Note 16 – Segment Information

The Company conducts its business through two reportable operating segments: Casinos and Distributed Gaming. During the third quarter of 2015, the Company redefined its reportable segments to reflect the change in its business following the Merger. Prior to the Merger, the Company conducted its business through the following two segments: Rocky Gap and Other. Information for the period prior to the Merger has been recast to reflect the new segment structure and present comparative year-over-year results.

The Company’s Casinos segment involves the ownership and operation of eight resort casino properties in Nevada and Maryland. The Company’s Distributed Gaming segment involves the installation, maintenance and operation of slots and amusement devices in certain strategic, high-traffic, non-casino locations (such as grocery stores, convenience stores, restaurants, bars, taverns and liquor stores) in Nevada and Montana, and the operation of wholly-owned branded taverns targeting local patrons located primarily in the greater Las Vegas, Nevada metropolitan area. The Corporate and Other segment includes the Company’s cash and cash equivalents, miscellaneous receivables and corporate overhead. Costs recorded in the Corporate and Other segment have not been allocated to the Company’s reportable operating segments because these costs are not easily allocable and to do so would not be practical. Amounts in the Eliminations column represent the intercompany management fee for Rocky Gap.

The Company evaluates each segment’s profitability based upon such segment’s Adjusted EBITDA, which represents each segment's earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, preopening expense, acquisition and merger expenses, share-based compensation expenses, executive severance and sign-on bonuses, gain on revaluation of contingent consideration, class action litigation expenses, gain/loss on disposal of property and equipment or investments, and impairments and other losses, calculated before corporate overhead (which is not allocated to each segment).

The following table sets forth, for the periods indicated, certain operating data for our segments, and reconciles Adjusted EBITDA to net income (loss) for each segment, as reported in our accompanying consolidated statements of operations:

	Year Ended December 31, 2017
(In thousands)	Casinos			Distributed Gaming			Corporate and Other			Consolidated
Net revenues	$	179,175		$	330,050		$	583		$	509,808

Adjusted EBITDA		50,979			48,890			(26,954	)		72,915
Acquisition expenses		—			—			(5,041	)		(5,041	)
Share-based compensation		—			—			(8,754	)		(8,754	)
Gain on revaluation of contingent consideration		—			1,719			—			1,719
Preopening expenses		—			(1,234	)		(398	)		(1,632	)
Class action litigation expenses		—			—			(1,617	)		(1,617	)
Executive severance and sign-on bonuses		(636	)		—			(506	)		(1,142	)
Other operating, net		(377	)		(174	)		267			(284	)
Depreciation and amortization		(19,544	)		(19,601	)		(1,641	)		(40,786	)
Income (loss) from operations		30,422			29,600			(44,644	)		15,378
Non-operating income (expense)
Interest expense, net		16			(390	)		(19,224	)		(19,598	)
Loss on extinguishment of debt		—			—			(1,708	)		(1,708	)
Gain on change in fair value of derivative		—			—			178			178
Total non-operating income (expense), net		16			(390	)		(20,754	)		(21,128	)
Income (loss) before income tax benefit		30,438			29,210			(65,398	)		(5,750	)
Income tax benefit		—			—			7,921			7,921
Net income (loss)	$	30,438		$	29,210		$	(57,477	)	$	2,171

	Year Ended December 31, 2016
(In thousands)	Casinos			Distributed Gaming			Corporate and Other			Consolidated
Net revenues	$	97,132		$	305,792		$	280		$	403,204

Adjusted EBITDA		23,571			43,555			(18,531	)		48,595
Merger expenses		—			—			(614	)		(614	)
Share-based compensation		—			—			(3,878	)		(3,878	)
Loss (gain) on disposal of property and equipment		(94	)		40			—			(54	)
Preopening expenses		—			(2,179	)		(292	)		(2,471	)
Executive severance and sign-on bonuses		—			—			(1,037	)		(1,037	)
Depreciation and amortization		(7,351	)		(18,889	)		(1,266	)		(27,506	)
Income (loss) from operations		16,126			22,527			(25,618	)		13,035
Non-operating income (expense)
Interest expense, net		(9	)		(144	)		(6,301	)		(6,454	)
Gain on sale of land held for sale		—			—			4,525			4,525
Other, net		—			—			869			869
Total non-operating expense, net		(9	)		(144	)		(907	)		(1,060	)
Income (loss) before income tax benefit (provision)		16,117			22,383			(26,525	)		11,975
Income tax benefit (provision)		—			(60	)		4,385			4,325
Net income (loss)	$	16,117		$	22,323		$	(22,140	)	$	16,300

	Year Ended December 31, 2015
(In thousands)	Casinos			Distributed Gaming ⁽¹⁾			Corporate and Other			Eliminations			Consolidated
Net revenues	$	73,245		$	103,610		$	1,985		$	(1,798	)	$	177,042
														-
Adjusted EBITDA		14,390			14,254			(10,370	)		—			18,274
Merger expenses		—			—			(11,525	)		—			(11,525	)
Disposition of notes receivable		—			—			23,590			—			23,590
Share-based compensation		—			—			(809	)		—			(809	)
Loss on disposal of property and equipment		(8	)		—			(8	)		—			(16	)
Gain on sale of investment		—			—			750			—			750
Impairments and other losses		—			—			(682	)		—			(682	)
Preopening expenses		—			(380	)		(41	)		—			(421	)
Depreciation and amortization		(4,928	)		(5,315	)		(555	)		—			(10,798	)
Income from operations		9,454			8,559			350			—			18,363
Non-operating income (expense)
Interest expense, net		(626	)		(68	)		(2,034	)		—			(2,728	)
Loss on extinguishment of debt		(1,174	)		—			—			—			(1,174	)
Other, net		(1,798	)		1			1,887			—			90
Total non-operating expense, net		(3,598	)		(67	)		(147	)		—			(3,812	)
Income before income tax benefit		5,856			8,492			203			—			14,551
Income tax benefit		—			—			9,969			—			9,969
Net income	$	5,856		$	8,492		$	10,172		$	—		$	24,520

Assets

The Company’s assets by segment consisted of the following amounts:

(In thousands)	Casinos		Distributed Gaming		Corporate and Other		Consolidated
Balance at December 31, 2017	$	1,039,025	$	298,453	$	27,697	$	1,365,175

Balance at December 31, 2016	$	108,418	$	294,822	$	15,838	$	419,078

Capital Expenditures

The Company’s capital expenditures by segment consisted of the following amounts:

(In thousands)	Casinos		Distributed Gaming		Corporate and Other		Consolidated
For the year ended December 31, 2017	$	9,665	$	18,011	$	1,787	$	29,463

For the year ended December 31, 2016	$	10,267	$	17,730	$	2,637	$	30,634

For the year ended December 31, 2015	$	2,594	$	4,595	$	757	$	7,946

(1)	Capital expenditures in the Distributed Gaming segment exclude non-cash purchases of property and equipment of approximately $2.6 million and $0.7 million for the years ended December 31, 2017 and 2016, respectively.