Note 3 – Acquisitions

American Acquisition

Overview

On October 20, 2017, the Company completed the acquisition of all of the outstanding equity interests of American for aggregate consideration of $787.6 million in cash (after giving effect to post-closing adjustments) and the issuance by the Company of approximately 4.0 million shares of its common stock to W2007/ACEP Holdings, LLC (“ACEP Holdings”), a former American equity holder. The fair value of the Company’s common stock issued to ACEP Holdings was $101.5 million, based on the closing price of the Company’s common stock on October 20, 2017 of $25.08 per share.

Acquisition Method of Accounting

The American Acquisition has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”). Under ASC 805, the purchase price of the acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values as determined by management based on its judgment with assistance from third-party appraisals. The excess of the purchase price over the net book value of the assets acquired and the liabilities assumed has been recorded as goodwill. The Company has recognized the assets acquired and liabilities assumed in the American Acquisition based on fair value estimates as of the date of the acquisition. The determination of the fair value of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) was completed in the second quarter of 2018. There were no measurement period adjustments that were material to the Company’s consolidated financial statements.

Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information has been prepared by management for illustrative purposes only and does not purport to represent what the results of operations, financial condition or other financial information of the Company would have been if the American Acquisition had occurred on January 1, 2016, or what such results or financial condition will be for any future periods. The unaudited pro forma combined financial information is based on preliminary estimates and assumptions and on the information available at the time of the preparation thereof. These preliminary estimates and assumptions may change, be revised or prove to be materially different, and the estimates and assumptions may not be representative of facts existing at the time of the American Acquisition. The unaudited pro forma combined financial information does not reflect non-recurring charges that will be incurred in connection with the American Acquisition, nor any cost savings and synergies expected to result from the American Acquisition (and associated costs to achieve such savings or synergies), nor any costs associated with severance, restructuring or integration activities resulting from the American Acquisition.

The following table summarizes certain unaudited pro forma combined financial information derived from a combination of the historical consolidated financial statements of the Company and of American for the three and six months ended June 30 2017, adjusted to give effect to the American Acquisition, related transactions (including the refinancing), and the adoption of ASC 606.

	Three Months Ended		Six Months Ended
(In thousands, except per share data)	June 30, 2017		June 30, 2017
Pro forma combined revenues	$	213,262	$	424,033
Pro forma combined net income		6,402		17,868
Weighted-average common shares outstanding:
Basic		26,311		26,304
Diluted		27,334		27,103
Pro forma combined net income per share:
Basic	$	0.24	$	0.68
Diluted		0.23		0.66

Laughlin Acquisition

On July 14, 2018, the Company entered into a purchase agreement (the “Purchase Agreement”) with Marnell Gaming, LLC (the “Seller”) to acquire Edgewater Gaming, LLC and Colorado Belle Gaming, LLC (collectively, the “Acquired Entities”). At the closing of the acquisition, the Company expects to pay the Seller $155 million in cash and issue to the Seller between 455,501 and 1,226,348 shares of the Company’s newly issued common stock (which was valued at signing at between $13 million and $35 million, based on the volume-weighted average trading price of the Company’s common stock for the twenty trading days ending on July 13, 2018), with the final amount based on the earnings before interest, taxes, depreciation, amortization, rent and management fees of the Acquired Entities from December 1, 2017 to November 30, 2018. Consummation of the acquisition is subject to the satisfaction or waiver of customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable gaming authority approvals, the absence of a material adverse effect regarding the Acquired Entities, and other customary closing conditions. The Company and the Seller have agreed that the closing of the transactions will not occur prior to January 1, 2019, unless otherwise agreed by the parties. The Company intends to finance the cash portion of the purchase price from a combination of borrowings under the Company’s revolving credit facility and cash on hand.