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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, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38850

baly-20210630_g1.jpg
Bally’s Corporation
(Exact name of registrant as specified in its charter)

Delaware20-0904604
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
100 Westminster Street
Providence,RI02903
(Address of principal executive offices)(Zip Code)
(401) 475-8474
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $0.01 par valueBALYNew 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 July 30, 2021, the number of shares of the registrant’s $0.01 par value common stock outstanding was 44,591,127.




BALLY’S CORPORATION

TABLE OF CONTENTS
Page No.
  
 

2


PART I.     FINANCIAL INFORMATION
ITEM 1.     Financial Statements
BALLY’S CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except share data)
June 30,
2021
December 31,
2020
Assets  
Cash and cash equivalents$195,834 $123,445 
Restricted cash677,849 3,110 
Accounts receivable, net32,837 14,798 
Inventory12,190 9,296 
Tax receivable77,347 84,483 
Prepaid expenses and other current assets74,380 53,823 
Total current assets1,070,437 288,955 
Property and equipment, net766,694 749,029 
Right of use assets, net503,115 36,112 
Goodwill424,871 186,979 
Intangible assets, net983,424 663,395 
Other assets8,768 5,385 
Total assets$3,757,309 $1,929,855 
Liabilities and Stockholders’ Equity
Current portion of long-term debt$5,750 $5,750 
Current portion of lease liabilities21,197 1,520 
Accounts payable30,904 15,869 
Accrued liabilities171,224 120,055 
Total current liabilities229,075 143,194 
Long-term debt, net 1,328,394 1,094,105 
Long-term portion of lease liabilities506,822 62,025 
Pension benefit obligations8,515 9,215 
Deferred tax liability58,641 36,983 
Naming rights liabilities197,703 243,965 
Contingent consideration payable46,920  
Other long-term liabilities14,015 13,770 
Total liabilities2,390,085 1,603,257 
Commitments and contingencies
Stockholders’ equity:
Common stock ($0.01 par value, 200,000,000 shares authorized; 44,591,127 and 30,685,938 shares issued; 44,591,127 and 30,685,938 shares outstanding)
445 307 
Preferred stock ($0.01 par value; 10,000,000 shares authorized; no shares outstanding)
  
Additional paid-in-capital1,363,779 294,643 
Treasury stock, at cost  
Retained earnings6,696 34,792 
Accumulated other comprehensive loss(3,696)(3,144)
Total stockholders’ equity1,367,224 326,598 
Total liabilities and stockholders’ equity$3,757,309 $1,929,855 
See accompanying notes to condensed consolidated financial statements.
3

BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except per share data)


Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Revenue:   
Gaming$205,288 $23,767 $358,197 $99,603 
Racing2,202 176 4,571 3,133 
Hotel22,315 2,115 35,374 9,761 
Food and beverage23,382 1,670 38,882 16,986 
Other14,546 1,196 22,975 8,589 
Total revenue267,733 28,924 459,999 138,072 
Operating (income) costs and expenses:
Gaming61,680 9,871 106,885 33,084 
Racing1,670 789 3,719 3,196 
Hotel7,506 1,152 12,655 4,444 
Food and beverage17,004 2,659 29,213 15,935 
Other2,021 123 3,818 2,053 
Advertising, general and administrative101,211 23,989 181,710 73,598 
Goodwill and asset impairment4,675 (154)4,675 8,554 
Expansion and pre-opening937  1,540  
Acquisition, integration and restructuring18,402 2,458 30,660 4,244 
Gain from insurance recoveries, net of losses(579)(143)(11,255)(1,026)
Rebranding382  1,295  
Gain on sale-leaseback(53,425) (53,425) 
Depreciation and amortization25,717 9,143 38,503 18,122 
Total operating (income) costs and expenses187,201 49,887 349,993 162,204 
Income (loss) from operations80,532 (20,963)110,006 (24,132)
Other income (expense):
Interest income530 112 1,054 255 
Interest expense, net of amounts capitalized(21,829)(15,222)(42,627)(26,738)
Change in value of naming rights liabilities19,070  (8,336) 
Gain on bargain purchases24,114  24,114  
Other, net(6,494) (3,823) 
Total other income (expense), net15,391 (15,110)(29,618)(26,483)
Income (loss) before provision for income taxes95,923 (36,073)80,388 (50,615)
Provision (benefit) for income taxes26,981 (12,518)22,151 (18,182)
Net income (loss)$68,942 $(23,555)$58,237 $(32,433)
Basic earnings (loss) per share$1.43 $(0.77)$1.39 $(1.05)
Weighted average common shares outstanding - basic48,156 30,452 42,038 31,011 
Diluted earnings (loss) per share$1.40 $(0.77)$1.37 $(1.05)
Weighted average common shares outstanding - diluted49,102 30,452 42,374 31,011 
See accompanying notes to condensed consolidated financial statements.
4

BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
(unaudited)
(In thousands)

Three Months EndedSix Months Ended
June 30, 2021June 30, 2021
Net income$68,942 $58,237 
Other comprehensive income (loss):
Foreign currency translation adjustment$419 $(633)
Defined benefit pension plan reclassification adjustment(1)
41 81 
Other comprehensive income (loss)460 (552)
Total comprehensive income $69,402 $57,685 
________________________________________________
(1) Tax effect of reclassification adjustment was de minimis.

Note: Net loss equals comprehensive loss for the three and six months ended June 30, 2020.
See accompanying notes to condensed consolidated financial statements.

5

BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(In thousands, except share data)
 Common StockAdditional
Paid-in Capital
Treasury
Stock
Retained
Earnings
Accumulated Other Comprehensive LossTotal Stockholders’
Equity
 Shares OutstandingAmount
Balance as of December 31, 202030,685,938 $307 $294,643 $ $34,792 $(3,144)$326,598 
Release of restricted stock23,811  (990)— — — (990)
Share-based compensation— — 4,483 — — — 4,483 
Stock options exercised30,000 — 129 — — — 129 
Penny warrants exercised932,949 9 — (9)— — — 
Reclassification of Sinclair options— — 59,724 — — — 59,724 
Issuance of MKF penny warrants— — 64,694 — — — 64,694 
Shares issued for purchase of SportCaller221,391 2 11,774 — — — 11,776 
Other comprehensive loss— — — — — (1,012)(1,012)
Net loss— — — — (10,705)— (10,705)
Balance as of March 31, 202131,894,089 $318 $434,457 $(9)$24,087 $(4,156)$454,697 
Release of restricted stock9,181 — (205)(116)— — (321)
Share-based compensation— — 3,901 — — — 3,901 
Retirement of treasury shares— (21)(28,488)114,842 (86,333)—  
Common stock offering12,650,000 127 667,746 — — — 667,873 
Sinclair shares exchanged for penny warrants(2,086,908)— 114,717 (114,717)— —  
Sinclair issuance of penny warrants— — 50,000 — — — 50,000 
Bally’s Interactive equity issuance2,084,765 21 121,479 — — — 121,500 
Stock options exercised40,000 — 172 — — — 172 
Other comprehensive income— — — — — 460 460 
Net income— — — — 68,942 — 68,942 
Balance as of June 30, 202144,591,127 $445 $1,363,779 $ $6,696 $(3,696)$1,367,224 
 Common StockAdditional
Paid-in Capital
Treasury
Stock
Retained
Earnings
Accumulated Other Comprehensive LossTotal Stockholders’
Equity
 Shares OutstandingAmount
Balance as of December 31, 201932,113,328 $412 $185,544 $(223,075)$250,418 $(1,888)$211,411 
Release of restricted stock131,131 1 (2,484)— — — (2,483)
Dividends and dividend equivalents - $0.10 per share
— — — — (3,174)— (3,174)
Share-based compensation— — 5,542 — — — 5,542 
Retirement of treasury shares— (107)(48,618)254,416 (205,691)—  
Share repurchases(1,649,768)— — (31,341)— — (31,341)
Cumulative effect adjustment upon adoption of ASU 2016-13— — — — (58)— (58)
Net loss— — — — (8,878)— (8,878)
Balance as of March 31, 202030,594,691 $306 $139,984 $ $32,617 $(1,888)$171,019 
Release of restricted stock24,427  (81)— — — (81)
Share-based compensation— — 2,127 — — — 2,127 
Retirement of treasury shares— (2)(733)1,951 (1,216)—  
Share repurchases(162,625)— — (1,951)— — (1,951)
Net loss— — — — (23,555)— (23,555)
Balance as of June 30, 202030,456,493 $304 $141,297 $ $7,846 $(1,888)$147,559 
See accompanying notes to condensed consolidated financial statements.
6

