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LEASES | 3 Months Ended
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Mar. 31, 2019
Leases [Abstract] |
LEASES | LEASES The Company has no material leases in which we are the lessor. As lessee, we have one finance lease for a hotel and various operating leases for land, casino and office space and equipment, buildings, and signage. Our lease terms range from one month to approximately 40 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land lease at Silver Slipper does include contingent rent as further discussed below, along with other agreements deemed material to the Company’s operations. Operating Leases Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, our subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. The agreement includes fixed, base monthly payments of $77,500 plus contingent rents of 3% of monthly gross gaming revenue (as defined in the lease) in excess of $3.65 million with no scheduled rent increases through the remaining lease term ending in 2058. The land lease currently includes a purchase option at any time through October 1, 2027, for $15.5 million plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date. In the event that we sell or transfer either (i) substantially all of the assets of Silver Slipper Casino Venture, LLC, or (ii) our membership interests in Silver Slipper Casino Venture, LLC in its entirety, the purchase price will increase to $17.1 million plus the retained interest mentioned above for 10 years. In either case, we also have an option to purchase a four-acre portion from the total 38 acres of leased land for $2.0 million in connection with the development of our owned hotel (subject to the same seller-retained interest provisions), which may be exercised at any time and would accordingly, reduce the purchase price of the remaining land by $2.0 million. There are certain other provisions within any buyout related to water issues at the property, the cost of which, is not believed to be material. Bronco Billy’s Lease through January 2035 and Option to Purchase. Bronco Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. Bronco Billy’s exercised its first renewal option through January 2020, which included monthly rent of $25,000 for the first two years of the renewal period and $30,000 for the third year that started in February 2019. Bronco Billy’s intends to exercise its second renewal option to continuously extend the lease term through January 31, 2023, which will increase the monthly rent to $32,500 beginning in February 2021. The lease also contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property. Christmas Casino at Bronco Billy’s through August 2021 and Option to Purchase. As part of the Bronco Billy’s expansion, the Company commenced a land lease consisting of a closed casino in August 2018 and opened the casino as the rebranded Christmas Casino in November 2018. The lease includes a minimum three-year term with annual lease payments of $0.2 million, and can be extended an additional two years with annual lease payments of $0.3 million. The Company can also purchase the casino at any time during the lease term, or as extended. The purchase price is $2.5 million, if bought by October 31, 2019, and increases by $0.1 million on each anniversary thereafter up to $2.8 million. Grand Lodge Casino Lease through August 2023. Our subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Hyatt Equities, L.L.C. (“Hyatt”) to operate the Grand Lodge Casino. The lease is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the $100 million of senior secured notes due 2024 (the “Notes”). Hyatt has an option, which began on January 1, 2019, to purchase our leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve-month period preceding the acquisition (or pro-rated if less than twelve months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property. The current monthly rent of $166,667 is applicable through the remaining lease term ending in August 2023. Corporate Office Lease through January 2025. In June 2017, the Company leased 4,479 square feet of office space in Las Vegas, Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires January 2025. Finance Lease Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. Our Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, we have the option to purchase the hotel at a price based upon the project’s actual cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At March 31, 2019, such net amount was $4.7 million. Upon expiration of the lease term in October 2027, (i) the Landlord has the right to sell the hotel to us, and (ii) we have the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs. Leases recorded on the balance sheet consist of the following:
(In thousands, Unaudited) |  |  |  |
Leases |  | Balance Sheet Classification |  | March 31, 2019
Assets |  |  |  |
Operating lease assets |  | Operating Lease Right-of-Use Assets |  | $ | 19,316 |
Finance lease assets |  | Property and Equipment, Net(1) |  | 5,155 |
Total lease assets |  |  |  | $ | 24,471 |
Liabilities |  |  |  |
Current |  |  |  |
Operating |  | Other Accrued Expenses and Current Operating Lease Obligations |  | $ | 2,172 |
Finance |  | Current Portion of Finance Lease Obligation |  | 515 |
Noncurrent |  |  |  |
Operating |  | Operating Lease Obligations, Net of Current Portion, and Other |  | 17,371 |
Finance |  | Finance Lease Obligation, Net of Current Portion |  | 4,182 |
Total lease liabilities |  |  |  | $ | 24,240 |
(1 | ) |  | Finance lease assets are recorded net of accumulated amortization of $2.6 million as of March 31, 2019.
