0001747079-19-000067.txt : 20190812 0001747079-19-000067.hdr.sgml : 20190812 20190812160059 ACCESSION NUMBER: 0001747079-19-000067 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 83 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190812 DATE AS OF CHANGE: 20190812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Twin River Worldwide Holdings, Inc. CENTRAL INDEX KEY: 0001747079 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 200904604 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38850 FILM NUMBER: 191016434 BUSINESS ADDRESS: STREET 1: 100 TWIN RIVER ROAD CITY: LINCOLN STATE: RI ZIP: 02865 BUSINESS PHONE: (401) 475-8474 MAIL ADDRESS: STREET 1: 100 TWIN RIVER ROAD CITY: LINCOLN STATE: RI ZIP: 02865 10-Q 1 trwh-2019630x10q.htm 10-Q Document
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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 June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38850
trwhblueout.jpg
Twin River Worldwide Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware
20-0904604
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
100 Westminster Street
Providence,
RI
02903
(Address of principal executive offices)
(Zip Code)
(401) 475-8474
(Registrant’s telephone number, including area code)
(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
Common stock, $0.01 par value
TRWH
New York Stock Exchange
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 an 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  
As of August 7, 2019 there were 38,607,688 shares of the registrant’s common stock outstanding.
 




TWIN RIVER WORLDWIDE HOLDINGS, INC.

TABLE OF CONTENTS
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



PART I.
FINANCIAL INFORMATION
ITEM 1.     Financial Statements

TWIN RIVER WORLDWIDE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except share data)
 
June 30,
2019
 
December 31,
2018
Assets
 

 
 

Cash and cash equivalents
$
383,431

 
$
77,580

Restricted cash
7,455

 
3,851

Accounts receivable, net
27,874

 
22,966

Inventory
7,689

 
6,418

Prepaid expenses and other assets
17,690

 
11,647

Total current assets
444,139

 
122,462

Property and equipment, net
515,525

 
416,148

Right of use assets, net
17,717

 

Goodwill
132,746

 
132,035

Intangible assets, net
113,268

 
110,104

Other assets
6,069

 
1,603

Total assets
$
1,229,464

 
$
782,352

Liabilities and Shareholders’ Equity
 
 
 
Current portion of long-term debt
$
3,000

 
$
3,595

Current portion of lease obligations
1,000

 

Accounts payable
18,827

 
14,215

Accrued liabilities
76,696

 
57,778

Total current liabilities
99,523

 
75,588

Lease obligations, net of current portion
16,719

 

Pension benefit obligations
6,407

 

Deferred tax liability
5,647

 
17,526

Long-term debt, net of current portion
681,576

 
390,578

Other long-term liabilities
2,149

 

Total liabilities
812,021

 
483,692

Commitments and contingencies


 


Shareholders’ equity:
 
 
 
Common stock, par value $0.01; 100,000,000 shares authorized; 41,163,937 and 39,421,356 shares issued as of June 30, 2019 and December 31, 2018, respectively; 41,147,597 and 37,989,376 shares outstanding as of June 30, 2019 and December 31, 2018, respectively, net of treasury stock.
411

 
380

Additional paid in capital
183,925

 
125,629

Treasury stock, at cost, 16,340 and 1,431,980 shares as of June 30, 2019 and December 31, 2018, respectively.
(409
)
 
(30,233
)
Retained earnings
233,516

 
202,884

Total shareholders’ equity
417,443

 
298,660

Total liabilities and shareholders’ equity
$
1,229,464

 
$
782,352

See accompanying notes to condensed consolidated financial statements.

3



TWIN RIVER WORLDWIDE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)
(In thousands, except per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue:
 

 
 

 
 

 
 
Gaming
$
100,234

 
$
82,266

 
$
191,102

 
$
161,848

Racing
3,783

 
3,870

 
6,723

 
7,154

Hotel
11,390

 
5,486

 
17,695

 
9,940

Food and beverage
18,801

 
12,298

 
32,312

 
23,786

Other
9,010

 
6,895

 
16,017

 
12,893

Total Revenue
143,218

 
110,815

 
263,849

 
215,621

 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
Gaming
26,078

 
17,027

 
47,154

 
33,754

Racing
2,833

 
2,545

 
5,024

 
4,724

Hotel
4,183

 
2,056

 
6,897

 
3,816

Food and beverage
15,634

 
9,696

 
26,741

 
18,668

Retail, entertainment and other
2,125

 
1,454

 
3,451

 
2,584

Advertising, general and administrative
48,047

 
40,363

 
86,310

 
78,393

Expansion and pre-opening

 
451

 