BALLY’S CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended June 30,
(in thousands)20212020
Cash flows from operating activities:  
Net income (loss )$58,237 $(32,433)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization38,503 18,122 
Amortization of operating lease right of use assets2,409 517 
Goodwill and asset impairment4,675 8,554 
Share-based compensation8,384 7,669 
Amortization of debt discount and debt issuance costs3,144 1,974 
Gain from insurance recoveries(11,160) 
Gain on sale-leaseback(53,425) 
Loss on assets and liabilities measured at fair value15,069  
Deferred income taxes(2,525)(3,221)
Change in value of naming rights liabilities8,336  
Change in contingent consideration payable(11,703) 
Gain on bargain purchases(24,114) 
Other operating activities2,761 813 
Changes in current operating assets and liabilities(4,366)(18,376)
Net cash provided by (used in) operating activities34,225 (16,381)
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired(332,029)(50,451)
Foreign exchange forward contract premiums(22,592) 
Capital expenditures(35,785)(5,448)
Insurance proceeds from hurricane damage11,160  
Other investing activities(481) 
Net cash used in investing activities(379,727)(55,899)
Cash flows from financing activities:
Issuance of common stock, net667,872  
Proceeds from sale-leaseback144,000  
Revolver borrowings275,000 250,000 
Revolver payments(35,000)(250,000)
Term loan proceeds, net of fees of $- and $13,820, respectively 261,180 
Term loan repayments(2,875)(1,500)
Payment of financing fees(5,840)(1,117)
Share repurchases (33,292)
Issuance of Sinclair penny warrants50,000  
Payment of shareholder dividends (3,199)
Share redemption for tax withholdings - restricted stock(1,311)(2,564)
Stock options exercised301  
Net cash provided by financing activities1,092,147 219,508 
Effect of foreign currency on cash and cash equivalents483  
Net change in cash and cash equivalents and restricted cash747,128 147,228 
Cash and cash equivalents and restricted cash, beginning of period126,555 185,502 
Cash and cash equivalents and restricted cash, end of period$873,683 $332,730 
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized$36,718 $23,402 
Cash paid for income taxes, net of refunds17,396 (165)
Non-cash investing and financing activities:
Unpaid property and equipment$6,868 $177 
Stock and equity instruments issued for acquisition of SportCaller and Monkey Knife Fight197,968  
Acquisitions in exchange for contingent liability58,685  
Deferred purchase price payable14,071  
Deposit applied to acquisition purchase price4,000  
See accompanying notes to condensed consolidated financial statements.
7

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


1.    GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Bally’s Corporation (the “Company”, “Bally’s”) is a U.S. full-service sports betting/iGaming company with physical casinos and online gaming solutions united under a single, prominent brand. The Company, through its wholly owned subsidiary Twin River Management Group, Inc. (“TRMG”), owns and manages the following properties:

Property by SegmentLocationTypeBuilt/Acquired
East
Twin River Casino Hotel
Lincoln, Rhode IslandCasino and Hotel2007
Tiverton Casino HotelTiverton, Rhode IslandCasino and Hotel2018
Dover Downs Hotel & Casino (“Dover Downs”)
Dover, DelawareCasino, Hotel and Raceway2019
Bally’s Atlantic City
Atlantic City, New JerseyCasino and Hotel2020
Tropicana Evansville
Evansville, IndianaCasino and Hotel2021
West
Hard Rock Hotel & Casino (“Hard Rock Biloxi”)Biloxi, MississippiCasino and Resort2014
Casino Vicksburg
Vicksburg, MississippiCasino and Hotel2020
Bally’s Kansas City Casino (“Bally’s Kansas City”)Kansas City, MissouriCasino2020
Bally’s Black Hawk (1)
Black Hawk, ColoradoThree Casinos2020
Eldorado Resort Casino Shreveport (“Shreveport”)Shreveport, LouisianaCasino and Hotel2020
Bally’s Lake Tahoe Casino Resort (“Bally’s Lake Tahoe”)
Lake Tahoe, Nevada
Casino and Resort2021
Jumer’s Casino & Hotel (“Jumer’s”)
Rock Island, IllinoisCasino and Hotel2021
__________________________________
Note - During the second quarter of 2021, the Company updated its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions. Refer to Note 16 “Segment Reporting” for further information.
(1) Includes the recently rebranded Bally’s Black Hawk North Casino (previously Mardi Gras Casino), Bally’s Black Hawk West Casino (previously Golden Gates Casino) and Bally’s Black Hawk East Casino (previously Golden Gulch Casino).

