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Table of Contents    


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
For the quarterly period ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to     
Commission file number 001-37754
RED ROCK RESORTS, INC.
(Exact name of registrant as specified in its charter)
Delaware
47-5081182
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1505 South Pavilion Center Drive, Las Vegas, Nevada
(Address of principal executive offices)
89135
(Zip Code)
(702495-3000
Registrant’s telephone number, including area code
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Class A Common Stock, $.01 par value
RRR
NASDAQ Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 

Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at October 31, 2019
Class A Common Stock, $0.01 par value
 
70,321,959
Class B Common Stock, $0.00001 par value
 
46,827,370


Table of Contents    


RED ROCK RESORTS, INC.
INDEX

 
 
 
 
 
 
 
 
 
 



Table of Contents    


Part I.    Financial Information
Item 1.    Financial Statements
RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
 
September 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
106,444

 
$
114,607

Restricted cash
4,061

 
3,651

Receivables, net
53,782

 
51,356

Inventories
17,323

 
14,910

Prepaid gaming tax
25,725

 
23,422

Prepaid expenses and other current assets
20,459

 
34,417

Assets held for sale
32,202

 
19,602

Total current assets
259,996

 
261,965

Property and equipment, net of accumulated depreciation of $989,131 and $847,718 at September 30, 2019 and December 31, 2018, respectively
3,088,325

 
3,012,405

Goodwill
195,676

 
195,676

Intangible assets, net of accumulated amortization of $52,652 and $46,117 at September 30, 2019 and December 31, 2018, respectively
110,685

 
117,220

Land held for development
238,440

 
193,686

Investments in joint ventures
8,750

 
8,903

Native American development costs
18,674

 
17,970

Deferred tax asset, net
111,913

 
111,833

Other assets, net
95,003

 
89,868

Total assets
$
4,127,462

 
$
4,009,526

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
30,074

 
$
25,896

Accrued interest payable
14,313

 
7,418

Other accrued liabilities
191,730

 
266,474

Current portion of long-term debt
33,938

 
33,894

Total current liabilities
270,055

 
333,682

Long-term debt, less current portion
3,016,749

 
2,821,465

Other long-term liabilities
32,763

 
12,436

Payable pursuant to tax receivable agreement
25,064

 
24,948

Total liabilities
3,344,631

 
3,192,531

Commitments and contingencies (Note 14)



Stockholders’ equity:
 
 
 
Preferred stock, par value $0.01 per share, 100,000,000 shares authorized; none issued and outstanding

 

Class A common stock, par value $0.01 per share, 500,000,000 shares authorized; 70,315,839 and 69,662,590 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
703

 
697

Class B common stock, par value $0.00001 per share, 100,000,000 shares authorized; 46,827,370 and 46,884,413 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively
1

 
1

Additional paid-in capital
372,941

 
361,970

Retained earnings
126,635

 
155,869

Accumulated other comprehensive (loss) income
(205
)
 
1,083

Total Red Rock Resorts, Inc. stockholders’ equity
500,075

 
519,620

Noncontrolling interest
282,756

 
297,375

Total stockholders’ equity
782,831

 
816,995

Total liabilities and stockholders’ equity
$
4,127,462

 
$
4,009,526

The accompanying notes are an integral part of these condensed consolidated financial statements.

3




Table of Contents    


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(amounts in thousands, except per share data)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Operating revenues:
 
 
 
 
 
 
 
Casino
$
238,269

 
$
230,723

 
$
728,470

 
$
699,726

Food and beverage
128,016

 
94,666

 
370,740

 
280,226

Room
48,169

 
39,306

 
145,555

 
128,655

Other
27,823

 
26,385

 
80,650

 
73,858

Management fees
23,581

 
21,252

 
70,333

 
67,094

Net revenues
465,858

 
412,332

 
1,395,748

 
1,249,559

Operating costs and expenses:
 
 
 
 
 
 
 
Casino
89,205

 
82,772

 
259,861

 
242,126

Food and beverage
128,376

 
87,097

 
360,767

 
252,320

Room
20,279

 
19,595

 
61,034

 
59,126

Other
14,077

 
13,216

 
39,610

 
34,111

Selling, general and administrative
107,756

 
104,360

 
317,423

 
297,540

Depreciation and amortization
57,925

 
44,235

 
164,613

 
133,391

Write-downs and other charges, net
34,094

 
6,439

 
66,668

 
21,070

Tax receivable agreement liability adjustment
(97
)
 

