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Exhibit 99.2

 

Elgin Riverboat Resort—Riverboat Casino

Financial Statements as of December 31, 2017 and 2016 and for the Three Years in the Period Ended December 31, 2017, and Independent Auditors’ Report


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

TABLE OF CONTENTS

 

 

 

     Page

INDEPENDENT AUDITORS’ REPORT

   1–2

FINANCIAL STATEMENTS:

  

Balance Sheets as of December 31, 2017 and 2016

   3

Statements of Income for the three years in the period ended December 31, 2017

   4

Statements of Partners’ Equity for the three years in the period ended December 31, 2017

   5

Statements of Cash Flows for the three years in the period ended December 31, 2017

   6

Notes to Financial Statements

   7–12


LOGO        

Deloitte & Touche LLP

111 Monument Circle

Suite 4200

Indianapolis, IN 46204-5105

USA

 

Tel: +1 317 464 8600

Fax: +1 317 464 8500

www.deloitte.com

INDEPENDENT AUDITORS’ REPORT

To the Partners of the

Elgin Riverboat Resort—Riverboat Casino

Elgin, Illinois

We have audited the accompanying financial statements of Elgin Riverboat Resort—Riverboat Casino (the “Joint Venture”), which comprise the balance sheets as of December 31, 2017 and 2016, and the related statements of income, partners’ equity, and cash flows for the three years in the period ended December 31, 2017, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Joint Venture’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint Venture’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Elgin Riverboat Resort—Riverboat Casino as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the three years in the period ended December 31, 2017 in accordance with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

February 13, 2018

 

- 2 -


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

BALANCE SHEETS    

AS OF DECEMBER 31, 2017 AND 2016    

 

 

     2017      2016  

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

   $ 27,963,886      $ 27,817,301  

Accounts receivable—net of allowance for doubtful accounts of $15,000 and $10,000, respectively

     17,300        11,500  

Inventories

     258,541        249,587  

Prepaid expenses

     876,361        890,259  
  

 

 

    

 

 

 

Total current assets

     29,116,088        28,968,647  

PROPERTY AND EQUIPMENT—Net

     37,824,681        37,783,528  

OTHER ASSETS

     1,106,901        815,471  
  

 

 

    

 

 

 

TOTAL

   $ 68,047,670      $ 67,567,646  
  

 

 

    

 

 

 

LIABILITIES AND PARTNERS’ EQUITY

     

CURRENT LIABILITIES:

     

Accounts payable

   $ 1,485,540      $ 2,547,861  

Accrued liabilities

     15,979,827        16,238,566  

Due to affiliates

     126,293        125,710  
  

 

 

    

 

 

 

Total current liabilities

     17,591,660        18,912,137  

OTHER LIABILITIES

     1,013,920        727,491  
  

 

 

    

 

 

 

Total liabilities

     18,605,580        19,639,628  

COMMITMENTS AND CONTINGENCIES (Note 5 and 6)

     

PARTNERS’ EQUITY

     49,442,090        47,928,018  
  

 

 

    

 

 

 

TOTAL

   $ 68,047,670      $ 67,567,646  
  

 

 

    

 

 

 

See notes to financial statements.    

 

- 3 -


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO    

STATEMENTS OF INCOME    

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015    

 

 

     2017     2016     2015  

REVENUES:

      

Casino

   $ 156,971,760     $ 153,286,887     $ 161,788,497  

Food and beverage

     12,522,053       12,761,669       13,349,104  

Admissions and other

     6,391,097       6,231,450       7,375,416  
  

 

 

   

 

 

   

 

 

 

Total revenues

     175,884,910       172,280,006       182,513,017  

Less casino promotional allowances

     (11,775,461     (11,777,098     (12,695,760
  

 

 

   

 

 

   

 

 

 

Revenues—net

     164,109,449       160,502,908       169,817,257  
  

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES:

      

Casino

     89,614,688       86,930,730       91,617,079  

Food and beverage

     4,499,429       4,400,335       4,532,953  

General and administrative

     11,436,103       10,205,071       10,715,562  

Charitable donations

     7,449,357       7,186,157       8,596,141  

Depreciation and amortization

     7,103,894       6,647,814       7,041,841  

Preferred distribution

     1,684,312       1,636,342       1,715,020  

Other operating expenses

     14,709,480       13,466,621       15,124,859  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     136,497,263       130,473,070       139,343,455  
  

 

 

   

 

 

   

 

 

 

OPERATING INCOME

     27,612,186       30,029,838       30,473,802  

OTHER INCOME—Net

     1,886       639,168       1,644  
  

 

 

   

 

 

   

 

 

 

NET INCOME

   $ 27,614,072     $ 30,669,006     $ 30,475,446  
  

 

 

   

 

 

   

 

 

 

See notes to financial statements.    