In addition to the properties noted above, the Company also owns the Arapahoe Park racetrack and 13 off-track betting licenses (“Mile High USA”) in Aurora, Colorado.

Under Bally’s Interactive division, the Company owns and manages Bally’s Interactive, formerly Bet.Works, a U.S. based sports betting platform provider, Horses Mouth Limited (“SportCaller”), a leading Business-to-Business (“B2B”) free-to-play game provider for sports betting and media companies across North America, the UK, Europe, Asia, Australia, LATAM and Africa, Monkey Knife Fight (“MKF”), a North American gaming platform and daily fantasy sports operator, and the Association of Volleyball Professionals (“AVP”), a premier professional beach volleyball organization and host of the longest-running domestic beach volleyball tour in the United States which was acquired July 12, 2021.

The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “BALY.”










8

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Acquisition of Gamesys Group, Plc.

On April 13, 2021, the Company announced the terms of a recommended offer to acquire all of the issued and to be issued ordinary share capital of Gamesys for a mixture of cash and shares of Bally’s common stock (the “Acquisition”). Gamesys is a leading international online gaming operator that provides entertainment to a global consumer base. Gamesys currently offers bingo and casino games to its players using brands that include Jackpotjoy, Virgin Games, Botemania, Vera&John, Heart Bingo, Megaways, Rainbow Riches Casino and Monopoly Casino, and focuses on building its diverse portfolio of distinctive and recognizable brands that deliver best-in-class player experience and gaming content. Under the terms of the Acquisition, Gamesys shareholders would have the option to receive, for each share of Gamesys, 1,850 pence in cash or shares of Bally’s common stock (at an exchange ratio of 0.343 for each Gamesys share) or a combination of both. Certain of Gamesys’ current shareholders holding 25.6% of Gamesys’ shares have agreed to receive shares of Bally’s common stock in the Acquisition. The maximum cash consideration payable to Gamesys shareholders, if only the former Gamesys founders and Gamesys executives elect to receive shares of Bally’s common stock, would be £1.6 billion.

It is intended that the Acquisition will be effected by means of a scheme of arrangement between Gamesys and its shareholders and was subject to approval by both the shareholders of Gamesys and Bally’s which was received in separate meetings held on June 30, 2021. The Acquisition is conditioned upon regulatory approvals and other customary closing conditions and is expected to close in the fourth quarter of 2021.

In order to manage the risk of appreciation of the GBP denominated purchase price and Gamesys debt, and additional debt held by Gamesys in Euros, the Company has entered into foreign exchange forward contracts. See Note 6 “Derivative Instruments” for further information.

The Company currently expects to finance the Acquisition and to refinance its and Gamesys’ debt through a combination of cash on hand, net proceeds from Bally’s April 2021 common stock offering, the proceeds of borrowings under new bank credit facilities, as well as the issuance of new bonds. The proceeds of the bond issuance, as well as a portion of the proceeds of the common stock offering will be escrowed to satisfy U.K. legal requirements relating to the Acquisition. Upon closing of the Acquisition, the escrowed amounts will be released and the Company will assume the role of issuer under the newly issued bonds and certain of the Company’s subsidiaries will guarantee the newly issued bonds. If the Acquisition is not completed, the escrowed amounts will be released from escrow and applied to redeem the bonds and the remaining amounts will be returned to the Company.

COVID-19 Pandemic

The COVID-19 pandemic has significantly impacted the Company’s business in a material manner. As of March 16, 2020, all of the Company’s properties at the time were temporarily closed as a result of the COVID-19 pandemic. The Company’s properties began to reopen in mid-2020 in some capacity and remained open for the rest of 2020, with the exception of Twin River Casino Hotel and Tiverton Casino Hotel, each of which closed again from November 29, 2020 through December 20, 2020. As of June 30, 2021, the Company’s properties have returned to full capacity with minimal restrictions. Although the Company is experiencing positive trends as a result of the reopening of its properties, the COVID-19 pandemic is ongoing and future developments, which are uncertain and cannot be predicted at this time, could have a material negative impact on operations.

Principles of Consolidation

The accompanying condensed consolidated financial statements of the Company include the accounts of the Company and its wholly-owned 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 financial statements of our foreign subsidiary is translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in net income (loss).