 
(97
)
 
(90,375
)
 
451,615

 
357,714

 
1,269,879

 
949,309

Operating income
14,243

 
54,618

 
125,869

 
300,250

Earnings from joint ventures
455

 
499

 
1,481

 
1,606

Operating income and earnings from joint ventures
14,698

 
55,117

 
127,350

 
301,856

Other (expense) income:
 
 
 
 
 
 
 
Interest expense, net
(40,517
)
 
(33,590
)
 
(118,936
)
 
(96,299
)
Loss on modification of debt

 

 
(302
)
 

Change in fair value of derivative instruments
(1,739
)
 
4,229

 
(21,335
)
 
27,353

Other
(82
)
 
(66
)
 
(234
)
 
(287
)
 
(42,338
)
 
(29,427
)
 
(140,807
)
 
(69,233
)
(Loss) income before income tax
(27,640
)
 
25,690

 
(13,457
)
 
232,623

Benefit (provision) for income tax
842

 
(623
)
 
(124
)
 
(26,324
)
Net (loss) income
(26,798
)
 
25,067

 
(13,581
)
 
206,299

Less: net (loss) income attributable to noncontrolling interests
(11,141
)
 
10,387

 
(5,401
)
 
57,704

Net (loss) income attributable to Red Rock Resorts, Inc.
$
(15,657
)
 
$
14,680

 
$
(8,180
)
 
$
148,595

 
 
 
 
 
 
 
 
(Loss) earnings per common share (Note 12):
 
 
 
 
 
 
 
(Loss) earnings per share of Class A common stock, basic
$
(0.22
)
 
$
0.21

 
$
(0.12
)
 
$
2.15

(Loss) earnings per share of Class A common stock, diluted
$
(0.22
)
 
$
0.20

 
$
(0.12
)
 
$
1.66

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
69,618

 
69,250

 
69,525

 
69,059

Diluted
69,618

 
117,074

 
69,525

 
117,006

 
 
 
 
 
 
 
 
Comprehensive (loss) income
$
(27,485
)
 
$
24,393

 
$
(15,744
)
 
$
204,415

Less: comprehensive (loss) income attributable to noncontrolling interests
(11,417
)
 
10,081

 
(6,271
)
 
56,839

Comprehensive (loss) income attributable to Red Rock Resorts, Inc.
$
(16,068
)
 
$
14,312

 
$
(9,473
)
 
$
147,576

The accompanying notes are an integral part of these condensed consolidated financial statements.

4




Table of Contents    


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands)
(unaudited)

 
Red Rock Resorts, Inc. Stockholders’ Equity
 
 
 
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comprehensive income (loss)
Noncontrolling interest
Total stockholders’ equity
Class A
 
Class B
Shares
 
Amount
Shares
 
Amount
Balances,
June 30, 2019
70,271

 
$
703

 
46,884

 
$
1

 
$
369,930

 
$
149,317

 
$
205

 
$
297,491

 
$
817,647

Net loss

 

 

 

 

 
(15,657
)
 

 
(11,141
)
 
(26,798
)
Other comprehensive loss, net of tax

 

 

 

 

 

 
(411
)
 
(276
)
 
(687
)
Share-based compensation

 

 

 

 
4,386

 

 

 

 
4,386

Distributions

 

 

 

 

 

 

 
(4,683
)
 
(4,683
)
Dividends

 

 

 

 

 
(7,025
)
 

 

 
(7,025
)
Issuance of restricted stock awards, net of forfeitures
(12
)
 

 

 

 

 

 

 

 

Exchanges of noncontrolling interests for Class A common stock
57

 

 
(57
)
 

 
368

 

 
1

 
(369
)
 

Recognition of tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock

 

 

 

 
(213
)
 

 

 

 
(213
)
Deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock

 

 

 

 
204

 

 

 

 
204

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco

 

 

 

 
(1,734
)
 

 

 
1,734

 

Balances,
September 30, 2019
70,316

 
$
703

 
46,827

 
$
1

 
$
372,941

 
$
126,635

 
$
(205
)
 
$
282,756

 
$
782,831

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5




Table of Contents    


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(amounts in thousands)
(unaudited)

 
Red Rock Resorts, Inc. Stockholders’ Equity
 
 
 
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comprehensive income
Noncontrolling interest
Total stockholders’ equity
Class A
 
