ACQUISITIONS

12 Months Ended

Dec. 31, 2019

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, on March 28, 2019, a subsidiary of the Company merged with and into Dover Downs with Dover Downs becoming an indirect wholly-owned subsidiary of the Company. 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 Dover Downs 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 merger was approximately $115.9 million, or $96.4 million, net of cash acquired of $19.5 million. This purchase price excludes transaction costs. During the year ended December 31, 2019, the Company incurred $7.9 million of transaction costs related to the merger and becoming a publicly traded company, compared to $6.6 million during the year ended December 31, 2018. These costs are included in “Acquisition, integration and restructuring expense” in the consolidated statements of operations.

The identifiable intangible assets recorded in connection with the closing of the merger based on final 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 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.

The following table summarizes the consideration paid and the fair values of the assets acquired and liabilities assumed based on preliminary and final valuations. The Company has recorded adjustments to the opening balance sheet, as reflected in the table below, as a result of final valuation procedures performed on balance sheet amounts.



	As of March 28, 2019
(in thousands)	Preliminary as of March 31, 2019			Year to Date Adjustments			Final as of December 31, 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			(107		)	2,479
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	—			1,047			1,047
Accounts payable	(7,470		)	97			(7,373		)
Purses due to horseman	(2,613		)	—			(2,613		)
Accrued and other current liabilities	(13,014		)	(499		)	(13,513		)
Lease obligations	(1,333		)	—			(1,333		)
Pension benefit obligations	(6,613		)	—			(6,613		)
Other long-term liabilities	(2,332		)	114			(2,218		)
Total purchase price	$	115,886		$	—		$	115,886

Dover Downs’ revenue and net income for the year ended December 31, 2019 was $80.8 million and $6.0 million, respectively.

The following table represents 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:



	Year Ended
(in thousands, except per share data)	December 31, 2019		December 31, 2018
Revenue	$	546,634	$	534,140
Net income	$	61,945	$	62,792
Net income applicable to common stockholders	$	61,945	$	63,432
Net income per share, basic	$	1.64	$	1.59
Net income per share, diluted	$	1.64	$	1.53

Black Hawk Casinos

On January 29, 2019, the Company entered into an agreement to acquire a subsidiary of Affinity that owns the three casino properties that comprise the Black Hawk Casinos: Golden Gates, Golden Gulch and Mardi Gras. The acquisition was completed on January 23, 2020.

The preliminary purchase price paid including initial net working capital estimates, net of cash acquired was approximately $53.0 million, excluding transaction costs. The Company incurred $1.7 million and $0.2 million of transaction costs during the years ended December 31, 2019 and 2018, respectively, which is included in “Acquisition, integration and restructuring expense” in the consolidated statements of operations.

The Company will account for the Black Hawk Casinos acquisition as a business combination under the acquisition method of accounting. As such, the purchase price will be allocated to the net assets acquired, inclusive of intangible assets, with any excess fair value recorded to goodwill. Since the closing date of the acquisition occurred subsequent to the end of the reporting period, the allocation of purchase price to the underlying net assets has not yet been completed. The Company will reflect the preliminary purchase price allocation in its consolidated financial statements during the year ending December 31, 2020. A preliminary allocation resulted in the identification of goodwill of approximately $4.4 million and intangible assets of approximately $6.0 million.

Isle Kansas City and Lady Luck Vicksburg

On July 10, 2019, the Company entered into a definitive agreement to acquire the operations and real estate of Isle Kansas City and Lady Luck Vicksburg from Eldorado Resorts, Inc. in a cash transaction for $230 million, subject to certain customary post-closing adjustments. The transaction is subject to the satisfaction of certain customary closing conditions, including approval by the gaming regulators in Mississippi (which was received in October 2019) and Missouri, and is expected to close in the second quarter of 2020.

For the year ended December 31, 2019, the Company recorded acquisition costs related to the acquisition of Isle Kansas City and Lady Luck Vicksburg of $1.3 million. These costs are included in “Acquisition, integration and restructuring expense” in the consolidated statements of operations.