9

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules 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.

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, 2020. 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, 2020.

We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates.

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 and cash equivalents.

As of June 30, 2021 and December 31, 2020, restricted cash was $677.8 million and $3.1 million, respectively. The balance at June 30, 2021 includes $667.9 million of cash proceeds from the equity issuances, noted above, and was classified as restricted for use in the Acquisition. In addition, restricted cash was comprised of video lottery terminal (“VLT”) and table games cash payable to the State of Rhode Island and certain cash accounts at other properties, 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)20212020
Cash and cash equivalents$195,834 $123,445 
Restricted cash677,849 3,110 
Total cash and cash equivalents and restricted cash$873,683 $126,555 

Accounts Receivable, Net

Accounts receivable, net consists of the following:
June 30,December 31,
(in thousands)20212020
Amounts due from Rhode Island and Delaware(1)
$11,417 $3,880 
Gaming receivables8,645 7,893 
Non-gaming receivables16,063 6,092 
Accounts receivable36,125 17,865 
Less: Allowance for doubtful accounts(3,288)(3,067)
Accounts receivable, net$32,837 $14,798 
(1) Represents the Company’s share of VLT and table games revenue for Twin River Casino Hotel and Tiverton Casino Hotel due from the State of Rhode Island and from the State of Delaware for Dover Downs.
10

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


Gain from insurance recoveries, net of losses

Gain from insurance recoveries, net of losses relate to losses incurred resulting from storms impacting the Company’s properties, net of insurance recovery proceeds. During the three and six months ended June 30, 2021, the Company recorded gain from insurance recoveries, net of losses of $0.6 million and $11.3 million, respectively, primarily attributable to insurance proceeds received due to the effects of Hurricane Zeta, which made landfall in Louisiana shutting down the Company’s Hard Rock Biloxi property for three days during the fourth quarter of 2020. During the three and six months ended June 30, 2020, we recorded a gain on insurance recoveries of $0.1 million and $1.0 million, respectively, related to proceeds received for a damaged roof at the Company’s Arapahoe Park racetrack.

Long-lived Assets

The Company reviews its long-lived assets, other than goodwill and intangible assets not subject to amortization, for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an asset is still under development, the analysis includes the remaining construction costs. Cash flows expected to be generated by the related assets are estimated over the assets’ useful lives based on updated projections. If the evaluation indicates that the carrying amount of an asset may not be recoverable, the potential impairment is measured based on a fair value discounted cash flow model. In connection with its rebranding initiatives, as decisions are made, it is possible that the Company could be required to record impairment charges which could be material. During the three months ended June 30, 2021, the Company recorded an impairment charge on certain of its intangible assets as a result of the Company’s rebranding. Refer to Note 5 “Goodwill and Intangible Assets” for further information.

Strategic Partnership - Sinclair Broadcast Group

On November 18, 2020, the Company and Sinclair Broadcast Group, Inc. (“Sinclair”) entered into a Framework Agreement (the “Sinclair Agreement”), which provides for a long-term strategic relationship between the Company and Sinclair combining Bally’s integrated, proprietary sports betting technology with Sinclair’s portfolio of local broadcast stations and live regional sports networks and its Tennis Channel, Stadium sports network and STIRR streaming service, whereby the Company received naming rights to the regional sports networks and certain integrations to network programming in exchange for annual fees paid in cash, the issuance of warrants and options, and an agreement to share in certain tax benefits resulting from the Sinclair Agreement with Sinclair (the “Tax Receivable Agreement”). The initial term of the Sinclair Agreement is ten years from April 1, 2021, which was the commencement date of the re-branded Sinclair regional sports networks, and can be renewed for one additional five-year term unless either the Company or Sinclair elect not to renew.

Naming Rights Intangible Asset - Under the terms of the Sinclair Agreement, the Company is required to pay annual naming rights fees to Sinclair for naming rights of the regional sports networks which escalate annually and total $88.0 million over the 10-year term of the agreement beginning April 1, 2021. The Company accounted for this transaction as an asset acquisition in accordance with the “Acquisition of Assets Rather Than a Business” subsections of Accounting Standards Codification (“ASC”) 805-50 using a cost accumulation model. The naming rights intangible asset represents the consideration transferred on the acquisition date comprised of the present value of annual naming rights fees, the fair value of the warrants and options and an estimate of the Tax Receivable Agreement payments, each explained below. The naming rights intangible asset was $333.6 million and $338.2 million as of June 30, 2021 and December 31, 2020, respectively. Amortization began on April 1, 2021, the commencement date of the re-branded Sinclair regional sports networks, and was $8.6 million for the three and six months ended June 30, 2021. Refer to Note 5 “Goodwill and Intangible Assets” for further information.

