ended September 30, 2021 increased $49.5 million, or 178.8%, to $77.2 million from $27.7 million in the prior year comparable period and increased $123.8 million, or 193.6%, to $187.8 million for the nine months ended September 30, 2021 from $64.0 million in the prior year comparable period. This increase was primarily attributable to the inclusion of Bally’s Atlantic City and Bally’s Shreveport, acquired in the fourth quarter of 2020, and Bally’s Quad Cities, Bally’s Evansville and Bally’s Lake Tahoe, acquired during the second quarter of 2021, which in the aggregate contributed incremental gaming expenses of $38.4 million and $81.5 million for the third quarter and first nine months of 2021.
Non-gaming expenses for the three months ended September 30, 2021 increased $29.6 million, or 331.8%, to $38.5 million from $8.9 million in the same period last year. Non-gaming expenses for the nine months ended September 30, 2021 increased $52.8 million, or 168.5%, to $84.1 million from $31.3 million in the same period last year. This increase was primarily attributable to the inclusion of Bally’s Atlantic City and Bally’s Shreveport, acquired in the fourth quarter of 2020, and acquisitions of Bally’s Quad Cities, Bally’s Evansville and Bally’s Lake Tahoe, acquired during the second quarter of 2021, which in the aggregate contributed incremental non-gaming expenses of $21.2 million and $44.0 million for the third quarter and first nine months of 2021.
Advertising, general and administrative
Advertising, general and administrative expenses for the three months ended September 30, 2021 increased $98.9 million, or 224.8%, to $142.9 million from $44.0 million in the same period last year. Advertising, general and administrative expenses for the nine months ended September 30, 2021 increased $207.0 million, or 176.0%, to $324.6 million from $117.6 million in the same period last year. This increase year-over-year is primarily due to the additions of Bally’s Atlantic City and Bally’s Shreveport, acquired in the fourth quarter of 2020, and year-to-date 2021 acquisitions of Bally’s Quad Cities, Bally’s Evansville, Bally’s Lake Tahoe, Bally Interactive, MKF, Telescope, AVP and SportCaller which in the aggregate contributed $77.5 million and $143.8 million to advertising, general and administrative expenses for the third quarter and first nine months of 2021.
Acquisition, integration and restructuring expense
We incurred $6.8 million and $37.5 million of acquisition, integration and restructuring expenses during the three and nine months ended September 30, 2021, respectively, compared to $2.7 million and $7.0 million in the prior year three and nine month periods, respectively. This increase was driven by costs incurred in connection with our acquisition of Gamesys, $3.7 million and $17.3 million for the three and nine months ended September 30, 2021, respectively, and acquisitions completed in 2021 which amounted to $1.4 million and $14.0 million for the three and nine months ended September 30, 2021, respectively. Refer to Note 10 “Acquisition, Integration and Restructuring” for further information.
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Other operating (income), costs and expenses
During the third quarter and first nine months of 2021, we recorded gains of $7.9 million, and $19.2 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta which made landfall in Louisiana shutting down our Hard Rock Biloxi property for three days during the fourth quarter of 2020. We also recorded rebranding expense of $0.4 million and $1.7 million during the third quarter and first nine months of 2021, respectively, in connection with our corporate name change to Bally’s Corporation in November 2020. During the second quarter of 2021, we sold our Dover Downs property to GLPI and recorded a gain on sale-leaseback of $53.4 million and recorded asset impairment charges of $4.7 million related to the Dover Downs and Bally’s Black Hawk tradenames in connection with our rebranding.
Depreciation and amortization
Depreciation and amortization for the three months ended September 30, 2021 was $29.0 million, an increase of $19.1 million, and $67.5 million for the nine months ended September 30, 2021, an increase of $39.4 million, each compared to the same period last year. The increase in depreciation and amortization is attributable to the additional properties acquired in 2020 and 2021, including fixed asset additions attributable to our Bally Interactive operating segment.
Income (loss) from operations
Income from operations was $27.7 million for the three months ended September 30, 2021 compared to $23.4 million in the comparable period in 2020. Income from operations was $137.7 million for the nine months ended September 30, 2021 compared to a loss from operations of $0.7 million in 2020.
The three and nine month comparable periods in 2020 were both impacted negatively by the COVID-19 pandemic with the shut-down of our properties from mid-March into June. As noted above, during the three and nine months ended September 30, 2021, we experienced strong revenue growth and a return in visitation to our properties as restrictions were lifted.
Total other income (expense), net
Total other expense, net for the three months ended September 30, 2021 increased $31.0 million to $47.9 million from $16.9 million the same period last year. This increase was driven by a loss on extinguishment of debt of $19.4 million in connection with the redemption of $210 million of the 6.75% senior notes due 2027, coupled with a $14.9 million increase in interest expense. Refer to Note 11 “Long-Term Debt” for further information. Offsetting these increases was $7.0 million of income recorded to adjust the naming rights liability associated with our contracts with Sinclair Broadcast group to fair value as of September 30, 2021.
Total other expense, net for the nine months ended September 30, 2021 increased $34.1 million to $77.5 million compared to $43.4 million in the same period last year. This was due to an increase in interest expense of $30.8 million year-over-year due to the timing of borrowings and the loss on extinguishment of debt of $19.4 million noted above, partially offset by a gain on bargain purchases of $23.1 million in connection with the acquisitions of Tropicana Evansville and Bally’s Lake Tahoe.
Provision (benefit) for income taxes
Benefit for income taxes for the three months ended September 30, 2021 was $5.4 million compared to $0.2 million for the three months ended September 30, 2020. The effective tax rate for the quarter was 26.8% compared to 3.8% for the three months ended September 30, 2020. Provision for income taxes for the nine months ended September 30, 2021 was $16.8 million compared to a benefit from income taxes of $18.4 million for the nine months ended September 30, 2020. The effective tax rate for the nine months ended September 30, 2021 was 27.8% compared to 41.8% for the nine months ended September 30, 2020. The increase in the year to date provision for income taxes in 2021 is mostly attributable to the increase in net income in the current year and the removal of the favorable carryback rate available during 2020 as a result of the CARES Act.
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Net income (loss) and earnings (loss) per share
Net loss for the three months ended September 30, 2021 was $14.7 million, or ($0.30) per diluted share, a decrease of $21.5 million, or 319.4%, from net income of $6.7 million, or $0.22 per diluted share, in the same period last year. As a percentage of revenue, net income decreased from 5.8% for the three months ended September 30, 2020 to net loss of 4.7% for the three months ended September 30, 2021.
Net income for the nine months ended September 30, 2021 was $43.5 million, an increase of $69.2 million, or 269.2%, from a net loss of $25.7 million, or ($0.83) per diluted share, in the same period last year. As a percentage of revenue, net income increased to 5.6% for the nine months ended September 30, 2021 from a net loss of 10.1% for the nine months ended September 30, 2020.
These changes were impacted by the factors noted above.
Adjusted EBITDA by Segment
Consolidated Adjusted EBITDA was $78.0 million for the three months ended September 30, 2021, up $40.0 million, or 105.2%, from $38.0 million in the same period last year. Consolidated Adjusted EBITDA was $214.2 million for the nine months ended September 30, 2021, up $164.9 million, or 334.1%, from $49.3 million in the same period last year.
Adjusted EBITDA for the East segment for the third quarter of 2021 increased $30.9 million, or 137.9%, to $53.3 million and increased $87.6 million, or 261.8%, to $121.0 million for the nine months ended September 30, 2021, each compared to the same prior year periods. The third quarter and year to date increases year over year were driven by the inclusion of Bally’s Evansville, which was acquired in the second quarter of 2021, coupled with strong results at our Rhode Island and Dover Downs properties.
Adjusted EBITDA for the West segment for the third quarter of 2021 increased $20.7 million to $41.8 million and increased $97.9 million, or 310.8%, to $129.4 million for the nine months ended September 30, 2021, each compared to the same prior year periods. The third quarter increase year over year was driven by the acquisition of Bally’s Shreveport, which was acquired in the fourth quarter of 2020, and Bally’s Quad Cities and Bally’s Lake Tahoe which were acquired in the second quarter of 2021. The year to date increase year over year was driven by Shreveport, which was acquired in the fourth quarter of 2020, and strong results at our Hard Rock Biloxi and Bally’s Kansas City properties.
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The following tables reconcile Adjusted EBITDA, a non-GAAP measure, to net income (loss), as derived from our financial statements (in thousands):
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||
| East | West | Other | Total | ||||||||||||||||||||
| Revenue | $ | 176,975 | $ | 124,603 | $ | 13,201 | $ | 314,779 | |||||||||||||||
| Net income (loss) | $ | 25,386 | $ | 24,001 | $ | (64,134) | $ | (14,747) | |||||||||||||||
| Interest expense, net of interest income | 6 | (1) | 31,301 | 31,306 | |||||||||||||||||||
| Provision (benefit) for income taxes | 9,077 | 7,217 | (21,694) | (5,400) | |||||||||||||||||||
| Depreciation and amortization | 5,763 | 8,279 | 14,958 | 29,000 | |||||||||||||||||||
Non-operating (income) expense (1) | — | — | 16,575 | 16,575 | |||||||||||||||||||
| Acquisition, integration and restructuring | — | — | 6,797 | 6,797 | |||||||||||||||||||
| Share-based compensation | — | — | 5,449 | 5,449 | |||||||||||||||||||
Other (2) | 1,397 | (5,853) | 13,453 | 8,997 | |||||||||||||||||||
| Allocation of corporate costs | 11,686 | 8,165 | (19,851) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 53,315 | $ | 41,808 | $ | (17,146) | $ | 77,977 | |||||||||||||||
__________________________________
(1) Non-operating (income) expense includes: (i) change in value of naming rights liabilities, (ii) loss on extinguishment of debt and (iii) other expense, net.
(2) Other includes the following non-recurring items: (i) Goodwill and asset impairments, (ii) deal-related, rebranding, expansion and pre-opening expenses, (iii) Employee Retention Credits related to COVID-19, (iv) Credit Agreement amendment related expenses, (v) costs related to pursuing sports betting, iGaming and lottery access in various jurisdictions, (vi) non-routine legal expenses, and (vii) net gains related to insurance recoveries.
| Three Months Ended September 30, 2020 | |||||||||||||||||||||||
| East | West | Other | Total | ||||||||||||||||||||
| Revenue | $ | 59,065 | $ | 55,900 | $ | 1,659 | $ | 116,624 | |||||||||||||||
| Net income (loss) | $ | 10,702 | $ | 11,381 | $ | (15,360) | $ | 6,723 | |||||||||||||||
| Interest expense, net of interest income | 30 | (12) | 16,890 | 16,908 | |||||||||||||||||||
| Provision (benefit) for income taxes | 3,846 | 3,155 | (7,249) | (248) | |||||||||||||||||||
| Depreciation and amortization | 5,571 | 4,279 | 82 | 9,932 | |||||||||||||||||||
| Acquisition, integration and restructuring | — | — | 2,740 | 2,740 | |||||||||||||||||||
| Share-based compensation | — | — | 1,799 | 1,799 | |||||||||||||||||||
Other (1) | (330) | (154) | 635 | 151 | |||||||||||||||||||
| Allocation of corporate costs | 2,591 | 2,453 | (5,044) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 22,410 | $ | 21,102 | $ | (5,507) | $ | 38,005 | |||||||||||||||
__________________________________
(1) Other includes the following non-recurring items: (i) Expansion and pre-opening expenses, (ii) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (iii) Credit Agreement amendment expenses include costs associated with amendments made to the Company’s Credit Agreement, (iv) gain related to insurance recovery proceeds received for a damaged roof at the Company’s Arapahoe Park racetrack, (v) expenses incurred associated with the Rhode Island State Police investigation into a tenant in the Lincoln property and a former employee of the Company, (vi) expenses incurred associated with the campaign attempting to create an open bid process for the Rhode Island Lottery Contract and (vii) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements).
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| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||
| East | West | Other | Total | ||||||||||||||||||||
| Revenue | $ | 408,458 | $ | 343,190 | $ | 23,130 | $ | 774,778 | |||||||||||||||
| Net income (loss) | $ | 90,353 | $ | 77,397 | $ | (124,260) | $ | 43,490 | |||||||||||||||
| Interest expense, net of interest income | 38 | (14) | 72,855 | 72,879 | |||||||||||||||||||
| Provision (benefit) for income taxes | 34,434 | 23,310 | (40,993) | 16,751 | |||||||||||||||||||
| Depreciation and amortization | 17,275 | 21,695 | 28,533 | 67,503 | |||||||||||||||||||
Non-operating (income) expense(1) | — | — | 4,620 | 4,620 | |||||||||||||||||||
| Acquisition, integration and restructuring | — | — | 37,457 | 37,457 | |||||||||||||||||||
| Share-based compensation | — | — | 13,833 | 13,833 | |||||||||||||||||||
| Gain on sale-leaseback | (53,425) | — | — | (53,425) | |||||||||||||||||||
Other(2) | 5,784 | (15,329) | 20,651 | 11,106 | |||||||||||||||||||
| Allocated corporate costs | 26,544 | 22,365 | (48,909) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 121,003 | $ | 129,424 | $ | (36,213) | $ | 214,214 | |||||||||||||||
__________________________________
(1) Non-operating (income) expense includes: (i) change in value of naming rights liabilities, (ii) gain on bargain purchases (iii) loss on extinguishment of debt and (iv) other expense, net.
(2) Other includes the following non-recurring items: (i) Goodwill and asset impairments, (ii) deal-related, rebranding, expansion and pre-opening expenses, (iii) Employee Retention Credits related to COVID-19, (iv) Credit Agreement amendment related expenses, (v) costs related to pursuing sports betting, iGaming and lottery access in various jurisdictions, (vi) non-routine legal expenses, and (vii) net gains related to insurance recoveries.
| Nine Months Ended September 30, 2020 | |||||||||||||||||||||||
| East | West | Other | Total | ||||||||||||||||||||
| Revenue | $ | 146,848 | $ | 104,039 | $ | 3,809 | $ | 254,696 | |||||||||||||||
| Net income (loss) | $ | 6,602 | $ | 7,710 | $ | (40,022) | $ | (25,710) | |||||||||||||||
| Interest expense, net of interest income | 51 | (25) | 43,365 | 43,391 | |||||||||||||||||||
| Provision (benefit) for income taxes | 2,443 | 610 | (21,483) | (18,430) | |||||||||||||||||||
| Depreciation and amortization | 18,022 | 9,805 | 227 | 28,054 | |||||||||||||||||||
| Acquisition, integration and restructuring | 20 | — | 6,964 | 6,984 | |||||||||||||||||||
| Share-based compensation | — | — | 9,468 | 9,468 | |||||||||||||||||||
Other(1) | (2,379) | 7,614 | 351 | 5,586 | |||||||||||||||||||
| Allocated corporate costs | 8,683 | 5,794 | (14,477) | — | |||||||||||||||||||
| Adjusted EBITDA | $ | 33,442 | $ | 31,508 | $ | (15,607) | $ | 49,343 | |||||||||||||||
__________________________________
(1) Other includes the following non-recurring items: (i) Goodwill and asset impairment, (ii) Expansion and pre-opening expenses, (iii) Employee Retention Credit under the CARES Act which provides the Company with a refundable tax credit of 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19, (iv) Credit Agreement amendment expenses include costs associated with amendments made to the Company’s Credit Agreement, (v) gain related to insurance recovery proceeds received for a damaged roof at the Company’s Arapahoe Park racetrack, (vi) expenses incurred associated with the Rhode Island State Police investigation into a tenant in the Lincoln property and a former employee of the Company, (vii) expenses incurred associated with the campaign attempting to create an open bid process for the Rhode Island Lottery Contract, (viii) non-routine legal expenses incurred in connection with certain litigation matters (net of insurance reimbursements), and (ix) costs incurred in connection with the implementation of a new human resources information system.
Critical Accounting Policies and Estimates
There were no material changes in critical accounting policies and estimates during the period covered by this Quarterly Report on Form 10-Q. Refer to Item 7. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for a complete list of our Critical Accounting Policies and Estimates.
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Recent Accounting Pronouncements
Refer to Note 3. “Recently Adopted and Issued Accounting Pronouncements” in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that affect us.
Liquidity and Capital Resources
We are a holding company. Our ability to fund our obligations depends on existing cash on hand, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been cash on hand, cash flow from operations, borrowings under our revolving credit facility and proceeds from the issuance of debt and equity securities.
Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and acquire properties at what we believe to be attractive valuations. As such, we continued to invest in our land-based casino business and began to build on our interactive/iGaming gaming business despite the COVID-19 pandemic.
On April 20, 2021, we completed a public offering of 12,650,000 common shares at a price to the public of $55.00 per share and the sale of warrants to purchase 909,090 shares to affiliates of Sinclair Broadcast Group, Inc. at the same offering price. The net proceeds from the offering and the warrant sale, after deducting underwriting discounts and estimated expenses, of £485 million or $671 million were placed in escrow and were included in restricted cash as of September 30, 2021.