 
485

Acquisition, integration and restructuring expense
2,239

 
664

 
9,117

 
664

Newport Grand disposal loss

 

 

 
5,885

Depreciation and amortization
8,233

 
5,135

 
15,002

 
10,347

Total operating costs and expenses
109,372

 
79,391

 
199,696

 
159,320

Income from operations
33,846

 
31,424

 
64,153

 
56,301

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Interest income
754

 
38

 
767

 
78

Interest expense, net of amounts capitalized
(9,966
)
 
(5,106
)
 
(17,017
)
 
(10,845
)
Loss on extinguishment and modification of debt
(1,491
)
 

 
(1,491
)
 

Other, net
182

 

 
182

 

Total other expense, net
(10,521
)
 
(5,068
)
 
(17,559
)
 
(10,767
)
 
 
 
 
 
 
 
 
Income before provision for income taxes
23,325

 
26,356

 
46,594

 
45,534

 
 
 
 
 
 
 
 
Provision for income taxes
6,145

 
6,056

 
11,818

 
12,600

Net income
$
17,180

 
$
20,300

 
$
34,776

 
$
32,934

Deemed dividends related to changes in fair value of common stock subject to possible redemption

 
(1,305
)
 

 
(2,610
)
Net income applicable to common stockholders
$
17,180

 
$
18,995

 
$
34,776

 
$
30,324

 
 
 
 
 
 
 
 
Net income per share, basic
$
0.42

 
$
0.51

 
$
0.88

 
$
0.82

Weighted average common shares outstanding, basic
41,137

 
36,925

 
39,701

 
36,874

Net income per share, diluted
$
0.42

 
$
0.49

 
$
0.87

 
$
0.79

Weighted average common shares outstanding, diluted
41,261

 
38,541

 
39,822

 
38,572

Note: Net income equals comprehensive income for all the periods presented.
See accompanying notes to condensed consolidated financial statements.

4



TWIN RIVER WORLDWIDE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited)
(In thousands, except share data)

 
Common Stock
 
Additional
Paid-in Capital
 
Treasury
Stock
 
Retained
Earnings
 
Total Shareholders’
Equity
 
Shares
 
Amount
 
 
 
 
Balance as of December 31, 2018
37,989,376

 
$
380

 
$
125,629

 
$
(30,233
)
 
$
202,884

 
$
298,660

Release of restricted stock
161,980

 
1

 

 

 

 
1

Share-based compensation - equity awards

 

 
151

 

 

 
151

Retirement of treasury shares

 

 
(30,233
)
 
30,233

 

 

Share repurchases
(16,340
)
 

 

 
(409
)
 

 
(409
)
Stock issued for purchase of Dover Downs
2,976,825

 
30

 
86,750

 

 

 
86,780

Net income

 

 

 

 
17,596

 
17,596

Balance as of March 31, 2019
41,111,841

 
$
411

 
$
182,297

 
$
(409
)
 
$
220,480

 
$
402,779

Release of restricted stock
35,756

 

 

 

 

 

Dividends - $0.10 per share

 

 

 

 
(4,144
)
 
(4,144
)
Share-based compensation - equity awards

 

 
1,628

 

 

 
1,628

Net income

 

 

 

 
17,180

 
17,180

Balance as of June 30, 2019
41,147,597

 
411

 
183,925

 
(409
)
 
233,516

 
417,443



 
Common Stock
 
Additional
Paid-in Capital
 
Treasury
Stock
 
Retained
Earnings
 
Total Shareholders’
Equity
 
Shares
 
Amount
 
 
 
 
Balance as of December 31, 2017
36,199,704

 
$
362

 
$
67,910

 
$
(22,275
)
 
$
130,806

 
$
176,803

Stock options exercised via repayment of non-recourse notes
368,000

 
4

 
9,016

 

 

 
9,020

Share-based compensation - equity awards

 

 
506

 

 

 
506

Release of restricted stock
25,136

 

 

 

 

 

Common stock subject to possible redemption
(25,136
)
 

 
(685
)
 

 

 
(685
)
Deemed dividends related to changes in fair value of common stock subject to possible redemption

 

 

 

 
(1,305
)
 
(1,305
)
Net income

 

 

 

 
12,634

 
12,634

Balance as of March 31, 2018
36,567,704

 
$
366

 
$
76,747

 
$
(22,275
)
 
$
142,135

 
$
196,973

Share-based compensation - equity awards

 

 
504

 

 

 
504

Deemed dividend related to changes in fair value of common stock subject to possible redemption

 

 

 

 
(1,305
)
 
(1,305
)
Net income

 

 

 

 
20,300

 
20,300

Balance as of June 30, 2018
36,567,704

 
366

 
77,251

 
(22,275
)
 
161,130

 
216,472


See accompanying notes to condensed consolidated financial statements.