Class B
Shares
 
Amount
Shares
 
Amount
Balances,
June 30, 2018
69,627

 
$
696

 
46,884

 
$
1

 
$
358,069

 
$
146,165

 
$
1,852

 
$
290,440

 
$
797,223

Net income

 

 

 

 

 
14,680

 

 
10,387

 
25,067

Other comprehensive loss, net of tax

 

 

 

 

 

 
(368
)
 
(306
)
 
(674
)
Share-based compensation

 

 

 

 
3,356

 

 

 

 
3,356

Distributions

 

 

 

 

 

 

 
(4,772
)
 
(4,772
)
Dividends

 

 

 

 

 
(6,967
)
 

 

 
(6,967
)
Stock option exercises
35

 
1

 

 

 
709

 

 

 

 
710

Deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock

 

 

 

 
(43
)
 

 

 

 
(43
)
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco

 

 

 

 
(1,476
)
 

 
5

 
1,471

 

Balances,
September 30, 2018
69,662

 
$
697

 
46,884

 
$
1

 
$
360,615

 
$
153,878

 
$
1,489

 
$
297,220

 
$
813,900

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

6




Table of Contents    


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(amounts in thousands)
(unaudited)

 
Red Rock Resorts, Inc. Stockholders’ Equity
 
 
 
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comprehensive income (loss)
Noncontrolling interest
Total stockholders’ equity
Class A
 
Class B
Shares
 
Amount
Shares
 
Amount
Balances,
December 31, 2018
69,663

 
$
697

 
46,884

 
$
1

 
$
361,970

 
$
155,869

 
$
1,083

 
$
297,375

 
$
816,995

Net loss

 

 

 

 

 
(8,180
)
 

 
(5,401
)
 
(13,581
)
Other comprehensive loss, net of tax

 

 

 

 

 

 
(1,293
)
 
(870
)
 
(2,163
)
Share-based compensation

 

 

 

 
12,814

 

 

 

 
12,814

Distributions

 

 

 

 

 

 

 
(14,060
)
 
(14,060
)
Dividends

 

 

 

 

 
(21,054
)
 

 

 
(21,054
)
Issuance of restricted stock awards, net of forfeitures
394

 
4

 

 

 
(4
)
 

 

 

 

Repurchases of Class A common stock
(14
)
 

 

 

 
(376
)
 

 

 

 
(376
)
Stock option exercises, net
216

 
2

 

 

 
4,263

 

 

 

 
4,265

Exchanges of noncontrolling interests for Class A common stock
57

 

 
(57
)
 

 
368

 

 
1

 
(369
)
 

Tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock

 

 

 

 
(213
)
 

 

 

 
(213
)
Deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock

 

 

 

 
204

 

 

 

 
204

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco

 

 

 

 
(6,085
)
 

 
4

 
6,081

 

Balances,
September 30, 2019
70,316

 
$
703

 
46,827

 
$
1

 
$
372,941

 
$
126,635

 
$
(205
)
 
$
282,756

 
$
782,831

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

7




Table of Contents    


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
(amounts in thousands)
(unaudited)

 
Red Rock Resorts, Inc. Stockholders’ Equity
 
 
 
 
Common stock
 
Additional paid-in capital
 
Retained earnings
 
Accumulated other comprehensive income
Noncontrolling interest
Total stockholders’ equity
Class A
 
Class B
Shares
 
Amount
Shares
 
Amount
Balances,
December 31, 2017
68,898

 
$
689

 
47,264

 
$
1

 
$
349,430

 
$
26,138

 
$
2,473

 
$
252,981

 
$
631,712

Net income

 

 

 

 

 
148,595

 

 
57,704

 
206,299

Other comprehensive loss, net of tax

 

 

 

 

 

 
(1,019
)
 
(865
)
 
(1,884
)
Share-based compensation

 

 

 

 
8,985

 

 

 

 
8,985

Distributions

 

 

 

 

 

 

 
(15,251
)
 
(15,251
)
Dividends

 

 

 

 

 
(20,855
)
 

 

 
(20,855
)
Issuance of restricted stock awards, net of forfeitures
137

 
1

 

 

 
(1
)
 

 

 

 

Repurchases of Class A common stock
(10
)
 

 

 

 
(307
)
 

 

 

 
(307
)
Stock option exercises
257

 
3

 

 

 
5,051

 

 

 

 
5,054

Exchanges of noncontrolling interests for Class A common stock
380

 
4

 
(380
)
 

 
2,149

 

 
21

 
(2,174
)
 

Tax receivable agreement liability resulting from exchanges of noncontrolling interests for Class A common stock

 

 

 

 
(2,528
)
 

 

 

 
(2,528
)
Deferred tax assets resulting from exchanges of noncontrolling interests for Class A common stock

 

 

 

 
2,675

 

 

 

 
2,675

Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco

 

 

 

 
(4,839
)
 

 
14

 
4,825

 

Balances,
September 30, 2018
69,662

 
$
697

 
46,884

 
$
1

 
$
360,615

 
$
153,878

 
$
1,489

 
$
297,220

 
$
813,900

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

8




Table of Contents    


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(13,581
)
 
$
206,299

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
164,613

 
133,391

Change in fair value of derivative instruments
21,335

 
(27,353
)
Reclassification of unrealized gain on derivative instruments into income
(2,163
)
 
(2,156
)
Write-downs and other charges, net
4,011

 
885

Tax receivable agreement liability adjustment
(97
)
 
(90,375
)
Amortization of debt discount and debt issuance costs
12,230

 
12,083

Share-based compensation
12,849

 
8,872

Earnings from joint ventures
(1,481
)
 
(1,606
)
Distributions from joint ventures
1,286

 
1,344

Loss on modification of debt
302

 

Deferred income tax
124

 
26,324

Changes in assets and liabilities:
 
 
 
Receivables, net
(2,918
)
 
(3,204
)
Inventories and prepaid expenses
(1,308
)
 
(17,805
)
Accounts payable
5,889

 
6,758

Accrued interest payable
6,895

 
4,255

Other accrued liabilities
7,800

 
8,766

Other, net
863

 
(5,495
)
Net cash provided by operating activities
216,649

 
260,983

Cash flows from investing activities:
 
 
 
Capital expenditures, net of related payables
(324,435
)
 
(407,612
)
Acquisition of land held for development
(57,354
)
 

Proceeds from asset sales
669

 
4,692

Distributions in excess of earnings from joint ventures
298

 
1,136

Native American development costs
(741
)
 
(443
)
Net settlement of derivative instruments
10,305

 
6,766

Other, net
(5,500
)
 
(8,928
)
Net cash used in investing activities
(376,758
)
 
(404,389
)
 
 
 
 

9




Table of Contents    


RED ROCK RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(amounts in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from financing activities:
 
 
 
Borrowings under credit agreements with original maturity dates greater than
three months
570,000

 
165,000

Payments under credit agreements with original maturity dates greater than three months
(382,247
)
 
(79,631
)
Proceeds from exercise of stock options
4,265

 
5,054

Distributions to noncontrolling interests
(14,060
)
 
(15,251
)
Dividends paid
(20,930
)
 
(20,770
)
Payment of debt issuance costs
(3,307
)
 

Payments on other debt
(689
)
 
(1,756
)
Payments on tax receivable agreement liability

 
(28,865
)
Other, net
(676
)
 
(921
)
Net cash provided by financing activities
152,356

 
22,860

Decrease in cash, cash equivalents and restricted cash
(7,753
)
 
(120,546
)
Balance, beginning of period
118,258

 
234,744

Balance, end of period
$
110,505

 
$
114,198

Cash, cash equivalents and restricted cash:
 
 
 
Cash and cash equivalents
$
106,444

 
$
110,585

Restricted cash
4,061

 
3,613

Balance, end of period
$
110,505

 
$
114,198

Supplemental cash flow disclosures:
 
 
 
Cash paid for interest, net of $2,777 and $5,949 capitalized, respectively
$
102,005

 
$
82,746

Cash paid for income taxes, net of refunds received
$
(65
)
 
$
(176
)
Non-cash investing and financing activities:
 
 
 
Capital expenditures incurred but not yet paid
$
27,145

 
$
108,939

The accompanying notes are an integral part of these condensed consolidated financial statements.