 

- 4 -


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO    

STATEMENTS OF PARTNERS’ EQUITY    

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015    

 

 

     Nevada
Landing
Partnership
    RBG, L.P.     Total  

BALANCE—January 1, 2015

   $ 24,491,783     $ 24,491,783     $ 48,983,566  

Net income

     15,237,723       15,237,723       30,475,446  

Distributions to partners

     (16,850,000     (16,850,000     (33,700,000
  

 

 

   

 

 

   

 

 

 

BALANCE—December 31, 2015

   $ 22,879,506     $ 22,879,506     $ 45,759,012  

Net income

     15,334,503       15,334,503       30,669,006  

Distributions to partners

     (14,250,000     (14,250,000     (28,500,000
  

 

 

   

 

 

   

 

 

 

BALANCE—December 31, 2016

     23,964,009       23,964,009       47,928,018  

Net income

     13,807,036       13,807,036       27,614,072  

Distributions to partners

     (13,050,000     (13,050,000     (26,100,000
  

 

 

   

 

 

   

 

 

 

BALANCE—December 31, 2017

   $ 24,721,045     $ 24,721,045     $ 49,442,090  
  

 

 

   

 

 

   

 

 

 

See notes to financial statements.    

 

- 5 -


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

 

 

     2017     2016     2015  

CASH FLOWS FROM OPERATING ACTIVITIES:

      

Net income

   $ 27,614,072     $ 30,669,006     $ 30,475,446  

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation and amortization

     7,103,894       6,647,814       7,041,841  

Loss on disposal of assets

     —         (909     (386

Changes in assets and liabilities:

      

Accounts receivable

     (5,800     (21,414     103,141  

Inventories

     (8,954     88,745       13,673  

Prepaid expenses

     13,898       (80,408     (117,657

Other assets

     (291,430     (206,050     (77,245

Accounts payable

     (87,498     (418,442     112,791  

Accrued liabilities

     (258,739     (1,369,635     823,539  

Due to affiliates

     583       (22,370     8,142  

Other liabilities

     286,429       231,050       87,162  
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     34,366,455       35,517,387       38,470,447  
  

 

 

   

 

 

   

 

 

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

      

Capital expenditures

     (7,876,738     (8,271,614     (4,912,148

Construction in progress

     (243,132     49,390       30,716  
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (8,119,870     (8,222,224     (4,881,432
  

 

 

   

 

 

   

 

 

 

CASH FLOWS USED IN FINANCING ACTIVITY—Distributions to partners

     (26,100,000     (28,500,000     (33,700,000
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (26,100,000     (28,500,000     (33,700,000
  

 

 

   

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     146,585       (1,204,837     (110,985

CASH AND CASH EQUIVALENTS:

      

Beginning of year

     27,817,301       29,022,138       29,133,123  
  

 

 

   

 

 

   

 

 

 

End of year

   $ 27,963,886     $ 27,817,301     $ 29,022,138  
  

 

 

   

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION—Capital expenditures incurred but not yet paid

   $ 615,640     $ 1,590,463     $ 127,452  
  

 

 

   

 

 

   

 

 

 

See notes to financial statements.

 

- 6 -


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

NOTES TO FINANCIAL STATEMENTS

 

 

1.

BUSINESS

Elgin Riverboat Resort—Riverboat Casino (the “Joint Venture”), doing business as the Grand Victoria Casino, was formed in December 1992, as a partnership under the Joint Venture Agreement between RBG, L.P. (“Managing Partner”) and Nevada Landing Partnership, in which each owns a 50% interest.

The Joint Venture is licensed by the Illinois Gaming Board (“IGB”) to own and operate a riverboat casino on the Fox River in Elgin, Illinois. The original license was issued on October 6, 1994. On October 7, 2016, the IGB approved the renewal of the license for another term of four years.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents—Cash and cash equivalents include investments and interest-bearing instruments with an original maturity of three months or less. Such investments are recorded at the lower of cost or market value. The Joint Venture maintains cash balances at a financial institution in excess of federally insured limits. Included in cash and cash equivalents is $300,000 of restricted cash related to the certificate of deposit used as collateral (refer to Note 9).

Inventories—Inventories, consisting of food, beverage and gift shop items, are stated at the lower of cost or market value. Cost is determined by the first-in, first-out method.

