XML 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 11 – Commitments and Contingencies

 

Participation and Revenue Share Agreements

In addition to the space agreements described above in Note 10, Leases, the Company also enters into slot placement contracts in the form of revenue share and participation agreements. Under revenue share agreements, the Company pays the business location a percentage of the gaming revenue generated from the Company’s slots placed at the location, rather than a fixed monthly rental fee. Under participation agreements, the business location holds the applicable gaming license and retains a percentage of the gaming revenue that it generates from the Company’s slots. During the three and six months ended June 30, 2018, the aggregate contingent payments recognized by the Company as gaming expenses under revenue share and participation agreements were $37.5 million and $74.6 million, respectively, including $0.2 million and $0.5 million, respectively, under revenue share and participation agreements with related parties, as described in Note 13, Related Party Transactions. During the three and six months ended June 30, 2017, the aggregate contingent payments recognized by the Company as gaming expenses under revenue share and participation agreements were $36.7 million and $71.5 million, respectively, including $0.3 million and $0.6 million, respectively, under revenue share and participation agreements with related parties.

The Company also enters into amusement device and ATM placement contracts in the form of revenue share agreements. Under these revenue share agreements, the Company pays the business location a percentage of the non-gaming revenue generated from the Company’s amusement devices and ATMs placed at the location. During the three months ended June 30, 2018 and 2017, the total contingent payments recognized by the Company as other operating expenses for amusement devices and ATMs under such agreements were $0.3 million and $0.4 million, respectively. During the six months ended June 30, 2018 and 2017, the total contingent payments recognized by the Company as other operating expenses for amusement devices and ATMs under such agreements were $0.7 million and $0.8 million, respectively.

Capital Lease Financing Agreement

In June 2018 the Company entered into a capital lease financing arrangement for external and internal lighting and renovations at the Stratosphere that are expected to commence in the third quarter of 2018. The total amount to be financed will be $8.5 million with monthly payments to be made over a 36-month period.

Miscellaneous Legal Matters

From time to time, the Company is involved in a variety of lawsuits, claims, investigations and other legal proceedings arising in the ordinary course of business, including proceedings concerning labor and employment matters, personal injury claims, breach of contract claims, commercial disputes, business practices, intellectual property, tax and other matters for which the Company has recorded reserves of $1.5 million for claims as of the date of this filing. Although lawsuits, claims, investigations and other legal proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of its currently pending matters should not have a material adverse effect on its business, financial condition, results of operations or liquidity. Regardless of the outcome, legal proceedings can have an adverse impact on the Company because of defense costs, diversion of management resources and other factors. In addition, it is possible that an unfavorable resolution of one or more such proceedings could in the future materially and adversely affect the Company’s business, financial condition, results of operations or liquidity in a particular period.

In February and April 2017, several former employees filed two separate purported class action lawsuits against the Company in the District Court of Clark County, Nevada, and on behalf of similarly situated individuals employed by the Company in the State of Nevada. The lawsuits allege that the Company violated certain Nevada labor laws including payment of an hourly wage below the statutory minimum wage without providing a qualified health insurance plan and an associated failure to pay proper overtime compensation. The complaints seek, on behalf of the plaintiffs and members of the putative class, an unspecified amount of damages (including punitive damages), injunctive and equitable relief, and an award of attorneys’ fees, interest and costs. In the second half of 2017, the Company agreed to settle the first of these two cases, subject to court approval. The second case is in the discovery phase.

 

In February 2018, a prior guest of the Stratosphere filed a purported class action complaint against the Company in the United States District Court, District of Nevada, on behalf of similarly situated individuals and entities that paid the Clark County Combined Transient Lodging Tax (“Tax”) on the portion of a resort fee that constitutes charges for Internet access, during the period of February 6, 2014 through the date the alleged conduct ceases. The lawsuit alleges that the Tax was charged in violation of the federal Internet Tax Freedom Act, which imposes a national moratorium on the taxation of Internet access by states and their political subdivisions, and seeks, on behalf of the plaintiff and the putative class, damages equal to the amount of the Tax collected on the Internet access component of the resort fee, injunctive relief, disgorgement, interest, fees and costs. The Company was served the complaint on May 4, 2018. On June 21, 2018 the plaintiff filed a notice of voluntary dismissal of the case against the Company. The plaintiffs in this matter may determine to refile the case in the applicable state court.

While legal proceedings are inherently unpredictable and no assurance can be given as to the ultimate outcome of any of the above matters, based on management’s current understanding of the relevant facts and circumstances, the Company believes that these proceedings should not have a material adverse effect on its financial position, results of operations or cash flows.