5



TWIN RIVER WORLDWIDE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
 
Six Months Ended June 30,
 
2019
 
2018
Cash flows from operating activities:
 

 
 

Net income
$
34,776

 
$
32,934

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation of property and equipment
12,113

 
7,609

Amortization of intangible assets
2,889

 
2,738

Amortization of operating lease right of use assets
722

 

Share-based compensation - liability awards

 
10,038

Share-based compensation - equity awards
1,779

 
1,010

Amortization of deferred financing costs and discounts on debt
1,428

 
1,847

Loss on debt extinguishment and modification of debt
1,491

 

Bad debt expense
58

 
116

Net pension and other postretirement benefit income
(39
)
 

Newport Grand disposal loss

 
5,885

Gain on disposal of property and equipment
(8
)
 

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
708

 
(3,233
)
Inventory
122

 
807

Prepaid expenses and other assets
(944
)
 
1,158

Accounts payable
(300
)
 
(6,399
)
Accrued liabilities
1,871

 
925

Net cash provided by operating activities
56,666

 
55,435

Cash flows from investing activities:
 
 
 
Repayment of loans from officers and directors

 
1,073

Acquisition of Dover Downs Gaming & Entertainment, Inc., net of cash acquired
(9,606
)
 

Proceeds from sale of land and building for Newport Grand disposal

 
7,108

Proceeds from sale of property and equipment
7

 
5

Capital expenditures, excluding Tiverton Casino Hotel and new hotel at Twin River Casino
(13,114
)
 
(5,607
)
Capital expenditures - Tiverton Casino Hotel
(1,824
)
 
(58,740
)
Capital expenditures - new hotel at Twin River Casino
(3,741
)
 
(14,101
)
Payments associated with gaming license
(942
)
 
(155
)
Net cash used in investing activities
(29,220
)
 
(70,417
)
Cash flows from financing activities:
 
 
 
Revolver borrowings
25,000

 
26,000

Revolver repayments
(80,000
)
 

Term loan proceeds, net of fees of $10,655
289,345

 

Term loan repayments
(342,439
)
 
(32,127
)
Senior note proceeds, net of fees of $6,130
393,870

 

Payment of financing fees
(3,358
)
 

Stock repurchases
(409
)
 

Stock options exercised via repayment of non-recourse notes

 
890

Net cash provided by (used in) financing activities
282,009

 
(5,237
)
 
 
 
 
Net change in cash and cash equivalents and restricted cash
309,455

 
(20,219
)
Cash and cash equivalents and restricted cash, beginning of period
81,431

 
93,216

Cash and cash equivalents and restricted cash, end of period
$
390,886

 
$
72,997

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
10,960

 
$
11,046

Cash paid for income taxes
$
8,794

 
$
10,226

 
 
 
 
Non-cash investing and financing activities:
 
 
 
Unpaid property and equipment
$
614

 
$
18,161

Deposit applied to fixed asset purchases
$
981

 
$

Deemed dividends related to changes in fair value of common stock subject to possible redemption
$

 
$
2,610

Intrinsic value of stock options exercised via repayment of non-recourse notes
$

 
$
8,131

Termination of operating leases via purchase of underlying assets
$
1,665

 
$

Stock issued for acquisition of Dover Downs Gaming & Entertainment, Inc.
$
86,780

 
$

See accompanying notes to condensed consolidated financial statements.

6

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



1.    SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Twin River Worldwide Holdings, Inc. (the “Company”, “TRWH”) is a diverse, multi-jurisdictional owner and operator of gaming and racing facilities, including slot machines and various casino table games. The Company, through its wholly owned subsidiary Twin River Management Group, Inc. (“TRMG”), owns and manages the Twin River Casino Hotel (“Twin River Casino Hotel”) in Lincoln, Rhode Island, the Tiverton Casino Hotel (“Tiverton Casino Hotel”) in Tiverton, Rhode Island, the Hard Rock Hotel & Casino (“Hard Rock Biloxi”) in Biloxi, Mississippi, the Dover Downs Hotel & Casino (“Dover Downs Casino Hotel”) in Dover, Delaware, and the Arapahoe Park racetrack and Havana Park off-track betting (“Mile High USA”) in Aurora, Colorado. Following the closure of the Newport Grand Casino (“Newport Grand”) in August 2018, we opened the Tiverton Casino Hotel on September 1, 2018. On March 28, 2019, we completed our acquisition of Dover Downs Gaming & Entertainment, Inc., which consisted of Dover Downs Casino Hotel, collectively (“Dover Downs”). On January 29, 2019, the Company entered into an agreement to acquire the operations and real estate of three casino properties in Black Hawk, Colorado and on July 10, 2019 the Company entered into an agreement to acquire the operations and real estate of Isle of Capri Casino Kansas City in Kansas City, Missouri and Lady Luck Casino Vicksburg in Vicksburg, Mississippi. See Note 4. “Acquisitions” for further information.
On March 29, 2019, the Company’s common stock was listed on the New York Stock Exchange and began trading under the ticker symbol “TRWH.”
Principles of Consolidation
The accompanying condensed consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiary TRMG and its subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information, including the instructions to Form 10-Q and Rule 10-01 of the SEC’s Regulation S-X. Accordingly, certain information and note disclosures normally required in complete financial statements prepared in conformity with accounting principles generally accepted in the United States have been condensed or omitted. In the Company’s opinion, these condensed consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. However, the results of operations for interim periods may not be indicative of the results that may be expected for a full year or any future period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Except as described below and in the Notes to the condensed consolidated financial statements, there were no material changes in significant accounting policies from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Stock Dividend
On January 18, 2019, the Board of Directors of the Company approved a common stock dividend, accounted for as a stock split. The stock split was effected through a stock dividend of three shares for each share outstanding as of the approval date. The effect of this dividend has been retroactively applied to the condensed consolidated financial statements as of and for the period ended December 31, 2018 and resulted in an increase to the number of shares of common stock outstanding as of December 31, 2018 from 9,855,339 to 39,421,356. All share and per share information included in the condensed consolidated financial statements has been retroactively adjusted to reflect the impact of the stock dividend. The shares of common stock authorized remained at 100 million, and the shares retained a par value per share of $0.01.
Capital Return Program and Quarterly Cash Dividend
On June 14, 2019, the Company announced that its Board of Directors approved a capital return program under which the Company may expend a total of up to $250 million for a stock repurchase program and payment of dividends. In connection with this announcement, the Company declared a cash dividend of $0.10 per common share payable on July 23, 2019 to shareholders of record as of July 9, 2019. On July 26, 2019, the Company completed a modified Dutch auction tender offer. Refer to Note 13. “Subsequent Events” for more information.

7

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


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 equivalents.
As of June 30, 2019 and December 31, 2018, restricted cash of $7.5 million and $3.9 million, respectively, was comprised of video lottery terminal (“VLT”) and table games cash payable to the State of Rhode Island which is 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)
2019
 
2018
Cash and cash equivalents
$
383,431

 
$
77,580

Restricted cash
7,455

 
3,851

Total cash and cash equivalents and restricted cash
$
390,886

 
$
81,431


Treasury Stock
The Company records the repurchase of shares of common stock at cost based on the settlement date of the transaction. These shares are classified as treasury stock, which is a reduction to shareholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares. The Company retired 1,431,980 shares of its common stock held in treasury during the three months ended March 31, 2019. The shares were returned to the status of authorized but unissued. The Company repurchased 16,340 shares of its common stock at an aggregate cost of $0.4 million during the three months ended March 31, 2019. There were no shares retired or repurchased during the second quarter of 2019.
Fair Value Measurements
Fair value is determined using the principles of Financial Accounting Standards Board (“FASB”) Codification Topic 820, Fair Value Measurement (“ASC 820”). Fair value is described as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes and defines the inputs to valuation techniques as follows:
Level 1: Observable quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs are observable for the asset or liability either directly or through corroboration with observable market data.
Level 3: Unobservable inputs.
The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates fair value due to the short-term nature of these instruments.
The carrying value of the Company’s term loans and revolving credit facilities, including the current portion, approximate fair value as the terms and conditions of these loans are consistent with comparable market debt issuances. These measurements fall within Level 2 of the fair value hierarchy.
The inputs used to measure the fair value of an asset or a liability are categorized within levels of the fair value hierarchy. The fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the measurement. There were no transfers made among the three levels in the fair value hierarchy for the three months ended June 30, 2019.


8

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Leases
Effective January 1, 2019, the Company accounts for its leases under FASB Codification Topic 842, Leases (“ASC 842”). Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the condensed consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Discount rates used to determine the present value of the lease payments are based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.
In calculating the right of use asset and lease liability, the Company accounts for both the lease component and the non-lease component as a single component for all classes of underlying assets. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.
The Company also has leasing arrangements with third-party lessees at its properties. Leasing arrangements for which the Company acts as a lessor are not deemed to be material as of June 30, 2019.
The Company continues to account for leases in the prior period financial statements under ASC Topic 840. See Note 9. “Leases” for further discussion.