Property and Equipment—Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

 

Buildings

     39 years  

Riverboat

     20 years  

Leasehold improvements

     15 years  

Furniture, fixtures and equipment, and gaming equipment

     2–5 years  

Long-Lived Assets—The Joint Venture reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. If undiscounted expected future cash flows are less than the carrying value, an impairment loss would be recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by the Joint Venture in performing this assessment include current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition and other economic factors. No impairment of long-lived assets was recognized by the Joint Venture during 2017, 2016, or 2015.

 

- 7 -


Reserve for Players’ Club—The Joint Venture’s players’ club allows customers to earn “points” based on the volume of slot play. Points are redeemable for cash back incentives.

The Joint Venture has accrued a liability for all points earned but not yet redeemed by active slot club members. This average cost has been determined to be 33.51% of the retail value.

Revenue Recognition—Casino revenues are recorded as the net win from gaming activities, which is the difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs and for chips in the customers’ possession. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. The Joint Venture accrues the incremental amount of progressive jackpots as the progressive machine is played and the progressive jackpot amount increases, with a corresponding reduction of casino revenue. Food, beverage, admissions and other revenues are recorded as services are rendered.

Promotional Allowances—The retail value of food, beverage, admissions and other complimentary items furnished to customers without charge is included in gross revenue and then deducted as promotional allowances. The estimated costs of providing such promotional allowances have been included in casino expenses for the years ended December 31, 2017, 2016, and 2015, and are as follows:

 

     2017      2016      2015  

Food and beverage

   $ 7,989,205      $ 7,741,972        8,080,458  

Admissions and other

     4,255,556        4,210,739        4,792,750  
  

 

 

    

 

 

    

 

 

 
   $ 12,244,761      $ 11,952,711      $ 12,873,208  
  

 

 

    

 

 

    

 

 

 

Advertising Expenses— Advertising expenses are expensed as incurred and included in other operating expenses. Advertising expense for the years ended December 31, 2017, 2016, and 2015 was $7,183,307, $6,335,420, and $7,107,142, respectively.

Income Taxes—The Joint Venture is taxed as a partnership for federal and state income tax purposes. The financial statements do not include a provision for income taxes, since any income or losses allocated to the Members are reportable for income tax purposes by each Member. The Joint Venture’s income tax returns and the amount of allocable income are subject to examination by federal and state taxing authorities. If an examination results in a change to the Joint Venture’s income, the Members’ taxes may also change.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

- 8 -


Gaming and Admission Taxes—The gaming tax payable to the State of Illinois is based on annual graduated rates ranging from 15% to 50% of adjusted gross receipts (as defined). In addition to the gaming tax, an admission tax of $3 per person entering the casino is assessed on the Joint Venture. Taxes are payable throughout the year in accordance with the schedule below:

 

Adjusted Gross Receipts     Tax Rate  
$ —       $ 25,000,000       15.0
  25,000,001       50,000,000       22.5  
  50,000,001       75,000,000       27.5  
  75,000,001       100,000,000       32.5  
  100,000,001       150,000,000       37.5  
  150,000,001       200,000,000       45.0  
  200,000,001       And above       50.0  

Gaming and admission taxes were approximately $55.47 million, $53.18 million, and $56.88 million for the years ended December 31, 2017, 2016, and 2015, respectively, and are included in casino expenses in the accompanying statements of income.

 

3.

PROPERTY AND EQUIPMENT

A summary of property and equipment as of December 31, 2017 and 2016 is as follows:

 

     2017      2016  

Buildings

   $ 46,911,579      $ 45,771,410  

Riverboat

     52,699,655        52,699,655  

Leasehold improvements

     5,020,886        5,020,886  

Furniture, fixtures and equipment, gaming equipment, and automotve

     64,525,064        60,753,063  

Construction in progress

     243,132        —    
  

 

 

    

 

 

 

Total property and equipment

     169,400,316        164,245,014  

Less accumulated depreciation and amortization

     (131,575,635      (126,461,486
  

 

 

    

 

 

 

Property and equipment - net

   $ 37,824,681      $ 37,783,528  
  

 

 

    

 

 

 

 

- 9 -


4.