10




Table of Contents    


RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.    Organization, Basis of Presentation and Significant Accounting Policies
Organization
Red Rock Resorts, Inc. (“Red Rock,” or the “Company”) was formed as a Delaware corporation in September 2015 to own an indirect equity interest in, and manage, Station Casinos LLC, a Nevada limited liability company (“Station LLC”). Station LLC is a gaming, development and management company that owns and operates ten major gaming and entertainment facilities and ten smaller casino properties (three of which are 50% owned) in the Las Vegas regional market. Station LLC also manages Graton Resort in Sonoma County, California on behalf of a Native American tribe. The Company owns all of the outstanding voting interests in Station LLC and has an indirect interest in Station LLC through its ownership interest in Station Holdco LLC (“Station Holdco”), which owns all of the economic interests in Station LLC. In May 2016, the Company completed an initial public offering (“IPO”) and used the proceeds to purchase newly issued limited liability company interests in Station Holdco (“LLC Units”) and outstanding LLC Units from existing members of Station Holdco.
At September 30, 2019, the Company held 60% of the economic interests in Station Holdco, as well as 100% of the voting interest in Station LLC and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and is the designated sole managing member of both Station Holdco and Station LLC. The Company controls and operates all of the business and affairs of Station Holdco and Station LLC, and conducts all of its operations through these entities. The Company is subject to federal income taxes and California state income taxes.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods have been made, and such adjustments were of a normal recurring nature. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Certain amounts in the condensed consolidated financial statements for the prior year have been reclassified to be consistent with the current year presentation.
Principles of Consolidation
Station Holdco and Station LLC are variable interest entities (“VIEs”), of which the Company is the primary beneficiary. Accordingly, the Company consolidates the financial position and results of operations of Station LLC and its consolidated subsidiaries and Station Holdco, and presents the interest in Station Holdco not owned by Red Rock within noncontrolling interest in the condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated.
The Company has investments in three 50% owned smaller casino properties which are joint ventures accounted for using the equity method.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported and disclosed. Actual results could differ from those estimates.
Significant Accounting Policies
A description of the Company’s significant accounting policies is included in the audited financial statements within its Annual Report on Form 10-K for the year ended December 31, 2018.
The Company updated its lease accounting policies as described in Note 13 in conjunction with the adoption of the new lease accounting standard.

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RED ROCK RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)

Recently Issued and Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued amended accounting guidance for measurement of credit losses on financial instruments. The amended accounting guidance replaces the incurred loss impairment model with a forward-looking expected loss model, and is applicable to most financial assets, including trade receivables other than those arising from operating leases. The amended guidance is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted for interim and annual periods beginning after December 15, 2018. A modified retrospective transition method with a cumulative-effect adjustment to retained earnings is required to be applied at the date of adoption. The Company will adopt this guidance in the first quarter of 2020 and does not expect the adoption to have a material impact on its financial position or results of operations.
In February 2016, the FASB issued a new accounting standard that changes the accounting for leases and requires expanded disclosures about leasing activities. Under the new standard, lessees are required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for leases with terms greater than twelve months. Lessor accounting will remain largely unchanged, other than certain targeted improvements intended to align lessor accounting with the lessee accounting model and with revenue recognition guidance.
The Company adopted the new lease accounting standard on January 1, 2019 using the modified retrospective transition method and elected not to retrospectively adjust its results of operations or balance sheets for comparative periods presented. The Company elected to use the package of practical expedients in its transition and accordingly, did not reassess its prior conclusions about lease identification, lease classification and initial direct costs. In addition, the Company elected not to apply the use-of-hindsight practical expedient. For leases under which the Company is the lessor, the Company elected not to separate non-lease components from lease components. Upon adoption, the Company recognized operating lease right-of-use assets and operating lease liabilities of $17.3 million. In addition, prepaid rent, deferred rent and off-market lease liability balances related to operating leases at December 31, 2018 were reclassified to right-of-use assets upon adoption. The Company recognized no cumulative-effect adjustment to retained earnings upon adoption of the new standard, and the adoption did not have a material impact on the Company’s statements of income or cash flows. See Note 13 for additional information.     
2.    Noncontrolling Interest in Station Holdco
As discussed in Note 1, Red Rock holds a controlling interest in and consolidates the financial position and results of operations of Station LLC and its subsidiaries and Station Holdco, and the interests in Station Holdco not owned by Red Rock are presented within noncontrolling interest in the condensed consolidated financial statements. During the three and nine months ended September 30, 2019, approximately 0.1 million LLC Units, together with an equal number of Class B common shares held by noncontrolling interest holders, were exchanged for Class A common shares, which increased Red Rock’s ownership interest in Station Holdco. During the nine months ended September 30, 2018, approximately 0.4 million LLC Units and Class B common shares were exchanged for Class A common shares.