Naming Rights Fees - The present value of the annual naming rights fees was recorded as part of the cost of the naming rights intangible asset with a corresponding liability which will be accreted through interest expense over the life of the agreement. The total value of the liability as of June 30, 2021 and December 31, 2020 was $57.7 million and $56.6 million, respectively. The short-term portion of the liability, which was $2.0 million as of June 30, 2021 and December 31, 2020, is recorded within “Accrued liabilities” and the long-term portion of the liability, which was $55.7 million and $54.6 million as of June 30, 2021 and December 31 2010, respectively, is recorded within “Naming rights liabilities” in the condensed consolidated balance sheets. Accretion expense for the three and six months ended June 30, 2021 was $1.1 million and $2.1 million respectively, and was reported in “Interest expense, net of amounts capitalized” in the condensed consolidated statements of operations.

11

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Warrants and Options - The Company issued to Sinclair (i) an immediately exercisable warrant to purchase up to 4,915,726 shares of the Company at an exercise price of $0.01 per share (“the Penny Warrants”), (ii) a warrant to purchase up to a maximum of 3,279,337 additional shares of the Company at a price of $0.01 per share subject to the achievement of various performance metrics (the “Performance Warrants”), and (iii) an option to purchase up to 1,639,669 additional shares in four tranches with purchase prices ranging from $30.00 to $45.00 per share, exercisable over a seven-year period beginning on the fourth anniversary of the November 18, 2020 closing (the “Options”). The exercise and purchase prices and the number of shares issuable upon exercise of the warrants and options are subject to customary anti-dilution adjustments. The issuance pursuant to the warrants and options of shares in excess of 19.9% of the Company’s currently outstanding shares was subject to the approval of the Company’s stockholders in accordance with the rules of the New York Stock Exchange (“NYSE”), which was obtained on January 27, 2021.

Penny Warrants. The Penny Warrants were determined to be an equity classified instrument because they are indexed to the Company’s own stock and met the conditions to be classified in equity under ASC 815, Derivatives and Hedging, including sufficient available shares for the Company to settle the exercise of the warrants in shares. The fair value of the Penny Warrants approximates the fair value of the underlying shares and was $150.4 million on November 18, 2020 at issuance, and was recorded to “Additional paid-in-capital” in the condensed consolidated balance sheets, with an offset to the naming rights intangible asset.

Performance Warrants. The Performance Warrants are accounted for as a derivative liability because the underlying performance metrics represent an adjustment to the settlement amount that is not indexed to the Company’s own stock and thus equity classification is precluded under ASC 815. The fair value as of June 30, 2020 and December 31, 2020 was $94.9 million and $88.1 million, respectively, and is recorded within “Naming Rights liabilities” of the condensed consolidated balance sheets. Refer to Note 6 “Derivative Instruments” for further information.

Options. As of December 31, 2020, the Options were accounted for as a derivative liability because the Options could have been required to be settled in cash, outside the Company’s control, prior to formal stockholder approval. Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value and reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the condensed consolidated balance sheet. Refer to Note 6 “Derivative Instruments” for further information.

The fair value of the Options as of December 31, 2020 was $58.2 million. Upon stockholder approval on January 27, 2021, the Options met the criteria to be classified as equity, at which point, the Options were adjusted to fair value and $59.7 million was reclassified from “Naming rights liabilities” to “Additional paid-in-capital” in the condensed consolidated balance sheet. The increase in fair value of the Options from December 31, 2020 through January 27, 2021 was $1.5 million and resulted in a mark to market loss in the first quarter of 2021, reported in “Change in value of naming rights liabilities” in the condensed consolidated statements of operations.

Tax Receivable Agreement - The Company is required to share 60% of the tax benefit the Company receives from the Penny Warrants, Options, Performance Warrants and payments under the Tax Receivable Agreement with Sinclair over the term of the agreement as tax benefit amounts are determined through the filing of the Company’s annual tax returns. Changes in estimate of the tax benefit to be realized and tax rates in effect at the time, among other changes, are treated as an adjustment to the naming rights intangible asset. As of June 30, 2021, the estimate of the Tax Receivable Agreement liability was $47.0 million, reflecting an increase of $4.0 million from the December 31, 2020 value of $43.0 million, and is included in “Naming rights liabilities” in the condensed consolidated balance sheets.

