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SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended
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Jun. 30, 2022
Accounting Policies [Abstract] |
Significant Accounting Policies | SIGNIFICANT ACCOUNTING POLICIES Correction of Previously Reported Consolidated Financial Statements As previously disclosed in Note 23 to the Company’s consolidated financial statements as of and for the year ended December 31, 2021 (the “2021 financial statements”) included in Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the Company revised its 2021 financial statements to correct an immaterial accounting error that pertained to a foreign exchange translation loss of approximately $42.9 million that was incorrectly recognized as a component of accumulated other comprehensive income (loss) in the Company’s consolidated statement of comprehensive income (loss) rather than as other income/(expense) in the Company’s consolidated statement of operations for the year ended December 31, 2021. As a result, the accompanying consolidated balance sheets as of June 30, 2022 and December 31, 2021 and consolidated statement of stockholders’ equity for the three and six months ended June 30, 2022 have been revised to give effect to the correction of this error by decreasing previously reported accumulated other comprehensive loss and increasing previously reported accumulated deficit as of June 30, 2022 and December 31, 2021 by approximately $42.9 million, respectively. 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 June 30, 2022 and December 31, 2021, restricted cash of $55.2 million and $68.6 million, respectively, consisted primarily of player deposits and payment service provider deposits in connection with the Company’s iGaming operations. Restricted cash also includes Video Lottery Terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, which are 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.
| June 30, |  | December 31,
(in thousands) | 2022 |  | 2021
Cash and cash equivalents | $ | 176,158 |  |  | $ | 206,193 |
Restricted cash | 55,198 |  |  | 68,647 |
Total cash and cash equivalents and restricted cash | $ | 231,356 |  |  | $ | 274,840 |
Accounts Receivable, Net Accounts receivable, net consists of the following:
| June 30, |  | December 31,
(in thousands) | 2022 |  | 2021
Amounts due from Rhode Island and Delaware(1) | $ | 13,729 |  |  | $ | 10,575 |
Gaming receivables | 12,110 |  |  | 10,576 |
Non-gaming receivables | 37,485 |  |  | 31,481 |
Accounts receivable | 63,324 |  |  | 52,632 |
Less: Allowance for doubtful accounts | (5,615) |  |  | (4,454) |
Accounts receivable, net | $ | 57,709 |  |  | $ | 48,178 |
__________________________________ (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 Bally’s Dover. 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. The Company recorded a gain from insurance recoveries, net of losses, of $0.6 million for the three months ended June 30, 2021 and $0.2 million and $11.3 million for the six months ended June 30, 2022 and 2021, 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. Gaming Expenses Gaming expenses include, among other things, payroll costs and expenses associated with the operation of VLTs, slots and table games, including gaming taxes payable to jurisdictions in which the Company operates outside of Rhode Island and Delaware, and advertising costs directly associated with the sale of the Company’s interactive gaming products and services. Gaming expenses also includes racing expenses comprised of payroll costs, off track betting (“OTB”) commissions and other expenses associated with the operation of live racing and simulcasting. Advertising Expense The Company expenses advertising costs as incurred. For the three months ended June 30, 2022 and 2021, advertising expense was $52.1 million and $1.7 million, respectively. For the six months ended June 30, 2022 and 2021, advertising expense was $117.4 million and $3.0 million, respectively. Advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three and six months ended June 30, 2022 was $49.7 million and $112.7 million, respectively. There was no advertising expense attributable to the Company’s interactive business included within Gaming expenses for the three and six months ended June 30, 2021. 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 Tax Receivable Agreement (“TRA”) with Sinclair. 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 five-year term unless either the Company or Sinclair elect not to renew. 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, Business Combinations—Related Issues, 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 TRA payments, each explained below. The naming rights intangible asset was $288.5 million and $311.7 million as of June 30, 2022 and December 31, 2021, respectively. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $8.4 million and $8.6 million for the three months ended June 30, 2022 and 2021, respectively, and $16.8 million and $8.6 million for the six months ended June 30, 2022 and 2021, respectively. Refer to Note 8 “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 June 30, 2022 and December 31, 2021 was $59.1 million and $58.9 million, respectively. The short-term portion of the liability, which was $2.0 million as of June 30, 2022 and December 31, 2021, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $57.1 million and $56.9 million as of June 30, 2022 and December 31 2021, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets. Accretion expense reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations was $1.1 million and $1.1 million for the three months ended June 30, 2022 and 2021, respectively, and $2.2 million and $2.1 million for the six months ended June 30, 2022 and 2021, respectively. Warrants and Options - The Company issued to Sinclair (1) 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”), (2) 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 (3) 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 NYSE, which was obtained on January 27, 2021. Penny Warrants & Options. The Penny Warrants and Options are equity classified instruments under ASC 815, Derivatives and Hedging, (“ASC 815”). 