ACCRUED LIABILITIES

A summary of accrued liabilities at December 31, 2017 and 2016 is as follows:

 

     2017      2016  

Accrued commitment to Grand Victoria Foundation and County of Kane

   $ 7,375,091      $ 7,144,360  

Accrued payroll, vacation, benefits and related taxes

     3,359,094        3,491,674  

Reserve for progressive jackpots

     1,579,416        1,456,860  

Accrued taxes

     823,076        1,070,559  

Reserve for slot club redemptions

     885,164        1,003,395  

Unredeemed chip/token liability

     676,504        737,841  

Accrued ground lease

     250,000        250,000  

Other

     1,031,482        1,083,877  
  

 

 

    

 

 

 

Total accrued liabilities

   $ 15,979,827      $ 16,238,566  
  

 

 

    

 

 

 

 

5.

LEASES

In accordance with the Ground Lease and Development Agreement, as amended, (the “Agreement”), the Joint Venture leased land for a term of 10 years, commencing with the initial issuance of the IGB license. The initial lease term expired in October 2004 and the third successive five-year term was renewed on October 31, 2014 until October 31, 2019. Effective January 1, 2015 the terms “Basic Rent” and “Percentage Rent” used throughout the Lease Agreement shall mean and be construed as the lesser of the Basic Rent or the Percentage Rent. Therefore, the annual lease payment is equal to the lesser of (i) $1,000,000 or (ii) 3% of the Joint Venture’s annual net operating income, as defined in the Agreement.

The Joint Venture leases certain electronic gaming devices from various approved manufacturers. The leases range from $15 to $100 per day and allow for either party to terminate the lease within 60 days of execution.

Rent expense for all operating leases for the years ended December 31, 2017, 2016, and 2015 was $3,203,675, $3,261,861, and $3,274,092, respectively.

 

6.

COMMITMENTS AND CONTINGENCIES

The Joint Venture has agreed to contribute to both the County of Kane and the Grand Victoria Foundation, a foundation established for the benefit of educational, environmental and economic development programs in the region. The total commitment is equal to 20% of adjusted net operating income, as defined. This commitment must be paid within 120 days of the end of the fiscal year for which it has been calculated. Combined donation expense for the County of Kane and the Grand Victoria Foundation for the years ended December 31, 2017, 2016, and 2015 was $7,375,091, $7,144,360, and $8,547,078, respectively.

 

- 10 -


7.

RELATED-PARTY TRANSACTIONS

The Joint Venture employs the legal services of a firm that is affiliated with a member of the Joint Venture’s Executive Committee.

The Joint Venture is reimbursed for certain allocated employment expenses for a key Joint Venture employee that provides oversight and management to an affiliated entity of the Managing Partner.

Under Amendment No. 1 to the Amended and Restated Joint Venture Agreement dated April 25, 2005, the Managing Partner is allowed to receive one percent (1%) of adjusted gross receipts, as defined by the Illinois Riverboat Gambling Act, as a preferred distribution. The preferred distribution for the years ended December 31, 2017, 2016, and 2015 was $1,684,312, $1,636,342, and $1,715,020, respectively.

 

8.

RETIREMENT PLANS

The Joint Venture maintains a defined contribution plan under section 401(k) of the Internal Revenue Code for all employees with certain eligibility requirement as outlined in the plan document. The plan allows employees to defer a portion of their income on a pretax basis. The Joint Venture matches a portion of employee contributions in accordance with a safe harbor provision adopted in January 2007. Matching contribution expenses for the years ended December 31, 2017, 2016, and 2015 were $880,758, $903,698, and $885,127, respectively.

On January 1, 2010, the Joint Venture started a nonqualified deferred retirement plan for certain key employees. The plan allows these employees to defer a portion of their salary and/or bonus on a pre-tax basis. The Joint Venture voluntarily matches a portion of employee contributions up to a maximum amount on a three-year cliff vesting schedule. Matching contribution expenses for the years ended December 31, 2017, 2016, and 2015 were $0, $56,000, and $59,900, respectively. Subsequently, on January 1, 2016, the Joint Venture started a new deferred retirement plan for certain key employees. Under the new plan the Joint Venture voluntarily matches a portion of employee contributions up to a maximum amount on each pay period. The matching contribution expense for the year ended December 31, 2017 was $64,976.

 

9.

LETTER OF CREDIT

The Joint Venture has an irrevocable and unconditional letter of credit of $300,000, bearing no interest, for the benefit of Zurich American Insurance Company and American Zurich Insurance Company (collectively, “Zurich”). The letter of credit is being maintained as security for the reimbursement of deductibles or retention payments made on the Joint Venture’s behalf by Zurich. The letter of credit renews annually on September 30, and is extended for one year, unless prior written notice is provided to Zurich. The letter of credit is secured with a certificate of deposit equal to the amount of the letter of credit.