12

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

2.    RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Issued Accounting Pronouncements

Standards implemented

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments–Credit Losses (Topic 326)–Measurement of Credit Losses on Financial Instruments (“ASC 326”). 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. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments–Credit Losses, to clarify that receivables arising from operating leases are not within the scope of ASC 326 and should instead, be accounted for in accordance with ASC 842, Leases. The standard is effective for annual and interim periods beginning after December 15, 2019. 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 adopted this ASU in the first quarter of 2020 and recorded a $58,000 adjustment to retained earnings as of January 1, 2020.

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. The Company adopted this ASU in the first quarter of 2020, with no impact to its condensed consolidated financial statements.

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 permitted. The Company’s adoption of this ASU in the first quarter of 2021 did not have a material impact to its condensed consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)–Simplifying the Accounting for Income Taxes. This amendment serves to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes. The amendment also improves the consistent application of ASC Topic 740 by clarifying and amending existing guidance. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company’s adoption of this ASU in the first quarter of 2021, did not have a material impact to its condensed consolidated financial statements.

13

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

3.    REVENUE RECOGNITION

The Company accounts for revenue earned from contracts with customers under ASC 606, Revenue from Contracts with Customers. The Company generates revenue from five principal sources: gaming services, hotel, racing, food and beverage and other.

Gaming revenue includes the share of VLT revenue for Twin River Casino Hotel and Tiverton Casino Hotel, in each case, as determined by each property’s 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 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 each were entitled to an 83.5% share of table games revenue generated as of June 30, 2021 and 2020. 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 services on behalf of the State of Rhode Island.

Gaming revenue also 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, 2021 and 2020, 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 services on behalf of the State of Delaware.

Gaming revenue also includes the casino revenue of Hard Rock Biloxi, Bally’s Black Hawk, beginning January 23, 2020, Bally’s Kansas City and Casino Vicksburg, beginning July 1, 2020, Bally’s Atlantic City, beginning November 18, 2020, Shreveport, beginning December 23, 2020, Bally’s Lake Tahoe, beginning April 6, 2021, Tropicana Evansville, beginning June 3, 2021, and Jumer’s, beginning June 14, 2021, 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 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 incentive earned for a hotel room stay, food and beverage or other amenity. 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 to customers for those items. The performance obligations for the incentives earned under the loyalty programs are deferred and recognized as revenue when the customer redeems the incentive. The allocated revenue for gaming wagers is recognized when the wagers occur as all such wagers settle immediately.

14

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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, 2021 and 2020:
 Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2021202020212020
Hotel$12,494 $1,162 $19,403 $5,748 
Food and beverage15,380 1,074 25,829 8,907 
Other1,459 32 2,410 1,806 
 $29,333 $2,268 $47,642 $16,461 
During 2020, the Company entered into several multi-year agreements with third-party operators for online sports betting and iGaming market access in the states of Colorado and New Jersey from which the Company has received or expects to receive one-time, up front market access fees in cash or equity securities (specific to one operator agreement) and certain other fees in cash generally based on a percentage of the gross gaming revenue generated by the operator, with certain annual minimum guarantees due to the Company. The one-time market access fees received have been recorded as deferred revenue and will be recognized as gaming revenue ratably over the respective contract terms, beginning with the commencement of operations of each respective agreement. The Company recognized commissions in certain states from online sports betting and iGaming which are included in gaming revenue for the six months ended June 30, 2021. Deferred revenue associated with third-party operators for online sports betting and iGaming market access was $5.7 million as of June 30, 2021 and is included in “Accrued liabilities” and “Other long-term liabilities” in the condensed consolidated balance sheets.
Racing revenue includes Twin River Casino Hotel’s, Tiverton Casino Hotel’s, 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, including B2B service revenue generated by the Bally’s Interactive operating segment, 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.

15

BALLY’S CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In the second quarter of 2021, the Company changed its reportable segments to better align with its strategic growth initiatives in light of recent and pending acquisitions. Refer to Note 16 “Segment Reporting” for further information. The following tables provide a disaggregation of revenue by segment: