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LEASES | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
LEASES | 3. LEASES The Company has no material leases in which it is the lessor. As lessee, the Company has one finance lease for a hotel and various operating leases for land, casino and office space, equipment, buildings, and signage. The Company’s lease terms, including extensions, range from one month to approximately 39 years. The Company’s 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. Operating Leases Silver Slipper Casino Land Lease through April 2058 and Options to Purchase. In 2004, the Company’s 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 base 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 the Company sells or transfers either (i) substantially all of the assets of Silver Slipper Casino Venture, LLC, or (ii) its 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. In either case, the Company also has 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 an owned hotel, which may be exercised at any time and would accordingly reduce the purchase price of the remaining land by $2.0 million. Following a buy-out of the lease, the property would have to purchase or otherwise provide for its drinking water, which is currently provided by the landlord as part of the lease. The cost of doing so is not believed to be significant. 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, and currently pays $30,000 per month in rent. In May 2019, Bronco Billy’s also exercised its second renewal option to 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 leased a closed casino in August 2018 and opened it 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 $2.6 million if bought by October 31, 2020, increasing by $0.1 million on each anniversary thereafter up to $2.8 million. Grand Lodge Casino Lease through August 2023. The Company’s 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 senior secured notes due 2024 (see Note 5). Hyatt has an option, which began on January 1, 2019, to purchase the Company’s 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 in January 2025. As of September 30, 2019, the Company has entered into two additional operating leases for gaming-related equipment, each at Bronco Billy’s and Rising Star Casino Resort, which are expected to commence within the fourth quarter of 2019. Finance Lease Rising Star Casino Hotel Lease through October 2027 and Option to Purchase. The Company’s Indiana subsidiary, Gaming Entertainment (Indiana) LLC, leases a 104‑room hotel at Rising Star Casino Resort. At any time during the lease term, the Company has the option to purchase the hotel at a price based upon the project’s actual cost of $7.7 million (see Note 4), reduced by the cumulative principal payments made by the Company during the lease term. At September 30, 2019, such net amount was $4.4 million. Upon expiration of the lease term in October 2027, (i) the Landlord has the right to sell the hotel to the Company, and (ii) the Company has 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 |  | September 30, 2019
Assets |  |  |  |  |
Operating lease assets |  | Operating Lease Right-of-Use Assets, Net |  | $ | 18,240
Finance lease assets |  | Property and Equipment, Net(1) |  |  | 5,076
Total lease assets |  |  |  | $ | 23,316
Liabilities |  |  |  |  |
Current |  |  |  |  |
Operating |  | Other Accrued Expenses and Current Operating Lease Obligations |  | $ | 2,266
Finance |  | Current Portion of Finance Lease Obligation |  |  | 471
Noncurrent |  |  |  |  |
Operating |  | Operating Lease Obligations, Net of Current Portion, and Other |  |  | 16,225
Finance |  | Finance Lease Obligation, Net of Current Portion |  |  | 3,948
Total lease liabilities |  |  |  | $ | 22,910
(1)Finance lease assets are recorded net of accumulated amortization of $2.6 million as of September 30, 2019. The components of lease expense are as follows:
(In thousands, Unaudited) |  |  |  |  |  |  |  |
|  |  |  | Three Months Ended |  | Nine Months Ended
Lease Costs |  | Statement of Operations Classification |  | September 30, 2019 |  | September 30, 2019
Operating leases: |  |  |  |  |  |  |  |
Fixed/base rent |  | Selling, General and Administrative Expenses |  | $ | 959 |  | $ | 2,877
Variable payments |  | Selling, General and Administrative Expenses |  |  | 146 |  |  | 501
Finance lease: |  |  |  |  |  |  |  |
Amortization of leased assets |  | Depreciation and Amortization |  |  | 40 |  |  | 119
Interest on lease liabilities |  | Interest Expense, Net |  |  | 51 |  |  | 157
Total lease costs |  |  |  | $ | 1,196 |  | $ | 3,654
Maturities of lease liabilities as of September 30, 2019 are summarized as follows:
(In thousands, Unaudited) |  |  |  |  |  |
|  | Operating |  | Financing
Year Ending December 31, |  | Leases |  | Lease(1)
2019 (excluding the nine months ended September 30, 2019) |  | $ | 968 |  | $ | 127
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 |  |  | 46,670 |  |  | 5,262
Less: Amount representing interest |  |  | (28,179) |  |  | (843)
Present value of lease liabilities |  |  | 18,491 |  |  | 4,419
Less: Current lease obligations |  |  | (2,266) |  |  | (471)
Long-term lease obligations |  | $ | 16,225 |  | $ | 3,948
(1)The Company’s 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 |  | September 30, 2019
|  | (Unaudited)
Weighted-average remaining lease term |  |  |
Operating leases |  | 21.3 | years
Finance lease |  | 8.0 | years
Weighted-average discount rate |  |  |
Operating leases(1) |  | 9.44 | %
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) |  |  |
|  | Nine Months Ended
Cash paid for amounts included in the measurement of lease liabilities: |  | September 30, 2019
Operating cash flows for operating leases |  | $ | 2,881
Operating cash flows for finance lease |  | $ | 157
Financing cash flows for finance lease |  | $ | 403

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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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