 

- 11 -


10.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This ASU clarifies the principles for recognizing revenue and to develop a common revenue standard for US GAAP and IFRS. The amendments in this guidance state that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. In August 2015, FASB issued new guidance to defer the effective date of the pronouncement to annual reporting periods beginning after December 15, 2018. An entity should apply the amendments in this update retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. The Joint Venture is currently evaluating the standard to understand the overall impact it will have on the financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the FASB Accounting Standards Codification. The objective of the update is to improve financial reporting by increasing transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. It is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments is permitted for all entities. The Joint Venture is currently evaluating the impact that this amended guidance will have on its financial statements and related disclosures.

 

11.

SUBSEQUENT EVENTS

No events have occurred after December 31, 2017, but before February 13, 2018, the date the financial statements were available to be issued that require consideration as adjustments to or disclosures in the financial statements.

* * * * * *

 

- 12 -


 

Elgin Riverboat Resort—Riverboat Casino

Unaudited Condensed Financial Statements as of June 30, 2018 and December 31, 2017 and for the six-months ended June 30, 2018 and June 30, 2017


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

TABLE OF CONTENTS

 

 

     Page  

UNAUDITED CONDENSED FINANCIAL STATEMENTS AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND FOR THE SIX-MONTHS ENDED JUNE 30, 2018 AND 2017:

  

Balance Sheets

     3  

Statements of Income

     4  

Statements of Cash Flows

     5  

Notes to Unaudited Condensed Financial Statements

     6–11  


ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

UNAUDITED CONDENSED BALANCE SHEETS

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

 

 

    

June 30,

2018

     December 31,
2017
 

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

   $ 28,261,016      $ 27,963,886  

Accounts receivable—net of allowance for doubtful accounts of $23,566 and $15,000, respectively

     124,507        17,300  

Inventories

     393,419        258,541  

Prepaid expenses

     1,157,219        876,361  
  

 

 

    

 

 

 

Total current assets

     29,936,161        29,116,088  

PROPERTY AND EQUIPMENT—Net

     35,226,964        37,824,681  

OTHER ASSETS

     960,885        1,106,901  
  

 

 

    

 

 

 

TOTAL

   $ 66,124,010      $ 68,047,670  
  

 

 

    

 

 

 

LIABILITIES AND PARTNERS’ EQUITY

     

CURRENT LIABILITIES:

     

Accounts payable

   $ 914,482      $ 1,485,540  

Accrued liabilities

     19,280,933        15,979,827  

Due to affiliates

     130,158        126,293  
  

 

 

    

 

 

 

Total current liabilities

     20,325,573        17,591,660  

OTHER LIABILITIES

     867,905        1,013,920  
  

 

 

    

 

 

 

Total liabilities

     21,193,478        18,605,580  
  

 

 

    

 

 

 

COMMITMENTS AND CONTINGENCIES (Notes 5 and 6)

     

PARTNERS’ EQUITY

     44,930,532        49,442,090  
  

 

 

    

 

 

 

TOTAL

   $ 66,124,010      $ 68,047,670  
  

 

 

    

 

 

 

See notes to unaudited condensed financial statements.

 

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ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

UNAUDITED CONDENSED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

 

 

    

June 30,

2018

   

June 30,

2017

 

REVENUES:

    

Casino

   $ 76,892,541     $ 80,455,807  

Food and beverage

     5,985,267       6,231,929  

Admissions and other

     2,665,900       2,877,425  
  

 

 

   

 

 

 

Total revenues

     85,543,708       89,565,161  

Less casino promotional allowances

     (5,296,233     (5,811,126
  

 

 

   

 

 

 

Revenues—net

     80,247,475       83,754,035  
  

 

 

   

 

 

 

OPERATING EXPENSES:

    

Casino

     41,971,574       45,549,816  

Food and beverage

     2,393,496       2,221,234  

General and administrative

     6,266,419       5,534,473  

Charitable donations

     4,596,876       4,668,843  

Depreciation and amortization

     3,692,946       3,550,677  

Preferred distribution

     807,569       863,799  

Other operating expenses

     5,733,195       6,649,421  
  

 

 

   

 

 

 

Total operating expenses

     65,462,075       69,038,263  
  

 

 

   

 

 

 

OPERATING INCOME

     14,785,400       14,715,772  

OTHER INCOME—net

     3,042       1,886  
  

 

 

   

 

 

 

NET INCOME

   $ 14,788,442     $ 14,717,658  
  

 

 

   

 

 

 

See notes to unaudited condensed financial statements.

 

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ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

 

 

    

June 30,

2018

   

June 30,

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net income

   $ 14,788,442     $ 14,717,658  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     3,692,946       3,550,677  

Changes in assets and liabilities:

    

Accounts receivable

     (107,207     (15,346

Inventories

     (134,878     17,432  

Prepaid expenses

     (280,858     (382,215

Other assets

     146,016       (135,016

Accounts payable

     (218,710     (1,364,503

Accrued liabilities

     3,301,106       2,007,385  

Due to affiliates

     3,865       17,715  

Other liabilities

     (146,015     130,016  
  

 

 

   

 

 

 

Net cash provided by operating activities

     21,044,707       18,543,803  
  

 

 

   

 

 

 

CASH FLOWS USED IN INVESTING ACTIVITIES:

    

Capital expenditures

     (1,427,417     (852,824

Construction in progress

     (20,160     (1,333,883
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,447,577     (2,186,707
  

 

 

   

 

 

 

CASH FLOWS USED IN FINANCING ACTIVITY—Distributions to partners

     (19,300,000     (14,200,000
  

 

 

   

 

 

 

Net cash used in financing activities

     (19,300,000     (14,200,000
  

 

 

   

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

     297,130       2,157,096  

CASH AND CASH EQUIVALENTS:

    

Beginning of period

     27,963,886       27,817,301  
  

 

 

   

 

 

 

End of period

   $ 28,261,016     $ 29,974,397  
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION—Capital expenditures incurred but not yet paid

   $ 263,292     $ 1,333,883  
  

 

 

   

 

 

 

See notes to unaudited condensed financial statements.

 

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ELGIN RIVERBOAT RESORT—RIVERBOAT CASINO

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND FOR SIX-MONTHS ENDED JUNE 30, 2018 AND 2017

 

 

1.

BUSINESS

Elgin Riverboat Resort—Riverboat Casino (the “Joint Venture”), doing business as the Grand Victoria Casino, was formed in December 1992, as a partnership under the Joint Venture Agreement between RBG, L.P. (“Managing Partner”) and Nevada Landing Partnership, in which each owns a 50% interest.

The Joint Venture is licensed by the Illinois Gaming Board (“IGB”) to own and operate a riverboat casino on the Fox River in Elgin, Illinois. The original license was issued on October 6, 1994. On October 7, 2016, the IGB approved the renewal of the license for another term of four years.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation—The condensed financial statements are unaudited, but in our opinion include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim period. The interim financial results are not necessarily indicative of results that may be expected for any other interim period or the fiscal year.

Cash and Cash Equivalents—Cash and cash equivalents include investments and interest-bearing instruments with an original maturity of three months or less. Such investments are recorded at the lower of cost or market value. The Joint Venture maintains cash balances at a financial institution in excess of federally insured limits. Included in cash and cash equivalents as of June 30, 2018 and December 31, 2017 is $300,000 of restricted cash related to the certificate of deposit used as collateral (refer to Note 9).

Inventories—Inventories, consisting of food, beverage and gift shop items, are stated at the lower of cost or market value. Cost is determined by the first-in, first-out method.

Property and Equipment—Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives are as follows:

 

Buildings

     39 years  

Riverboat

     20 years  

Leasehold improvements

     15 years  

Furniture, fixtures and equipment, and gaming equipment

     2–5 years  

Long-Lived Assets—The Joint Venture reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. If undiscounted expected future cash flows are less than the carrying value, an impairment loss would be recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by

 

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the Joint Venture in performing this assessment include current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition and other economic factors. No impairment of long-lived assets was recognized by the Joint Venture for the six-months ended June 30, 2018 or 2017.

Reserve for Players’ Club—The Joint Venture’s players’ club allows customers to earn “points” based on the volume of slot play. Points are redeemable for cash back incentives. The Joint Venture has accrued a liability for all points earned but not yet redeemed by active slot club members.

Revenue Recognition—Casino revenues are recorded as the net win from gaming activities, which is the difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs and for chips in the customers’ possession. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. The Joint Venture accrues the incremental amount of progressive jackpots as the progressive machine is played and the progressive jackpot amount increases, with a corresponding reduction of casino revenue. Food, beverage, admissions and other revenues are recorded as services are rendered.