Change in Accounting Principle

In the second quarter of 2019, the Company changed its accounting principle for reporting share-based compensation expense in the condensed consolidated statements of operations per FASB Codification Topic 718, Compensation - Stock Compensation (“ASC 718”). The new principle will be to record compensation expense for share-based compensation awards which contain only a service condition, i.e. time-based awards, using the straight-line method of accounting recognizing compensation expense over the requisite service period and treating all tranches as one award. The Company previously recorded share-based compensation expense for awards with graded vesting over the requisite service period on an accelerated basis, as if each tranche were a separate award. The straight-line method of accounting was adopted to better align the Company’s recognition of share-based compensation expense with its peers and to expense restricted stock units in a consistent manner that is representative of the requisite service period. This change in accounting principle was retrospectively applied but had an immaterial effect on the condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statements of shareholders’ equity, and condensed consolidated statements of cash flows. As a result of this change in accounting principle, share-based compensation expense was reduced by $0.2 million and $0.1 million for the three and six months ended June 30, 2019, respectively. Net income for each of the three and six month periods ended June 30, 2019 increased by approximately $0.1 million with an immaterial impact to diluted earnings per share amounts.

2.    RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous United States Generally Accepted Accounting Principles (“US GAAP”). For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods, which for the Company was the first quarter of 2019) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. The Company adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented, and elected the entire package of practical expedients described above. Based on the analysis, on

9

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


January 1, 2019, the Company recorded right of use assets and a corresponding lease liability of approximately $18.8 million. There was no impact to opening retained earnings.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which changes the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness and presenting all items that affect earnings in the same income statement line item as the hedged item. The ASU also provides new alternatives for applying hedge accounting to additional hedging strategies, measuring the hedged item in fair value hedges of interest rate risk, reducing the cost and complexity of applying hedge accounting by easing the requirements for effectiveness testing, hedge documentation and application of the critical terms match method and reducing the risk of a material error correction if a company applies the shortcut method inappropriately. This ASU is effective for public companies in fiscal years beginning after December 15, 2018, which for the Company was the first quarter of 2019. The Company adopted the guidance in this ASU in the first quarter of 2019, with no impact to its condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments. This standard amends several aspects of the measurement of credit losses on financial instruments, including trade receivables. The standard replaces the existing incurred credit loss model with the Current Expected Credit Losses (“CECL”) model and amends certain aspects of accounting for purchased financial assets with deterioration in credit quality since origination. Under CECL, the allowance for losses for financial assets that are measured at amortized cost reflects management’s estimate of credit losses over the remaining expected life of the financial assets, based on historical experience, current conditions and forecasts that affect the collectability of the reported amount. The standard is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted for annual and interim periods beginning after December 15, 2018. Adoption is through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (a modified-retrospective approach). The Company anticipates adopting this standard in the first quarter of 2020. The impact of adoption on the Company’s consolidated financial statements will depend on, among other things, the economic environment and the type of financial assets held on the date of adoption.

In August 2018, the FASB issued ASU No 2018-14, Compensation –Retirement Benefits – Defined Benefit Plans – General. This amendment improves disclosures over defined benefit plans and is effective for interim and annual periods ending after December 15, 2020 with early adoption allowed. The Company anticipates adopting this amendment during the first quarter of 2021 and does not expect it to have a significant impact on the condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820),—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company anticipates adopting this amendment in the first quarter of 2020, and does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

3.    REVENUE RECOGNITION
The Company accounts for revenue earned from contracts with customers under ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The Company generates revenue from five principal sources: gaming services, hotel, racing, food and beverage and other.
Gaming revenue includes Twin River Casino Hotel’s, Tiverton Casino Hotel’s (upon its opening on September 1, 2018) and Newport Grand’s (until its closing on August 28, 2018) share of VLT revenue as determined by their respective master VLT contracts with the State of Rhode Island. Twin River Casino Hotel is entitled to a 28.85% share of VLT revenue on the initial 3,002 units and a 26.00% share of VLT revenue generated from units in excess of 3,002 units. Tiverton Casino Hotel is (and Newport Grand was) entitled to receive a percentage of VLT revenue that is equivalent to the percentage received by Twin River Casino Hotel. Gaming revenue also includes Twin River Casino Hotel’s and Tiverton Casino Hotel’s share of table games revenue. Twin River Casino Hotel and Tiverton Casino Hotel were, as of June 30, 2019, entitled to an 83.5% share of table games revenue. Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Rhode Island operations on a net basis which is the percentage share of VLT and table games revenue received as the Company acts as an agent in operating the gaming service on behalf of the State of Rhode Island.

10

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Gaming revenue includes Dover Downs’ share of revenue as determined under the Delaware State Lottery Code from the date of its acquisition. Dover Downs is authorized to conduct video lottery, sports wagering, table game and internet gaming operations as one of three “Licensed Agents” under the Delaware State Lottery Code. Licensing, administration and control of gaming operations in Delaware is under the Delaware State Lottery Office and Delaware’s Department of Safety and Homeland Security, Division of Gaming Enforcement. As of June 30, 2019, Dover Downs was entitled to an approximately 42% share of VLT revenue and an 80% share of table games revenue. Revenue is recognized when the wager is complete, which is when the customer has received the benefits of the Company’s gaming services and the Company has a present right to payment. The Company records revenue from its Delaware operations on a net basis which is the percentage share of VLT and table games revenue received as the Company acts as an agent in operating the gaming service on behalf of the State of Delaware.
Gaming revenue also includes Hard Rock Biloxi’s casino revenue, which is the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs, for chips outstanding and “ticket-in, ticket-out” coupons in the customers’ possession, and for accruals related to the anticipated payout of progressive jackpots. Progressive slot machines, which contain base jackpots that increase at a progressive rate based on the number of credits played, are charged to revenue as the amount of the progressive jackpots increase.
Gaming services contracts have two performance obligations for those customers earning incentives under the Company’s player loyalty programs and a single performance obligation for customers who do not participate in the programs. The Company applies a practical expedient by accounting for its gaming contracts on a portfolio basis as such wagers have similar characteristics and the Company reasonably expects the effects on the condensed consolidated financial statements of applying the revenue recognition guidance to the portfolio to not differ materially from that which would result if applying the guidance to an individual wagering contract. For purposes of allocating the transaction price in a wagering contract between the wagering performance obligation and the obligation associated with incentives earned under loyalty programs, the Company allocates an amount to the loyalty program contract liability based on the stand-alone selling price of the incentives earned for a hotel room stay, food and beverage or other amenities. The performance obligations for the incentives earned under the loyalty programs are deferred and recognized as revenue when the customer redeems the incentive. When redeemed, revenue is recognized in the department that provides the goods or service. After allocating revenue to other goods and services provided as part of casino wager contracts, the Company records the residual amount to gaming revenue as the stand-alone price for wagers is highly variable and no set established price exists for such wagers. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately.
The estimated retail value related to goods and services provided to guests without charge or upon redemption under the Company’s player loyalty programs included in departmental revenues, and therefore reducing gaming revenues, are as follows for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Hotel
$
5,376

 
$
2,792

 
$
8,934

 
$
5,325

Food and beverage
7,758

 
5,994

 
13,548

 
11,557

Other
1,783

 
1,516

 
3,161

 
2,578

 
$
14,917

 
$
10,302

 
$
25,643

 
$
19,460


Racing revenue includes Twin River Casino Hotel’s, Tiverton Casino Hotel’s (upon its opening on September 1, 2018), Newport Grand’s (until its closing on August 28, 2018), Mile High USA’s and Dover Downs’ share of wagering from live racing and the import of simulcast signals. Racing revenue is recognized when the wager is complete based on an established take-out percentage. The Company functions as an agent to the pari-mutuel pool. Therefore, fees and obligations related to the Company’s share of purse funding, simulcasting fees, tote fees, pari-mutuel taxes, and other fees directly related to the Company’s racing operations are reported on a net basis and included as a deduction to racing revenue.
Hotel revenue is recognized at the time of occupancy, which is when the customer obtains control through occupancy of the room. Advance deposits for hotel rooms are recorded as liabilities until revenue recognition criteria are met.
Food and beverage revenue are recognized at the time the goods are sold from Company-operated outlets.
All other revenues are recognized at the time the goods are sold or the service is provided.
Sales tax and other taxes collected on behalf of governmental authorities are accounted for on a net basis and are not included in revenue or operating expenses.

