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Note 4 - Intangible Assets

12 Months Ended

Dec. 31, 2020

Intangible Assets Disclosure [Text Block]

NOTE 4. INTANGIBLE ASSETS

Intangible assets consist of the following:

	*December 31, 2020*
	*Weighted*	*Gross*					*Accumulated*
	*Useful Life*	*Carrying*		*Accumulated*			*Impairment*			*Intangible*
*(In thousands)*	*Remaining (in years)*	*Value*		*Amortization*			*Losses*			*Assets, Net*
*Amortizing intangibles*
Customer relationships	2.5	$	68,100	$	(55,062	)	$	—		$	13,038
Host agreements	12.4		58,000		(9,989	)		—			48,011
Development agreement	—		21,373		—			—			21,373
			147,473		(65,051	)		—			82,422

*Indefinite lived intangible assets*
Trademarks	Indefinite		204,000		—			(24,800	)		179,200
Gaming license rights	Indefinite		1,376,685		(33,960	)		(222,174	)		1,120,551
			1,580,685		(33,960	)		(246,974	)		1,299,751
Balances, December 31, 2020		$	1,728,158	$	(99,011	)	$	(246,974	)	$	1,382,173

December 31, 2019

Weighted

Gross

Accumulated

Useful Life

Carrying

Accumulated

Impairment

Intangible

(In thousands)

Remaining (in years)

Value

Amortization

Losses

Assets, Net

Amortizing intangibles

Customer relationships
3.5 $ 68,100 $ (39,598 ) $ — $ 28,502

Host agreements
13.4 58,000 (6,122 ) — 51,878

Development agreement
— 21,373 — — 21,373

147,473 (45,720 ) — 101,753

Indefinite lived intangible assets

Trademarks

Indefinite
206,687 — (4,300 ) 202,387

Gaming license rights

Indefinite
1,376,685 (33,960 ) (179,974 ) 1,162,751

1,583,372 (33,960 ) (184,274 ) 1,365,138

Balances, December 31, 2019
$ 1,730,845 $ (79,680 ) $ (184,274 ) $ 1,466,891

Amortizing Intangible Assets

Customer Relationships

Customer relationships represent the value of repeat business associated with our customer loyalty programs. The value of customer relationships is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these customers, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: revenue of our rated customers, based on expected level of play; promotional allowances provided to these existing customers; attrition rate related to these customers; operating expenses; general and administrative expenses; trademark expense; discount rate; and the present value of tax benefit.

Host Agreements

Host agreements represent the value associated with our host establishment relationships. The value of host agreements is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to these establishments, discounted to present value at a risk-adjusted rate of return.

Development Agreement

Development agreement is an acquired contract with Wilton Rancheria under which the Company has the right to assist Wilton Rancheria in the development and management of a gaming facility on the Wilton Rancheria's land. The design and project budget have been finalized and Wilton Rancheria has secured third-party financing. This asset, although amortizable, is not amortized until development is completed. In the interim, this asset is subject to periodic impairment reviews.

Indefinite Lived Intangible Assets

Trademarks

Trademarks are based on the value of our brands, which reflect the level of service and quality we provide and from which we generate repeat business. Trademarks are valued using the relief from royalty method, which presumes that without ownership of such trademark, we would have to make a stream of payments to a brand or franchise owner in return for the right to use their name. By virtue of this asset, we avoid any such payments and record the related intangible value of our ownership of the trade name. We used the following significant projections and assumptions to determine value under the relief from royalty method: revenue from gaming and hotel activities; royalty rate; tax expense; terminal growth rate; discount rate; and the present value of tax benefit.

Gaming License Rights

Gaming license rights represent the value of the license to conduct gaming in certain jurisdictions, which is subject to highly extensive regulatory oversight, and a limitation on the number of licenses available for issuance therein. In the majority of cases, the value of our gaming licenses is determined using a multi-period excess earnings method, which is a specific discounted cash flow model. The value is determined at an amount equal to the present value of the incremental after-tax cash flows attributable only to future gaming revenue, discounted to present value at a risk-adjusted rate of return. With respect to the application of this methodology, we used the following significant projections and assumptions: gaming revenues; gaming operating expenses; general and administrative expenses; tax expense; terminal value; and discount rate. In two instances, we determine the value of our gaming licenses by applying a cost approach. Our primary consideration in the application of this methodology is the initial statutory fee associated with acquiring a gaming license in the jurisdiction.

Activity for the Years Ended December 31, 2020, 2019 and 2018

The following table sets forth the changes in these intangible assets:

*(In thousands)*	*Customer Relationships*			*Host Agreements*			*Favorable Lease Rates*			*Development Agreement*		*Trademarks*			*Gaming License Rights*			*Intangible Assets, Net*
Balance, January 1, 2018	$	5,930		$	—		$	8,655		$	21,373	$	147,587		$	659,401		$	842,946
Additions		56,000			58,000			—			—		55,500			468,350			637,850
Amortization		(11,643	)		(2,256	)		(227	)		—		—			—			(14,126	)
Balance, December 31, 2018		50,287			55,744			8,428			21,373		203,087			1,127,751			1,466,670
Purchase price adjustments		2,700			—			—			—		(700	)		35,000			37,000
Amortization		(24,485	)		(3,866	)		—			—		—			—			(28,351	)
Other (1)		—			—			(8,428	)		—		—			—			(8,428	)
Balance, December 31, 2019		28,502			51,878			—			21,373		202,387			1,162,751			1,466,891
Impairments		—			—			—			—		(20,500	)		(42,200	)		(62,700	)
Amortization		(15,464	)		(3,867	)		—			—		—			—			(19,331	)
Other (2)		—			—			—			—		(2,687	)		—			(2,687	)
Balance, December 31, 2020	$	13,038		$	48,011		$	—		$	21,373	$	179,200		$	1,120,551		$	1,382,173

(1) The remaining balance of the favorable lease rates intangible asset was reclassified and added to the operating lease right-of-use asset upon the adoption of the Lease Standard effective January 1, 2019.

(2) A domain rights asset was written off in second quarter 2020.

Future Amortization

Customer relationships are being amortized on an accelerated basis over a weighted average original life of five years. Host agreements are being amortized on a straight-line basis over an original life of 15 years. Future amortization is as follows:

*(In thousands)*	*Customer Relationships*		*Host Agreements*		*Total*
*For the year ending December 31,*
2021	$	8,737	$	3,867	$	12,604
2022		3,322		3,867		7,189
2023		939		3,867		4,806
2024		40		3,867		3,907
2025		—		3,867		3,867
Thereafter		—		28,676		28,676
Total future amortization	$	13,038	$	48,011	$	61,049

Trademarks and gaming license rights are not subject to amortization, as we have determined that they have an indefinite useful life; however, these assets are subject to an annual impairment test each year and between annual test dates in certain circumstances.

Impairment Considerations

The Company recorded impairment charges of $16.9 million for trademarks, of which $8.0 million related to our Las Vegas Locals segment and $8.9 million related to our Midwest & South segment, and $42.2 million for gaming license rights related to our Midwest & South segment as part of the first quarter 2020 impairment review. An additional trademark impairment charge of $3.6 million, of which $2.5 million related to the Las Vegas Locals segment and $1.1 million related to the Midwest & South segment, was recorded as part of the annual 2020 impairment test. No impairment charges resulted from our quarterly reviews or annual tests of intangible assets for impairment in 2019 and 2018.