Promotional Allowances—The retail value of food, beverage, admissions and other complimentary items furnished to customers without charge is included in gross revenue and then deducted as promotional allowances. The estimated costs of providing such promotional allowances have been included in casino expenses, and are as follows for the six-months ended June 30:

 

     2018      2017  

Food and beverage

   $ 3,619,653      $ 3,881,652  

Admissions and other

     1,821,765        2,026,224  
  

 

 

    

 

 

 
   $ 5,441,418      $ 5,907,876  
  

 

 

    

 

 

 

Advertising Expenses—Advertising expenses are expensed as incurred and included in general and administrative. Advertising expenses for the six-months ended June 30, 2018 and 2017 were $2,322,970 and $3,500,180, respectively.

Income Taxes—The Joint Venture is taxed as a partnership for federal and state income tax purposes. The unaudited condensed financial statements do not include a provision for income taxes, since any income or losses allocated to the Members are reportable for income tax purposes by each Member. The Joint Venture’s income tax returns and the amount of allocable income are subject to examination by federal and state taxing authorities. If an examination results in a change to the Joint Venture’s income, the Members’ taxes may also change.

Use of Estimates—The preparation of unaudited condensed financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

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Gaming and Admission Taxes—The gaming tax payable to the State of Illinois is based on annual graduated rates ranging from 15% to 50% of adjusted gross receipts (as defined). In addition to the gaming tax, an admission tax of $3 per person entering the casino is assessed on the Joint Venture. Taxes are payable throughout the year in accordance with the schedule below:

 

Adjusted Gross Receipts     Tax Rate  
$ —       $ 25,000,000       15.0
  25,000,001       50,000,000       22.5  
  50,000,001       75,000,000       27.5  
  75,000,001       100,000,000       32.5  
  100,000,001       150,000,000       37.5  
  150,000,001       200,000,000       45.0  
  200,000,001       And above       50.0  

In the state of Illinois, gaming taxes are based on graduated rates. The Joint Venture records gaming tax expense at the Joint Venture’s estimated effective gaming tax rate on an annual basis, considering estimated taxable gaming revenue and the applicable rates. Such estimates are adjusted each interim period.

Gaming and admission taxes were approximately $26.01 million and $28.63 million for the six-months ended June 30, 2018 and 2017, respectively, and are included in casino expenses in the accompanying unaudited condensed statements of income.

 

3.

PROPERTY AND EQUIPMENT

A summary of property and equipment as of June 30, 2018 and December 31, 2017 is as follows:

 

    

June 30,

2018

     December 31,
2017
 

Buildings

   $ 46,911,579      $ 46,911,579  

Riverboat

     52,699,655        52,699,655  

Leasehold improvements

     5,020,886        5,020,886  

Furniture, fixtures and equipment, gaming equipment, and automotive

     65,600,133        64,525,064  

Construction in progress

     263,292        243,132  
  

 

 

    

 

 

 

Total property and equipment

     170,495,545        169,400,316  

Less accumulated depreciation and amortization

     (135,268,581      (131,575,635
  

 

 

    

 

 

 

Property and equipment—net

   $ 35,226,964      $ 37,824,681  
  

 

 

    

 

 

 

 

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4.

ACCRUED LIABILITIES

A summary of accrued liabilities as of June 30, 2018 and December 31, 2017 is as follows:

 

    

June 30,

2018

     December 31,
2017
 

Deferred gaming taxes

   $ 6,061,901      $ —    

Accrued commitment to Grand Victoria Foundation and County of Kane

     4,553,320        7,375,091  

Accrued payroll, vacation, benefits and related taxes

     3,061,043        3,359,094  

Reserve for progressive jackpots

     1,632,383        1,579,416  

Reserve for slot club redemptions

     814,093        885,164  

Unredeemed chip/token liability

     663,047        676,504  

Accrued taxes

     853,445        823,076  

Accrued ground lease

     250,000        250,000  

Other

     1,391,701        1,031,482  
  

 

 

    

 

 

 

Total accrued liabilities

   $ 19,280,933      $ 15,979,827  
  

 

 

    

 

 

 

 

5.

LEASES

In accordance with the Ground Lease and Development Agreement, as amended, (the “Agreement”), the Joint Venture leased land for a term of 10 years, commencing with the initial issuance of the IGB license. The initial lease term expired in October 2004 and the third successive five-year term was renewed on October 31, 2014 until October 31, 2019. Effective January 1, 2015 the terms “Basic Rent” and “Percentage Rent” used throughout the Agreement shall mean and be construed as the lesser of the Basic Rent or the Percentage Rent. Therefore, the annual lease payment is equal to the lesser of (i) $1,000,000, as increased by the CPI index adjustment, or (ii) 3% of the Joint Venture’s annual net operating income, as defined in the Agreement.

The Joint Venture leases certain electronic gaming devices from various approved manufacturers. The leases range from $15 to $100 per day and allow for either party to terminate the lease within 60 days of execution.

Rent expense for all operating leases for the six-months ended June 30, 2018 and 2017, was $1,506,934 and $1,591,543, respectively.

 

6.

COMMITMENTS AND CONTINGENCIES

The Joint Venture has agreed to contribute to both the County of Kane and the Grand Victoria Foundation, a foundation established for the benefit of educational, environmental and economic development programs in the region. The total commitment is equal to 20% of adjusted net operating income, as defined in the agreements. This commitment must be paid within 120 days of the end of the fiscal year for which it has been calculated. Combined donation expense for the County of Kane and the Grand Victoria Foundation for the six-months ended June 30, 2018 and 2017, was $4,553,320 and $4,633,972, respectively.

 

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7.

RELATED-PARTY TRANSACTIONS

The Joint Venture employs the legal services of a firm that is affiliated with a member of the Joint Venture’s Executive Committee. Related party legal expense for the six-months ended June 30, 2018 and 2017 was $662,508 and 148,762, respectively. These expenses are included in general and administrative expense.

The Joint Venture is reimbursed for certain allocated employment expenses for a key Joint Venture employee that provides oversight and management to an affiliated entity of the Managing Partner.

Under Amendment No. 1 to the Amended and Restated Joint Venture Agreement dated April 25, 2005, the Managing Partner is allowed to receive one percent (1%) of adjusted gross receipts, as defined by the Illinois Riverboat Gambling Act, as a preferred distribution. The preferred distribution for the six-months ended June 30, 2018 and 2017 was $807,569 and $863,799, respectively.

 

8.

RETIREMENT PLANS

The Joint Venture maintains a defined contribution plan under section 401(k) of the Internal Revenue Code for all employees with certain eligibility requirement as outlined in the plan document. The plan allows employees to defer a portion of their income on a pretax basis. The Joint Venture matches a portion of employee contributions in accordance with a safe harbor provision adopted in January 2007. Matching contribution expenses for the six-months ended June 30, 2018 and 2017, were $446,655 and $443,274, respectively.

On January 1, 2016, the Joint Venture started a new deferred retirement plan for certain key employees. Under the new plan the Joint Venture voluntarily matches a portion of employee contribution up to a maximum amount on each pay period. The matching contribution expenses for the six-months ended June 30, 2018 and 2017 were $37,440 and $39,280, respectively.

 

9.

LETTER OF CREDIT

The Joint Venture has an irrevocable and unconditional letter of credit of $300,000, bearing no interest, for the benefit of Zurich American Insurance Company and American Zurich Insurance Company (collectively, “Zurich”). The letter of credit is being maintained as security for the reimbursement of deductibles or retention payments made on the Joint Venture’s behalf by Zurich. The letter of credit renews annually on September 30, and is extended for one year, unless prior written notice is provided to Zurich. The letter of credit is secured with the certificate of deposit held with Zurich.

 

10.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This ASU clarifies the principles for recognizing revenue and to develop a common revenue standard for US GAAP and IFRS. The amendments in this guidance state that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and

 

- 10 -


uncertainty of revenue that is recognized. In August 2015, FASB issued new guidance to defer the effective date of the pronouncement to annual reporting periods beginning after December 15, 2018. An entity should apply the amendments in this update retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. The Joint Venture is currently evaluating the standard to understand the overall impact it will have on the unaudited condensed financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the FASB Accounting Standards Codification. The objective of the update is to improve financial reporting by increasing transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. It is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early application of the amendments is permitted for all entities. The Joint Venture is currently evaluating the impact that this amended guidance will have on the unaudited condensed financial statements and related disclosures.

 

11.

SUBSEQUENT EVENTS

On August 7, 2018, Eldorado Resorts, Inc., a Nevada corporation (“Eldorado”) completed its previously announced acquisition of the Joint Venture (the “Acquisition”). The Acquisition was made pursuant to the Interest Purchase Agreement (the “Purchase Agreement”), dated as of April 15, 2018. As a result of the Acquisition, the Joint Venture will be an indirect wholly-owned subsidiary of Eldorado. Eldorado purchased the Joint Venture for $327.5 million, subject to a post-closing working capital adjustment.

In preparing these unaudited condensed financial statements, the Joint Venture has evaluated events and transactions for potential recognition or disclosure through August 24, 2018, the date the Joint Venture’s unaudited condensed financial statements were available to be issued.

* * * * * *

 

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