11

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The following tables provide a disaggregation of revenue by segment:
(in thousands)
Rhode Island
 
Delaware
 
Biloxi
 
Other
 
Total
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
Gaming
$
65,572

 
$
13,906

 
$
20,756

 
$

 
$
100,234

Racing
1,155

 
252

 

 
2,376

 
3,783

Hotel
1,694

 
4,192

 
5,504

 

 
11,390

Food and beverage
8,308

 
6,339

 
4,152

 
2

 
18,801

Other
6,127

 
1,062

 
1,706

 
115

 
9,010

Total revenue
$
82,856

 
$
25,751

 
$
32,118

 
$
2,493

 
$
143,218

 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
Gaming
$
61,915

 
n/a

 
$
20,351

 
$

 
$
82,266

Racing
1,111

 
n/a

 

 
2,759

 
3,870

Hotel

 
n/a

 
5,486

 

 
5,486

Food and beverage
7,381

 
n/a

 
4,917

 

 
12,298

Other
5,528

 
n/a

 
1,262

 
105

 
6,895

Total revenue
$
75,935

 
n/a

 
$
32,016

 
$
2,864

 
$
110,815


Six Months Ended June 30, 2019
Rhode Island
 
Delaware
 
Biloxi
 
Other
 
Total
Gaming
$
134,412

 
$
14,875

 
$
41,815

 
$

 
$
191,102

Racing
2,146

 
279

 

 
4,298

 
6,723

Hotel
3,235

 
4,336

 
10,124

 

 
17,695

Food and beverage
17,400

 
6,689

 
8,221

 
2

 
32,312

Other
11,787

 
1,096

 
2,989

 
145

 
16,017

Total revenue
$
168,980

 
$
27,275

 
$
63,149

 
$
4,445

 
$
263,849

 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
Gaming
$
121,358

 
n/a

 
$
40,490

 
$

 
$
161,848

Racing
1,983

 
n/a

 

 
5,171

 
7,154

Hotel

 
n/a

 
9,940

 

 
9,940

Food and beverage
14,671

 
n/a

 
9,114

 
1

 
23,786

Other
10,296

 
n/a

 
2,480

 
117

 
12,893

Total revenue
$
148,308

 
n/a

 
$
62,024

 
$
5,289

 
$
215,621


Revenue included in operations from Dover Downs from the date of acquisition, March 28, 2019, through June 30, 2019 is reported in the “Delaware” segment. Refer to Note 4. “Acquisitions” for further information.
The Company’s receivables related to contracts with customers are primarily comprised of marker balances and other amounts due from gaming activities, amounts due for hotel stays, and amounts due from tracks and off track betting (“OTB”) locations. The Company’s receivables related to contracts with customers were $16.5 million and $13.3 million as of June 30, 2019 and December 31, 2018, respectively. The Company has the following liabilities related to contracts with customers: liabilities for loyalty programs, deposits made in advance for goods and services yet to be provided, and unpaid wagers. All of the contract liabilities are short term in nature. Loyalty program incentives earned by customers are typically redeemed within one year from when they are earned and expire if a customer’s account is inactive for more than twelve months; therefore, the majority of these incentives outstanding at the end of a period will either be redeemed or expire within the next twelve months. The Company’s contract liabilities related to loyalty programs were $12.0 million, and $9.5 million as of June 30, 2019 and December 31, 2018, respectively, and are included as accrued liabilities in the condensed consolidated balance sheets. The Company recognized $2.3 million and $2.1 million of revenue related to loyalty program redemptions for the three months ended June 30, 2019 and 2018, respectively, and $4.6 million and $4.0 million for the six months ended June 30, 2019 and 2018.

12

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Advance deposits are typically for future banquet events and to reserve hotel rooms. These deposits are usually received weeks or months in advance of the event or hotel stay. The Company’s contract liabilities related to deposits from customers were $2.1 million and $0.6 million as of June 30, 2019 and December 31, 2018, respectively, and are included as accrued liabilities in the condensed consolidated balance sheets.
Unpaid wagers include unpaid pari-mutuel tickets and unpaid sports bet tickets. Unpaid pari-mutual tickets not claimed within twelve months by the customer who earned them are escheated to the state. The Company’s contract liabilities related to unpaid wagers were $1.1 million and $0.9 million as of June 30, 2019 and December 31, 2018, respectively, and are included as accrued liabilities in the condensed consolidated balance sheets.
Topic 606 requires complimentary items to be considered a separate performance obligation, which requires the Company to allocate a portion of revenue from a gaming transaction to other operating revenue based on the estimated standalone selling prices of the promotional items provided. For example, when a casino customer is given a complimentary room, the Company is required to allocate a portion of the casino revenue earned from the customer to hotel revenue based on the estimated standalone selling price of the hotel room. The estimated standalone selling price of hotel rooms is determined based on observable prices. The standalone selling price of food and beverage, and other miscellaneous goods and services is determined based upon the actual retail prices charged customers for those items. Revenue is recognized in the period the goods or services are provided.