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. The fair value of the Options was $59.7 million as of December 31, 2021 and is recorded within “Additional paid-in-capital” in the condensed consolidated balance sheets. 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. Refer to Note 9 “Fair Value Measurements” for further information. 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. The TRA liability was $35.8 million and $42.2 million as of June 30, 2022 and December 31, 2021, respectively, 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. Variable Interest Entities The Company evaluates entities for which control is achieved through means other than voting rights to determine if it is the primary beneficiary of a VIE. An entity is a VIE if it has any of the following characteristics: (1) the entity has insufficient equity to permit it to finance its activities without additional subordinated financial support (2) equity holders, as a group, lack the characteristics of a controlling financial interest or (3) the entity is structured with non-substantive voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company consolidates its investment in a VIE when it determines that it is the primary beneficiary of such entity. In determining whether it is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; and significance of the Company’s investment and other means of participation in the VIE’s expected profits/losses. Significant judgments related to these determinations include estimates about the current and future fair values and performance of assets held by these VIEs and general market conditions. Management analyzed and concluded that Breckenridge Curacao B.V. (“Breckenridge”) is a VIE because it does not have sufficient equity investment at risk. The Company has determined that it is the primary beneficiary and consolidates the VIE because (a) although the Company does not control all decisions of Breckenridge, the Company has the power to direct the activities of Breckenridge that most significantly impact its economic performance through various contracts with the entity and (b) the nature of these agreements between Breckenridge and the Company provides the Company with the obligation to absorb losses and the right to receive benefits based on fees that are based upon off-market rates and commensurate to the level of services provided. The Company receives significant benefits in the form of fees that are not at market and commensurate to the level of services provided. As a result, the Company consolidates all of the assets, liabilities and results of operations of Breckenridge and its subsidiaries in the accompanying consolidated financial statements. As of June 30, 2022 and December 31, 2021 Breckenridge had total assets of $73.1 million and $85.4 million, respectively, and total liabilities of $72.4 million and $75.2 million, respectively. Breckenridge had revenues of $73.9 million and $160.8 million for the three and six months ended June 30, 2022. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis. Related Party Transaction On September 26, 2019, prior to the Company’s acquisition of Gamesys, Gamesys (Holdings) Limited (“GHL”) was acquired by JPJ Group plc (“JPJ”) and subsequently renamed Gamesys. In connection with the JPJ acquisition, £10.0 million of the cash consideration was deferred and payable (plus interest) to GHL’s majority shareholders 30 months after closing. The Company recorded deferred consideration of $15.1 million within current liabilities of the condensed consolidated balance sheets as of December 31, 2021. Of such amount, approximately $7.4 million was payable to related parties as former majority shareholders. The Company paid the deferred consideration in April 2022. Provision (Benefit) for Income Taxes During the three months ended June 30, 2022 and 2021, the Company recorded a provision for income tax of $5.4 million, at an effective tax rate of 8.4%, and a provision for income tax of $27.0 million, at an effective tax rate of 28.1%, respectively. The 2022 effective tax rate was lower than the US federal statutory rate of 21%, largely due to a tax benefit recorded in foreign jurisdictions during the quarter offset by discrete tax item related to gain on sale leaseback transactions in Colorado and Illinois. The 2021 effective tax rate was higher than the US federal statutory rate of 21%, largely due to higher state income tax related to gain on sale leaseback in Delaware. During the six months ended June 30, 2022 and 2021, the Company recorded a benefit for income tax of $0.1 million, at an effective tax rate of (0.2)% and a provision for income tax of $22.2 million, at an effective tax rate of 27.6%, respectively. The 2022 effective tax rate was lower than the US federal statutory rate of 21%, largely due to a tax benefit recorded in foreign jurisdictions during the quarter offset by discrete tax item related to gain on sale leaseback transactions in Colorado and Illinois. The 2021 effective tax rate was higher than the US federal statutory rate of 21%, largely due to higher state income tax related to gain on sale leaseback in Delaware. In the second quarter of 2022, the Company has changed its assertion and is no longer permanently reinvest in its undistributed foreign earnings and plans to remit cash back to the United States. The Company has determined, based on certain tax planning strategies available, no deferred taxes were accrued related to unremitted earnings as of the period ending June 30, 2022.

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- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=123372394&loc=d3e18726-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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