The components of lease expense are as follows:
(In thousands, Unaudited) |  |  |  |
|  |  |  | Three Months Ended March 31, 2019
Lease Costs |  | Statement of Operations Classification |
Operating leases: |  |  |  |
Operating lease costs |  | Selling, General and Administrative Expenses |  | $ | 960 |
Short-term lease costs |  | Selling, General and Administrative Expenses |  | 137 |
Variable lease costs |  | Selling, General and Administrative Expenses |  | 184 |
Finance lease: |  |  |  |
Amortization of leased assets |  | Depreciation and Amortization |  | 40 |
Interest on lease liabilities |  | Interest Expense, Net |  | 54 |
Total lease costs |  |  |  | $ | 1,375 |
Maturities of lease liabilities as of March 31, 2019 are summarized as follows:
(In thousands, Unaudited) |  |  |  |
|  | Operating Leases |  | Financing Lease(1)
Year Ending December 31, |  |
2019 (excluding the three months ended March 31, 2019) |  | $ | 2,887 |  |  | $ | 508 |
2020 |  | 3,850 |  |  | 680 |
2021 |  | 3,719 |  |  | 652 |
2022 |  | 3,503 |  |  | 652 |
2023 |  | 2,478 |  |  | 652 |
Thereafter |  | 32,152 |  |  | 2,499 |
Total future minimum lease payments |  | 48,589 |  |  | 5,643 |
Less: Amount representing interest |  | (29,046 | ) |  | (946 | )
Present value of lease liabilities |  | 19,543 |  |  | 4,697 |
Less: Current lease obligations |  | (2,172 | ) |  | (515 | )
Long-term lease obligations |  | $ | 17,371 |  |  | $ | 4,182 |
(1 | ) |  | Our only material finance lease is at Rising Star Casino Resort for a 104-room hotel.
Other information related to lease term and discount rate is as follows:
Lease Term and Discount Rate |  | March 31, 2019
|  | (Unaudited)
Weighted-average remaining lease term |  |
Operating leases |  | 20.9 years
Finance lease |  | 8.6 years
Weighted-average discount rate |  |
Operating leases(1) |  | 9.41%
Finance lease |  | 4.50%
(1 | ) |  | Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.
Supplemental cash flow information related to leases is as follows:
(In thousands, Unaudited) |  |
|  | Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows for operating leases |  | $ | 961 |
Operating cash flows for finance lease |  | $ | 54 |
Financing cash flows for finance lease |  | $ | 125 |
LEASES | LEASES The Company has no material leases in which we are the lessor. As lessee, we have one finance lease for a hotel and various operating leases for land, casino and office space and equipment, buildings, and signage. Our lease terms range from one month to approximately 40 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants, but the land lease at Silver Slipper does include contingent rent as further discussed below, along with other agreements deemed material to the Company’s operations. Operating Leases Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, our subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease with Cure Land Company, LLC for approximately 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. The agreement includes fixed, base monthly payments of $77,500 plus contingent rents of 3% of monthly gross gaming revenue (as defined in the lease) in excess of $3.65 million with no scheduled rent increases through the remaining lease term ending in 2058. The land lease currently includes a purchase option at any time through October 1, 2027, for $15.5 million plus a seller-retained interest in Silver Slipper Casino and Hotel’s operations of 3% of net income (as defined) for 10 years following the purchase date. In the event that we sell or transfer either (i) substantially all of the assets of Silver Slipper Casino Venture, LLC, or (ii) our membership interests in Silver Slipper Casino Venture, LLC in its entirety, the purchase price will increase to $17.1 million plus the retained interest mentioned above for 10 years. In either case, we also have an option to purchase a four-acre portion from the total 38 acres of leased land for $2.0 million in connection with the development of our owned hotel (subject to the same seller-retained interest provisions), which may be exercised at any time and would accordingly, reduce the purchase price of the remaining land by $2.0 million. There are certain other provisions within any buyout related to water issues at the property, the cost of which, is not believed to be material. Bronco Billy’s Lease through January 2035 and Option to Purchase. Bronco Billy’s leases certain parking lots and buildings, including a portion of the hotel and casino, under a long-term lease. The lease term includes six renewal options in three-year increments to 2035. Bronco Billy’s exercised its first renewal option through January 2020, which included monthly rent of $25,000 for the first two years of the renewal period and $30,000 for the third year that started in February 2019. Bronco Billy’s intends to exercise its second renewal option to continuously extend the lease term through January 31, 2023, which will increase the monthly rent to $32,500 beginning in February 2021. The lease also contains a $7.6 million purchase option exercisable at any time during the lease term, or as extended, and a right of first refusal on any sale of the property. Christmas Casino at Bronco Billy’s through August 2021 and Option to Purchase. As part of the Bronco Billy’s expansion, the Company commenced a land lease consisting of a closed casino in August 2018 and opened the casino as the rebranded Christmas Casino in November 2018. The lease includes a minimum three-year term with annual lease payments of $0.2 