4.
ACQUISITIONS

Dover Downs Gaming & Entertainment, Inc.
On July 22, 2018, the Company entered into a merger agreement with Dover Downs pursuant to which, among other things, a subsidiary of the Company merged with and into Dover Downs with Dover Downs becoming an indirect wholly-owned subsidiary of the Company as the merger was consummated on March 28, 2019. The merger resulted in Dover Downs’ shareholders exchanging their Dover Downs stock for Company common shares representing 7.225% of the outstanding shares of common stock in the combined company at closing. A total of 2,976,825 shares of common stock were issued at the transaction closing on March 28, 2019 and the valuation of those shares was based on the closing price of Dover Downs’ common stock on March 27, 2019.
(in thousands, except share and per share data)
March 28, 2019
Dover Downs shares outstanding
33,125,997

Closing Dover Downs share price on March 27, 2019
$
2.62

Total fair value of stock purchased *
$
86,790

Cash paid by the Company at closing, including amounts to retire Dover Downs debt, inclusive of accrued interest
$
29,096

Consideration transferred
$
115,886

 
 
*Shares issued at approximately $29.15 per share when considering the fair value of stock purchased and number of Company shares issued in conjunction with the acquisition.

The total consideration paid by the Company in connection with the Dover Downs acquisition was approximately $115.9 million, or $96.4 million, net of cash acquired of $19.5 million. This preliminary purchase price excludes transaction costs. During the three and six months ended June 30, 2019, the Company incurred $0.8 million and $7.2 million, respectively, of transaction costs related to the merger and becoming a publicly traded company compared to $0.7 million in the prior year periods. These costs are included in acquisition, integration and restructuring expense in the condensed consolidated statements of operations and comprehensive income.

The identifiable intangible assets recorded in connection with the closing of the merger based on preliminary valuations include trademarks of $3.9 million, rated player relationships of $0.8 million and hotel and conference pre-bookings of $0.4 million, which are being amortized on a straight-line basis over estimated useful lives of approximately ten years, eight years, and three years, respectively. The preliminary fair value of the identifiable intangible assets acquired was determined by using an income approach. Significant assumptions utilized in the income approach were based on company-specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance.

The Company accounted for the acquisition as a business combination using the acquisition method with Twin River as the accounting acquirer in accordance with FASB Codification Topic 805, Business Combinations (“ASC 805”). Under this method of accounting the purchase price has been allocated to Dover Downs’ assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date.

13

TWIN RIVER WORLDWIDE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



The following table summarizes the consideration paid and the preliminary fair values of the assets acquired and liabilities assumed. As of June 30, 2019, the purchase price allocation was preliminary and will be finalized when valuations are complete and final assessments of the fair value of other acquired assets and assumed liabilities are completed. There can be no assurance that such finalizations will not result in material changes from the preliminary purchase price allocations. The Company’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed.  During the second quarter of fiscal 2019, the Company recorded adjustments to the preliminary opening balance sheet, as reflected in the table below, as a result of valuation procedures performed on balance sheet amounts. As a result of these adjustments, the Company recorded goodwill of $0.7 million. While the Company is still completing the final purchase accounting adjustments, material changes are not expected to the amounts recorded in the condensed consolidated financial statements as of June 30, 2019.
 
As of March 28, 2019
(in thousands)
Preliminary as of March 31, 2019
Adjustments in Current Quarter
Preliminary as of June 30, 2019
Cash
$
19,500

$

$
19,500

Accounts receivable
5,674


5,674

Due from State of Delaware
2,535


2,535

Inventory
1,891

(498
)
1,393

Prepaid expenses and other assets
2,586


2,586

Property and equipment
103,657

(5,378
)
98,279

Right of use asset
1,333


1,333

Intangible assets
5,110


5,110

Deferred income tax assets
6,655

5,224

11,879

Other assets
320


320

Goodwill

711

711

Accounts payable
(7,470
)
97

(7,373
)
Purses due to horseman
(2,613
)

(2,613
)
Accrued and other current liabilities
(13,014
)
(128
)
(13,142
)
Lease obligations
(1,333
)

(1,333
)
Pension benefit obligations
(6,613
)

(6,613
)
Other long-term liabilities
(2,332
)
(28
)
(2,360
)
Total purchase price
$
115,886

$

$
115,886



Dover Downs’ revenue for the three and six months ended June 30, 2019 was $25.8 million and $27.3 million, respectively. Net income for each of the three and six month periods ended June 30, 2019 was $1.3 million.

The following table presents unaudited supplemental pro forma consolidated revenue and net income based on Dover Downs’ historical reporting periods as if the acquisition had occurred as of January 1, 2018:
 
Three Months Ended
 
Six Months Ended
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenue
$
134,365

 
$
286,905

 
$
261,946

Net income
$
21,368

 
$
41,108

 
$