On August 20, 2021, we issued $750.0 million aggregate principal amount of senior notes due 2029 and $750.0 million aggregate principal amount of Senior Notes due 2031 (together, the “New Senior Notes”). Certain of the net proceeds from the New Senior Notes offering are included within restricted cash as of September 30, 2021. On October 1, 2021, upon the closing of the Gamesys Acquisition, the Company assumed the issuer obligation under the New Senior Notes.
On October 1, 2021, we entered into a credit agreement (the “New Credit Agreement”) providing for a senior secured term loan facility in an aggregate principal amount of $1.945 billion (the “New Term Loan Facility”), which will mature in 2028, and a senior secured revolving credit facility in an aggregate principal amount of $620.0 million (the “New Revolving Credit Facility”), which will mature in 2026. The New Revolving Credit Facility was undrawn at closing.
The credit facilities allow the Company to increase the size of the New Term Loan Facility or request one or more incremental term loan facilities or increase commitments under the New Revolving Credit Facility or add one or more incremental revolving facilities in an aggregate amount not to exceed the greater of $650 million and 100% of the Company’s consolidated EBITDA for the most recent four-quarter period plus or minus certain amounts as specified in the New Credit Agreement, including an unlimited amount subject to compliance with a consolidated total secured net leverage ratio.
On October 1, 2021, we acquired Gamesys for 9,773,537 shares of Bally’s common stock and approximately £1.544 billion in cash. The acquisition and refinancing of our and Gamesys’ debt was funded with, among other sources, the proceeds of the public offering of common shares, the warrant sale, the New Senior Notes and the New Term Loan Facility.
We expect that our primary capital requirements going forward will relate to the operation, maintenance and improvement of our properties we acquired along with debt service, rent and acquisitions. Our capital expenditure requirements are expected to moderately increase as a result of the properties acquired in the last 18 months. We have a $40 million planned redevelopment project for the Bally’s Kansas City property that we acquired in 2020 and we plan to invest $100 million in our Atlantic City property over five-years. In addition, we signed an agreement to jointly design and build a new casino in Centre County, Pennsylvania, in which we are a 51% owner. We estimate the total cost of the project, including construction, licensing and sports betting/iGaming operations, at $120 million. During the third quarter of 2021, we commenced the expansion and other capital improvements at our Bally’s Twin River location related to our partnership with IGT. We expect to use cash on hand and cash generated from operations to meet such obligations. Finally, we agreed to acquire the Tropicana Las Vegas for $150 million, which we expect to finance through sale-leaseback transactions with GLPI. For the nine months ended September 30, 2021, capital expenditures were $67.2 million, compared to $8.6 million in the same period last year.
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We expect that our current liquidity, cash flows from operations and borrowings under our credit facility will be sufficient to fund our operations, capital requirements and service our outstanding indebtedness for the next 12 months, including giving effect to our pending acquisitions.
Cash Flows Summary
| Nine Months Ended September 30, | |||||||||||
| (In thousands) | 2021 | 2020 | |||||||||
| Net cash provided by operating activities | $ | 70,843 | $ | 1,711 | |||||||
| Net cash used in investing activities | (302,127) | (288,513) | |||||||||
| Net cash provided by financing activities | 2,155,397 | 218,154 | |||||||||
| Net change in cash and cash equivalents and restricted cash | 1,924,113 | (68,648) | |||||||||
| Effect of foreign currency on cash and cash equivalents | (41,651) | — | |||||||||
| Cash and cash equivalents and restricted cash, beginning of period | 126,555 | 185,502 | |||||||||
| Cash and cash equivalents and restricted cash, end of period | $ | 2,009,017 | $ | 116,854 | |||||||
Operating Activities
Net cash provided by operating activities for the nine months ended September 30, 2021 was $70.8 million, compared to net cash provided by operating activities of $1.7 million for the nine months ended September 30, 2020. This increase was primarily attributable to increased net income across our properties, including the additional properties acquired in the 2020 and 2021.
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2021 was $302.1 million, an increase of $13.6 million compared to the nine months ended September 30, 2020. The increase was primarily driven by cash paid for acquisitions year-over-year coupled with a $58.6 million increase in expenditures, driven mostly by the expansion and renovation projects at our Bally’s Atlantic City, Bally’s Kansas City, Hard Rock Biloxi and Rhode Island properties, offset by $144.0 million of proceeds related to the sale-leaseback transaction for our Dover Downs property to GLPI in the second quarter. In the first nine months of 2021, we paid an aggregate $371.7 million for MKF, SportCaller, Bally Interactive, Bally’s Lake Tahoe, Bally’s Evansville, Bally’s Quad Cities, AVP and Telescope compared to $275.9 million for Bally’s Black Hawk and Bally’s Kansas City and Bally’s Vicksburg in the same period last year.
Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2021 was $2.16 billion compared to $218.2 million for the nine months ended September 30, 2020. Drivers of cash provided by financing activities for the first nine months of 2021 included $1.49 billion of cash proceeds from our senior notes offering and cash proceeds from equity issuances of $667.9 million in connection with the acquisition of Gamesys, revolver borrowings of $275.0 million and $50.0 million in connection with the issuance of Sinclair penny warrants, offset in part by payments on our revolver and senior notes. Cash provided by financing activities in the first half of 2020 was driven by $261.2 million of borrowings, net of fees, on our additional term loan offset by $33.3 million spent on share repurchases and cash dividends paid of $3.2 million under our capital return program.
Working Capital
At September 30, 2021, our net working capital was $1.97 billion compared to $145.8 million at December 31, 2020. The increase in net working capital of $1.83 billion was primarily attributable to $1.49 billion of cash proceeds from our senior notes offering and $667.9 million of cash proceeds received from our equity issuance, both of which were classified as restricted for use in our acquisition of Gamesys, as explained in Note 1 “General Information,” coupled with the timing of transactions in each respective period, as noted above.
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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. We are exposed to changes in interest rates primarily from long-term variable-rate debt arrangements.
On April 16, 2021, a subsidiary of the Company entered into a foreign exchange contract to hedge the risk of appreciation of the GBP-denominated purchase price related to Gamesys pursuant to which such subsidiary can purchase approximately £900 million at a contracted exchange rate.
On April 16, 2021, a subsidiary of the Company entered into two foreign exchange contracts to hedge the risk of appreciation of both the GBP-denominated and Euro-denominated debt held by Gamesys which would be paid off at closing of the Gamesys acquisition pursuant to which such subsidiary can purchase £200 million and €336 million, at a contracted exchange rate, respectively.
The total premium paid by the subsidiary of the Company on these contracts was $22.6 million.
On August 20, 2021, a subsidiary of the Company modified the above mentioned foreign exchange forward contracts, decreasing the notional amount of the GBP-denominated forward purchase commitments by £746 million to £354 million, collectively. The Company received $1.7 million upon settlement of the modification, which decreased the remaining fair value of the contracts.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2021, the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
The Company completed its acquisitions of SportCaller on February 5, 2021, Monkey Knife Fight on March 23, 2021, Bally Interactive, formerly Bet.Works, on March 23, 2021, Bally’s Lake Tahoe on April 6, 2021, Bally’s Evansville on June 3, 2021, Bally’s Quad Cities on June 14, 2021, AVP on July 12, 2021, and Telescope on August 12, 2021. See Note 5 “Acquisitions” included in Part I. Item 1 of this Quarterly Report on Form 10-Q for a discussion of the acquisitions and related financial data. The Company is currently in the process of integrating the acquired companies’ internal controls over financial reporting. Except for the inclusion of the acquired companies, there has been no change in our internal control over financial reporting that occurred during the third quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
We are party to various legal proceedings which have arisen in the normal course of our business. Such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings will not materially impact our consolidated financial condition or results of operations. While we maintain insurance coverage that we believe is adequate to mitigate the risks of such proceedings, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. The current liability for the estimated losses associated with these proceedings is not material to our consolidated financial condition and those estimated losses are not expected to have a material impact on our results of operations.
ITEM 1A. RISK FACTORS
There have been no material changes to our risk factors contained in Part I. Item IA. “Risk Factors” 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
There have been no repurchases by the Company of its common stock for the quarter ended September 30, 2021.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
EXHIBIT INDEX
| Exhibit No. | Description | |||||||
| 3.1* | ||||||||
| 4.1 | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1* | ||||||||
| 32.2* | ||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the interactive data file because XBRL tags are embedded within the inline XBRL document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | The cover page from Bally's Corporation's Quarterly report on Form 10-Q for the quarter ended September 30, 2021, formatted in inline XBRL contained in Exhibit 101 | |||||||
______________________________________________
* Filed herewith.
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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 thereunto duly authorized, on November 9, 2021.
| BALLY’S CORPORATION | |||||||||||
| By: | /s/ STEPHEN H. CAPP | ||||||||||
| Stephen H. Capp | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
| (Principal Financial and Accounting Officer) | |||||||||||
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