million, and can be extended an additional two years with annual lease payments of $0.3 million. The Company can also purchase the casino at any time during the lease term, or as extended. The purchase price is $2.5 million, if bought by October 31, 2019, and increases by $0.1 million on each anniversary thereafter up to $2.8 million. Grand Lodge Casino Lease through August 2023. Our subsidiary, Gaming Entertainment (Nevada), LLC, has a lease with Hyatt Equities, L.L.C. (“Hyatt”) to operate the Grand Lodge Casino. The lease is collateralized by the Company’s interests under the lease and property (as defined in the lease) and is subordinate to the liens of the $100 million of senior secured notes due 2024 (the “Notes”). Hyatt has an option, which began on January 1, 2019, to purchase our leasehold interest and related operating assets of the Grand Lodge Casino, subject to assumption of applicable liabilities. The option price is an amount equal to the Grand Lodge Casino’s positive working capital, plus Grand Lodge Casino’s earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the twelve-month period preceding the acquisition (or pro-rated if less than twelve months remain on the lease), plus the fair market value of the Grand Lodge Casino’s personal property. The current monthly rent of $166,667 is applicable through the remaining lease term ending in August 2023. Corporate Office Lease through January 2025. In June 2017, the Company leased 4,479 square feet of office space in Las Vegas, Nevada. Annual rent is approximately $0.2 million and the term of the office lease expires January 2025. Finance Lease Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. Our Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104-room hotel at Rising Star Casino Resort. At any time during the lease term, we have the option to purchase the hotel at a price based upon the project’s actual cost of $7.7 million, reduced by the cumulative principal payments made by the Company during the lease term. At March 31, 2019, such net amount was $4.7 million. Upon expiration of the lease term in October 2027, (i) the Landlord has the right to sell the hotel to us, and (ii) we have the option to purchase the hotel. In either case, the purchase price is $1 plus closing costs. Leases recorded on the balance sheet consist of the following:
(In thousands, Unaudited) |  |  |  |
Leases |  | Balance Sheet Classification |  | March 31, 2019
Assets |  |  |  |
Operating lease assets |  | Operating Lease Right-of-Use Assets |  | $ | 19,316 |
Finance lease assets |  | Property and Equipment, Net(1) |  | 5,155 |
Total lease assets |  |  |  | $ | 24,471 |
Liabilities |  |  |  |
Current |  |  |  |
Operating |  | Other Accrued Expenses and Current Operating Lease Obligations |  | $ | 2,172 |
Finance |  | Current Portion of Finance Lease Obligation |  | 515 |
Noncurrent |  |  |  |
Operating |  | Operating Lease Obligations, Net of Current Portion, and Other |  | 17,371 |
Finance |  | Finance Lease Obligation, Net of Current Portion |  | 4,182 |
Total lease liabilities |  |  |  | $ | 24,240 |
(1 | ) |  | Finance lease assets are recorded net of accumulated amortization of $2.6 million as of March 31, 2019.
The components of lease expense are as follows:
(In thousands, Unaudited) |  |  |  |
|  |  |  | Three Months Ended March 31, 2019
Lease Costs |  | Statement of Operations Classification |
Operating leases: |  |  |  |
Operating lease costs |  | Selling, General and Administrative Expenses |  | $ | 960 |
Short-term lease costs |  | Selling, General and Administrative Expenses |  | 137 |
Variable lease costs |  | Selling, General and Administrative Expenses |  | 184 |
Finance lease: |  |  |  |
Amortization of leased assets |  | Depreciation and Amortization |  | 40 |
Interest on lease liabilities |  | Interest Expense, Net |  | 54 |
Total lease costs |  |  |  | $ | 1,375 |
Maturities of lease liabilities as of March 31, 2019 are summarized as follows:
(In thousands, Unaudited) |  |  |  |
|  | Operating Leases |  | Financing Lease(1)
Year Ending December 31, |  |
2019 (excluding the three months ended March 31, 2019) |  | $ | 2,887 |  |  | $ | 508 |
2020 |  | 3,850 |  |  | 680 |
2021 |  | 3,719 |  |  | 652 |
2022 |  | 3,503 |  |  | 652 |
2023 |  | 2,478 |  |  | 652 |
Thereafter |  | 32,152 |  |  | 2,499 |
Total future minimum lease payments |  | 48,589 |  |  | 5,643 |
Less: Amount representing interest |  | (29,046 | ) |  | (946 | )
Present value of lease liabilities |  | 19,543 |  |  | 4,697 |
Less: Current lease obligations |  | (2,172 | ) |  | (515 | )
Long-term lease obligations |  | $ | 17,371 |  |  | $ | 4,182 |
(1 | ) |  | Our only material finance lease is at Rising Star Casino Resort for a 104-room hotel.
Other information related to lease term and discount rate is as follows:
Lease Term and Discount Rate |  | March 31, 2019
|  | (Unaudited)
Weighted-average remaining lease term |  |
Operating leases |  | 20.9 years
Finance lease |  | 8.6 years
Weighted-average discount rate |  |
Operating leases(1) |  | 9.41%
Finance lease |  | 4.50%
(1 | ) |  | Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.
Supplemental cash flow information related to leases is as follows:
(In thousands, Unaudited) |  |
|  | Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows for operating leases |  | $ | 961 |
Operating cash flows for finance lease |  | $ | 54 |
Financing cash flows for finance lease |  | $ | 125 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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